Now Showing: Declining Sales at Theater Snack Bars
Moviegoers tend to stuff themselves full of salty popcorn and sweet candy. When people start steering clear of the multiplex -- as audiences have done for three straight years -- the manufacturers of those theater snacks are the ones left with a sour taste in their mouths.
Much has been made of how declining movie admissions and box-office grosses have clipped the earnings of movie studios and film exhibitors. But audience apathy also is taking a bite out of the oft-overlooked concession business. Particularly hard hit are those companies that rely on movie theaters for the bulk of their sales.
“It’s kind of scary. It’s been going downhill for three years,” says Paul Bonfiglio, whose Summit Food Enterprises has had to lay off nearly a third of its employees because of steadily worsening sales for its movie theater candy line, which includes P.J. Gummi Bears. Adds Norm Krug, the chairman of the Nebraska farmers cooperative Preferred Popcorn, “Our sales are going down pretty directly with attendance.”
As the movie theater industry’s annual convention came to a close here Thursday, organizers tried to characterize the box-office slump as more media propaganda than business predicament. Hollywood studios were on hand to offer sneak peeks of the animated features “Cars” and “Over the Hedge” and clips from such live-action fare as “Superman Returns,” “Mission: Impossible III” and “Poseidon,” all in an effort to rally interest in the upcoming slate of movies.
But on the trade show floor of ShoWest, as the annual convention of theater owners is known, candy and popcorn peddlers trying to drum up business for their products were decidedly uninspired.
It probably doesn’t help that theater owners have been raising the prices of those same Gummi Bears and buckets of popcorn in response to the downturn -- an astronomical markup that the concession suppliers never see. (Just $30 worth of raw popcorn can translate into as much as $3,000 in sales at the movie theaters.)
“I don’t think that raising prices at the concession stand is the way to do it,” said Frank Liberto, whose Ricos Products Co. introduced the chips-and-cheese nacho snack at movie theaters nearly 30 years ago.
Several concession makers fear that such price hikes may cause more moviegoers to stop buying snacks at the multiplex and sneak cheaper, store-bought food into the venue.
An audience survey released last week by Nielsen Analytics found that more than 36% of moviegoers polled said they were going to fewer films because “concessions are too expensive.” (The top reasons for staying away: high ticket prices and bad movies.)
John Fithian, president of the National Assn. of Theatre Owners, said movie concessions were fairly priced when compared with theme parks and other out-of-home entertainment options. Were it not for concessions, Fithian said, “ticket prices would be twice as high.”
Fithian said he was unaware of any study that tracked overall theater concession spending. The National Assn. of Concessionaires did not return telephone calls seeking comment.
For many exhibitors, concession sales can mean the difference between profit and loss and often total more than a third of a chain’s box-office revenue. Exhibitors generally return about half of all box-office receipts to movie studios as film rental fees. Conversely, they keep the majority of candy counter income; concession profit margins can run above 85%.
At Regal Entertainment Group, the nation’s largest theater chain, with more than 6,200 screens, concession sales last year generated $659.8 million in revenue, more than a quarter of Regal’s total income. But Regal was one of the only publicly held chains to show healthy growth for what are often unhealthy snacks.
AMC Entertainment Inc., which runs nearly 5,700 screens, sold $313.9 million worth of hot dogs, soda, popcorn and candy in its most recent three quarters, down 8% from the comparable period a year earlier, when concession revenue totaled $341.8 million. Carmike Cinemas Inc., operator of nearly 2,500 screens, said concession revenue in its last six months was $75.1 million, compared with $82.1 million in the comparable period in 2004, down 9%. Carmike’s spending on concessions during those six months slid even faster, from $9.1 million to $8 million, a 12% drop.
Even though Regal’s concession sales were up in its most recent fiscal year, the average amount of concessions sold per customer over the last three years has not kept pace with the rise in average ticket prices.
Domestic theater admissions fell nearly 9% last year to 1.4 billion tickets sold, the third consecutive year of decline. After the 1.64 billion admissions in 2002, the turnstile slowed to 1.57 billion tickets in 2003 and 1.54 billion tickets in 2004, the Motion Picture Assn. of America said.
That’s why popcorn merchants see few kernels of good cheer. Weaver Popcorn Co. said its theater sales had fallen about 10% over the last several years. But because the company also makes microwave popcorn, it benefits when film fans choose to stay home and rent DVDs instead and cook their own snacks.
“If people are not going to theaters, we can still have people [eating] popcorn at home,” said Jim Labas, Weaver’s concession representative.
In an attempt to boost slumping sales for the 41 farmers who are part of his cooperative, Preferred Popcorn’s Krug has been pushing popcorn in theaters as distant as Japan, India and Russia. The box-office drop “has caused us to be more aggressive in foreign markets,” Krug said.
J&J; Snack Foods Corp. said only a tiny piece of sales for its snack products (Minute Maid Soft Frozen Lemonade and the new CinnaPretzel, among others) came from theaters. Still, the company feels the downturn.
“We count every penny,” said Jerry Law, a J&J; Snack Foods representative at ShoWest. “Last year was a bad year. We’ll see what kind of movies they have for this summer.”
Few theater concessionaires are having as difficult a time as Bonfiglio of Summit Foods. As theater sales for Gummi Bears have slumped, and some of Summit’s exclusive theater deals have been voided by exhibition industry consolidation, the company was forced last year to lay off 10 of its 33 employees.
Summit is introducing an array of new theater candies, including Bulls-Eye caramels, and moving into retail stores such as Walgreens to try to improve its fortunes. But Bonfiglio is not convinced that the only thing ailing Hollywood is a recent crop of regrettable releases; he worries moviegoing as a social habit may be disappearing. “There are so many other vehicles for entertainment,” he said.
Not all the ShoWest vendors said the slowing sales had hurt their bottom lines.
American Licorice Co., the makers of Red Vines, relies on theaters for 10% of its business and hasn’t noticed weakening returns because of the box-office drop. The people behind Dippin’ Dots, a snack made from frozen ice cream pellets, say their product’s novelty has helped maintain profit. “We just keep growing,” said Doug Barwig, manager of western operations.
And Ricos Products’ Liberto said that although movie sales “have been softening,” the company was diversified enough -- it sells nachos at Wal-Mart stores and to theaters as distant as Dubai -- to avoid an earnings hit.
Where some see lemons, others see lemonade -- or, at least, fruit smoothies. Steve Nilforoushan says that what theaters and their patrons really need is a healthy alternative to all those salty and sugary rations.
Appearing at the convention for the first time, Nilforoushan was launching Smoovies, a frozen drink filled with bananas, strawberries and no high-fructose corn syrup. Nilforoushan says his concoctions would cost just over $1 for exhibitors to make, and retail for as much as $6.50 -- a healthy profit for theaters, he says, but not a wallet-gouging increase over what such drinks cost in smoothie stores.
“Look around here. Everything is junk food,” Nilforoushan said, surveying the ShoWest tradeshow floor. “Movie attendance doesn’t really worry me, because the graph for growth in the smoothie industry is going up exponentially.”