Martignetti Companies

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Martignetti Companies

975 University Avenue
Norwood, Massachusetts 02062-2643
U.S.A.
Telephone: (781) 278-2000
Fax: (781) 278-2253
Web site: http://www.martignetti.com

Private Company
Founded: 1908
Employees: 394
Sales: $128 million (2005 est.)
NAIC: 422800 Beer, Wine, and Distilled Alcoholic Beverage Wholesalers

Based in the Boston area, Martignetti Companies is one of the leading retailers and wholesalers of beer, wine, and spirits in New England, operating in Massachusetts, Maine, Vermont, New Hampshire, and Rhode Island. The company maintains a 16,000-square-foot flagship store in Brighton, Massachusetts, and two other locations in Boston's North End and the Parkway Plaza Mall in Chelsea, Massachusetts. The stores feature more than 3,500 wines, a wide selection of imported and microbrewed beers, an array of high-end spirits, and hand-rolled cigars. To serve wholesale customers, Martignetti operates a temperature-controlled warehouse, more than 435,000-square-feet in size. Martignetti Companies is privately owned, now run by the third generation of the Martignetti family.

ORIGINS DATE TO 1908

The founder of Martignetti Companies was Carmine Martignetti, who in 1908 opened a small Italian grocery store in Boston's North End, offering such fare as pasta, cheese, cold cuts, produce, and olive oils. It was not until 1933 that he added wine and other spirits. After the "great experiment" of Prohibition, initiated in 1919, proved to be a colossal failure, causing more ills than cures, it was repealed in 1933. Because more than a decade had passed since the legalized sale of alcohol, the retail field was open to all comers. Martignetti converted his North End shop into a liquor store, albeit one that continued to offer many of the deli items the grocery store had carried.

During the Prohibition years the second generation of the Martignetti family was born: twins Ferdinand and Joseph in 1925 and Anthony three years later. They grew up working in the family store and took charge in the years following World War II. The family opened the Brighton store in 1963. It became particularly well known for its selection of wines. According to the Boston Herald, Anthony Martignetti "was a pioneer in the marketing and promotion of wines in the Boston area." The newspaper also credited him with building the operation into what was, for a time, the largest liquor store in the world. The family later opened another Boston-area liquor store, thereby reaching the state-mandated limit of three stores that a family or company could own.

Martignetti and other large chains put pressure on the state of Massachusetts to raise the number of liquor stores they could own, and in the early 1980s a liquor-law reform bill was introduced in the state legislature. Another area addressed in the bill that concerned Martignetti on the wholesale side of the business was "primary source legislation," meant to combat wholesalers who bypassed the established distribution system in the state by trucking in alcoholic products from New York and Oklahoma. As a result, a wholesaler such as Martignetti might lay out a sizable amount of money to acquire the distribution rights in Massachusetts to a brand, perhaps taking on some products it did not necessarily want in the bargain, and would then spend more to promote the brand. A renegade wholesaler could then cherry-pick the most popular and profitable products, buy them out of state at a good price, truck them into Massachusetts, and undercut the licensed distributor.

In the 50 years since the Martignetti Companies began selling alcoholic beverages, the liquor industry had evolved into a byzantine collection of factions and political ties in Massachusetts. All the special interests—including the distillers, wholesalers, chain retailers, and small package store operators—were invited to participate on a special commission. Compromises on ownership limitations and primary source legislation were worked out and passed by the state legislature, only to have the governor veto the bill in early 1982.

With no way to add more stores, Martignetti began to build up its wholesale business through acquisitions and sought out opportunities in surrounding states. The effort to take the company to the next level would be spearheaded by a third generation of the Martignetti family. Anthony Martignetti retired in 1986, dying a dozen years later at the age of 70, while Ferdinand stayed on as chairman of the board, a title he held until his death at the age of 75 in 2000. By then management had been transferred to the new generation, Carmine Martignetti and Carl J. Martignetti, who would become co-owners and share the presidency.

DISTRIBUTOR ACQUIRED: 1991

The first step in growing Martignetti Companies through external means came in 1991 with the purchase of Charles E. Gilman & Sons, a well-established wholesale liquor distributor in Medford and Springfield, Massachusetts. It had been purchased in 1980 by Mitchell Nussman, the former national sales manager for Seagram Distillers Co. who went to work for Gilman in 1969. Nussman had died of cancer in late 1989, making the distributor available for Martignetti to add to its holdings. A year later, in 1992, Martignetti continued to add to its wholesale business by acquiring Pastene Wine Company, a former family firm that had operations in both Boston and New York.

Martignetti pressed its acquisition spree in 1994. It added Silenus Wine Company, a Waltham, Massachusetts-based importer of wines, and also expanded outside of Massachusetts by acquiring Jet Wine & Spirits, a New Hampshire company founded ten years earlier. New Hampshire took a different approach to the sale of beer, wine, and spirits than did Massachusetts. While beers, wines, and ports were available at grocery stores and other retail outlets, spirits could be sold only at "New Hampshire State Liquor Stores," strategically located state-operated outlets. In addition to acting as a retailer, the state also acted as a wholesaler through the state liquor commission. Jet Wine was licensed to sell to the commission. In many respects, Jet Wine was a promoter, educator, and advocate. It represented wine and spirits producers to the state, while also bringing products to the attention of New Hampshire retailers, restaurants, hotels, and other parties, and marketing the products directly to consumers to build demand.

Jet Wine became the foundation of a new subsidiary, Martignetti Companies of New Hampshire, which would be supplemented by another unit, Executive Wine & Spirits. Also out of the Manchester, New Hampshire, headquarters, Martignetti operated new ventures that branched out to Vermont and Maine, called Martignetti Companies of Vermont and Martignetti Companies of Maine.

COMPANY PERSPECTIVES

As one of America's leading wine and spirits distributors, Martignetti Companies' mission is to provide world class service to our customers while committing to long term brand building activities with our supplier partners.

While Martignetti was expanding throughout New England, back at home the company continued to operated in a highly charged political environment. Martignetti along with five other liquor wholesalers were caught in a sting operation conducted by the state Alcoholic Beverages Control Commission (ABCC), which used an undercover investigator to pose as an employee at a package store in the winter of 1993. Although the wholesalers were not allowed by law to sell below the prices they published in a monthly beverage journal, they offered the investigator price cuts and other illegal incentives. The posting requirements had been on the books since Prohibition as a way to prevent liquor prices from dipping too low—in order to encourage temperance. While many contended that the provision was antiquated and artificially inflated the price of beer and liquor to the disadvantage of consumers, small package store owners maintained that it allowed them to more fairly compete against such larger players as Martignetti. In August 1994 the state issued some of the toughest sanctions in decades against the industry, ordering the six liquor wholesalers that were ensnared in the trap to shut down for five days.

The Boston Globe reported when the penalties were announced that "several liquor industry officials, who asked not to be identified, suggested … that the tough action against wholesalers was a deliberate attempt to offset allegations that the [Massachusetts Governor William] Weld administration has been too cozy with the industry." In particular, Martignetti came under fire because in April 1994 it had hosted a $30,000 fundraiser at the Four Seasons Hotel in Boston for Governor Weld. The next day Martignetti received a conditional license from the ABCC it had applied for just four days earlier to sell Miller Beer products in the greater Boston area. Earlier in 1994 Martignetti had formed a new subsidiary, Charles River Distributing Corporation, to acquire the Boston-area wholesaler of Miller beer. Normally a thorough investigation to examine the finances and background of the applicant was required before a wholesale license could be granted. By giving it a conditional license, Martignetti was able to sell Miller Beer while the background investigation was conducted. The timing of the events raised some questions in the press, no doubt encouraged by Weld's political enemies. Moreover, a month after the fund-raiser, Martignetti received another favorable ruling from the ABCC that allowed it to win the exclusive right to sell Molson Ice beer, beating out the area's Molson distributor for the previous 20 years, United Liquors Ltd. of West Bridgewater. The ABCC paved the way by ruling Molson Ice was a new product, hence Molson had no obligation to make the product available through United Liquors.

In response to the uproar, which Martignetti contended was drummed up by its competitors, the state attorney general's office investigated both matters, involving a grand jury. With an election on the horizon it was impossible to keep politics out of the equation and it became a campaign issue in the fall. Weld conducted his own review of the situation and pronounced himself clean while urging the grand jury investigation to be wrapped up before the November elections. It would not be until the end of March 1995 that the state attorney general's office finally announced that it could find no evidence of criminal wrongdoing.

NEW WAREHOUSE OPENS: 1999

Martignetti rounded out its New England operations in 1998 by forming Martignetti Companies of Rhode Island. To keep pace with its growth, the company also began construction on a 325,000-square-foot distribution and headquarters facility in Norwood, Massachusetts. In this way, it could improve efficiency by consolidating the three warehouses it operated in the Boston area. Moreover, it could incorporate state-of-the-art equipment and inventory systems to create a fully temperature-controlled warehouse. The facility opened in 1999.

With the start of the 21st century Martignetti continued its evolution from local store owner to major regional distributor. In 2000 it acquired Classic Wine Imports, Inc., a Boston-based importer of fine wines. The business was relocated to Norwood, where it would do business in New Hampshire, Vermont, Rhode Island, and Maine as well as Massachusetts. In 2004 Martignetti solidified its Maine operations by winning the state's wholesale liquor contract for ten years at a price of $125 million, part of an effort to privatize Maine's wholesale liquor business and close a state budget deficit. It was a controversial award that was contested by the losing bidders, who contended that the bidding process had not been fair. Eventually a compromise was worked out that made Martignetti a partner with a Maine-based company, Pine State Trading Company, a leading convenience store distributor.

KEY DATES

1908:: Carmine Martignetti opens Boston grocery store.
1933:: Martignetti begins selling spirits.
1963:: Flagship liquor store opens.
1994:: New Hampshire-based Jet Wine & Spirts acquired.
1999:: A Norwood, Massachusetts, warehouse opens.
2006:: United Liquors is acquired.

To match its growth, Martignetti expanded its warehouse until it exceeded 425,000 square feet in 2005. Some of the extra space would be needed to serve yet another acquisition, the 2006 purchase of longtime rival United Liquors, which along with Horizon Beverage Co. of Avon had been among the top three wholesalers in Massachusetts. Martignetti was the dominant force in the state, as well as New England in general, a far cry from the small grocery store Carmine Martignetti opened nearly a century earlier.

Ed Dinger

PRINCIPAL SUBSIDIARIES

Martignetti Companies of New Hampshire; Martignetti Companies of Vermont; Martignetti Companies of Maine; Martignetti Companies of Rhode Island; Martignetti Grocery and Liquor Company.