Pa.'s wine-vending machine experiment at an end

HARRISBURG, Pa. (AP) - September 20, 2011

Monday was the last day to resolve the dispute with contractor Simple Brands LLC and keep the machines operating, and liquor board CEO Joe Conti said he could not foresee the program being revived.

The liquor board maintains that Simple Brands owes the state about $1 million, but Simple Brands has disputed that assessment, saying the liquor board had incurred unnecessary expenses and "improperly" billed the company. Meanwhile, Simple Brands is seeking $81 million from the agency for breach of contract, Conti said.

"I think it was a great attempt to try to do something for the convenience of our customers," Conti said. "It didn't end up successful, but we learned a lot, we will be better for it, and listen, we had thousands of buyers who predominantly were happy with the convenience when they bought a bottle of wine through these kiosks."

Conti said he believes the liquor board will prevail in its legal fight and, if it does, it will be able to show that the agency reaped about $250,000 in profits for the state from the program.

Alan Fellheimer, a lawyer for Simple Brands, said the liquor board has been unable to show any evidence to support its claims, and that the liquor board insisted on the claims process instead of Simple Brands' efforts to negotiate an agreement that would allow the program to continue.

"We were working on a solution to solve the whole problem," he said.

Conti said negotiations had been minimal. The liquor board is removing wine bottles from the machines and Simple Brands has 30 days to pick them up, agency officials said.

The machines started going into grocery stores around the state last summer, and the liquor board says 21 had continued to operate, largely in western Pennsylvania. Conti said the machines would stop operating and have to be removed from the stores and sent back to Simple Brands.

The liquor board had been obligated to try to find 100 locations to take the machines, Conti said, but it couldn't, in some cases because many groceries in rural areas were too small to accept the size and weight of the machine. The technology also was ill-suited to an older, wine-buying crowd, he said.

In recent months, both Walmart and Wegmans pulled out of agreements to host the machines.

Wal-Mart Stores Inc. blamed "mechanical concerns" regarding the 10-foot-high machines, which can hold hundreds of bottles. Wegmans cited problems with the machines and too many complaints from customers, who, it said, found the choices too limited and wanted more personalized service.

A lawyer for Simple Brands said recently that mechanical problems affect less than 0.5 percent of transactions. Before software changes, the machines, at their worst, had problems with less than 1 percent of transactions, he said.

The machines keep the bottles at room temperature and allow a customer to choose a wine on a touch-screen display. The customer must swipe an ID, blow into an alcohol sensor and look into a surveillance camera that is remotely monitored by a state employee in Harrisburg who approves the sale after verifying the buyer isn't drunk and matches the photo ID.

The move to halt the vending machine program comes amid an effort by Gov. Tom Corbett and some Republican state lawmakers to end state control over wine and liquor sales. If sales are privatized, liquor store licenses could be available to big store operators like Walmart and Costco as well as supermarkets.

Meanwhile, the liquor board is trying to expand its "store within a store" concept, and is discussing it with Wal-Mart, Conti said.

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