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Charges brought in Pinot Noir-Red Bicyclette scandal
February 3, 2010
By Maggie Rosen
Several parties in the Languedoc have been formally charged with selling millions of euros of fake Pinot Noir to Ernest & Julio Gallo for its Red Bicyclette brand.
Following an investigation that lasted over a year, French public prosecutor Francis Battut arraigned the accused before a three-person tribunal in Carcassonne, recommending prison sentences and heavy fines.
The 13 defendants include executives from two wineries and five co-operatives, as well as negociant Ducasse and conglomerate Sieur d'Arques. Only the latter denied the charges.
'The executives from Sieur d'Arques maintain they were unaware the wine they were selling to their American client was not Pinot Noir, even though one of their own winemakers admitted it,' Battut told decanter.com.
'I think they were mocking the court.'
Between 2006 and 2008, Sieur d'Arques allegedly sold 135,000 hectolitres of vin de Pays d'Oc labelled Pinot Noir to E&J Gallo for 4m (£3.5m).
However the total production from those supplying the French distributors amounted to 15,000 hectolitres a year.
Battut said the case proves the defendants were knowingly involved in cutting the Pinot Noir with much less costly Merlot and Syrah, delivering the equivalent of 16m bottles, or 460 oil tankers and making a profit.
According to French newspaper La Dépêche, one of the accused said that had the suppliers 'been asked to put Yoplait on the label, they would have' in order to satisfy customer demand.
Battut has recommended fines and gaol terms approaching the maximum allowed: a year in prison and a fine of 40,000 (£35,000) for broker Claude Courset of Ducasse; 180,000 (£157,000) against Sieur d'Arques; and various fines and terms (some suspended) for the others. French customs, too, has demanded symbolic fines of 750 (£655).
'The economic consequences of this case could be critical,' said Battut.
'Not only might it lead to a loss of confidence in French suppliers, but American clients may start demanding guarantees from the French government.'
A spokesperson for Gallo would only say they were awaiting the judge's ruling, while nobody from Sieur d'Arques was available to comment.
The tribunal will announce its verdict on 17 February.
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 The US could demand guarantees from the French Government? But why don't they ask Gallo first? They're the ones who bought the wines from Sieur d'Arques, and not to know how much pinot noir can be produced is the pays d'Oc and sell 10 times more to their faithful US customers is sheer incompetence (at best).
That such a big group (with surely an army of good technicians and lawyers) could be so naive, ill-informed or blind is unbelievable.
And I am sure Decanter knows better then to blame the small producers, or the French appellation system. Too easy. Strangely enough, Gallo never complained, Sieur d'Arques either, and the trial was initiated... by the French State. So here's your guarantee. Hervé Lalau, Belgium
Why anyone with even basic knowledge of Pinot Noir would buy Pinot
Noir from regions outside Burgundy, California and Oregon such as Vin
De Pays d'Oc is a mystery to me. The quality is always marginal if
not downright disappointing and the market here in the states is
flooded with high quality Pinot Noir, even in the under $15 range.
Please, support our growers and wineries stateside and forget about
these cutely named bottles of hooch from Vin de Pays. William Gaffney
One would have thought that a professional buyer would have been able
to sniff or taste the difference, but at less than 30 centimes a litre
(for Pinot Noir?), perhaps the prevailing aroma was 'margin'. Gavin Quinney, Château Bauduc, Bordeaux
Whilst I don't in any way support fraudulent labeling of varietal / appellation wines, E+J Gallo can have been under few illusions over whether they were really purchasing Pinot Noir in this instance & seems to have failed to take the basic steps of the wine industry to validate the ability of the supplier to deliver to specification.
It is well known within the wine industry that many French wineries are desperately fighting for their survival.
Understandably has attracted the interest of EJ Gallo's bulk wine buyers, amongst others.
The average price is reportedly EUR 0.296 / Litre (EUR 4mill for 135,00HL).
This is without any shadow of doubt a loss-making & unsustainable price for a southern French winery.
EJ Gallo would be well aware of this fact, being the largest producer of 'value' wine globally.
For such a significant volume purchase (13.5 Million Litres) from an overseas supplier EJ Gallo could readily & ought to have validated the supplier could source/supply such volumes of the requested specification (pinot noir).
EJ Gallo certainly owes it's consumers of its Red Bicyclette brand that responsibility to validate that they're really getting what they're paying for.
A simple request by EJ Gallo for the pinot noir intake/crush volumes from the supplier during the price negotiations & certainly prior to purchase would have protected consumers of the Red Bicyclette brand.
Instead, it looks from this vantage point that EJ Gallo, whilst acting within the rules of law, has happily squeezed its supplier for EJ Gallo's own profit whilst failing to take the basic & normal industry action to protect consumers (eg intake/crush volumes of pinot noir as indicator of maximum pinot noir volume).
Whether these Frenchmen have acted illegally is for the tribunal / courts to decide.
But the separate matter of how EJ Gallo has acted to protect its consumers, whilst simultaneously negotiating unsustainable terms from a supplier not larger than 0.001 of EJ Gallo's its size, is also of considerable interest, as a wine industry businessman & sometime wine consumer. Name supplied
Wait a minute! I dont get it! Gina Gallo and Jean-Charles Boisset got married not so long ago and Gallo buys it's pinot noir from Languedoc? It's February the first not April the first isnt'it? Raymond Chalifoux
Add me to the list of those who think that Gallo proves once again that they are the lowest life form on planet earth. I noticed about 3 years ago that too much low price Pinot noir being sold under American labels was sourced from overseas, mainly from France, some from Italy and some even from Germany & Hungary (Glen Ellen, Sopran, in the 1.5 lts.) . With a weak US $ vs. the Euro, how could this be? Buyer beware, used to be the rule in court of law. Has this law been repealed? Gallo must have known and they must have also calculated that the seller would bear the guilt if ever caught, and the buyer, Gallo, get off scot free with good lawyering.
But since Gallo Hearty Burgundy is still legal in the U.S. despite having no Burgundy and probably no Pinot noir, ultimately, the U.S. consumer and the U.S. wine industry suffer the consequences of ignorance. Charmion (Name supplied)
My comment is posed at William Gaffney for adding his comments on the buying habbits of the average customer. Sure, as a wine geek, I would tend to agree that Pinot Noirs from outside of Burgundy, Oregon, California, and NZ are usually pretty dodgey, but I feel that you are not taking into account that the average person doesn't know much, nor care much, about wine. People are buying based on price, packaging, and perceived value. If the wine is pleasant to them, that is their business. This is another issue entirely. I feel that the real isssue that comments should be focused on is the lack of government being excercised on both sides of the Atlantic. Russell Lichtenthal
In January 2010, when Steve Heimoff asked Gina Gallo (Eleven Questions, eleven answers) what was the "Weakest performing brands of 2009?"
She answered: "Some of the hardest sells were the international Red Bicyclette, Europe, because of the exchange [rate]. "
As the other commenters ask, how could E&J Gallo think they could buy that much French juice at that price? Maybe they knew all along? There has always been a lot of "Don't ask; Don't tell" in the jug wine industry. Steve Winston
The Red Bicyclette web page has these offered to the market at $US 11.99 a bottle in California.
Let's see, 13.5 million hectolitres equates to 1.5 million cases. Wine cost = 29 cents (Euro) a litre
To maximise profits (and after all, it is evident that this is what all this is about - profit - the wine is incidental), this will have been shipped in bulk and bottle at Gallo's own plant. Therefore we can assume a transport costing of say 15 cents (Euro) a litre. This brings the total landed cost, California to 45c (Euro), say, $US 0.68c and in turn to 50c a bottle.
Add in packaging costs (bottle, cork label, carton, bottling) of say $1.50, thus, ex winery $US 2.00 a bottle. Gallo do their own distibution (no margin).
Now, until recent times when discounting became so strong, a retailer in California might work on a mark up of 50%, assuming this still applies - the in-store price is in the order of $US 6.00. Allow say 50c a bottle for intea/inter State transport and as you can readily see, there is not all that much margin there for Gallo only $2.50 a bottle or $US 45 million on this one deal - nett profit before tax.
California Law, you may blend up to 49% of "off label" wine. Therefore this wine transgresses US Federal and State laws. Let Buyer Beware applies, but is surely altered by statute. I would say, that Gallo are in the gun - especially as California needs every tax dollar they can garner. Murray Paterson
Doesn't this just show that companies like Gallo know nothing about wine.
Don't they analyse products before marketing? Don't they have a quality control department? Perhaps Gallo also need to be charged for selling a fraudulent product. Graeme Mackenzie
The loss of integrity in the wine industry isn't an outrageously new phenomenon. Every few years, it seems that a new scandal takes us by storm. What really gets me is the amount of greed that was produced by Gallo in the midst of a recession. With so much of a mass appeal of the Red Bicyclette in America (both the wine and the marketing), it seems that putting "Pinot Noir" on the label just gave it an additional push that it didn't even need to be a successful wine. One would think that with Gallo's financial and influential advantages, they didn't need to jump on the Pinot bandwagon with the rest of the wine industry, and instead use these troubled years to build their integrity and emerge from this recession as a more respected company. Unfortunately, they used this time to deceive their consumers, and their lawyer fees will not parallel the profit they made. Does this happen all of the time with our imported wines? I'm sure it does, but in a less extreme way. All the more reason to support your local wineries and breweries, and be suspect of the wines marketed towards American suckers. Hannah Dunton, Sonoma County
Decanter, Shame on you. You have done a poor job at executing fair media. You are quick to post comments accusing Gallo, when they have yet to be convicted of anything, let alone a huge lie. It isn't rare to see the "big guys" always having the finger pointed at them. They are they largest family owned winery in the world, so watch how quickly people try and knock them down. It must be stated that the wine industry wouldn't be where it is today without the help of the Gallo family. I find it hard to believe that any of those people commenting have never had a glass of Gallo. Spare me! Stephanie Presley, Ohio
If this was an Australian sale, our Wine corporation would have blocked this as a start, and would never have happened. Only approved wines can be exported, and if the buyer labelled the wine falsely, they would be blocked from further imports.
Mark Cohen
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