Maine company forms to bid on lucrative liquor contract

By Whit Richardson, BDN Staff
Posted Sept. 07, 2012, at 7:53 p.m.

CUMBERLAND, Maine — A successful Maine businessman has formed a new company to compete for the state’s lucrative wholesale liquor distribution contract.

Ford Reiche, former president of Safe Handling Inc. in Auburn, announced on Friday the formation of a new company, Dirigo Spirit, that will compete for Maine’s liquor contract, which the state plans to renegotiate over the course of the next year. The state’s 10-year contract with Maine Beverage Co. is scheduled to expire in June 2014.

The business plan for Dirigo Spirit has been in the works for a year, Reiche told the Bangor Daily News. He legally formed the company in February, according to public documents from Maine’s Bureau of Corporations, Elections and Commissions.

Reiche was in Augusta on Friday observing as Gerry Reid, director of the Maine Bureau of Alcoholic Beverages and Lottery Operations, and Sawin Millett, commissioner of the Department of Administrative and Financial Services, briefed the Legislature’s Appropriations and Financial Affairs Committee on the state’s plan to renegotiate its liquor contract and attempt to regain a larger piece of the revenue pie. The plan was “uniformly praised by everyone who spoke on the appropriations committee,” Reiche said.

Under the current liquor contract, Maine Beverage Co. paid the state a lump sum of $125 million in 2004 to take over the warehousing and distribution of liquor in the state. The contract has proven to be much more valuable than that and the state now is trying to increase its cash flow with a renegotiated contract. Reid, from the Maine Bureau of Alcoholic Beverages and Lottery Operations, said at Friday’s appropriations committee meeting that the state’s new plan could increase annual revenue by $29 million, according to the Sun Journal.

The responsibility of warehousing and distributing every bottle of liquor sold in Maine would be a job not unlike what Reiche oversaw at Safe Handling, which he grew into an $18 million transportation and logistics company that moved materials such as chemicals for the paper industry and ethanol. Reiche sold Safe Handling in 2009 to a Utah company. Whether liquor or liquid fuel, both would involve warehousing and transporting goods within a highly regulated environment, Reiche said.

“It’s very familiar territory for us,” Reiche said.

There are at least five interested parties that Reiche knows of that are interested in competing for the contract, but he said Dirigo Spirit has a head start on most of them.

“We’re the ones who have been publicly working on this the longest,” he said, “except the incumbents.”

Despite its name, Maine Beverage Co. is not a Maine-based company. It’s a partnership between the Martignetti Cos. of Norwood, Mass., and New York-based private equity group Lindsay Goldberg. It subcontracts the work to Augusta-based Pine State Trading Co.

Reiche said the Dirigo Spirit plan will capture more of the revenue that’s flowing to an out-of-state distributor and New Hampshire stores. His plan calls for more financial and operational transparency, more collaboration with in-state liquor retailers and other stakeholders, and better competition with New Hampshire.

“I knew about the contract, and as a Mainer was unhappy about the arrangement,” Reiche said.

A major topic of discussion at Friday’s meeting was the loss of revenue to New Hampshire, which attracts many Mainers who want to buy liquor without the sale tax, Reiche said.

Mainers pay retail prices that are between $2 and $7 per bottle more than paid in New Hampshire, a price difference Reid said Maine plans to reduce to capture more of that lost sales revenue, according to the Sun Journal.

“We would close about two-thirds of the retail price premium, which would take away a tremendous amount of the incentive for people to buy across the border,” Reid said.

Reiche called the loss of revenue to New Hampshire “an untapped resource,” which he looks forward to tapping if his company is successful in its contract bid.

“Nobody anticipates that [the price difference between Maine and New Hampshire] could be completely overcome, but Maine has done very little to compete with New Hampshire so anything we do will be more than we’ve done so far,” he said.

http://bangordailynews.com/2012/09/07/business/maine-company-forms-to-bid-on-lucrative-liquor-contract/ printed on October 23, 2014