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State of Maine Awards New Wholesale Spirits Contract
New ten-year contract expected to yield $450 million for State
AUGUSTA – Today the Bureau of Alcoholic Beverages and Lottery Operations (BABLO), a part of the Department of Administrative and Financial Services, announced that it has awarded a contract for spirits administration that includes warehousing and distribution to Pine State Trading Company of Augusta.
A key aspect of Governor LePage’s vision for a new wholesale spirits contract was recapturing the profits of the spirits business and producing a dramatic increase in revenue for the state and its citizens.
The current spirits administration agreement with Maine Beverage Company saw the state receive approximately $190 million over ten years, including an upfront payment of $125 million and annual revenue sharing with the state. The new contract, based on modest sales forecasts, is expected to yield $450 million in revenue over ten years. The projected increase in revenues has been accomplished by delivering a much lower cost wholesale distribution deal for Maine and not by increasing the consumption or retail price of spirits.
“Today is a great day for Maine. The new spirits contract will allow the State of Maine to take back the significant revenue created by the spirits business,” said Governor Paul R. LePage. “My plan allowed us to repay Maine’s hospitals and will allow the state to invest in clean water programs, transportation projects, and increase the balance of the rainy day fund.”
In September 2013, Governor LePage fulfilled his pledge to repay nearly $490 million in welfare debt to Maine hospitals. The state’s portion of that debt, $183.5 million, was paid for with a revenue bond that pledged the state’s liquor business revenue as its collateral.
The award of the contract to Pine State Trading also ensures virtually no risk of product delivery disruptions to retailers or Maine consumers.
“Pine State Trading Company has worked diligently as a subcontractor of Maine Beverage for the last ten years,” said Gerry Reid, director of BABLO. “Under the new contract, Maine consumers will save money and Maine businesses will see higher profits while continuing to experience the same great service they’ve grown accustomed to.”
BABLO intends to selectively reduce the price of high traffic spirits stocked in agency liquor stores across the state. Reduced prices will also allow Maine consumers to receive a better value in Maine and allow the State to recover a portion of the sales continuously lost to New Hampshire. BABLO estimates that under the new pricing strategy, Maine will consumers will save $8-10 million each year.
As outlined in the RFP, the Bureau sought bidders to provide spirits administration and sprits trade marketing for the State of Maine. An announcement on a contract award for trade marketing will occur following review of the received proposals by the RFP review team.
Maine is one of 18 control jurisdictions, where the government controls the sale and price of spirits. The new spirits administration contract will take effect on July 1, 2014.
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