How top movie theatre justify selling food and drink at higher price?

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How much would you pay for a movie marathon—such as RRR, star wars, KGF,Avatar and so on—with a couple drink and food vouchers? like at the PVR,INOX,CINEPOLIS. Elsinore or some other single screen theatre.

Around Rs 2300 or 25 dollars?

Bahubali, Superman, and alien 3, would be a fantastic marathon.Three movies plus intermission hits approximately eight hours. Doing the two complete trilogies of star wars would be 15.7 hours including intermissions. 

 The movie theatres in Malls,Multiplexes restaurants, etc are charged an extra tax that is not levied to other retail shops for the sale of the same food and beverage. Secondly, they are not only giving us the bottle/can, but also a glass, straw and service from a waiter for whom they have to pay. Thirdly, they need to cover up on their expenses such as rent, salaries etc. And lastly, they need to make a profit. Hence it is necessary for them to charge an extra amount.

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During first week of movies booking, almost 80–100% of booking fees is directly send to distributors of movie. Next week, its around 50 % taken directly by distributor. Now, if movie goes for more than 3 weeks ( normally theater’s favourite moment), only 20–25% is taken back by distributor. If movie goes more than month, around 15–20 % is taken by distributor.

Many times, royalty charges depends on producers. That is, high budget movie or famous producers gets 90–100% for first week directly.

You can figure this out by looking at their financial statements (all figures in INR Lakhs):

Revenue from operations: 224,612

Revenue excluding F&B: 163,846

Revenue from food and beverage (F&B): 60,766

Operating Cost (excluding F&B consumption and employee benefit): 168,842

Consumption of Food and Beverages: 15,468

Source: PVR Annual Report, 2018

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Bit of calculation will tell you, they would have been in losses if they would not have overcharged on F&B. Food and Beverages contribute around 27% of revenue which is quite high for a “side business” considering not everyone will buy food when they go out to watch movie.

If we talk about gross margins, they earn a gross margin of over 75% on sale of f&b. Which means they are selling popcorn worth Rs. 50 for Rs. 200. So you can say that F&B sales is what is driving their profit.

Now, how can someone earn a margin of 75%?

From economics standpoint, two factors are at play here: monopoly and inelastic demand:

Monopoly: Once you are inside the theatre, you have no option but to eat their insanely overpriced substandard food.

Inelastic Demand: You can see for yourself, how many luxury theatres have opened up in recent times where prices are even more expensive and all of these go full house. Secondly, even after such high prices, there is a long queue to buy their food. So, basically, people are buying irrespective of high prices.

Brand-KGF-a-block-buster-hit

Movie exhibition business is not as profitable as it looks like, considering they have to give more than 50% of revenue to distributor/producer. Now, only way to stay afloat in the market is to charge for extra (or side) facilities over and above exhibiting movies.

Another important point to note here is: as PVR is in movie exhibition business and people would select a movie hall on the basis of ticket prices and not on the basis of F&B prices.

Therefore, an increase in ticket price would hamper their sale more as compared to an increase in F&B price.

Kantara-Kannada-Movie-where-Content-idea-is-brand-identity.

Ever notice when a new film opens, the media brags about how much money it made?

That’s what the film studio made, which is awfully close to the total ticket revenue. That is, in order to get major releases, first-run cinema chains sign contracts agreeing to pay 96–99% of the ticket revenue back to the film studio.

And that is before the cinema pays its employees, the light bill to run those projectors and the air conditioning, the lease on the building, the cost of having the film delivered, all the supplies needed to clean uniforms and maintain the theaters .

Name-a-film-you-saw-at-a-drive-in-Movie-Theatre.

Drive in theatres of the 1980’s.

Film revenue alone produces less than 5% of the cost of running the cinema. You can thank Hollywood for the high price of your tickets, because they get pretty much all the money.

Cinema stay in business by selling patrons popcorn, cokes, candy, and whatever else people will buy. Yes, concession prices are higher than you would pay for the same items at a grocery store, but about the same as you would pay at a restaurant that served comfort food, or what you would pay for concessions at a sporting event.

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 One reason every cinema sells the stuff, is that a lot of people demand it, literally won’t watch a movie without it. Even now, when some big drama is about to unfold, people joke “I’ll get the popcorn”. The amazing thing is that popcorn sells itself. It’s bright and colorful, it’s warm and soft, it makes happy popping sounds when it’s being made, and I have seen the smell change minds from across a lobby – “Do you want anything from the concession stand? No, I’m not hungry and – hey is that popcorn fresh? Let’s get some”.

Guide-to-Potato-French-Fries-and-Burger.

Cinema managers love popcorn because even using premium ingredients, you still get a 96% profit margin on the stuff. Popcorn literally keeps a lot of movie theaters in business.

And for those complaining about sticky floors, you can thank the idiot/ clowns who think it’s funny when a film ends to pour half their sodas onto the floor. 

Garbage-disposal-and-fmcg-products

Very difficult to answer this question. For movie buffs who are loaded with dough, no price is unfair. If people are ready to dole out hard earned money to procure a pack of popcorns at unimaginable prices, the multiplexes can’t be blamed for putting on the screws.

Supply is there because demand is there. Reasons citing heavy overheads and low customer bases in multiplex is strictly for the birds and has no relevance.

How do the theatres and highway hotels sell food items at a higher price than the maximum retail price?

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Is there a definitive way to determine the ideal retail price of a product?

Cost-plus pricing

Value-based pricing

Competitor-based pricing

Skimming pricing

Penetration pricing

Ultimately, the ideal retail price will depend on a combination of factors specific to the product and the business. It’s a good idea to experiment with different pricing strategies, and track their effectiveness and adjust accordingly.

Theatre association should take call. My observation is that movie lovers becoming choosy for theatre and expenses. Sooner or later, this need to turn around.

Cinema-and-fmcg-brands.

The $1.00 price on say Arizona iced tea is not the price it is the manufacturers suggested price. The price is set by the retailer and the market

Probably the most expensive Coca Cola.

But to answer your question, why is food so expensive in theaters?

We’re paying that extra money for the opportunity to enjoy the food or drink at that specific location.

Just like a bottle of water is worth maybe 100X more in the middle of the desert — somehow, the scarcity of that popcorn doesn’t seem to “taste” the same at home.

By the way, this is the value proposition of Starbucks.

Starbucks has proven that the convenience and experience of enjoying a coffee in their beautiful coffee shops and exclusive locations around the world justifies a $5 dollar coffee.

Who do I complain about on more prices of food in theatres?

Not all theatres. Only the multiplexes charge a lot. So, the McDonalds or Barista or Dominoes inside a theatre are third-party vendors. They pay rent to the mall. And this rent, I believe, is extremely high, which is why the costs of food are also high in order to recover money for the rent and make profit.

Everyone-Loves-Tea.

Most people who watch films in multiplexes belong to a middle or upper-middle class strata, justifying the costs of the food. People say, if a person can afford a 400 rupee ticket, they can afford a 200 rupee popcorn bucket. I know the logic is warped but that’s how people think.

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