California Transparency in Supply Chains Act Information

On January 1, 2012, a new law comes into effect in California called the Transparency in Supply Chains Act (SB 657). The law requires many large retailers and manufacturers to disclose publicly their efforts, if they are taking any, to eradicate slavery and human trafficking from their supply chains. The law aims to increase the information available to consumers so that they can make more informed purchasing choices.

E. & J. Gallo Winery, as well as Gallo-owned subsidiaries and affiliates, including the Gallo Glass Company, support the goal of eradicating slavery and human trafficking in all forms, including forced and child labor. We are undertaking efforts to ensure and verify the absence of such practices in our supply chain. Our efforts include the following programs currently in effect and under development:

Written Policies: Our contracts with suppliers require compliance with labor and immigration laws and we fully expect our suppliers to comply with all applicable laws, including this one. We are in the process of amending our contracts to expressly require compliance with this law. We will have a zero tolerance policy for violations. Our disciplinary policy will permit the termination of a supplier for even a single violation.

Supplier Communication: In order to qualify to serve as a vendor for us, suppliers are asked to show that they abide by ethical business practices. We are in the process of educating our suppliers about this new law as well as our expectation that they will work with us to ensure compliance with it.

Audits: We require suppliers to allow us access to their facilities. We conduct announced audits and/or inspections to verify conformance with quality and performance metrics. We also require packaging, wine ingredient, and finished ingredient suppliers to conduct their own internal audits. We are developing our supplier score card system and are looking at including social responsibility metrics, which would include compliance with this law.

Corrective Action: If an area of concern is identified during an audit, the supplier is issued a non-conformity and required to provide a Root Cause Analysis and Corrective Action Plan. Additionally, under our supplier agreements a single violation of labor or immigration laws may provide sufficient grounds to terminate a supply contract.

Supplier and Employee Education: We are looking at developing a Supplier Code of Conduct to educate suppliers further about our expectations and requirements for strong supplier and factory compliance programs. For our employees involved in the procurement of goods and services, we are updating our training materials to include this law and instructions on how to identify potential areas of concern in our supply chains.

It is crucial to E. & J. Gallo Winery and our affiliates that everyone involved in the manufacture of our products is treated with dignity. We will continue to update our policies and procedures to ensure we maintain the highest standards of conduct throughout our supply chain. If you have any questions, please contact ContractAdministration@ejgallo.com.

December 20, 2011