AUGUSTA – As Maine Beverage Company LLC prepares to assume control of statewide liquor distribution on June 28, the company is also pitching a plan that would completely revamp the state’s current pricing of distilled spirits.
Representing the interests of Martignetti Cos. of Norwood, Mass., Kay Rand said her client, a partner in Maine Beverage, wants the state to reconsider its complicated pricing system, which relies on a variety of factors, in favor of a simpler system that would establish a flat rate above costs on all alcohol products.
Rand said that converting to a flat mark-up system would bring “clarity” to the process. She added that consumers would see no increase in liquor prices.
“If there’s any change at all, it would probably be a reduction in costs,” she said.
Most states use a flat-rate formula, Rand said. Maine, however, relies on a variety of comparative factors that include brand names, quality of liquor, bottle sizes, and popularity of liquors, among others.
Rand said some out-of-state wholesalers have even wondered whether or not Maine’s pricing system is biased toward in-state wholesalers.
Rand said Maine Beverage is encouraging the change in hopes of achieving “a level playing field” in the state for all of its suppliers.
Currently, she said, the state pricing system is subjective and could vary among competitors offering products of similar quality and taste.
“A formula would promote predictability and create the opportunity to market new products in Maine as a test state,” she said. “New products don’t enter this market because the price is likely to be higher. Under a formula, all wholesalers would know that they’re being treated the same and will know what the price is as they consider introducing new products into Maine.”
The director of Maine’s Bureau of Alcoholic Beverages, Pam Coutts, said a special state panel charged with implementing rule-making for liquor pricing is expected to continue its evaluation of the Maine Beverage request this summer and will make a decision later this year.
Dean Williams, president of Maine Beverage, said that in addition to inspiring predictability, a formula price system would allow the state greater flexibility in confronting the changing “trends and fashions” in the retail liquor business.
“Pricing can now be brought out of the ‘subjective’ or ‘back-room phase’ and stand the scrutiny under the brightest of spotlights,” Williams said in a letter to the state Department of Administrative and Financial Services.
On Wednesday, DAFS Commissioner Rebecca Wyke told members of the Legislature’s Appropriations Committee the state was on schedule toward implementing its liquor privatization contract with Maine Beverages by July 1.
Maine Beverages is a partnership consisting of Martignetti Cos., Pine State Trading Co. of Augusta and Lindsay Goldberg and Bessemer, the New York financial group that holds the majority interest in the limited liability corporation.
“They are what we refer to as the ‘dream team'” Wyke said. “They will improve services and profitability, not only for the several hundred Maine businesses that rely on the product, but also for the state in its revenue sharing.”
Under its agreement with Maine Beverage, the state has already received the first $75 million of its $125 million contract. The balance is due July 1.
Last year, the governor and the Legislature eliminated part of a $1.2 billion deficit in the state’s two-year budget by privatizing Maine’s wholesale liquor business.
Under the contract, the state forfeited profits it would have earned over the life of the 10-year lease in exchange for the up front payment of $125 million.