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Wine Kiosk Program Ends in Contract Dispute

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The deadline has passed without a resolution in a contract dispute between the Pennsylvania Liquor Control Board and the vendor for its wine kiosk program.   It means that the experiment with the wine vending machines at grocery stores has come to an end.

LCB spokeswoman Stacey Witalec says the kiosks are no longer open and they’re working with the vendor, Simple Brands LLC, on a removal schedule.  There were 21 of the kiosks still operating after Wegmans pulled out of the program earlier this year.  

The LCB says Simple Brands should reimburse over one million dollars in expenses incurred with the kiosk program. The company disputed the amount, saying some of the expenditures were unnecessary.   The LCB exercised a 45 day cure period in the contract and that period came to an end Monday night without a resolution.  The machines did not open on Tuesday morning.

The LCB plans to hold Simple Brands accountable, according to Witalec.

The stores that housed the kiosks have the option of applying for a license that would allow them to sell limited amounts of beer and wine.  The Wegmans store on the Carlisle Pike in Mechanicsburg has such a license. Witalec says over 80 grocery stores have already applied for similar licenses. She says interested stores have to go through the typical licensure process.

Witalec says they’ve also been discussion with a number of retailers who are interested in having one of their brick and mortar stores connected or within their established locations. She says these are known as one stop locations and there are currently 19 in the Commonwealth.  She says it’s another model that is successful and they look forward to utilizing as well.

The experiment with the kiosks began last year and had come in for recent criticism from the Auditor General and others for not meeting its goal of customer convenience. Meanwhile, the state House Majority Leader launched a campaign this summer to privatize liquor sales in Pennsylvania.

Auditor General’s Report Critical of Wine Kiosk Program

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There has been more criticism of the PLCB‘s wine kiosk program, this time from a special performance audit.   Auditor General Jack Wagner says the program does not meet the goals of greater convenience or increased profitability, or reaching under-served areas.  He says unless there are radical changes in the contract with the vendor, the LCB should terminate the contract.

Wagner says there are still 22 kiosks operating at supermarkets in Pennsylvania since Wegman’s pulled out of the program, but sales at those stores are running far below the LCB’s original projections.

Wagner the kiosks were not even open on Sunday. He adds the General Assembly needs to take the handcuffs off the LCB, permitting all of the state stores to be open seven days a week, 12 hours a day.   

Joe Conti, CEO of the Pennsylvania Liquor Control Board, says the future of the kiosk program depends on the resolution of a financial dispute with the vendor over cost reimbursement.  The vendor was declared in breach of the contract.  There is a 45 day cure period which expires September 19th.

Conti agrees with Wagner that the state stores should be able to change their hours of operation.  He says they need a legislative amendment to the liquor code to expand those hours.  He says one was adopted last session but vetoed by then-Governor Ed Rendell.  Conti says there is legislation moving again to expand the hours.

Conti called Wagner’s report very fair and balanced.  He says they will certainly review the recommendations.

Wagner’s report recommends that if the contract for the kiosks is not terminated, the LCB should explore other options for testing blood alcohol concentrations at the kiosks and be more aggressive in holding the vendor accountable for ensuring the kiosks are fully functional at all times.

It recommends the LCB work with the General Assembly to pass legislation that would allow all stores and kiosks to be open seven days a week, with state stores open from 9 a.m. until at least 9 p.m. and kiosks available from 9 a.m. until midnight if they are housed in stores open during those hours.   It also recommends the kiosk offer liquor sales as well as expand wine offerings.

The report finds the kiosks had more than 900 malfunctions before they were shut down last December for repairs.  Even after they were brought back on line in January, there were more than 100 malfunctions reported from late January into late February.

The report also finds that the LCB has spent 1.12 million dollars more than it took in over two fiscal years on the program. The board has billed the vendor for the costs, but the vendor has not paid, resulting in the breach of contract situation.