Will regulating F&B prices impact multiplexes? Find out what theatre industry has to say

Movies are never complete without a bucket full of popcorn and a glass of coke but not everyone is happy with what the theatres are charging for the food and beverages (F&B). And now, even the Bombay High Court has said the prices of F&B should be regulated at the theatres. But what may come as a relief to moviegoers can put a lot of pressure on the theatre industry that gets a significant share of profits from this segment.

In conversation with Moneycontrol, Rahul Puri, MD of Mukta Arts said, “The move will affect the theatre industry a lot. Theatre industry basically is like a service industry, like a five star hotel or a restaurant, so if you don’t ask five star hotels to regulate their prices why ask multiplexes to regulate the prices.”

Multiplex chains have seen a steady increase in contribution from F&B in overall revenues over the years, said a 2017 FICCI-KPMG report. To increase growth in this high margin revenue stream, these chains have expanded their F&B menu, introduced live kitchen counters, increased point of sales distribution all over cinema and used technology in the F&B process.

While multiplexes are striving to improve their F&B revenues, the Bombay HC judgment may be a dampener. The court has also asked the Maharashtra government to frame a policy in six weeks on the regulation of F&B prices at theatres.

According to a 2017 ICRA report, F&B has given a strong push to the overall revenues of multiplexes, a trend which is expected to continue in the near term, given its enormous potential. According to Puri the “F&B segment is very large and ranges between 25-30 percent of the industry and it is more important when it comes to profits."

“Running a theatre in terms of structure is not particularly a profitable business therefore a great contribution does comes from F&B and limiting that contribution will hurt the industry quiet badly.”

The Bombay HC ruling comes in response to a PIL that challenged the prohibition of outside food in theatres. The court had said if multiplexes can prohibit people from bringing their own food, then there should be a total prohibition on eatables.

However, theatre industry says otherwise. “If people opt to go to restaurants and don’t expect them to allow outside then why should they expect multiplexes to allow food from outside,” said Puri. Another argument to note is that since multiplexes have the right to admission reserved, they can bar outside eatables in cinema halls.

The exhibition business relies a lot on revenues that come from selling food and beverages at theatres as ticket sales alone do not cover operating costs. While the decision involves just one state- Maharashtra, regulation of F&B prices will impact the theatre business. Multiplex chains are also saying that business would become non-viable if food stalls were not allowed to make profits.