Movie theaters get creative with concessions
AMC Empire 25 near Times Square is open as NYC movie theaters reopen for the first time in a year since closing due to the coronavirus on March 5, 2021.
Angela Weiss | AFP | Getty Images
Movie theaters have been struggling to fill seats during the Covid pandemic, but some are facing a different problem – what to do with their menus.
In many movie theaters, popcorn and soda pop along with tortillas, grilled lobster cheese and gourmet cocktails. But with heavy debt and box office shortages, movie theater chains of all sizes have been forced to change menus and launch creative food initiatives to boost revenue.
“The American consumer right now is really demanding more than just popcorn and drink, nachos or candy,” said Rolando Rodriguez, chairman of the National Association of Theater Owners and senior adviser at Marcus theaters. “They are really looking for the experience that they get from the food associated with watching movies. Expanding … to food and drink is absolutely essential.”
Since 2019, before the pandemic, the number of screens in North America has decreased by more than 3,000, according to Comscore, according to research company Mintel. only 54% of people was at the theater from April to October 2022.
Mike Gallinari, senior travel and leisure analyst at Mintel, said people are more likely to wait to watch a movie, which gives streaming services an edge over cinemas. This forced some cinemas to improve their food game.
“Things like concessions and how that fits into the wider cinema experience are really things that cinemas need to focus on and delve into,” Gallinari said. “It’s not only the part of the experience that they can control, but the majority of the revenue that they can control since the box office in theaters [performances] vary depending on the film.
Not enough movies
Theaters have struggled to keep their doors open during the pandemic. Kinomir, which operates Regal Cinemas, filed for Chapter 11 bankruptcy protection in September, posting a net debt of $8.9 billion. Regal Cinemas will refuse to rent 39 cinemas from February 15th.
AMC Entertainmentthe world’s largest cinema chain, withdrew from third quarter with more than $5.3 billion in debt. AMC shares have fallen about 50% over the past 12 months. On Monday, the company announced a change in ticket prices depending on the seat.
AMC, which operates dozens of AMC Dine-In Theaters, is unlikely to generate positive free cash flow until 2024, said Eric Wald, an analyst at B. Riley Securities.
He added that the lack of content is the biggest problem for cinemas. Compared to 2019, there were 50% fewer films released in theaters last year, according to Wald. Box office receipts fell by more than 30%. He predicted that the film industry would not return to pre-pandemic film release rates until 2025 due to delays and backlogs.
However, the studios have certainly been more specific about what films are shown in theaters, favoring blockbuster-style releases. Avatar: The Way of Water, released in December, and Spider-Man: No Way Home, released at the end of 2021, are among the top 10 highest-grossing films of all time.
Tom Holland as Spider-Man in Sony-Marvel’s Spider-Man: No Way Home.
“A restaurant can open if it has food and chefs. A theme park can open if it has electricity and people running the rides. But if movies don’t come out, the theater can’t open up and show whatever they want,” Wald said.
Struggling with lower attendance, Marcus Theaters have cut menus at their Zaffiro’s, Reel Sizzle and Take Five Lounge concepts, as well as their Movie Taverns. Menus have now largely returned to pre-pandemic levels as consumer spending has risen.
“Every home has a kitchen, but people still go out to eat,” said Marcus CEO Greg Marcus.
“In the end, people want to be among each other,” he said. “They want to get out. They don’t want to stay at home and they don’t want to sit on the couch.”
Economics of concessions
According to Wald, the revenue from ticket sales is about a third more than from the sale of concessions. But theaters make much more money from concessions than they do from ticket sales.
About half of the money from ticket sales goes to the studios, while theaters keep all the concessions, which are typically over 80%, according to Wald. Marcus Theaters generates 44% of its total revenue from concessions, compared to 39% in Cinemas and 36% in AMC.
“No matter how great a tortilla is or what a delicious cocktail the theater may make, if the film is lousy, no one will come to the theater,” Wald said. “If you can make the best meal possible while someone is already there, and give them an extra reason why they want to go to the cinema to see a movie… that’s definitely attractive and can be an additional source of income.”
According to research firm EntTelligence, the average popcorn in domestic theaters costs $8.14 and the average drink is $6.20. Wald said these commodities typically have a margin of 90% on average.
For more upscale merchandise, margins are significantly smaller, meaning cinemas can’t ditch the classics, but are instead looking for additional revenue from sandwiches or entrees.
“Throughout the pandemic, you have seen the average number of giveaways per visitor skyrocket,” Wald said. “It’s a combination of getting more value out of each patron by increasing the size of the basket of what they order at the counter, as well as bringing more people to the counter who would otherwise miss it.”
Prior to the fourth-quarter earnings report, Wald said cinemas were not under pressure for consumer benefits despite the rate hike. According to him, concessions were “a fairly recession-resistant segment.”
A Cinemark employee serves popcorn to a customer at the Cinemark’s Century 16 kiosk at the South Point Hotel and Casino on August 14, 2020 in Las Vegas, Nevada.
Ethan Miller | News Getty Images | Getty Images
However, according to Mintel’s Gallinari, movie theaters with large menus are facing similar problems as restaurants, with price hikes in response to higher prices for eggs and meat. Some are shifting to healthier food and baked goods, as well as partnering with local businesses.
“Because cinemas and concessions already have a reputation for being overpriced, bending to the will of the market in this way can really work against cinemas,” Gallinari said.
Wald said cinemas have been using the pandemic to ease concession sales amid labor shortages. Before the pandemic, some theaters adopted a mealtime model in which waiters delivered food from the central kitchen to the auditorium, although many have moved to takeout apps and reserved seats.
Marcus Theaters recently introduced an online ordering application that handles large volumes of orders more efficiently. He said the app has become more efficient in boosting sales and reducing queues.
“If you digress for a minute or two, a minute and a half from [ordering] process and multiply that by 15 million transactions, that’s a significant number if you can figure out how to structure yourself in terms of work to go from taking orders to just fulfilling them,” Markus said.
Long term success
With some menus exceeding 50 items, cinemas are being more methodical in recruiting and preparing food for slower, heavier nights, Wald said.
Some theaters, such as the Studio Movie Grill in Dallas, are forecasting attendance weeks in advance.
“We have enough history with enough analysis to say that we know, whether it’s a horror movie or a romantic comedy, how it will perform based on national projections and based on our specific locations,” said CEO Ted Croft.
Studio Movie Grill, which takes on-site orders from customers, recently shrunk the menu to focus on burgers, pizza and spirits, which the team can quickly fill to accommodate sometimes over 1,000 seats. About 25% of the entire field team is made up of kitchen workers, according to Croft.
After returning hours of operation to pre-pandemic levels and introducing themed drinks for movies like Black Panther: Wakanda Forever, Croft said average discounts per person continue to rise.
“The fact that we’re outperforming pre-pandemic KPIs gives us a lot more confidence that if we just get more films, we’ll continue to grow,” Croft said.
Angela Bassett plays Queen Ramonda in Marvel’s Black Panther: Wakanda Forever.
Rich Dotridge, president and CEO of Warehouse Cinemas in Maryland, has noticed a similar trend. He said about two-thirds of movie theater employees work in the kitchen or behind the counters, preparing grilled gourmet cheeses, homemade beer cheese hot dogs and classics like nachos and a seasonal popcorn mix.
Dothridge said there were no more perishable, low-margin options on the menu, such as steak or seafood.
The self-service beer wall features a selection of craft cocktails and 32 craft beers and ciders on tap. This month, the theater will offer a Winnie the Pooh: Blood and Honey themed cocktail.
“Hollywood makes great stories and it’s our job to make sure our products, sound, picture, seats and all of those things together are what they want to see on the big screen,” said Dothridge, who is also president of the Independent Motion Picture Alliance. .
Cinépolis, a Mexican movie theater chain with 25 locations in the US, is updating its menu twice a year to offer lobster tacos and truffle pizza and other non-traditional theatrical snacks.
For the extended run of the gory culinary satire “Menu”, Cinépolis launched the “Film and Food” initiative to curate seasonal specials with the film. The company will be making another iteration for Cocaine Bear, including two drinks, two appetizers, a main course and a dessert.
“As our founder said back in Mexico, we build cinemas to sell food,” said CEO Luis Olloqui.
– CNBC Sarah Witten made a report.
Disclosure: Cocaine Bear is distributed by Universal Pictures, which is part of CNBC’s parent company, NBCUniversal.
Clarification: This story has been updated to make it clear that AMC Entertainment ended its third quarter with over $5.3 billion in debt.