Munching popcorn may be your favourite pastime, but not in the multiplex because the food there is too expensive. But why does multiplex keep such a huge markup on food?
Let’s explore!
Pathaan has made a marvellous box office collection. Yash Raj Films is indeed happy with this achievement, but do you know who else is happy?
The answer is multiplex chains. Even if the business of a multiplex is to show a movie, the major source of revenue comes from selling food and beverages.
But the question is, why is popcorn targeted to be expensive while tickets are nominally priced?
Let’s find out.
What’s Happening?
Who does not love having buttery popcorn with a gigantic glass of coke while watching a movie? But you would also accept that the popcorn sold at multiplex chains has a huge markup. For example, according to Economic Times, the Act II Cheese Delight Microwave Popcorn of 109 grams is available for Rs 75 in a local market and is sold for Rs 290 for 90 grams in multiplexes.
That’s almost 3.8 times the cost, and you also get 19 grams less!
But multiplex giants like PVR and INOX are making tons of profits from selling food and beverages. In FY22, PVR earned Rs 413 crores in revenues from selling food and beverages. Similarly, INOX Leisure earned Rs 193 crores in revenues during the same period.
According to Moneycontrol, when it comes to spending of each visitor on food and beverages, PVR and INOX have seen an increase of 32% and 23%, respectively, in the H1FY23 as compared to pre-COVID H1FY20.
Why Are Popcorns Expensive and Not Tickets at Multiplexes?
When we decide to go to a movie, we look for reasonable tickets. We don’t bother to look at the price of food at the multiplex. Hence, the multiplex follows a psychologically intelligent business model. They keep their ticket prices nominal to attract viewers. Later, around 40% of the box-office earnings are shared with the production houses or distributors. From the remaining 60% of revenues, they have to cover costs invested in building the multiplex, rental costs, electricity and workforce costs, and the ticket sales alone do not cover all these costs. Hence, they sell food and beverages like popcorn, makhana, coke, etc., at an expensive rate. This huge markup helps these multiplexes offset the cost of selling tickets at low prices and sustain in the industry.
So, now you know why popcorns are a target of multiplexes.
What’s Next?
To increase earnings, giant multiplex companies have created loyalty programs that offer discounts on food and tickets. Moreover, multiplexes are launching more dishes in collaboration with popular brands, just as PVR launched popcorn bars in partnership with Minus 30 Degrees.
According to Crisil Ratings mentioned in Economic Times, the spend per head on food and beverages is expected to rise by 10% to 15% over the medium term amid inflationary pressure.
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