There has been plenty of debate this year (and every year really since Eve bit on that apple) about the price of food and beverage at Australia’s cricket and football grounds.
The debate is usually lead by those that have no idea. They sometimes blame Cricket Australia or the AFL. Mainly they blame Kevin Pietersen.
The truth is, none of these entities have any control over what is going on.
This is how it works.
The Ground Owns Their Catering Rights
Almost without exception, the major grounds in Australia own the right to cater to both the public and the corporates within their stadium. They value this right and try and maximise its value.
Some grounds choose to cater themselves. These guys include ANZ Stadium in Sydney and the Adelaide Oval.
Others, like the MCG and the WACA outsource their catering to creditable 3rd parties.
Some, like Etihad Stadium in Melbourne have a hybrid model. They outsource the public catering, but keep their premium product, the Medallion Club, to themselves.
Catering Makes the Ground Money and Lots of It
Most stadiums, unless they are the bigger ones, are marginal operations at best. They rely on council contributions or funds from participating sports or State governments to survive. Given that, catering is very important to them.
So how does a ground that outsources its catering make money?
Actually, they do it in a few ways.
Firstly, they take a clip of the ticket of every item sold.
The bigger stadiums in Australia usually command around 25%. The smaller grounds start at around 15%.
Now think about a ground like the MCG. It hosts more sporting events per year than any other stadium in the world. Usually it is well over 50 major AFL and cricket matches. That’s a lot of pies, beer, MCC members lunches and corporate box bain-marees. If they were getting a 25% clip of the ticket, that’s a lot of income.
Apart from a clip of the Ticket, how else is my pie price loaded?
Well, the grounds usually treat their clip as straight revenue. They look for other means to manage capital expenditure that is needed. For example, the beer lines need redoing, or an outlet needs refreshing or the kitchens need new ovens.
These capital requirements never disappear. Some grounds aim to refresh their outlets every 3 – 5 years to ensure it looks clean and fresh. This in return encourages more sales and more income for the ground.
To do this, the caterers will usually either pay the ground a Capital Levy or offer to do it themselves. In return, they ask for a long term contract.
Cricket and Football grounds usually offer a minimum of 5 years. I know of one soccer ground that offered its latest contract up for 14 years. Another multipurpose venue offered 15 years.
With this length of tenure on offer, the catering companies offer up all kinds of crazy deals. However, a ground could expect between 2 – 4% on top of their normal clip to go towards capital investment.
Also, various providers of food and beverage will compete to be the sole provider at a ground. For example, at some grounds you will only see CUB beer and wine products. At others, you will see Patties pies and not Four ‘N Twenty. As an aside, I know what the 4 and the 20 represent, but you really don’t want to know.
These guys have usually paid a marketing fee to the stadium and in return are exclusive suppliers to the caterer. Where there is a monopoly, there is little incentive for lower wholesale prices.
Then surely the caterer is a greedy bastard?
Not really.
He takes the risk of the quality of fixture, crowd sizes, weather, staffing, food wastage, new product lines,etc. He also comes under the most pressure than anyone else from the ground management.
The caterer also has to agree prices with the ground every year. this includes not just the prices for the public, but also the corporate plates and wine list. Depending on the ground, the corporate food and beverage can be close to 50% of the revenue.
The toilets could be overflowing and queues banked back to the carpark, but if the caterer runs out of chips, ground management has a heart attack. For the record, hot chips are the most popular food product at Australian grounds. Healthy options are the lowest sellers.
In the bigger grounds, a caterer may look for a gross margin of around 3-5% if he’s lucky.
With that, he needs to pay his staff, run his business and make a profit. He will aim to make a bigger margin in the smaller grounds as his revenue base is lower to cover fixed overheads.
So, let’s take a working example:
At the WACA, a beer is probably $7.00. I haven’t checked for a while, but let’s assume I am right.
Let’s then assume approximately 25% of that goes to the ground. That’s $1.75
Let’s assume there’s a 4% Capital Investment levy. That’s $0.28
Let’s assume the margin for the caterer is 5%. That’s $0.35
That means the cost of the beer from the wholesaler is $4.62. That price is probably slightly inflated, as now that the beer company is sole supplier to the ground, he will also have a marketing component added to that price that the ground receives.
So what does all this mean?
To provide food and beverage at a sporting event is not a cheap exercise.
There is a lot of infrastructure required to provide, in the case of an AFL game, maybe 5 hours of service a week. The staff are casuals and expensive. The expectations from the ground are high and so is pressure from the fans.
Cricket Australia and the AFL have almost no control of ground prices. The power lies in the hands of the grounds themselves.
So, if prices are an issue for you, pack a lunch. It will be healthier and cheaper.
Disclaimer
I once spent a small amount of time in 2012 as a General Manager in one of the biggest Australian stadium caterers. My clients included all of the the big cricket and football grounds.
The numbers I have used are not to be read as actual representations of existing commercial deals at any of these grounds. I can’t remember the exact details and am no longer in that industry. Any resemblance is purely coincidence. They are for illustrative purposes only.
