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LCB research called plan 'deficient,' but it was approved anyway

| Monday, Aug. 15, 2011

HARRISBURG -- The state Liquor Control Board approved a plan to place wine kiosks in grocery stores despite an internal report that predicted problems and recommended against it.

The report that found the business plan "deficient" was completed in 2008, shortly before the three-member board controlling the agency approved the plan, agency officials said.

The first machines reached stores in June 2010. LCB records show consumers bought 95,378 bottles from about 30 wine kiosks with sales totaling $1.2 million. That's about the same amount of revenue as one healthy small-town Wine & Spirits Shoppe. The state has 624 liquor stores.

But the machines frustrated many consumers, and a contract dispute now has the LCB on the verge of pulling out. The contract dispute, with Simple Brands, is "headed toward litigation," board CEO Joe Conti told a House oversight panel last week. Neither the company nor its lawyer could be reached.

The flap unfolds as privatization advocates push legislation to end the state's monopoly on wine and spirits. Wine kiosks in grocery stores were supposed to give consumers an alternative to state stores while allowing the state to keep control of the products.

Last week, House Republicans released a copy of an internal evaluation panel's report, saying the suburban Philadelphia company's plan to place wine kiosks in grocery stores risked failure.

The LCB refused to confirm the document's accuracy, raising questions about its authenticity.

In response to a question about that recommendation, Conti told the House Liquor Control Committee the report did not recommend against the LCB's plan.

But the agency subsequently confirmed that while the report released by Republicans was an earlier, not final version, the final report recommended against proceeding with the kiosk plan with Simple Brands.

The LCB won't release the final report because it is a confidential document, said spokeswoman Stacey Witalec .

The three-member board controlling the agency moved forward with the plan by Simple Brands, believing the contract would address evaluators' concerns and skepticism. The company was the lone bidder.

A review by LCB Chief Counsel Faith Diehl found the final report "recommends against going forward and does contain the word deficient," Witalec wrote in an e-mail.

As for Conti's testimony, Witalec said he "misspoke."

The 10-foot-tall machines that include a Breathalyzer device a person must blow into before buying wine have proved cumbersome for some consumers.

The kiosks' apparent failure is providing fodder to privatization proponents responding to arguments that the LCB needs leeway to operate like a business.

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