SWEET SUCCESS; CONCESSIONS ARE A BLOCKBUSTER AT THE BOX OFFICE.
Forget ``Titanic,'' ``Armageddon'' and ``Saving Private Ryan.''
Popcorn, Milk Duds and Cokes are Hollywood's blockbuster hits.
Snack bars are the theater industry's economic engine, generating profits of 80 to 90 cents for every $1 spent.
Theater operators unapologetically charge $10 for a bag of popcorn, a candy bar and a soda, knowing that customers won't complain.
``You've got a captive audience, and you're stuck with the choices, just like at an airport,'' said restaurant consultant Janet Lowder.
How important is the snack bar?
Well, it's the source of nearly $3 billion in annual revenues for theater chains and is growing: Analysts estimate that snack-bar spending per patron grew by 5 percent last year, outstripping attendance growth of 3.7 percent.
``The truth of the movie business is that concessions are where exhibitors make their money,'' said Kevin Skislock, an analyst with LH Friend, Weinress, Frankson & Presson.
Skislock estimates that AMC Entertainment, for example, generated 84.5 percent profit margins on concessions in its most recent quarter, compared to 45 percent margins at the box office. ``Maybe Hollywood looks down its nose at popping popcorn, but that's where the money's made,'' he said.
For customers, popcorn is the food most closely associated with movies. For theater owners, the economics of popcorn probably make it their favorite too. A 50-pound bag of popcorn that costs $7.50 wholesale will produce $500 worth of popcorn at the concession stand.
``For a lot of people, a movie is just not a movie without popcorn,'' said Gordon Hodge, an entertainment analyst with NationsBanc Montgomery Securities.
Soft drinks, an area dominated by Coca-Cola, are the second largest revenue generator, helped by the ubiquitous cup holders now built into most theater seats. Third place goes to candy, where Milk Duds, Reese's Pieces and Raisinets duel for supremacy.
Even with those staples generating a healthy profit, theater owners aren't standing pat. Nachos, for example, have gone from unknown ethnic food to multiplex regular in a decade.
Now theater owners are selling items like Pink's Hot Dogs, chicken wings, pizzas, specialty coffees and garlic pretzels - all at inflated prices - to tempt more and more moviegoers.
Still, it's tough for new entries to break through, particularly if they require extra staff time.
``The fundamentals of selling popcorn, sodas and candy haven't really changed much because speed at the concession line is king,'' said Michael Rosenberg, president of Promotion in Motion, a New Jersey-based supplier. ``You're not going to find chicken wings becoming a standard.''
Jenny Cohen, marketing executive with Los Angeles-based Pacific Theaters, agrees. ``The primary candies are pretty consistent - Milk Duds, Red Vines, Raisinets,'' she said. ``We have the 80-20 rule, which means that 80 percent of your sales in candy come from 20 percent of your products.''
Still, Cohen reports, response has been strong from Pacific's introduction of Pink's Hot Dogs at its state-of-the-art Winnetka 20 in Chatsworth earlier this year, with plans to take the snack into half a dozen other Pacific outlets.
``We look at the hot dog reflecting the same indulgence as the theater does, particularly compared to a quick-fix hot dog,'' she said. ``It really snaps when you bite into it.''
Outside of the occasional moviegoer who sneaks food in, most patrons accept the premium prices without complaint.
AMC, which generally discounts prices to slightly below average in its markets, has seen snack-bar spending per visit jump by 12 percent over the past two years to $1.97.
Even with the discounting, AMC's snack-bar margins are in the 82 to 85 percent range, analysts estimate. That's a few percentage points lower than the returns at Regal and Carmike.
How do theater operators manage to ring up profits better than virtually any other major business? There are seven key factors:
The need to snack.
``I think it's a crossover from watching television, where they can't just sit down in front of a screen without having something in hand,'' said Sherdian Warrick, food and nutrition editor at Health magazine. ``There has to be something else going on.''
``With movies at megaplexes starting every 20 minutes, the theater can fully staff the stands and keep lines shorter,'' Skislock noted. ``If there are 10 people in a line and your movie's going to start soon, you can't be bothered; but if there's only two or three people, it's much easier to buy what you want.''
Bulk candy, which is sold from self-service bins for $6 to $7 a pound.
``The idea caught on pretty quickly,'' said Scott Samet, co-founder of Los Angeles-based Taste of Nature, which ships more than 1 million pounds of candy annually to theater chains. ``Once the numbers got analyzed, the circuits realized there was serious money to be made in bulk. Since it's self-service, people's eyes are usually bigger than their stomachs.''
Consumer giants such as Nestle, Coca-Cola and Hershey are tying their products to the big summer movies, generating more excitement for the movies and the products behind the concession stand.
``Even though `Godzilla' didn't live up to expectations at the box office, our campaign on the movie went very well,'' said Hershey spokesman Mike Kinney. ``We're definitely going to do more.''
The megaplex phenomenon.
``When people come to megaplexes, they have heightened expectations and they tend to spend more time at the location,'' Rosenberg said.
More, more, more.
Theater staffs have developed the technique of ``upselling,'' or convincing patrons to buy larger sizes of popcorn and drinks for a discount. Kathy Warning, UA's director of food services, says she recommends trying to upsell to about half the customers.
Americans aren't particularly concerned about healthy eating and tend to ignore warnings about the treats at the movie snack bar. ``People are just getting fatter and fatter,'' said Jane Hurley, a senior nutritionist at the Center for Science in the Public Interest.
Theater owners say such criticism isn't merited since they are simply delivering what their customers want.
``We're not a health-food store, and we never claimed to be,'' said Mark Pascucci, a Loews Cineplex Entertainment vice president.
As for the future, chains are scrambling for the magic solution to make themselves stand out.
``My sense is that chains are looking hard at bumping up the quality of snacks as a way to differentiate themselves,'' said Ginger Wilson, vice president of marketing at Pasadena-based Wetzel's Pretzels, now in 50 theaters after less than a year of trying to crack the market.
The Regal chain has opened Funscape complexes containing bowling alleys, miniature golf and bumper cars; Loews Cineplex has developed items cooked at the concession stand such as curly fries, pizzas and chicken tenders, and is ramping up offerings of specialty coffees.
``We tried coffee five years ago, but we did it with fancy machines that no one could work,'' Pascucci said. ``But with the boom in coffee bars, we're going to try again. People have been asking for it for a long time.''
And in a move that could signal a major turn toward upscale moviegoing, General Cinemas opened Premium Cinema four months ago in a Chicago suburb. The idea was to give customers willing to pay $15 rather than the regular $7.50 enough extra flourishes to turn them into repeat customers.
For the extra cash, Premium customers get access to a 70-seat auditorium next to the company's ``standard'' 18-theater complex. The auditorium has a separate entrance, valet parking, concierge service and a bistro-type restaurant. The theater itself has leather seats and tables.
Movie theaters went into the concession business to stay alive during the Great ookies in the Depression. Previously, popcorn carts and candy stores around theaters had served the function of today's snack bar. Other facts:
Only a third of customers actually buy items from the snack bar, although half of those are buying for more than themselves.
Moviegoers prefer bite-size candies rather than bars, so many bars like Snickers are sold at theaters as a four- or eight-pack of bite-sized bars.
Texans are partial to pickles. ``They love pickles,'' says Loews Cineplex's Mark Pascucci. ``They eat them like candy bars.''
Action films like ``Godzilla'' and ``Armageddon'' generate the best sales while adult-oriented fare like ``The Horse Whisperer'' and ``Saving Private Ryan'' generate notably smaller popcorn sales.
Men are more likely to buy from snack bars than women.
Senior citizens are the least likely to buy, while young adults are the biggest spenders.
Candy bars sold at theaters tend to be in the 3- to 6-ounce size.
Coca-Cola has ``pouring'' rights in 70 percent of American theaters.
Many snack counters are not set to give out tap water. Bottled water, virtually unheard of at concession stands five years ago, has become a major presence.
New concession stands have cashiers more closely together.
The candy industry has no tally of which brands sell best at movie theaters, but experts say the following are consistently strong performers:
Consistent top seller
Broke through on popularity of ``E.T.''
Promoted as a healthy snack
Eye-catching blue box
Strawberry-flavored licorice; big seller in the East
Major seller in the West
Sour Patch Kids
Jaret Candy International
Latest hit brand
Broke through during past decade
Easy to distribute among a group
Crunchiness, low-fat are strong points
Ferrara Pan Candy
Big seller at the Carmike chain
Photo, 2 boxes
Photo: no caption (popcorn and candies)
Photo illustration by David Crane/Daily News
Box: (1) Fast facts (see text)
(2) Dandy candies (see text)
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Aug 24, 1998|
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