A few months ago, the Bombay High Court had ruled that food items and bottled water be sold at regular prices inside multiplexes. The Maharashtra government had said it would soon frame a policy in this regard. On Friday, Ravindra Chavan, junior minister for food and civil supplies, said according to the Maharashtra Cinemas (Regulation) Rules, 1966, cinemas could not prohibit consumers from carrying food and action would be taken against those who do not allow it. The ban on dual pricing-the practice of charging different MRPs for the same product in different places-will be implemented from August 1.
The end of prohibition on outside food will come as a big dampener just when the multiplex industry is growing rapidly and exploring newer sources of income.
According to global property consultant Cushman & Wakefield, a boom in retail over the past few years has propelled growth in multiplexes. By the end of FY17, PVR Cinemas and Inox Leisure had 625 and 476 screens, respectively, up from 150 and 63 in FY11, as real estate developers added 33 malls during the period, taking the count to 225. “While we were adding 60-80 screens every year, it is expected to jump 30-40% in 2018-19 and will follow the suit in the next two to three years as well, mainly due to an increasing construction of malls.” Gautam Dutta, chief executive of PVR Cinemas, told ET in March. As more multiplexes come up, owners look for newer sources of revenue. “We have introduced concepts like Play House, a theatre for children, virtual reality (VR) lounge, sub-brands like PVR Icon etc., and are focusing more on the food and beverage segment by introducing celebrity chefs and newer menus to boost revenues,” said Dutta.
The focus on F&B is understandable.
In the past five years ending FY17, the share of revenues from high-margin F&B has risen to 25-26 per cent in FY17 from 19 per cent, and the share of revenues from ticket sales has fallen to 56 per cent from 62 per cent in FY12. In fact, it is estimated that multiplexes earn as high as 75 per cent gross margin on F&B sales. The average F&B spend as a percentage of ticket expenses is up from 28 per cent in FY12 to 41 per cent in FY17, according to industry data.
If state governments force multiplexes to sell F&B items at maximum retail price and allow outside food, the industry may have to put up with lower earnings growth in the coming months. Shares of leading multiplexes saw a sharp fall on Friday.