The largest movie theater chain in the world is collaborating with one of the largest retailers in the world on a new line of popcorn. Yes, AMC Theatres has announced it is teaming up with Walmart for an exclusive launch of a new line of microwave and ready-to-eat popcorn. Sure, there are plenty of options for popcorn already at a supermarket near you, but do any of those currently come from AMC? And, more to the point, can any of those brands of popcorn help chip away at AMC's gigantic mountain of debt? No. No, they cannot.
First, let's talk about the popcorn. The collaboration begins with featured endcaps, which will display AMC Perfectly Popcorn in hundreds of Walmarts throughout the U.S. beginning on March 11, just in time for the Academy Awards on March 12. In April, AMC's popcorn will hit shelves in more than 2,600 Walmart locations, as well as Walmart.com. There will be six items in total, including three flavors of microwave popcorn and popped popcorn: Classic Butter, Extra Butter, and Lightly Salted. The microwave Extra Butter comes with buttery topping packets to "replicate that ultimate movie theatre experience of adding even more butter flavor to their popcorn." Adam Aron, Chairman and CEO of AMC Theatres, had this to say in a press release:
"For years, AMC's in-theatre innovations and initiatives like recliner seating, better food & beverage offerings, enhanced sight & sound presentation technology, AMC Stubs, and premium formats have focused on Making Movies Better at the movie theatre. Through our retail introduction of AMC Theatres microwave and ready-to-eat popcorn, we continue to Make Movies Better, this time in the comfort of your own home. And with popcorn now hitting shelves, we remain focused on future innovations that will continue to surprise and delight movie lovers and our shareholders."
Can The Retail Space Actually Help AMC's Financials?
Let's circle back to the financials of this new venture. It's no secret that the pandemic was very, very hard on the movie business, particularly theaters. For what it's worth, AMC had some financial issues they needed to sort out before all of its theaters were forced to close for the better part of a year, leading into a very slow recovery period at the box office. Things have improved, but it's still not great. The company's stock has tumbled from radical highs in the summer of 2021 approaching $60 per share to just over $6 per share as of this writing. (Much of that boom was driven by the so-called "meme-stock" trade, much like what happened with GameStop.)
The other very important thing to note is that AMC is saddled with around $5 billion in debt as of late 2022. That debt load is a massive burden, and, coupled with the decline in its stock price, has created a rough situation for the largest theater chain in North America. Meanwhile, Regal's owner, Cineworld, is in the middle of ugly bankruptcy proceedings, leaving the second-largest theater chain in the U.S. on uncertain ground. That's where the popcorn comes in.
AMC Perfectly Popcorn's microwavable varieties are expected to retail for $4.98, plus tax, for a six-pack, while the ready-to-eat popcorn will be available in a 4.2 – 5.2 oz bag, and will retail for $3.98, plus tax. So, how much revenue could that actually generate? If things go well, it turns out the answer is quite a bit. And, if it goes really well, yes, this could actually be a way to chip away at that mountain of debt.
The Economics Of Popcorn
According to Grand View Research, the global popcorn market was around $5.64 billion in 2022, with the market expected to grow by 11.2% per year. That means sales are forecasted to eclipse $13.5 billion by 2030 at the current rate of growth. The at-home market exploded during the pandemic, creating a great deal of opportunity for makers of microwavable and ready-to-eat popcorn. Of note, ready-to-eat popcorn accounts for around 74% of global revenue in the market. North America accounted for the biggest chunk of the global market, nearly 25%, in 2021. There is a huge market for AMC to tap into here.
One challenge is that the market is already quite saturated, with Pop Secret (owned by Campbell Snacks) ranking as the best-selling brand in 2020, for example, with sales totaling $169.5 million. But the AMC brand is one that is very recognizable to North American moviegoers, and it could be argued that AMC is like the Walmart of moviegoing experiences. It's the biggest, most accessible, and recognizable brand in that market. That could very much help AMC get a leg up in an already crowded retail space. Not to mention that Walmart seems to be getting behind the product in a meaningful way.
While it's impossible to estimate sales, if AMC could get near Pop Secret levels, that could be tens of millions worth of revenue that they didn't have before, and it could actually help the company's financials. Now, is that kind of money going to make $5 billion in debt magically disappear? Absolutely not. But it's nothing to snub one's nose at, and if things go well, it could open the door for additional retail opportunities. Bottom line: AMC getting into the retail business makes sense and could be more than just a cute marketing ploy.
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