Wednesday, December 29, 2010

$8 Beers: The Stadium Food Service Business

If you are like me and you enjoy going to many different sporting events, you pay attention to many of the team’s revenue drivers: ticket sales, corporate sponsors, suits, naming rights, merchandise sales, and more. Concessions always seem to slip my mind. Maybe it’s because I used to view them as an overpriced and unappealing service. However, a recent talk with a former Aramark VP of Marketing is beginning to reshape my perception of the business.

Aramark is a leader in the stadium and arena food service industry. They also specialize in facilities management, premium event catering, and more. They can make money three different ways. In a “P+L” deal, the concessions collect money from the fans and pay the team 40% – 50% of the earnings. In a “Fee” deal, the client (the sports team) pays a flat management fee for Aramark’s services. In a “Split” deal, a combination of the two occurs. Does 40%-50% seem like a big chunk of money to pay the team? You bet! The fast food business operates on an average 30% markup. When you have to pay 40%-50% to the team and still make a profit, you find yourself charging $8 for a beer. For Aramark, Beer is great. It’s where they make their biggest margin. Here are some of their other initiatives:

Shift to being more fan friendly

Due to their big presence in baseball stadiums, Aramark studied fan characteristics and developed two consumer profiles. The “baseball purist” is the stereotypical fan who follows the sport, is dedicated to his/her team, and is relatively easy to please. An equally important segment is the “Social fan”, the person who enjoys the game for the entertainment it offers, or the great family value that is derived from it. As if New York teams weren’t competitive enough, the simultaneous rise of Citi Field and New Yankee Stadium (not served by Aramark) presented new challenges. While New Yankee stadium offered restaurants like the delicious, yet fairly common Hard Rock CafĂ©, Aramark decided to take a different approach with Citi Field. It included restaurants and stands filled with unique NY foods, from small local pizza shops to fancy long island seafood choices. In Coors Field, Aramark included a gluten free stand – a move that earned them national praise and higher sales.

Shift to being more tech savvy

Huge opportunities lie in the concept of “Loaded Tickets”. Those are ballpark admissions with loaded credit which can be used for food, drinks, and merchandise. Families seem to be heavy users of the concept, as the parents prefer sending the children to the concessions with a ticket rather than cash. Business people also showed favoritism towards them as the loaded options make the tickets a more lucrative gift. In general, people tend to spend more when they have credit left on the tickets. The teams get to enjoy the unused credit at the end of the night. The Philadelphia Phillies became the first MLB team to use loaded tickets with Aramark’s help. According to the Sports Business Journal, The Arizona Diamondbacks and Levy Restaurants have invested $700,000 for the new technology.

Aramark is a good example of how the concessions service industry is re-thinking fan expectations, thus creating higher revenues for themselves as well as the sports teams they serve. Now I know how my $8 beer is being used.


Image by Kevin H.