Ford Reiche, president of Dirigo Spirit, sees the state’s wholesale liquor contract as broken but fixable.
As co-founder and former president of Maine’s largest logistics company, he’s used to solving problems and handling details.
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His new company aims to bid against Maine Beverage Co., which has held the 10-year state liquor contract since 2004, and other potential bidders that have yet to emerge publicly.
“There’s something that’s really broken here,” said Reiche, 58. “I have the experience and resources to help Maine solve the problem.”
The Bureau of Alcoholic Beverages and Lottery Operations is looking for a way to increase the amount of money the state collects from liquor sales, while lowering retail prices by $2 to $7 per bottle to make Maine more competitive with New Hampshire’s state-run liquor stores.
The state also wants to pay higher commissions to agency liquor stores, said Gerry Reid, the bureau’s director.
Reiche says Dirigo Spirit can be leaner and more efficient and cost the state less than Maine Beverage.
Prompted by lawmakers’ discussions about the liquor contract as a revenue source, he has spent the past year surrounding himself with a team of 15 advisors and consultants to develop Dirigo and its plan for bidding on the contract.
The state awarded the current wholesale liquor contract at a time of fiscal crisis, when it needed help closing a $1.2 billion budget deficit.
Maine Beverage Co. got the 10-year contract for $125 million. The fair market value of the contract was pegged at $378 million in a study done in 2009 by Deloitte & Touche.
Maine Beverage has said it is interested in a renewal of the contract. The company’s president and chief executive officer, Dean Williams, would not discuss the details of a possible extension, but said “we have made many operational improvements to this business and have significantly increased the value of the state’s asset by growing sales appreciably.”
Reid, the liquor bureau’s director, said he has been told that another interested party will soon approach the state about the contract. Other prospective bidders have said they would like to be notified when the selection process starts, he said.
The state hopes to save time by bypassing the standard request-for-proposals process and negotiating directly with qualified bidders. About a half-dozen firms in Maine have the ability to provide the needed services, Reid has said, so it’s clear that Reiche will have competitors.
Reiche says his expertise in logistics — getting the right product to the right place at the right time — is a natural fit for Maine’s liquor contract, which involves warehousing and distributing about 2,600 products to 364 retail outlets around the state.
In 1989, Reiche co-founded Auburn-based Safe Handling, a rail-to-truck transportation logistics company that shipped and warehoused a billion pounds of products a year for customers including Country Kitchen and Poland Spring.
When the company was sold to Salt Lake City-based Savage Services Corp. in 2009, Reiche insisted that the contract preserve the jobs of Safe Handling’s 100 employees.
“He worked very hard to pick the next owners,” said Peter Worrell, managing director and CEO of The Bigelo Co. in Portsmouth, a mergers and acquisitions firm that advised on the sale of Safe Handling. “He’s really a thinker — not someone who makes decisions from a gut response. He agonizes over these things.”
Auburn Mayor Jonathan LaBonte said the liquor contract fits with Reiche’s background in transportation, distribution and logistics. “If the private sector can make a buck and the state still benefits — that’s Ford.”
Reiche said Safe Handling improved the efficiency of product deliveries in Maine by integrating rail and truck transportation. He sees similarities in the inception of Dirigo Spirit.
“We know an awful lot about the contract and how to do this efficiently,” he said. “We know how little money we can make and be profitable and stay in business.”
That approach differs from the current contract.
Maine Beverage, a venture of Martignetti Cos. of Massachusetts and the New York private equity firm Lindsay Goldberg and Bessemer, gets a guaranteed annual profit margin of 36.8 percent based on sales of all liquor.
Maine Beverage subcontracts with Pine State Trading of Augusta and makes about $36 million a year in profits, before taxes and amortization of the lease payments. Its actual operating costs are about $7 million a year, said Reid.
By comparison, Reiche says he envisions Dirigo Spirit as a “small company making small company profits,” with about 55 employees, all based in Maine.
Reiche, a history buff whose family has been in the state since the 1630s, was trained as a lawyer but has spent most of his career as an entrepreneur and philanthropist. He served on the board of The Nature Conservancy of Maine and as president of the group’s Caribbean program.
His political donations show that he spreads his money among Republicans, Democrats and independents. He and his wife, Karen, who live in Cumberland, each gave the maximum amount of $750 to Paul LePage’s gubernatorial campaign in 2010.
Reiche had backed Matt Jacobson, who lost to LePage in the Republican primary.
This year, Reiche gave $500 to independent U.S. Senate candidate Angus King. He also donated to Bruce Poliquin, who finished second in the Republican Senate primary in June.
And in 2008, he donated to Adam Cote, who lost his bid for the Democratic nomination in Maine’s 1st Congressional District.
— Staff Writer Steve Mistler contributed to this report.
Staff Writer Jessica Hall can be contacted at 791-6316 or at:
jhall@mainetoday.com
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