AUGUSTA — Maine regulators are looking to raise the price of several less expensive categories of alcohol, including a 50 percent increase in the price of nips, the tiny 50-milliliter bottles that recently were the subject of a conflict between Gov. Paul LePage and the Legislature.

The state wants to achieve a minimum markup of 75 cents for each nips bottle, which would raise the price of the most popular brand, Fireball Cinnamon Whisky, from 99 cents to $1.49. Under the new pricing structure, the largest bottles of alcohol sold, 1.75 liters, would have a minimum markup of $6 a bottle, and smaller bottles would have lesser markups, according to a memo last week by Tracy Willett, manager of liquor operations at the Maine Bureau of Alcoholic Beverages and Lottery Operations.

If approved by the state Liquor and Lottery Commission, the price increases will go into effect in October.

The memo came just days after Greg Mineo, director of the beverages and lottery bureau, told the commission that the state’s wholesale liquor business was experiencing steady sales growth, up $10 million over last year, or about 6 percent.

But Millet said in her memo that the state wasn’t gaining enough benefit under current pricing structures. “This change is a result of the conversations from last fall on a general concern that the state’s profit was not proportional to our sales growth,” Millett wrote.

Some observers, however, worry that the price increases may undermine Maine’s efforts to become more competitive with neighboring New Hampshire, which generally offers lower prices.

Maine revamped its wholesale alcohol business in 2013 after its 10-year contract with Maine Beverage Co. expired. Under the new contract, the state entered into a more aggressive marketing and pricing campaign to recapture sales it believed had been lost to New Hampshire.

That pricing strategy, the work of Gerry Reid, the former director of the beverages and lottery bureau, was considered critical to paying off a $220 million bond that LePage and the Legislature approved in 2013 to repay $183 million in backlogged Medicaid reimbursements that the state owed to Maine’s hospitals.

The new pricing formula also follows the liquor commission’s vote against delisting and ending the sale of nips. LePage made the delisting request after the Legislature added a 5-cent bottle deposit on nips because they have been an increasing source of litter complaints.

LePage warned that rising sales of nips – with revenue increasing from just over $500,000 in 2006 to $8.4 million in 2016 – were contributing to more drinking and driving in Maine.

During the delisting debate, the liquor commission did not discuss whether to increase the cost of nips, which are now priced so low that it’s cheaper to buy 750 milliliters of alcohol in 15 nips bottles than to buy a single bottle of the same amount and brand.

Sen. Tom Saviello, R-Wilton, who ushered through the new law that adds a nips deposit, is not surprised at the proposed pricing change on nips and in some ways agrees with it. He doesn’t believe the move is direct retaliation against the liquor commission’s reluctance to ban nips outright, but is more a response to a concern that nips were priced too cheaply.

“I don’t think it was in retaliation for anything we did. I think this has been in the works for a while,” Saviello said. “I’ve always argued that (nips) should be more expensive than they are.”

He said the price increase also could be needed to cover the cost of labeling nips bottles with a 5-cent deposit.

However, the price increases for larger bottles of liquor are a concern because they could drive customers back to New Hampshire, undermining the recent push to have a more competitive pricing structure, Saviello said.

The most popular brands of liquor are often priced higher in Maine than in New Hampshire, including Allen’s Coffee Brandy, which has been a decades-long top seller in Maine.

In 2016, Mainers bought 342,129 bottles of Allen’s in the large, 1.75-liter size. The state’s current non-sale price for that size is $19.99, while the non-sale price in New Hampshire is $15.99.

Millett’s memo indicated that nearly 1,000 products would be affected by the new pricing formula. Although most of the product prices would increase, some would be marked down.

“Under our current pricing formula, different sizes and products deliver very different profit margins to the state,” Tim Poulin, deputy director of the beverages and lottery bureau, said in a prepared statement Monday. “In 2016, we successfully standardized the vodka portion of our product portfolio. With the proposed change, we hope to accomplish the same results across all categories and sizes of spirits products.”

Poulin said Willette’s memo was issued to give retailers a heads-up, and he emphasized that the price changes were only proposed. The changes are subject to negotiation between the bureau and brokers or suppliers.

Scott Thistle can be contacted at 791-6330 or at:

sthistle@pressherald.com

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