January 10

Maine awards wholesale liquor contract to Augusta company

Pine State Trading is already doing the warehousing and distribution as a subcontractor. Terms of the lucrative 10-year deal were not disclosed.

By Jessica Hall jhall@pressherald.com
Staff Writer

Pine State Trading Co., which distributes liquor to retailers throughout Maine, was awarded a new state contract Thursday to keep doing the job for the next 10 years. The state did not disclose the terms of the contract, which are crucial for its repayment of a $220 million bond.

click image to enlarge

Manager Jim Frey arranges bottles Thursday at Bow Street Market in Freeport. Store owner Adam Nappi said he’s glad to continue working with Pine State Trading Co., which was awarded a new state liquor contract.

Gordon Chibroski/Staff Photographer

Augusta-based Pine State Trading, a food and beverage distributor, is now a subcontractor handling distribution and warehousing for Maine Beverage Co., which has held the state’s wholesale liquor contract for the past decade.

The company was one of two that bid for the distribution and warehousing portion of a two-part contract that will take effect July 1. A contractor for administration and marketing will be chosen by the state after it reviews the bids received.

Maine Beverage did not bid for either part of the new contract.

The contract is part of a plan to overhaul the state’s wholesale liquor operation. The state wants to keep a greater portion of the revenue from liquor sales, while lowering retail prices to become more competitive with New Hampshire’s state-run liquor stores. It also wants to pay higher commissions to agency liquor stores.

The new contract is expected to generate $450 million for the state over 10 years, more than double the amount the state has collected under the current 10-year contract.

Pine State Trading now supplies liquor twice a week to more than 425 agency stores in Maine. The family-owned company has 900 employees, including 100 who are involved in the liquor operation.

Its chief executive officer, Nick Alberding, said, “Our employees have worked really hard for the past 10 years to ensure quality service and we look forward to working with the state for the next decade.”

Alberding said some contract details remain to be settled. He would not provide details of the company’s bid.

In a prepared statement, the state said “the award of the contract to Pine State Trading ... ensures virtually no risk of product delivery disruptions to retailers or Maine consumers.”

Pine State Trading also submitted a bid to handle liquor marketing and administration, as did CDM Communications of Portland and Dirigo Spirit Co. of Cumberland.

RETAILERS PLEASED WITH PINE STATE’S WORK

Retailers said they are relieved that Maine’s liquor distribution will continue with the same provider, so there won’t be any disruption of service.

“I’m extremely happy with Pine State. They offer outstanding customer service,” said Anthony Rossetti, owner of Bootleggers Beverage Warehouse & Redemption Center in Topsham. “Any time you’re considering changing a supplier, you want to be careful and deal with someone with a lot of experience. Not to say anything against the other bidder, but Pine State would be hard to beat. They’re very sharp.”

The losing bidder for the distribution contract was All Maine Spirits, a company formed last year by six Maine residents for the sole purpose of bidding on the liquor contract. Its chairman is Eben Marsh of Scarborough, who was director of the Maine Bureau of Liquor and Lottery Operations under Gov. Angus King.

“Obviously, we were disappointed. We thought we put forward a creative and productive arrangement for the state,” said John Menario, spokesman for All Maine Spirits. “Pine State is a very strong Maine company and we knew it would be difficult to unseat them.”

Details of the two proposals, and the scoring sheets on the bids, were not released by the state.

Doug Weber, who owns Downeast Beverage Co. in Portland, said he is pleased with the decision from a service standpoint but he wants to know the financial details of the contract.

“From a sheer logistics standpoint, this makes sense. ... They’ve got the history. They’re in the distribution business. It’s what they do,” Weber said. “I don’t know the background on the proposal – so is the state getting the best deal financially? I don’t know.”

Adam Nappi, owner of the Bow Street Market in Freeport, said he’s glad to continue to work with Pine State Trading.

“They bring innovation, experience and stability to the Maine marketplace. We look forward to working with Pine State in responsibly growing spirit sales in Maine,” Nappi said in a prepared statement. “Bow Street Market would also like to acknowledge and thank All Maine Spirits for their bid. They brought competition to the process and Mainers will benefit from that.”

HIGHER REVENUES TO HELP PAY OFF BOND

Maine Beverage won its contract in 2004, when the state needed help to close a $1.2 billion budget deficit. The company got the contract for an upfront payment of $125 million.

Maine Beverage is owned by Martignetti Cos., which also owns a liquor operation in New Hampshire, and the New York private equity firm Lindsay Goldberg & Bessemer.

The contract guaranteed Maine Beverage a gross profit of 36.8 percent of annual sales. From 2004 through 2012, the company collected about $339 million in gross profits, after revenue sharing, according to data provided by the state.

The state says it received about $190 million over the 10-year contract, including the upfront payment of $125 million.

A new liquor contract that gives the state a greater portion of sales revenue is part of Maine’s plan to pay off $183.5 million that it owed to the state’s hospitals.

In September, the state sold a $220 million bond that will be repaid with revenue from the liquor contract. The proceeds from the bond were used to repay the hospitals, with additional funding for transportation, clean water projects and the state’s rainy day fund.

“Today is a great day for Maine,” Gov. Paul LePage said Thursday in a prepared statement. “The new spirits contract will allow the state of Maine to take back the significant revenue created by the spirits business.”

The Bureau of Alcoholic Beverages and Lottery Operations said the new contract also will enable the state to cut prices for “high-traffic spirits,” so it can compete better with low-cost alcohol sold in New Hampshire. Maine is one of 18 states where the government controls the sale and price of spirits.

Staff Writer Edward D. Murphy contributed to this report.

Jessica Hall can be contacted at 791-6316 or at:

jhall@pressherald.com

Twitter: @JessicaHallPPH

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