Tim Hortons parent company gives notice of price increases in 2022

The price of your morning coffee from Tim Hortons could be going up, as the parent company of the popular chain grapples with volatile supply chains, labour inflation and rising commodity costs.

Restaurant Brands International (QSR)(QSR.TO) chief executive José Cil says the company's brands – including Tim Hortons, Burger King, Popeyes and Firehouse Subs – "have not been immune" to inflationary pressure and supply chain challenges in recent months.

"Given the level of commodity costs and labour inflation we're seeing, we expect additional price increases in 2022," Cil told analysts on a conference call on Tuesday following the release of financial results. He added that Tim Hortons menu price increases in Canada have been slightly below Consumer Price Index levels, and that the company is working with franchise owners to help guide and determine the right level of pricing.

"It's really important for us to ensure that we control the demand side of it and not get too far ahead of the consumer from a pricing standpoint," he said.

"Our teams work closely with the owners in Canada and with our supply chain teams to ensure that we have the right pricing going forward and continue to create that strong demand for our beverages and food."

RBI's chief corporate officer Duncan Fulton says the company will continue to manage pricing by analyzing a range of factors, including inflation, commodity costs, what competitors are doing in terms of pricing, as well as regional differences.

"It's really an ongoing process," he said in an interview.

"We're highly competitive for Canadians in price, but also being fair to our franchisees."

The potential price hikes come as sales continue to improve at Tim Hortons amid the COVID-19 recovery. The coffee and doughnut chain saw comparable sales – a key metric in the retail industry – increase 10.3 per cent year-over-year in the three-month period ending Dec. 31. In the same quarter last year, comparable sales fell 11 per cent.

Sales in the breakfast category was a key driver of the strong performance in the quarter, Cil notes, with sales surpassing 2019 levels for the first time. He also says Tim Hortons' collaboration with Justin Bieber, which saw the launch of three new Timbit flavours and a lineup of merchandise, "was one of the more successful traffic-driving initiatives in recent memory and outperformed our internal expectations."

Fulton notes that the recovery at Tim Hortons still has room to grow, particularly in urban and suburban locations where traffic has not yet recovered to pre-pandemic levels. Sales at rural locations, meanwhile, have surpassed 2019 levels.

"We still have pockets of government intervention... but we've got a great business performance now, based on our breakfast, lunch and beverage offerings," Fulton said.

"As people begin to return to downtown locations and increase their frequency of commuting to the office, that's all upside for us as the country continues to reopen."

Overall sales at RBI, which reports its financial results in U.S. dollars, hit $1.55 billion, up from $1.36 billion during the same time last year. On an adjusted basis, RBI says it earned 74 cents per diluted share in the fourth quarter, up from 53 cents per diluted share in 2020.

Analysts on average had expected an adjusted profit of 69 cents per share and US$1.52 billion in revenue, according to financial markets data firm Refinitiv.

With files from The Canadian Press

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

Download the Yahoo Finance app, available for Apple and Android.