Outside food gives multiplexes the jitters
Multiplex share prices fall as Maharashtra hints at allowing outside food in movie theatres
Share prices of several multiplex companies fell sharply after a Maharashtra minister stated in the Assembly on Friday the government would allow people to carry outside food into cinema theatres. The move, if implemented, could severely hit cinema theatre operators, as sales of food and beverages contribute a sizable chunk to their revenues and profits.
Shares of PVR and Inox Leisure plunged 13.1 per cent and 5.43 per cent, respectively, on the BSE. The share price of Subhash Ghai’s Mukta Arts, which runs the Mukta A2 chain of multiplexes, also fell but recovered later to end the day with a 1.26 per cent gain. The state government will also meet multiplex owners soon on reduction of food prices sold on their premises and bringing them at par with market rates.
In January, a Mumbai resident, Jainendra Baxi, filed public interest litigation on the matter with the Bombay High Court. He claimed in the PIL that there was no legal or statutory provision prohibiting people from carrying personal food items into film theatres. He also said that by preventing outside food and beverages in cinema halls, theatre owners charged higher prices for the eatables sold by them. The matter is still pending in the high court and is expected to be heard on July 25.
Reacting to the development, the Multiplex Association of India (MAI) said in a statement, “We wish to clarify that none of the multiplex cinema theatres operated by any of our members has received any order, notification or communication to this effect from the government of Maharashtra or any other regulatory authority. Hence, we are not aware of any decision to this effect, if taken by the government.”
“Since the matter is sub judice, and since we have no other formal communication from any regulatory authority, we would not like to comment any further on the matter,” added Deepak Asher, president, MAI.
Last week, the association had said it had filed an affidavit and written suggestions in the high court on why outside food and beverages should not be allowed in multiplexes.
If an order allowing outside food in multiplexes is passed, it would have impact on the earnings of multiplexes. Food and beverage (F&B) revenues accounted for nearly 27 per cent of the top line in the case of PVR and 22 per cent for Inox in 2017-18. It is also the second-fastest growing revenue stream after advertising, at 10 per cent year-on-year (y-o-y) for PVR and 7.7 per cent y-o-y for Inox. A lot of the growth has come from the average spend per head (SPH) for both chains. In FY18, spends per head grew 10 per cent in the case of PVR and 7.3 per cent for Inox.
“Almost 35-40 per cent of revenue is generated by the F&B segment for multiplexes. Hence, it is a high margin business for the industry. For a company like Mukta A2 Cinemas, 25-30 per cent sales are contributed from the F&B sector. As the final verdict is yet to be made by the court, the government must engage with multiplexes before passing any statement on this issue,” said Rahul Puri, MD, Mukta A2 Cinemas.
Maharashtra is one of the biggest markets for movies, and the home of Hindi cinema. Maharashtra accounts for 20-25 per cent of revenues for multiplex chains.
Multiplexes across the board have been trying to grow their F&B offerings by experimenting with cuisines and products. For example, some properties from Inox offer a specially curated menu by celebrity chef Vicky Ratnani, while PVR has experimented with classic movie hall fare popcorn and started its brand of popcorn called 4700BC Gourmet Popcorn.