Wine Kiosks a Big Mistake from the Beginning, Turzai Says
9/20/2011

HARRISBURG – Majority Leader Mike Turzai (R-Allegheny) released the following statement today regarding the Pennsylvania Liquor Control Board’s (PLCB) decision to end the wine kiosk program:

“I don’t think it comes as a shock to anyone outside the PLCB’s top echelon that the wine kiosk program was a complete failure. The kiosk program was a joke from the very beginning and the PLCB knew it. The agency’s own internal evaluation committee recommended against the kiosk idea.  Yet the board went through with the cockamamie program anyway.    

“This is just another example of why a government agency should not be attempting to mimic private industry.  The wine kiosk program resulted in machines that sometimes worked, and sometimes didn’t; and it forced consumers to actually blow into a cumbersome machine – no one wants to buy wine that way.  Real customer convenience will only come once the sale of wine and spirits is moved to the private sector.”

PLCB Wine Kiosk Timeline:

  • March 28, 2008 – Public Notice of Wine Kiosk RFP on PLCB and DGS websites; proposals due May 8, 2008. Simple Brands (Simple) only applicant.
  • July 9, 2008 – PLCB RFP Evaluation Committee submits report to PLCB Chief Counsel’s Office for inclusion in that day’s board meeting. Report advises against contracting with Simple, not a well-founded business plan; failure to get advisory opinion from TTB (federal government) on permissibility of Kiosk program; awards Simple a score of 305 out of 1,000 points for its proposal.
  • July 9, 2008 – RFP Evaluation Committee advised that the board would not be reviewing the committee’s report; committee members told to destroy all copies/documentation relating to the report; and that CEO Joe Conti would meet with them on July 10.
  • July 9, 2008 – LCB members met and voted to approve Simple Brands proposal.
  • July 10, 2008 – Conti met with Evaluation Committee members, told them not to speak of the evaluation; to destroy all copies; and their concerns would “be taken care of.”
  • January 29, 2009 – Effective date for Contract 20080318 between LCB and Simple for 100 wine kiosk vending machines.
  • June 30, 2009 – Relationship between Simple investors and former Governor Ed Rendell discovered: Investor Herbert Vederman gave Mr. Rendell $346,276, including a $100,000 lump sum in 2002, campaign finance records show. Mr. Vederman also served as the governor's campaign finance chairman. His business partner, Ira Lubert, meanwhile, gave Mr. Rendell $140,980 in that time period.
  • June 23, 2010 – LCB places two kiosks in Harrisburg area grocery stores: Giant Foods in Dauphin County and Wegman’s in Cumberland County.
  • June 30, 2010 – End of FY 09-10, Profit and Loss statement. Kiosk program showed a net loss of $255,077.
  • July 9, 2010 – LCB conditionally accepts delivery of two kiosk machines subject to Simple remedying operational problems with the machines (doors failing to open or close, credit card machine failures and general failures with particular transactions).
  • September 1, 2010 – Second letter sent to Simple giving conditional acceptance of two kiosks provided they remedy operational problems within 60 days of notice.
  • September 8, 2010 – Contract with Simple amended to include a $1 per transaction fee (collected from the consumer and paid to Simple) and a 50-cent per bottle “advertising fee.” The amount to be paid to Simple for advertising was capped at $1.5 million per year. PLCB also warned Simple that it would not accept delivery of additional kiosks (only two were in operation at the time) unless the various problems previously identified by the board were remedied.
  • October 15, 2010 – LCB Announces roll-out of more kiosks throughout the state. According to LCB press release:
  • “We’ve been testing the Pronto Wine Kiosks at two supermarkets in the Harrisburg area for the past three months,” said Board Chairman Patrick J. “PJ” Stapleton. “The kiosks have proven to be safe and reliable and we are looking forward to giving consumers across Pennsylvania the opportunity to do one-stop shopping.”
  • December 21, 2010 – PLCB takes all 29 wine kiosks out of service due to systemic problems.

(LCB Press release: “While customer satisfaction with the six-month old kiosk program remains high, recent problems -- such as product not dispensing -- require us to take immediate action while we wait for the manufacturer to correct all of the identified issues,” said Pennsylvania Liquor Control Board Chairman Patrick J. “PJ” Stapleton. “We apologize for any inconvenience this may cause our customers and supermarket partners, but felt this temporary closure was critical to the future success of the program.”)

  • December 22, 2010 – Board notifies Simple that the Kiosks were taken out of service because Simple failed to remedy the various problems with the Kiosks. According to the Board:
  • “While most of the several hundred specific instances were eventually resolved, the recurring nature of the problems confirms that the problems are systemic, rather than isolated.”
  • Simple was advised to deliver fully functioning wine kiosks, and a certification that the systemic problems had been rectified by March 14, 2011
  • December 30, 2010 – PA Auditor General notifies the board of its Wine Kiosk performance audit and advises LCB to preserve and maintain any and all documents and materials (including e-mails) relating to the kiosk project.
  • February 22, 2011 – Simple hopes to expand to smaller kiosks at convenience stores like Wawa and Sheetz – per letter to the Board.
  • June 2010 – Wegman’s notifies LCB it will terminate its “kiosk” relationship.
  • June 25, 2011 – Right-To-Know-Law request submitted to LCB by Leader Turzai requesting a copy of the TTB advisory required by the RFP; all costs associated with Kiosk program and all invoices to, and payments from, Simple pursuant to the contract
  • June 30, 2011 – End of FY 10-11, Profit and Loss statement. Kiosk program showed a net loss of $843,369 for FY-10-11; Additional losses (not accounted for on prior FY P&L statement) of $24,877. Total net loss for project: $1,123,323.
  • August 4, 2011 – Response from LCB indicates Simple failed to obtain TTB advice and that no billing had been done up to that point, but LCB was in the process of sending the Profit and Loss statement to Simple for payment.
  • August 5, 2011 – Board demands payment from Simple.
  • August 15, 2011 – Walmart advises PLCB it will not participate in the Kiosk program (23 machines were planned for Walmart stores).
  • August 17, 2011 – PLCB chief Joe Conti indicates the agency will continue the wine kiosks once its litigation is resolved. "This was not a faulty fiscal decision," Conti said.
  • September 1, 2011 – PA Auditor General issues audit detailing the failed program.
  • September 16, 2011 – PA Independent reporter Eric Boehm reports, contrary to public comments and direct testimony, PLCB failed to conduct any market research in relation to the kiosk program.
  • September 20, 2011 – PLCB announces the end of the failed kiosk program; it pulls the plug on remaining machines in several supermarkets.

State Representative Mike Turzai
28th District, Pennsylvania House of Representatives
Contact: Stephen Miskin   
smiskin@pahousegop.com  
717.705.1852
PAHouseGOP.com
RepTurzai.com
Twitter: www.Twitter.com/SAM1963

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