Beverage pricing: They're still not listening

Kyle2154 said:
@DJ: You're right, that is an over generalization, but to the douche at the counter giving the cashier (who has nothing to do with it) a hard time going "You know what! This is going to put this place out of business!", is it? Or is it going to bring in the next ride that brings in the next 3,000,000 people just like him?

Again, hyperbole FTL.

I'm not remotely suggesting or engaging in the above behavior. Questioning their pricing "strategy", given their lack of economic health is perfectly reasonable, for precisely the reasons Jugga points out above.

My reasoning for not eating in the park has nothing to do with my budget, and everything to do with my perception of value. I can afford to eat in the park. I can also afford to purchase green hi-top sneakers. But that doesn't mean I'm going to do either.

green hi-top sneakers meet hyperbole, hyperbole, green sneakers. ;)

I have no problem with questioning the strategy, it's shifting it to sure certainty that the new prices are the cause of the downfall and will be the end of Cedar Point as we know and love it. Cedar Fair is a money making machine. Interest expense from the debt is seriously their only problem, the formula on the ground works IMO.

Captive pricing of non-fungible goods/services is a lot more of an art than a science. If I own a gas station which is on a corner with another gas station, it will be easy for me to set my price. Its much tougher when you are looking at pricing decisions for a business like CP which is fungible with other amusement parks and to a lesser degree with other forms of entertainment but is also unique.

They could increase food quality and decrease food prices and could upgrade the resorts and decrease room rates and that likely would bring more folks through the gates buying more food and staying in the resorts. But it isn't necessarily clear that those changes will result in increased profits (in the near or long term). There are costs associated with each (in terms of the lost revenues from folks who would buy without the changes and the costs of the changes themselves) which may or may not be greater than the increased revenues. And no matter what you do, some folks won't be happy with the quality or will believe the price is too high. Its a fine line determining when those folks who hold those views are too high in number.

Kyle2154 said:
@Juggs: The only problem with the income statement is the interest expense (from the debt), take that away and CF makes a cool $100M every year. The debt is the million (billion?) dollar question.

Which is why I noted both numbers that are pre-debt payments.

The straight revenues are down 8% and Earnings Before Interest Taxes Debt and Amortization (EBITDA) is down 15%.

The chain is bringing in less money than before. So even if there wasn't the debt and interest payments, you're looking at a 15% loss year over year.

Edit 1:

To note: I don't doubt for a minute that some portion of that is economy related, but a good chunk is value related. And the current food quality/pricing scheme doesn't leave a taste of good value in my mouth when I visit the park.

Edit 2: Also, and someone correct me if I'm wrong, but EBITDA is only park earnings and doesn't include things like the sold property in Canada does it?

Kyle2154 said

I have no problem with questioning the strategy, it's shifting it to sure certainty that the new prices are the cause of the downfall and will be the end of Cedar Point as we know and love it.

Kyle I hardly doubt Cedar Point will close. Just because the beverage prices are high doesn't mean people are going to stop coming. I see people buy the beverages all the time in line for Top Thrill Dragster, Millennium Force, Magnum, and Maverick. Cedar Point does sell the beverage wrist band that came out last year which is a good idea. There is also the souvenir bottle that you can buy that can save you money.

JuggaLotus said:

Edit 2: Also, and someone correct me if I'm wrong, but EBITDA is only park earnings and doesn't include things like the sold property in Canada does it?

Depends on how EBITDA is being defined. Not all companies use the same definition. Starting point is net income which would include gains from asset sales. So EBITDA would include those gains unless you were backing them out. Would need to look at CF's definition/adjustments to net income to calculate the EBITDA that it reports.

Edit -- According to CF's 10-Q for March 2010, the backed out a $23 million gain on asset sales from net income to determine Adjusted EBITDA. So EDIBTA did not include that gain.

Kyle2154 said:
...shifting it to sure certainty that the new prices are the cause of the downfall and will be the end of Cedar Point as we know and love it.

Did I say that?

I'm trying to get my head around the argument that is going on in this thread. I think in Kyle's mind, the argument is - Cedar Fair is making the right decisions, raking in the cash, and is at the top of their game. This cannot be much more than pure fanboyism, because the evidence does not support that argument (profits down significantly post-merger, suspension of the distribution, company tries to sell self, etc.).

The other side of the argument is trying to figure out how to improve the profitability of the company we love. We all know there is more to improving profits than just adjusting the dollars and cents in the pricing strategy. Customer perception and enjoyment are key to profits, particularly in the long-term. We've keyed in to the fact that food is low quality and overpriced causing a problem with customer perception, and we are using this board to "advise" the company on how we believe the profitability can be improved. I am always amazed by the insights of most on this board (and the stupidity of a few), and people need to understand that we are simply trying to point out how we feel the company could improve guest satisfaction and profitability at the same time. Of course when they don't take our advice and the company's financial results are poor, a little "I told you so" is in order. :)

Untill they lower the prices and bring the quality up to par, I will not be spending my money on food or drink at the park.

Ever been to busch gardens? They have some of the best food, and at great prices.I got a half slab of ribs with sides and a roll PLUS a drink and desert for around $15. And the food was fresh and great. The food lines were full, but fast moving. Other park chains can get this right, I think cedar point could as well if they tried.

I don't know about you, but when I go to a park, the food is part of the experiance. I look forword to having a good meal. I do expect to pay a little more, but not 3-5x as much as I can get it a mile down the road.

Take subway for example. The $5 footlong is one of the biggest advertisng promotions I have seen in a while. But when you go to cedar point, a footlong sub is $13-$14 bucks. Almost 3x as much as it is down the street. Again, I would expect to pay a little more at the park, but almost $10 more???

I would gladly pay $7 or $8 for a "five dollar footlong". Though it seems there are plenty of morons (mostly kids spending their parents' money, it seems) willing to pay $13, so I don't expect anything to change there.

It may have been mentioned before, but I wonder if the footlong is priced as such because they assume two people would split it.

These people arn't idiots. I buy both lunch and dinner while at CP and sometimes a snack or two during the day. Hell, I even buy food at my movie theater and trust me those prices are even worse than CP. I guess with me I do notice the prices are high but, hey if I am hungry or thirsty I will eat or drink.

Do you spend 10 hours at a movie theater?

No, what's the difference though?

It has to do with how long you're "captive".

The high prices at a movie theater aren't nearly as offensive, because most people can make it through a 2-hour movie without needing to buy an entire meal.

People spend upwards of 10 hours at an amusement park, and as Kinzel has said, "people have to eat". That's how they justify charging absurd prices for mostly crappy food.

I actually disagree about the food. I have never had a problem with food at CP. What do you speak of that is crappy?

^^Sounds like something kinzel would say.

It's nothing new guys. Mike Ilitch owns the Detroit Tigers and Little Caesars pizza. Little Caesars is famous for their $5 hot and ready pizza. Comerica Park is littered with Little Caesars inside, walk up to the window and order a $5 hot and ready pizza at a Tigers game, lol.

You're stuck, they know it, just because Dick said the truth doesn't make him wrong, it might be rubbing our noses in it a little bit, but we are stuck, and they are taking advantage.

^^Again, your not stuck at the ballpark for 10 hours plus. The avarage ball game may last 2.5-3 hours.

If I go to a tigers game, we usaly go to greek town or hard rock before or after the game.

crazy horse said:
^^Sounds like something kinzel would say.

That's because he did!

"We've been able to pass along higher food costs very easily," he said. "When people come to the park, they have to eat."

What food is crappy? Wow... How about we go with food that is edible, since that's a shorter list. The pretzels range from acceptable to decent; Chick-Fil-A is decent; Panda Express was, at best, mediocre. And really, that's all I got. There may be more exceptions, but it's tough to recall as I've all but completely stopped eating in the park, choosing only to eat at Fridays and, more recently, Famous Dave's while on the peninsula.

The fries, which used to be one of my favorites, have disappointed me the last 3 or 4 times I've had them.

crazy horse said:
^^Again, your not stuck at the ballpark for 10 hours plus. The avarage ball game may last 2.5-3 hours.

If I go to a tigers game, we usaly go to greek town or hard rock before or after the game.

Under that theory Cedar Point has you more 'stuck' so they should charge even more.