How Does a Wine Monopoly Lose Money?

In a report issued today, Pennsylvania Auditor General Jack Wagner says the state liquor control board's wine vending machines, a wonderful illustration of what happens when a government monopoly tries to act more like a business, are operating at a loss, costing taxpayers more than $1 million since they were introduced a year ago. "We think the wine kiosk program has failed," Wagner said at a press conference, "and it needs dramatic, radical changes if the program is going to continue to exist." His report attributes the failure largely to mechanical problems that caused an embarrassing month-long shutdown of the machines right in the middle of last year's Christmas season. "Despite shutting the kiosks down for over a month to repair them after nearly 1,000 errors occurred," the report says, "the Liquor Control Board and the kiosk vendor lost credibility and customer confidence when malfunctions continued after the kiosks reopened." 

When they are working, the kiosks dispense a limited selection of wines at limited locations and times (not on Sunday, of course!) to customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card. The Pennsylvania Liquor Control Board (PLCB) originally expected to have 100 kiosks in grocery stores throughout the state, each selling 30 to 50 bottles a day. But only 32 machines were ever up and running at one time, and only 15 manged to hit the bottom end of that sales target. In June the Wegmans supermarket chain withdrew from the kiosk program, bringing the total number of machines down to 22. Here is how the company explained its decision:

Customers want the convenience of purchasing wine in a supermarket, but found the choice too limited in the kiosk. Also, our customers rely upon the knowledgeable, personalized service our employees provide every day, something an automated kiosk just cannot provide. In the end, the kiosks just did not fit well with our store environment.

A week ago Walmart announced that it had decided not to install 23 planned kiosks. Presumably Wegmans and Walmart had second thoughts at least partly because they want shoppers to feel like valued customers instead of suspected criminals forced to take a sobriety test. A July 2008 memo (PDF) from the committee assigned to evaluate bids for the kiosk contract warned:

The proposed process for purchasing products via the kiosk machine is cumbersome and may meet with public criticism for not being "user-friendly." Specific areas of concern include 1) public angst over blood-alcohol level scanning, 2) excessive credit card "hold" amounts and 3) general distrust over having to register with the government to use the kiosk machine.

The committee also worried that the lone bidder, Simple Brands (I shit you not) of Conshohocken, was vague about the fees it might be charging, did not respond to repeated requests for information, and "continued to change its business plan 'on the fly' as the Committee has broached operational issues and concerns." The committee recommended that the PLCB reject the bid. But the PLCB, determined to fend off calls for privatization (which Gov. Tom Corbett and House Majority Leader Mike Turzai support) by showing how businesslike and customer-oriented it can be, hired Simple Brands anyway. The Philadelphia Inuirer reports the PLCB "is currently locked in a nasty legal dispute with the Conshohocken-based contractor, leading to the very real—and very likely—possibility that the kiosk program will end." The PLCB says the company owes the state the money it has lost so far; the company disagrees. Wagner urges the PLCB to "take immediate steps to terminate the kiosk contract unless the kiosk operations can be modified to meet the originally stated objectives of providing greater customer convenience, reaching into underserved areas, minimizing Board costs, and increasing Board profitability." 

Jay Ostrich, director of public affairs for the Commonwealth Foundation, sees the kiosk program, which was supposed to demonstrate that the PLCB can adapt to the demands of consumers, as Exhibit A in the case for privatization:

The taxpayers and consumers of Pennsylvania have rejected a program that the PLCB has been trying to shove down the throats of those parties. This is really a symptom of a much greater illness in that the PLCB has continued to try to mimic private enterprise and has been a complete failure at doing so.

You have to give the PLCB credit for this much: It has shown that, with the aid of modern technology, the government can lose money while selling a highly popular product over which it has a monopoly.

More on Pennsylvania's wine kiosks here. More on liquor privatization here.

[Thanks to Max Minkoff for most of the links.]

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  • Joe M||

    This idiotic program can't collapse fast enough.

  • Hugh Akston||

    That blowjob machine is a grim portent for the future of governance.

  • ||

    So sales were "unexpectedly" less than anticipated. Why should we take the word of these clowns over someone like Miss Cleo? Both suck at predicting the future.

  • ||

    Sounds like a scam to me.

  • ||

    Further proof we will never reach Peak Retard.

  • ||

    Yet somehow we always seem to be at Full Retard. I blame you, sage.

  • ||

    Never go full retard, dude.

  • ||

    I'm trying to stomp retards. I was saying we need to throttle back on the retard before it was cool.

  • SEIU||

    You heartless moronic idiots - do you know how many JOBS this program provides? FASCISTS

  • Keystone Lager, Rolling Rock||

    We agree wholeheartedly!

  • Copernicus||

    According to Barry: Automated Wine Kiosks (AWKs), like ATMs, eliminate jobs.

  • ||

    Fry: Yes, I'd like to make a collect call.
    Suicide Wine Booth Recording: You have selected slow and horrible.

  • ||

    Wine bucket: Low wine level detected. [pours wine into Amy's glass.]

    Amy: Thank you.

    Leo Wong: Stop seducing him, you hussy!

    Amy: Dad, gleesh! I'm attracted to Bender! Not this emotionless wine bucket!

    Wine bucket: [tear rolls down its face.] Hopes...deleted.

  • ||

    Oh Epi! Your pop-culture references are wonderful!

  • ||

    But not you JW. Fuck off.

  • Cliché Bandit||

    color me unsurprised. Govt, after all, bankrupted a BROTHEL!!!

    Still not sure how that happens.

  • BakedPenguin||

    It's a government job - you aren't allowed to discriminate by age, looks, sex, etc.

  • Eduard van Haalen||

    "I know you want Clarissa, but Betty here has seniority."

  • Pope Jimbo||

    CB, be fair. While the government has tons of experience fucking citizens, the brothel - being fucked by citizens - was uncharted water for them.

  • Vake||

    You, sir, win the internet.

  • TRTB||

    Looks like they lost money on the kiosk program, not on their alcohol monopoly overall.

    In fiscal year 2010-11, the PLCB had $1.96 billion in sales and transferred $496 million in profits and taxes to the General Fund.

    Thank god this scheme never occurred to government of the great state of Michigan. We may not have any jobs, but I can buy a goddam bottle of bourbon from a grocery store.

  • Brian E||

    Sometimes, sometimes not. As an Illinoisan, I find your state's blue laws annoyingly sobriety inducing at the worst times.

  • ||

    you can now by booze on a Sunday morning... you used to have to wait until 12PM, which was annoying if you were planning a Sunday BBQ.

  • Captain Trips||

    The difference between their revenue and their profits is 1.5 billion? That still reeks of inefficiency.

  • some guy||

    Their profit was 25% of sales. That's a wonderful margin. The kind you usually only see in the tech industry. Of course, no one in the tech industry has a monopoly...

  • ||

    the 25% of sales includes taxes, which would not be "profit" to a private business.

  • ||

    As bad as California is, at least they have very liberal alcohol laws. Just today I picked up a fifth of Jack Daniels at my local grocery store. Now, we just need to get rid of that silly, arbitrary 2AM to 6AM sale prohibition, and allow the sale of liquor above 151 proof.

  • Brandon||

    Yall can't buy everclear? The humanity!

  • ||

    They sell Everclear here, but it's the diluted 151 proof version (not the 190 proof available in neighboring states). Which makes no sense since it's just as easy to overdose and die from 75.5% grain alcohol as it is with 95%. It just annoys me when big daddy government makes decisions for me by limited my options.

  • some guy||

    I agree that Everclear should be allowed to sell it's product everywhere. But why would anybody ever want that product?! I still don't get it...

  • Ska||

    Jungle juice.

  • ||

    good question - "back in the day", kids would mix it down (waaaay down) with punch, big-gulps, etc.

  • The Snob||

    It's good for making infusions, tinctures, homemade cocktail bitters, and catatonic sorority chicks.

  • ||

    also great for cleaning stuff.

  • ||

    Nerve blocks on performance horses. Don't you people know anything?

  • Chupacabra||

    Agreed. One of the few (and ever decreasing) reasons to live here.

    Of course, they're only liberal with alcohol laws because it's such a big industry here.

  • JD||

    If I lived in California, I'd need to drink heavily too.

  • Greer||

    customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card

    Fuck. I live in Cal., I went into a Target to get some beer and they swiped my license to verify ID (I'm 53). After that, I decided never to buy at Target again. If I had to do this shit, I might become a teetotaler (or make my own). What a bunch of shit.

  • Auric Demonocles||

    HOMEBREW THREAD!

  • ||

    Indiana, where I live, recently passed a law requiring IDs always be checked for liqour sales. The employees still apologize every time they do it. Most even laugh about it when my 75 year old father buys a beer with his meal in a restaraunt. Some laws inspire contempt even from the clovers.

  • Russ 2000||

    They want to make sure everyone who drinks knows how to drive, too. This is why a "drinking age" is the stupidest concept ever.

  • Doctor Whom||

    Something similar happened to me at a Target in Virginia.

  • Invisible Finger||

    At the Targets at which I've had the misfortune of being in line behind a liquor purchaser, they always have to fetch a "manager" who has the "password" for the register to allow a liquor sale.

  • Bradley||

    Where I live you have to buy everything from the local government monopoly store: beer, wine, and liquor.

    Well, that's not quite true: you can instead opt to buy beer from one other retail outlet bestowed with monopoly power, which happens to be owned by a consortium of large brewing corporations. (Might the owners favor their own products at the expense of their competitors'? No, of course not. What a silly thing to imply.)

    And you can opt to buy wine — but only locally produced wine — from a retail store owned by several established wineries, also bestowed with monopoly power.

    A beautiful example of big business and big government working in harmony to fuck us over.

    Oh, and they all close at 10PM.

    Oh, and you can only return empty bottles to the second type of retail outlet I mentioned, not the first or the third.

    Oh, and the first outlet I mentioned refuses to stock certain products because the shape of their bottles might send the wrong message to young people.

    Oh, an*shoots self in head*

  • ||

    I feel for y'all. Here in Louisiana you can buy everclear seven days per week until 2am. Hell, we even have drive through daiquiri stores. Some parishes and municipalities are dry, but that decision is made locally.

  • Colonel_Angus||

    Pennsylvania- Fuck your liquor control board. I hope you stupid puritan paternalist shits get fucked hard by some aspect of state invasion of personal liberty someday soon.

  •  ||

    Or...you could just not live there.

  • ||

    Fuck, you're bitchy today. Well, and naggy. And passive aggressive.

  • ||

    Or... you could turn off your phone, bitch pudding.

  •  ||

    Swing and a miss.

  • Name Nomad||

    Have you ever been in a public place where there's some small child running around generally being awful and you wonder why the parents aren't doing anything about it? One father did something about it and deserves his place in a hall of heroes.

  • Boss||

    Is this a threadjack?
    You're supposed to announce, "Threadjack."
    Thank you.

  • ||

    DANCE!

  •  ||

    You just did!

  • Whitey the Injun||

    Meine singen macht es so dass die Puppen tanzen.

  • Anonymous Coward||

    A Southern California man stands accused of throwing his 7-year-old son overboard from a harbor tour boat because the boy would not stop crying, the Los Angeles Times reports.

    Okay, clearly child abuse, but still funny.

  • Xenocles||

    Actually, if you're the kind of person who would do that, I'm actually surprised it took seven years.

  • hmm||

    It takes a special kind of stupid to come up with things like this.

  • GILMORE||

    ...dispense a limited selection of wines at limited locations and times (not on Sunday, of course!) to customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card.

    I can't imagine why this wouldn't work perfectly. I mean, the government is *so good* at other similar things??

    http://cityroom.blogs.nytimes......-problems/

    it gets better!
    http://articles.nydailynews.co.....erk-riders

    Try finding a metrocard machine with a working card-reader. Give the government an opportunity to put 'public service' machines in place? I promise you, they will be (if it is even conceivable) *less functional* than the current actual non-functional public employees. Also, you can yell at the machines all you want, and they put up with it!

    But wine is totally different. Government should have checks in place to prevent wine drinkers from engaging in mass drunken bacchanalias, which would obviously get out of control if you didn't *humiliate and frustrate* every customer who tried to buy a bottle of Chablis.

    I'm sure they'll get it right with the Healthcare industry though.

  • ||

    chablis is fine, but I'M NOT DRINKING ANY FUCKING MERLOT!

  • goneGalt||

    As you wish. But as for me...

    Any "Port" in a storm!

  • GILMORE||

    You need to visit the Bairro Alto, Lisbon.

    Whoo whee. That town can party pretty hard. They like their vino.

  • Wayne||

    And the cheese fights, my God, the cheese fights.

  • GILMORE||

    The cheese machine only requires you show an American passport and also lick a swab to show you're not potentially allergic. It was improved based on feedback from the wine machine.

  • Fatty Bolger||

    They're still working on the state condom machines. Something about the sizing process not working correctly, and people getting stuck.

  • JD the elder||

    "Try finding a metrocard machine with a working card-reader."

    Did it this morning, actually. The first machine was only dispensing one-day Metrocards, for some reason (go figure) but the second one worked OK. There are plenty of reasons to hate the MTA without needing to make up more.

  • Anonymous Coward||

    But I don't understand. How could any state-sponsored program where the technical instructions are to:

    1. Bend over.
    2. Wrap your lips around an object.
    3. Blow.

    And even after this public degradation you may or may not get a payoff because the machine is malfunctioning? How could this possibly fail?

    Clearly needs more tax money.

  • ||

    The story of the PA wine kiosks makes me think of what might have happened if, on a cultural exchange mission, ministers from the old Soviet Union had become enamored of Japan's amazing array of vending machines. From where I sit, the contraptions from PA have a decidedly Soviet-era aspect to them, sort of like the Trabants of vending machines.

  • db||

    The other day I saw a photo on foreignpolicy.com of a row of old Soviet soda vending machines. They used communal glasses, of all things. Yes, each machine had one glass, and each customer was expected to consume his soda at the machine, then put the glass back under the dispenser for the next customer. Talk about a public health nightmare.

  • Daniel||

    You misunderstood. Each customer was expected to consume his soda at the machine, then put the glass back under the dispenser and WASH IT for the next customer. There was a special nozzle for that.
    One of the fond memories of my childhood.

  • db||

    Was there any soap?

  • Fist of Etiquette||

    As a commonwealther, I welcome the protections the PLCB affords me, with their selfless stewardship of PA's various firewater offerings.

    As for the unused and underused kiosks, they should do a Diebold (or ES&S) voting machine/wine vending machine mashup and see if we can get this swing state really swinging on Election Day. Who's [hiccup] with me?

  • Tim||

    Thinking outside the bottle? Excellent.

  • Jeff ||

    It's all those damn Quakers in eastern PA. Carpet bomb a triangular area from Scranton to Hanover to Lancaster and we might finally have some hope of implementing a few sane alcohol laws, ala New York and Maryland.

  • ||

    I thought PA's laws were pretty frakked-up, but if you're calling Maryland's "sane"... for the love of Cthulhu, somebody please pass the 40-grit sandpaper so I can remove all knowledge of Pennsylvania from my brain.

  • cipples||

    I always thought that Jack Wagner was a better golfer than actor.

  • Butts Wagner||

    Jack has stopped taking my calls. He insists that he has no brother named Butts. Don't worry, I plan on malfunctioning during Christmas this year. Especially when it comes time to exchange gifts. heh heh heh

  • ||

    (not on Sunday, of course!)

    Fucking atheists.

  • Nooge||

    You have to give the PLCB credit for this much: It has shown that, with the aid of modern technology, the government can lose money while selling a highly popular product over which it has a monopoly.

    Ouch. If bureaucrats and politicians had souls or feelings, both would be scarred.

  • ||

    I remember when Vermont was the home of rugged individualist mountain men. Now?

    The town's water system was working, driven by a generator, but water had to be boiled — an impossibility with no power to homes.

    How in the world did people boil water before Edison and Tesla?

  • ||

    After the disastrous 1927 floods Vermonters were offered federal assistance. They turned it down, saying that Vermonters would take care of their own. My how times have changed.

  • Tim||

    The State office building flooded and now 2,000 State Employess are being paid to sit hom indefinitely.

    Why are these TWO THOUSAND people not being put to work helping residents?

  • ||

    Safety.

  • Invisible Finger||

    Helping people is not in their job description.

  • ||

    Unions! If they help people then they are taking jobs away from their brothers in the helping people shop.

  • Shelby||

    with the aid of modern technology, the government can lose money while selling a highly popular product over which it has a monopoly.

    I can't believe I'm the first person to mention that the Mustang Ranch proves that modern technology isn't needed. Though admittedly, while MR was government-owned, it wasn't really a monopoly.

  • Shelby||

    Never mind - clichy bandit just didn't use its name.

  • NotSure||

    This is actually a very clever way to reintroduce prohibtion, do not ban the stuff, just make it practical pain to buy it.

  • db||

    The other day I saw a photo on foreignpolicy.com of a row of old Soviet soda vending machines. They used communal glasses, of all things. Yes, each machine had one glass, and each customer was expected to consume his soda at the machine, then put the glass back under the dispenser for the next customer. Talk about a public health nightmare.

  • ||

    You have to give the PLCB credit for this much: It has shown that, with the aid of modern technology, the government can lose money while selling a highly popular product over which it has a monopoly.


    I bet that felt good to write.

  • ||

    One has to wonder, in the near future when marajuana use and sale are legal countrywide, what sort of Rube Goldberg contraptions the state governments will come up with as a barrier between the citizenry and their pot.

  • Some Sock Puppet||

    The DEA.

  • Tim||

    To be fair, no one has ever made a profit on Wine, in all of history.

  • Tim||

    It's harder than even teaching kids to read.

  • ||

    ""a wonderful illustration of what happens when a government monopoly tries to act more like a business,""

    What business would make customers jump through such hoops to purchase it's product? None! PA was doing what they could to NOT run it like a business. They were doing their best to run it like a government.

  • Eduard van Haalen||

    Booze from vending machines sounds like Japan.

    How far will Pennsylvania go in emulating Japan? What else will they sell through vending machines?

  • ||

    These government doofuses do not have a clue as to how to run a business.

  • JD the elder||

    My main thought on reading this story was, "And remember, there are some people who want these geniuses to be in charge of healthcare, too." Come to think of it, the vending machine procedure is awfully close to the medical machines in Idiocracy...

  • db||

    The other day I saw a photo on foreignpolicy.com of a row of old Soviet soda vending machines. They used communal glasses, of all things. Yes, each machine had one glass, and each customer was expected to consume his soda at the machine, then put the glass back under the dispenser for the next customer. Talk about a public health nightmare.

  • ||

    This is why Delaware has one of the biggest liquor stores in the world, Total Wine, right across the border in Claymont. Great selection, great staff, no state sales tax.

  • ||

    A triumph of profiting from government interference in the market.

  • ||

    This is a no bid contract to a private sector company which happens to be a donor/friend of Ed Rendell. The problem is not government versus private sector. It is corruption versus transparent and fair competition. The kiosk program was run via a private sector company through a public sector monopoly.... sort of like how Bank of America continues to exist thanks to the Federal Reserve.

  • ||

    Good grief.

  • ||

    easy solution - privatize it. I'm continually amazed by how screwed up PA liquor laws are. It's time to move your state out of the 1930's. The industry would generate 1000's of new jobs and millions of new tax revenue by allowing private business to take over.

  • ||

    So, a government monopoly on wines fares about as well as the government monopoly on first class mail... Whoodathunkit?

  • ||

    So, a government monopoly on wines fares about as well as the government monopoly on first class mail... Whoodathunkit?

  • ||

    In the vein of all government clusterfuck-boondoggles, I can assure you that somewhere there is a guy in the wine kiosk business that just made a shit-ton of money. Whether his product works or not is irrelevant to the govt.

  • Gerholdt||

    In Germany there is usually a beer vending machine right next to the one for sodas. They have this odd idea that beer and wine are food rather than drugs.

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