State of Maine Seeks Bids for New Liquor Contract
October 4, 2013
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For Immediate Release: Friday, Oct. 4
Contact: Adrienne Bennett, Press Secretary, 207-287-2531
AUGUSTA – Governor Paul R. LePage announced today that the Bureau of Alcoholic Beverages and Lottery Operations (BABLO), a part of the Department of Administrative and Financial Services, is seeking bidders to provide spirits administration and spirits trade marketing for the State of Maine.
By issuing this request for proposals (RFP), the State of Maine is continuing the implementation of Governor LePage’s plan for a new wholesale liquor contract.
“The current contract has cost Maine hundreds of millions in lost revenue,” said Governor Paul R. LePage. “These new contracts will allow the State of Maine to take back the significant revenue created by the spirits business and provide a better deal for Mainers.”
In 2004, the State of Maine signed a 10-year agreement to lease its liquor operations to Maine Beverage Company in exchange for a one-time payment of $125 million and annual revenue sharing with the state. In 2012, the spirits business in Maine generated $45.8 million in operating income after covering its direct costs. The state’s share was just $8.7 million.
In September, Governor LePage fulfilled his pledge to pay 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 governor’s plan represents a vastly superior spirits wholesale services strategy and business model than the current contract,” said Gerry Reid, director of BABLO. “By recovering lost revenue that resulted from leasing the business and removing the 36.8% gross profit guarantee that existed in the old contract, Maine consumers will get a much better value from these contracts than they have previously.”
After recovering and controlling the full value generated by the business, BABLO will carefully reduce the consumer price of spirits stocked in agency liquor stores and improve the stores’ profitability. Reduced prices will also allow the state to recover a portion of the sales lost to New Hampshire. BABLO estimates that the new 10-year contract will more than double the operating income received by the state compared to the past 10 years.
Revenue from the liquor business will be used to make payments on the hospital bond. Excess revenue will be used to pay for clean water and transportation projects, along with increasing the balance of the state’s depleted rainy day fund.
As outlined in the RFP, the BABLO is seeking bidders to provide spirits administration and spirits trade marketing. Interested vendors can bid on one or both contracts.
Maine is one of 17 control jurisdictions, where the government controls the sale and price of spirits.