UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934
For the fiscal year ended February 28, 1998
                          -----------------

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 
For the transition period from                    to
                               ------------------     -------------------

                           COMMISSION FILE NO. 0-7570

         DELAWARE          CANANDAIGUA BRANDS, INC.              16-0716709
                                AND ITS SUBSIDIARIES:
         NEW YORK          BATAVIA WINE CELLARS, INC.            16-1222994
         NEW YORK          CANANDAIGUA WINE COMPANY, INC.        16-1462887
         NEW YORK          CANANDAIGUA EUROPE LIMITED            16-1195581
         NEW YORK          ROBERTS TRADING CORP.                 16-0865491
         DELAWARE          BARTON INCORPORATED                   36-3500366
         DELAWARE          BARTON BRANDS, LTD.                   36-3185921
         MARYLAND          BARTON BEERS, LTD.                    36-2855879
         CONNECTICUT       BARTON BRANDS OF CALIFORNIA, INC.     06-1048198
         GEORGIA           BARTON BRANDS OF GEORGIA, INC.        58-1215938
         NEW YORK          BARTON DISTILLERS IMPORT CORP.        13-1794441
         DELAWARE          BARTON FINANCIAL CORPORATION          51-0311795
         WISCONSIN         STEVENS POINT BEVERAGE CO.            39-0638900
         ILLINOIS          MONARCH IMPORT COMPANY                36-3539106
         GEORGIA           THE VIKING DISTILLERY, INC.           58-2183528
     (State or other       (Exact name of registrant as     (I.R.S. Employer
      jurisdiction of       specified in its charter)        Identification No.)
      incorporation or
      organization)


              300 WILLOWBROOK OFFICE PARK, FAIRPORT, NEW YORK  14450
              ------------------------------------------------------
               (Address of principal executive offices)   (Zip Code)


        Registrants' telephone number, including area code (716) 393-4130
                                                           --------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

     Title of each class          Name of each exchange on which registered
     -------------------          -----------------------------------------
            None                                    None


           SECURITIES REGISTERED PURSUANT TO SECTION 12(g)OF THE ACT:

  Class A Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
  ---------------------------------------------------------------------------
                                (Title of Class)

   Class B Common Stock (Par Value $.01 Per Share) of Canandaigua Brands, Inc.
   ---------------------------------------------------------------------------
                                (Title of Class)


 


Indicate  by check mark  whether  the  Registrants  (1) have  filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days.  Yes X   No
                                                   ---    ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrants'  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The  aggregate  market  value of the  common  stock  held by  non-affiliates  of
Canandaigua Brands, Inc., as of May 18, 1998, was $665,089,755.

The number of shares  outstanding  with respect to each of the classes of common
stock of Canandaigua  Brands,  Inc., as of May 18, 1998, is set forth below (all
of the Registrants,  other than Canandaigua Brands, Inc., are direct or indirect
wholly-owned subsidiaries of Canandaigua Brands, Inc.):

                   CLASS                            NUMBER OF SHARES OUTSTANDING
                   -----                            ----------------------------

Class A Common Stock, Par Value $.01 Per Share               15,470,066
Class B Common Stock, Par Value $.01 Per Share                3,296,976


                       DOCUMENTS INCORPORATED BY REFERENCE

The proxy  statement  of  Canandaigua  Brands,  Inc. to be issued for the annual
meeting of  stockholders  to be held July 21, 1998, is incorporated by reference
in Part III.

================================================================================

<PAGE>

                                     PART I

ITEM 1.   BUSINESS
-------   --------

     UNLESS  THE  CONTEXT  OTHERWISE  REQUIRES,  THE TERM  "COMPANY"  REFERS  TO
CANANDAIGUA  BRANDS,  INC. AND ITS  SUBSIDIARIES,  ALL REFERENCES TO "NET SALES"
REFER TO GROSS  REVENUES LESS EXCISE TAXES AND RETURNS AND ALLOWANCES TO CONFORM
WITH THE COMPANY'S METHOD OF CLASSIFICATION. ALL REFERENCES TO "FISCAL 1998" AND
"FISCAL  1997"  SHALL REFER TO THE  COMPANY'S  FISCAL YEAR ENDED THE LAST DAY OF
FEBRUARY OF THE INDICATED  YEAR.  DURING JANUARY 1996, THE BOARD OF DIRECTORS OF
THE COMPANY CHANGED THE COMPANY'S FISCAL YEAR END FROM AUGUST 31 TO THE LAST DAY
OF FEBRUARY.  ACCORDINGLY,  THIS FORM 10-K INCLUDES AND PRESENTS INFORMATION FOR
THE  COMPANY'S  TRANSITION  PERIOD FROM  SEPTEMBER 1, 1995, TO FEBRUARY 29, 1996
(THE "TRANSITION  PERIOD"),  AS WELL AS INFORMATION FOR THE PERIOD FROM MARCH 1,
1995,  TO FEBRUARY 29, 1996 ("PRO FORMA  FISCAL  1996").  REFERENCES  TO "FISCAL
1995" SHALL REFER TO THE COMPANY'S FISCAL YEAR ENDED AUGUST 31, 1995.

     DURING  FISCAL 1998,  THE COMPANY  CHANGED ITS NAME FROM  CANANDAIGUA  WINE
COMPANY, INC. TO CANANDAIGUA BRANDS, INC. THE NEW NAME BETTER REFLECTS THE SCOPE
OF THE  COMPANY'S  OPERATIONS  AS A PRODUCER,  MARKETER  AND  IMPORTER OF BRANDS
WITHIN  ALL THREE  BEVERAGE  ALCOHOL  PRODUCT  CATEGORIES  IN WHICH THE  COMPANY
OPERATES: WINE, BEER AND DISTILLED SPIRITS.

     MARKET SHARE AND INDUSTRY DATA  DISCLOSED IN THIS REPORT HAVE BEEN OBTAINED
FROM THE FOLLOWING INDUSTRY AND GOVERNMENT PUBLICATIONS:  THE GOMBERG-FREDRIKSON
REPORT;  JOBSON'S  LIQUOR  HANDBOOK;   JOBSON'S  WINE  HANDBOOK;  JOBSON'S  BEER
HANDBOOK;  ADAMS MEDIA HANDBOOK ADVANCE;  THE U.S. WINE MARKET:  IMPACT DATABANK
REVIEW AND FORECAST;  THE U.S. BEER MARKET: IMPACT DATABANK REVIEW AND FORECAST;
BEER  MARKETER'S  INSIGHTS;  BEER  INDUSTRY  UPDATE;  THE BEER  INSTITUTE;  U.S.
DEPARTMENT  OF THE  TREASURY  STATISTICAL  RELEASES;  AND THE  MAXWELL  CONSUMER
REPORT.  THE COMPANY HAS NOT  INDEPENDENTLY  VERIFIED  THIS DATA.  REFERENCES TO
MARKET SHARE DATA ARE BASED ON UNIT VOLUME.

     The Company is a Delaware corporation organized in 1972 as the successor to
a  business  founded  in 1945 by  Marvin  Sands,  Chairman  of the  Board of the
Company.

     The Company is a leading  producer and marketer of branded beverage alcohol
products,  with over 130 national and regional  brands which are  distributed by
over 850 wholesalers  throughout the United States and in selected international
markets.  The Company's  beverage  alcohol  brands are marketed in three general
categories:  wine (primarily  table wine),  beer  (primarily  imported beer) and
distilled  spirits.  The Company is the second  largest  supplier  of wine,  the
second  largest  importer of beer and the fourth  largest  supplier of distilled
spirits in the  United  States.  The  Company's  principal  brands  include  the
following:

     WINE:  Inglenook, Almaden, Paul Masson, Manischewitz, Taylor, Marcus James,
     Estate Cellars,  Vina Santa Carolina,  Dunnewood,  Cook's, J. Roget,  Great
     Western, Richards Wild Irish Rose and Cisco

     BEER:  Corona  Extra,  Corona  Light,  St.  Pauli  Girl,  Modelo  Especial,
     Pacifico, Tsingtao, Negra Modelo, Peroni, Double Diamond and Point

     DISTILLED SPIRITS:  Fleischmann's,  Barton,  Mr. Boston,  Canadian LTD, Ten
     High, Montezuma, Inver House, Monte Alban and Chi-Chi's Prepared Cocktails

     Many of the Company's brands are leaders in their respective  categories in
the United States,  including  Corona Extra,  the largest selling  imported beer
brand;  Almaden and Inglenook,  the fifth and seventh largest selling table wine
brands; Richards Wild Irish Rose, the largest selling dessert wine brand; Cook's
champagne, the second largest selling sparkling wine brand;  Fleischmann's,  the
fourth  largest  blended  whiskey and fourth largest  domestically  bottled gin;
Montezuma,  the second  largest  selling  tequila  brand;  and Monte Alban,  the
largest selling mezcal brand.

     The  Company has  diversified  its  product  portfolio  through a series of
strategic  acquisitions  that have  resulted in an increase in the Company's net
sales from $176.6  million in fiscal 1991 to $1,212.8  million for Fiscal  1998.
Through these acquisitions, the Company has developed strong market positions in
the growing  beverage  alcohol  product  categories of varietal table wine (wine
named for the grape that  comprises  the  principal  component  of the wine) and
imported beer. During this period, the Company has strengthened its relationship
with  wholesalers,   expanded  its  distribution  and  enhanced  its  production
capabilities as well as acquired additional management,  operational,  marketing
and research and development expertise.

     In October 1991, the Company acquired Cook's, Cribari,  Dunnewood and other
brands and related facilities and assets from Guild Wineries & Distilleries.  In
June 1993, the Company acquired Barton  Incorporated  ("Barton"),  which enabled
the Company to diversify into the imported beer and distilled spirits categories
(the "Barton  Acquisition").  With the Barton Acquisition,  the Company acquired
distribution  rights with  respect to the  Corona,  St.  Pauli  Girl,  and other
imported  beer brands;  the Barton,  Ten High,  Montezuma,  and other  distilled
spirits brands;  and related facilities and assets. In October 1993, the Company
acquired the Paul Masson, Taylor California Cellars and other brands and related
facilities and assets of Vintners  International Company, Inc. ("Vintners") (the
"Vintners  Acquisition").  In August  1994,  the Company  acquired  the Almaden,
Inglenook  and other  brands,  a grape juice  concentrate  business  and related
facilities  and assets (the  "Almaden/Inglenook  Product  Lines") from Heublein,
Inc. (the  "Almaden/Inglenook  Acquisition").  On September 1, 1995, the Company
acquired the Mr.  Boston,  Canadian LTD, Skol,  Old Thompson,  Kentucky  Tavern,
Glenmore and di Amore distilled spirits brands;  the rights to the Fleischmann's
and Chi-Chi's distilled spirits brands under long-term license  agreements;  the
U.S. rights to the Inver House,  Schenley and El Toro distilled  spirits brands;
and related  facilities  and assets from United  Distillers  Glenmore,  Inc. and
certain of its North American affiliates (collectively, "UDG"); in addition, the
transaction  included multiyear  agreements under which UDG supplies the Company
with bulk whiskey and the Company supplies UDG with services including continued
packaging of various UDG brands not acquired by the Company  (collectively,  the
"UDG Acquisition").

     The Company's growth through  acquisitions has  substantially  expanded its
portfolio  of  brands  and has  enabled  it to  become  a major  participant  in
additional product  categories of the beverage alcohol business.  This expansion
has positioned the Company to benefit from faster growing  categories  with over
40% of the Company's net sales generated from the growth  categories of imported
beer and varietal table wine.

     The  Company's  business  strategy is to manage its  existing  portfolio of
brands and businesses in order to maximize profit and return on investment,  and
reposition its portfolio of brands to benefit from growth trends in the beverage
alcohol industry.  To achieve the foregoing,  the Company intends to: (i) adjust
the price/volume  relationships  of certain brands;  (ii) develop new brands and
introduce  line  extensions;  (iii)  expand  geographic  distribution;  and (iv)
acquire businesses that meet its strategic and financial objectives.

INDUSTRY

     The  beverage  alcohol  industry  in  the  United  States  consists  of the
production,  importation, marketing and distribution of wine, beer and distilled
spirits   products.   Over  the  past  five  years  there  has  been  increasing
consolidation  at the supplier,  wholesaler  and, in certain  markets,  retailer
tiers of the beverage alcohol industry.  As a result, it has become advantageous
for certain  suppliers to expand their portfolio of brands through  acquisitions
and internal development in order to take advantage of economies of scale and to
increase  their  importance  to a more  limited  number of  wholesalers  and, in
certain  markets,   retailers.   During  the  1990's,  the  overall  per  capita
consumption  of  beverage  alcohol  products in the United  States has  declined
slightly; however, consumption of table wine, in particular varietal table wine,
and imported beer has increased during the period.

     The  following  table sets forth the industry  unit volume for shipments of
beverage  alcohol  products in the Company's  three principal  beverage  alcohol
product  categories  in the United  States  for the five  calendar  years  ended
December 31, 1997:

    INDUSTRY DATA              1997       1996       1995       1994       1993
---------------------        -------    -------    -------    -------    -------
Wine (a)(b)                  219,970    212,399    197,258    193,052    188,846
Imported Beer (c)            197,355    173,077    157,023    146,096    128,815
Distilled Spirits (b)        137,798    138,536    137,330    139,997    144,162

     (a)  Includes domestic and imported table, sparkling and dessert wine, wine
          coolers and vermouth
     (b)  Units are in thousands of 9-liter case equivalents  (2.378 gallons per
          case)
     (c)  Units are in thousands of 2.25 gallon cases

 

     WINE:  From 1993 to 1997, shipments of wine in the United States  increased
at an average  compound annual rate of 4%. In 1997, wine shipments  increased by
4% when  compared  to 1996,  led by  increased  shipments  of table  wine  (wine
containing  14% or less alcohol by volume).  Table wine accounted for 88% of the
total  United  States  wine  market  in  1997  while  sparkling  wine  (includes
effervescent wine like champagne and spumante) and dessert wine (wine containing
more than 14%  alcohol  by volume)  each  accounted  for 6%.  Over the last five
years,  sparkling and dessert  wine,  as a percentage  of total wine,  have been
declining in the United  States.  The Company  believes the  improvement  in the
table wine  consumption  may be due in part to  published  reports,  over recent
years,  from a number of sources,  citing the health  benefits of moderate  wine
consumption.  The Company  believes the  declines in sparkling  and dessert wine
consumption in the United States reflect a general shift in consumer preferences
and, with respect to sparkling wine,  concerns about drinking and driving,  as a
large part of  sparkling  wine  consumption  occurs  outside  the home at social
gatherings and restaurants.

     IMPORTED  BEER:  Shipments  of imported  beer have  increased at an average
compound annual rate of 11% from 1993 to 1997. Shipments of Mexican beer in 1997
increased  37%  over  1996 as  compared  to an  increase  of 14% for the  entire
imported beer category. Shipments of imported beer as a percentage of the United
States beer market,  increased to 7.3% in 1997 from 6.5% in 1996. Imported beer,
along with  microbrews  and  super-premium  priced  domestic  beer, is generally
priced above the leading domestic premium brands.

     DISTILLED  SPIRITS:  Although  shipments of distilled spirits in the United
States  declined  at an average  compound  annual  rate of 1% from 1993 to 1997,
certain  types of  distilled  spirits,  such as rum,  tequila  and  brandy  have
increased.  In 1997, shipments of distilled spirits declined by 0.5% as compared
to 1996. The Company  believes  shipments of certain types of distilled  spirits
may have been negatively affected by concerns about drinking and driving,  and a
shift in consumer  preference  toward lower alcohol or lighter tasting  products
like imported beer and varietal table wine which have grown substantially during
the period from 1993 to 1997.

PRODUCT CATEGORIES

     The Company  produces,  markets and imports  beverage  alcohol  products in
three principal product categories: wine (primarily table wine), beer (primarily
imported beer) and distilled spirits. The following tables include net sales and
unit volume of branded  products sold by the Company and the  distilled  spirits
table includes the brands and products  acquired in the UDG  Acquisition for all
periods shown as if they had been owned by the Company for the entire period.

<PAGE>

     WINE:  The  Company is the second  largest  supplier  of wine in the United
States.  The  Company  participates  in the table,  dessert and  sparkling  wine
categories.  The table below sets forth the net sales (in  thousands of dollars)
and unit  volume (in  thousands  of  9-liter  case  equivalents)  for all of the
branded wine sold by the Company for the periods shown:
                                                             
<TABLE>
<CAPTION>
                                                              PRO FORMA
                 FISCAL 1998           FISCAL 1997           FISCAL 1996           FISCAL 1995
             ------------------    ------------------    ------------------    ------------------
WINE (a)     NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME
             ---------   ------    ---------   ------    ---------   ------    ---------   ------
             <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>
             $ 533,257   34,587    $ 512,510   33,787    $ 499,962   35,396    $ 487,101   34,910
<FN>
     (a)  Includes domestic and imported table, dessert and sparkling wine
</FN>
</TABLE>

     Net sales and unit volume of the Company's wine brands increased 4% and 2%,
respectively,  in Fiscal 1998  compared to Fiscal 1997.  These  increases can be
attributed to increased sales of table wine.

     The Company sells over 70 different  brands of wine,  substantially  all of
which are marketed in the  popularly  priced  segment (wine that retails at less
than $5.75 per 750 ml.  bottle).  The Company's  principal  wine brands  include
Inglenook,  Almaden,  Paul Masson,  Manischewitz,  Taylor,  Marcus James, Estate
Cellars,  Vina Santa  Carolina,  Dunnewood,  Richards  Wild Irish  Rose,  Cisco,
Cook's, J. Roget and Great Western.

     BEER:  The Company is the second  largest  marketer of imported beer in the
United States.  The Company  distributes five of the top 20 imported beer brands
in the United  States:  Corona  Extra,  Corona  Light,  St.  Pauli Girl,  Modelo
Especial and Pacifico.  The Company's  other  imported beer brands include Negra
Modelo from Mexico,  Tsingtao from China,  Peroni from Italy and Double  Diamond
from the United Kingdom.  The Company also operates the Stevens Point Brewery, a
regional brewer located in Wisconsin,  which produces Point Special, among other
brands.  The table below sets forth the net sales (in  thousands of dollars) and
unit volume (in thousands of 2.25 gallon cases) for the beer sold by the Company
for the periods shown:
                                                              
<TABLE>
<CAPTION>
                                                           PRO FORMA 
              FISCAL 1998           FISCAL 1997           FISCAL 1996           FISCAL 1995
          ------------------    ------------------    ------------------    ------------------
BEER      NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME
          ---------   ------    ---------   ------    ---------   ------    ---------   ------
          <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>
          $ 376,607   30,016    $ 298,925   23,848    $ 239,785   19,344    $ 216,159   17,471
</TABLE>

     Net sales and unit  volume of the  Company's  beer  brands have grown since
Fiscal  1995,  primarily  as a result of the  increased  sales of Corona and the
Company's other Mexican beer brands.  Net sales and unit volume  increased 26.0%
in Fiscal 1998  compared to Fiscal 1997.  This sales growth  helped Corona Extra
become the number one imported beer nationwide.

 

     DISTILLED SPIRITS:  The Company is the fourth largest supplier of distilled
spirits in the United States. The Company produces, bottles, imports and markets
a diversified  line of quality  distilled  spirits,  and also exports  distilled
spirits to approximately 20 foreign countries. The Company's principal distilled
spirits  brands include  Fleischmann's,  Barton,  Mr. Boston,  Canadian LTD, Ten
High, Montezuma, Inver House and Monte Alban. Substantially all of the Company's
spirits unit volume consists of products marketed in the price value segment.

     The table below sets forth the net sales (in thousands of dollars) and unit
volume (in thousands of 9-liter case  equivalents)  for the  distilled  products
case goods sold by the Company for the periods shown:

<TABLE>
<CAPTION>
                                                                PRO FORMA
                   FISCAL 1998           FISCAL 1997         FISCAL 1996 (a)       FISCAL 1995 (a)
DISTILLED      ------------------    ------------------    ------------------    ------------------
 SPIRITS       NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME    NET SALES   VOLUME
               ---------   ------    ---------   ------    ---------   ------    ---------   ------
               <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>
               $ 200,276   11,456    $ 183,843   10,899    $ 178,803   10,740    $ 184,536   10,930
<FN>
     (a)  Net sales and volume  include the brands and products  acquired in the
          UDG  Acquisition  as if they had been  owned  by the  Company  for the
          entire period.
</FN>
</TABLE>

     For Fiscal 1998, net sales and unit volume of distilled spirits brands sold
by the Company increased 9% and 5%, respectively,  compared to Fiscal 1997. Unit
volume of vodka,  tequila,  brandy,  bourbon  whiskey and  Canadian  whisky have
increased  while  blended  whiskey,  Scotch  whisky  and  gin  have  experienced
decreases in unit volume.

     From the beginning of Fiscal 1995 to the end of Pro Forma Fiscal 1996,  the
unit  volume of brands  acquired  in the UDG  Acquisition  declined in excess of
industry  rates.  The  Company  believes  that  these  declines   resulted  from
noncompetitive   retail  pricing  and   promotional   activities.   The  Company
implemented  pricing  and  promotional   activities  during  Fiscal  1997  which
eliminated the rate of decline and resulted in a volume increase of 3% in Fiscal
1997 and 4% in Fiscal 1998.

     OTHER  PRODUCTS  AND  RELATED  SERVICES:  As a  related  part  of its  wine
business, the Company produces grape juice concentrate.  Grape juice concentrate
is sold to the food and wine  industries as a raw material for the production of
juice-based   products,   no-sugar-added   foods  and  beverages.   Grape  juice
concentrate  competes with other domestically  produced and imported fruit-based
concentrates.  The  Company  is one  of  the  leading  grape  juice  concentrate
producers in the United States.  The Company's  other wine related  products and
services include: bulk wine; grape juice; St. Regis, a leading nonalcoholic line
of wine in the United  States;  cooking  wine;  and wine for the  production  of
vinegar.  The Company also sells distilled spirits in bulk and provides contract
production and bottling services for third parties.

<PAGE>

MARKETING AND DISTRIBUTION

     The  Company's  products are  distributed  and sold  throughout  the United
States through over 850 wholesalers, as well as through state alcoholic beverage
control agencies. The Company employs a full-time, in-house marketing, sales and
customer service organization of approximately 415 people to develop and service
its sales to  wholesalers  and state  agencies.  The  Company's  sales  force is
organized in separate sales divisions: a beer division, a spirits division and a
wine division.  The Company  believes that the  organization  of its sales force
into separate divisions  positions it to maintain a high degree of focus on each
of its principal product categories.

     The Company's  marketing  strategy places primary emphasis upon promotional
programs  directed  at its  broad  national  distribution  network  (and  to the
retailers served by that network).  The Company has extensive marketing programs
for its brands  including  promotional  programs  on both a  national  basis and
regional  basis in  accordance  with the  strength of the brands,  point-of-sale
materials, consumer media advertising, event sponsorship, market research, trade
advertising and public relations.

     In  fiscal  1999,   the  Company   expects  to  increase  its   advertising
expenditures  to put more  emphasis on  consumer  advertising  for certain  wine
brands,  including newly  introduced  brands,  and for its imported beer brands,
primarily Mexican brands. In addition, promotional spending in fiscal 1999 could
increase  as it  relates to the  Company's  wine  brands to address  competitive
factors.

TRADEMARKS AND DISTRIBUTION AGREEMENTS

     The Company's wine and distilled  spirits  products are sold under a number
of trademarks. Most of these trademarks are owned by the Company.

     The Company also  produces and sells wine and  distilled  spirits  products
under  exclusive  license or  distribution  agreements.  Significant  agreements
include:  a long-term  license  agreement with Nabisco Brands Company for a term
which expires in 2008 and which automatically  renews for successive  additional
20 year terms  unless  canceled  by the Company  for the  Fleischmann's  spirits
brands; a long-term  license agreement with Hiram Walker & Sons, Inc. for a term
which  expires  in 2116 for the Ten High,  Crystal  Palace,  Northern  Light and
Imperial  Spirits  brands;  and  a  long-term  license  agreement  with  the  B.
Manischewitz Company for a term which expires in 2042 for the Manischewitz brand
of  kosher  wine.  The  Company  also has other  less  significant  license  and
distribution  agreements  related to the sale of wine and distilled spirits with
terms of various durations.

     All of the Company's  imported beer products are marketed and sold pursuant
to exclusive distribution agreements with the suppliers of these products. These
agreements  have terms that vary and prohibit the Company from  importing  other
beer from the same country. The Company's agreement to distribute Corona and its
other Mexican beer brands  exclusively  throughout 25 states expires in December
2006 and,  subject to compliance with certain  performance  criteria,  continued
retention of certain Company personnel and other terms under the agreement, will
be  automatically  renewed for  additional  terms of five years.  The  Company's
agreement  for the  importation  of St. Pauli Girl  expires in 2003,  subject to
compliance with certain  performance  criteria.  The Company's agreement for the
exclusive importation of Tsingtao throughout the entire United States expires in
December 1999 and, subject to compliance with certain  performance  criteria and
other terms under the agreement,  will be  automatically  renewed until December
2002.  Prior to their  expiration,  these  agreements  may be  terminated if the
Company fails to meet certain performance  criteria.  The Company believes it is
currently in compliance with its material imported beer distribution agreements.
From time to time,  the  Company  has  failed,  and may in the future  fail,  to
satisfy certain performance  criteria in its distribution  agreements.  Although
there can be no assurance that its beer distribution agreements will be renewed,
given the Company's  long-term  relationships  with its  suppliers,  the Company
expects that such agreements will be renewed prior to their  expiration and does
not believe that these agreements will be terminated.

COMPETITION

     The beverage alcohol industry is highly  competitive.  The Company competes
on the  basis  of  quality,  price,  brand  recognition  and  distribution.  The
Company's   beverage   alcohol   products   compete  with  other  alcoholic  and
nonalcoholic beverages for consumer purchases,  as well as shelf space in retail
stores and marketing focus by the Company's  wholesalers.  The Company  competes
with numerous  multinational  producers  and  distributors  of beverage  alcohol
products,  many of which have significantly  greater resources than the Company.
The  Company's  principal  competitors  include E & J Gallo  Winery and The Wine
Group in the wine category; Heineken USA, Molson Breweries USA, Labatt's USA and
Guinness  Import Company in the imported beer category;  and Jim Beam Brands and
Heaven Hill Distilleries, Inc. in the distilled spirits category.

PRODUCTION

     The Company's wine is produced from several  varieties of wine grapes grown
principally  in California and New York. The grapes are crushed at the Company's
wineries and stored as wine, grape juice or concentrate. Such grape products may
be made  into wine for sale  under  the  Company's  brand  names,  sold to other
companies for resale under their own labels, or shipped to customers in the form
of juice,  juice  concentrate,  unfinished  wine,  high-proof  grape  spirits or
brandy.  Most of the  Company's  wine is bottled and sold within 18 months after
the grape crush. The Company's  inventories of wine, grape juice and concentrate
are usually at their highest levels in November and December,  immediately after
the crush of each year's grape harvest,  and are substantially  reduced prior to
the subsequent year's crush.

     The bourbon whiskeys, domestic blended whiskeys and light whiskeys marketed
by the Company are primarily  produced and aged by the Company at its distillery
in  Bardstown,  Kentucky,  though  it may  from  time  to  time  supplement  its
inventories  through  purchases from other distillers.  At its Albany,  Georgia,
facility,  the Company  produces all of the neutral  grain  spirits and whiskeys
used by it in the  production  of vodka,  gin and blended  whiskey sold by it to
customers in the state of Georgia.  The Company's  requirements  of Canadian and
Scotch whiskies,  and tequila,  mezcal, and the neutral grain spirits used by it
in the  production  of gin and  vodka for sale  outside  of  Georgia,  and other
spirits products, are purchased from various suppliers.

SOURCES AND AVAILABILITY OF RAW MATERIALS

     The  principal  components  in  the  production  of the  Company's  branded
beverage alcohol products are: packaging materials, primarily glass; grapes; and
other agricultural products, such as grain.

     The Company  utilizes  glass and PET bottles and other  materials,  such as
caps,  corks,  capsules,  labels and  cardboard  cartons,  in the  bottling  and
packaging of its products.  Glass bottle costs are one of the largest components
of the  Company's  cost of product  sold.  The glass  bottle  industry is highly
concentrated   with  only  a  small  number  of   producers.   The  Company  has
traditionally  obtained,  and continues to obtain, its glass requirements from a
limited  number of  producers.  The Company has not  experienced  difficulty  in
satisfying its  requirements  with respect to any of the foregoing and considers
its  sources of supply to be  adequate.  However,  the  inability  of any of the
Company's  glass bottle  suppliers to satisfy the Company's  requirements  could
adversely affect the Company's operations.

     Most of the Company's annual grape  requirements are satisfied by purchases
from each  year's  harvest,  which  normally  begins in August and runs  through
October.  Costs per ton for grapes in the fall 1995 and fall 1996 grape harvests
escalated dramatically.  Costs per ton for grapes in the fall 1997 grape harvest
decreased  slightly  as  compared  to the fall 1996 grape  harvest.  The Company
believes  that it has  adequate  sources  of grape  supplies  to meet its  sales
expectations.  However,  in the event demand for certain wine  products  exceeds
expectations, the Company could experience shortages.

     The Company purchases grapes from over 700 independent  growers principally
in the San Joaquin  Valley and Monterey  regions of  California  and in New York
State.  The Company enters into written  purchase  agreements with a majority of
these growers on a  year-to-year  basis.  The Company  currently  owns or leases
under various arrangements approximately 4,200 acres of vineyards,  either fully
bearing or under development,  in California and New York. This acreage supplies
only a small percentage of the Company's total needs.  The Company  continues to
consider the purchase or lease of additional vineyards,  and additional land for
vineyard plantings, to supplement its grape supply.

     The  distilled   spirits   manufactured  by  the  Company  require  various
agricultural  products,  neutral  grain  spirits and bulk  spirits.  The Company
fulfills  its  requirements  through  purchases  from various  sources,  through
contractual  arrangements and through purchases on the open market.  The Company
believes that adequate supplies of the aforementioned  products are available at
the present time.

 

GOVERNMENT REGULATION

     The  Company's  operations  are  subject  to  extensive  federal  and state
regulation.  These  regulations  cover,  among other matters,  sales  promotion,
advertising and public relations, labeling and packaging, changes in officers or
directors,  ownership or control,  distribution  methods and relationships,  and
requirements  regarding brand  registration  and the posting of prices and price
changes. All of the Company's facilities are also subject to federal,  state and
local  environmental  laws and regulations and the Company is required to obtain
permits and licenses to operate its facilities.  The Company believes that it is
in   compliance  in  all  material   respects  with  all  presently   applicable
governmental  laws  and  regulations  and that  the  cost of  administration  of
compliance with such laws and regulations  does not have, and is not expected to
have, a material adverse impact on the Company's  financial condition or results
of operations.

EMPLOYEES

     The Company  had  approximately  2,500  full-time  employees  at the end of
Fiscal  1998 and Fiscal  1997.  As of February  28,  1998,  approximately  1,030
employees were covered by collective bargaining  agreements.  Additional workers
may be employed by the Company  during the grape  crushing  season.  The Company
considers its employee relations generally to be good.


ITEM 2.   PROPERTIES
-------   ----------

     The Company currently  operates 10 wineries,  two distilling plants, one of
which includes bottling operations, three bottling plants and a brewery, most of
which include  warehousing and distribution  facilities on the premises.  All of
these  facilities  are owned by the  Company  other  than a winery  in  Escalon,
California,  a winery  in  Batavia,  New York and a  bottling  plant in  Carson,
California,  each of  which is  leased.  The  Company  considers  its  principal
facilities to be the Mission Bell winery in Madera, California; the Canandaigua,
New York  winery;  the Monterey  Cellars  winery in  Gonzales,  California;  the
distilling  and  bottling  facility  located  in  Bardstown,  Kentucky;  and the
bottling facility located in Owensboro, Kentucky.

     In New York, the Company  operates three wineries  located in  Canandaigua,
Naples and Batavia.  The Company  currently  operates seven winery facilities in
California. The Mission Bell winery is a crushing, wine production, bottling and
distribution  facility and a grape juice concentrate  production  facility.  The
Monterey  Cellars winery is a crushing,  wine production and bottling  facility.
The other  wineries  operated in  California  are  located in  Escalon,  Madera,
Fresno,  and Ukiah.  The  Company  has  exercised  its option to buy the Escalon
facility and is in the process of transferring  the facility's  ownership to the
Company.  The  Company  currently  owns or  leases  under  various  arrangements
approximately   4,200  acres  of  vineyards,   either  fully  bearing  or  under
development, in California and New York.

     The  Company  operates  five  facilities  that  produce,  bottle  and store
distilled  spirits.  It owns a  distilling,  bottling  and  storage  facility in
Bardstown,  Kentucky, and a distilling and storage facility in Albany,  Georgia,
and operates  bottling  plants in Atlanta,  Georgia;  Owensboro,  Kentucky;  and
Carson, California. The Carson plant is operated under a management contract and
a sublease,  each of which is  scheduled  to expire on December  31,  1998.  The
parties are currently  negotiating an extension of this arrangement.  The Carson
plant receives  distilled  spirits in bulk from  Bardstown and outside  vendors,
which it bottles and distributes. The Company also performs contract bottling at
the Carson  plant.  The  Bardstown  facility  distills,  bottles and  warehouses
distilled  spirits products for the Company's account and on a contractual basis
for other  participants  in the  industry.  The Owensboro  facility  bottles and
warehouses  distilled  spirits  products for the Company's  account and performs
contract bottling.  The Company's Atlanta,  Georgia facility bottles, for itself
and on a contract basis, and its Albany,  Georgia facility distills, for its own
account, vodka, gin and blended whiskeys.

     The Company owns a brewery in Stevens Point,  Wisconsin,  where it produces
and bottles Point beer and brews and packages on a contract  basis for a variety
of brewing and other food and beverage industry members.

     The Company  maintains  its  corporate  headquarters  in offices  leased in
Fairport,  New York,  and maintains its wine  division  headquarters  in offices
owned in Canandaigua,  New York, where it also leases  additional  office space.
The  Company  also leases  office  space in  Chicago,  Illinois,  for its Barton
headquarters.

     The Company  believes that all of its  facilities are in good condition and
working order and have adequate  capacity to meet its needs for the  foreseeable
future.

     Most of the  Company's  real  property has been pledged  under the terms of
collateral  security  mortgages as security for the payment of outstanding loans
under the Company's  bank Credit  Agreement (as defined in Item 7 of this Report
on Form 10-K under "Financial Liquidity and Capital Resources").


ITEM 3.   LEGAL PROCEEDINGS
-------   -----------------

     The Company and its  subsidiaries  are subject to  litigation  from time to
time in the ordinary  course of business.  Although the amount of any  liability
with  respect  to such  litigation  cannot  be  determined,  in the  opinion  of
management,  such  liability  will not have a  material  adverse  effect  on the
Company's financial condition or results of operations.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-------   ---------------------------------------------------

     Not Applicable.


<PAGE>


EXECUTIVE OFFICERS OF THE COMPANY

     The  following  table sets forth  information  with  respect to the current
executive officers of the Company:

NAME               AGE   OFFICE HELD
----               ---   -----------
Marvin Sands        74   Chairman of the Board
Richard Sands       47   President and Chief Executive Officer
Robert Sands        39   Executive Vice President, General Counsel and Secretary
Daniel C. Barnett   48   President of Canandaigua Wine Company, Inc.
Alexander L. Berk   48   President and Chief Operating Officer of Barton 
                         Incorporated
Thomas S. Summer    44   Senior Vice President and Chief Financial Officer

     Marvin  Sands is the founder of the  Company,  which is the  successor to a
business  he started  in 1945.  He has been a director  of the  Company  and its
predecessor  since 1946 and was Chief  Executive  Officer  until  October  1993.
Marvin Sands is the father of Richard Sands and Robert Sands.

     Richard  Sands,  Ph.D.,  has  been  employed  by  the  Company  in  various
capacities since 1979. He was elected Executive Vice President and a director in
1982,  became President and Chief Operating  Officer in May 1986 and was elected
Chief  Executive  Officer in October  1993.  He is a son of Marvin Sands and the
brother of Robert Sands.

     Robert Sands was appointed  Executive Vice  President,  General  Counsel in
October 1993. In January 1995, he was appointed Secretary of the Company. He was
elected a director of the Company in January 1990 and served as Vice  President,
General Counsel since June 1990.  From June 1986,  until his appointment as Vice
President,  General  Counsel,  Mr.  Sands was employed by the Company as General
Counsel. He is a son of Marvin Sands and the brother of Richard Sands.

     Daniel C. Barnett serves as President of Canandaigua Wine Company,  Inc., a
wholly-owned  subsidiary of the Company.  In this  capacity,  Mr.  Barnett is in
charge of the Company's wine division,  and has been since he joined the Company
in  November  1995.  From July  1994 to  October  1995,  Mr.  Barnett  served as
President and Chief Executive  Officer of Koala Springs  International,  a juice
beverage  company.  Prior to that, from April 1991 to June 1994, Mr. Barnett was
Vice  President and General  Manager of Nestle USA's beverage  businesses.  From
October  1988 to April  1991,  he was  President  of  Weyerhauser's  baby diaper
division.

     Alexander L. Berk serves as President and Chief Operating Officer of Barton
Incorporated,  a wholly-owned  subsidiary of the Company. In this capacity,  Mr.
Berk is in charge of the Company's beer and spirits  divisions.  Mr. Berk became
an executive  officer of the Company on February 28, 1998, when his position was
expanded to include overall  responsibility  for the beer and spirits divisions.
This  change   occurred   when  Ellis  M.   Goodman,   who  formerly  held  this
responsibility,  left Barton to pursue other  interests.  Mr. Berk has served as
President and Chief  Operating  Officer of Barton since 1990. From 1988 to 1990,
Mr. Berk was the President and Chief  Executive  Officer of Schenley  Industries
and previously  served in various other  positions with Schenley since 1971. Mr.
Berk served during an interim  period of 1974 to 1978 as the Vice  President and
Director of  Marketing  for  Schieffelin  & Co.,  Inc.,  an importer of wine and
spirits.

     Thomas S.  Summer  joined the  Company  during  April  l997 as Senior  Vice
President and Chief  Financial  Officer.  From November 1991 to April 1997,  Mr.
Summer served as Vice  President,  Treasurer of Cardinal  Health,  Inc., a large
national  health care services  company,  where he was responsible for directing
financing strategies and treasury matters.  Prior to that, from November 1987 to
November  1991,  Mr.  Summer held several  positions  in  corporate  finance and
international treasury with PepsiCo, Inc.

     Executive officers of the Company hold office until the next Annual Meeting
of the Board of Directors and until their successors are chosen and qualify.

 

                                     PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------   -----------------------------------------------------------------
          MATTERS
          -------

     The Company's Class A Common Stock (the "Class A Stock") and Class B Common
Stock (the "Class B Stock") trade on the NASDAQ  National Stock Market under the
symbols "CBRNA" and "CBRNB,"  respectively.  The following  tables set forth for
the periods indicated the high and low sales prices of the Class A Stock and the
Class B Stock as reported on the NASDAQ National Stock Market.

                                         CLASS A STOCK
                   ---------------------------------------------------------
                   1ST QUARTER     2ND QUARTER    3RD QUARTER    4TH QUARTER
                   -----------     -----------    -----------    -----------
Fiscal 1997
  High               $39 1/2         $32 1/4        $27 1/2        $31 3/4
  Low                $27             $22 7/8        $15 3/4        $25 1/2
Fiscal 1998
  High               $32 1/4         $42 3/4        $53 1/2        $58 1/2
  Low                $21 7/8         $29 3/8        $39 1/2        $43 3/4

                                         CLASS B STOCK
                   ---------------------------------------------------------
                   1ST QUARTER     2ND QUARTER    3RD QUARTER    4TH QUARTER
                   -----------     -----------    -----------    -----------
Fiscal 1997
  High               $39 1/2         $32 1/2        $29 3/4        $34
  Low                $27 3/4         $25 3/8        $19            $28 3/4
Fiscal 1998
  High               $37             $43            $54 5/8        $57 3/4
  Low                $27             $35 1/2        $40 3/4        $45


     At May 18, 1998, the number of holders of record of Class A Stock and Class
B Stock of the Company were 1,076 and 317, respectively.

     The  Company's  policy is to retain  all of its  earnings  to  finance  the
development and expansion of its business, and the Company has not paid any cash
dividends since its initial public offering in 1973. In addition,  the Company's
current bank Credit  Agreement,  the Company's  indenture for its $130 million 8
3/4% Senior  Subordinated Notes due 2003 and its indenture for its $65 million 8
3/4% Series C Senior  Subordinated  Notes due 2003  restrict the payment of cash
dividends.

<PAGE>


ITEM 6.   SELECTED FINANCIAL DATA
-------   -----------------------

<TABLE>
<CAPTION>
                                                               FOR THE SIX
                                   FOR THE YEARS ENDED         MONTHS ENDED               FOR THE YEARS ENDED
                                       FEBRUARY 28,            FEBRUARY 29,                    AUGUST 31,
                               ---------------------------    --------------   -------------------------------------
                                    1998         1997              1996            1995         1994          1993
                               ------------   ------------    --------------   ----------   -----------   ----------
(in thousands, except per     
 share data)
<S>                            <C>           <C>               <C>             <C>           <C>           <C>
Gross sales                    $ 1,632,357   $  1,534,452      $   738,415     $ 1,185,074   $  861,059    $  389,417 
  Less-excise taxes               (419,569)      (399,439)        (203,391)       (278,530)    (231,475)      (83,109)
                               ------------  -------------     ------------    ------------  -----------   -----------
    Net sales                    1,212,788      1,135,013          535,024         906,544      629,584       306,308
Cost of product sold              (864,053)      (844,181)        (396,208)       (653,811)    (447,211)     (214,931)
                               ------------  -------------     ------------    ------------  -----------   -----------
    Gross profit                   348,735        290,832          138,816         252,733      182,373        91,377
Selling, general and
  administrative expenses         (231,680)      (208,991)        (112,411)       (159,196)    (121,388)      (59,983)
Nonrecurring restructuring
  expenses                            -              -              (2,404)         (2,238)     (24,005)         -
                               ------------  -------------     ------------    ------------  -----------   -----------
    Operating income               117,055         81,841           24,001          91,299       36,980        31,394
Interest expense, net              (32,189)       (34,050)         (17,298)        (24,601)     (18,056)       (6,126)
                               ------------  -------------     ------------    ------------  -----------   -----------
    Income before provision
      for Federal and state
      income taxes                  84,866         47,791            6,703          66,698       18,924        25,268 
Provision for Federal and
  state income taxes               (34,795)       (20,116)          (3,381)        (25,678)      (7,191)       (9,664)
                               ------------  -------------     ------------    ------------  -----------   -----------
Net income                     $    50,071   $     27,675      $     3,322     $    41,020   $   11,733    $   15,604
                               ============  =============     ============    ============  ===========   ===========

Earnings per common share:
  Basic                        $      2.68   $       1.43      $      0.17     $      2.18   $     0.76    $     1.32
                               ============  =============     ============    ============  ===========   ===========
  Diluted                      $      2.62   $       1.42      $      0.17     $      2.16   $     0.75    $     1.20
                               ============  =============     ============    ============  ===========   ===========
Total assets                   $ 1,073,159   $  1,020,901      $ 1,054,580     $   785,921   $  826,562    $  355,182
                               ============  =============     ============    ============  ===========   ===========
Long-term debt                 $   309,218   $    338,884      $   327,616     $   198,859   $  289,122    $  108,303
                               ============  =============     ============    ============  ===========   ===========
</TABLE>

For the fiscal years ended  February 28, 1998 and 1997, and the six months ended
February  29,  1996,  see  Management's  Discussion  and  Analysis of  Financial
Condition  and  Results of  Operations  under Item 7 of this Report and Notes to
Consolidated  Financial Statements as of February 28, 1998, under Item 8 of this
Report.

Earnings  per common  share for all  periods  presented  reflect  the  Company's
adoption  of SFAS No.  128  (see  Notes 1 and 10 in the  Notes  to  Consolidated
Financial Statements as of February 28, 1998, under Item 8 of this Report).


 
 


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
-------   --------------------------------------------------------------- 
          RESULTS OF OPERATIONS 
          --------------------- 

INTRODUCTION

     The following  discussion and analysis  summarizes the significant  factors
affecting  (i)  consolidated  results of  operations of the Company for the year
ended February 28, 1998 ("Fiscal 1998"), compared to the year ended February 28,
1997 ("Fiscal  1997"),  Fiscal 1997 compared to the twelve months ended February
29, 1996 ("Pro Forma Fiscal 1996"),  and the six month  transition  period ended
February  29,  1996  ("Transition  Period"),  compared  to the six months  ended
February 28, 1995 ("February 1995 Six Months"), and (ii) financial liquidity and
capital  resources for Fiscal 1998.  This discussion and analysis should be read
in conjunction with the Company's  consolidated  financial  statements and notes
thereto included herein.

     The Company  operates  primarily  in the  beverage  alcohol  industry.  The
Company is  principally  a producer  and  supplier of wine and an  importer  and
producer  of beer and  distilled  spirits in the United  States.  The  Company's
beverage alcohol brands are marketed in three general categories: wine, beer and
distilled spirits.

RESULTS OF OPERATIONS

FISCAL 1998 COMPARED TO FISCAL 1997

     NET SALES

     The following  table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Fiscal 1998 and
Fiscal 1997.

<TABLE>
<CAPTION>
                                     Fiscal 1998 Compared to Fiscal 1997
                    ---------------------------------------------------------------------
                                  Net Sales                           Unit Volume
                    ------------------------------------     ----------------------------
Branded Beverage                              %Increase/                       %Increase/
Alcohol Products:      1998         1997      (Decrease)      1998     1997    (Decrease)
                    ----------   ----------   ----------     ------   ------   ----------
<S>                 <C>          <C>            <C>          <C>      <C>         <C>
  Wine              $  533,257   $  512,510       4.0%       27,793   27,393       1.5%    
  Beer                 376,607      298,925      26.0%       30,016   23,848      25.9%
  Spirits              200,276      183,843       8.9%        9,930    9,390       5.8%
Other (a)              102,648      139,735     (26.5%)        N/A      N/A        N/A
                    ----------   ----------   ----------     ------   ------   ----------
                    $1,212,788   $1,135,013       6.9%       67,739   60,631      11.7%    
                    ==========   ==========   ==========     ======   ======   ==========     
                                  
<FN>
     (a)  Other consists  primarily of nonbranded  concentrate  sales,  contract
          bottling and other production services and bulk product sales, none of
          which are sold in case quantities.
</FN>
</TABLE>
<PAGE>


     Net sales for Fiscal 1998  increased  to  $1,212.8  million  from  $1,135.0
million for Fiscal 1997, an increase of $77.8  million,  or 6.9%.  This increase
resulted  primarily  from (i) $77.7  million of additional  beer sales,  largely
Mexican beer, (ii) $22.5 million of additional  table wine sales and (iii) $16.4
million of additional  spirits sales.  These increases were partially  offset by
lower  sales of grape  juice  concentrate,  bulk  wine and  other  branded  wine
products.  Although table wine sales have increased, the Company has experienced
a market share  decline of its wine  products  during Fiscal 1998, a trend which
has continued into fiscal 1999. The Company is implementing  various programs to
address the decline,  such as addressing  noncompetitive  consumer prices of its
wine products on a market-by-market  basis as well as increasing its promotional
activities where appropriate.

     GROSS PROFIT

     The Company's gross profit increased to $348.7 million for Fiscal 1998 from
$290.8  million for Fiscal 1997, an increase of $57.9  million,  or 19.9%.  As a
percent of net sales, gross profit increased to 28.8% for Fiscal 1998 from 25.6%
for Fiscal 1997.  The dollar  increase in gross profit  resulted  primarily from
increased  beer  sales,   higher  average  selling  prices  and  cost  structure
improvements  related to branded wine sales,  higher  average  selling prices in
excess of cost  increases  related to grape juice  concentrate  sales and higher
average  selling prices and increased  volume related to branded  spirits sales.
These  increases  were  partially  offset by lower  sales  volume of grape juice
concentrate and bulk wine.

     In general,  the preferred method of accounting for inventory  valuation is
the last-in,  first-out  method  ("LIFO")  because,  in most  circumstances,  it
results in a better matching of costs and revenues.  For comparison  purposes to
companies  using the  first-in,  first-out  method of  accounting  for inventory
valuation  ("FIFO") only,  gross profit reflected an addition of $5.0 million in
Fiscal 1998 and a reduction of $31.4 million in Fiscal 1997 due to the Company's
LIFO accounting method.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and  administrative  expenses increased to $231.7 million
for Fiscal  1998 from  $209.0  million  for Fiscal  1997,  an  increase of $22.7
million,  or 10.9%. The dollar increase in selling,  general and  administrative
expenses  resulted  principally from marketing and selling costs associated with
the  Company's  increased  branded  sales  volume,  and a  one-time  charge  for
separation  costs  related  to an  organizational  change  within  the  Company.
Selling, general and administrative expenses as a percent of net sales increased
to 19.1% for Fiscal 1998 as compared to 18.4% for Fiscal  1997.  The increase in
percent of net sales  resulted  from the one-time  charge for  separation  costs
related to an organizational  change within the Company and from a change in the
sales mix driven by an increase in net sales of branded  products,  which have a
higher percent of marketing and selling cost relative to sales, partially offset
by a decrease in net sales of nonbranded products,  which have relatively little
associated marketing and selling costs.

 


     INTEREST EXPENSE, NET

     Net interest expense  decreased to $32.2 million for Fiscal 1998 from $34.1
million for Fiscal 1997, a decrease of $1.9 million,  or 5.5%.  The decrease was
primarily  due to a  decrease  in the  Company's  average  borrowings  which was
partially offset by an increase in the average interest rate.

     PROVISION FOR FEDERAL AND STATE INCOME TAXES

     The Company's  effective  tax rate for Fiscal 1998  decreased to 41.0% from
42.1% for Fiscal 1997 as Fiscal 1997  reflected a higher  effective  tax rate in
California  caused by statutory  limitations on the Company's ability to utilize
certain deductions.

     NET INCOME

     As a result of the above factors, net income increased to $50.1 million for
Fiscal 1998 from $27.7 million for Fiscal 1997, an increase of $22.4 million, or
80.9%.

     For  financial  analysis  purposes  only,  the  Company's  earnings  before
interest,  taxes,  depreciation and amortization ("EBITDA") for Fiscal 1998 were
$150.2  million,  an increase of $36.5 million over EBITDA of $113.7 million for
Fiscal  1997.  EBITDA  should not be construed  as an  alternative  to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.


FISCAL 1997 COMPARED TO PRO FORMA FISCAL 1996

     NET SALES

     Net sales for Fiscal 1997 increased to $1,135.0 million from $987.1 million
for Pro Forma  Fiscal  1996,  an  increase  of $147.9  million,  or 15.0%.  This
increase resulted  primarily from (i) $59.1 million of additional  imported beer
sales,  primarily Mexican beer; (ii) the inclusion of $49.0 million of net sales
of products and services from the UDG  Acquisition  during the period from March
1, 1996,  through August 31, 1996;  (iii) $22.7 million of higher sales of grape
juice  concentrate;  (iv) $19.4  million of increased net sales of the Company's
varietal  table  wine  products  (wine  named for the grape that  comprises  the
principal  component  of  the  wine)  resulting  from  selling  price  increases
implemented  between  October  1995 and May  1996,  as well as  additional  unit
volume;  and (v) $5.8 million of additional  sales of spirits brands;  partially
offset by $5.2 million of decreased  sales of the  Company's  nonvarietal  table
wine brands (wine named after the European  regions  where similar types of wine
were  originally  produced  [e.g.,  burgundy],  niche  products and  proprietary
brands) and a decrease of $2.9 million in sales of other products and services.

<PAGE>


     For purposes of computing  the net sales and unit volume  comparative  data
for the table below and for the remainder of the discussion of net sales,  sales
of spirits  acquired in the UDG  Acquisition  have been  included for the period
from  March 1,  1995,  through  August  31,  1995,  which  was  prior to the UDG
Acquisition.

     The following  table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other products and services sold by the Company for Fiscal 1997 and
Pro Forma Fiscal 1996.

<TABLE>
<CAPTION>
                                Fiscal 1997 Compared to Pro Forma Fiscal 1996
                    ---------------------------------------------------------------------
                                  Net Sales                           Unit Volume
                    ------------------------------------     ----------------------------
Branded Beverage                              %Increase/                       %Increase/
Alcohol Products:      1997         1996      (Decrease)      1997     1996    (Decrease)
                    ----------   ----------   ----------     ------   ------   ----------
<S>                 <C>          <C>             <C>         <C>      <C>         <C>
  Wine              $  512,510   $  499,962       2.5%       27,393   28,232      (3.0%)
  Beer                 298,925      239,786      24.7%       23,848   19,344      23.3%
  Spirits (a)          183,843      178,803       2.8%        9,390    9,223       1.8%
Other (b)              139,735      110,047      27.0%         N/A      N/A        N/A
                    ----------   ----------   ----------     ------   ------   ----------
                    $1,135,013   $1,028,598      10.3%       60,631   56,799       6.7%
                    ==========   ==========   ==========     ======   ======   ==========     
<FN>                                           
     (a)  For comparison  purposes only, net sales of $41,514 and unit volume of
          2,001 cases of distilled  spirits brands  acquired in the September 1,
          1995, UDG  Acquisition  have been included in the table for the twelve
          months ended February 29, 1996. These amounts  represent net sales and
          unit  volume of those  brands  for the period  March 1, 1995,  through
          August 31, 1995, which was prior to the UDG Acquisition.

     (b)  Other consists  primarily of nonbranded  concentrate  sales,  contract
          bottling and other production services and bulk product sales, none of
          which are sold in case quantities.
</FN>
</TABLE>

     Net  sales  and unit  volume  for  Fiscal  1997  increased  10.3% and 6.7%,
respectively,  as  compared to Pro Forma  Fiscal  1996.  The net sales  increase
resulted  from  higher  imported  beer  sales,   higher  sales  of  grape  juice
concentrate,  price  increases on most of the Company's  branded wine  products,
particularly  varietal table wine brands,  and increased  sales of the Company's
spirits  brands.  Unit volume  increases were led by  substantial  growth in the
Company's  imported  beer brands and  increases in its  varietal  table wine and
spirits brands, partially offset by declines in unit volume of nonvarietal table
wine,  dessert  wine  and  sparkling  wine.  Excluding  the  impact  of the  UDG
Acquisition,   net  sales  and  unit  volume   increased   by  10.7%  and  7.1%,
respectively.  Net sales of the brands acquired in the UDG Acquisition decreased
by 1.2% and unit volume  increased  by 2.5% in Fiscal 1997.  Net sales  declines
reflected the impact of downward selling price adjustments to bring these brands
more in line with the  pricing  strategy  of the rest of the  Company's  spirits
portfolio.

 


     GROSS PROFIT

     The Company's gross profit  increased to $290.8 million in Fiscal 1997 from
$264.8 million in Pro Forma Fiscal 1996, an increase of $26.1 million,  or 9.8%.
This change in gross profit  resulted  primarily from (i) $20.5 million of gross
profit from sales generated during the period from March 1, 1996, through August
31, 1996, from the business  acquired from UDG; (ii) $19.0 million of additional
gross profit from increased  beer sales;  and (iii) $13.4 million of lower gross
profit  primarily  due to increased  cost of product sold,  particularly  higher
grape  costs in the fall  1996  harvest  and  additional  costs  resulting  from
inefficiencies  in the  production  of wine and grape juice  concentrate  at the
Company's Mission Bell winery in California,  partially offset by additional net
sales resulting  primarily from selling price increases of the Company's branded
wine and grape juice  concentrate  products and a reduction of certain long-term
grape  contracts  to reflect  current  market  prices and the  renegotiation  of
certain unfavorable contracts.  The Company's increased production costs stemmed
from low bulk wine  conversion  rates and bottling  inefficiencies.  The Company
also experienced  high imported  concentrate and bulk freight costs. The Company
has  instituted  a  series  of steps  to  address  these  matters,  including  a
reengineering  effort to redesign its work processes,  organizational  structure
and information systems.

     Gross  profit as a  percentage  of net sales was 25.6% for  Fiscal  1997 as
compared to 26.8% in Pro Forma  Fiscal  1996.  The  decline in the gross  profit
margin was largely due to higher costs,  particularly  grape costs,  of wine and
grape juice concentrate  products,  partially offset by increased selling prices
on most of the Company's branded wine and grape juice concentrate products.  The
Company has experienced  significant increases in its cost of grapes in both the
1995 and 1996 harvests. The Company believes that these increases in grape costs
were due to an imbalance in supply and demand in the varieties which the Company
purchases.

     In general,  the preferred method of accounting for inventory  valuation is
the last-in,  first-out  method  ("LIFO")  because,  in most  circumstances,  it
results in a better matching of costs and revenues.  For comparison  purposes to
companies  using the  first-in,  first-out  method of  accounting  for inventory
valuation ("FIFO") only, gross profit reflected a reduction of $31.4 million and
$3.9 million in Fiscal 1997 and Pro Forma Fiscal 1996, respectively,  due to the
Company's LIFO accounting method.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and  administrative  expenses for Fiscal 1997 were $209.0
million,  an increase of $17.3  million as compared to Pro Forma Fiscal 1996. Of
this amount,  $13.5 million was due primarily to increased personnel and related
expenses  stemming  from the  Company's  reengineering  efforts,  including  the
continued  strengthening  of  the  Company's  management,   and  other  expenses
consistent  with the  Company's  growth;  and $11.3  million  related to the UDG
Acquisition.  These items were offset  primarily by one-time  costs  incurred in
advertising and promotion expenses in Pro Forma Fiscal 1996 due to the change in
the Company's fiscal year-end.

     NONRECURRING RESTRUCTURING EXPENSES

     Pro Forma Fiscal 1996 included $4.0 million of  nonrecurring  restructuring
expenses.

     INTEREST EXPENSE, NET

     Net interest  expense  totaled $34.1 million in Fiscal 1997, an increase of
$5.3 million as compared to Pro Forma Fiscal 1996,  primarily  due to additional
interest expense from the UDG Acquisition financing.

     PROVISION FOR FEDERAL AND STATE INCOME TAXES

     The  Company's  effective tax rate for Fiscal 1997 was 42.1% as compared to
40.5% for Pro Forma Fiscal 1996 due to a higher effective tax rate in California
caused by statutory  limitations  on the  Company's  ability to utilize  certain
deductions.

     NET INCOME

     As a result of the above  factors,  net income  for  Fiscal  1997 was $27.7
million, an increase of $3.7 million as compared to Pro Forma Fiscal 1996.

     For  financial  analysis  purposes  only,  the  Company's  earnings  before
interest,  taxes,  depreciation and amortization ("EBITDA") for Fiscal 1997 were
$113.7 million, an increase of $22.6 million over EBITDA of $91.1 million in Pro
Forma Fiscal 1996. EBITDA should not be construed as an alternative to operating
income or net cash flow from operating activities and should not be construed as
an indication of operating performance or as a measure of liquidity.


TRANSITION PERIOD COMPARED TO FEBRUARY 1995 SIX MONTHS

     NET SALES

     Net sales for the Transition Period increased to $535.0 million from $454.5
million for the  February  1995 Six Months,  an  increase of $80.5  million,  or
17.7%.  In addition to the net sales of $53.4  million of products  and services
from the UDG Acquisition,  the Company had additional net sales of $23.6 million
from its imported beer brands and $14.1 million from its varietal wine products,
partially  offset  by  lower  sales of bulk  wine,  nonvarietal  wine,  contract
bottling services, grape juice concentrate and dessert wine.

     For purposes of computing  the net sales and unit volume  comparative  data
below and for the remainder of the  discussion  of net sales,  sales of products
acquired in the UDG Acquisition have been included in the Company's  results for
the entire Transition Period and the entire February 1995 Six Months,  which was
prior to the UDG Acquisition.

<PAGE>


     The following  table sets forth the net sales (in thousands of dollars) and
unit volume (in thousands of cases), if applicable, for branded beverage alcohol
products and other  products and services sold by the Company for the Transition
Period and the February 1995 Six Months.

<TABLE>
<CAPTION>
                                Transition Period Compared to February 1995 Six Months
                    -----------------------------------------------------------------------------
                                  Net Sales                               Unit Volume
                    ------------------------------------     ------------------------------------
                                  February                                 February
Branded Beverage    Transition      1995      %Increase/     Transition      1995      %Increase/
Alcohol Products:     Period     Six Months   (Decrease)       Period     Six Months   (Decrease)
                    ----------   ----------   ----------     ----------   ----------   ----------
<S>                 <C>          <C>             <C>           <C>          <C>           <C>
  Wine              $ 268,782    $ 255,881        5.0%         14,783       14,537         1.7% 
  Beer                115,757       92,131       25.6%          9,316        7,444        25.1%
  Spirits (a)          91,219       96,547       (5.5%)         4,648        4,793        (3.0%)
Other (b)              59,266       60,548       (2.1%)          N/A          N/A          N/A
                    ----------   ----------   ----------     ----------   ----------   ----------
                    $ 535,024    $ 505,107        5.9%         28,747       26,774         7.4% 
                    ==========   ==========   ==========     ==========   ==========   ==========     
<FN>
     (a)  For comparison  purposes only, net sales of $50,622 and unit volume of
          2,340 of distilled spirits have been included in the table for the six
          months  ended   February  28,  1995,   which  was  prior  to  the  UDG
          Acquisition.

     (b)  Other consists  primarily of nonbranded  concentrate  sales,  contract
          bottling and other production services and bulk product sales, none of
          which are sold in case quantities.
</FN>
</TABLE>

     Net sales and unit  volume for the  Transition  Period  increased  5.9% and
7.4%, respectively, as compared to the February 1995 Six Months. These increases
were  principally  due to increased  net sales and unit volume of the  Company's
imported beer brands and varietal table wine brands. Excluding the impact of the
UDG Acquisition,  net sales and unit volume grew by 6.0% and 9.2%, respectively,
in  the  Transition  Period.  Unit  sales  of the  brands  acquired  in the  UDG
Acquisition  were 11.5% lower than in the February  1995 Six Months,  accounting
for lower overall spirits sales. During the period from 1993 to 1995, the brands
acquired  in the UDG  Acquisition  declined  in excess of  industry  rates.  The
Company believes that these declines resulted from noncompetitive retail pricing
and promotional activities.

     GROSS PROFIT

     Gross profit for the Transition  Period was $138.8 million,  an increase of
$12.0  million as compared to gross  profit of $126.8  million for the  February
1995 Six Months.  This  increase in gross profit  resulted from $18.5 million of
additional gross profit from sales generated from the business acquired from UDG
and $1.0  million  from  ongoing  operations,  which was  offset in part by $7.5
million of (i) overtime,  freight and other expenses and  restructuring  charges
related to production and shipping delays associated with the relocation of West
Coast bottling operations to the Company's Mission Bell winery, employee bonuses
and  certain  nonrecurring  expenses;  and (ii) as a result of the change in the
Company's  fiscal year end,  increased cost of product sold due to the different
amount and composition of inventory levels at the end of February versus the end
of August,  the Company's  former fiscal year end. The $1.0 million  increase in
gross profit from ongoing  operations  resulted from a $7.3 million  increase in
gross  profit,  primarily  due to  increased  sales and gross  margins  from the
Company's  imported  beer  business,  partially  offset by $6.3 million of lower
gross  profits in the  Company's  wine and grape juice  concentrate  businesses,
which was due  primarily  to  higher  grape  costs  which  were  only  partially
recovered by selling price increases in the Transition Period.

     Gross profit as a percentage  of net sales  declined from 27.9% to 25.9% in
the  Transition  Period.  This decline was due primarily to the impact of higher
grape and other costs in the Transition  Period,  partially offset by the higher
gross profit sales of brands  acquired  from UDG and improved  gross profit as a
percentage  of net sales in the  Company's  imported  beer  business.  The gross
profit  percentage  was  positively  impacted by the UDG  Acquisition,  as gross
profit as a percentage of net sales on the business acquired from UDG was 34.7%.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses totaled $112.4 million for the
Transition Period, an increase of $32.5 million as compared to the February 1995
Six Months.  Exclusive of $11.1 million of nonrecurring  costs  including,  as a
result of the change in the Company's fiscal year end, the recognition of higher
than normal  advertising and promotion  expenses in the Transition Period due to
the  seasonality of these expenses and employee  bonuses and other  nonrecurring
costs and $8.3  million  related to the UDG  Acquisition,  selling,  general and
administrative expenses increased by $13.1 million, or 16.3%, as compared to the
February 1995 Six Months.  Advertising  and promotion  increases of $6.7 million
were  related  primarily  to the  Almaden/Inglenook  Product  Lines  which  were
acquired in August 1994 and which the Company did not  advertise or promote at a
full level in the first several months after their acquisition. The Company also
incurred  increased  advertising and promotion expenses related to the increased
sales of its imported beer. Selling expenses increased by $5.4 million primarily
as a  result  of the  Almaden/Inglenook  Product  Line  acquisitions,  with  the
Transition  Period including a full complement of sales and marketing  personnel
to  service  the  brands  that  were not in place for the  entire  period in the
February 1995 Six Months.  The Transition Period also included  additional sales
personnel in the Company's  spirits and imported beer  divisions.  Other general
and administrative expenses increased by $1.0 million.

     Excluding the nonrecurring costs referred to above and the UDG Acquisition,
selling, general and administrative expenses as a percent of net sales increased
to 19.3% from 17.6% in the  February  1995 Six Months due to the  inclusion of a
full  complement of  advertising,  promotion and selling  expense related to the
Almaden/Inglenook Product Lines.

     NONRECURRING RESTRUCTURING EXPENSES

     The  Company  incurred  net  restructuring  charges of $2.4  million in the
Transition  Period, as compared to restructuring  charges of $0.7 million in the
February 1995 Six Months.  The  restructuring  expenses in the Transition Period
represent $3.1 million of  incremental,  nonrecurring  expenses such as overtime
and freight expense  related to production and shipment  delays  associated with
the  Restructuring  Plan,  offset by a net  reduction of $0.7 million in accrued
liabilities  associated with the  Restructuring  Plan to take into account lower
than expected expenses for severance and facility holding and closure costs. See
the Notes to the Company's Consolidated Financial Statements included herein.

     INTEREST EXPENSE, NET

     Net  interest  expense  increased  $4.2  million  to $17.3  million  in the
Transition  Period as compared to the  February  1995 Six Months.  The  increase
resulted from additional interest expense associated with the borrowings related
to the UDG Acquisition, amounting to $5.1 million, and increased working capital
requirements  due  primarily  to higher  grape  costs  and the UDG  Acquisition,
partially  offset by net  reductions in the  Company's  term loans and revolving
loans using proceeds of the Company's November 18, 1994, public equity offering.

     PROVISION FOR FEDERAL AND STATE INCOME TAXES

     The Company's  effective tax rate for the  Transition  Period  increased to
50.4% from 38.5% for the February 1995 Six Months due to a higher  effective tax
rate in California  caused by statutory  limitations on the Company's ability to
utilize certain deductions.

     NET INCOME

     As a result of the above factors,  net income for the Transition Period was
$3.3  million,  a decrease of $17.0 million as compared to the February 1995 Six
Months.


FINANCIAL LIQUIDITY AND CAPITAL RESOURCES

     GENERAL

     The  Company's  principal  use of cash in its  operating  activities is for
purchasing and carrying  inventories.  The Company's primary source of liquidity
has historically  been cash flow from operations,  except during the annual fall
grape harvests when the Company has relied on short-term borrowings.  The annual
grape crush  normally  begins in August and runs  through  October.  The Company
generally  begins  purchasing  grapes in August  with  payments  for such grapes
beginning to come due in  September.  The  Company's  short-term  borrowings  to
support  such  purchases  generally  reach their  highest  levels in November or
December. Historically, the Company has used cash flow from operating activities
to repay  its  short-term  borrowings.  The  Company  will  continue  to use its
short-term borrowings to support its working capital  requirements.  The Company
believes  that  cash  provided  by  operating   activities   and  its  financing
activities,  primarily short-term borrowings, will provide adequate resources to
satisfy its working  capital,  liquidity  and  anticipated  capital  expenditure
requirements for both its short-term and long-term capital needs.

 


     FISCAL 1998 CASH FLOWS

     OPERATING ACTIVITIES

     Net cash  provided  by  operating  activities  for  Fiscal  1998 was  $28.8
million,  which  resulted from $88.7 million in net income  adjusted for noncash
items, less $59.9 million representing a net increase in the Company's operating
assets in excess of operating liabilities.  The net increase in operating assets
in excess of operating  liabilities  resulted  primarily from an increase in the
Company's  inventory  levels  of  $65.6  million  related  primarily  to  higher
purchases of grapes from the 1997 grape harvest.

     INVESTING ACTIVITIES AND FINANCING ACTIVITIES

     Net cash used in investing  activities  for Fiscal 1998 was $18.6  million,
which  resulted  from $31.2  million of capital  expenditures,  including  $11.5
million for vineyards,  partially  offset by proceeds from the sale of property,
plant and equipment of $12.6 million.

     Net cash used in financing  activities  for Fiscal 1998 was $18.9  million,
which  resulted  primarily  from the repurchase of $9.2 million of the Company's
Class A Common Stock and principal payments of $186.4 million of long-term debt,
which  included $74.2 million of scheduled and required  principal  payments and
payment of $112.2  million of principal  under the  Company's  Third Amended and
Restated  Credit  Agreement  which was  refinanced  under the December 19, 1997,
Credit Agreement (see Note 6 to the Company's  financial  statements  located in
Item 8 of this  Report  on Form  10-K).  This  amount  was  partially  offset by
proceeds of $140.0 million of long-term debt as a result of the  refinancing and
proceeds of $34.9 million of net revolving loan  borrowings  under the Company's
Credit Agreement.

     As of  February  28,  1998,  under the Credit  Agreement,  the  Company had
outstanding term loans of $140.0 million bearing interest at 6.4%, $91.9 million
of revolving loans bearing interest at 6.0%, undrawn revolving letters of credit
of $3.9 million, and $89.2 million in revolving loans available to be drawn.

     Total debt outstanding as of February 28, 1998, amounted to $425.2 million,
a decrease of $11.1 million from  February 28, 1997.  The ratio of total debt to
total  capitalization  decreased to 50.6% as of February 28, 1998, from 54.5% as
of February 28, 1997.

     During  January  1996,  the  Company's  Board of Directors  authorized  the
repurchase of up to $30.0 million of its Class A Common Stock and Class B Common
Stock (the  "Repurchase  Program").  During May 1997, the Company  completed the
Repurchase  Program with the  repurchase of 362,100 shares of its Class A Common
Stock at a cost of $9.2 million.  With respect to the  Repurchase  Program,  the
Company  repurchased  a total of 1,149,550  shares of Class A Common Stock at an
aggregate cost of $30.0 million, or at an average cost of $26.10 per share.

<PAGE>


     THE COMPANY'S CREDIT AGREEMENT

     On December 19, 1997, the Company,  its principal  operating  subsidiaries,
and a syndicate of banks (the "Syndicate Banks"),  for which The Chase Manhattan
Bank acts as  Administrative  Agent,  entered into a new $325.0  million  senior
Credit Agreement (the "Credit Agreement").  The proceeds of the Credit Agreement
were used to repay all outstanding  principal and accrued  interest on all loans
under the Company's Third Amended and Restated Credit Agreement,  as amended. As
of February 28, 1998,  the Credit  Agreement  provided for (i) a $140.0  million
term loan  facility due in June 2003 and (ii) a $185.0  million  revolving  loan
facility,  including  letters of credit up to a maximum of $20.0 million,  which
expires in June 2003. A brief  description of the Credit  Agreement is contained
in Note 6 to the Company's financial statements located in Item 8 of this Report
on Form 10-K.

     SENIOR SUBORDINATED NOTES

     As of  February  28,  1998,  the  Company had  outstanding  $195.0  million
aggregate  principal  amount of 8 3/4% Senior  Subordinated  Notes due  December
2003,  being the $130.0  million  aggregate  principal  amount of 8 3/4%  Senior
Subordinated  Notes due  December  2003 issued in December  1993 (the  "Original
Notes")  and the $65.0  million  aggregate  principal  amount of 8 3/4% Series C
Senior Subordinated Notes due December 2003 issued in February 1997 (the "Series
C  Notes").  The  Original  Notes and the Series C Notes are  redeemable  at the
option of the  Company,  in whole or in part,  on or after  December 15, 1998. A
brief  description  of the Original Notes and the Series C Notes is contained in
Note 6 to the Company's financial statements located in Item 8 of this Report on
Form 10-K.

     CAPITAL EXPENDITURES

     During  Fiscal  1998,  the  Company  expended  $31.2  million  for  capital
expenditures, including $11.5 million related to vineyards. The Company plans to
spend  approximately  $25.0  million  for  capital  expenditures,  exclusive  of
vineyards,  in fiscal 1999. In addition,  the Company  continues to consider the
purchase,  lease and  development  of  vineyards.  See  "Business  - Sources and
Availability  of Raw  Materials"  under Item 1 of this  Report.  The Company may
incur additional  expenditures for vineyards if opportunities  become available.
Management reviews the capital expenditure program  periodically and modifies it
as required to meet current business needs.

     COMMITMENTS

     The Company has agreements  with suppliers to purchase  various spirits and
blends of which certain  agreements are denominated in British pounds  sterling.
The future  obligations  under these  agreements,  based upon exchange  rates at
February 28, 1998,  aggregate  approximately  $23.4 million to $40.9 million for
contracts expiring through December 2005.

 


     At February 28, 1998, the Company had no open currency  forward  contracts.
The  Company's  use of such  contracts is limited to the  management of currency
rate risks related to purchases denominated in a foreign currency. The Company's
strategy  is to enter  into  currency  exchange  contracts  that are  matched to
specific purchases and not to enter into any speculative contracts.

     EFFECTS OF INFLATION AND CHANGING PRICES

     The Company's  results of operations and financial  condition have not been
significantly  affected by inflation and changing prices other than grape costs.
The  Company  has   discussed  the  impact  of  increases  in  grape  prices  in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."  The  Company  has  been  able,   subject  to  normal   competitive
conditions, to pass along rising costs through increased selling prices.

     ACCOUNTING PRONOUNCEMENTS

     In  June  1997,  Statement  of  Financial  Accounting  Standards  No.  130,
"Reporting  Comprehensive  Income,"  (SFAS No. 130) and  Statement  of Financial
Accounting  Standards No. 131,  "Disclosures about Segments of an Enterprise and
Related  Information,"  (SFAS No.  131) were  issued.  SFAS No. 130  establishes
standards for reporting and display of  comprehensive  income and its components
in a full set of financial statements. The Company is required to adopt SFAS No.
130  for  interim   periods   and  fiscal   years   beginning   March  1,  1998.
Reclassification  of  financial  statements  for earlier  periods  provided  for
comparative  purposes is required.  The Company  believes the effect of adoption
will not be  significant.  SFAS No.  131  establishes  standards  for  reporting
information about operating segments in annual financial statements and requires
reporting of selected information in interim financial  statements.  The Company
is required to adopt SFAS No. 131 for fiscal years  beginning March 1, 1998, and
for  interim  periods  beginning  March  1,  1999.  Restatement  of  comparative
information  for earlier  years is required in the initial  year of adoption and
comparative  information  for interim periods in the initial year of adoption is
to be  reported  for  interim  periods in the second  year of  application.  The
Company  has not yet  determined  the  impact of SFAS No.  131 on its  financial
statements.

     YEAR 2000 ISSUE

     The Company is  currently  working to resolve the  potential  impact of the
year 2000 on the  processing  of  date-sensitive  information  by the  Company's
computerized   information   systems   (including  both  hardware  and  software
applications). The year 2000 issue is the result of computer logic being written
using two digits  rather  than four to define the  applicable  year.  Any of the
Company's logic that processes  date-sensitive  information may recognize a date
using "00" as the year 1900  rather than the year 2000,  which  could  result in
miscalculations or system failures. Based on preliminary  information,  costs of
addressing  potential  issues  are not  currently  expected  to have a  material
adverse  impact on the Company's  financial  position,  results of operations or
cash flows in future  periods.  The Company and its  customers  and vendors have
been,  and continue to be, active in  identifying,  assessing and resolving such
processing  issues.  However,  if the Company and its  customers  or vendors are
unable to resolve such processing  issues in a timely manner, it could result in
a  material  financial  risk.  Accordingly,  the  Company  plans to  devote  the
necessary  resources  to resolve  all  significant  year 2000 issues in a timely
manner.

<PAGE>


 ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 -------   -------------------------------------------


                    CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                    -----------------------------------------

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                       AND
                                       ---
                             SUPPLEMENTARY SCHEDULES
                             -----------------------

                                FEBRUARY 28, 1998
                                -----------------


                                                                            Page
                                                                            ----
The following information is presented in this report:

     Report of Independent Public Accountants .............................. 30
     Consolidated Balance Sheets - February 28, 1998 and 1997 .............. 31
     Consolidated Statements of Income for the years ended February 28, 
          1998 and 1997, for the six months ended February 29, 1996 
          and February 28, 1995 (unaudited), and for the year ended 
          August 31, 1995 .................................................. 32
     Consolidated Statements of Changes in Stockholders' Equity for the 
          years ended February 28, 1998 and 1997, for the six months ended
          February 29, 1996, and for the year ended August 31, 1995 ........ 33
     Consolidated Statements of Cash Flows for the years ended February 28, 
          1998 and 1997, for the six months ended February 29, 1996 
          and February 28, 1995 (unaudited), and for the year ended 
          August 31, 1995 .................................................. 34
     Notes to Consolidated Financial Statements ............................ 35
     Selected Financial Data ............................................... 15
     Selected Quarterly Financial Information (unaudited) .................. 51

Schedules I through V are not submitted  because they are not  applicable or not
required under the rules of Regulation S-X.

Individual  financial statements of the Registrant have been omitted because the
Registrant is primarily an operating  company and no subsidiary  included in the
consolidated financial statements has minority equity interest and/or noncurrent
indebtedness,  not  guaranteed  by the  Registrant,  in  excess  of 5% of  total
consolidated assets.

 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Canandaigua Brands, Inc.:

We have audited the  accompanying  consolidated  balance  sheets of  Canandaigua
Brands,  Inc. (a Delaware  corporation) and subsidiaries as of February 28, 1998
and  1997,  and the  related  consolidated  statements  of  income,  changes  in
stockholders'  equity and cash flows for the years ended  February  28, 1998 and
1997,  the six months ended  February  29,  1996,  and the year ended August 31,
1995.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Canandaigua  Brands,  Inc. and
subsidiaries  as of  February  28,  1998  and  1997,  and the  results  of their
operations  and their cash flows for the years ended February 28, 1998 and 1997,
the six months ended  February 29, 1996,  and the year ended August 31, 1995, in
conformity with generally accepted accounting principles.


Rochester, New York,                         /s/ Arthur Andersen LLP
  April 8, 1998

<PAGE>
<TABLE>
                                   CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                       (in thousands, except share data)
<CAPTION>
                                                                February 28,       February 28,
                                                                    1998               1997
                                                                ------------       ------------
                    ASSETS
                    ------
<S>                                                            <C>                <C>              
CURRENT ASSETS:
  Cash and cash investments                                     $     1,232        $    10,010
  Accounts receivable, net                                          142,615            142,592
  Inventories, net                                                  394,028            326,626
  Prepaid expenses and other current assets                          26,463             21,787
                                                                ------------       ------------
    Total current assets                                            564,338            501,015
PROPERTY, PLANT AND EQUIPMENT, net                                  244,035            249,552
OTHER ASSETS                                                        264,786            270,334
                                                                ------------       ------------
  Total assets                                                  $ 1,073,159        $ 1,020,901
                                                                ============       ============
    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------
CURRENT LIABILITIES:
  Notes payable                                                 $    91,900        $    57,000
  Current maturities of long-term debt                               24,118             40,467
  Accounts payable                                                   52,055             55,892
  Accrued Federal and state excise taxes                             17,498             17,058
  Other accrued expenses and liabilities                             97,763             76,156
                                                                ------------       ------------
    Total current liabilities                                       283,334            246,573
                                                                ------------       ------------
LONG-TERM DEBT, less current maturities                             309,218            338,884
                                                                ------------       ------------
DEFERRED INCOME TAXES                                                59,237             61,395
                                                                ------------       ------------
OTHER LIABILITIES                                                     6,206              9,316
                                                                ------------       ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Preferred Stock, $.01 par value-
    Authorized, 1,000,000 shares; 
    Issued, none at February 28, 1998, and
    February 28, 1997                                                  -                  -
  Class A Common Stock, $.01 par value-
    Authorized, 60,000,000 shares;
    Issued, 17,604,784 shares at February 28, 1998,
    and 17,462,332 shares at February 28, 1997                          176                174   
  Class B Convertible Common Stock, $.01 par value-
    Authorized, 20,000,000 shares;
    Issued, 3,956,183 shares at February 28, 1998, and
    February 28, 1997                                                    40                 40
  Additional paid-in capital                                        231,687            222,336
  Retained earnings                                                 220,346            170,275
                                                                ------------       ------------
                                                                    452,249            392,825
                                                                ------------       ------------
  Less-Treasury stock-
  Class A Common Stock, 2,199,320 shares at
    February 28, 1998, and 1,915,468 shares at
    February 28, 1997, at cost                                      (34,878)           (25,885)
  Class B Convertible Common Stock, 625,725 shares
    at February 28, 1998, and February 28, 1997, at cost             (2,207)            (2,207)
                                                                ------------       ------------
                                                                    (37,085)           (28,092)
                                                                ------------       ------------
    Total stockholders' equity                                      415,164            364,733
                                                                ------------       ------------
  Total liabilities and stockholders' equity                    $ 1,073,159        $ 1,020,901
                                                                ============       ============

<FN>
      The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
</TABLE>
 
<TABLE>
                                               CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                 (in thousands, except per share data)
<CAPTION>
                                                   For the Years Ended            For the Six Months Ended      For the Year Ended
                                            -------------------------------     ----------------------------   --------------------
                                             February 28,      February 28,     February 29,   February 28,        August 31,
                                                1998              1997              1996           1995               1995
                                             -----------       -----------      ------------   ------------        -----------
                                                                                                (unaudited)
<S>                                         <C>               <C>               <C>             <C>               <C>              
GROSS SALES                                 $  1,632,357      $  1,534,452      $  738,415      $  592,305        $ 1,185,074
  Less - Excise taxes                           (419,569)         (399,439)       (203,391)       (137,820)          (278,530)
                                             ------------      ------------      ----------      ----------         ----------
    Net sales                                  1,212,788         1,135,013         535,024         454,485            906,544
COST OF PRODUCT SOLD                            (864,053)         (844,181)       (396,208)       (327,694)          (653,811)
                                             ------------      ------------      ----------      ----------         ----------
    Gross profit                                 348,735           290,832         138,816         126,791            252,733
SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                       (231,680)         (208,991)       (112,411)        (79,925)          (159,196)
NONRECURRING RESTRUCTURING EXPENSES                 -                 -             (2,404)           (685)            (2,238)
                                             ------------      ------------      ----------      ----------         ----------
    Operating income                             117,055            81,841          24,001          46,181             91,299
INTEREST EXPENSE, net                            (32,189)          (34,050)        (17,298)        (13,141)           (24,601)
                                             ------------      ------------      ----------      ----------         ----------
    Income before provision for Federal
      and state income taxes                      84,866            47,791           6,703          33,040             66,698
PROVISION FOR FEDERAL AND
  STATE INCOME TAXES                             (34,795)          (20,116)         (3,381)        (12,720)           (25,678)
                                             ------------      ------------      ----------      ----------         ----------
NET INCOME                                  $     50,071      $     27,675      $    3,322     $    20,320         $   41,020
                                             ============      ============      ==========      ==========         ==========

SHARE DATA:
Earnings per common share:
    Basic                                   $       2.68      $       1.43      $     0.17     $      1.13         $     2.18 
                                             ============      ============      ==========     ===========         ==========
    Diluted                                 $       2.62      $       1.42      $     0.17     $      1.12         $     2.16
                                             ============      ============      ==========     ===========         ==========
Weighted average common shares outstanding:
    Basic                                         18,672            19,333          19,611          17,989             18,776
    Diluted                                       19,105            19,521          19,807          18,179             19,005

<FN>
                The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                               CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                                   (in thousands, except share data)
<CAPTION>
                                                     Common Stock       Additional   
                                                    ----------------      Paid-In    Retained   Treasury   Restricted
                                                    Class A  Class B      Capital    Earnings     Stock       Stock       Total
                                                    -------  -------    ----------   --------   ---------  ----------   --------
<S>                                                 <C>      <C>         <C>         <C>        <C>        <C>          <C>  
BALANCE,  August 31, 1994                           $  138   $   40      $ 113,348   $ 98,258   $ (7,591)  $        -  $ 204,193
Conversion of 19,093 Class B Convertible Common
  shares to Class A Common shares                        -        -              -          -          -            -          -
Issuance of 3,000,000 Class A Common shares             30        -         90,353          -          -            -     90,383
Exercise of 432,067 Class A stock options 
  related to the Vintners Acquisition                    5        -         13,013          -          -            -     13,018
Employee stock purchases of 28,641 treasury shares       -        -            546          -         87            -        633
Exercise of 114,075 Class A stock options                1        -          1,324          -          -            -      1,325
Tax benefit on stock options exercised                   -        -          1,251          -          -            -      1,251
Tax benefit on disposition of employee stock 
  purchases                                              -        -             59          -          -            -         59
Net income for fiscal 1995                               -        -              -     41,020          -            -     41,020
                                                     ------   -------    ---------   --------   --------   ----------  ---------
BALANCE,  August 31, 1995                              174        40       219,894    139,278     (7,504)           -    351,882
Conversion of 5,000 Class B Convertible Common 
  shares to Class A Common shares                        -         -             -          -          -            -          -
Exercise of 18,000 Class A stock options                 -         -           238          -          -            -        238
Employee stock purchases of 20,869 treasury shares       -         -           593          -         63            -        656
Issuance of 10,000 Class A stock options                 -         -           134          -          -            -        134
Tax benefit on stock options exercised                   -         -           198          -          -            -        198
Tax benefit on disposition of employee stock 
  purchases                                              -         -            76          -          -            -         76
Net income for Transition Period                         -         -             -      3,322          -            -      3,322
                                                    ------   -------     ----------  --------   --------   ----------  ---------
BALANCE,  February 29, 1996                            174        40       221,133    142,600     (7,441)           -    356,506
Conversion of 35,500 Class B Convertible Common 
  shares to Class A Common shares                        -         -             -          -          -            -          -
Exercise of 3,750 Class A stock options                  -         -            17          -          -            -         17
Employee stock purchases of 37,768 treasury shares       -         -           884          -        114            -        998
Repurchase of 787,450 Class A Common shares              -         -             -          -    (20,765)           -    (20,765)
Acceleration of 18,500 Class A stock options             -         -           248          -          -            -        248
Tax benefit on stock options exercised                   -         -            27          -          -            -         27
Tax benefit on disposition of employee stock 
  purchases                                              -         -            27          -          -            -         27
Net income for fiscal 1997                               -         -             -     27,675          -            -     27,675
                                                    ------   -------     ----------  --------   --------   ----------  ---------
BALANCE,  February 28, 1997                            174        40       222,336    170,275    (28,092)           -    364,733
Exercise of 117,452 Class A stock options                2         -         1,799          -          -            -      1,801
Employee stock purchases of 78,248 treasury shares       -         -         1,016          -        240            -      1,256
Repurchase of 362,100 Class A Common shares              -         -             -          -     (9,233)           -     (9,233)
Acceleration of 142,437 Class A stock options            -         -         3,625          -          -            -      3,625
Issuance of 25,000 restricted Class A Common shares      -         -         1,144          -          -       (1,144)         -
Amortization of unearned restricted stock 
  compensation                                           -         -             -          -          -          267        267
Accelerated amortization of unearned restricted 
  stock compensation                                     -         -           200          -          -          877      1,077
Tax benefit on stock options exercised                   -         -         1,382          -          -            -      1,382
Tax benefit on disposition of employee stock 
  purchases                                              -         -           185          -          -            -        185
Net income for fiscal 1998                               -         -             -     50,071          -            -     50,071
                                                    ------   -------     ----------  --------   --------   ----------  ---------
BALANCE,  February 28, 1998                         $  176   $    40     $ 231,687   $220,346   $(37,085)  $        -  $ 415,164
                                                    ======   =======     ==========  ========   ========   ==========  =========

<FN>
           The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
 
<TABLE>
                                                  CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                (in thousands)
<CAPTION>
                                                         For the Years Ended        For the Six Months Ended     For the Year Ended
                                                         -------------------        ------------------------     ------------------
                                                      February 28,  February 28,   February 29,   February 28,        August 31, 
                                                          1998          1997          1996           1995               1995
                                                      ------------  ------------   ------------   ------------        ----------
                                                                                                  (unaudited)
<S>                                                     <C>          <C>             <C>           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                            $  50,071    $  27,675       $   3,322     $  20,320         $  41,020

  Adjustments  to  reconcile  net  income to net
    cash provided by (used in) operating activities:
      Depreciation of property, plant and equipment        23,847       22,359           9,521         9,786            15,568
      Amortization of intangible assets                     9,314        9,480           4,437         2,865             5,144
      Deferred tax provision                                6,319        5,769           1,991            57            19,232
      Stock-based compensation expense                      1,747          275            -             -                 -
      Amortization of discount on long-term debt              352          112            -             -                 -
      (Gain) loss on sale of property, plant and
        equipment                                          (3,001)      (3,371)             81          -                  (33)
      Restructuring charges - fixed asset write-down         -            -                275          -               (2,050)
      Change in operating assets and liabilities:
        Accounts receivable, net                              749        3,523         (27,008)        1,586             7,392
        Inventories, net                                  (65,644)      16,232         (70,172)      (18,783)           41,528
        Prepaid expenses and other current assets          (4,354)       3,271          (2,350)        3,079            (3,884)
        Accounts payable                                   (3,288)        (431)         (2,362)      (30,068)          (13,415)
        Accrued Federal and state excise taxes                440       (2,641)          4,066         6,907            (1,025)
        Other accrued expenses and liabilities             14,655       24,617          (8,564)      (28,175)          (20,784)
        Other assets and liabilities, net                  (2,452)         898           1,930        (3,817)          (15,375)
                                                        ---------    ---------      ----------     ---------         ---------
        Total adjustments                                 (21,316)      80,093         (88,155)      (56,563)           32,298
                                                        ---------    ---------      ----------     ---------         ---------
        Net cash provided by (used in) operating 
          activities                                       28,755      107,768         (84,833)      (36,243)           73,318
                                                        ---------    ---------      ----------     ---------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment, 
    net of minor disposals                                (31,203)     (31,649)        (16,077)      (11,342)          (37,121)
  Proceeds from sale of property, plant and equipment      12,552        9,174             555          -                1,336
  Payment of accrued earn-out amounts                        -         (13,848)        (11,307)         -              (28,300)
                                                        ---------    ---------      ----------     ---------         ---------
        Net cash used in investing activities             (18,651)     (36,323)        (26,829)      (11,342)          (64,085)
                                                        ---------    ---------      ----------     ---------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments of long-term debt                   (186,367)     (50,842)        (14,579)      (89,474)         (139,906)
  Purchases of treasury stock                              (9,233)     (20,765)           -             -                 -
  Payment of issuance costs of long-term debt              (1,214)      (1,550)           -             -                 -
  Proceeds from issuance of long-term debt, 
    net of discount                                       140,000       61,668          13,220        47,000            47,000
  Net proceeds from (repayment of) notes payable           34,900      (54,300)        111,300       (12,000)          (19,000)
  Exercise of employee stock options                        1,776           17             224           341             1,325
  Proceeds from employee stock purchases                    1,256          998             656          -                  633
  Proceeds from equity offering, net                         -            -               -          103,313           103,400
                                                        ---------    ---------      ----------     ---------         ---------
        Net cash (used in) provided by financing 
         activities                                       (18,882)     (64,774)        110,821        49,180            (6,548)
                                                        ---------    ---------      ----------     ---------         ---------
NET (DECREASE) INCREASE IN CASH AND CASH INVESTMENTS       (8,778)       6,671            (841)        1,595             2,685
CASH AND CASH INVESTMENTS, beginning of period             10,010        3,339           4,180         1,495             1,495
                                                        ---------    ---------      ----------     ---------         ---------
CASH AND CASH INVESTMENTS, end of period                $   1,232    $  10,010      $    3,339     $   3,090         $   4,180
                                                        =========    =========      ==========     =========         ========= 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                            $  33,394    $  32,615      $   14,720     $  14,068         $  25,082
                                                        =========    =========      ==========     =========         =========
    Income taxes                                        $  32,164    $   4,411      $    3,612     $   9,454         $  11,709
                                                        =========    =========      ==========     =========         ========= 
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
  AND FINANCING ACTIVITIES:
    Fair value of assets acquired, including
      cash acquired                                     $    -       $    -         $  144,927     $    -            $    -
    Liabilities assumed                                      -            -             (3,147)         -                 -
                                                        ---------    ---------      ----------     ---------         ---------
    Cash paid                                                -            -            141,780          -                 -
    Less - Amounts borrowed                                  -            -           (141,780)         -                 -
                                                        ---------    ---------      ----------     ---------         ---------
    Net cash paid for acquisition                       $    -       $    -         $     -        $    -            $    -
                                                        =========    =========      ==========     =========         =========
    Goodwill reduction on settlement of disputed 
      final closing net current asset statement 
      for Vintners Acquisition                          $    -       $   5,894      $     -        $    -            $    -
                                                        =========    =========      ==========     =========         ==========
    Accrued earn-out amounts                            $    -       $    -         $   15,155     $    -            $  10,000
                                                        =========    =========      ==========     =========         ==========

<FN>
               The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>

                    CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 1998

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

DESCRIPTION OF BUSINESS - 
Canandaigua  Brands,  Inc.  (formerly  Canandaigua Wine Company,  Inc.), and its
subsidiaries  (the Company) operate  primarily in the beverage alcohol industry.
The Company is  principally  a producer and supplier of wine and an importer and
producer of beer and  distilled  spirits in the United  States.  It  maintains a
portfolio of over 130 national and regional brands of beverage alcohol which are
distributed  by over 850  wholesalers  throughout the United States and selected
international markets. Its beverage alcohol brands are marketed in three general
categories: wine, beer and distilled spirits.

YEAR-END  CHANGE - 
The  Company  changed  its  fiscal  year end from  August  31 to the last day of
February.  The period from  September 1, 1995,  through  February  29, 1996,  is
hereinafter referred to as the "Transition Period."

PRINCIPLES OF CONSOLIDATION -
The  consolidated  financial  statements of the Company  include the accounts of
Canandaigua Brands, Inc., and all of its subsidiaries. All intercompany accounts
and transactions have been eliminated.

UNAUDITED FINANCIAL STATEMENTS -
The  consolidated  statements  of income and cash flows for the six month period
ended  February 28, 1995,  have been  prepared by the  Company,  without  audit,
pursuant to the rules and regulations of the Securities and Exchange  Commission
applicable to interim reporting and reflect, in the opinion of the Company,  all
adjustments   necessary  to  present  fairly  the  financial   information   for
Canandaigua  Brands,  Inc., and its subsidiaries.  All such adjustments are of a
normal recurring nature.

MANAGEMENT'S USE OF ESTIMATES AND JUDGMENT -
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

CASH INVESTMENTS -
Cash investments  consist of highly liquid investments with an original maturity
when  purchased  of  three  months  or  less  and  are  stated  at  cost,  which
approximates  market value.  The amounts at February 28, 1998 and 1997,  are not
significant.

FAIR VALUE OF FINANCIAL INSTRUMENTS -
To  meet  the  reporting  requirements  of  Statement  of  Financial  Accounting
Standards No. 107, "Disclosures about Fair Value of Financial  Instruments," the
Company  calculates the fair value of financial  instruments using quoted market
prices  whenever  available.  When quoted market prices are not  available,  the
Company uses standard pricing models for various types of financial  instruments
(such as  forwards,  options,  swaps,  etc.) which take into account the present
value of  estimated  future cash flows.  The  methods  and  assumptions  used to
estimate the fair value of financial instruments are summarized as follows:

     ACCOUNTS RECEIVABLE: The carrying amount approximates fair value due to the
short maturity of these instruments,  the  creditworthiness of the customers and
the large number of customers  constituting  the  accounts  receivable  balance

     NOTES PAYABLE:  These  instruments are variable interest rate bearing notes
for which the carrying value  approximates  the fair value. 

     LONG-TERM  DEBT: The carrying value of the debt  facilities with short-term
variable interest rates approximates the fair value. The fair value of the fixed
rate debt was estimated by discounting cash flows using interest rates currently
available for debt with similar terms and maturities. 

     FOREIGN  EXCHANGE  HEDGING  AGREEMENTS:  The fair value of currency forward
contracts is estimated based on quoted market prices.

     INTEREST RATE HEDGING  AGREEMENTS:  The fair value of interest rate hedging
instruments  is the  estimated  amount  that the  Company  would  receive  or be
required to pay to terminate  the  derivative  agreements  at year end. The fair
value includes  consideration of current interest rates and the creditworthiness
of the counterparties to the agreements.

     LETTERS OF CREDIT:  At February 28, 1998 and 1997,  the Company had letters
of  credit  outstanding  totaling   approximately   $3,865,000  and  $8,622,000,
respectively,  which  guarantee  payment  for certain  obligations.  The Company
recognizes  expense on these  obligations as incurred and no material losses are
anticipated.

The  carrying  amount  and  estimated  fair  value  of the  Company's  financial
instruments are summarized as follows:

<TABLE>
<CAPTION>
                                        February 28, 1998            February 28, 1997
                                     ------------------------      ------------------------
                                     Carrying          Fair        Carrying         Fair
                                      Amount           Value        Amount          Value
                                     ---------      ---------      ---------      ---------
(in thousands)
Liabilities:
------------
<S>                                  <C>            <C>            <C>            <C>
Notes payable                        $  91,900      $  91,900      $  57,000      $  57,000
Long-term debt, including current    
  portion                            $ 333,336      $ 340,934      $ 379,351      $ 374,628

Derivative Instruments:
-----------------------
Foreign exchange hedging agreements:
  Currency forward contracts         $    -         $    -         $     374      $     407
Interest rate hedging agreements:  
  Interest rate cap agreement        $    -         $    -         $    -         $    -
  Interest rate collar agreement     $    -         $    -         $    -         $    -

</TABLE>
 
INTEREST RATE FUTURES AND CURRENCY FORWARD CONTRACTS -
From time to time,  the Company  enters into interest rate futures and a variety
of currency  forward  contracts  in the  management  of  interest  rate risk and
foreign currency transaction  exposure.  Unrealized gains and losses on interest
rate futures are deferred and recognized as a component of interest expense over
the borrowing period.  Unrealized gains and losses on currency forward contracts
are deferred and  recognized as a component of the related  transactions  in the
accompanying  financial  statements.  Discounts or premiums on currency  forward
contracts are recognized over the life of the contract.

INVENTORIES -
Inventories  are valued at the lower of cost  (computed in  accordance  with the
last-in, first-out (LIFO) or first-in,  first-out (FIFO) methods) or market. The
percentage  of  inventories  valued  using  the  LIFO  method  is 92% and 94% at
February 28, 1998 and 1997,  respectively.  Replacement  cost of the inventories
determined on a FIFO basis is  approximately  $411,424,000 at February 28, 1998,
and $349,006,000 at February 28, 1997.

A substantial portion of barreled whiskey and brandy will not be sold within one
year because of the  duration of the aging  process.  All  barreled  whiskey and
brandy are  classified  as  in-process  inventories  and are included in current
assets,  in accordance with industry  practice.  Bulk wine  inventories are also
included  as work in process  within  current  assets,  in  accordance  with the
general  practices of the wine industry,  although a portion of such inventories
may be aged for  periods  greater  than one  year.  Warehousing,  insurance,  ad
valorem taxes and other  carrying  charges  applicable  to barreled  whiskey and
brandy held for aging are included in inventory costs.

Elements  of cost  include  materials,  labor and  overhead  and  consist of the
following:

                                                  
                                             February 28,     February 28,
                                                 1998             1997
                                             ------------     ------------
(in thousands)
Raw materials and supplies                    $   14,439       $   14,191
Wine and distilled spirits in process            304,037          262,289
Finished case goods                               92,948           72,526
                                              ----------       ----------
                                                 411,424          349,006
Less - LIFO reserve                              (17,396)         (22,380)
                                              ----------       ----------
                                              $  394,028       $  326,626
                                              ==========       ==========


If the FIFO method of  inventory  valuation  had been used,  reported net income
would have been approximately $2,941,000, or $0.15 per share on a diluted basis,
lower for the year ended  February 28, 1998,  and reported net income would have
been approximately  $18,163,000,  or $0.93 per share on a diluted basis,  higher
for the year ended February 28, 1997.

PROPERTY, PLANT AND EQUIPMENT -
Property, plant and equipment is stated at cost. Major additions and betterments
are charged to property  accounts,  while maintenance and repairs are charged to
operations as incurred. The cost of properties sold or otherwise disposed of and
the related  accumulated  depreciation  are eliminated  from the accounts at the
time of disposal and  resulting  gains and losses are included as a component of
operating income.

DEPRECIATION -
Depreciation  is  computed  primarily  using the  straight-line  method over the
following estimated useful lives:

                                          Depreciable Life in Years
                                          -------------------------
Buildings and improvements                      10 to 33 1/3
Machinery and equipment                           3 to 15
Motor vehicles                                    3 to 7

Amortization  of  assets  capitalized  under  capital  leases is  included  with
depreciation expense.  Amortization is calculated using the straight-line method
over the shorter of the estimated useful life of the asset or the lease term.

OTHER ASSETS - 
Other assets, which consist of goodwill, distribution rights, trademarks, agency
license agreements,  deferred financing costs, cash surrender value of officers'
life  insurance  and  other  amounts,  are  stated at cost,  net of  accumulated
amortization.  Amortization  is  calculated  on  a  straight-line  or  effective
interest basis over the following estimated useful lives:

                                            Useful Life in Years
                                            --------------------
             Goodwill                                40
             Distribution rights                     40
             Trademarks                              40
             Agency license agreements            16 to 40
             Deferred financing costs              5 to 10

At February 28, 1998, the weighted average remaining useful life of these assets
is  approximately  36 years.  The face  value of the  officers'  life  insurance
policies totaled $2,852,000 at both February 28, 1998 and 1997.

LONG-LIVED  ASSETS AND  INTANGIBLES -
In  accordance  with  Statement  of  Financial  Accounting  Standards  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed  of,"  the  Company  reviews  its  long-lived  assets  and  certain
identifiable   intangibles   for  impairment   whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable on an undiscounted cash flow basis. The statement also requires that
long-lived  assets and  certain  identifiable  intangibles  to be disposed of be
reported  at the lower of carrying  amount or fair value less cost to sell.  The
Company did not record any asset impairment in fiscal 1998.

ADVERTISING AND PROMOTION COSTS - 
The Company  generally  expenses  advertising  and promotion  costs as incurred,
shown or distributed.  Prepaid  advertising costs at February 28, 1998 and 1997,
are not material. Advertising and promotion expense for the years ended February
28, 1998 and 1997, the Transition Period, the six months ended February 28, 1995
(unaudited),   and  the  year  ended   August  31,  1995,   were   approximately
$111,685,000,    $101,319,000,    $60,187,000,   $41,658,000   (unaudited)   and
$84,246,000, respectively.

INCOME TAXES - 
The Company  uses the  liability  method of  accounting  for income  taxes.  The
liability method accounts for deferred income taxes by applying  statutory rates
in effect at the balance  sheet date to the  difference  between  the  financial
reporting and tax basis of assets and liabilities.

ENVIRONMENTAL - 
Environmental  expenditures  that relate to current  operations  are expensed as
appropriate.  Expenditures  that relate to an existing  condition caused by past
operations, and which do not contribute to current or future revenue generation,
are expensed.  Liabilities are recorded when  environmental  assessments  and/or
remedial  efforts  are  probable,  and the  cost  can be  reasonably  estimated.
Generally,  the timing of these  accruals  coincides  with the  completion  of a
feasibility  study  or the  Company's  commitment  to a formal  plan of  action.
Liabilities for  environmental  costs were not material at February 28, 1998 and
1997.

EARNINGS PER COMMON SHARE - 
The  Company  adopted  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 128,  "Earnings Per Share," (SFAS No. 128) effective  February 28,
1998.  Basic  earnings  per common  share  excludes  the effect of common  stock
equivalents and is computed by dividing income available to common  stockholders
by the weighted  average number of common shares  outstanding  during the period
for Class A Common Stock and Class B Convertible Common Stock.  Diluted earnings
per common share reflects the potential dilution that could result if securities
or other contracts to issue common stock were exercised or converted into common
stock.  Diluted  earnings per common share assumes the exercise of stock options
using the  treasury  stock  method and assumes  the  conversion  of  convertible
securities,  if any, using the "if converted"  method.  Historical  earnings per
common share have been restated to conform with the provisions of SFAS No. 128.

OTHER -
Certain  fiscal  1997,  Transition  Period and fiscal  1995  balances  have been
reclassified to conform with current year presentation.

2.  ACQUISITIONS:

UDG  ACQUISITION - 
On September 1, 1995, the Company through its  wholly-owned  subsidiary,  Barton
Incorporated  (Barton),  acquired  certain  of the  assets of United  Distillers
Glenmore, Inc., and certain of its North American affiliates (collectively, UDG)
(the UDG  Acquisition).  The  acquisition was made pursuant to an Asset Purchase
Agreement dated August 29, 1995 (the Purchase  Agreement),  entered into between
Barton  and  UDG.  The   acquisition   included  all  of  UDG's  rights  to  the
Fleischmann's,  Skol, Mr. Boston,  Canadian LTD, Old Thompson,  Kentucky Tavern,
Chi-Chi's,  Glenmore and di Amore distilled  spirits brands;  the U.S. rights to
Inver  House,  Schenley  and El  Toro  distilled  spirits  brands;  and  related
inventories  and  other  assets.  The  acquisition  also  included  two of UDG's
production facilities; one located in Owensboro, Kentucky, and the other located
in Albany, Georgia. In addition, pursuant to the Purchase Agreement, the parties
entered into multiyear  agreements under which Barton (i) purchases various bulk
distilled  spirits  brands from UDG and (ii)  provides  packaging  services  for
certain of UDG's distilled spirits brands as well as warehousing services.

The aggregate  consideration  for the acquired brands and other assets consisted
of  $141,780,000  in cash and  assumption of certain  current  liabilities.  The
source of the cash payment made at closing, together with payment of other costs
and expenses  required by the UDG  Acquisition,  was  financing  provided by the
Company  pursuant to a term loan under the  Company's  then existing bank credit
agreement.

The UDG  Acquisition was accounted for using the purchase  method;  accordingly,
the UDG assets were  recorded at fair market  value at the date of  acquisition.
The excess of the purchase price over the estimated fair market value of the net
assets acquired (goodwill),  $86,348,000,  is being amortized on a straight-line
basis over 40 years.  The results of operations of the UDG Acquisition have been
included in the Consolidated Statements of Income since the date of acquisition.

3. PROPERTY, PLANT AND EQUIPMENT:

The major components of property, plant and equipment are as follows:

                                             February 28,    February 28,
                                                1998            1997
                                             ------------    ------------
(in thousands)
Land                                         $    15,103     $    16,961
Buildings and improvements                        74,706          76,379
Machinery and equipment                          244,204         243,274
Motor vehicles                                     5,316           5,355
Construction in progress                          17,485          13,999
                                             ------------    ------------
                                                 356,814         355,968
Less - Accumulated depreciation                 (112,779)       (106,416)
                                             ------------    ------------
                                             $   244,035     $   249,552
                                             ============    ============
       
4.  OTHER ASSETS:

The major components of other assets are as follows:

                                             February 28,    February 28,
                                                 1998           1997
                                             ------------    ------------
(in thousands)
Goodwill                                     $   150,595     $   150,595
Distribution rights, agency license
  agreements and trademarks                      119,346         119,316
Other                                             23,686          22,936
                                             ------------    ------------
                                                 293,627         292,847
Less - Accumulated amortization                  (28,841)        (22,513)
                                             ------------    ------------
                                             $   264,786     $   270,334
                                             ============    ============



 

                                                                        
5.  OTHER ACCRUED EXPENSES AND LIABILITIES:

The major components of other accrued expenses and liabilities are as follows:

                                             February 28,    February 28,
                                                1998             1997
                                             ------------    ------------
(in thousands)
Accrued salaries and commissions             $    23,704     $    12,109
Other                                             74,059          64,047
                                             ------------    ------------
                                             $    97,763     $    76,156
                                             ============    ============

6.  BORROWINGS:

Borrowings consist of the following:

<TABLE>
<CAPTION>
                                                                  February 28, 1998                      February 28, 1997
                                                      ------------------------------------------         -------------------
                                                        Current       Long-term         Total                  Total
                                                      -----------   -------------     ----------         -------------------
(in thousands)
Notes Payable:
--------------
<S>                                                  <C>            <C>              <C>                     <C>
  Senior Credit Facility:
    Revolving Credit Loans                            $  91,900      $     -          $  91,900               $  57,000 
                                                      ==========     ===========      ==========              ==========
Long-term Debt:
---------------
  Senior Credit Facility:
    Term Loan, variable rate, aggregate 
    proceeds of $140,000, due in 
    installments through June 2003                    $  24,000     $   116,000       $ 140,000               $ 185,900

  Senior Subordinated Notes:
    8.75% redeemable after December 15, 1998, 
    due 2003                                               -            130,000         130,000                 130,000

    8.75%  Series C redeemable after December 15,
    1998, due 2003 (less unamortized discount of
    $2,868 - effective rate 9.76%)                         -             62,132          62,132                  61,780

  Capitalized Lease Agreements:
    Capitalized facility lease bearing interest 
    at 9%, due in monthly installments through
    fiscal 1998                                            -               -               -                        348

  Industrial Development Agencies:
    7.50% 1980 issue, original proceeds $2,370, 
    due in annual installments of $119 through 
    fiscal 2000                                             118             119             237                     356

  Other Long-term Debt:
    Loans payable bearing interest at 5%, secured 
    by cash surrender value of officers' life 
    insurance policies                                     -                967             967                     967
                                                      ----------     -----------      ----------              ---------- 
                                                      $  24,118      $  309,218       $ 333,336               $ 379,351  
                                                      ==========     ===========      ==========              ==========
</TABLE>

SENIOR CREDIT FACILITY -
On December 19, 1997, the Company and a syndicate of banks (the Syndicate Banks)
entered into a new $325,000,000  senior Credit Agreement (the Credit Agreement).
The  proceeds  of the  Credit  Agreement  were  used to  repay  all  outstanding
principal and accrued  interest on all loans under the  Company's  Third Amended
and Restated  Credit  Agreement,  as amended.  As compared to the previous  bank
credit  agreement,  the Credit  Agreement  includes,  among other things,  lower
interest rates,  lower quarterly loan amortization and greater  flexibility with
respect to effecting  acquisitions,  incurring indebtedness and repurchasing the
Company's  capital stock. The Credit Agreement  provides for a $140,000,000 term
loan  facility  due in June 2003 and a  $185,000,000  revolving  loan  facility,
including  letters of credit up to a maximum of  $20,000,000,  which  expires in
June 2003. The rate of interest payable,  at the Company's option, is a function
of the London interbank  offered rate (LIBOR) plus a margin,  federal funds rate
plus a margin,  or the prime  rate.  The  margin is  adjustable  based  upon the
Company's Debt Ratio (as defined in the Credit Agreement).  The Credit Agreement
also provides for certain mandatory term loan prepayments.

The term loan facility  requires  quarterly  repayments of $6,000,000  beginning
March 1998 through  December 2002, and payments of $10,000,000 in March 2003 and
June 2003. At February 28, 1998, the margin on the term loan facility borrowings
was  0.75%  and may be  decreased  by up to 0.35%  and  increased  by up to 0.5%
depending on the Company's Debt Ratio.

The revolving loan facility is utilized to finance working capital requirements.
The Credit Agreement requires that the Company reduce the outstanding balance of
the revolving loan facility to less than $60,000,000 for thirty consecutive days
during the six months  ending each August 31. The margin on the  revolving  loan
facility was 0.5% at February 28, 1998,  and may be decreased by up to 0.25% and
increased by up to 0.4% depending on the Company's Debt Ratio. In addition,  the
Company pays a facility fee on the total  revolving loan  facility.  At February
28,  1998,  the  facility  fee was 0.25% and may be reduced or increased by 0.1%
subject to the Company's Debt Ratio.

Each of the Company's principal operating  subsidiaries has guaranteed,  jointly
and  severally,  the  Company's  obligations  under the  Credit  Agreement.  The
Syndicate Banks have been given security  interests in substantially  all of the
assets of the Company  including  mortgage liens on certain real  property.  The
Company  is subject to  customary  secured  lending  covenants  including  those
restricting  additional  liens, the incurrence of additional  indebtedness,  the
sale of assets,  the payment of dividends,  transactions with affiliates and the
making of certain  investments.  The  primary  financial  covenants  require the
maintenance of a Debt Ratio, a senior debt coverage  ratio, a fixed charge ratio
and an interest coverage ratio. Among the most restrictive  covenants  contained
in the Credit  Agreement is the  requirement to maintain a fixed charge ratio of
not less than 1.0 at the last day of each  fiscal  quarter  for the most  recent
four quarters.

The Company had average  outstanding  Revolving  Credit  Loans of  approximately
$59,892,000  and  $88,825,000  for the years ended  February  28, 1998 and 1997,
respectively.  Amounts  available  to be drawn down under the  Revolving  Credit
Loans  were  $89,235,000  and  $119,378,000  at  February  28,  1998  and  1997,
respectively. The average interest rate on the Revolving Credit Loans was 6.57%,
6.58%,  6.76% and 7.16%, for fiscal 1998 and 1997, the Transition Period and for
fiscal 1995,  respectively.  Facility  fees on the new Credit  Agreement are due
based upon the total revolving loan facility,  whereas commitment fees under the
prior  agreement  were  based  upon the unused  portion  of the  revolving  loan
facility.  These fees are based upon the Company's Debt Ratio and can range from
0.15% to 0.35%. At February 28, 1998, the facility fee percentage was 0.25%. The
commitment fee percentage at February 28, 1997, was 0.325%.

SENIOR SUBORDINATED NOTES -
On December 27, 1993, the Company issued $130,000,000 aggregate principal amount
of 8.75% Senior Subordinated Notes due in December 2003 (the Notes). Interest on
the Notes is payable  semiannually  on June 15 and December 15 of each year. The
Notes are unsecured and  subordinated to the prior payment in full of all senior
indebtedness of the Company, which includes the Credit Agreement.  The Notes are
guaranteed,  on a senior subordinated basis, by all of the Company's significant
operating subsidiaries.

The Trust Indenture relating to the Notes contains certain covenants, including,
but  not  limited  to,  (i)  limitation  on  indebtedness;  (ii)  limitation  on
restricted  payments;  (iii) limitation on transactions  with  affiliates;  (iv)
limitation on senior  subordinated  indebtedness;  (v) limitation on liens; (vi)
limitation on sale of assets;  (vii) limitation on issuance of guarantees of and
pledges  for  indebtedness;  (viii)  restriction  on  transfer  of assets;  (ix)
limitation on subsidiary  capital  stock;  (x) limitation on the creation of any
restriction on the ability of the Company's  subsidiaries to make  distributions
and other payments;  and (xi)  restrictions on mergers,  consolidations  and the
transfer  of all or  substantially  all of the assets of the  Company to another
person.  The limitation on  indebtedness  covenant is governed by a rolling four
quarter fixed charge ratio requiring a specified minimum.

On October 29, 1996, the Company issued $65,000,000  aggregate  principal amount
of 8.75% Series B Senior  Subordinated  Notes due in December 2003 (the Series B
Notes). The Company used the net proceeds of approximately  $61,700,000 to repay
$50,000,000  of  Revolving  Credit  Loans and to prepay and  permanently  reduce
$9,600,000  of the Term Loan.  The  remaining  proceeds were used to pay various
fees and expenses associated with the offering.  The terms of the Series B Notes
were  substantially  identical  to those of the Notes.  In  February  1997,  the
Company  exchanged  $65,000,000  aggregate  principal  amount of 8.75%  Series C
Senior  Subordinated  Notes due in  December  2003 (the  Series C Notes) for the
Series B Notes.  The terms of the Series C Notes are  identical  in all material
respects to the Series B Notes.

LOANS PAYABLE -
Loans payable,  secured by officers' life insurance policies,  carry an interest
rate of 5%. The notes carry no due dates and it is management's intention not to
repay the notes during the next fiscal year.

CAPITALIZED LEASE AGREEMENTS - INDUSTRIAL DEVELOPMENT AGENCIES -
Certain  capitalized lease agreements require the Company to make lease payments
equal to the  principal  and  interest  on certain  bonds  issued by  Industrial
Development  Agencies.  The bonds are  secured  by the  leases  and the  related
facilities.  These  transactions  have been  treated as capital  leases with the
related  assets  included  in  property,  plant  and  equipment  and  the  lease
commitments included in long-term debt. Among the provisions under the debenture
and lease agreements are covenants that define minimum levels of working capital
and  tangible  net worth and the  maintenance  of  certain  financial  ratios as
defined in the agreements.

DEBT PAYMENTS -
Principal  payments  required under long-term debt  obligations  during the next
five fiscal years are as follows:

                               February 28, 1998
                               -----------------
                                 (in thousands)
                              1999       $ 24,118
                              2000         24,119
                              2001         24,000
                              2002         24,000
                              2003         24,000
                              Thereafter  215,967
                                         ---------
                                         $336,204
                                         =========



<PAGE>


7.  INCOME TAXES:

The  provision  for  Federal  and  state income taxes consists of the following:

<TABLE>
<CAPTION>
                                              For the                  For the         For the Six         For the
                                             Year Ended               Year Ended       Months Ended       Year Ended
                                         February 28, 1998           February 28,      February 29,        August 31,
                                ---------------------------------    ------------      ------------      ------------ 
                                            State and                                      
                                 Federal      Local        Total         1997              1996              1995
                                ---------  -----------   --------    ------------      ------------      ------------
(in thousands)
<S>                             <C>        <C>           <C>          <C>               <C>              <C>
Current income tax provision    $ 21,032   $    7,444    $ 28,476     $   14,347        $    1,390       $     6,446  
Deferred income tax provision      5,935          384       6,319          5,769             1,991            19,232
                                ---------  -----------   ---------    -----------       -----------      ------------
                                $ 26,967   $    7,828    $ 34,795     $   20,116        $    3,381       $    25,678 
                                =========  ===========   =========    ===========       ===========      ============
</TABLE>

A  reconciliation  of the total tax provision to the amount computed by applying
the expected U.S. Federal income tax rate to income before provision for Federal
and state income taxes is as follows:

<TABLE>
<CAPTION>
                       For the Year Ended    For the Year Ended    For the Six Months    For the Year Ended
                          February 28,          February 28,       Ended February 29,        August 31, 
                              1998                  1997                  1996                  1995
                       ------------------    ------------------    ------------------    ------------------
                                   % of                  % of                  % of                  % of
                                  Pretax                Pretax                Pretax                Pretax
                        Amount    Income      Amount    Income      Amount    Income      Amount    Income
                        ------    ------      ------    ------      ------    ------      ------    ------
<S>                    <C>          <C>     <C>          <C>       <C>         <C>      <C>          <C>
(in thousands)
Computed "expected"
  tax provision        $ 29,703     35.0    $ 16,727     35.0      $ 2,346     35.0     $ 23,344     35.0
State and local
  income taxes,
  net of Federal
  income tax benefit      5,089      6.0       3,304      6.9          827     12.3        2,395      3.6
Nondeductible meals
  and entertainment
  expenses                  294      0.3         310      0.6          205      3.1          290      0.4
Miscellaneous items,
  net                      (291)    (0.3)       (225)    (0.4)           3      --          (351)    (0.5)
                       --------     ----    --------     ----      -------     ----     --------     ----
                       $ 34,795     41.0    $ 20,116     42.1      $ 3,381     50.4     $ 25,678     38.5
                       ========     ====    ========     ====      =======     ====     ========     ====
</TABLE>

Deferred tax liabilities (assets) are comprised of the following:

                                           February 28,   February 28, 
                                               1998           1997
                                           ------------   ------------ 
          (in thousands)
          Depreciation and amortization      $ 70,303       $ 68,155
          LIFO reserve                         13,601          2,019
          Inventory reserves                    6,974          9,418
          Other accruals                      (18,193)       (13,191)
                                             --------       -------- 
                                             $ 72,685       $ 66,991
                                             ========       ========

At February 28, 1998, the Company has state and U.S.  Federal net operating loss
(NOL)  carryforwards  of $16,213,000  and  $3,654,000,  respectively,  to offset
future taxable income that, if not otherwise  utilized,  will expire as follows:
state NOLs of $6,945,000,  $6,828,000 and $2,440,000 at February 28, 2001,  2002
and 2003, respectively, and Federal NOL of $3,654,000 at February 28, 2011.

8. PROFIT SHARING RETIREMENT PLANS AND RETIREMENT SAVINGS PLAN:

The Company's profit sharing  retirement  plans,  which cover  substantially all
employees, provide for contributions by the Company in such amounts as the Board
of  Directors  may  annually  determine  and  for  voluntary   contributions  by
employees. The plans are qualified as tax-exempt under the Internal Revenue Code
and conform  with the  Employee  Retirement  Income  Security  Act of 1974.  The
Company's  provisions for the plans,  including the Barton plan described below,
were  $5,571,000  and $4,999,000 for the years ended February 28, 1998 and 1997,
respectively,  $2,579,000 in the  Transition  Period and  $3,830,000  for fiscal
1995.

The Company's retirement savings plan, established pursuant to Section 401(k) of
the Internal Revenue Code, permits  substantially all full-time employees of the
Company  (excluding  Barton  employees,  who  are  covered  by a  separate  plan
described  below) to defer a portion of their  compensation  on a pretax  basis.
Participants may defer, subject to a maximum contribution limitation,  up to 10%
of their compensation for the year. The Company makes a matching contribution of
25% of the first 4% of compensation an employee defers. Company contributions to
this plan were  $367,000 and $700,000 for the years ended  February 28, 1998 and
1997,  respectively,  $325,000 in the  Transition  Period and $281,000 in fiscal
1995.

The Barton  profit  sharing  and 401(k) plan covers all  salaried  employees  of
Barton. The amount of Barton's  contribution under the profit sharing portion of
the plan is at the discretion of its Board of Directors,  subject to limitations
of the plan.  Contribution  expense was  $2,799,000 and $2,504,000 for the years
ended  February 28, 1998 and 1997,  respectively,  $1,095,000 in the  Transition
Period and  $1,430,000  in fiscal  1995.  Pursuant to the 401(k)  portion of the
plan,  participants  may  defer up to 8% of  their  compensation  for the  year,
subject to limitations of the plan,  and receive no matching  contribution  from
Barton.

9. STOCKHOLDERS' EQUITY:

COMMON STOCK -
The Company has two classes of common  stock:  Class A Common  Stock and Class B
Convertible   Common  Stock.   Class  B  Convertible  Common  Stock  shares  are
convertible  into shares of Class A Common  Stock on a  one-to-one  basis at any
time at the option of the holder.  Holders of Class B  Convertible  Common Stock
are  entitled  to ten  votes  per  share.  Holders  of Class A Common  Stock are
entitled to only one vote per share but are entitled to a cash dividend premium.
If the Company pays a cash  dividend on Class B Convertible  Common Stock,  each
share of Class A Common  Stock  will  receive  an amount  at least  ten  percent
greater  than  the  amount  of the  cash  dividend  per  share  paid on  Class B
Convertible  Common Stock.  In addition,  the Board of Directors may declare and
pay a dividend on Class A Common  Stock  without  paying any dividend on Class B
Convertible Common Stock.

At February 28, 1998,  there were 15,405,464  shares of Class A Common Stock and
3,330,458  shares  of  Class B  Convertible  Common  Stock  outstanding,  net of
treasury stock.

STOCK REPURCHASE AUTHORIZATION -
On January 11, 1996, the Company's Board of Directors  authorized the repurchase
of up to  $30,000,000  of its Class A and Class B Common stock.  The Company was
permitted to finance such purchases,  which became treasury shares, through cash
generated from operations or through the Credit Agreement. The Company completed
its repurchase program during fiscal 1998,  repurchasing 362,100 shares of Class
A Common Stock for $9,233,000.  Throughout the year ended February 28, 1997, the
Company repurchased 787,450 shares of Class A Common Stock totaling $20,765,000.

LONG-TERM STOCK INCENTIVE PLAN -
In July 1997,  the  stockholders  approved the amendment and  restatement of the
Company's  Stock Option and Stock  Appreciation  Right Plan (the Original  Stock
Plan) as the Long-Term Stock Incentive Plan (the Long-Term Stock Plan).  Options
granted under the Original  Stock Plan remain  outstanding  and in full force in
accordance with their terms.

Under the Long-Term Stock Plan,  nonqualified stock options,  stock appreciation
rights,  restricted  stock  and  other  stock-based  awards  may be  granted  to
employees,  officers and directors of the Company. Grants, in the aggregate, may
not exceed  4,000,000 shares of the Company's Class A Common Stock. The exercise
price,  vesting  period  and term of  nonqualified  stock  options  granted  are
established by the committee  administering the plan (the Committee).  Grants of
stock  appreciation  rights,  restricted stock and other stock-based  awards may
contain such vesting,  terms, conditions and other requirements as the Committee
may  establish.  During  fiscal 1998,  no stock  appreciation  rights and 25,000
shares of restricted  Class A Common Stock were  granted.  At February 28, 1998,
there were 1,840,258 shares available for future grant.


 

A summary of nonqualified stock option activity is as follows:

<TABLE>
<CAPTION>
                                                         Weighted                      Weighted
                                                           Avg.                          Avg.
                                      Shares Under       Exercise       Options        Exercise
                                         Option           Price       Exercisable       Price
                                      ------------       --------     -----------      --------
<S>                                   <C>                <C>            <C>            <C>  
Balance, August 31, 1994                 563,500         $ 15.65
Options granted                          289,000         $ 40.29
Options exercised                       (114,075)        $  7.02
Options forfeited/canceled                (4,500)        $ 19.22
                                       ---------
Balance, August 31, 1995                 733,925         $ 26.68         39,675        $  4.44
Options granted                          571,050         $ 36.01
Options exercised                        (18,000)        $ 13.23
Options forfeited/canceled              (193,250)        $ 44.06
                                       ---------
Balance, February 29, 1996             1,093,725         $ 28.70         28,675        $  4.44
Options granted                        1,647,700         $ 22.77
Options exercised                         (3,750)        $  4.44
Options forfeited/canceled            (1,304,700)        $ 32.09
                                       ---------
Balance, February 28, 1997             1,432,975         $ 18.85         51,425        $ 10.67
Options granted                          569,400         $ 38.72
Options exercised                       (117,452)        $ 15.33
Options forfeited/canceled               (38,108)        $ 17.66
                                       ---------
Balance, February 28, 1998             1,846,815         $ 25.23        360,630        $ 25.46
                                       =========

</TABLE>

The following table summarizes  information  about stock options  outstanding at
February 28, 1998:

                            Options Outstanding             Options Exercisable
                   -------------------------------------   ---------------------
                                  Weighted
                                     Avg.       Weighted                Weighted
                                  Remaining       Avg.                    Avg.
   Range of           Number     Contractual    Exercise      Number    Exercise
Exercise Prices    Outstanding       Life        Price     Exercisable    Price
---------------    -----------   -----------    --------   -----------  --------
$ 4.44 - $11.50        38,675     3.5 years     $  9.15       38,675    $  9.15
$17.00 - $25.63       998,540     7.3 years     $ 17.37      134,280    $ 17.00
$26.75 - $31.25       351,800     8.5 years     $ 28.46       80,200    $ 27.30
$35.38 - $56.75       457,800     9.6 years     $ 41.25      107,475    $ 40.53
                    ---------                                -------
                    1,846,815     8.0 years     $ 25.23      360,630    $ 25.46
                    =========                                =======
                                                                        
The weighted  average fair value of options  granted during fiscal 1998,  fiscal
1997 and the Transition Period was $20.81, $10.27 and $15.90, respectively.  The
fair value of options is estimated on the date of grant using the  Black-Scholes
option-pricing model with the following weighted average assumptions:  risk-free
interest  rate of 6.4% for fiscal  1998,  6.6% for fiscal  1997 and 5.5% for the
Transition  Period;  volatility of 41.3% for fiscal 1998,  42.7% for fiscal 1997
and 39.6%  for the  Transition  Period;  expected  option  life of 6.9 years for
fiscal 1998, 4.7 years for fiscal 1997 and 5.4 years for the Transition  Period.
The  dividend  yield was 0% for  fiscal  1998,  fiscal  1997 and the  Transition
Period. Forfeitures are recognized as they occur.

INCENTIVE STOCK OPTION PLAN -
The ability to grant  incentive  stock options under the Original Stock Plan was
eliminated when it was amended and restated as the Long-Term Stock Plan. In July
1997, stockholders approved the adoption of the Company's Incentive Stock Option
Plan.  Under the  Incentive  Stock Option Plan,  incentive  stock options may be
granted  to  employees,  including  officers,  of the  Company.  Grants,  in the
aggregate,  may not  exceed  1,000,000  shares of the  Company's  Class A Common
Stock. The exercise price of any incentive stock option may not be less than the
fair market  value of the  Company's  Class A Common Stock on the date of grant.
The vesting period and term of incentive  stock options  granted are established
by the  Committee.  The maximum  term of incentive  stock  options is ten years.
During fiscal 1998, no incentive stock options were granted.

EMPLOYEE STOCK PURCHASE PLAN -
In fiscal 1989, the Company approved a stock purchase plan under which 1,125,000
shares  of Class A Common  Stock  can be  issued.  Under  the terms of the plan,
eligible  employees may purchase  shares of the  Company's  Class A Common Stock
through payroll  deductions.  The purchase price is the lower of 85% of the fair
market  value of the  stock on the  first  or last day of the  purchase  period.
During  fiscal 1998 and fiscal  1997,  the  Transition  Period and fiscal  1995,
employees purchased 78,248, 37,768, 20,869 and 28,641 shares, respectively.

The weighted  average fair value of purchase  rights  granted during fiscal 1998
and fiscal 1997 was $11.90 and $8.41,  respectively.  The fair value of purchase
rights is estimated on the date of grant using the Black-Scholes  option-pricing
model with the following weighted average  assumptions:  risk-free interest rate
of 5.3% for fiscal 1998 and 5.6% for fiscal 1997; volatility of 35.1% for fiscal
1998 and 65.4% for fiscal 1997;  expected  purchase  right life of 0.5 years for
fiscal 1998 and 0.8 years for fiscal 1997.  The  dividend  yield was 0% for both
fiscal 1998 and fiscal 1997. No purchase  rights were granted in the  Transition
Period.

PRO FORMA DISCLOSURE -
The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees,"  and related  interpretations  in accounting for its
plans.  In  fiscal  1997,  the  Company  elected  to adopt  the  disclosure-only
provisions of Statement of Financial  Accounting  Standards No. 123, "Accounting
for  Stock-Based  Compensation,"  (SFAS No. 123).  Accordingly,  no compensation
expense has been  recognized for its  stock-based  compensation  plans.  Had the
Company  recognized the compensation  cost based upon the fair value at the date
of grant for awards under its plans  consistent with the methodology  prescribed
by SFAS No.  123,  net income and  earnings  per  common  share  would have been
reduced to the pro forma amounts as follows:

<TABLE>
<CAPTION>
                                                            
                                For the Year Ended       For the Year Ended      For the Six Months
                                February 28, 1998        February 28, 1997    Ended February 29, 1996
                               --------------------     --------------------  -----------------------
                                  As          Pro          As          Pro         As         Pro
                               Reported      Forma      Reported      Forma     Reported     Forma
                               --------    --------     --------    --------    --------    -------
<S>                            <C>         <C>          <C>         <C>          <C>        <C>
(in thousands, except per
 share data)
Net income                     $ 50,071    $ 46,171     $ 27,675    $ 25,038     $ 3,322    $ 3,178
Earnings per common share:
  Basic                        $   2.68    $   2.47     $   1.43    $   1.30     $  0.17    $  0.16
  Diluted                      $   2.62    $   2.42     $   1.42    $   1.28     $  0.17    $  0.16

</TABLE>
                                                                               
The  provisions  of SFAS No. 123 have not been  applied  to options or  purchase
rights  granted prior to September 1, 1995.  Therefore,  the resulting pro forma
effect on net income may not be  representative of that to be expected in future
years.


<PAGE>


STOCK OFFERING -
During November 1994, the Company completed a public offering and sold 3,000,000
shares of its Class A Common Stock,  resulting in net proceeds to the Company of
approximately  $95,515,000  after  underwriters'  discounts and  commissions and
expenses. In connection with the offering, 432,067 of the Vintners option shares
were exercised and the Company received proceeds of $7,885,000.  Under the terms
of the then existing bank credit agreement,  approximately  $82,000,000 was used
to repay a portion of the Term Loan under the bank credit agreement. The balance
of net proceeds was used to repay  Revolving  Credit Loans under the bank credit
agreement.

10.  EARNINGS PER COMMON SHARE:

The following  table presents  historical  earnings per common share restated to
conform with the provisions of SFAS No. 128.

<TABLE>
<CAPTION>                                                                                              
                                                                                                   For the
                                            For the Years Ended       For the Six Months Ended    Year Ended   
                                         --------------------------  --------------------------   ----------
                                         February 28,  February 28,  February 29,  February 28,   August 31,
                                             1998          1997          1996          1995          1995
                                         ------------  ------------  ------------  ------------   ----------

(in thousands, except per share data)                                              (unaudited)
BASIC EARNINGS PER COMMON SHARE:
--------------------------------
<S>                                        <C>           <C>           <C>           <C>           <C>
  Income applicable to common shares       $ 50,071      $ 27,675      $  3,322      $ 20,320      $ 41,020
  Weighted average common shares                                                                      
   outstanding                               18,672        19,333        19,611        17,989        18,776
BASIC EARNINGS PER COMMON SHARE            $   2.68      $   1.43      $   0.17      $   1.13      $   2.18
                                           ========      ========      ========      ========      ========
DILUTED EARNINGS PER COMMON SHARE:                                                                    
----------------------------------                                                                    
  Income applicable to common shares       $ 50,071      $ 27,675      $  3,322      $ 20,320      $ 41,020
                                           --------      --------      --------      --------      --------
  Weighted average common shares                                                                      
   outstanding                               18,672        19,333        19,611        17,989        18,776
  Incentive stock options                       423           179           129           152           155
  Options/employee stock purchases               10             9            67            38            74
                                           --------      --------      --------      --------      --------
  Adjusted weighted average common                                                                    
   shares outstanding                        19,105        19,521        19,807        18,179        19,005
                                           --------      --------      --------      --------      --------
DILUTED EARNINGS PER COMMON SHARE          $   2.62      $   1.42      $   0.17      $   1.12      $   2.16
                                           ========      ========      ========      ========      ========
</TABLE>
                                                    
11. COMMITMENTS AND CONTINGENCIES:

OPERATING LEASES -
Future payments under noncancelable operating leases having initial or remaining
terms of one year or more are as follows:


 

                                February 28, 1998
                                -----------------
                                 (in thousands)

                               1999       $  3,506
                               2000          2,627
                               2001          1,947
                               2002          1,513
                               2003          1,291
                            Thereafter       8,590
                                          --------   
                                          $ 19,474
                                          ========

Rental expense was  approximately  $5,554,000 and $4,716,000 for fiscal 1998 and
fiscal 1997,  respectively,  $2,382,000 in the Transition  Period and $4,193,000
for fiscal 1995.

PURCHASE COMMITMENTS AND CONTINGENCIES -
The Company has  agreements  with three  suppliers  to purchase  blended  Scotch
whisky  through  December  2001.  The purchase  prices under the  agreements are
denominated  in British pounds  sterling.  Based upon exchange rates at February
28, 1998, the Company's  aggregate future obligation  ranges from  approximately
$10,758,000 to $22,835,000 for the contracts expiring through December 2001.

The Company  has an  agreement  to  purchase  Canadian  blended  whisky  through
September 1, 1999, with a maximum  obligation of approximately  $4,453,000.  The
Company also has two  agreements to purchase  Canadian new  distillation  whisky
(including  dumping  charges)  through  December  2005  at  purchase  prices  of
approximately  $12,521,000  to  $13,536,000.  In  addition,  the  Company has an
agreement to purchase  corn whiskey  through  April 1999 at a purchase  price of
approximately $90,000.

All of the  Company's  imported  beer products are marketed and sold pursuant to
exclusive  distribution  agreements  from the suppliers of these  products.  The
Company's  agreement  to  distribute  Corona and its other  Mexican  beer brands
exclusively  throughout 25 states was renewed  effective  November 22, 1996, and
expires December 2006, with automatic five year renewals thereafter,  subject to
compliance  with  certain  performance   criteria  and  other  terms  under  the
agreement.  The remaining  agreements  expire through June 2003.  Prior to their
expiration,  these  agreements  may be  terminated  if the Company fails to meet
certain performance  criteria.  At February 28, 1998, the Company believes it is
in compliance  with all of its material  distribution  agreements and, given the
Company's  long-term  relationships  with its  suppliers,  the Company  does not
believe that these agreements will be terminated.

In  connection  with  the  Vintners   Acquisition   and  the   Almaden/Inglenook
Acquisition,  the Company  assumed  purchase  contracts with certain growers and
suppliers.  In addition,  the Company has entered into other purchase  contracts
with various  growers and suppliers in the normal course of business.  Under the
grape  purchase  contracts,  the  Company is  committed  to  purchase  all grape
production yielded from a specified number of acres for a period of time ranging
up to 20 years. The actual tonnage and price of grapes that must be purchased by
the Company will vary each year depending on certain factors, including weather,
time of harvest,  overall market  conditions and the agricultural  practices and
location of the growers and suppliers under contract.

The Company purchased $154,909,000 of grapes under these contracts during fiscal
1998. Based on current production yields and published grape prices, the Company
estimates that the aggregate  purchases under these contracts over the remaining
term of the contracts will be approximately $915,651,000. During fiscal 1994, in
connection with the Vintners Acquisition and the Almaden/Inglenook  Acquisition,
the Company  established a reserve for the estimated loss on these firm purchase
commitments of approximately $62,664,000,  which was subsequently reduced during
fiscal  1995 to  reflect  the  effects  of the  termination  payments  to cancel
contracts with certain growers.  The remaining reserve for the estimated loss on
the remaining contracts is approximately $771,000 at February 28, 1998.

The Company's  aggregate  obligations under bulk wine purchase contracts will be
approximately  $32,502,000 over the remaining term of the contracts which expire
through fiscal 2001.

EMPLOYMENT CONTRACTS -
The Company has employment  contracts with certain of its executive officers and
certain other  management  personnel  with  remaining  terms ranging up to three
years.  These agreements  provide for minimum  salaries,  as adjusted for annual
increases,  and may include incentive bonuses based upon attainment of specified
management goals. In addition,  these agreements  provide for severance payments
in the event of specified  termination of employment.  The aggregate  commitment
for  future  compensation  and  severance,   excluding  incentive  bonuses,  was
approximately  $7,903,000  as of  February  28,  1998,  of  which  approximately
$1,436,000 is accrued in other liabilities as of February 28, 1998.

<PAGE>


EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS -
Approximately 42% of the Company's full-time employees are covered by collective
bargaining  agreements at February 28, 1998. Agreements expiring within one year
cover approximately 7% of the Company's full-time employees.

LEGAL MATTERS -
The Company is subject to litigation from time to time in the ordinary course of
business.  Although the amount of any liability with respect to such  litigation
cannot be determined, in the opinion of management, such liability will not have
a material  adverse  effect on the Company's  financial  condition or results of
operations.

12. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK:

The Company sells its products  principally to wholesalers  for resale to retail
outlets  including  grocery  stores,  package liquor  stores,  club and discount
stores and  restaurants.  Gross  sales to the five  largest  wholesalers  of the
Company  represented 26.4%,  22.9%, 16.9% and 21.6% of the Company's gross sales
for the fiscal years ending  February 28, 1998 and 1997, the  Transition  Period
and for the fiscal year ended August 31, 1995, respectively.  Gross sales to the
Company's  largest  wholesaler,  Southern Wine and Spirits,  represented  12.1%,
10.5% and 10.6% of the Company's gross sales for the fiscal years ended February
28, 1998 and 1997, and for the fiscal year ended August 31, 1995,  respectively.
Accounts receivable from the Company's largest wholesaler  represented 14.1% and
11.3% of the  Company's  total  accounts  receivable as of February 28, 1998 and
1997, respectively. No single wholesaler was responsible for greater than 10% of
gross sales during the  Transition  Period.  Gross sales to the  Company's  five
largest  wholesalers are expected to continue to represent a significant portion
of the  Company's  revenues.  The  Company's  arrangements  with  certain of its
wholesalers may, generally, be terminated by either party with prior notice. The
Company  performs  ongoing  credit  evaluations  of  its  customers'   financial
position,  and  management  of the  Company is of the  opinion  that any risk of
significant  loss is reduced due to the  diversity of customers  and  geographic
sales area.

13. RESTRUCTURING PLAN:

The Company  provided for costs to restructure  the operations of its California
wineries (the  Restructuring  Plan) in the fourth quarter of fiscal 1994.  Under
the Restructuring Plan, all bottling operations at the Central Cellars winery in
Lodi,  California,  and the branded  wine  bottling  operations  at the Monterey
Cellars  winery in Gonzales,  California,  were moved to the Mission Bell winery
located in Madera,  California.  The Monterey Cellars winery will continue to be
used as a crushing,  winemaking  and  contract  bottling  facility.  The Central
Cellars  winery was closed in the fourth quarter of fiscal 1995 and was sold for
its  approximate  net book  value  during  fiscal  1997.  In  fiscal  1994,  the
Restructuring  Plan reduced income before taxes and net income by  approximately
$24,005,000  and  $14,883,000,  respectively,  or $0.92  per  share on a diluted
basis. Of the total pretax charge in fiscal 1994, approximately  $16,481,000 was
to recognize estimated losses associated with the revaluation of land, buildings
and  equipment  related to  facilities  described  above to their  estimated net
realizable  value; and approximately  $7,524,000  related to severance and other
benefits  associated  with the  elimination  of 260 jobs.  In fiscal  1995,  the
Restructuring  Plan  reduced  income  before  income  taxes  and net  income  by
approximately $2,238,000 and $1,376,000,  respectively,  or $0.07 per share on a
diluted basis. Of the total pretax charge in fiscal 1995,  $4,288,000 relates to
equipment  relocation  and employee  hiring and  relocation  costs,  offset by a
decrease of  $2,050,000  in the  valuation  reserve as compared to fiscal  1994,
primarily  related to the land,  buildings and equipment at the Central  Cellars
winery. The Company also expended  approximately  $19,071,000 in fiscal 1995 for
capital  expenditures to expand storage  capacity and install certain  relocated
equipment. In the Transition Period, the expense incurred in connection with the
Restructuring  Plan reduced income before taxes and net income by  approximately
$2,404,000 and $1,192,000,  respectively, or $0.06 per share on a diluted basis.
These  charges  represented  incremental,  nonrecurring  expenses of  $3,982,000
primarily   incurred   for  overtime  and  freight   expenses   resulting   from
inefficiencies  related to the Restructuring  Plan, offset by a reduction in the
accrual for  restructuring  expenses of $1,578,000,  primarily for severance and
facility holding and closure costs. The Company completed the Restructuring Plan
at February 29, 1996, with a total employment reduction of 177 jobs. The Company
expended  approximately  $2,125,000  in fiscal  1997 and  $6,644,000  during the
Transition  Period for capital  expenditures to expand storage  capacity.  As of
February 28, 1997, the Company had accrued liabilities of approximately $402,000
relating to the Restructuring  Plan. As of February 28, 1998, the Company had no
accrued liabilities relating to the Restructuring Plan.

14. SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS:

The  subsidiary  guarantors  are  wholly  owned  and the  guarantees  are  full,
unconditional,   joint  and  several  obligations  of  each  of  the  subsidiary
guarantors.  Summarized financial  information for the subsidiary  guarantors is
set forth below.  Separate financial statements for the subsidiary guarantors of
the Company are not  presented  because  the  Company has  determined  that such
financial  statements  would  not  be  material  to  investors.  The  subsidiary
guarantors comprise all of the direct and indirect  subsidiaries of the Company,
other  than  the  nonguarantor  subsidiaries  which  individually,  and  in  the
aggregate, are inconsequential.  There are no restrictions on the ability of the
subsidiary  guarantors  to  transfer  funds to the  Company  in the form of cash
dividends  or  loan  repayments;   however,  except  for  limited  amounts,  the
subsidiary guarantors may not loan funds to the Company.

The following  table presents  summarized  financial  information for subsidiary
guarantors in connection  with all of the  Company's  8.75% Senior  Subordinated
Notes:

                                         February 28,     February 28, 
                                             1998             1997
                                         ------------     ------------ 
          (in thousands)
          Balance Sheet Data:
            Current assets                $ 460,618        $ 401,870
            Noncurrent assets             $ 395,225        $ 403,068
            Current liabilities           $ 102,207        $ 100,009
            Noncurrent liabilities        $  61,784        $  65,300

<TABLE>
<CAPTION>
                                                                                             For the Year
                                       For the Years Ended        For the Six Months Ended       Ended
                                    --------------------------   --------------------------  ------------
                                    February 28,  February 28,   February 29,  February 28,    August 31,
                                        1998          1997           1996          1995           1995
                                    ------------  ------------   ------------  ------------    ----------
<S>                                  <C>           <C>            <C>           <C>            <C>
(in thousands)
Income Statement Data:
  Net sales                          $ 985,757     $ 907,387      $ 416,839     $ 334,885      $ 716,969
  Gross profit                       $ 196,642     $ 164,471      $  73,843     $  62,883      $ 131,489
  Income before provision for                                                   
    Federal and state income taxes   $  64,270     $  47,303      $  17,083     $  22,690      $  52,756
  Net income                         $  38,094     $  27,392      $   8,466     $  13,954      $  32,445
                                                                               
</TABLE>

15.  ACCOUNTING PRONOUNCEMENTS:

In June 1997,  Statement of Financial  Accounting  Standards No. 130, "Reporting
Comprehensive  Income,"  (SFAS No. 130) and  Statement of  Financial  Accounting
Standards No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information," (SFAS No. 131) were issued. SFAS No. 130 establishes standards for
reporting and display of  comprehensive  income and its components in a full set
of  financial  statements.  The  Company is  required  to adopt SFAS No. 130 for
interim periods and fiscal years beginning  March 1, 1998.  Reclassification  of
financial  statements for earlier periods  provided for comparative  purposes is
required.  The Company  believes the effect of adoption will not be significant.
SFAS No. 131  establishes  standards for reporting  information  about operating
segments in annual  financial  statements  and  requires  reporting  of selected
information in interim  financial  statements.  The Company is required to adopt
SFAS No. 131 for fiscal years  beginning  March 1, 1998, and for interim periods
beginning  March 1, 1999.  Restatement  of comparative  information  for earlier
years is required in the initial  year of adoption and  comparative  information
for  interim  periods in the initial  year of  adoption  is to be  reported  for
interim  periods in the second  year of  application.  The  Company  has not yet
determined the impact of SFAS No. 131 on its financial statements.

16.  SELECTED QUARTERLY FINANCIAL INFORMATION  (UNAUDITED):

A summary of selected quarterly financial information is as follows:

<TABLE>
<CAPTION>
                                                   QUARTER ENDED
                               -----------------------------------------------------
                                 May 31,     August 31,   November 30,  February 28,
       Fiscal 1998                1997          1997          1997          1998        Full Year
--------------------------     ---------     ----------   ------------  ------------   -----------
(in thousands, except per
 share data)
<S>                            <C>           <C>           <C>           <C>           <C>
Net sales                      $ 306,011     $ 301,524     $ 322,703     $ 282,550     $ 1,212,788
Gross profit                   $  80,732     $  84,759     $  98,000     $  85,244     $   348,735
Net income                     $  10,046     $  12,365     $  17,611     $  10,049     $    50,071
Earnings per common share:
  Basic                        $    0.54     $    0.67     $    0.94     $    0.54     $      2.68
  Diluted                      $    0.53     $    0.65     $    0.92     $    0.53     $      2.62


                                                   QUARTER ENDED
                               -----------------------------------------------------
                                 May 31,     August 31,   November 30,  February 28,
       Fiscal 1997                1996          1996          1996          1997        Full Year
--------------------------     ---------     ----------   ------------  ------------   -----------
(in thousands, except per
 share data)
Net sales                      $ 276,493     $ 279,218     $ 317,733     $ 261,569     $ 1,135,013
Gross profit                   $  72,907     $  69,835     $  81,683     $  66,407     $   290,832
Net income                     $   8,501     $   4,941     $   8,311     $   5,922     $    27,675
Earnings per common share:                                                          
  Basic                        $    0.43     $    0.25     $    0.43     $    0.31     $      1.43
  Diluted                      $    0.43     $    0.25     $    0.43     $    0.31     $      1.42
                                                             
</TABLE>

 


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
-------   --------------------------------------------------------------- 
          FINANCIAL DISCLOSURE
          --------------------

     Not Applicable.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------  --------------------------------------------------

     The information required by this Item (except for the information regarding
executive  officers  required by Item 401 of Regulation S-K which is included in
Part I hereof in  accordance  with  General  Instruction  G(3)) is  incorporated
herein by reference to the Company's  proxy statement to be issued in connection
with the Annual  Meeting of  Stockholders  of the Company to be held on July 21,
1998,   under  those  sections  of  the  proxy  statement  titled  "Election  of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance", which
proxy  statement  will be filed  within 120 days after the end of the  Company's
fiscal year.


ITEM 11.  EXECUTIVE COMPENSATION
--------  ----------------------

     The information  required by this Item is incorporated  herein by reference
to the  Company's  proxy  statement to be issued in  connection  with the Annual
Meeting of Stockholders  of the Company to be held on July 21, 1998,  under that
section of the proxy statement titled "Executive  Compensation" and that caption
titled  "Director  Compensation"  under  "Election  of  Directors",  which proxy
statement  will be filed within 120 days after the end of the  Company's  fiscal
year.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------  --------------------------------------------------------------

     The information  required by this Item is incorporated  herein by reference
to the  Company's  proxy  statement to be issued in  connection  with the Annual
Meeting of Stockholders of the Company to be held on July 21, 1998,  under those
sections  of the  proxy  statement  titled  "Beneficial  Ownership"  and  "Stock
Ownership of  Management",  which proxy  statement will be filed within 120 days
after the end of the Company's fiscal year.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------  ----------------------------------------------

     The information  required by this Item is incorporated  herein by reference
to the  Company's  proxy  statement to be issued in  connection  with the Annual
Meeting of Stockholders  of the Company to be held on July 21, 1998,  under that
section of the proxy  statement  titled  "Executive  Compensation",  which proxy
statement  will be filed within 120 days after the end of the  Company's  fiscal
year.

<PAGE>


                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------   ----------------------------------------------------------------

(a)  1.   Financial Statements

          The  following  consolidated  financial  statements of the Company are
          submitted herewith:

               Report of Independent Public Accountants

               Consolidated Balance Sheets - February 28, 1998 and 1997

               Consolidated  Statements  of Income for the years ended  February
               28, 1998 and 1997, for the six months ended February 29, 1996 and
               February 28, 1995 (unaudited),  and for the year ended August 31,
               1995

               Consolidated  Statements of Changes in  Stockholders'  Equity for
               the years ended  February  28, 1998 and 1997,  for the six months
               ended February 29, 1996, and for the year ended August 31, 1995

               Consolidated  Statements  of  Cash  Flows  for  the  years  ended
               February 28, 1998 and 1997, for the six months ended February 29,
               1996 and  February 28, 1995  (unaudited),  and for the year ended
               August 31, 1995

               Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules

          The  following   consolidated   financial   information  is  submitted
          herewith:

               Selected Financial Data

               Selected Quarterly Financial Information (unaudited)

All other  schedules  are not submitted  because they are not  applicable or not
required under Regulation S-X or because the required information is included in
the financial statements or notes thereto.

Individual  financial statements of the Registrant have been omitted because the
Registrant is primarily an operating  company and no subsidiary  included in the
consolidated   financial   statements  has  minority  equity   interests  and/or
noncurrent  indebtedness,  not guaranteed by the Registrant,  in excess of 5% of
total consolidated assets.

 


     3.   Exhibits required to be filed by Item 601 of Regulation S-K

          The following  exhibits are filed herewith or  incorporated  herein by
          reference, as indicated:

          2.1       Stock  Purchase  Agreement  dated  April 27,  1993 among the
                    Company,  Barton Incorporated and the stockholders of Barton
                    Incorporated,  Amendment No. 1 to Stock  Purchase  Agreement
                    dated May 3, 1993,  and  Amendment  No. 2 to Stock  Purchase
                    Agreement  dated June 29, 1993 (filed as Exhibit 2(a) to the
                    Company's Current Report on Form 8-K dated June 29, 1993 and
                    incorporated herein by reference).

          2.2       Asset Sale  Agreement  dated  September 14, 1993 between the
                    Company and Vintners  International  Company, Inc. (filed as
                    Exhibit  2(a) to the  Company's  Current  Report on Form 8-K
                    dated   October   15,  1993  and   incorporated   herein  by
                    reference).

          2.3       Amendment  dated  as of  October  14,  1993  to  Asset  Sale
                    Agreement  dated as of  September  14,  1993 by and  between
                    Vintners  International Company, Inc. and the Company (filed
                    as Exhibit 2(b) to the Company's  Current Report on Form 8-K
                    dated   October   15,  1993  and   incorporated   herein  by
                    reference).

          2.4       Amendment  No. 2 dated as of January  18, 1994 to Asset Sale
                    Agreement  dated as of  September  14,  1993 by and  between
                    Vintners  International Company, Inc. and the Company (filed
                    as Exhibit  2.1 to the  Company's  Quarterly  Report on Form
                    10-Q for the fiscal  quarter  ended  February  28,  1994 and
                    incorporated herein by reference).

          2.5       Asset  Purchase  Agreement  dated August 3, 1994 between the
                    Company and  Heublein,  Inc.  (filed as Exhibit  2(a) to the
                    Company's  Current  Report on Form 8-K dated  August 5, 1994
                    and incorporated herein by reference).

          2.6       Amendment dated November 8, 1994 to Asset Purchase Agreement
                    between Heublein, Inc. and the Company (filed as Exhibit 2.2
                    to  the  Company's   Registration   Statement  on  Form  S-3
                    (Amendment No. 2) (Registration No. 33-55997) filed with the
                    Securities  and Exchange  Commission on November 8, 1994 and
                    incorporated herein by reference).

          2.7       Amendment   dated   November  18,  1994  to  Asset  Purchase
                    Agreement between  Heublein,  Inc. and the Company (filed as
                    Exhibit 2.8 to the Company's  Annual Report on Form 10-K for
                    the fiscal  year  ended  August  31,  1994 and  incorporated
                    herein by reference).

          2.8       Amendment   dated   November  30,  1994  to  Asset  Purchase
                    Agreement between  Heublein,  Inc. and the Company (filed as
                    Exhibit 2.9 to the Company's  Quarterly  Report on Form 10-Q
                    for  the  fiscal   quarter  ended   November  30,  1994  and
                    incorporated herein by reference).

          2.9       Asset  Purchase  Agreement  among  Barton   Incorporated  (a
                    wholly-owned  subsidiary of the Company),  United Distillers
                    Glenmore, Inc., Schenley Industries, Inc., Medley Distilling
                    Company,  United  Distillers  Manufacturing,  Inc.,  and The
                    Viking  Distillery,  Inc.,  dated  August 29, 1995 (filed as
                    Exhibit 2(a) to the  Company's  Current  Report on Form 8-K,
                    dated August 29, 1995 and incorporated herein by reference).

          3.1(a)    Certificate of Amendment of the Certificate of Incorporation
                    of the  Company  (filed as Exhibit  3.1(a) to the  Company's
                    Quarterly  Report on Form 10-Q for the fiscal  quarter ended
                    August 31, 1997 and incorporated herein by reference).

          3.1(b)    Restated  Certificate of Incorporation of the Company (filed
                    as Exhibit 3.1 to the  Company's  Transition  Report on Form
                    10-K for the  Transition  Period from  September  1, 1995 to
                    February 29, 1996 and incorporated herein by reference).

          3.2       Amended  and  Restated  By-laws  of the  Company  (filed  as
                    Exhibit 3.2 to the Company's  Quarterly  Report on Form 10-Q
                    for  the  fiscal   quarter   ended   August  31,   1997  and
                    incorporated herein by reference).

          4.1       Indenture  dated as of December  27, 1993 among the Company,
                    its  Subsidiaries and The Chase Manhattan Bank (as successor
                    to Chemical  Bank)  (filed as Exhibit  4.1 to the  Company's
                    Quarterly  Report on Form 10-Q for the fiscal  quarter ended
                    November 30, 1993 and incorporated herein by reference).

          4.2       First  Supplemental  Indenture  dated as of  August  3, 1994
                    among the  Company,  Canandaigua  West,  Inc.  and The Chase
                    Manhattan  Bank (as  successor  to Chemical  Bank) (filed as
                    Exhibit 4.5 to the Company's  Registration Statement on Form
                    S-8 (Registration  No. 33-56557) and incorporated  herein by
                    reference).

          4.3       Second  Supplemental  Indenture  dated August 25, 1995 among
                    the  Company,  V  Acquisition  Corp.  (a  subsidiary  of the
                    Company  now known as The Viking  Distillery,  Inc.) and The
                    Chase  Manhattan Bank (as successor to Chemical Bank) (filed
                    as Exhibit 4.5 to the  Company's  Annual Report on Form 10-K
                    for the fiscal year ended  August 31, 1995 and  incorporated
                    herein by reference).

          4.4       Third  Supplemental  Indenture dated as of December 19, 1997
                    among  the  Company,  Canandaigua  Europe  Limited,  Roberts
                    Trading Corp. and The Chase Manhattan Bank (filed herewith).

          4.5       Indenture  with  respect  to  the 8  3/4%  Series  C  Senior
                    Subordinated  Notes due 2003  dated as of October  29,  1996
                    among the  Company,  its  Subsidiaries  and Harris Trust and
                    Savings  Bank  (filed  as  Exhibit  4.2  to  the   Company's
                    Registration   Statement  on  Form  S-4   (Registration  No.
                    333-17673) and incorporated herein by reference).

          4.6       First  Supplemental  Indenture dated as of December 19, 1997
                    among  the  Company,  Canandaigua  Europe  Limited,  Roberts
                    Trading  Corp.  and Harris  Trust and  Savings  Bank  (filed
                    herewith).

          4.7       Credit   Agreement   between  the  Company,   its  principal
                    operating  subsidiaries,  and  certain  banks  for which The
                    Chase Manhattan Bank acts as Administrative  Agent, dated as
                    of December 19, 1997  (including a list briefly  identifying
                    the contents of all omitted  schedules and exhibits thereto)
                    (filed herewith). The Registrant will furnish supplementally
                    to the  Commission,  upon  request,  a copy  of any  omitted
                    schedule or exhibit.

          10.1      Employment  Agreement between Barton  Incorporated and Ellis
                    M.  Goodman  dated  as of  October  1,  1991 as  amended  by
                    Amendment   to   Employment    Agreement    between   Barton
                    Incorporated  and Ellis M. Goodman dated as of June 29, 1993
                    (filed as Exhibit  10.5 to the  Company's  Annual  Report on
                    Form 10-K for the  fiscal  year ended  August  31,  1993 and
                    incorporated herein by reference).

          10.2      Barton  Incorporated  Management  Incentive  Plan  (filed as
                    Exhibit 10.6 to the Company's Annual Report on Form 10-K for
                    the fiscal  year  ended  August  31,  1993 and  incorporated
                    herein by reference).

          10.3      Ellis M. Goodman Split Dollar Insurance  Agreement (filed as
                    Exhibit 10.7 to the Company's Annual Report on Form 10-K for
                    the fiscal  year  ended  August  31,  1993 and  incorporated
                    herein by reference).

          10.4      Barton Brands,  Ltd.  Deferred  Compensation  Plan (filed as
                    Exhibit 10.8 to the Company's Annual Report on Form 10-K for
                    the fiscal  year  ended  August  31,  1993 and  incorporated
                    herein by reference).

          10.5      Marvin  Sands Split  Dollar  Insurance  Agreement  (filed as
                    Exhibit 10.9 to the Company's Annual Report on Form 10-K for
                    the fiscal  year  ended  August  31,  1993 and  incorporated
                    herein by reference).

          10.6      Letter  agreement,  effective  as of  October  7,  1995,  as
                    amended,  addressing  compensation,  between the Company and
                    Daniel  Barnett  (filed as  Exhibit  10.23 to the  Company's
                    Transition  Report  on Form 10-K for the  Transition  Period
                    from September 1, 1995 to February 29, 1996 and incorporated
                    herein by reference).

          10.7      Employment   Agreement   between  Barton   Incorporated  and
                    Alexander  L. Berk dated as of  September 1, 1990 as amended
                    by Amendment No. 1 to Employment  Agreement  between  Barton
                    Incorporated  and Alexander L. Berk dated  November 11, 1996
                    (filed herewith).

          10.8      Credit   Agreement   between  the  Company,   its  principal
                    operating  subsidiaries,  and  certain  banks  for which The
                    Chase Manhattan Bank acts as Administrative  Agent, dated as
                    of December 19, 1997  (including a list briefly  identifying
                    the contents of all omitted  schedules and exhibits thereto)
                    (incorporated by reference to Exhibit 4.7, filed herewith).

          10.9      Long-Term Stock  Incentive  Plan,  which amends and restates
                    the  Canandaigua  Wine Company,  Inc. Stock Option and Stock
                    Appreciation  Right  Plan  (filed  as  Exhibit  10.1  to the
                    Company's  Quarterly  Report  on Form  10-Q  for the  fiscal
                    quarter  ended  May 31,  1997  and  incorporated  herein  by
                    reference).

          10.10     Amendment  Number One to the Long-Term  Stock Incentive Plan
                    of the  Company  (filed  as  Exhibit  10.1 to the  Company's
                    Quarterly  Report on Form 10-Q for the fiscal  quarter ended
                    August 31, 1997 and incorporated herein by reference).

          10.11     Incentive Stock Option Plan of the Company (filed as Exhibit
                    10.2 of the Company's  Quarterly Report on Form 10-Q for the
                    fiscal quarter ended August 31, 1997 and incorporated herein
                    by reference).

          10.12     Amendment  Number One to the Incentive  Stock Option Plan of
                    the  Company   (filed  as  Exhibit  10.3  of  the  Company's
                    Quarterly  Report on Form 10-Q for the fiscal  quarter ended
                    August 31, 1997 and incorporated herein by reference).

          10.13     Annual  Management  Incentive  Plan of the Company (filed as
                    Exhibit 10.4 of the Company's  Quarterly Report on Form 10-Q
                    for  the  fiscal   quarter   ended   August  31,   1997  and
                    incorporated herein by reference).

          10.14     Amendment Number One to the Annual Management Incentive Plan
                    of the Company (filed herewith).

          11.1      Statement  re  Computation  of  Per  Share  Earnings  (filed
                    herewith).

          21.1      Subsidiaries of Company (filed herewith).

          23.1      Consent of Arthur Andersen LLP (filed herewith).

          27.1      Financial  Data Schedule for fiscal year ended  February 28,
                    1998 (filed herewith).

          27.2      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended November 30, 1997 (filed herewith).

          27.3      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended August 31, 1997 (filed herewith).

          27.4      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended May 31, 1997 (filed herewith).

          27.5      Restated  Financial  Data Schedule for the fiscal year ended
                    February 28, 1997 (filed herewith).

          27.6      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended November 30, 1996 (filed herewith).

          27.7      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended August 31, 1996 (filed herewith).

          27.8      Restated  Financial  Data  Schedule  for the fiscal  quarter
                    ended May 31, 1996 (filed herewith).

          27.9      Restated  Financial Data Schedule for the Transition  Period
                    from   September   1,  1995  to  February  29,  1996  (filed
                    herewith).

          27.10     Restated  Financial  Data Schedule for the fiscal year ended
                    August 31, 1995 (filed herewith).

          99.1      1989 Employee Stock Purchase Plan of the Company, as amended
                    by  Amendment  Number 1  through  Amendment  Number 5 (filed
                    herewith).

(b)  Reports on Form 8-K

     No Reports on Form 8-K were filed by the Company  with the  Securities  and
     Exchange  Commission  during  the fourth  quarter of the fiscal  year ended
     February 28, 1998.

 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    CANANDAIGUA BRANDS, INC.


                                        By:  /s/ Richard Sands
                                             -----------------
                                             Richard Sands, President and 
                                             Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


/s/ Richard Sands                       /s/ Thomas S. Summer           
-----------------                       --------------------
Richard Sands, President, Chief         Thomas S. Summer, Senior Vice President
Executive Officer and Director          and Chief Financial Officer (Principal
(Principal Executive Officer)           Financial Officer and Principal 
Dated:  May 29, 1998                    Accounting Officer)
                                        Dated:  May 29, 1998

/s/ Marvin Sands                        /s/ Robert Sands
----------------                        ----------------
Marvin Sands, Chairman of               Robert Sands, Director
the Board                               Dated:  May 29, 1998
Dated:  May 29, 1998


/s/ George Bresler                      /s/ James A. Locke
------------------                      ------------------
George Bresler, Director                James A. Locke, III, Director
Dated:  May 29, 1998                    Dated:  May 29, 1998


/s/ Thomas C. McDermott                 /s/ Bertram E. Silk 
-----------------------                 ------------------- 
Thomas C. McDermott, Director           Bertram E. Silk, Director
Dated:  May 29, 1998                    Dated:  May 29, 1998


/s/ Paul L. Smith
-----------------
Paul L. Smith, Director
Dated:  May 29, 1998



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BATAVIA WINE CELLARS, INC.


                                        By:  /s/ Ned Cooper
                                             --------------
                                             Ned Cooper, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Ned Cooper                 
                                        --------------                 
                                        Ned Cooper, President
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Thomas S. Summer
                                        --------------------
                                        Thomas S. Summer, Treasurer
                                        (Principal Financial Officer and 
                                        Principal Accounting Officer)


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Director


Dated:  May 29, 1998                    /s/ Robert Sands
                                        ----------------
                                        Robert Sands, Director

 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    CANANDAIGUA WINE COMPANY, INC.


                                        By:  /s/ Daniel C. Barnett
                                             ---------------------
                                             Daniel C. Barnett, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Daniel C. Barnett
                                        ---------------------
                                        Daniel C. Barnett, President 
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Thomas S. Summer
                                        --------------------
                                        Thomas S. Summer, Treasurer
                                        (Principal Financial Officer and 
                                        Principal Accounting Officer)


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Director


Dated:  May 29, 1998                    /s/ Robert Sands
                                        ----------------
                                        Robert Sands, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    CANANDAIGUA EUROPE LIMITED


                                        By:  /s/ Douglas Kahle
                                             -----------------
                                             Douglas Kahle, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Douglas Kahle
                                        -----------------
                                        Douglas Kahle, President
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Thomas S. Summer
                                        --------------------
                                        Thomas S. Summer, Treasurer
                                        (Principal Financial Officer and 
                                        Principal Accounting Officer)


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Director


 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    ROBERTS TRADING CORP.


                                        By:  /s/ Daniel C. Barnett
                                             ---------------------
                                             Daniel C. Barnett, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Daniel C. Barnett
                                        ---------------------
                                        Daniel C. Barnett, President
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Thomas S. Summer
                                        --------------------
                                        Thomas S. Summer, Treasurer
                                        (Principal Financial Officer and 
                                        Principal Accounting Officer)


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Director


Dated:  May 29, 1998                    /s/ Robert Sands
                                        ----------------
                                        Robert Sands, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON INCORPORATED


                                        By:  /s/ Alexander L. Berk
                                             ---------------------
                                             Alexander L. Berk, President and 
                                             Chief Operating Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, President, Chief 
                                        Operating Officer and Director 
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, Director


Dated:  May 29, 1998                    /s/ William F. Hackett
                                        ----------------------
                                        William F. Hackett, Director


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Director


Dated:  May 29, 1998                    /s/ Robert Sands
                                        ----------------
                                        Robert Sands, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON BRANDS, LTD.


                                        By:  /s/ Edward L. Golden
                                             --------------------
                                             Edward L. Golden, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, President and Director
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, Director


 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON BEERS, LTD.


                                        By:  /s/ Richard Sands
                                             -----------------
                                             Richard Sands, Chief Executive 
                                             Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Richard Sands
                                        -----------------
                                        Richard Sands, Chief Executive Officer 
                                        and Director (Principal Executive 
                                        Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, Director


Dated:  May 29, 1998                    /s/ William F. Hackett
                                        ----------------------
                                        William F. Hackett, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON BRANDS OF CALIFORNIA, INC.

                                        By:  /s/ Alexander L. Berk
                                             ---------------------
                                             Alexander L. Berk, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, President and 
                                        Director (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, Director


 

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON BRANDS OF GEORGIA, INC.


                                        By:  /s/ Alexander L. Berk
                                             ---------------------
                                             Alexander L. Berk, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, President and 
                                        Director (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON DISTILLERS IMPORT CORP.


                                        By:  /s/ Alexander L. Berk
                                             ---------------------
                                             Alexander L. Berk, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, President and
                                        Director (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal 
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, Director


 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    BARTON FINANCIAL CORPORATION


                                        By:  /s/ Raymond E. Powers
                                             ---------------------
                                             Raymond E. Powers, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, President, Secretary
                                        and Director (Principal Executive 
                                        Officer)


Dated:  May 29, 1998                    /s/ Charles T. Schlau
                                        ---------------------
                                        Charles T. Schlau, Treasurer and 
                                        Director (Principal Financial Officer 
                                        and Principal Accounting Officer)

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    STEVENS POINT BEVERAGE CO.


                                        By:  /s/ James P. Ryan
                                             -----------------
                                             James P. Ryan, President and Chief
                                             Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ James P. Ryan
                                        -----------------
                                        James P. Ryan, President, Chief 
                                        Executive Officer and Director 
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, Director


Dated:  May 29, 1998                    /s/ William F. Hackett
                                        ----------------------
                                        William F. Hackett, Director

 


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    MONARCH IMPORT COMPANY


                                        By:  /s/ James P. Ryan
                                             -----------------
                                             James P. Ryan, Chief Executive 
                                             Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ James P. Ryan
                                        -----------------
                                        James P. Ryan, Chief Executive Officer
                                        (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, Director


Dated:  May 29, 1998                    /s/ William F. Hackett
                                        ----------------------
                                        William F. Hackett, Director



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  May 29, 1998                    THE VIKING DISTILLERY, INC.


                                        By:  /s/ Alexander L. Berk
                                             ---------------------
                                             Alexander L. Berk, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
Report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Dated:  May 29, 1998                    /s/ Alexander L. Berk
                                        ---------------------
                                        Alexander L. Berk, President and 
                                        Director (Principal Executive Officer)


Dated:  May 29, 1998                    /s/ Raymond E. Powers
                                        ---------------------
                                        Raymond E. Powers, Executive Vice 
                                        President, Treasurer, Assistant 
                                        Secretary and Director (Principal
                                        Financial Officer and Principal 
                                        Accounting Officer)


Dated:  May 29, 1998                    /s/ Edward L. Golden
                                        --------------------
                                        Edward L. Golden, Director

 


                                INDEX TO EXHIBITS

EXHIBIT NO.

       2.1    Stock Purchase  Agreement  dated April 27, 1993 among the Company,
              Barton  Incorporated and the stockholders of Barton  Incorporated,
              Amendment No. 1 to Stock Purchase Agreement dated May 3, 1993, and
              Amendment No. 2 to Stock  Purchase  Agreement  dated June 29, 1993
              (filed as Exhibit 2(a) to the Company's Current Report on Form 8-K
              dated June 29, 1993 and incorporated herein by reference).

       2.2    Asset Sale Agreement  dated September 14, 1993 between the Company
              and Vintners International Company, Inc. (filed as Exhibit 2(a) to
              the  Company's  Current  Report on Form 8-K dated October 15, 1993
              and incorporated herein by reference).

       2.3    Amendment  dated as of October  14,  1993 to Asset Sale  Agreement
              dated  as  of   September   14,  1993  by  and  between   Vintners
              International Company, Inc. and the Company (filed as Exhibit 2(b)
              to the Company's Current Report on Form 8-K dated October 15, 1993
              and incorporated herein by reference).

       2.4    Amendment  No.  2 dated  as of  January  18,  1994 to  Asset  Sale
              Agreement  dated as of September 14, 1993 by and between  Vintners
              International  Company, Inc. and the Company (filed as Exhibit 2.1
              to the  Company's  Quarterly  Report on Form  10-Q for the  fiscal
              quarter  ended  February  28,  1994  and  incorporated  herein  by
              reference).

       2.5    Asset Purchase  Agreement dated August 3, 1994 between the Company
              and Heublein, Inc. (filed as Exhibit 2(a) to the Company's Current
              Report on Form 8-K dated August 5, 1994 and incorporated herein by
              reference).

       2.6    Amendment  dated  November  8,  1994 to Asset  Purchase  Agreement
              between  Heublein,  Inc. and the Company  (filed as Exhibit 2.2 to
              the Company's Registration Statement on Form S-3 (Amendment No. 2)
              (Registration No. 33-55997) filed with the Securities and Exchange
              Commission  on  November  8,  1994  and  incorporated   herein  by
              reference).

       2.7    Amendment  dated  November  18, 1994 to Asset  Purchase  Agreement
              between  Heublein,  Inc. and the Company  (filed as Exhibit 2.8 to
              the Company's Annual Report on Form 10-K for the fiscal year ended
              August 31, 1994 and incorporated herein by reference).

       2.8    Amendment  dated  November  30, 1994 to Asset  Purchase  Agreement
              between  Heublein,  Inc. and the Company  (filed as Exhibit 2.9 to
              the Company's Quarterly Report on Form 10-Q for the fiscal quarter
              ended November 30, 1994 and incorporated herein by reference).

       2.9    Asset Purchase Agreement among Barton Incorporated (a wholly-owned
              subsidiary  of the Company),  United  Distillers  Glenmore,  Inc.,
              Schenley  Industries,  Inc.,  Medley  Distilling  Company,  United
              Distillers Manufacturing,  Inc., and The Viking Distillery,  Inc.,
              dated  August 29,  1995  (filed as Exhibit  2(a) to the  Company's
              Current Report on Form 8-K, dated August 29, 1995 and incorporated
              herein by reference).

       3.1(a) Certificate of  Amendment of the  Certificate  of Incorporation of
              the Company  (filed as Exhibit  3.1(a) to the Company's  Quarterly
              Report on Form 10-Q for the fiscal  quarter  ended August 31, 1997
              and incorporated herein by reference).

       3.1(b) Restated  Certificate  of  Incorporation  of the Company (filed as
              Exhibit 3.1 to the  Company's  Transition  Report on Form 10-K for
              the Transition  Period from September 1, 1995 to February 29, 1996
              and incorporated herein by reference).

       3.2    Amended and Restated  By-laws of the Company (filed as Exhibit 3.2
              to the  Company's  Quarterly  Report on Form  10-Q for the  fiscal
              quarter  ended  August  31,  1997  and   incorporated   herein  by
              reference).

       4.1    Indenture  dated as of December  27, 1993 among the  Company,  its
              Subsidiaries  and  The  Chase  Manhattan  Bank  (as  successor  to
              Chemical  Bank) (filed as Exhibit 4.1 to the  Company's  Quarterly
              Report on Form 10-Q for the fiscal quarter ended November 30, 1993
              and incorporated herein by reference).

       4.2    First Supplemental  Indenture dated as of August 3, 1994 among the
              Company,  Canandaigua  West, Inc. and The Chase Manhattan Bank (as
              successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's
              Registration Statement on Form S-8 (Registration No. 33-56557) and
              incorporated herein by reference).

       4.3    Second  Supplemental  Indenture  dated  August 25,  1995 among the
              Company,  V  Acquisition  Corp.  (a  subsidiary of the Company now
              known as The Viking Distillery, Inc.) and The Chase Manhattan Bank
              (as  successor  to  Chemical  Bank)  (filed as Exhibit  4.5 to the
              Company's  Annual  Report on Form 10-K for the  fiscal  year ended
              August 31, 1995 and incorporated herein by reference).

       4.4    Third  Supplemental  Indenture dated as of December 19, 1997 among
              the Company, Canandaigua Europe Limited, Roberts Trading Corp. and
              The Chase Manhattan Bank (filed herewith).

       4.5    Indenture with respect to the 8 3/4% Series C Senior  Subordinated
              Notes due 2003 dated as of October 29, 1996 among the Company, its
              Subsidiaries  and Harris  Trust and Savings Bank (filed as Exhibit
              4.2  to  the   Company's   Registration   Statement  on  Form  S-4
              (Registration   No.   333-17673)   and   incorporated   herein  by
              reference).

       4.6    First  Supplemental  Indenture dated as of December 19, 1997 among
              the Company, Canandaigua Europe Limited, Roberts Trading Corp. and
              Harris Trust and Savings Bank (filed herewith).

       4.7    Credit  Agreement  between the Company,  its  principal  operating
              subsidiaries, and certain banks for which The Chase Manhattan Bank
              acts as  Administrative  Agent,  dated  as of  December  19,  1997
              (including a list briefly  identifying the contents of all omitted
              schedules and exhibits thereto) (filed  herewith).  The Registrant
              will furnish  supplementally  to the Commission,  upon request,  a
              copy of any omitted schedule or exhibit.

       10.1   Employment  Agreement  between  Barton  Incorporated  and Ellis M.
              Goodman  dated as of October 1, 1991 as  amended by  Amendment  to
              Employment  Agreement  between  Barton  Incorporated  and Ellis M.
              Goodman  dated as of June 29, 1993  (filed as Exhibit  10.5 to the
              Company's  Annual  Report on Form 10-K for the  fiscal  year ended
              August 31, 1993 and incorporated herein by reference).

       10.2   Barton  Incorporated  Management  Incentive Plan (filed as Exhibit
              10.6 to the  Company's  Annual  Report on Form 10-K for the fiscal
              year ended August 31, 1993 and incorporated herein by reference).

       10.3   Ellis M.  Goodman  Split  Dollar  Insurance  Agreement  (filed  as
              Exhibit 10.7 to the  Company's  Annual Report on Form 10-K for the
              fiscal  year ended  August  31,  1993 and  incorporated  herein by
              reference).

       10.4   Barton Brands,  Ltd. Deferred  Compensation Plan (filed as Exhibit
              10.8 to the  Company's  Annual  Report on Form 10-K for the fiscal
              year ended August 31, 1993 and incorporated herein by reference).

       10.5   Marvin Sands Split Dollar  Insurance  Agreement  (filed as Exhibit
              10.9 to the  Company's  Annual  Report on Form 10-K for the fiscal
              year ended August 31, 1993 and incorporated herein by reference).

       10.6   Letter  agreement,  effective  as of October 7, 1995,  as amended,
              addressing  compensation,  between the Company and Daniel  Barnett
              (filed as Exhibit 10.23 to the Company's Transition Report on Form
              10-K for the Transition  Period from September 1, 1995 to February
              29, 1996 and incorporated herein by reference).

       10.7   Employment  Agreement between Barton Incorporated and Alexander L.
              Berk dated as of September  1, 1990 as amended by Amendment  No. 1
              to Employment  Agreement between Barton Incorporated and Alexander
              L. Berk dated November 11, 1996 (filed herewith).

       10.8   Credit  Agreement  between the Company,  its  principal  operating
              subsidiaries, and certain banks for which The Chase Manhattan Bank
              acts as  Administrative  Agent,  dated  as of  December  19,  1997
              (including a list briefly  identifying the contents of all omitted
              schedules  and  exhibits  thereto)  (incorporated  by reference to
              Exhibit 4.7, filed herewith).

       10.9   Long-Term  Stock  Incentive  Plan,  which  amends and restates the
              Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation
              Right  Plan  (filed as  Exhibit  10.1 to the  Company's  Quarterly
              Report on Form 10-Q for the fiscal  quarter ended May 31, 1997 and
              incorporated herein by reference).

       10.10  Amendment  Number One to the Long-Term Stock Incentive Plan of the
              Company (filed as Exhibit 10.1 to the Company's  Quarterly  Report
              on Form 10-Q for the fiscal  quarter  ended  August  31,  1997 and
              incorporated herein by reference).

       10.11  Incentive  Stock Option Plan of the Company (filed as Exhibit 10.2
              of the  Company's  Quarterly  Report on Form  10-Q for the  fiscal
              quarter  ended  August  31,  1997  and   incorporated   herein  by
              reference).

       10.12  Amendment  Number One to the  Incentive  Stock  Option Plan of the
              Company (filed as Exhibit 10.3 of the Company's  Quarterly  Report
              on Form 10-Q for the fiscal  quarter  ended  August  31,  1997 and
              incorporated herein by reference).

       10.13  Annual Management  Incentive Plan of the Company (filed as Exhibit
              10.4 of the Company's Quarterly Report on Form 10-Q for the fiscal
              quarter  ended  August  31,  1997  and   incorporated   herein  by
              reference).

       10.14  Amendment  Number One to the Annual  Management  Incentive Plan of
              the Company (filed herewith).

       11.1   Statement re Computation of Per Share Earnings (filed herewith).

       21.1   Subsidiaries of Company (filed herewith).

       23.1   Consent of Arthur Andersen LLP (filed herewith).

       27.1   Financial  Data  Schedule for fiscal year ended  February 28, 1998
              (filed herewith).

       27.2   Restated  Financial  Data  Schedule for the fiscal  quarter  ended
              November 30, 1997 (filed herewith).

       27.3   Restated  Financial  Data  Schedule for the fiscal  quarter  ended
              August 31, 1997 (filed herewith).

       27.4   Restated  Financial Data Schedule for the fiscal quarter ended May
              31, 1997 (filed herewith).

       27.5   Restated  Financial  Data  Schedule  for  the  fiscal  year  ended
              February 28, 1997 (filed herewith).

       27.6   Restated  Financial  Data  Schedule for the fiscal  quarter  ended
              November 30, 1996 (filed herewith).

       27.7   Restated  Financial  Data  Schedule for the fiscal  quarter  ended
              August 31, 1996 (filed herewith).

       27.8   Restated  Financial Data Schedule for the fiscal quarter ended May
              31, 1996 (filed herewith).

       27.9   Restated  Financial Data Schedule for the  Transition  Period from
              September 1, 1995 to February 29, 1996 (filed herewith).

       27.10  Restated  Financial Data Schedule for the fiscal year ended August
              31, 1995 (filed herewith).

       99.1   1989 Employee  Stock  Purchase Plan of the Company,  as amended by
              Amendment Number 1 through Amendment Number 5 (filed herewith).