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Business Analysis & Features

The end of popcorn economics

Cinemas are suffering as cash-strapped movie fans watch their pennies

You arrive when the trailers have already started, pay using a credit card in a bid to forget that the family seats that used to cost a tenner now leave little change from £40. You try, desperately, to usher the kids away from the popcorn kiosk towards the screen door. You have a packet of Mars Bars in your pocket, bought for £2 from Tesco.

But the mission fails. Little Marcus has sniffed the kernels. If you don't buy that family car-sized tub of popcorn, a full-blown tantrum will erupt. You succumb, buy a bucket of the stuff, plus a few drinks to counter the salt. The total rings up on the till; it's more than half the cost of your tickets. You stifle a gasp.

Welcome to popcorn economics.

Anger about the price of cinema concessions has seen one disgruntled film fan in the US file a class action in an attempt to bring down costs. Joshua Thompson launched the suit after a trip to the stand at an AMC cinema cost him $8 for a pack of sweets and a Coke. In a local shop, the same purchase would have cost him $2.73, but the cinemas chain banned people from bringing food into its screens in 2009.

"He got tired of being taken advantage of," Mr Thompson's lawyer, Kerry Morgan, said. "It's hard to justify prices that are three and four times higher than anywhere else."

Popcorn economics sees big numbers bandied about. A Morningstar analyst claims that, of every dollar spent on popcorn in the US, roughly 85 per cent is profit. Here in the UK, a bag of popping corn can be bought from the supermarket for 50p per 100 grams. Cinemas will pay less due to bulk discounts, but they charge more than £6 per 100 grams, about a 1200 per cent mark-up.

Unsurprisingly, operators disagree. "You can't just look at the price of goods," says Steve Wiener, chief executive of Cineworld, the listed cinemas group. "A huge chunk of the cost is made up of staff wages, land rents, electricity. Our average cinema is about 40,000 square feet, a corner shop sells popcorn on about 500 square feet of land, where Asda's turnover from a 40,000 square feet shop would be much bigger than cinema revenue. We need our "extras", goes the cinemas' argument, to subsuduse ticket prices. "If," Mr Wiener says, "we got rid of concession sales and raised ticket prices, people wouldn't like that either."

Retail analysts say if cinema concessions were brought down to their cost in a supermarket, it would add another £3 to the average ticket price. But the importance of popcorn to the industry was highlighted by Guy Hands of private-equity group Terra Firma, who on buying cinemas chain Odeon, said, "The management team really believed they were part of the film business. I had the difficult job of explaining to them that they were in the popcorn-selling business."

Still, if popcorn is that important as a commodity in the industry, the latest purchasing trends may worry some. While UK box-office takings passed the £1bn mark for the first time last year, up 5 per cent according to the British Film Institute, insiders say spending on extras like popcorn fell.

Privately owned Odeon and the other national chain, Vue, owned by Doughty Hanson private equity, do not publish retail figures, Cineworld saw its average retail spend per person fall from £1.73 to £1.69 in 2011. Given a third of cinema revenues come from the concessions stand – and screen advertising, also hit by the downturn, makes up about 10 per cent – Nick Batram, analyst at Peel Hunt, says cinemas need to modernise their food and drink offering.

"In cinema, retail is the most sensitive pressure point when the economic backdrop is difficult. There's more that chains can do to be competitive, like monitoring who their customers are, when they are coming and offering promotional deals on things like popcorn for those who book online. The foyer experience of a cinema hasn't changed for decades and the industry needs to modernise."

Stop and search in hunt for snacks

Ever thought about smuggling a Coca-Cola or packet of Butterkist into the cinema? Think again.

Anecdotes abound of cost-conscious cinemas ordering staff to search customers' bags for snacks. Regular cinemagoers have horror stories, as a straw poll around The Independent office shows. One movie buff was told to leave her Pret A Manger sandwich at the front desk. She went away, hid it in her hood, and returned. Another reports being stopped for having a bottle of mineral water with him. He ordered a free glass of (grudgingly served) tap water from the bar instead. Cinemas claim they do not operate a stop-and-search policy unless for security reasons.