Distillers oppose liquor contract Allen’s coffee brandy fears loss of revenues

AUGUSTA – The manufacturers and distributors of the most popular booze in Maine are hoping the state’s $125 million liquor contract award to Martignetti Cos. will wind up on the rocks next week.

Lawyers for M.S. Walker and White Rock Distilleries demanded Tuesday that the state vacate its contract award to Martignetti which they fear could manipulate and promote sales of competing products resulting in revenue losses to their companies that historically have enjoyed a level playing field in the state.

According to state estimates, M.S. Walker of Somerville, Mass., sells more than 7,000 cases of Allen’s Coffee Flavored Brandy each month in Maine, which leads the nation as the highest per-capita consumer of the 70 proof cordial. White Rock of Lewiston distills a variety of gins, vodkas and rums.

For 70 years, Maine was a “liquor control state” and assumed full responsibility for the importation, storage and distribution of liquor through a system of warehouses and state liquor stores. Last year, as part of a strategy to eliminate a $125 million deficit in the state budget, the Legislature agreed to lease its liquor distribution and warehousing rights to a private contractor.

As the largest liquor distributor in northern New England, Martignetti Cos. of Norwood, Mass., was able to make a compelling offer that state officials maintain was weighed carefully against all other bidders. In addition to the $125 million, the company also has agreed to implement a profit-sharing plan that eventually could be worth another $50 million to the state.

Maine Liquors of Augusta and MaineCentric of Auburn have appealed the award of the 10-year lease for liquor distribution rights to Martignetti, alleging that irregularities in the state’s request-for-proposals selection process gave the winner an unfair advantage.

Walker and White Rock, two of five intervenors in the appeal, said that in addition to questions about irregularities in the bidding process, there are significant concerns about the future of fair competition in Maine. Walker questions whether there is anything in the state’s contract to protect them in the event Martignetti seeks to replace Allen’s with another brand that provides the distributor with higher profits.

“There is no legally permissible competitive alternative for [the distillers],” wrote attorneys for Walker and White Rock in their motion to the state to vacate the contract award. “Their only option is to withdraw from the Maine market if conditions become sufficiently disadvantageous. Short of that, they are tied to the prevailing monopolist for 10 years.”

Efforts to reach a legal representative for Walker and White Rock on Tuesday were unsuccessful.

Hearings in the appeal are scheduled to begin Feb. 23 and could run well into the next week. The two losing bidders maintain that the state’s $125 million deal was not a good one because Maine now collects about $26 million a year from its operation of the wholesale liquor business, or about $260 million over the life of the 10-year lease. The appellants allege the state allowed Martignetti to amend its proposal in violation of state rules and awarded the contract fully aware that Martignetti allegedly had failed to meet all of the state’s requirements.

As the state attempts to move beyond the appeal process, it also is preparing to draw up policies regulating liquor pricing. Domna Giatas, deputy commissioner of the Department of Administrative and Financial Services, said a Feb. 26 rulemaking hearing is expected only to formalize the state’s current wholesale and retail liquor price-setting policy.

Still, the session is expected to draw a number of agency liquor store owners who would like the state to increase their average 10 percent profit share on a single liquor sale to 15 percent. Agency store operators claim the increases are needed to maintain fair wages and benefits for the additional employees required to load, unload and shelve liquor stock at their stores.