Beer and burger sequel steals the show in Cineplex earnings

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More moviegoers are swapping out popcorn and soda for a burger and a beer – and it's helping Cineplex Inc. offset declines at the box office.

Larger menus and expanded beer and wine offerings made up for fewer people going to the movies last year, the Toronto-based company reported on Thursday. Cineplex reached new annual records in box-office revenues per patron, concession revenues per patron and theatre food service revenues. The movie theatre chain is depending on customers spending more because fewer of them are coming through the doors, with attendance falling 5.6 per cent to 70.4 million visits last year and total box-office revenue falling 2.5 per cent to $715.6-million.

Movie theatres across the continent are struggling with rising competition from other entertainment sources, such as Netflix; theatre attendance in North America in 2017 dropped to its lowest level since the early 1990s. That has contributed to a decline in profit for Cineplex, and its shares have dropped 42 per cent since last May.

The company wants to make it easier to spend on food and drink. It is working on an update to its mobile application to allow for concession orders via mobile devices, the same way it currently encourages digital ticket orders.

Meanwhile, Cineplex's smaller, more comfortable VIP theatres have represented higher value in concessions because people tend to buy more meal items and can also order alcohol.

Now those opportunities are expanding. About two years ago, Ontario changed the rules for selling liquor in movie theatres, removing the restriction that minors not be present. That let Cineplex expand beer and wine sales beyond its VIP theatres in the province. Last August, Alberta made a similar change to its rules.

"We've already rolled that out to a number of locations across the two provinces, and we'll continue to do that through 2018," chief executive officer Ellis Jacob said in an interview. A beer ranges from roughly $7 to $9, depending on size (and provincial taxes) and wine ranges from $11 to $16. "We feel being able to buy a beer or a glass of wine will help as far as the overall [concession revenue per patron] goes."

Mr. Jacob believes the company has an important tool to improve the movies' ability to draw audiences. He recently held meetings with Hollywood studios to discuss the marketing opportunity of Cineplex's Scene loyalty program, which has 8.9 million members. While some studios have used Scene for marketing in the past, Mr. Jacob is promoting the fact that more can be done with its customer data to employ targeted advertising – either because a customer fits the demographic the movie speaks to or because they have a history of attending similar fare.

"It allows us to pinpoint and market to you, which they can't do without the data," he said.

But Mr. Jacob has also been trying to rely less on the vicissitudes of the Hollywood film slate. In November, the company announced a three-year partnership with the National Football League to bring Sunday night games to its theatres. While box office and theatre food service revenue still make up the bulk of Cineplex's business, its Amusement division has been growing; the company has built four Rec Room "eats and entertainment" locations and has made acquisitions in the gaming and entertainment space in the past year.

"I'm looking three to five years out and saying, 'What are we going to be as a company?'" Mr. Jacob said. "The focus is on the non-theatre businesses and our continued diversification."

However, he added that the recent blockbuster opening weekend for Black Panther proves that movie theatres still have a draw. The movie made US$242-million across North America in its first four days and Mr. Jacob said it was the highest-grossing opening in the first quarter that Cineplex has ever seen.

"Everyone keeps talking about this being a systemic change," he said. "To me, it's cyclical and it's all product-driven. On the movie side, every week it's a new business."

Cineplex reported a fourth-quarter profit of $28.8-million, or 45 cents a diluted share, up from $23.3-million or 37 cents a diluted share a year earlier. Revenue for the quarter ended Dec. 31 was $426.3-million, up from 385.4-million the previous year.