AUGUSTA, Maine — The price Mainers pay for handles of vodka, nips of Fireball and bottles of other spirits could change under a plan to lower costs and implement a simpler pricing regime.
The proposal from Sen. Craig Hickman, D-Winthrop, would simplify Maine’s spirits pricing formula. To make a profit and cover overhead, liquor stores use 75 different markup categories to set retail prices that can be up to double the wholesale price. Lawmakers and industry officials are rallying around a version that institutes a uniform 65 percent markup.
It sets up an interesting debate over the state’s fairly unique regulatory environment for alcohol. Maine, which still has a handful of dry towns, is among 17 states that oversee some aspects of liquor sales and prices. New Hampshire and Vermont are also part of that group.
Supporters of the change call the existing model far too complex. But Gov. Janet Mills’ administration warned a uniform mark-up for liquor prices could cause “grave concern” for Maine’s budget by reducing state revenue and hurting nearly 650 agency liquor stores.
Here’s what you need to know about the plan ahead of a potential vote Tuesday in a legislative committee on Hickman’s measure, which was rolled out last year.
What is the current liquor pricing system in Maine?
The Maine Bureau of Alcoholic Beverages and Lottery Operations, or BABLO, recommends retail prices using a formula that considers the type of spirits, volume and whether the product was manufactured in Maine. It includes the 75 different categories and other aspects recognized by retailers more than the average consumer, such as a “premium tax” of $1.25 per proof gallon that supports substance use disorder prevention and treatment services.
Maine contracts with a wholesale spirits distributor. The state indicated last month it intends to stick with Pine State Trading. The Gardiner-based company won the state’s 10-year liquor contract in 2014. It was also the only firm to bid for a new contract coming this year.
How are certain spirits priced now?
The 1.75-liter bottles of Tito’s Handmade Vodka topped the list of Maine’s best-selling spirits in 2022, according to state data. It accounts for a little over 5 percent of the total volume of spirits sold in Maine and retails for $34.99, according to Anya Trundy, the legislative liaison for Mills’ budget department.
The cost of each bottle is $21.14, meaning it gets a 66 percent markup to reach the $34.99 retail price, similar to what could take effect under the uniform system for all products.
By comparison, a 1.75L bottle of Crown Russe Vodka has a retail price of $14.99 in Maine and a wholesale “bottle cost” of $6.30, resulting in a markup of 138 percent, according to information Trundy presented to lawmakers.
Who supports a uniform pricing system in Maine?
Companies in the spirits industry, Democratic lawmakers, and state chamber of commerce are among groups to testify in support of a change to a uniform pricing system, though it is unclear if all would agree on a 65 percent markup rate.
The Sazerac Company’s hundreds of alcohol brands include 1820 Spirits, which has a Lewiston facility that employs more than 270 Mainers, Assistant House Majority Leader Kristen Cloutier, a Democrat from Maine’s second-largest city, noted in supporting the proposal.
A Sazerac official testified Maine’s current system penalizes low-income consumers and the retailers and distillers that serve them by marking up cheaper products and smaller sizes more than larger, expensive bottles.
The Distilled Spirits Council of the United States, a national trade group, believes Maine’s current formula is “complex, uncertain and unpredictable,” according to senior vice president Andy Deloney. Without noting the 65 percent rate, Deloney added “the benefits of predictability and certainty would be negatively outweighed by an exceedingly high markup rate.”
Would state revenue decline under the uniform pricing plan?
Maine’s liquor contract with Pine State Trading has “delivered a dependable, stable revenue stream” over the past decade, initially helping to pay down a $220 million bond the state used to cover Medicaid debt owed to hospitals, Trundy said.
Maine saw roughly $70 million in revenue from spirits sales in fiscal year 2023. After deducting operating expenses, about $66.7 million was transferred to cover general and highway-related expenses, but Trundy testified the Highway Fund may lose about $18 million if the state set a uniform 65 percent mark-up for spirits.
“The state has the unenviable task of holding our own business interests, as well as those of our suppliers, our agency liquor stores, consumers and public health in tension with each other,” Trundy said.
