The statement by consumer affairs minister Ravindra Chavan in the assembly comes in the context of a public interest litigation being heard in the Mumbai High Court about ‘overcharging’ by theaters on food and beverage items.
There have been a lot of complaints about how consumes are being forced to shell out Rs 50 for popcorn that is available at Rs 5-10 outside.
Local political parties, such as Maharashtra Navnirman Sena, have also sought to interfere in the matter and force multiplex theaters to allow customers to carry their own food and drinks inside.
While some people on the street are expressing worries about the smell of ‘chutneys’ and ‘curries’ inside multiplexes, others point out that once outside food is allowed, theater owners will automatically reduce the price of ‘inside food’, and people will then prefer to buy popcorn from the theater instead of ‘packing lunch’.
The government’s move could hurt multiplexes as they get about 35%-40% of their profit by selling food and drink items considerably above their actual sourcing costs.
Stocks of multiplex companies such as PVR were down 10%-13% after the news.
Rahul Puri, MD of Mukta A2 cinema chain, said such a move will be extremely disruptive for the industry and that his understanding was that the government will instead focus on regulating the food.
“If the government wants to change the way the business operates, a certain amount of discussion is required with the industry,” he said.
He said people are willing to pay high rates for food in restaurants and theme parks, and there seemed to be no reason to target multiplexes alone.
About 25-30% of the total revenue and about 35-40% of the total operating profit of multiplexes come from the sale of food and drinks.
Even though the PIL in Bombay High Court deals with only multiplexes in Maharashtra, any ruling by the court there could ultimately lead to a sharp impact on the prices of food and drink items in multiplexes across India.
However, Karan Taurani of Dolat Capital said his checks with industry sources indicated that the move has not been made notified yet.
“Officially, nothing has happened. There are also security issues in allowing outside food into theaters,” he said, quoting industry feedback.Take Our PollInvesting expert SP Tulsian said even if the govt agreed to go for a price control instead of forcing theater owners to allow ‘outside food’, there will be an impact on multiplex owners’ profits.
“Even if there is a settlement, the government will be keen to ensure that the prices are reasonable, and this will bring down the profit margin on F&B.”
Maharashtra contributes about 35% of the total revenue of India’s multiplex industry, even though it accounts for only about 25% of the seats.