I recently read a piece that detailed the mark-up on movie theater snacks (popcorn, soft drinks, candy) that was rather shocking. I mean, I know that you're charged a pretty big mark-up for your movie-time snacks, but I didn't realize how big.

Amanda Bell's article over at Yahoo has some pretty interesting numbers, culled from Richard B. McKenzie, professor emeritus at the UC Irvine Merage School of Business and author of Why Popcorn Costs So Much at the Movies and Other Pricing Puzzles. Here are the markups for the biggest cinema staples:

Popcorn

  • $8.15: The average cost* of a large bucket popcorn (with free refill)
  • 90¢: The estimated cost of the raw goods needed to make it, per McKenzie’s research.
  • That’s a markup of nearly 90 percent from kernel to consumption. Though for you bargain hunters with big appetites, if you get a refill, that margin drops to around 79 percent.
Okay, suddenly I'm not quite as hungry. Maybe I'll just have something to drink.

Soda

  • $6.31: The average cost* of a large soda
  • 40¢: The estimated cost of the raw syrup that goes into a 50.5 oz. large Coke.
  • Adding in the cost of cups (say from Costco, $.07 apiece), lids (half a cent each), straws (about a penny per), and soda water (about 2 cents a serving) it’d be more like 51 cents a cup. Tack on another 40 cents if the moviegoer gets a free refill, and it’s still an 86 percent markup.
Okay, so popcorn and a Coke are out. Can I get some candy, or will I need to re-finance my mortgage for that, too?

Candy

  • $4.25: The cost of plain M&Ms at AMC
  • $2.08: The cost of plain M&Ms from Wal-Mart
  • All in all a (relative) bargain at a 51 percent markup.
As to why these items are so expensive, the professor has an explanation. You want to keep your movie theater, right?
According to McKenzie, theater owners need these concessions profits to cover the dozens of hidden house costs — employee wages, installation of snazzy sounds systems, energy bills, for example — since most of the actual ticket money gets sent back up the ladder to the movie studios. “If movie theaters didn’t make as much off concessions, they’d want to charge more for tickets,” says McKenzie. But raising ticket prices is complicated because movie studios “put contractual controls on theaters in terms of prices they can charge.”
It's not just movie theaters, either. Check this out.