Food and Beverage Should Be an Experience Driver, Not a Revenue Driver

Food and Beverage Should Be an Experience Driver, Not a Revenue Driver

Smith Entertainment Group (SEG) recently announced it is making some of its most popular concession items –Dasani water, popcorn, nachos, hot dogs, and Farr’s ice cream bowls– available for $2 and $3 at all Utah Jazz and Utah Hockey Club home games this season. Fans purchasing the five items will save more than 45% relative to pricing at Delta Center last year.

SEG recognizes that the reduction is unlikely to affect the 20% of fans responsible for the majority of in-arena spending. None of the clubs’ corporate partners have complained about food and beverage (F&B) pricing.

“But we know it could impact the other 80% and reframe and change their experience,” Chris Barney (president, revenue and commercial strategy, SEG) said. We believe “instead of it being a revenue driver, F&B should be an experience driver.”

The data collected to date supports the notion that fan-friendly food and drink pricing can improve the fans’ experience. NPS scores on F&B amongst Jazz season ticket holders have risen from -37 in ’23-’24 to 10 this year.

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It’s said that The Masters is a tradition unlike any other. Presumably, that is in reference to the tournament/course/history and not the annual trek hard-hitting journalists will make to Georgia to cover concession pricing. 

But every April, without fail, the media writes a multitude of articles about the shockingly low cost of pimento cheese and egg salad sandwiches. F&B at August is believed to be the least expensive in sports.

One would think the earned media alone would have pushed other properties to follow the club’s lead and lower prices. It’s not as if concessions are a huge profit driver for most to begin with (think: ~7% of SEG’s total revenue).

However, the Atlanta Falcons are amongst the few that have. 

Some organizations (or ownership groups) fear leaving guaranteed revenues on the table. Others are hamstrung by existing concessionaire deals. 

But with F&B pricing frequently a topic of fan complaints, more should consider it.

"You would literally have to have earmuffs on, with your hands over the top of them, in our bi-weekly customer experience focused calls not to know that is the number one friction point for fans attending games," Barney said.

SEG created a value menu consisting of five of its most-consumed concessions.

"We picked a center plate kind of an item with a hot dog and added some ancillary things around it,” Barney said. “We wanted to include choices that would have the most impact on young families and families that might not be able to otherwise afford coming to games.”

According to Team Marketing Report’s Fan Cost Index, it cost a family of four an average of $444.12 to attend an NBA game during the ’21-’22 season (think: parking, four tickets, four soft drinks, four hot dogs, two beers, and two hats).

And remember, the average Utah household has had less time to build wealth than those in other states. Residents of the Beehive state are ~6.5 years younger than the national average (~38).

The decision to provide family-friendly F&B options looks to be paying off early. 

"We haven’t received any commentary on the price of alcohol, the price of gear at the team store, nothing negative," Barney said. "It’s all been very positive. Fans saying, 'I can't believe you're only charging me $3 for ice cream'."

And not just in terms of goodwill, either. Fans are spending more on other F&B items and in other parts of the building.

Utah Hockey Club sold $490,000 worth of merchandise and $150,000 in beer on opening night (the merch figure does not include any jersey sales as none were in stock). For context, SEG’s single-game record for Jazz merchandise sales is $190,000, and the typical game generated ~$50,000 in beer sales last year. 

“That’s part of our thesis behind the model,” Barney said.

The discounted food options at Delta Center have not hurt the teams’ local restaurant partners.

“We have four anchor restaurants in the corners of our building. One happens to specialize in a product that is on our fan friendly pricing menu,” Barney said. Their “per caps are actually up YoY.”

SEG will expand its fan-friendly pricing menu should the data continue to support the approach. But don’t expect to see the price of every item sold in the building cut in half.

SEG wants to continue partnering with outside vendors to ensure it is providing fans with an expansive F&B experience. It can’t do that and dictate pricing.

Other clubs will take note should SEG begin expanding on its offering and should eventually follow suit. Sports is a copycat business.

It won’t be every organization; executive incentives are often misaligned (think: short-term revenue versus LTV). 

Their concessionaire must be on board too. In this case, Levy Restaurants was. 

The restaurant and hospitality co. understands the model and how it impacts per cap spending and labor costs. It is the Falcons’ partner.

“Our deal is also structured to be bottom line driven,” Barney said. “The fact that both of us are motivated by profits changes the economics and the lens in which it’s looked through.”

However, that isn’t a particularly common deal structure. Many teams have at least half their F&B revenue tied to top line results.

And most stadiums and arenas weren’t constructed (think: number of points of sale) and aren’t staffed to handle the increased demand that comes with family-friendly pricing.

“We sold about 1,200 bottles of water at Jazz games last year,” Barney said. “We sold 4,200 during the first hockey game this year.”

But Smith has not been afraid to push the envelope and make decisions in the best interest of fans since buying the club four years ago.

He has made all non-nationally televised Jazz games available via an over-the-air broadcast station (a subscription-based streaming option exists for the digitally native portion of the fan base) and now “we’re working to ensure concessions are available to every economic demographic,” Barney said.

His willingness to leave some revenues on the table may be at least loosely tied to the growth the business has enjoyed. The Jazz have risen to second in the NBA, behind only the Golden State Warriors, in total partnership revenue.

“When you improve a business like that, you get to go make these kinds of decisions for fans,” Barney said. 

Of course, he is also convinced his ‘fan-friendly’ platform is good for the business long-term.

It should be noted that SEG’s value menu is only available at the Delta Center during Jazz and Utah HC games.

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