Multiplexes see F&B revenue growth beat ticket sales

Rahul Singh, chief operating officer, PVR Inox Ltd, said the company is aggressively and proactively diversifying its avenues to generate F&B revenue, ensuring resilience against fluctuations of footfalls.

That's showing in the numbers. PVR Inox saw income from F&B grow 17% in Q4FY24 compared to Q4FY23. Ticket sales earnings, on the other hand, rose 6% over this period. F&B sales have grown steadily over a period of time, and as of Q4 FY24, comprised 32% of PVR Inox's total income, compared to 49.2% share of ticket sales.

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And for Cinepolis, its F&B revenues have historically grown by around 20-22% annually, whereas box office revenues have risen by 18-20%, the company's managing director, Devang Sampat, said. Cinepolis is an unlisted company with a movie theatre chain comprising 442 screens in more than 35 cities.

“Multiplex chains are heavily investing in creating a comprehensive and enjoyable cinema experience for their customers, which includes diversifying their food and beverage offerings. By providing a wider variety of food options, these chains encourage patrons to spend more on F&B," said Sampat. 

Companies such as PVR Inox and Cinepolis India say they are aware of the importance of food offerings when families step out, and work on combos and offers, especially when film releases are few or titles are unexciting.

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Trade experts, however, point out that it is crucial for movies to start delivering on all other revenue streams to sustain their businesses. “It is fine to try and monetize these sources well, but the urgency to watch a film will remain the backbone of the business. In the long run, even mall rents are dependent on admissions," film producer, trade and exhibition expert Girish Johar said.

The art of making money

F&B pricing at Cinepolis has been adjusted in such a way that even with declining admissions, revenue from this category continues to grow. An increase in the key metric known as spend per head (SPH) indicates that despite fewer visitors, the average amount each person spends on food and beverages is higher, compensating for the reduced number of admissions.

Trade experts say SPH makes up for admissions when F&B rates go up, or as premium offerings are introduced. With the launch of luxury cinema formats, theatres are encouraging higher spends even if footfalls are low. Combos and offers also help.

“While the first half of the year has been challenging with respect to admissions, we have seen robust growth in spend per head and overall F&B revenues," Sampat explained. "Other revenue streams such as home delivery and catering have also contributed to the overall increase in F&B revenue. Although their contribution is relatively small compared to on-site sales, they nonetheless play a role in boosting the total F&B revenue." 

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Meanwhile, PVR Inox has devised a strategy for low footfalls, which is most crucial and drives the business but can be inconsistent. 

“To address this, we have developed a robust home delivery channel, which is agnostic to cinema content, allowing customers to order our food and beverages through aggregators," Singh said. “Additionally, we are looking at being present at outdoor events, kiosks in malls to extend our reach. We are working on a line of products like microwave popcorn and ipop (instant popcorn) for patrons to enjoy at home." 

While referring to popcorn and cola as hero items, Singh said the company has moved beyond traditional offerings and has menus curated by celebrity chefs such as Sara Todd, Vicky Ratnani and Saito.

To be sure, combos, discounts and offers are strategies thought of in advance when theatre owners are aware of a lean content pipeline. 

Rahul Puri, managing director, Mukta Arts and Mukta A2 Cinemas said the idea is to cash in on the fact that lower admissions mean there will be fewer people queuing up at counters and those visiting cinemas will have it easier and can, therefore, spend more. The other big advantage with F&B revenue is that unlike ticket sales, no entertainment tax is levied on it.