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Pennsylvania Liquor Control Board spent $475K to hype own brands

Although state Liquor Control Board chief executive Joe Conti claimed his agency channeled no resources to promote its eight controversial in-house brands of wine and spirits, records obtained by the Tribune-Review tell a different story.

The LCB spent nearly a half-million dollars last fiscal year, about 10 percent of its advertising budget, to promote five of its own private-label brands — TableLeaf, Dialed In, LA MERIKA, Hayes Valley and Las Parcelas, records show. No money was spent on two other wine brands, Zita and Vinestone, or Copper Sun vodka.

Even though Conti said he was “99 percent sure” no LCB money was spent to promote or develop the brands, ads placed by his agency for its in-house products appeared in high-profile, hard-to-miss locations in newspapers and magazines, on billboards, public transit vehicles in Pittsburgh and Philadelphia, radio shows and the Internet radio service Pandora, as well as in online sponsorships, records show.

The LCB spent more than $474,600 with Philadelphia-based Harmelin Media to place ads for its private brands, records obtained under the state’s Right to Know Law indicate. The remainder of the $4.72 million ad-buying budget went to promote the more than 960 other brands sold in state wine and spirits stores by private-sector companies.

The move has been viewed unfavorably by wine industry experts and government watchdogs, some saying it is improper for a government agency to market its own items to compete with the private entities whose products it is charged with regulating and selling.

If the LCB is giving its products special treatment, then “the government is in the business of picking winners and losers. My guys don’t want that to be the case,” said Terri Cofer Beirne, counsel for the California-based Wine Institute, which represents winemakers, including producers of the LCB’s in-house brands.

“(Vendors) want the rules to apply to everybody,” Beirne said.

“Here they are spending a half-million (advertising) a product they had no business doing,” said Frank Gamrat, senior research analyst with the Allegheny Institute for Public Policy, who has said that since the LCB has a monopoly on liquor sales in the state, the in-house brands are unnecessary.

“I would think that the real issue … is they were doing something they should not have been doing and spending money that rightfully should have gone to taxpayers,” Gamrat said.

The LCB’s foray into selling its own brands of wine and vodka — 36 products under the eight in-house labels — has been dogged by critics, many of whom say it’s improper and one more reason why liquor sales in Pennsylvania should be privatized.

In October, LCB Chairman Joseph E. “Skip” Brion began an internal probe into the products, stating he did not know most of the brands existed until he was four months into his term and that he voted to approve a new brand and a new variety of an existing in-house label without knowing they were LCB brands.

Nowhere on a bottle of TableLeaf, which was introduced 21⁄2 years ago, or any other brand, does it indicate that it is an LCB product, and few in the public, including some state store employees questioned for this story, are aware that it is an in-house label.

“The agency has a responsibility to the citizens of this commonwealth to sell the product whether it’s merchant label or not. With that in mind, it makes sense to promote those products in the same way we promote other vendor’s products,” Brion said. “However, as chairman of the PLCB, I understand the questions that have been raised regarding this program. As we move forward, the future of merchant label products is an issue that I want to address and that we, as a board, will be addressing.”

One marketing expert questioned why the agency spent such a disproportionate share of its advertising budget to promote a small number of products.

“Ten percent sounds like it’s unbelievably high for all the hundreds, maybe thousands of wines they have,” said Audrey Guskey, associate professor of marketing at Duquesne University.

“The fact they’re giving such huge play to their brands — 10 percent — is significant. That’s a huge chunk of their advertising,” Guskey said. “These LCB brands are really getting top-priority treatment.”

At the same time, if you have the brands and you want them to be successful, you have to back them up with marketing dollars, Guskey said.

From the start, Conti, LCB marketing director Jim Short and others outside the agency have consistently offered conflicting accounts of how the private labels came to fruition and who was involved.

Records show that in addition to spending money on advertising, LCB employees were involved in the selection and development of the in-house brands.

Short said LCB staff worked with California vendor Delicato Vineyards to develop the name Dialed In and worked with vendors on product packaging for every in-house brand except Zita.

In an interview, Conti said the agency did not play a role in naming, developing or marketing of its in-house brands other than TableLeaf.

TableLeaf, the first in-house brand, was trademarked by the LCB for use as the new name for state wine and spirits stores. When that idea faltered, the agency decided to use the name for its own brand of wine.

Either way, one government watchdog said the in-house brands don’t make the grade with him.

“Using tax dollars to advance a monopoly makes fishing in a barrel look like an Olympic feat,” said Jay Ostrich, spokesman for the conservative Harrisburg-based Commonwealth Foundation. “It’s unnecessary, unfair and un-American.”