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Wednesday, February 07, 2007

Attention Interventionist Politicians!
If You Want to Abolish ATM Fees, Why Not Force Down Tim Horton Coffee Prices, Too?

Tim Horton's, an iconic Canadian coffee and donut chain that is slowly expanding into the U.S. (digressive recommendation: sell Dunkin' Donuts short in anticipation of this move), reported that its profits sky-rocketed last quarter from 10 cents/share to 35 cents/share.

Mr. House [CEO] said fourth-quarter results were strong because of a range of new product introductions, some price increases and a milder December in some parts of Canada and the United States.

... “Western New York is the gateway for Tim Hortons into the U.S. market . . . The people of Western New York have truly embraced Tim Hortons and we thank them for making Tim Hortons a part of their everyday life,” the company said in its earnings release.

I am absolutely certain that the price of coffee at Tim Horton's is wwaaaayyyy higher than the (short-run) marginal costs of producing it. Clearly they are ripping off their customers, and the chain has become so dominant and successful in the industry that much of the competition has been driven out of existence, leaving "Timmy's" in a position where they can rip us all off. If socialist NDP Leader Jack Layton wants Canadian banks to give away their ATM services [see this and the links provided there], he should also demand that Tim Hortons lower their coffee and donut prices, too.

Why is it that banks are considered a fair target but Tim Hortons isn't?
One possibility is that gubmnt regulations keep the banks are free from much competition because insurance companies and foreign banks find it next-to-impossible to compete with the major banks in Canada. Another possible explanation is just plain old William Jennings Bryan-type populism and antipathy toward banks. I see, too, that some commenters on the G&M article are, indeed, asserting that the high Tim Horton profits are a sign of (a) consumers' being ripped off, and not (b) Tim Hortons' providing better service and products that consumers want and are willing to pay for. And that sounds like a nasty combination of ignorance, greed, and envy to me.

Whatever the reason, let me make two things clear:
  1. Given my personal record of prognostication, I assume no responsibility for any investment advice I give, should you choose to follow it. I use low-MER index funds myself.
  2. I do not really think Tim Hortons is ripping off its customers, and I am absolutely not serious about wanting politicians to regulate the prices at Tim Hortons.

Posted by EclectEcon on February 7, 2007 in Food and Drink | Permalink

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If You Want to Abolish ATM Fees, Why Not Force Down Tim Horton Coffee Prices, Too?:

Comments

Dude!! Chill!! Clearly you have had one too many cups of Timmy's this morning. Better switch to decaf. Or vodka.

Posted by: Mark Logan | 2007-02-07 8:50:23 AM

Every politician needs a basic lesson in Economics 101.

As simple as I am, even I understand that virtually all government interference in our free market system is a net loss.

As a side note, I found a competing bank service (Pres. Choice Financial) that has no annoying ATM fees, and I switched all my banking to them many years ago. That's called "competition".

Posted by: Joel | 2007-02-07 9:11:44 AM

Presidents Choice Financial is a Loblaw's Brand
but Loblaw's are not in the Financial Business
-this resource is underwritten by a Canadian Commercial Bank, I think it is CIBC but Could be
Toronto Dominion. WalMart do not underwrite their Credit Cards but sold the underwriting rights
long, long ago. Read Sam Walton's Biography and one can understand why. MacLeod

Posted by: Jack MacLeod | 2007-02-07 9:43:16 AM

Logan, you could use a few coffees to wake up from your never-ending state of 'chill'.

That post was right on the money (no pun)

Every time a socialist open his mouth about getting the poor down trodden customers (free choice to be one) of any particular business it winds up costing us all more for everything.

If bank customers are tired of paying ATM fees, they can stop using them. I wish that were so for over-taxation.

Posted by: Duke | 2007-02-07 9:43:44 AM

Anyone wonder why Tim Horton's is the only large national chain that is an all cash busines??? They staunchly resist interect ( which would leave a record os sales) I wonder what the gap is between claimed revenues and actual revenues?....lots of cash falls between the cracks in all cash, high sales volume business.

Posted by: Wlyonmackenzie | 2007-02-07 9:48:31 AM

Tim Horton's Ron Joyce ex OPP ex Nova Sctia Country
Boy would get a chuckle if he read your Post Wlyon
-which I think is right on the money (if you'll pardon the pun). cash sales in the NS lumber business particularly for fireplace logs is strictly cash
(big hills in the left pocket, small bills in the
right) no GST, no receipts, life goes on without bookeeping which it has for over two hundred years.
MacLeod

Posted by: Jack MacLeod | 2007-02-07 10:04:57 AM

Since Tim’s will only take cash and it is becoming a monopoly, then that is unfair unless they install free cash machines.

Tim’s should also be forced to make small business loans. That should be easy since the cliental are sitting there anyway. Tim’s could always threaten to not sell them a cup of coffee if they don’t pay the loan back. That’s more threatening than the kneecapping collection methods of the banks.

Posted by: nomdenet | 2007-02-07 10:07:45 AM

Actually I’m beginning to understand the push from Layton’s core base on this issue. There are 2 kinds of Dippers - those on minimum wage and those guilty with inherited wealth like Jack and Ted Kennedy.

Those on minimum wage are earning $7 an hour, they deposit it the bank, then they get a craving for a coffee and Timbits, they pay $1.50 cash withdrawal and spend $5.50 on a coffee and donut.

Then an hour later, the process starts all over again. So Jack has to go after the banks or raise the minimum wage or both.

This election is not going to be about Kyoto, it’s about Tim’s and ATMs.
As Preston Manning’s book says “Think Big” ...JACK

Posted by: nomdenet | 2007-02-07 10:57:49 AM

President's Choice Financial is indeed CIBC. Initially it was an arm of Amicus bank which
manages several retailer banks such as Target National Bank in the U.S.
I am a Presidents Choice client. No service charges, interest on chequing accounts calculated on the daily balance. Points earned when using their Mastercard or debit card for purchases from the Loblaws group of Companies. No ATM fees if used at any CIBC outlet.
We have used our points over the years to save hundreds of dollars on grocery purchases.
All in all, a great financial Institution to deal with.

Posted by: Ralph Rattfuc | 2007-02-07 11:04:50 AM

Tim Horton's donuts are stale and over-sugared.

Always fresh? Not a chance.

Posted by: Speller | 2007-02-07 12:40:38 PM

Take a thermos of coffee to work . You can use the best brand of coffee , use stevia as a sweetener and scoff the creamers free . Why drive a mile out of ones` way , stand in line with the car burning gas , and in one instance get a seat belt ticket on the way ; for one cup . I`m sure all those idling cars are not exactly environmentaly friendly. The MSG they put in their brand of coffee to keep you coming back , isn`t the best thing for ones` health and don`t expect to lose weight by loading up on their caffein and sugar , which will drive insulin resistance down to diabetic - like levels .

Posted by: daveh | 2007-02-07 2:55:49 PM

Avoid stale coffee and donuts by staying away from Tim Hortons, avoid ATM charges by staying away from banks and dealing with Credit Unions .
Avoid "the Video Professor" by staying away from the NDP.

Posted by: nick | 2007-02-07 3:08:06 PM

nomdent

A company like Tim Hortons would not be careless about monitoring it's cash otherwise the employees would be driving new lexus' and the tax dept would have Tim in Jack Bauer's interrogation room.

Posted by: Duke | 2007-02-07 4:25:55 PM

Duke,

Are you mixing me up with Macleod or WLM?

I didn't say Tims would be careless about cash.

My points were sarcasm directed at how Timbit Jack is still only operating at a city councillor level not a leader at the Federal level.

Posted by: nomdenet | 2007-02-07 4:37:22 PM

I think the Dippers should push to stick Horton's with a healthcare surtax for all the coronaries their greasy blobs of dough have burdened the public system with...maybe the police assn. or Workman's comp can then sue for all the coronaries they have paid out on as good cops fall victim to the deadly colesterol in their favorite food. ;-)

"Sell a Cruller, kill a cop" great slogan..get at it Jacko :)

Great crusade with a rich pay-off a perfect hobby horse for a pimping dipper.

Posted by: Wlyonmackenzie | 2007-02-07 4:59:01 PM

I personally try to avoid any product being sold with a patriotic scream. (usually crap) Not to mention how easy it is to avoid shoddy products or overpriced services by simply not using them.

I'm not sure why anyone would think making consumer decisions requires the intervention of the authorities.

I guess they are really, really smart and we are all just so stupid we can't do anything without them.

Posted by: David | 2007-02-07 8:25:22 PM

"One possibility is that gubmnt regulations keep the banks are free from much competition because insurance companies and foreign banks find it next-to-impossible to compete with the major banks in Canada."

That's a reasonable assumption. Believe it or not, most of us do understand the beauty and efficiency of free markets. But the idea of free markets brings us uncomfortable thoughts of having to, you know, go out and get a real job. Brrrrr! No thanks. So if you don't mind, we'd rather compound failures caused by government intervention by introducing more interventions.

Posted by: Socialists Everywhere | 2007-02-07 10:11:26 PM

Having a job in a free market is good.
Having anti-trust legislation makes having a job better.

Having the government take it's responsibility to ensure quality goods for consumers seriously along with anti-trust legislation would be super.

Having anti-trust anti-monopoly legislation isn't going to happen when the State is the monopoly or protecting a monopoly to protect non-competitive jobs.

Why would the state protect monopolies?

They couldn't do it without transfer payments or excessive taxes on certain groups of people.

Gee. It would better if there was more citizen initiated legislation.(frog in the simmering pot)

Posted by: Speller | 2007-02-07 10:39:03 PM

Regarding Horton's "loose cash" bit.
Next time you are in one, take a look at the surveillance cameras. They aren't watching you folks, their pointed directly at the cashiers. No Lexus' for them, I'm afraid.

Posted by: Ralph Rattfuc | 2007-02-08 3:32:08 AM

Actually the incredible success of Tim Hortons over the decades is a classic story of success in our Capitalist System which the Socialist Horde and their Left Wing companions detest. The late Tim Horton and his mentor partner Ron Joyce created a whole new concept in fast food marketing. Ironically their coffee is American Made from the Great Atlantic and Pacific Tea Company, which has been their choice since the first Tim's opened. The guys that designed and built the Tim's Stores all came from Hamilton Ontario and were contracted for many, many decades
-a Canadian Success Story - MacLeod

Posted by: Jack Macleod | 2007-02-08 4:20:43 AM

Actually the incredible success of Tim Hortons over the decades is a classic story of success in our Capitalist System which the Socialist Horde and their Left Wing companions detest. The late Tim Horton and his mentor partner Ron Joyce created a whole new concept in fast food marketing. Ironically their coffee is American Made from the Great Atlantic and Pacific Tea Company, which has been their choice since the first Tim's opened. The guys that designed and built the Tim's Stores all came from Hamilton Ontario and were contracted for many, many decades
-a Canadian Success Story - MacLeod

Posted by: Jack Macleod | 2007-02-08 4:22:31 AM

Well Loblaw isn't a "Canadian success story". The Sobey's must be glad they avoided the banking business and stayed focused.

Ralph R likes Presidents Choice which does not charge fees. I wonder if there is a correlation to no revenue and Loblaw taking a 4% hit today , the stock is $49, down from a high of $75.

I wonder if Galen Weston is secretly a Ted Kennedy Dipper?

Posted by: nomdenet | 2007-02-08 9:27:25 AM

Wage and Price controls are the answer!

Stagflation - high unemployment & high inflation was such fun in the seventies - why not do that again!

Legions of bureaucrats could examine every intimate detail of our lives and make things all better!

Posted by: Philanthropist | 2007-02-08 11:07:54 AM

Dunno if the no-fee thing is related to Loblaws poor performance or not. This thread was about ATM fees.
Just advising how one person gets around bank fees.ATM and otherwise.

Posted by: Ralph Rattfuc | 2007-02-08 11:30:46 AM

Loblaws made two errors in marketing judgement
investing in Quebec based retailers, and taking on WalMart point blank by changing their traditional merchanidise mix to match Walmart. Weston family now has control and have brought some of their UK personnel with them. Sobey's are not in the game with Walmart and Loblaws. Daughter who is VP of a very large US based Retailer asked me, who would win in Canada between Sobeys and Weston (one on one)
I replied Westons (Loblaws) because they do not need to borrow money to endlessly expand and Sobeys must.

Posted by: Jack Macleod | 2007-02-08 11:37:15 AM

RR, I know and good for you for finding a way to not pay bank fees, I wasn’t taking a shot at you. I’m really trying to get at the Professor'

s original post which has to do with years or Librano$ intervention in our economy. It must not be allowed to continue because the oceans and borders no longer protect Canada from global competition, it’s here.

Jack, Wal-Mart has been destroying capital for 5 years. I used to go to Bentonville a decade ago and they were very focused, I came back bought the stock, it doubled in 2 years, I held on a bit too long but did OK.
Now Wal-Mart is not focused and unionized Loblaws fell into the trap of chasing them. Loblaws owns its locations, worth billions, so it still might be Ok if it doesn’t also fall into the trap of nepotism at the management level.

But to come back to regulated industries like banking, what I think Harper has to do is open up Canada to foreign takeovers. We have way too much on the TSX tied up in banking and communications. We need to either let the big companies get big enough to compete globally
(I think it’s too late for that now that Martin screwed up on Bank mergers and his own Harold Mackay competitive study out of Regina told him that)
or
Let the Banks and Bell and Shaw and Rogers and CTV get bought out by global players and let those billions of dollars get redeployed in our economy by entrepreneurs. We have great entrepreneurs in Canada. You have to be great to make a company survive in a Liberal environment. We don't like "big comapnies' and we don't have a big enough population to have global scale, so sell 'em and redploy. So let’s open it up.

Posted by: nomdenet | 2007-02-08 12:32:25 PM

I agree with your entire post, we work in the International Technology and Aerospace sector and have advocated international investment and takeovers which not only gains access to heaps of capital but also talent which trades off to upgrading Canadian participants and employees.
United Technologies Pratt & Whitney Canada is a classic example. The Canadian company and it's famed technology base dominates the entire UT Empire, and their FMS Plant in Nova Scotia is the most succesful and profitable in the Empire, a truly Canadian dominated international operation.
MacLeod

Posted by: Jack MacLeod | 2007-02-08 4:13:16 PM

Damn. I was going to vote for EclectEcon until I got to very last sentence.

Posted by: rockyt | 2007-02-08 6:24:20 PM

We don't have a free capitalist system Jack. We have ( by Ottawa;s admission) a "mixed economy" which is allegedly a cross between a capitalist "demand" economy and a socilalist "demand" economy...but the reality is that we really have a bureaucratic Kleptocracy where bureaucrats regulate commerce and industry so closely that to have a business success break that barrier between "small" business and "big business"...you have to make political alignments and greas palms.

Sobey's, McCains, Irving Oil, Magna, Powercor, Husky IM, Apotex...all Liberal connected/protected...I'm sure you can name others...the bottom line is you do not make it big in the Canadian economic system without buying political influence to cut you breaks and open regulatory doors....this is linear with all socialist systems and one can see the mirror of the Candina business cycle in China and Russia these days...socialist capitalim is essentially a kleptocratic insider profiteering system and Canada has become a prime example.

Posted by: Wlyonmackenzie | 2007-02-09 7:54:58 AM

Well put WLM.

A century of control by the Natural Governing Party has created a cabal of crony -capitalists that ARE the Liberal Party machine ... Desmarais and Power Corp being the most obvious.

But there are others and not totally Liberal. In my view, Jack might correct me, Danny Williams as a "Conservative" Premier in name, is a classic “Kleptocracy” kind of capitalist poser.

Because he was able to sleazily kiss the right bureaucratic butts, he got Cable TV licenses and got rich and deluded himself and the voters into thinking that he was business savvy. He's not , he's political savvy.

He was so un-business savvy he chased the oil companies out of Newfoundland and now its citizens are commuting to Fort McMurray because he was so dumb as to not understand that project managers, executives, in the oil patch are very very hard to come by. They are scarcer than oil itself. So when Danny statred being cute with his silly negotiating with big-oil, the excecs up and moved their families to another part of the world, they won't return for a generation. But Danny Boy, the faux-capitalist, does not understand that. What an interventionist goof!

Posted by: nomdenet | 2007-02-09 8:52:40 AM


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