New state liquor contract nearly ready to bid; ‘prices will go down’ says state alcohol chief

Gerry Reid, the current head of the Maine Bureau of Alcoholic Beverages and Lottery Operations in Maine, thinks new legislation can recover the sales being lost to New Hampshire.
Russ Dillingham | Sun Journal
Gerry Reid, the current head of the Maine Bureau of Alcoholic Beverages and Lottery Operations in Maine, thinks new legislation can recover the sales being lost to New Hampshire.
By Kathryn Skelton, Sun Journal
Posted June 29, 2013, at 9:02 a.m.

AUGUSTA, Maine — The head of Maine’s alcohol bureau has wanted to take a swing at New Hampshire.

He’s about to.

Maine is weeks from putting its new, 10-year liquor contract out to bid, and unlike the current contract, it leaves the state with more money and more room to target liquor sales continually lost to New Hampshire.

Gerry Reid, head of the Maine Bureau of Alcoholic Beverages and Lottery Operations, complained this past spring that Maine’s neighbor routinely undercut prices and sold as many as 200,000 cases of alcohol to residents here each year.

“Personally, it really makes me angry,” Reid said in an April interview. “You’ve heard of ‘rope-a-dope’ in boxing? It’s when you cover up and let the other guy pound the hell out of you. That’s what they’re doing to us — punch, punch, punch — and we never punch back.”

Two competing bills in the Legislature set to revamp the liquor contract and repay Maine’s sizable hospital debt were merged into a committee bill that retained most of what Reid and Gov. Paul LePage had been after, Reid said.

“I’m very satisfied with it,” he added.

It allows flexibility for price changes and gives more money to agency liquor stores and more control of revenue to the state.

Without the markup for a 36.8 percent profit guarantee, a stipulation under the current contract with Maine Beverage Co., alcohol prices will go down, Reid said.

“Rest assured, it will be noticeable because we want people to understand that they (will) now get a much better value in Maine than they used to get,” he said. “The only commitment we (will) have now is to our own business plan and our own citizens.”

In 2004, the state leased its liquor operations to Maine Beverage for a $125 million upfront payment and an annual share of revenue. Reid has forecast that over the contract’s 10 years, the state will have received $189 million from that agreement.

With new terms and a new contract, he predicts the state could see as much as $514 million over 10 years. A portion would go toward the expected $188.5 million in bonds the state will use to pay back hospital-related debt.

The state hopes to release the new request for proposals by Aug. 1, with either a 30- or 45-day bidding window. It requires a nonrefundable filing fee of up to $20,000 for companies bidding on “spirits administration” — warehousing, trucking and accounts receivable/payable — and, for the first time, a nonrefundable filing fee of up to $5,000 for companies bidding to oversee “trade marketing.”

“The current business does have some elements of trade marketing, but a lot will be new,” Reid said. “(It includes) better assortment, more space, possible off-shelf displays. These are things that are routinely done in other states, for years, but have been rather quiet to nonexistent in the state of Maine.”

Each company can bid on both contracts, and bidders will name either a flat fee or a percentage of sales needed to operate.

“It is in their interest, frankly, to express it as a percentage of net revenue,” Reid said. “Then it has an opportunity to escalate with success in the business.”

The winner could also take a hit if sales declined.

Reid said the contract will contain incentives, to be announced, for passing certain sales thresholds.

Maine counted $135 million in alcohol sales in 2012. It’s estimated that $30 million in sales is lost across the border each year to aggressive marketing and lower prices.

“We need to do some things differently in order to recover some of this volume we lose to New Hampshire,” Reid said.

A former liquor company executive, he has staked his new job on turning that trend around.

He anticipates the new contract will be awarded by Dec. 1. The current contract with Maine Beverage ends June 30, 2014.

In addition to setting the stage for the new contract, lawmakers this legislative session returned liquor law enforcement to Reid’s agency; it had been shifted to the Department of Public Safety after budget cuts in 2002.

Reid said plans on how to spend an additional $750,000 in enforcement dollars starting July 2014 are still to be determined.

 

http://bangordailynews.com/2013/06/29/news/state/new-state-liquor-contract-nearly-ready-to-bid-prices-will-go-down-says-state-alcohol-chief/ printed on September 20, 2014