Tuesday, December 10, 2013
AUGUSTA - Several companies are interested in competing for a new contract to be Maine's exclusive wholesale distributor of liquor, state officials told the Legislature's Appropriations Committee on Friday.
Cutting prices could reduce sales lost when Mainers shop in New Hampshire, officials say.
Shawn Patrick Ouellette/Staff Photographer
The Bureau of Alcoholic Beverages and Lottery Operations is looking for a way to increase the amount of money the state collects from liquor sales while lowering retail prices by $2 to $7 a bottle and making Maine more competitive with New Hampshire's state-run liquor stores.
The aim isn't to have consumers drink more, but to increase the likelihood that liquor consumed in the state is purchased in the state, said Gerry Reid, the bureau's director, in a brief presentation to lawmakers.
"Our consumers in the state of Maine do not get a good deal, and that's costing us business," Reid said.
The goal isn't to match New Hampshire's prices, but to close the gap so consumers will have less incentive to cross the border, he said.
The state's current wholesale liquor contract, held by Maine Beverage Co., expires in 2014. The state faces a June 2013 deadline for having a new contract.
Rather than seeking proposals, the state would allow interested parties to make proposals and then negotiate with each party, said Sawin Millett, the state's finance and administrative services commissioner.
The plan outlined before the committee projects that Maine could get an additional $25.8 million under different contract terms.
The state has received an average of about $30.1 million a year since the current contract was signed in 2004. That includes a $125 million payment by Maine Beverage Co. early in the term of the agreement.
Millett told the committee that the process for the next contract would be less formal than the usual request-for-proposals procedure but would open the door to the same parties.
He said the request-for-proposals process takes time and carries the possibility of an appeal, which could put the state in an awkward position as it tries to meet its deadline.
But the state must have a request for proposals ready by this fall in case the negotiated-contract process doesn't yield a favorable deal, Millett said.
The contract would be for operations -- warehousing, delivery to agency stores and bottle redemption -- and possibly for administration and in-store marketing. There are no plans for the state to get back into the retail liquor business or take back the operations, Reid said.
He said Maine loses sales of 200,000 to 500,000 cases of liquor annually to New Hampshire, and could recover half of those losses. New Hampshire aggressively markets itself on television, on radio and in print -- not just in New Hampshire, but also in Maine, he noted.
"We would do a degree of that competitiveness to protect our borders and keep the value here," he said.
Reid said the state needs very specific services and there aren't many parties -- perhaps half a dozen -- that can provide them. He said the state knows that the current cost of the operation is $7 million a year, so the aim is to meet or beat that number in the new contract.
One person who is interested in the contract agreed that is a reachable goal.
"It should have been done years ago," said Ford Reiche, president of a new venture called Dirigo Spirit.
Reiche, who also founded the Auburn-based trucking company Safe Handling, announced his interest in the liquor contract in a letter to state officials in May.
Maine Beverage Co. has expressed interest in the new contract, Reid said, and a lobbyist told him Friday that another party plans to present its credentials soon. A couple of other people have said they would like to be notified when the selection process starts, he said.
In 2004, the state signed a 10-year agreement with Maine Beverage Co., with a $125 million payment that helped the state close a $1.2 billion budget deficit.
The fair market value of the liquor distribution business was pegged at $378 million as of Jan. 1, 2009, according to a study done by Deloitte & Touche.
Neither George Woods, Maine Beverage Co.'s chief financial officer, nor D. Dean Williams, the president and CEO, returned calls seeking comment Friday.
Staff Writer Ann S. Kim can be contacted at 791-6383 or at: