Reference no: EM133215219

Summarize this article and answer three questions asked at the end.

After two years of watching movies on small screens, the reopening of cinemas following COVID-19 closures has been a welcome change of pace. For many, watching favorite actors on a larger than life screen has been a much-missed experience. For some, having a chance to consume movie snacks is a highlight of a visit to the cinema, especially for those who agree that no matter what the package says, homemade 'movie theater' popcorn is never quite the same as the real thing. So, the news that popcorn may be in short supply at cinemas is leaving some movie-goers dismayed and disappointed, and theater owners wondering what additional challenges are coming. Indeed, despite the allure of a summer's worth of anticipated blockbuster hits, movie-goers and theater owners may find that this summer, movie experiences fall short of expectations.

What's behind the looming popcorn shortage? The answer is complicated. The supply chain issues that have plagued so many industries in the wake of the COVID-19 pandemic are affecting the availability of not only popcorn kernels, but also the paper containers used to serve popcorn. Perhaps a bigger factor though is the global shortage of fertilizer. Global supplies of fertilizer have been all but cut off thanks to Russia's decision to invade Ukraine and the ensuing trade sanctions on Russia from much of the rest of the world. Prior to the invasion, Russia had been a primary exporter of fertilizer and the main ingredients in fertilizer.

Now, with fertilizer in short supply across the world and prices on what is available skyrocketing, many farmers are holding off on planting corn or switching to crops like soy that require less fertilizer. These decisions are contributing to a limited supply of popcorn. A shortage of popcorn could be devastating to the bottom line for theaters, especially smaller, independent ones. Concession sales typically make up a significant portion of overall profits, and anything that might deter movie-lovers from returning to watch movies in-person, will also have a negative impact on profits.

Discussion Questions:

1. Consider the basic profit model for movie theaters especially with regard to fixed costs and variable costs. Why are popcorn sales and concessions in general so important to the overall profitability of cinemas? Would you change your decision to go to a cinema if you knew your favorite snacks would not be available?  

2.  Explain the connection between the conflict in Ukraine, crop planting decisions by farmers, and the availability of popcorn for movie-goers. What does your response tell you about the interdependency of the global economy?

3. As the global supply of popcorn dwindles, prices are likely to rise. Using the concept of price elasticity of demand, discuss just how high concession prices can go before consumers start to limit their purchases.