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, 1997 
                          -----------------

                                       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 Wine Company, Inc.           16-0716709
                       and its subsidiaries:
    New York          Batavia Wine Cellars, Inc.               16-1222994
    Delaware          Bisceglia Brothers Wine Co.              94-2248544
    California        California Products Company              94-0360780
    New York          Guild Wineries & Distilleries, Inc.      16-1401046
    New York          Widmer's Wine Cellars, Inc.              16-1184188
    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 
                       (f/k/a Barton Management, Inc.)         36-3539106
    New York          Vintners International Company, Inc.     16-1443663
    New York          Canandaigua West, Inc.                   16-1462887
    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)                                             

                 116 BUFFALO STREET, CANANDAIGUA, NEW YORK 14424
                 -----------------------------------------------
               (Address of principal executive offices) (Zip Code)

        REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE (716) 394-7900
                                                           -------------- 

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

                                                     Name of each exchange
     Title of each class                              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 Wine Company, Inc.
--------------------------------------------------------------------------------
                                (Title of Class)

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

<PAGE>

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  voting  stock  held by  non-affiliates  of
Canandaigua Wine Company, Inc., as of May 16, 1997, was $421,831,323.

The number of shares  outstanding  with respect to each of the classes of common
stock of Canandaigua Wine Company,  Inc., as of May 16, 1997, is set forth below
(all of the Registrants,  other than Canandaigua Wine Company,  Inc., are direct
or indirect wholly-owned subsidiaries of Canandaigua Wine Company, Inc.):

                                                    NUMBER OF SHARES OUTSTANDING
       CLASS                                             AS OF MAY 16, 1997
       -----                                             ------------------

Class A Common Stock, Par Value $.01 Per Share               15,211,713
Class B Common Stock, Par Value $.01 Per Share                3,330,458


                       DOCUMENTS INCORPORATED BY REFERENCE

The proxy  statement  of  Canandaigua  Wine  Company,  Inc. to be issued for the
annual  meeting of  stockholders  to be held July 22,  1997 is  incorporated  by
reference in Part III.
================================================================================
<PAGE>

                                     PART I

ITEM 1.     BUSINESS

     UNLESS  THE  CONTEXT  OTHERWISE  REQUIRES,  THE TERM  "COMPANY"  REFERS  TO
CANANDAIGUA  WINE COMPANY,  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,  AND ALL REFERENCES TO THE
COMPANY'S  FISCAL YEAR SHALL REFER TO THE YEAR ENDED AUGUST 31 OF THE  INDICATED
YEAR,  EXCEPT,  HOWEVER,  REFERENCES TO FISCAL 1997 SHALL REFER TO THE COMPANY'S
FISCAL YEAR ENDED FEBRUARY 28, 1997. 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").

     MARKET SHARE AND INDUSTRY DATA  DISCLOSED IN THIS REPORT HAVE BEEN OBTAINED
FROM THE FOLLOWING  INDUSTRY AND  GOVERNMENT  PUBLICATIONS:  WINES & VINES;  THE
GOMBERG-FREDRIKSON  REPORT;  JOBSON'S LIQUOR  HANDBOOK;  JOBSON'S WINE HANDBOOK;
NIELSEN WINE SCAN;  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; 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 125 national and regional  brands which are  distributed by
over  1,400   wholesalers   throughout   the  United   States  and  in  selected
international  markets. The Company is the second largest supplier of wines, the
third  largest  importer of beers and the fourth  largest  supplier of distilled
spirits in the United States. The Company's beverage alcohol brands are marketed
in five  general  categories:  table  wines,  sparkling  wines,  dessert  wines,
imported beer and distilled spirits, and include the following principal brands:

o    TABLE WINES:  Inglenook,  Almaden,  Paul Masson, Taylor California Cellars,
     Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood

o    SPARKLING WINES: Cook's, J. Roget, Great Western and Taylor

o    DESSERT WINES: Richards Wild Irish Rose, Cisco and Taylor

o    IMPORTED  BEER:  Corona,  St.  Pauli Girl,  Modelo  Especial,  Pacifico and
     Tsingtao

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

<PAGE>

     Based on available industry data, the Company believes that during calendar
year 1996 it had a 20%  share of the wine  market,  a 13% share of the  imported
beer  market  and an 8% share of the  distilled  spirits  market  in the  United
States.  Within the wine market,  the Company believes it had a 25% share of the
non-varietal  table wine market, an 11% share of the varietal table wine market,
a 42% share of the  dessert  wine market and a 29% share of the  sparkling  wine
market. Many of the Company's brands are leaders in their respective  categories
in the United States, including Corona, the second largest selling imported beer
brand;  Inglenook and Almaden,  the fifth and sixth  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 $1,135.0  million for fiscal  1997.
Through these acquisitions, the Company developed strong market positions in the
growing beverage alcohol product  categories of varietal table wine and imported
beer. The Company ranks second and third in the varietal table wine and imported
beer categories,  respectively. 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. ("Heublein") (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 will  supply the Company  with bulk  whisky and the Company  will supply UDG
with services including  continued  packaging of various UDG brands not acquired
by the Company (collectively, the "UDG Acquisition").

<PAGE>

     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.

CURRENT OPERATING ENVIRONMENT

     The  Company's  growth  through  acquisitions  over the past five years 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  sales  generated  from the
growth  categories of imported beer and varietal  wines.  The Company's beer and
spirits  division,  Barton,  has  continued to increase its  operating  profits.
However,  recent  operating  results in the  Company's  wine  division have been
negatively impacted by two factors:  increases in grape prices and certain costs
and operating inefficiencies relating to the consolidation of certain West Coast
winery operations in connection with the acquisitions.

     While the consolidation of certain wine operations has produced significant
overall  synergies,  some of the planned  efficiencies have not materialized and
unanticipated  costs have occurred.  The Company believes that the unanticipated
production  costs  resulted  from its rapid  growth  over the last three  years,
combined  with  the  lack  of  integrated  production  control  systems  and the
complexity of production at its newly consolidated Mission Bell Winery.

     Additionally,  as the  Company  has  increased  its  wine and  grape  juice
concentrate  business,  it has become the second largest purchaser of grapes for
wine and  concentrate in  California.  The Company's  profits are  significantly
influenced by grape price changes.  Costs for grapes have escalated dramatically
over the last two grape  harvests  (fall 1995 and fall  1996).  Holding  tonnage
constant,  the  Company's  overall  cost of grapes  increased  17.5% in the 1996
harvest.

     In order to  address  these  matters,  the  Company  is  taking a number of
specific steps to improve sales and margins,  minimize  unexpected costs related
to inefficiencies  and realize  opportunities  for efficiencies  afforded by the
Company's  consolidation  of its West Coast wine operations and its economies of
scale as a major participant in the beverage alcohol  industry.  There can be no
assurance,  however,  that the specific steps the Company is taking will address
such  inefficiencies  and unexpected  costs that the Company has incurred.  Such
steps include the following:

o    The Company has completed a comprehensive  reengineering effort in its wine
     division.  The new structure  resulting  from the  reengineering  effort is
     intended to  increase  the  efficiency  of all of the  Company's  operating
     processes,  create  smaller,  more  manageable  business  units and  create
     greater  management  accountability  for its wine business.  Organizational
     changes  include the creation of Accountable  Business  Units  organized by
     product categories which are accountable for

<PAGE>

     production  and  marketing,  and Customer  Business  Centers,  organized by
     region,  which are  responsible  for sales,  customer  service  and product
     delivery. The Company intends,  through the creation of remote distribution
     centers,  to store  inventory  closer to its  customers,  thereby  reducing
     delivery times.  The Company believes these efforts will reduce the overall
     amount of inventory  it and its  customers  carry,  thus  reducing  capital
     employed and offering  benefits to its customers  that cannot  currently be
     obtained  from   competitors.   The  Company  will  be   implementing   the
     distribution center concept on a measured basis to determine its efficacy.

o    In connection with the reengineering  effort, the Company is implementing a
     new accounting and  management  information  system to upgrade the type and
     level of information  the Company can generate,  and to enable it to manage
     its business more precisely.

o    The  Company has created a number of special  task forces  specifically  to
     address  various  issues related to  inefficiencies  at its West Coast wine
     operations,  and has  relocated,  in some cases  temporarily  and in others
     permanently, personnel with particular expertise necessary to address these
     matters.  All aspects of the  Company's  wine and grape  juice  concentrate
     production, material requirements planning functions, warehousing logistics
     and bottling operations at the Company's Mission Bell Winery in California,
     are being reviewed and changed as necessary to create greater efficiencies.

o    The Company has  instituted  several broad price  increases on its varietal
     and non-varietal  table wines in response to increased grape costs from the
     1995 and 1996 grape harvests.  In general,  it is both industry and Company
     practice  to make  selling  price  adjustments  around  the  time  the wine
     produced  with the higher  cost grapes is actually  sold,  which  generally
     occurs in the calendar  year  following  the grape  harvest.  Over the last
     eighteen  months the industry and the Company have increased  their selling
     prices.  In the case of the Company,  these selling price increases,  on an
     annualized basis, have not completely offset the increased costs associated
     with the fall 1995 and fall 1996 harvests.

o    The Company has  recruited  new  management in several key positions in its
     Corporate organization, including a new Chief Financial Officer and a Chief
     Human Resources Officer. In the wine division,  the Company has added a new
     President  of its  wine  division  with  extensive  experience  in the U.S.
     beverage  industry,  and a number of senior managers in the wine division's
     operating,  manufacturing,  selling, and finance areas. It is expected that
     the filling of these  positions has given,  and will continue to give,  the
     Company significantly increased management depth and experience.


<PAGE>

INDUSTRY

     The  beverage  alcohol  industry  in  the  United  States  consists  of the
production,  importation, marketing and distribution of beer, wine 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, and in particular varietal table
wine, and imported beer, has increased during the period.

     The  following  table sets forth the industry unit volumes for shipments of
beverage  alcohol  products in the Company's  five  principal  beverage  alcohol
product  categories  in the United  States  for the five  calendar  years  ended
December 31, 1996:

         INDUSTRY DATA            1992      1993     1994      1995      1996
         -------------          -------   -------   -------   -------   -------
Domestic Table Wines (a)(b)     308,169   300,953   307,481   318,546   339,450
Domestic Dessert Wines (a)(c)    32,449    29,698    27,634    25,439    24,727
Domestic Sparkling Wines (a)     23,794    23,600    22,855    22,298    21,827
Imported Beer (d)               114,590   127,418   144,527   155,178   171,186
Distilled Spirits (e)           148,017   144,162   140,504   137,809   137,750

                         ------------------------------

(a)  Units are in thousands of gallons. Data exclude sales of wine coolers.
(b)  Includes other special natural (flavored) wines under 14% alcohol.
(c)  Includes  dessert  wines,  other special  natural  flavored  wines over 14%
     alcohol and vermouth.
(d)  Units are in thousands of cases (2.25 gallons per case).
(e)  Units are in thousands of 9-liter cases (2.378 gallons per case).

     TABLE WINES.  Wines  containing 14% or less alcohol by volume are generally
referred  to as table  wines.  Within  this  category,  table  wines are further
characterized as either "non-varietal" or "varietal." Non-varietal wines include
wines  named  after the  European  regions  where  similar  types of wines  were
originally  produced (e.g.,  burgundy),  niche products and proprietary  brands.
Varietal  wines are  those  named for the grape  that  comprises  the  principal
component  of the wine.  Table  wines that retail at less than $5.75 per 750 ml.
bottle are generally  considered to be popularly  priced while those that retail
at $5.75 or more per 750 ml. bottle are considered premium wines.

     From 1992 to 1996,  shipments  of  domestic  table  wines  increased  at an
average  compound  annual  rate of 2%. In 1996,  domestic  table wine  shipments
increased by 7% when  compared to 1995,  led by increased  shipments of varietal
table  wines.  The  Company  believes  this  improvement  may be due in  part to
published  reports,  over recent  years,  from a number of  sources,  citing the
health benefits of moderate wine  consumption.  Based on shipments of California
table  wines,  which  constituted  approximately  95% of the total  domestically
produced

<PAGE>

table wine market in 1996,  shipments of varietal wines have grown at an average
compound  annual rate of 10% since 1992. In contrast,  shipments of non-varietal
table wines have generally  declined over the same period.  The Company believes
that the trends in table wine  consumption  reflect a general change in consumer
preference  from  non-varietal  to varietal  table wines.  Shipments of imported
table wines have  increased  from 58.6  million  gallons in 1992 to 80.6 million
gallons in 1996. Imported table wines constituted 19% of the United States table
wine market in 1996.

     DESSERT  WINES.  Wines  containing  more than 14%  alcohol  by  volume  are
generally  referred to as dessert wines.  Dessert wines  generally fall into the
same price  categories as table wines.  In 1996,  shipments of domestic  dessert
wines  decreased  3% as compared  to 1995.  During the period from 1992 to 1996,
shipments of domestic  dessert wines declined at an average compound annual rate
of 7%. Dessert wine consumption in the United States has been declining for many
years, reflecting a general shift in consumer preferences.

     SPARKLING WINES.  Sparkling wines include effervescent wines like champagne
and spumante.  Sparkling wines generally fall into the same price  categories as
table wines. Shipments of sparkling wines declined at an average compound annual
rate of 2% from 1992 to 1996,  with shipments of domestic  sparkling  wines also
declining 2% in 1996 as compared to 1995. The Company  believes that the decline
in sparkling wine consumption  reflects  continuing  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  beers have  increased at an average
compound  annual rate of 11% from 1992 to 1996.  Shipments  of Mexican  beers in
1996  increased  28% over 1995 as  compared to an increase of 10% for the entire
imported  beer  category.  Shipments of imported  beers as a  percentage  of the
United  States beer market,  increased  to 7% in 1996 from 6% in 1995.  Imported
beers,  along with  microbrews and  super-premium  priced  domestic  beers,  are
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 2% from 1992 to 1996,
certain types of distilled spirits, such as tequila,  brandy and liqueurs,  have
increased.  In 1996, shipments of distilled spirits remained flat as compared to
1995. The Company believes  shipments of certain types of distilled  spirits may
have been negatively affected by high excise taxes,  concerns about drinking and
driving,  and a shift in consumer  preference  toward  lower  alcohol or lighter
tasting  products  like  imported  beer and  varietal  wines  which  have  grown
substantially during the period from 1992 to 1996.

PRODUCT CATEGORIES

     The Company produces, imports and markets beverage alcohol products in five
principal  product  categories:  table wines,  dessert wines,  sparkling  wines,
imported beer and distilled spirits.  The following tables include net sales and
unit volume of products and services  from the Vintners,  Almaden/Inglenook  and
UDG  Acquisitions for all periods shown as if they had been owned by the Company
for the entire period.

<PAGE>

     The table below sets forth the net sales (in thousands of dollars) and unit
volumes (in  thousands of gallons) for all of the table,  dessert and  sparkling
wines, grape juice concentrate and other wine-related products and services sold
by  the  Company  and  under  brands  and  products  acquired  in  the  Vintners
Acquisition and the Almaden/Inglenook  Acquisition for fiscal 1994, fiscal 1995,
Pro Forma Fiscal 1996 and fiscal 1997.

<TABLE>
<CAPTION>
                                                     PRO FORMA
                           FISCAL 1994              FISCAL 1995              FISCAL 1996             FISCAL 1997
                      --------------------     --------------------     --------------------     -------------------
                        NET                      NET                      NET                      NET
                       SALES        VOLUME      SALES       VOLUME       SALES        VOLUME      SALES       VOLUME
                      --------     -------     --------     -------     --------     -------     --------     ------

<S>                   <C>          <C>         <C>          <C>         <C>          <C>         <C>          <C>
TOTAL WINES AND
RELATED PRODUCTS      $608,859     103,343     $603,526     101,430     $595,665     102,431     $630,964     99,739
</TABLE>

     TABLE WINES.  The Company  sells over 40 different  brands of  non-varietal
table wines,  substantially  all of which are marketed in the  popularly  priced
segment,  which constituted  approximately 42% of the domestic table wine market
in the United States in the latest year for which data is available. The Company
also  sells  over 15  different  brands  of  varietal  table  wines  in both the
popularly  priced and premium  categories.  The Company's  principal  table wine
brands include  Inglenook,  Almaden,  Paul Masson,  Taylor  California  Cellars,
Cribari, Manischewitz, Taylor, Marcus James, Deer Valley and Dunnewood.

     The table below sets forth the unit  volumes (in  thousands of gallons) for
the  domestic  table  wines sold by the Company  and under  domestic  table wine
brands  acquired  in  the  Vintners   Acquisition   and  the   Almaden/Inglenook
Acquisition for the periods shown:

                        FISCAL          FISCAL         PRO FORMA         FISCAL
                         1994            1995         FISCAL 1996         1997
TABLE WINES             VOLUME          VOLUME          VOLUME           VOLUME
------------            ------          ------        -----------        ------
Non-varietal            52,610          47,774          45,888           43,897
Varietal                12,794          16,344          18,318           16,999
TOTAL (A)               65,404          64,118          64,206           60,896
-----------------------------
(a)      Excludes sales of wine coolers but includes sales of wine in bulk.

     Unit volume sales of non-varietal table wines have declined, while varietal
table wines have generally increased.  The Company believes that these trends in
the  consumption of table wines reflect a general change in consumer  preference
from non-varietal wines to varietal table wines.

     The Company also markets a selection of  popularly  priced  imported  table
wines. The Company's unit volume sales of imported wine increased  steadily from
1.9 million  gallons in fiscal 1994 to 2.8 million  gallons in fiscal 1997. This
improvement  is  attributable  primarily to increased  sales of the Marcus James
varietal wine brand.

<PAGE>

     DESSERT  WINES.  With the  exception  of the  premium  dessert  wine brands
acquired in the Vintners  Acquisition,  the Company markets its dessert wines in
the lower end of the popularly  priced  category.  The popularly priced category
represented  approximately 93% of the dessert wine market in the latest year for
which data is available.  The Company's  principal  dessert wine brands  include
Richards Wild Irish Rose, Cisco and Taylor.

     The table below sets forth the unit  volumes (in  thousands of gallons) for
the domestic  dessert wines sold by the Company and under domestic  dessert wine
brands acquired in the Vintners Acquisition for the periods shown:

                       FISCAL        FISCAL          PRO FORMA        FISCAL
                        1994          1995          FISCAL 1996        1997
  DESSERT WINES        VOLUME        VOLUME           VOLUME          VOLUME
                       ------        ------         -----------       ------
                       12,037        10,962           10,780          10,313


     The  Company's  unit volumes of dessert  wines have  declined over the last
three years.  The decline can be attributed to a general decline in dessert wine
consumption in the United States. The Company's unit volume sales of its dessert
wine brands  (including  the brands  acquired from  Vintners) have decreased 14%
from fiscal 1994 through fiscal 1997.

     SPARKLING  WINES.  The Company markets  substantially  all of its sparkling
wines in the popularly priced segment,  which  constituted  approximately 46% of
the  domestic  sparkling  wine  market  in the  latest  year for  which  data is
available.  The Company's  principal  sparkling wine brands include  Cook's,  J.
Roget, Great Western and Taylor.

     The table below sets forth the unit  volumes (in  thousands of gallons) for
the domestic  sparkling  wines sold by the Company and under domestic  sparkling
wine  brands  acquired in the  Vintners  Acquisition  and the  Almaden/Inglenook
Acquisition for the periods shown:

                             FISCAL        FISCAL       PRO FORMA       FISCAL
                              1994          1995       FISCAL 1996       1997 
     SPARKLING WINES         VOLUME        VOLUME         VOLUME        VOLUME
                             ------        ------      -----------      ------
                              7,353         6,500         6,650          6,317


     GRAPE  JUICE  CONCENTRATE.  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 believes that it is the leading grape juice concentrate  producer in the
United  States.  The table below sets forth the unit  volumes (in  thousands  of
gallons) for the grape juice concentrate sold by the Company and the grape juice
concentrate  business  acquired  in the  Almaden/Inglenook  Acquisition  for the
periods shown:

<PAGE>

                         FISCAL       FISCAL        PRO FORMA        FISCAL
GRAPE JUICE               1994         1995        FISCAL 1996       1997 
CONCENTRATE              VOLUME       VOLUME          VOLUME         VOLUME
                         ------       ------       -----------       ------
                         11,826        11,017           11,004       12,204

     OTHER WINE PRODUCTS AND RELATED SERVICES.  The Company's other wine related
products and services  include:  grape juice; St. Regis, a leading  nonalcoholic
line of wines in the United States;  wine coolers sold  primarily  under the Sun
Country brand name;  cooking wine; and wine for the  production of vinegar.  The
Company also provides various bottling and distillation  production services for
third parties.

     BEER.  The Company is the third largest  marketer of imported  beers in the
United States. The Company  distributes four of the top 20 imported beers in the
United  States:  Corona  Extra and Corona  Light,  St.  Pauli  Girl,  and Modelo
Especial. The table below sets forth the net sales (in thousands of dollars) and
unit  volumes (in  thousands  of cases) for the beer sold by the Company for the
periods shown:

                FISCAL          FISCAL           PRO FORMA         FISCAL
  BEER           1994            1995             FISCAL 1996       1997
            --------------  ---------------   ---------------  ---------------
            NET             NET               NET                NET
            SALES   VOLUME  SALES    VOLUME   SALES   VOLUME   SALES    VOLUME
            ------- ------  -------  ------   ------- ------   -------  ------
           $173,883 14,100 $216,159  17,471  $239,785 19,344  $298,925  23,848

     The Company's other imported beer brands include  Pacifico and Negra Modelo
from Mexico,  Tsingtao from China, Peroni from Italy and Double Diamond from the
United  Kingdom.  The Company  operates the Stevens  Point  Brewery,  a regional
brewer located in Wisconsin, which produces Point Special, among other brands.

     Net sales and unit  volumes of the  Company's  beer brands have grown since
fiscal  1994,  primarily  as a result of the  increased  sales of Corona and the
Company's other Mexican beer brands.  Net sales and unit volume  increased 24.7%
and 23.3%, respectively, in fiscal 1997 compared to Pro Forma Fiscal 1996.

     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 more than 15 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
volumes (in thousands of 9-liter  cases) for the  distilled  products case goods
sold by the Company and under brands acquired in the Vintners  Acquisition,  the
Almaden/Inglenook  Acquisition,  and for the brands and products acquired in the
UDG Acquisition for the periods shown:

<PAGE>
                                                  PRO FORMA
               FISCAL 1994      FISCAL 1995      FISCAL 1996       FISCAL 1997
            ---------------- ---------------- ---------------- ----------------
  
              NET              NET              NET              NET 
SPIRITS      SALES    VOLUME  SALES    VOLUME  SALES    VOLUME  SALES    VOLUME
            --------  ------ --------  ------ --------  ------ --------  ------
Company
(exclusive  $ 88,549  5,678  $ 92,400   5,917 $ 94,671   6,031 $100,907   6,059
of UDG)
UDG          101,916  4,941    92,136   5,013   84,132   4,709   82,936   4,840
            -------- ------  --------  ------ --------  ------ --------  ------
TOTAL       $190,465 10,619  $184,536  10,930 $178,803  10,740 $183,843  10,899
            ======== ======  ========  ====== ========  ====== ========  ======

     For the year  ended  February  28,  1997,  net  sales  and unit  volume  of
distilled  spirits  brands sold by the Company and under brands  acquired in the
Vintners   and   Almaden/Inglenook   Acquisitions   increased   6.6%  and  0.5%,
respectively.  Unit volume of vodka,  tequila and brandy  have  increased  while
Scotch and bourbon have experienced decreases in unit volume.

     During the period from the beginning of fiscal 1994 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 addition to the branded products described above, the Company also sells
distilled  spirits  in  bulk  and  provides  contract  production  and  bottling
services.

MARKETING AND DISTRIBUTION

     The  Company's  products are  distributed  and sold  throughout  the United
States  through  over  1,400  wholesalers,  as well as through  state  alcoholic
beverage control agencies.  The Company employs a full-time,  in-house marketing
and sales  organization of  approximately  300 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.

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.

<PAGE>

     The Company also  produces and sells wines 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  cancelled  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 wines.

     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
beers 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 1998 and,
subject to compliance with certain performance criteria,  may be extended by the
Company until 2003.  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 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 in
the distilled spirits category.

<PAGE>

PRODUCTION

     The  Company's  wines are 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 wines, high-proof grape spirits
or brandy.  Most of the  Company's  wines are  bottled and sold within 18 months
after the grape  crush.  The  Company's  inventories  of wines,  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 for grapes have escalated  dramatically  over the last two grape
harvests  (fall 1995 and fall 1996).  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.

<PAGE>

     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.  However, in connection with the Vintners
Acquisition and the Almaden/Inglenook  Acquisition, the Company acquired certain
long-term  grape  purchase  contracts.  In addition,  the  Company's  negligible
purchases  of grapes  from the Napa  Valley and  related  regions  minimize  its
exposure to phylloxera  and other  agricultural  risks.  However,  phylloxera in
these regions has caused certain  wineries to increase their purchases of grapes
from the San Joaquin and Monterey regions.  The Company currently owns or leases
under various arrangements approximately 4,500 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 1997 and Pro Forma  Fiscal 1996.  As of February 28, 1997,  approximately
1,100  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.

<PAGE>

ITEM 2.     PROPERTIES

     The Company  currently  operates 12 wineries,  two  distilling and bottling
plants,  three bottling plants and a brewery,  most of which include warehousing
and distribution facilities on the premises. 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.  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.

     In New York, the Company  operates three wineries  located in  Canandaigua,
Naples and Batavia.  The Company  currently  operates nine 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,  Lodi,
McFarland,  Madera, Fresno, and Ukiah. The Company expects to sell its winery in
Lodi, California.  The Escalon facility is operated under a long-term lease with
an  option  to  buy.  The  Company   currently  owns  or  leases  under  various
arrangements  approximately  4,500 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  distilling,  bottling  and storage  facilities  in
Bardstown,  Kentucky,  and 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, and its Albany, Georgia facility distills and
bottles, 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.  In  addition,  the
Company owns and maintains its corporate headquarters in Canandaigua,  New York,
where it also  leases  additional  office  space,  and  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 

<PAGE>

Credit  Agreement (as defined below 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.

     In  connection  with an  investigation  in the  State  of New  Jersey  into
regulatory trade practices in the beverage alcohol industry, one employee of the
Company was arrested in March 1994 and another employee  subsequently came under
investigation  in  connection  with  providing  "free  goods"  to  retailers  in
violation of New Jersey beverage alcohol laws. A proposed consent order has been
received from the appropriate regulatory agency by the Company which would, when
finalized, fully resolve the matter without any material effect on the Company.

     With respect to the following  described  litigation,  on November 8, 1996,
the  District  Court  entered  summary  judgment in favor of the Company and the
other  defendants.  The Court's judgment  resolves all claims against all of the
defendants in this  litigation.  The time period in which  plaintiffs could have
filed a notice of appeal to the United  States  Court of Appeals  for the Second
Circuit expired on December 12, 1996, without any such notice being filed.

     On November 13, 1995, a purported  stockholder of the Company filed a class
action in the United  States  District  Court for the  Southern  District of New
York,  Ventry,  et al. v.  Canandaigua  Wine Company,  Inc., et al. (the "Ventry
Class  Action").  On November 16, 1995,  another  purported  stockholder  of the
Company  filed a class  action  in the  United  States  District  Court  for the
Southern  District of New York,  Brickell  Partners,  et al. v. Canandaigua Wine
Company,  Inc., et al. (the  "Brickell  Class  Action").  On December 6, 1995, a
third  purported  stockholder  of the Company filed a class action in the United
States District Court for the Southern  District of New York,  Babich, et al. v.
Canandaigua Wine Company,  Inc., et al. (and this class action together with the
Brickell  Class Action and the Ventry Class Action,  the "Class  Actions").  The
defendants  in the Class  Actions  were the Company,  Richard  Sands and Lynn K.
Fetterman.  The Class Actions were consolidated and a consolidated complaint was
filed on January 16, 1996.  The Class  Actions  asserted  violations  of Section
10(b)  of the  Securities  Exchange  Act of  1934  and  Rule  10b-5  promulgated
thereunder  and sought to recover  damages in an  unspecified  amount  which the
class members  allegedly  sustained by purchasing the Company's  common stock at
artificially  inflated prices.  The complaints in the Class Actions alleged that
the Company's public documents and statements were materially incomplete and, as
a result, misleading.

     On April 8, 1996,  the Company  filed a motion to dismiss the  consolidated
complaint and oral argument was held on September 25, 1996. After oral argument,
the Court stated that it intended to construe the Company's motion to dismiss as
a motion for summary judgment. As noted above, on November 8, 1996, the District
Court entered summary judgment in favor of the Company and the other defendants.

<PAGE>

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

         Not Applicable.

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          73       Chairman of the Board
Richard Sands         46       President and Chief Executive Officer
Robert Sands          38       Executive Vice President, General Counsel 
                               and Secretary
Ellis M. Goodman      60       Chief Executive Officer of Barton Incorporated
Daniel C. Barnett     47       Senior Vice President and President of 
                               Wine Division
Bertram E. Silk       65       Senior Vice President
Thomas S. Summer      43       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.

     Ellis M.  Goodman  is the Chief  Executive  Officer of Barton and serves in
that capacity under the terms of an employment  agreement with Barton. By virtue
of his  position and  responsibilities  with  Barton,  Mr.  Goodman is deemed an
executive  officer of the Company.  From July 1993 to January 1996,  Mr. Goodman
served as a director of the Company.  Also,  from July 1993 to October  1993, he
served as a Vice President of the Company and from October 1993 to January 1996,
Mr. Goodman  served as an Executive  Vice President of the Company.  Mr. Goodman
has been  Chief  Executive  Officer  of Barton  since  1987 and Chief  Executive
Officer of Barton Brands, Ltd. (predecessor to Barton) since 1982.

     Daniel C. Barnett joined the Company during  November 1995 as a Senior Vice
President  and  President  of the  Company's  wine  division.  From July 1994 to
October 1995, Mr. Barnett

<PAGE>

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.

     Bertram E. Silk has been a director and Vice President of the Company since
1973 and was elected Senior Vice President in October 1993. He has been employed
by the Company  since 1965.  Currently,  Mr. Silk is  responsible  for  industry
relations  with  respect to labor unions in  California,  as well as for various
trade   association  and   international   alcohol  beverage  industry  matters.
Immediately  prior to his current  position,  he was in charge of the  Company's
grape grower relations in California.  Before moving from Canandaigua,  New York
to  California in 1989,  Mr. Silk was in charge of  production  for the Company.
From 1989 to August 1994,  Mr. Silk was in charge of the  Company's  grape juice
concentrate business in California.

     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 heath 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.

<PAGE>

                                     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  Market  tier of the
Nasdaq  Stock Market under the symbols  "WINEA" and "WINEB,"  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 Market.

                                           CLASS A STOCK
                      --------------------------------------------------------
                      1ST QUARTER    2ND QUARTER    3RD QUARTER    4TH QUARTER
                      -----------    -----------    -----------    -----------
                       
Fiscal 1995
  High                  $34 1/4       $40 1/2         $44 3/4        $48
  Low                   $29 3/4       $33 1/4         $33 1/2        $40 1/2
Transition Period
  High                  $53           $39
  Low                   $30 3/4       $29 3/4
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

                                           CLASS B STOCK
                      --------------------------------------------------------
                      1ST QUARTER    2ND QUARTER    3RD QUARTER    4TH QUARTER
                      -----------    -----------    -----------    -----------
Fiscal 1995
  High                  $34 1/2       $40             $45 1/2        $47 3/4
  Low                   $30 1/2       $33             $35 1/4        $43
Transition Period
  High                  $52 1/4       $38 3/4
  Low                   $32 1/2       $32 1/4
Fiscal 1997
  High                  $39 1/2       $32 1/2         $29 3/4        $34
  Low                   $27 3/4       $25 3/8         $19            $28 3/4


     At May 5, 1997,  the number of holders of record of Class A Stock and Class
B Stock of the Company were 1,292 and 351, 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 prohibits and 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 
                                                                                           MONTHS 
                                          FOR THE YEARS ENDED AUGUST 31,                   ENDED            FOR THE YEARS ENDED
                              ------------------------------------------------------    ------------    ----------------------------
                                                                                        February 29,    February 29,    February 28,
                                 1992          1993          1994           1995            1996          1996 (a)          1997
                              ----------    ----------    ----------    ------------    ------------    ------------    ------------
(IN THOUSANDS, EXCEPT
  PER SHARE DATA)
<S>                           <C>           <C>           <C>           <C>             <C>             <C>             <C>
Sales:
  Gross, including excise
    taxes                     $ 305,118     $ 389,417     $ 861,059     $ 1,185,074     $   738,415     $ 1,331,184     $ 1,534,452
  Less-excise taxes             (59,875)      (83,109)     (231,475)       (278,530)       (203,391)       (344,101)       (399,439)
                              ---------     ---------     ---------     -----------     -----------     -----------     -----------
    Net sales                   245,243       306,308       629,584         906,544         535,024         987,083       1,135,013
Cost of product sold           (174,686)     (214,931)     (447,211)       (653,811)       (396,208)       (722,325)       (844,181)
                              ---------     ---------     ---------     -----------     -----------     -----------     -----------
    Gross profit                 70,557        91,377       182,373         252,733         138,816         264,758         290,832
Selling, general and
  administrative expenses       (46,491)      (59,983)     (121,388)       (159,196)       (112,411)       (191,683)       (208,991)
Nonrecurring restructuring
  expenses                         --            --         (24,005)         (2,238)         (2,404)         (3,957)           --
                              ---------     ---------     ---------     -----------     -----------     -----------     -----------
    Operating income             24,066        31,394        36,980          91,299          24,001          69,118          81,841
Interest expense, net            (6,182)       (6,126)      (18,056)        (24,601)        (17,298)        (28,758)        (34,050)
                              ---------     ---------     ---------     -----------     -----------     -----------     -----------
    Income before provision
      for Federal and state
      income taxes               17,884        25,268        18,924          66,698           6,703          40,360          47,791
Provision for Federal and
  state income taxes             (6,528)       (9,664)       (7,191)        (25,678)         (3,381)        (16,339)        (20,116)
                              ---------     ---------     ---------     -----------     -----------     -----------     -----------
Net income                    $  11,356     $  15,604     $  11,733     $    41,020     $     3,322     $    24,021     $    27,675
                              =========     =========     =========     ===========     ===========     ===========     ===========
Net income per common and
  common equivalent share:
    Primary                   $    1.08     $    1.30     $     .74     $      2.14     $       .17     $      1.20     $      1.41
                              =========     =========     =========     ===========     ===========     ===========     ===========
    Fully diluted             $    1.01     $    1.20     $     .74     $      2.13     $       .17     $      1.20     $      1.40
                              =========     =========     =========     ===========     ===========     ===========     ===========

Total assets                  $ 217,835     $ 355,182     $ 826,562     $   785,921     $ 1,054,580     $ 1,054,580     $ 1,020,901
                              =========     =========     =========     ===========     ===========     ===========     ===========
Long-term debt                $  61,909     $ 108,303     $ 289,122     $   198,859     $   327,616     $   327,616     $   338,884
                              =========     =========     =========     ===========     ===========     ===========     ===========
</TABLE>

For the fiscal year ended  February 28, 1997,  the twelve months ended  February
29,  1996,  the six months ended  February 29, 1996,  and the fiscal years ended
August 31, 1995 and 1994, 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, 1997, under Item 8 of this
report.

(a) The twelve month period ended  February 29, 1996,  consisted of the last six
months of the  Company's  1995 fiscal year ended  August 31,  1995,  and the six
month  fiscal  period ended  February  29, 1996,  as a result of a change in the
Company's fiscal year end.

<PAGE>

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

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of income expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
                                                                           PRO FORMA
                             FISCAL YEAR                                TWELVE MONTHS   FISCAL YEAR
                            ENDED AUGUST        SIX MONTHS ENDED            ENDED          ENDED
                                 31,        FEBRUARY 28,  FEBRUARY 29,    FEBRUARY 29,  FEBRUARY 28,
                            1994    1995       1995*         1996            1996*         1997   
                           ------  ------   ------------  ------------  --------------  ------------

<S>                        <C>      <C>        <C>           <C>             <C>           <C>
Net sales                  100.0%   100.0%     100.0%        100.0%          100.0%        100.0%   
Cost of product sold        72.1     74.1       73.2          74.4            71.0          72.1
 Gross profit               29.0     27.9       27.9          25.9            26.8          25.6
Selling, general and    
administrative expenses     19.3     17.6       17.6          21.0            19.4          18.4
Nonrecurring restructuring                                    
expenses                     3.8      0.2        0.1           0.4             0.4           0.0
 Operating income            5.9     10.1       10.2           4.5             7.0           7.2
Interest expense, net        2.9      2.7        2.9           3.2             2.9           3.0
 Income before provision   
 for income taxes            3.0      7.4        7.3           1.3             4.1           4.2
Provision for Federal and            
state income taxes           1.1      2.9        2.8           0.7             1.7           1.8
 Net income                  1.9%     4.5%       4.5%          0.6%            2.4%          2.4%
*Unaudited
</TABLE>

TWELVE MONTHS ENDED FEBRUARY 28, 1997,  COMPARED TO TWELVE MONTHS ENDED FEBRUARY
29, 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  approximately
15.0%.  This increase  resulted  primarily  from (i) $59.1 million of additional
imported  beer sales,  primarily  Mexican  beers;  (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 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
non-varietal  table wine 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 table below sets forth the net sales (in thousands of dollars) and unit
volumes (in  thousands  of cases) for the  branded  beverage  alcohol  products,
branded wine products,  each category of branded wine products, beer and spirits
brands sold by the Company for fiscal 1997 and Pro Forma Fiscal 1996:


                  FISCAL 1997 COMPARED TO PRO FORMA FISCAL 1996

                                   NET SALES                 UNIT VOLUME
                          --------------------------    ----------------------
                                               %INC/                     %INC/
                            1997      1996     (DEC)     1997    1996    (DEC)
                          --------  --------   -----    ------  ------   -----
Branded Beverage 
 Alcohol Products (1)     $994,500  $919,206    8.2%    60,631  56,823    6.7%
Branded Wine Products      512,510   499,962    2.5     27,393  28,232   (3.0)
 Non-varietal table wines  216,284   221,522   (2.4)    13,518  14,203   (4.8)
 Varietal table wines      162,174   142,812   13.6      6,858   6,666    2.9
 Dessert wines              67,132    67,625   (0.7)     4,175   4,371   (4.5)
 Sparkling wines            66,920    68,003   (1.6)     2,843   2,992   (5.0)
Beer                       298,925   239,786   24.7     23,848  19,344   23.3
Spirits (2)                183,843   178,803    2.8      9,390   9,223    1.8

-------------------------

(1)      The sum of the net sales and unit volume  amounts  from the  categories
         may  not  equal  total  Branded   Beverage   Alcohol  Products  because
         miscellaneous items affecting net sales and unit volume may be included
         in total  Branded  Beverage  Alcohol  Products but not reflected in the
         category information.

(2)      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.

     Net  sales  and unit  volume  of the  Company's  branded  beverage  alcohol
products for fiscal 1997 increased 8.2% and 6.7%,  respectively,  as compared to
Pro Forma Fiscal 1996. The net sales increase resulted from higher imported beer
sales,  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  non-varietal
table wines, dessert wines and sparkling wines.

     Net sales and unit volume of the Company's non-varietal table wine products
declined by 2.4% and 4.8% respectively, for fiscal 1997 as compared to Pro Forma
Fiscal 1996. The

<PAGE>

Company  believes  that the  decline in unit volume  reflects  the impact of the
Company's  selling price increases,  reduced  promotion,  and other  competitive
pressures.

     Net sales and unit  volume of the  Company's  varietal  table  wine  brands
increased by 13.6% and 2.9%, respectively. Net sales increased at a greater rate
than unit volume due to selling price increases  instituted between October 1995
and May 1996.  Net sales of the Company's  varietal  table wine products such as
chardonnay, cabernet sauvignon and merlot, which represent more than half of the
Company's  varietal table wine volume,  increased  substantially in fiscal 1997,
while net sales of white zinfandel  products  declined  slightly in fiscal 1997.
The Company  believes that unit volume growth of its varietal  table wine brands
has slowed  during  fiscal 1997 due to price  increases.  During this period the
entire industry experienced a slowdown of its varietal wine volume growth due to
price increases related to higher costs from the last two grape harvests.

     Net sales and unit volume of the Company's  dessert wine brands declined by
0.7% and 4.5%,  respectively,  during fiscal 1997.  The Company  believes  that,
although the impact of the decline in unit volume was mitigated by selling price
increases,  these results reflect the continuing  trend of consumer  preferences
away from the dessert wine category.

     Net sales and unit volume of the  Company's  sparkling  wines  decreased by
1.6% and 5.0%, respectively,  during fiscal 1997 as compared to Pro Forma Fiscal
1996.  The Company  believes that the decline in unit volume is consistent  with
industry trends.

     Net sales and unit volume of the Company's beer brands  increased 24.7% and
23.3%, respectively, during fiscal 1997. These increases were largely due to the
Company's  Mexican beer brands,  which represented over 70% of total beer sales.
The  Company  believes  that the growth in its  Mexican  beers is related to the
growth of the Hispanic  population  in the  Company's  distribution  areas,  the
continued popularity of imported beers in general and the narrowing retail price
gap between imported beers and domestic beers.

     Net  sales  and unit  volume  of the  Company's  distilled  spirits  brands
increased  by 2.8% and 1.8%,  respectively,  in fiscal  1997 as  compared to Pro
Forma  Fiscal 1996.  Excluding  the impact of the UDG  Acquisition,  spirits net
sales  and unit  volume  increased  by 6.4% and 1.3%,  respectively,  reflecting
strong  brandy  sales,   increased   sales  of  tequila  and  liqueurs  and  the
introduction  of a number of new products.  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  reflect 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)  approximately  $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)
approximately $19.0 million of additional gross profit from increased

<PAGE>

beer  sales;  and  (iii)  approximately  $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 wines 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, the Company's  fiscal 1997 results reflect a reduction
in gross  profit  of  approximately  $31.4  million  due to the  Company's  LIFO
accounting method. For comparison purposes,  results for the Company's Pro Forma
Fiscal 1996 reflected a reduction in gross profit of approximately  $3.9 million
due to LIFO.

     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.

<PAGE>
  
     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 foregoing, 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 was
$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.  For
comparison  purposes  to  companies  using the FIFO method of  accounting  only,
EBITDA on a FIFO basis was $145.1  million in fiscal 1997,  an increase of $50.1
million over EBITDA on a FIFO basis of $95.0 million in Pro Forma Fiscal 1996.


SIX MONTH  TRANSITION  PERIOD ENDED  FEBRUARY  29, 1996,  COMPARED TO SIX MONTHS
ENDED FEBRUARY 28, 1995

     NET SALES

     Net sales for the Transition Period increased to $535.0 million from $454.5
million  for the six months  ended  February  28, 1995 (the  "February  1995 Six
Months"),  an increase of $80.5 million,  or 17.7%.  In addition to the sales 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,
non-varietal  wine,  contract  bottling  services,  grape juice  concentrate and
dessert wine.

     For purposes of computing  the net sales and unit volume  comparative  data
below,  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.

     The following  table sets forth the net sales (in thousands of dollars) and
unit volumes (in thousands of cases) for the branded beverage alcohol  products,
branded wine products, each
     
<PAGE>

category of branded wine  product,  beer and spirits  brands sold by the Company
for the Transition Period and the February 1995 Six Months:
<TABLE>
          TRANSITION PERIOD COMPARED TO FEBRUARY 1995 SIX MONTHS
<CAPTION>
                                      NET SALES                                  UNIT VOLUME
                       ---------------------------------------    ---------------------------------------
                       TRANSITION   FEBRUARY 1995   %INCREASE     TRANSITION   FEBRUARY 1995   %INCREASE
                         PERIOD      SIX MONTHS     (DECREASE)      PERIOD      SIX MONTHS     (DECREASE)
                       ----------   -------------   ----------    ----------   -------------   ----------
<S>                    <C>           <C>              <C>           <C>           <C>            <C>
Branded Beverage
 Alcohol Products (1)  $474,450      $443,204          7.1%         28,748        26,786          7.3%
Branded Wine Products   268,782       255,881          5.0          14,783        14,537          1.7
 Non-varietal wines     116,128       117,805         (1.4)          7,325         7,699         (4.9)
 Varietal wines          78,182        64,049         22.1           3,637         2,971         22.4
 Dessert wines           32,640        33,435         (2.4)          2,033         2,137         (4.9)
 Sparkling wines         41,831        40,592          3.1           1,788         1,731          3.3
Beer                    115,757        92,131         25.6           9,316         7,444         25.1
Spirits (2)              91,219        96,547         (5.5)          4,648         4,793         (3.0)
-----------------
<FN>
(1)      The sum of the net sales and unit volume  amounts  from the  individual
         categories do not equal total Branded Beverage Alcohol Products because
         miscellaneous  items  reducing  net sales and adding to unit volume are
         included  in  total  Branded  Beverage  Alcohol  Products  but  are not
         reflected in the category information.

(2)      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.
</FN>
</TABLE>
     Net  sales  and unit  volume  of the  Company's  branded  beverage  alcohol
products for the Transition  Period  increased 7.1% and 7.3%,  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.

     Net  sales  of the  Company's  branded  wine  products  increased  by $12.9
million, or 5.0%, for the Transition Period as compared to the February 1995 Six
Months.  Unit  volume  of the  Company's  branded  wine  products  increased  by
approximately  246,000  cases,  or 1.7%.  Of the $12.9  million  increase in net
sales, (i) $8.6 million was due to higher average selling prices per case due to
a combination of price increases implemented by the Company between October 1995
and  January  1996 and a change  in the  product  mix in favor of  higher-priced
categories;  and  (ii)  $4.3  million  was  due to  increased  shipments  of the
Company's  varietal table wines and sparkling  wines,  partially offset by lower
shipments of non-varietal  table wines and dessert wines.  The Company  believes
that the  increase  in unit volume was  partially  due to the  fulfillment  of a
backlog of orders at the end of fiscal 1995 caused by  production  and  shipping
delays associated with the  consolidation of certain of its California  wineries
(the "Restructuring  Plan"). The backlog of unfilled orders from August 1995 was
substantially eliminated in the first three months of the Transition Period.

<PAGE>

     Net sales and unit volume of the Company's  non-varietal  table wine brands
for the Transition Period decreased by 1.4% and 4.9%, respectively,  as compared
to the  February  1995 Six  Months.  The  decline in net sales was less than the
decline in unit volume as a result of the selling price increases implemented by
the Company.  The Company  believes that the volume decline is consistent with a
general change in consumer preferences from non-varietal table wines to varietal
table wines and may also reflect the impact of the Company's price increases.

     Net sales and unit volume of the Company's  varietal  table wine brands for
the Transition  Period increased 22.1% and 22.4%,  respectively,  as compared to
the  February  1995 Six  Months.  With the price  increases  implemented  in the
Transition Period, the phasing out of introductory pricing on varietal wine line
extensions,  and changes in mix, the average price per case of varietal wine has
virtually returned to the level the Company experienced in the February 1995 Six
Months.

     Net sales and unit volume of the Company's  sparkling wine brands increased
by 3.1% and 3.3%,  respectively,  in the  Transition  Period as  compared to the
February  1995 Six Months.  While these  results  were better than the  industry
growth rate in the category  during this period,  they  reflect  comparisons  to
lower  sales for the  Company in the  February  1995 Six Months  relative to the
industry.

     Net sales and unit volume of the Company's dessert wine brands decreased by
2.4% and  4.9%,  respectively,  in the  Transition  Period  as  compared  to the
February 1995 Six Months,  reflecting the continuing  decline in the consumption
of  beverage  dessert  wines,  partially  offset  by  increases  in the  sale of
traditional dessert wines such as ports and sherries.

     Net sales and unit volume of the Company's  beer brands for the  Transition
Period increased by 25.6% and 25.1%,  respectively,  as compared to the February
1995 Six  Months.  These  increases  were  principally  driven  by growth in the
Company's Mexican beer brands, which represented over 70% of total beer sales.

     Net  sales  and unit  volume  of the  Company's  distilled  spirits  brands
declined by 5.5% and 3.0%, respectively, in the Transition Period as compared to
the February 1995 Six Months.  Excluding the impact of the UDG Acquisition,  net
sales and unit volume of the Company's distilled spirits brands grew by 6.2% and
5.0%,  respectively,  in the Transition Period,  led by higher brandy,  tequila,
liqueur and rum sales,  partially offset by lower whiskey,  gin and vodka sales.
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

<PAGE>

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 UDGand  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 ADMINISTRTIVE EXPENSES

     Selling,  general and  administrative  expenses totalled $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  beers.  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.

<PAGE>

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


FISCAL YEAR ENDED AUGUST 31, 1995, COMPARED TO FISCAL YEAR ENDED AUGUST 31, 1994

     NET SALES

     Net sales for fiscal 1995  increased to $906.5  million from $629.6 million
for fiscal 1994, an increase of $276.9 million,  or  approximately  44.0%.  This
increase  resulted  from the  inclusion  of (i)  $234.7  million of net sales of
products acquired in the Almaden/Inglenook Acquisition; (ii) an overall increase
of $25.8 million in net sales of Company  products,  excluding the impact of the
net sales of  products  that were  acquired  during  fiscal  1994;  and (iii) an
additional  $16.4  million of net sales of  Vintners'  products  resulting  from
inclusion  of these  products in the  Company's  portfolio  for the entire first
quarter  of fiscal  1995  versus  only six weeks in the first  quarter of fiscal
1994. Excluding the impact of the additional six weeks of net sales of Vintners'
products  during  the  first  quarter  of  fiscal  1995 and all of the net sales
resulting  from  the  Almaden/Inglenook  Acquisition  during  fiscal  1995,  the
Company's net sales increased 4.1% as

<PAGE>

compared to fiscal 1994.  This was  principally  due to  increased  net sales of
imported beer brands and varietal table wines.

     For purposes of computing  the net sales and unit volume  comparative  data
below,  sales  of  products  acquired  in  the  Vintners  and  Almaden/Inglenook
Acquisitions  have been included in the entire  period for fiscal 1995,  and the
entire fiscal year 1994, part of which was prior to the Vintners Acquisition and
the Almaden/Inglenook Acquisition.

     The table below sets forth the net sales (in thousands of dollars) and unit
volumes (in  thousands  of cases) for the  branded  beverage  alcohol  products,
branded wine products,  each category of branded wine products, beer and spirits
brands sold by the Company for the 1995 and 1994 fiscal years:

<TABLE>
                                    FISCAL 1995 COMPARED TO FISCAL 1994
<CAPTION>
                                           NET SALES                                  UNIT VOLUME
                             ---------------------------------------    ---------------------------------------
                                                          %INCREASE                                  %INCREASE
                                1995          1994        (DECREASE)       1995           1994       (DECREASE)
                              --------      --------      ----------      -------        ------      ----------
<S>                           <C>           <C>             <C>            <C>           <C>           <C>
Branded Beverage Alcohol
 Products (1)                 $795,290      $750,180          6.0%         50,547        47,688          6.0%
Branded Wine Products (2)      487,101       486,838          0.1          28,019        28,657         (2.2)
 Non-varietal wines            223,391       234,541         (4.8)         14,577        15,594         (6.5)
 Varietal wines                128,679       106,559         20.8           6,032         4,943         22.0
 Dessert wines                  68,094        71,320         (4.5)          4,474         4,794         (6.7)
 Sparkling wines                66,937        74,418        (10.1)          2,936         3,326        (11.7)
Beer                           216,159       173,883         24.3          17,471        14,100         23.9
Spirits (2) (3)                 92,400        88,549          4.3           5,041         4,847          4.0
-----------------------
<FN>
(1)      The sum of the net sales and unit volume amounts from the categories do
         not equal total Branded Beverage Alcohol Products because miscellaneous
         items affecting net sales and unit volume are included in total Branded
         Beverage  Alcohol  Products  but  are  not  reflected  in the  category
         information.

(2)      For comparison  purposes  only, the following  amounts of net sales and
         unit volume of brands  acquired  in the  Vintners  Acquisition  and the
         Almaden/Inglenook  Acquisition  have  been  included  in the  table for
         fiscal year 1994;

                                        NET SALES          UNIT VOLUME
    Non-varietal wines                  $113,754                7,964
    Varietal wines                        53,622                2,818
    Dessert wines                          1,637                   78
    Sparkling wines                        7,701                  265
    Spirits                                3,566                  134

     These  amounts  represent  net  sales and unit  volume  of brands  from the
Vintners Acquisition for the period September 1, 1993, through October 14, 1993,
which was prior to the Vintners

<PAGE>

Acquisition,  and net sales and unit volume of brands from the Almaden/Inglenook
Acquisition for the period September 1, 1993,  through August 4, 1994, which was
prior to the Almaden/Inglenook Acquisition.

(3)  The Spirits category  includes for both years presented case goods sales of
     a number of brandy  products  under  brands  acquired in the  Vintners  and
     Almaden/Inglenook Acquisitions.
</FN>
</TABLE>

     Net  sales  and unit  volume  of the  Company's  branded  beverage  alcohol
products  for fiscal 1995 each  increased  6% as compared to fiscal  1994.  This
increase  was  principally  due to  increased  net sales and unit  volume of the
Company's imported beer brands and varietal table wine brands.

     Net sales and unit volume of the Company's branded wine products for fiscal
1995  increased  0.1% and decreased  2.2%,  respectively,  as compared to fiscal
1994.  These  results  were  primarily  due to lower  non-varietal  table  wine,
sparkling  wine and dessert wine sales offset by improved  varietal  wine sales.
The Company's  results were also negatively  affected by a backlog in fulfilling
orders  at  the  end of  fiscal  1995  due to  production  and  shipment  delays
associated  with  the  relocation  of  West  Coast  bottling  operations  to the
Company's  Mission Bell winery  under the  Restructuring  Plan.  The backlog was
substantially eliminated in the first three months of the Transition Period. The
Company  also  increased  prices on selected  branded wine  products  during the
Transition  Period in response to increased grape costs associated with the 1995
harvest  and to phase out  introductory  pricing  on  recently  introduced  line
extensions of varietal wine products.

     Net sales and unit volume of the Company's  non-varietal  table wine brands
for fiscal  1995  declined  4.8% and 6.5%,  respectively,  as compared to fiscal
1994. The Company  believes these declines are consistent with a general decline
in the  consumption  of  non-varietal  table wine products  reflecting  changing
consumer preferences toward varietal table wines.

     Net sales and unit volume of the Company's  varietal  table wine brands for
fiscal 1995 increased 20.8% and 22.0%, respectively, as compared to fiscal 1994.
These increases  reflect the  continuation  of the Company's  strategy to expand
distribution  into new  markets and  increase  penetration  of existing  markets
primarily  through line extensions and promotional  activities.  As part of this
strategy,  the Company also offered certain new and existing  products at highly
competitive prices.

     Net sales and unit volume of the  Company's  dessert wine brands for fiscal
1995  decreased  4.5% and 6.7%,  respectively,  as compared to fiscal 1994.  The
Company  believes  those  declines  are  consistent  with a general  decline  in
consumption of dessert wines.  Declines in the Company's  beverage dessert wines
were partially offset by growth in higher priced traditional  dessert wines such
as port and sherry.

     Net sales and unit volume of the Company's sparkling wine brands for fiscal
1995 declined 10.1% and 11.7%,  respectively,  as compared to fiscal 1994. These
declines  were  primarily  the result of strong  competition  and weak  consumer
demand for sparkling wine.

<PAGE>

     Net sales and unit  volume of the  Company's  beer  brands for fiscal  1995
increased  24.3% and 23.9%,  respectively,  as  compared to fiscal  1994.  These
increases  resulted primarily from increased sales of the Company's Corona brand
and its other  Mexican beer  brands,  which  represented  over 70% of total beer
sales.

     Net sales and unit volume of the Company's  spirits  brands for fiscal 1995
increased 4.3% and 4.0%, respectively, as compared to fiscal 1994. The growth is
due to increased shipments of brandy, vodka, and tequila.

     GROSS PROFIT

     Gross  profit for fiscal  1995  increased  to $252.7  million  from  $182.4
million for fiscal 1994, an increase of $70.3 million,  or approximately  38.6%.
This increase resulted from the inclusion of the Almaden/Inglenook Product Lines
with  those of the  Company,  and to a lesser  extent  from  increased  sales of
imported beer brands and the inclusion of Vintners'  product lines with those of
the Company.  The Company's  gross profit as a percentage of net sales decreased
to 27.9% for fiscal 1995 from 29.0% for fiscal 1994. The Company's  gross profit
percentages decreased as a result of the inclusion of operations acquired in the
Almaden/Inglenook  Acquisition,  which had a lower gross profit  percentage than
the remainder of the Company's operations,  and reduced gross profit percentages
on sales of  certain  of the  Company's  table  wine  brands in  fiscal  1995 as
compared to fiscal 1994. The cost of grapes,  a major component of the Company's
raw materials for its winemaking,  increased  significantly for the 1995 harvest
compared with the 1994 harvest.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and administrative  expenses for fiscal 1995 increased to
$159.2  million  from  $121.4  million  for fiscal  1994,  an  increase of $37.8
million,  or  approximately  31.1%.  This increase  primarily  resulted from the
additional  expenses  associated  with the sales and  marketing  of the products
acquired in the  Almaden/Inglenook  Acquisition,  and to a lesser extent, higher
advertising and promotion  expenses  associated  with certain wine brands.  As a
percentage of net sales, selling,  general and administrative expenses decreased
to 17.6% for fiscal  1995 as  compared  to 19.3% for fiscal  1994 as a result of
increased economies of scale.

     NONRECURRING RESTRUCTURING EXPENSES

     In fiscal 1995, the Company incurred a nonrecurring restructuring charge of
$2.2  million  related to its  Restructuring  Plan which  reduced net income per
share  by  $0.07  on a  fully  diluted  basis  as  compared  to  a  nonrecurring
restructuring  charge of $24.0  million  in fiscal  1994,  also  related  to the
Restructuring  Plan,  which  reduced  net  income  per share by $0.91 on a fully
diluted basis. See the Notes to the Company's  Consolidated Financial Statements
included herein.

<PAGE>

     INTEREST EXPENSE, NET

     Net interest expense increased $6.5 million to $24.6 million in fiscal 1995
as compared to fiscal 1994. The increase is primarily due to borrowings  related
to the Vintners and Almaden/Inglenook Acquisitions.

     NET INCOME

     Net income for fiscal 1995  increased to $41.0  million from $11.7  million
for fiscal 1994, an increase of $29.3 million,  or approximately  249.6%.  Fully
diluted  earnings  per share  increased  to $2.13 in fiscal  1995 from  $0.74 in
fiscal 1994, a 187.8% improvement.

     Excluding the impact of the nonrecurring restructuring expenses, net income
was $42.4  million in fiscal 1995 as compared to $26.6  million in fiscal  1994.
This  represents  an  improvement  in net  income  of $15.8  million  or  59.4%.
Excluding the impact of the nonrecurring  restructuring expenses,  fully diluted
earnings per common share  increased to $2.20 from $1.65,  an increase of 33.3%.
These increases were due to the  contribution of the  Almaden/Inglenook  Product
Lines and other  products  acquired  in the  Almaden/Inglenook  Acquisition  and
increased sales of imported beer brands.


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 1997 CASH FLOWS

     OPERATING ACTIVITIES

     Net cash  provided  by  operating  activities  in  fiscal  1997 was  $107.8
million.  The net cash provided by operating  activities in fiscal 1997 resulted
principally from net income adjusted for

<PAGE>

noncash  items,  a net decrease in  operating  assets and a net increase in
operating  liabilities.  The net decrease in operating assets resulted primarily
from a $16.2 million decrease in inventory levels. The net increase in operating
liabilities  resulted  primarily from a $24.6 million  increase in other accrued
expenses and liabilities  principally the result of an increase of $15.6 million
in accrued income taxes and an increase of $2.0 million in accrued interest.

     INVESTING ACTIVITIES AND FINANCING ACTIVITIES

     Net cash used in investing activities in fiscal 1997 was $36.3 million. The
net cash used in investing  activities  in fiscal 1997 resulted  primarily  from
$31.6  million of capital  expenditures  and the final  $13.8  million  earn-out
payment to the former Barton  stockholders,  offset in part by proceeds from the
sale of property,  plant and  equipment of $9.2 million,  resulting  principally
from the May 1996 sale of the Company's  Central Cellars winery located in Lodi,
California,  and the December 1996 sale of the Company's  Soledad winery located
in Soledad, California.

     Net cash used in financing activities in fiscal 1997 was $64.8 million. The
net cash used in financing  activities in fiscal 1997 resulted  principally from
net repayment of $54.3 million of revolving loan borrowings  under the Company's
Credit  Agreement  (as defined  below),  principal  payments of $50.8 million of
long-term debt and  repurchases of $20.8 million of the Company's Class A Common
Stock,  partially  offset by net proceeds of $61.7  million from the issuance of
additional subordinated notes.

     As of  February  28,  1997,  under its Credit  Agreement,  the  Company had
outstanding Term Loans of $185.9 million bearing interest at 6.5%, $57.0 million
of Revolving Loans bearing interest at 6.4%, undrawn Revolving Letters of Credit
of $8.6 million and $119.4 million available to be drawn in Revolving Loans.

     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  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.

     THE COMPANY'S CREDIT AGREEMENT

     The Company,  its principal operating  subsidiaries,  and a syndicate of 15
banks  (the  "Syndicate  Banks"),  for which The  Chase  Manhattan  Bank acts as
Administrative  Agent,  are  parties  to a Third  Amended  and  Restated  Credit
Agreement,  as amended (the "Credit  Agreement").  As of February 28, 1997,  the
Credit  Agreement  provided for (i) a $185.9  million Term Loan  facility due in
August 2001 ("Term  Loans") and (ii) a $185.0  million  Revolving Loan facility,
including  all drawn or  undrawn  letters  of  credit  up to a maximum  of $20.0
million ("Revolving Letters of Credit"),  which expires in June 2001 ("Revolving
Loans").

     As of May 7, 1997, under its Credit Agreement,  the Company had outstanding
Term  Loans of  $175.9  million  bearing  interest  at 6.8%,  $20.0  million  of
Revolving Loans bearing

<PAGE>

interest at 6.3%, undrawn Revolving Letters of Credit of $5.6 million and $159.4
million available to be drawn in Revolving Loans.

     SENIOR SUBORDINATED NOTES

     In December 1993, the Company  issued $130.0  million  aggregate  principal
amount of 8 3/4% Senior Subordinated Notes due 2003 (the "Original Notes").  The
Original Notes are redeemable at the option of the Company, in whole or in part,
on or after December 15, 1998. The Original Notes are unsecured and subordinated
to the prior payment in full of all senior  indebtedness  of the Company,  which
includes the Credit  Agreement.  The Original Notes are guaranteed,  on a senior
subordinated   basis,   by   substantially   all  of  the  Company's   operating
subsidiaries.   (Subsequent  to  fiscal  1997,  Monarch  Wine  Company,  Limited
Partnership,  a subsidiary  guarantor,  was liquidated  into another  subsidiary
guarantor and Tenner  Brothers,  Inc., a subsidiary  guarantor,  was merged into
another subsidiary guarantor.)

     On October 29, 1996, the Company issued $65.0 million  aggregate  principal
amount of 8 3/4%  Series B Senior  Subordinated  Notes  due 2003 (the  "Series B
Notes").  The Company used the net proceeds  from the sale of the Series B Notes
to repay amounts outstanding under its Credit Agreement, including $50.0 million
under  Revolving Loans and  approximately  $9.6 million to repay and permanently
reduce Term Loans.  The  remaining  proceeds  were used to pay various  fees and
expenses associated with the offering.

     The terms of the Series B Notes are substantially identical to those of the
Original Notes. A brief description of the Original Notes and the Series B Notes
is contained in Note 5 to the Company's  financial  statements located in Item 8
of this  Report on Form 10-K.  On February 7, 1997,  the  Company  commenced  an
exchange offer for the exchange of up to $65 million aggregate  principal amount
of its 8 3/4% Series C Senior Subordinated Notes due 2003 (the "Series C Notes")
for any and all of the issued and  outstanding  Series B Notes.  All outstanding
Series B Notes were  exchanged  for Series C Notes.  The Company did not receive
any  proceeds  from the  exchange  offer.  The  terms of the  Series C Notes are
identical in all material respects to the Series B Notes.

     As of  February  28,  1997,  the  Company had  outstanding  $195.0  million
aggregate  principal amount of 8 3/4% Senior  Subordinated Notes due 2003, being
the Original Notes and the Series C Notes.

     CAPITAL EXPENDITURES

     During fiscal 1997, the Company  expended  approximately  $31.6 million for
capital expenditures, including approximately $8.7 million related to vineyards.
The Company plans to spend approximately $18.5 million for capital expenditures,
exclusive of vineyards,  in fiscal 1998. In addition,  the Company  continues to
consider the  purchase,  lease and  development  of  vineyards.  See "Business -
Sources and  Availability of Raw  Materials."  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.

<PAGE>

     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, 1997,  aggregate  approximately  $37.0 million to $65.1 million for
contracts expiring through December 2005.

     At February 28, 1997, the Company had an open currency  forward contract to
purchase British pounds sterling of $374,000 which matures within twelve months.
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.

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                 CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                       AND
                             SUPPLEMENTARY SCHEDULES

                                FEBRUARY 28, 1997

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

  Report of Independent Public Accountants ...................................37
  Consolidated Balance Sheets - February 28, 1997 and February 29, 1996.......38
  Consolidated Statements of Income for the year ended February 28, 1997, 
    for the six months ended February 29, 1996 and February 28, 1995 
    (unaudited) and for the years ended August 31, 1995 and 1994..............39
  Consolidated Statements of Changes in Stockholders' Equity 
    for the year ended February 28, 1997, for the six months 
    ended February 29, 1996 and for the years ended August 31,1995 and 1994...40
  Consolidated Statements of Cash Flows for the year ended February 28, 1997, 
    for the six months ended February 29, 1996 and February 28, 
    1995 (unaudited) and for the years ended August 31, 1995 and 1994.........41
  Notes to Consolidated Financial Statements..................................42
  Selected Financial Data ....................................................19
  Selected Quarterly Financial Information (unaudited) .......................60

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.

<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Canandaigua Wine Company, Inc.:

We have audited the accompanying consolidated balance sheets of Canandaigua Wine
Company,  Inc. (a Delaware corporation) and subsidiaries as of February 28, 1997
and  February  29,  1996,  and the related  consolidated  statements  of income,
changes in  stockholders'  equity and cash flows for the year ended February 28,
1997, the six months ended February 29, 1996 and the years ended August 31, 1995
and 1994.  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 Wine Company, Inc.
and  subsidiaries as of February 28, 1997 and February 29, 1996, and the results
of their  operations  and their cash flows for the year ended February 28, 1997,
the six months  ended  February 29, 1996 and the years ended August 31, 1995 and
1994, in conformity with generally accepted accounting principles.


Rochester, New York,                          /s/ Arthur Andersen LLP
  April 25, 1997

<PAGE>

<TABLE>
                         CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS
                                (in thousands, except share data)

<CAPTION>
                                                                 February 28,        February 29,
                                                                     1997                1996     
                                                                 ------------        ------------                       
<S>                                                              <C>                 <C>           
                    ASSETS
                    ------
CURRENT ASSETS:
  Cash and cash investments                                      $    10,010         $     3,339
  Accounts receivable, net                                           142,592             142,471
  Inventories, net                                                   326,626             341,838
  Prepaid expenses and other current assets                           21,787              30,372
                                                                 -----------         -----------
    Total current assets                                             501,015             518,020
PROPERTY, PLANT AND EQUIPMENT, NET                                   249,552             250,638
OTHER ASSETS                                                         270,334             285,922
                                                                 -----------         -----------
  Total assets                                                   $ 1,020,901         $ 1,054,580
                                                                 ===========         ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY
      ------------------------------------
CURRENT LIABILITIES:
  Notes payable                                                  $    57,000         $   111,300
  Current maturities of long-term debt                                40,467              40,797
  Accounts payable                                                    63,492              59,730
  Accrued Federal and state excise taxes                              17,058              19,699
  Other accrued expenses and liabilities                              68,556              68,440
                                                                 -----------         -----------
    Total current liabilities                                        246,573             299,966
                                                                 -----------         -----------
LONG-TERM DEBT, less current maturities                              338,884             327,616
                                                                 -----------         -----------
DEFERRED INCOME TAXES                                                 61,395              58,194
                                                                 -----------         -----------
OTHER LIABILITIES                                                      9,316              12,298
                                                                 -----------         -----------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Class A Common Stock, $.01 par value-
    Authorized, 60,000,000 shares;
    Issued, 17,462,332 shares at February 28, 1997,
    and 17,423,082 shares at February 29, 1996                           174                 174
  Class B Convertible Common Stock, $.01 par value-
    Authorized, 20,000,000 shares;
    Issued, 3,956,183 shares at February 28, 1997,
    and 3,991,683 shares at February 29, 1996                             40                  40
  Additional paid-in capital                                         222,336             221,133
  Retained earnings                                                  170,275             142,600
                                                                 -----------         -----------
                                                                     392,825             363,947
                                                                 -----------         -----------
  Less-Treasury stock-
  Class A Common Stock, 1,915,468 shares at
    February 28, 1997, and 1,165,786 shares at
    February 29, 1996, at cost                                       (25,885)             (5,234)
  Class B Convertible Common Stock, 625,725 shares
    at February 28, 1997, and February 29, 1996, at cost              (2,207)             (2,207)
                                                                 -----------         -----------
                                                                     (28,092)             (7,441)
                                                                 -----------         -----------
    Total stockholders' equity                                       364,733             356,506
                                                                 -----------         -----------
  Total liabilities and stockholders' equity                     $ 1,020,901         $ 1,054,580
                                                                 ===========         ===========

                                                                                           
<FN>
   The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                        CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF INCOME
                                                 (in thousands, except share data)
<CAPTION>
                                                     For the Year Ended   For the Six Months Ended         For the Years Ended
                                                     ------------------ ----------------------------    --------------------------
                                                        February 28,    February 29,    February 28,    August 31,     August 31,
                                                            1997            1996            1995           1995           1994
                                                        ------------    ------------    ------------    -----------    -----------
                                                                                        (unaudited)
<S>                                                     <C>             <C>             <C>             <C>            <C>
GROSS SALES                                             $ 1,534,452     $   738,415     $   592,305     $1,185,074     $  861,059
  Less - Excise taxes                                      (399,439)       (203,391)       (137,820)      (278,530)      (231,475)
                                                        -----------     -----------     -----------     ----------     ----------
    Net sales                                             1,135,013         535,024         454,485        906,544        629,584
COST OF PRODUCT SOLD                                       (844,181)       (396,208)       (327,694)      (653,811)      (447,211)
                                                        -----------     -----------     -----------     ----------     ----------
    Gross profit                                            290,832         138,816         126,791        252,733        182,373
SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                                  (208,991)       (112,411)        (79,925)      (159,196)      (121,388)
NONRECURRING RESTRUCTURING EXPENSES                            --            (2,404)           (685)        (2,238)       (24,005)
                                                        -----------     -----------     -----------     ----------     ----------
    Operating income                                         81,841          24,001          46,181         91,299         36,980
INTEREST EXPENSE, net                                       (34,050)        (17,298)        (13,141)       (24,601)       (18,056)
                                                        -----------     -----------     -----------     ----------     ----------
    Income before provision for Federal  
      and state income taxes                                 47,791           6,703          33,040         66,698         18,924
PROVISION FOR FEDERAL AND
  STATE INCOME TAXES                                        (20,116)         (3,381)        (12,720)       (25,678)        (7,191)
                                                        -----------     -----------     -----------     ----------     ----------  
NET INCOME                                              $    27,675     $     3,322     $    20,320     $   41,020     $   11,733
                                                        ===========     ===========     ===========     ==========     ==========

SHARE DATA:
Net income per common and common
  equivalent share:
    Primary                                             $      1.41     $       .17     $      1.11     $     2.14     $      .74
                                                        ===========     ===========     ===========     ==========     ==========
    Fully diluted                                       $      1.40     $       .17     $      1.11     $     2.13     $      .74
                                                        ===========     ===========     ===========     ==========     ==========
Weighted average common shares outstanding:
    Primary                                              19,657,297      20,006,267      18,343,870     19,147,935     15,783,583
    Fully diluted                                        19,706,271      20,006,267      18,346,513     19,296,269     16,401,598

<FN>
      The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                    CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                          (in thousands, except share data)
                                                                               
<CAPTION>
                                                                                Additional 
                                                            Common Stock         Paid-in      Retained      Treasury
                                                          Class A   Class B      Capital      Earnings        Stock         Total
                                                          -------   -------     ----------    ---------     ---------     ----------
 <S>                                                      <C>       <C>         <C>           <C>           <C>           <C>
 BALANCE,  August 31, 1993                                $   106   $    41     $  47,202     $  86,525     ($ 7,770)     $ 126,104
 Conversion of 52,800 Class B Convertible Common
   shares to Class A Common shares                              1        (1)         --            --           --             --
 Conversion of 7% Convertible debentures to
   Class A Common shares                                       31      --          58,925          --           --           58,956
 To write-off unamortized deferred financing costs
   on debentures converted, net of amortization              --        --          (1,569)         --           --           (1,569)
 To write-off interest accrued on debentures, net
   of tax effect                                             --        --             850          --           --              850
 Employee stock purchase of 58,955 treasury shares           --        --             878          --            179          1,057
 To record exercise of 2,250 Class A stock options           --        --              10          --           --               10
 To record 500,000 Class A stock options related to
   the Vintners Acquisition                                  --        --           4,210          --           --            4,210
 To record 600,000 Class A stock options related to
   the Almaden/Inglenook Acquisition                         --        --           2,842          --           --            2,842
 Net income for fiscal 1994                                  --        --            --          11,733         --           11,733
                                                          -------   -------     ---------      --------      -------      ---------

 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 purchase of 28,641 treasury shares           --        --             546          --             87            633
 To record exercise of 114,075 Class A stock options            1      --           1,324          --           --            1,325
 To record tax benefit on stock options exercised            --        --           1,251          --           --            1,251
 To record 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                           --        --            --            --           --             --
 To record exercise of 18,000 Class A stock options          --        --             238          --           --              238
 Employee stock purchase of 20,869 treasury shares           --        --             593          --             63            656
 To record issuance of 10,000 Class A stock options          --        --             134          --           --              134
 To record tax benefit on stock options exercised            --        --             198          --           --              198
 To record 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                           --        --            --            --           --             --
 To record exercise of 3,750 Class A stock options           --        --              17          --           --               17
 Employee stock purchase of 37,768 treasury shares           --        --             884          --            114            998
 To record repurchase of 787,450 Class A Common shares       --        --            --            --        (20,765)       (20,765)
 To record acceleration of 18,500 Class A stock options      --        --             248          --           --              248
 To record tax benefit on stock options exercised            --        --              27          --           --               27
 To record 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
                                                          =======   =======     =========     =========      =======      =========
<FN>
                The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
                                          CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (in thousands)

<CAPTION>
                                                    For the Year Ended   For the Six Months Ended     For the Years Ended August 31,
                                                    ------------------ ----------------------------   ------------------------------
                                                       February 28,    February 29,    February 28,
                                                           1997            1996            1995            1995            1994
                                                       ------------    ------------    ------------     ----------       ---------
                                                                                       (unaudited)
<S>                                                     <C>             <C>             <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                            $  27,675       $   3,322       $  20,320       $  41,020       $  11,733

Adjustments to reconcile net income to net
  cash provided by (used in) operating activities:
    Depreciation of property, plant and equipment          22,359           9,521           9,786          15,568          10,534
    Amortization of intangible assets                       9,507           4,437           2,865           5,144           3,281
    Deferred tax provision (benefit)                        5,769           1,991              57          19,232          (4,319)
    Stock option expense                                      248            --              --              --              --
    Amortization of discount on long-term debt                112            --              --              --              --
    (Gain) loss on sale of property, plant and
      equipment                                            (3,371)             81            --               (33)           --
    Restructuring charges - fixed asset write-down           --               275            --            (2,050)         13,935
    Accrued interest on converted debentures,
      net of taxes                                           --              --              --              --               161
    Change in operating assets and liabilities, net of
      effects from purchases of businesses:
        Accounts receivable, net                            3,523         (27,008)          1,586           7,392         (17,946)
        Inventories, net                                   16,232         (70,172)        (18,783)         41,528             784
        Prepaid expenses and other current assets           3,271          (2,350)          3,079          (3,884)          1,703
        Accounts payable                                     (431)         (2,362)        (30,068)        (13,415)          2,680
        Accrued Federal and state excise taxes             (2,641)          4,066           6,907          (1,025)          4,405
        Other accrued expenses and liabilities             24,617          (8,564)        (28,175)        (20,784)          4,023
    Other                                                     898           1,930          (3,817)        (15,375)         (3,795)
                                                        ---------       ---------       ---------       ---------       ---------
        Total adjustments                                  80,093         (88,155)        (56,563)         32,298          15,446
                                                        ---------       ---------       ---------       ---------       ---------
        Net cash provided by (used in) operating
          activities                                      107,768         (84,833)        (36,243)         73,318          27,179
                                                        ---------       ---------       ---------       ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment,
    net of minor disposals                                (31,649)        (16,077)        (11,342)        (37,121)         (7,853)
  Payment of accrued earn-out amounts                     (13,848)        (11,307)           --           (28,300)         (4,000)
  Proceeds from sale of property, plant
    and equipment                                           9,174             555            --             1,336            --
  Purchase of brands                                         --              --              --              --            (5,100)
  Purchases of businesses, net of cash acquired              --              --              --              --                 3
                                                        ---------       ---------       ---------       ---------       ---------
        Net cash used in investing activities             (36,323)        (26,829)        (11,342)        (64,085)        (16,950)
                                                        ---------       ---------       ---------       ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Repayment of) proceeds from notes payable,
    short-term borrowings                                 (54,300)        111,300          57,100          50,100          (2,035)
  Principal payments of long-term debt                    (50,842)        (14,579)         (7,474)        (57,906)         (6,856)
  Purchases of treasury stock                             (20,765)           --              --              --              --
  Payment of issuance costs of long-term debt              (1,550)           --              --              --            (4,624)
  Proceeds from issuance of long-term debt,
    net of discount                                        61,668            --              --              --              --
  Proceeds from employee stock purchases                      998             656            --               633           1,056
  Exercise of employee stock options                           17             224             341           1,325              10
  Proceeds from Term Loan, long-term debt                    --            13,220          47,000          47,000            --
  Proceeds from equity offering, net                         --              --           103,313         103,400            --
  Repayment of notes payable from equity 
    offering proceeds                                        --              --           (22,100)        (22,100)           --
  Repayment of notes payable from proceeds of
    Term Loan                                                --              --           (47,000)        (47,000)           --
  Repayment of Term Loan from equity offering
    proceeds, long-term debt                                 --              --           (82,000)        (82,000)           --
  Fractional shares paid for debenture conversions           --              --              --              --                (3)
                                                        ---------       ---------       ---------       ---------       ---------
        Net cash (used in) provided by financing
          activities                                      (64,774)        110,821          49,180          (6,548)        (12,452)
                                                        ---------       ---------       ---------       ---------       ---------
NET INCREASE (DECREASE) IN CASH AND CASH INVESTMENTS        6,671            (841)          1,595           2,685          (2,223)
CASH AND CASH INVESTMENTS, beginning of period              3,339           4,180           1,495           1,495           3,718
                                                        ---------       ---------       ---------       ---------       ---------
CASH AND CASH INVESTMENTS, end of period                $  10,010       $   3,339       $   3,090       $   4,180       $   1,495
                                                        =========       =========       =========       =========       =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                            $  32,615       $  14,720       $  14,068       $  25,082       $  14,727
                                                        =========       =========       =========       =========       =========
    Income taxes                                        $   4,411       $   3,612       $   9,454       $  11,709       $  15,751
                                                        =========       =========       =========       =========       =========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:
    Fair value of assets acquired, including cash
      acquired                                          $    --         $ 144,927       $    --         $    --         $ 428,442
    Liabilities assumed                                      --            (3,147)           --              --          (153,827)
                                                        ---------       ---------       ---------       ---------       ---------
    Cash paid                                                --           141,780            --              --           274,615
    Less - Amounts borrowed                                  --          (141,780)           --              --          (276,860)
    Less - Issuance of Class A stock options                 --              --              --              --            (7,052)
    Add - Receivable from Seller                             --              --              --              --             9,297
                                                        ---------       ---------       ---------       ---------       ---------
    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       $  28,300
                                                        =========       =========       =========       =========       =========
    Issuance of Class A Common Stock for conversion
      of debentures                                     $    --         $    --         $    --         $    --         $  58,960
                                                        =========       =========       =========       =========       =========
    Write-off of unamortized deferred financing costs
      on debentures                                     $    --         $    --         $    --         $    --         $   1,569
                                                        =========       =========       =========       =========       =========
    Write-off unpaid accrued interest on debentures
      through conversion date                           $    --         $    --         $    --         $   --          $   1,371
                                                        =========       =========       =========       =========       =========
<FN>
              The accompanying notes to consolidated financial statements are an integral part of these statements.
</FN>
</TABLE>

                                                                               


<PAGE>
                 CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 28, 1997

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

DESCRIPTION OF BUSINESS -
Canandaigua Wine Company,  Inc. and its subsidiaries  (the Company)  operates in
the beverage alcohol industry.  The Company is a producer and supplier of wines,
an importer  and  producer of beers and  distilled  spirits,  and a producer and
supplier  of grape  juice  concentrate  in the United  States.  It  maintains  a
portfolio of over 125 national and regional brands of beverage alcohol which are
distributed by over 1,400 wholesalers  throughout the United States and selected
international  markets. Its beverage alcohol brands are marketed in five general
categories:  table wines,  sparkling  wines,  dessert  wines,  imported 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  Wine Company,  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 Wine Company, 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  primarily  consist of money market funds and  certificates of
deposit with an original maturity when purchased of three months or less and are
stated at cost, which approximates  market value. These investments  amounted to
approximately $17,000 at February 28, 1997, and $1,732,000 at February 29, 1996.

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.

<PAGE>

     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 February 28, 1997. The
fair  value   includes   consideration   of  current   interest  rates  and  the
creditworthiness of the counterparties to the agreements.

     LETTERS OF CREDIT:  At February 28, 1997 and February 29, 1996, the Company
had  letters  of  credit  outstanding  totaling  approximately   $8,622,000  and
$18,729,000,  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:

                                        February 28, 1997     February 29, 1996
                                       -------------------   -------------------
                                       Carrying     Fair     Carrying     Fair
                                        Amount      Value     Amount      Value
                                       --------   --------   --------   --------
(IN THOUSANDS)
Liabilities:
------------
Notes payable                          $ 57,000   $ 57,000   $111,300   $111,300
Long-term debt, including current
  portion                              $379,351   $374,628   $368,413   $365,089

Derivative Instruments:
-----------------------
Foreign exchange hedging agreements:
  Currency forward contracts           $    374   $    407   $  3,129   $  3,164
Interest rate hedging agreements:
  Interest rate cap agreement          $   --     $   --     $   --     $   --
  Interest rate collar agreement       $   --     $   --     $   --     $   --


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 94% at February 28,
1997 and February 29, 1996.  Replacement cost of the inventories determined on a
FIFO basis is approximately  $349,006,000 at February 28, 1997, and $332,849,000
at February 29, 1996. The net realizable  value of the Company's  inventories is
in excess of $326,626,000 at February 28, 1997, and $341,838,000 at February 29,
1996.

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

<PAGE>

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 29,
                                                   1997            1996
                                               ------------    ------------
   (IN THOUSANDS)
   Raw materials and supplies                    $ 17,822        $ 24,197
   Wines and distilled spirits in process         237,186         254,956
   Finished case goods                             71,618          62,685
                                                 --------        --------
                                                 $326,626        $341,838
                                                 ========        ========


If the FIFO method of  inventory  valuation  had been used,  reported net income
would have been approximately $18,163,000,  or $.92 per share on a fully diluted
basis,  higher for the year ended  February  28,  1997,  and reported net income
would have been approximately  $2,159,000,  or $.11 per share on a fully diluted
basis, higher for the twelve months ended February 29, 1996 (unaudited).

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

<PAGE>

At February 28, 1997, 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, 1997 and February 29, 1996.

LONG-LIVED ASSETS AND INTANGIBLES -
In March 1996, the Company adopted Statement of Financial  Accounting  Standards
No. 121 (SFAS No. 121),  "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived  Assets to be Disposed of." SFAS No. 121 requires that long-lived
assets and certain identifiable  intangibles be reviewed 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  adoption  of SFAS No. 121 did not have a  material  effect on the
financial statements.

ADVERTISING AND PROMOTION COSTS -
The Company  generally  expenses  advertising  and promotion  costs as incurred,
shown or  distributed.  Prepaid  advertising  costs  at  February  28,  1997 and
February 29, 1996, are not material.  Advertising and promotion  expense for the
year ended  February  28,  1997,  the  Transition  Period,  the six months ended
February  28, 1995  (unaudited),  and the years ended  August 31, 1995 and 1994,
were   approximately   $101,319,000,   $60,187,000,   $41,658,000   (unaudited),
$84,246,000 and $64,540,000, 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 or
capitalized 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, 1997 and
February 29, 1996.

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE -
Primary  net  income per  common  and  common  equivalent  share is based on the
weighted  average number of common and common  equivalent  shares (stock options
determined  using the treasury  stock  method)  outstanding  during the year for
Class A Common Stock and Class B  Convertible  Common  Stock.  Fully diluted net
income  per common  and  common  equivalent  share  assumes  the  conversion  of
convertible securities,  if any, using the "if converted" method and assumes the
exercise of stock options using the treasury stock method.

OTHER -
Certain Transition Period,  fiscal 1995 and 1994 balances have been reclassified
to conform with current year presentation.


2.  ACQUISITIONS:

VINTNERS -
On October 15, 1993, the Company acquired  substantially all of the tangible and
intangible assets of Vintners  International Company, Inc. (Vintners) other than
cash and the  Hammondsport  winery (the Vintners  Assets),  and assumed  certain
current   liabilities   associated  with  the  ongoing  business  (the  Vintners
Acquisition).  Vintners was the United  States' fifth  largest  supplier of wine
with two of the country's most highly recognized brands,  Paul Masson and Taylor
California  Cellars.  The wineries  acquired from Vintners included the Monterey
Cellars winery in Gonzales,  California,  and the Paul Masson wineries in Madera
and Soledad,  California.  In  addition,  the Company  


<PAGE>

leased from Vintners the  Hammondsport  winery in  Hammondsport,  New York.  The
lease  was for a  period  of  eighteen  months  from  the  date of the  Vintners
Acquisition and expired during fiscal 1995.

The  aggregate  purchase  price of  $148,900,000  (the Cash  Consideration)  was
subject to  adjustment  based upon the  determination  of the Final Net  Current
Asset Amount as defined in the Asset Sale  Agreement.  In addition,  the Company
incurred  $8,961,000 of direct acquisition and financing costs. The Company also
delivered options to Vintners and Household Commercial of California,  Inc., one
of  Vintners'  lenders,  to  purchase  an  aggregate  of  500,000  shares of the
Company's  Class A Common Stock (the  Vintners  Option  Shares),  at an exercise
price per share of $18.25,  which were exercisable at any time until October 15,
1996. These options were recorded at $8.42 per share,  based upon an independent
appraisal,  and  $4,210,000  was reflected as a component of additional  paid-in
capital.  On November  18,  1994,  432,067 of the  Vintners  Option  Shares were
exercised (see Note 8). The remaining  67,933 options expired,  unexercised,  on
October 15, 1996.

The Cash  Consideration  was funded by the Company pursuant to (i) approximately
$12,600,000  of  Revolving  Credit  Loans  under the Credit  Agreement  of which
$11,200,000  funded the Cash  Consideration and $1,400,000 funded the payment of
direct acquisition costs; (ii) an accrued liability of approximately  $7,700,000
for the holdback described below and (iii) a $130,000,000 subordinated loan (see
Note 5).

At closing, the Company held back from the Cash Consideration  approximately 10%
of the then  estimated net current  assets of Vintners  purchased by the Company
and deposited an additional  $2,800,000 of the Cash Consideration into an escrow
pending  consent of both parties for its release.  On  September  26, 1996,  the
Company reached a final  settlement with the company  formerly known as Vintners
International  Company,  Inc. and its lenders on the disputed  final closing net
current asset  statement.  As a result,  the Company  recorded a purchase  price
reduction  for the Vintners  Acquisition,  which  reduced  recorded  goodwill by
approximately $5,894,000.

The  Vintners   Acquisition  was  accounted  for  using  the  purchase   method;
accordingly,  the Vintners 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),  $38,257,000, is being amortized on
a straight-line  basis over 40 years. The results of operations of Vintners have
been  included  in the  Consolidated  Statements  of  Income  since  the date of
acquisition.

ALMADEN/INGLENOOK -
On August 5, 1994, the Company  acquired the Inglenook and Almaden  brands,  the
fifth and sixth largest selling table wines in the United States,  a grape juice
concentrate  business  and  wineries  in Madera and  Escalon,  California,  from
Heublein, Inc. (Heublein) (the Almaden/Inglenook  Acquisition). The Company also
acquired  Belaire  Creek  Cellars,  Chateau La Salle and  Charles Le Franc table
wines, Le Domaine champagne and Almaden,  Hartley and Jacques Bonet brandy.  The
accounts receivable and the accounts payable related to the acquired assets were
not acquired by the Company.

The aggregate  consideration  for the acquired brands and other assets consisted
of $130,600,000 in cash,  assumption of certain current  liabilities and options
to purchase an aggregate of 600,000  shares of Class A Common Stock (the Almaden
Option  Shares).  Of the Almaden  Option Shares,  200,000 were  exercisable at a
price of $30 per share and the remaining  400,000 were exercisable at a price of
$35 per share.  All of the options were  exercisable at any time until August 5,
1996.  The  200,000  and 400,000  options  were  recorded at $5.83 and $4.19 per
share,  respectively,  based upon an independent  appraisal,  and $2,842,000 was
reflected  as a component  of  additional  paid-in  capital.  All of the options
expired,  unexercised, on August 5, 1996. The source of the cash payment made at
closing,  together  with  payment of other  costs and  expenses  required by the
Almaden/Inglenook Acquisition, was financing provided by the Company pursuant to
a term loan under the Credit Agreement (see Note 5).

The cash purchase price was subject to adjustment  based upon the  determination
of the Final Net Asset Amount as defined in the Asset Purchase  Agreement;  and,
based upon the final closing statement delivered to the Company by Heublein, was
reduced by $9,297,000 which was paid to the Company in November 1994.

<PAGE>

Heublein  also agreed not to compete  with the Company in the United  States and
Canada for a period of five years following the closing of the Almaden/Inglenook
Acquisition  in the  production  and sale of grape juice  concentrate or sale of
packaged  wines bearing the  designation  "Chablis" or "Burgundy"  except where,
among other exceptions, such designations are currently used with certain brands
retained by  Heublein.  Certain  companies  acquired by Heublein,  however,  may
compete directly with the Company.

The  Almaden/Inglenook  Acquisition was accounted for using the purchase method;
accordingly,  the Almaden/Inglenook assets were recorded at fair market value at
the date of acquisition.  During fiscal 1995, the Company  terminated certain of
its long-term grape contracts acquired in connection with the  Almaden/Inglenook
Acquisition.  As a result, the estimated loss reserve at the date of acquisition
was reduced by  approximately  $23,751,000,  with a  corresponding  reduction in
goodwill  (see Note 9). The excess of  purchase  price over the  estimated  fair
market  value  of the net  assets  acquired  (goodwill),  $24,028,000,  is being
amortized on a straight-line  basis over 40 years.  The results of operations of
Almaden/Inglenook  have been included in the  Consolidated  Statements of Income
since the date of acquisition.

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 will (i) purchase various
bulk distilled spirits brands from UDG and (ii) provide  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 Credit Agreement (see Note 5).

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.

<PAGE>

3.  PROPERTY, PLANT AND EQUIPMENT:

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

                                             February 28,   February 29,
                                                 1997           1996
                                             ------------   ------------
    (IN THOUSANDS)
    Land                                      $   16,961     $   16,867
    Buildings and improvements                    76,379         76,694
    Machinery and equipment                      243,274        226,432
    Motor vehicles                                 5,355          5,814
    Construction in progress                      13,999         12,404
                                              ----------     ----------
                                                 355,968        338,211
    Less - Accumulated depreciation             (106,416)       (87,573)
                                              ----------     ----------
                                              $  249,552     $  250,638 
                                              ==========     ==========      


4.  OTHER ASSETS:

The major components of other assets are as follows:

                                             February 28,   February 29,
                                                 1997           1996
                                             ------------   ------------
    (IN THOUSANDS)
    Goodwill                                  $  150,595     $  156,489   
    Distribution rights, agency license
      agreements and trademarks                  119,316        119,316
    Other                                         22,936         23,123
                                              ----------     ----------
                                                 292,847        298,928
    Less - Accumulated amortization              (22,513)       (13,006)
                                              -----------    ----------
                                              $  270,334     $  285,922  
                                              ==========     ==========

<PAGE>

5.  BORROWINGS:

Borrowings consist of the following:
  
<TABLE>
<CAPTION>
                                                                                     February 29,
                                                        February 28, 1997                1996
                                              ------------------------------------   ------------
                                              Current       Long-term       Total        Total
(IN THOUSANDS)                                --------      ---------     --------     ---------
<S>                                           <C>           <C>           <C>           <C>
Notes Payable:
  Senior Credit Facility:
    Revolving Credit Loans                    $ 57,000      $   --        $ 57,000      $111,300
                                              ========      ========      ========      ========
Long-term Debt:
  Senior Credit Facility:
    Term Loan, variable rate,
    aggregate proceeds of $246,000,
    due in installments through
    August 2001                               $ 40,000      $145,900      $185,900      $236,000

  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 $3,220 -
    effective rate 9.76%)                         --          61,780        61,780          --

  Capitalized Lease Agreements:
    Capitalized facility lease bearing
    interest at 9%, due in monthly
    installments through fiscal 1998               348          --             348           972

  Industrial Development Agencies:
    7.50% 1980 issue, original proceeds
    $2,370, due in annual installments
    of $119 through fiscal 2000                    119           237           356           474

  Other Long-term Debt:
    Loans payable bearing interest at
    5%, secured by cash surrender value
    of officers' life insurance policies          --             967           967           967
                                              --------      --------      --------      --------
                                              $ 40,467      $338,884      $379,351      $368,413
                                              ========      ========      ========      ========
</TABLE>

SENIOR CREDIT FACILITY -
The Company and a syndicate  of 15 banks (the  Syndicate  Banks),  for which The
Chase  Manhattan  Bank,  N.A. acts as agent,  are parties to a third amended and
restated credit agreement (the Credit Agreement). The Credit Agreement currently
provides for a Term Loan and a Revolving  Credit Loan facility.  The interest on
the Term Loan and on all drawn Revolving Credit Loans may be based on either the
London Interbank Offering Rate (LIBOR) plus a predetermined margin,  competitive
bid rates from the Syndicate  Banks or the prime rate.  The interest rate margin
for LIBOR based loans may range from 0.5% to 1.25%  depending  on the  Company's
debt  coverage  ratio as defined in the  Credit  Agreement.  The margin on LIBOR
based loans was 1.00%, 0.75%, 1.00% and 1.25% at February 28, 1997, February 29,
1996 and August 31, 1995 and 1994, respectively.

The  principal  of the Term Loan is to be repaid in  quarterly  installments  of
$10,000,000  with a final payment of $5,900,000,  due on August 15, 2001.  There
are certain  mandatory Term Loan  prepayments as defined in the Credit Agreement
including aggregate proceeds received in excess of $50,000,000 from subordinated
debt offerings,  50% of any proceeds from the sale of equity and excess proceeds
from the sale of assets as defined in the Credit Agreement.

The Revolving  Credit Loan facility has a capacity of $185,000,000  which may be
utilized  by the  Company  in the form of  Revolving  Credit  Loans  and up to a
maximum of $20,000,000  of Revolving  Letters of Credit.  The Company  primarily
utilizes the  Revolving  Credit Loans to finance  working  capital and operating
requirements and classifies the Revolving  Credit Loans as a current  liability,
as it intends to repay all amounts  outstanding within one 


<PAGE>

year.   The  Company  had  average   outstanding   Revolving   Credit  Loans  of
approximately  $88,825,000  and $93,800,000 for the year ended February 28, 1997
and the  Transition  Period,  respectively.  Amounts  available to be drawn down
under the Revolving  Credit Loans were  $119,378,000 and $68,680,000 at February
28, 1997 and February 29, 1996,  respectively.  The average interest rate on the
Revolving Credit Loans was 6.58%,  6.76%,  7.16% and 6.07%, for fiscal 1997, the
Transition Period,  fiscal 1995 and fiscal 1994,  respectively.  Commitment fees
are due based upon the unused portion of the Revolving Credit Loan facility. The
fee is based upon the  Company's  debt ratio as defined in the Credit  Agreement
which can range from 0.2% to 0.375%. At February 28, 1997 and February 29, 1996,
the commitment fee percentages were 0.325% and 0.25%, respectively.

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
Credit  Agreement  contains  certain  covenants  providing for  restrictions  on
mergers,  consolidations,  sale of assets, payment of dividends and incurring of
other  debt,  liens,  guarantees  and  making of new  investments.  The  primary
financial  covenants in the Credit Agreement  require the maintenance of minimum
defined  tangible net worth,  a debt ratio, a fixed charge ratio and an interest
coverage ratio.

At February 28,  1997,  the Company  maintains,  in  accordance  with the Credit
Agreement,   interest  rate  protection  agreements,   in  an  amount  equal  to
$55,000,000, which protect the Company against three month LIBOR exceeding 6.25%
per annum and require  payments  when three  month LIBOR rates are below  4.75%.
These agreements expire through December 1997.

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). The Company
used the net proceeds to repay the  subordinated  loan  incurred in the Vintners
Acquisition.  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

<PAGE>

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, 1997
                             -----------------
                              (IN THOUSANDS)
                         1998               $ 40,467
                         1999                 40,119
                         2000                 40,118
                         2001                 40,000
                         2002                 25,900
                      Thereafter             195,967
                                            --------
                                            $382,571
                                            ========


6. INCOME TAXES:

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

<TABLE>
<CAPTION>
                                                              For the Six                   
                                        For the                  Months             For the     
                                      Year Ended                 Ended            Years Ended
                                   February 28, 1997          February 29,         August 31,
                            -------------------------------   ------------    --------------------
                                       State and
                            Federal      Local       Total        1996          1995        1994
                            -------    ---------    -------   ------------    --------    --------
<S>                         <C>         <C>         <C>          <C>          <C>         <C>
(IN THOUSANDS)
Current income tax
  provision                 $ 9,412     $ 4,935     $14,347      $ 1,390      $  6,446    $ 11,510
Deferred income tax
  provision (benefit)         5,621         148       5,769        1,991        19,232      (4,319)
                            -------     -------     -------      -------      --------    --------
                            $15,033     $ 5,083     $20,116      $ 3,381      $ 25,678    $  7,191
                            =======     =======     =======      =======      ========    ========
</TABLE>

The components of the deferred income tax provision (benefit) are as follows:
 
                         
                                             For the Six
                               For the Year     Months      For the Years Ended
                                  Ended         Ended            August 31,
                               February 28,  February 29,  ---------------------
                                   1997          1996        1995         1994
                               ------------  ------------  --------     --------

Depreciation and amortization    $ 5,130      $  4,752     $ 10,089     $ 4,610
LIFO reserve                        (602)       (2,007)       1,871       1,306
Prepaid advertising               (1,379)         (922)         792         258
Inventory reserves                 5,616         1,868        5,163      (2,186)
Restructuring costs                  386         2,155        3,144      (8,843)
Other accruals                    (3,382)       (3,855)      (1,827)        536
                                 -------      --------     --------     -------
                                 $ 5,769      $  1,991     $ 19,232     $(4,319)
                                 =======      ========     ========     =======

<PAGE>

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 Six Months        For the Years Ended August 31,
                               February 28,         Ended February 29,      ----------------------------------
                                   1997                    1996                   1995              1994
                            -------------------     -------------------     ----------------   ---------------
                                          % 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             $16,727       35.0      $ 2,346       35.0      $23,344    35.0    $ 6,623   35.0  

State and local
  income taxes,
  net of Federal income
  tax benefit                 3,304        6.9          827       12.3        2,395     3.6        644    3.4

Nondeductible meals
  and entertainment
  expenses                      310         .6          205        3.1          290      .4         87     .5

Miscellaneous items, net       (225)       (.4)           3        --          (351)    (.5)      (163)   (.9)
                            -------       ----      -------       ----      -------    ----    -------   ----     
                            $20,116       42.1      $ 3,381       50.4      $25,678    38.5    $ 7,191   38.0 
                            =======       ====      =======       ====      =======    ====    =======   ====
</TABLE>

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

                                           February 28,     February 29,
                                               1997             1996
                                           ------------     ------------
        (IN THOUSANDS) 
        Depreciation and amortization        $ 71,511         $ 66,746
        LIFO reserve                            2,019            2,638
        Prepaid advertising                       801            2,201
        Restructuring costs                    (3,567)          (3,963)
        Inventory reserves                      9,418            3,648
        Other accruals                        (13,191)          (9,685)
                                             --------         --------
                                             $ 66,991         $ 61,585
                                             ========         ========


At February 28, 1997, the Company has state and U.S.  Federal net operating loss
(NOL)  carryforwards  of $17,043,000  and  $4,567,000,  respectively,  to offset
future taxable income that, if not otherwise  utilized,  will expire as follows:
state  NOLs of  $6,945,000  and  $10,098,000  at  February  28,  2001 and  2002,
respectively, and Federal NOL of $4,567,000 at February 28, 2011.

At February 28,  1997,  the Company has Federal  alternative  minimum tax credit
carryforwards of $2,852,000 to offset future tax with no expiration date.


7. 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 

<PAGE>

plan  described  below,  were  $4,999,000  for the year ended February 28, 1997,
$2,579,000 in the Transition Period and $3,830,000 and $3,414,000 in fiscal 1995
and 1994, respectively.

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) to defer a portion of their compensation on
a pretax basis.  Participants may defer 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
$700,000 for the year ended February 28, 1997, $325,000 in the Transition Period
and $281,000 and $207,000 in fiscal 1995 and 1994, respectively.

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 $2,504,000 for the year ended February 28,
1997,  $1,095,000 in the  Transition  Period and  $1,430,000  and  $1,395,000 in
fiscal 1995 and 1994, respectively.  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.


8.  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, 1997,  there were 15,546,864  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 may
finance  such  purchases,  which  will  become  treasury  shares,  through  cash
generated from operations or through the Credit  Agreement.  Throughout the year
ending  February 28, 1997,  the Company  repurchased  787,450  shares of Class A
Common Stock totaling $20,765,000.

PREFERRED STOCK -
The Company is authorized to issue up to 1,000,000  shares of preferred stock in
one or more series,  at a par value of $.01 per share. The terms of any issuance
of the preferred stock will be fixed by resolution of the Board of Directors. No
preferred stock has been issued as of February 28, 1997.

STOCK OPTION AND STOCK APPRECIATION RIGHT PLAN -
The Company has in place a Stock Option and Stock  Appreciation  Right Plan (the
Plan).  Under the Plan,  nonqualified  stock options and incentive stock options
may be granted to purchase  and stock  appreciation  rights may be granted  with
respect to, in the aggregate,  not more than  3,000,000  shares of the Company's
Class A Common  Stock.  Options and stock  appreciation  rights may be issued to
employees,  officers or  directors  of the Company.  Nonemployee  directors  are
eligible to receive  only  nonqualified  stock  options  and stock  appreciation
rights.  The option price of any incentive stock option may not be less than the
fair market value of the shares on the date of grant.  The exercise price of any
nonqualified  stock  option must equal or exceed 50% of the fair market value of
the shares on the date of grant.  Options  become fully  vested and  exercisable
over periods of one to five years as determined by the Compensation Committee of
the Board of  Directors  and have a maximum  term of ten 

<PAGE>

years.  Changes in the status of the Plan  during  the year ended  February  28,
1997,  the  Transition  Period,  fiscal 1995 and fiscal 1994 are  summarized  as
follows:


                                                      Weighted         Options
                                       Shares       Avg. Exercise     Available
                                    Under Option        Price         for Grant
                                    ------------    -------------     ---------
  Balance, August 31, 1993             452,375         $  12.65
  Options granted                      125,000         $  25.62
  Options exercised                     (2,250)        $   4.44
  Options forfeited/canceled           (11,625)        $   8.09
                                     ---------
  Balance, August 31, 1994             563,500         $  15.65       2,401,850
  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       2,117,350
  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       1,739,550
  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       1,396,550
                                     =========


The following table summarizes  information  about stock options  outstanding at
February 28, 1997:
<TABLE>
<CAPTION>
                                Options Outstanding                       Options Exercisable
                    ---------------------------------------------    -----------------------------
                                   Weighted Avg.
    Range of           Number        Remaining      Weighted Avg.       Number       Weighted Avg.
Exercise Prices     Outstanding  Contractual Life  Exercise Price    Exercisable    Exercise Price
---------------     -----------  ----------------  --------------    -----------    --------------
                                       
<S>                  <C>             <C>              <C>               <C>            <C>
$ 4.44 - $11.50         94,675       4.7 years        $   9.64          28,425         $   5.31                      
$17.00 - $22.25      1,079,800       8.3 years        $  17.29          23,000         $  17.30 
$22.25 - $30.00        258,500       9.3 years        $  28.76            --           $    -     
                     ---------                                          ------
                     1,432,975                                          51,425
                     =========                                          ======
</TABLE>

The weighted  average fair value of options  granted  during fiscal 1997 and the
Transition Period was $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 6.6%
for fiscal  1997 and 5.5% for the  Transition  Period;  volatility  of 42.7% for
fiscal 1997 and 39.6% for the  Transition  Period;  expected  option life of 4.7
years for fiscal  1997 and 5.4 years for the  Transition  Period.  The  dividend
yield was 0% for both fiscal 1997 and the  Transition  Period.  Forfeitures  are
recognized as they occur.

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  

<PAGE>

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 1997,  the Transition  Period,  fiscal 1995 and
fiscal 1994,  employees  purchased  37,768,  20,869,  28,641 and 58,955  shares,
respectively.

The weighted  average fair value of purchase  rights  granted during fiscal 1997
was $7.74.  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 5.6%;  volatility  of 65.4%;  expected
purchase right life of 0.8 years and a dividend yield of 0%. 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 (SFAS No.
123), "Accounting for Stock-Based  Compensation."  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 net  income per common and common  equivalent
share would have been reduced to the pro forma amounts as follows:

                                For the Year Ended      For the Six Months Ended
                                 February 28, 1997          February 29, 1996
                              -----------------------   ------------------------
                              As Reported   Pro Forma   As Reported   Pro Forma
                              -----------   ---------   -----------   ---------
(IN THOUSANDS, EXCEPT 
 PER SHARE DATA)
Net income                     $  27,675    $  25,163    $  3,322     $  3,178

Net income per common
  and common equivalent share:
    Primary                    $    1.41    $    1.28    $    .17     $    .16
    Fully diluted              $    1.40    $    1.28    $    .17     $    .16
 
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.

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 amended Credit Agreement,  approximately  $82,000,000 was used to repay a
portion of the Term Loan under the Company's  Credit  Agreement.  The balance of
net  proceeds  was  used to  repay  Revolving  Credit  Loans  under  the  Credit
Agreement.

<PAGE>

9.  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, 1997
                                 -----------------
                                   (IN THOUSANDS)
                            1998                 $ 1,068
                            1999                     829
                            2000                     776
                            2001                     740
                            2002                     714
                         Thereafter                1,790
                                                 -------
                                                 $ 5,917
                                                 =======

Rental  expense was  approximately  $4,716,000  for the year ended  February 28,
1997,  $2,382,000  in the  Transition  Period,  $4,193,000  in  fiscal  1995 and
$3,318,000 in fiscal 1994.

PURCHASE  COMMITMENTS AND  CONTINGENCIES - The Company has agreements with three
suppliers to purchase  blended Scotch whisky through December 2003. The purchase
prices under the agreements are denominated in British pounds sterling and based
upon  exchange  rates at February  28,  1997,  the  Company's  aggregate  future
obligation  will be  approximately  $18,340,000 to $36,775,000 for the contracts
expiring through December 2003.

The Company has two  agreements  to purchase  Canadian  blended  whisky  through
December 1999 at a purchase price of approximately $1,050,000 to $8,903,000. The
Company also has two  agreements to purchase  Canadian new  distillation  whisky
(including  dumping  charges)  through  December  2005  at  purchase  prices  of
approximately  $17,360,000  to  $19,133,000.  In  addition,  the  Company has an
agreement to purchase  corn whiskey  through  April 1999 at a purchase  price of
approximately $294,000.

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  December 1999 and may be
extended by the Company  through June 2003,  subject to compliance  with certain
performance  criteria.  Prior  to  their  expiration,  these  agreements  may be
terminated  if the  Company  fails  to meet  certain  performance  criteria.  At
February  28, 1997,  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  fifteen  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.

<PAGE>

The Company purchased $142,547,000 of grapes under these contracts during fiscal
1997. 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 $900,343,000. 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  (see Note 2). The  remaining  reserve for the
estimated  loss  on the  remaining  contracts  is  approximately  $1,171,000  at
February 28, 1997.

The Company's  aggregate  obligations under bulk wine purchase contracts will be
approximately  $61,486,000 over the remaining term of the contracts which expire
through fiscal 2000.

EMPLOYMENT  CONTRACTS - 
The Company has employment  contracts with certain of its executive officers and
certain  other  management  personnel  with  remaining  terms ranging up to four
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  $10,534,000  as of  February  28,  1997,  of which  approximately
$2,223,000 is accrued in other liabilities as of February 28, 1997.

EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS - 
Approximately 43% of the Company's full-time employees are covered by collective
bargaining  agreements at February 28, 1997. Agreements expiring within one year
cover approximately 27% 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.


10. 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 22.9%,  16.9%, 21.6% and 23.7% of the Company's gross sales
for the fiscal year ending February 28, 1997, the Transition  Period and for the
fiscal  years ended August 31, 1995 and 1994,  respectively.  Gross sales to the
Company's  largest  wholesaler,  Southern Wine and Spirits,  represented  10.5%,
10.6% and 12.3% of the Company's  gross sales for the fiscal year ended February
28, 1997 and for the fiscal years ended August 31, 1995 and 1994,  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.

<PAGE>

11. 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 $.91 per share on a fully 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 $.07 per share on a
fully  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 $.06 per share on a fully 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 and February 29, 1996, the Company had accrued  liabilities of
approximately   $402,000   and   $1,186,000,   respectively,   relating  to  the
Restructuring Plan.


12. 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  non-guarantor  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, loans or advances.

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 29,
                                      1997                  1996
                                  ------------          ------------
(IN THOUSANDS)
Balance Sheet Data:
  Current assets                   $  401,870            $  404,655
  Noncurrent assets                $  403,068            $  306,647
  Current liabilities              $  100,009            $  122,923
  Noncurrent liabilities           $   65,300            $   67,132

<PAGE>
<TABLE>
<CAPTION>
                               For the Year     For the Six Months Ended     For the Years Ended August 31,
                                  Ended       ----------------------------   ------------------------------
                               February 28,   February 29,    February 28,
                                   1997           1996            1995             1995           1994
                               -----------    ------------    ------------       --------       --------
<S>                              <C>            <C>             <C>              <C>            <C>
(IN THOUSANDS)
Income Statement Data:
  Net sales                      $907,387       $416,839        $334,885         $716,969       $514,466 
  Gross profit                   $164,471       $ 73,843        $ 62,883         $131,489       $ 81,454  
  Income (loss) before
  provision for Federal and   
  and state income taxes         $ 47,303       $ 17,083        $ 22,690         $ 52,756       $ (7,048)                       
  Net income (loss)              $ 27,392       $  8,466        $ 13,954         $ 32,445       $ (4,370)
</TABLE>

13.  ACCOUNTING PRONOUNCEMENTS:

In February 1997,  Statement of Financial Accounting Standards No. 128 (SFAS No.
128), "Earnings per Share," was issued,  superseding Accounting Principles Board
Opinion No. 15 (Opinion 15), "Earnings per Share." This statement  specifies the
computation,  presentation  and disclosure  requirements  for earnings per share
(EPS) for companies  with publicly held common stock or potential  common stock.
This statement  replaces the reporting of primary EPS with basic EPS and changes
the  computation  of fully  diluted EPS to  dilutive  EPS which uses the average
share price for the period, rather than the more dilutive greater of the average
share price or  end-of-period  share  price  required by Opinion 15. The Company
will be required to adopt SFAS No. 128 on a  prospective  basis in fiscal  1998.
The Company believes the effect of adoption will not be material.


14.  FEBRUARY FISCAL YEAR FINANCIAL DATA (UNAUDITED):

The financial data presented below summarizes recast unaudited  activity for the
1996, 1995 and 1994 fiscal years ended the last day of February.

                                    Full Year     Full Year     Full Year
                                      Recast        Recast        Recast
                                   February 29,  February 28,  February 28,
                                       1996          1995          1994
                                   ------------  ------------  ------------
                                    (unaudited)   (unaudited)   (unaudited)
(IN THOUSANDS)
GROSS SALES                         $1,331,184    $1,046,792    $ 635,983    
  Less - Excise taxes                 (344,101)     (257,239)    (165,049)
                                    ----------    ----------    ---------    
    Net sales                          987,083       789,553      470,934
COST OF PRODUCT SOLD                  (722,325)     (566,713)    (332,463)
                                    ----------    ----------    ---------    
    Gross profit                       264,758       222,840      138,471
SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES             (191,683)     (141,653)     (93,903)
NONRECURRING RESTRUCTURING EXPENSES     (3,957)      (24,690)        -
                                    ----------    ----------    ---------    
    Operating income                    69,118        56,497       44,568
INTEREST EXPENSE, NET                  (28,758)      (22,911)     (11,495)
                                    ----------    ----------    ---------    
    Income before provision for
    Federal and state income taxes      40,360        33,586       33,073
PROVISION FOR FEDERAL AND
  STATE INCOME TAXES                   (16,339)      (12,928)     (12,629)
                                    ----------    ----------    ---------    
NET INCOME                          $   24,021    $   20,658    $  20,444
                                    ==========    ==========    =========

<PAGE>
                 CANANDAIGUA WINE COMPANY, INC. AND SUBSIDIARIES

              SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

  FOR THE YEAR ENDED FEBRUARY 28, 1997, SIX MONTHS ENDED FEBRUARY 29, 1996 AND
                    THE YEARS ENDED AUGUST 31, 1995 AND 1994
                      (in thousands, except per share data)

QUARTER ENDED          5/31/96     8/31/96    11/30/96     2/28/97       YEAR
                      ----------------------------------------------------------
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 share:
  Primary                  .43         .25         .42         .31          1.41
  Fully diluted            .43         .25         .42         .30          1.40

QUARTER ENDED         11/30/95     2/29/96                            SIX MONTHS
                      ----------------------------------------------------------
Net sales             $285,585    $249,439                              $535,024
Gross profit            77,253      61,563                               138,816
Net income              10,412(a)   (7,090)(b)                             3,322
Earnings per share:
  Primary                  .52        (.36)                                  .17
  Fully diluted            .52        (.36)                                  .17


QUARTER ENDED         11/30/94     2/28/95     5/31/95     8/31/95       YEAR
                      ----------------------------------------------------------
Net sales             $243,542    $210,943    $222,770    $229,289    $  906,544
Gross profit            69,160      57,631      63,262      62,680       252,733
Net income              10,332       9,988      10,637      10,063        41,020
Earnings per share:
  Primary                  .61         .50         .53         .50          2.14
  Fully diluted            .61         .50         .53         .50          2.13


QUARTER ENDED         11/30/93     2/28/94     5/31/94     8/31/94       YEAR
                      ----------------------------------------------------------
Net sales             $154,485    $140,031    $154,223    $180,845    $  629,584
Gross profit            44,655      41,668      42,775      53,275       182,373
Net income               5,653       5,741       6,655      (6,316)       11,733
Earnings per share:
  Primary                  .40         .35         .41        (.39)          .74
  Fully diluted            .37         .35         .41        (.38)          .74


<PAGE>

(a)   During  the  quarter  ended  November  30,  1995,  the  Company   recorded
      nonrecurring operating expenses,  net of tax, of approximately  $1,980,000
      related to inefficiencies  resulting from the Company's Restructuring Plan
      offset by a reduction in the accrual for  restructuring  expenses,  net of
      tax, of  approximately  $960,000,  primarily  for  severance  and facility
      holding  and  closure  costs.  The  Company  recorded  other  nonrecurring
      expenses, net of tax, of approximately $780,000.

(b)   During  the  quarter  ended  February  29,  1996,  the  Company   recorded
      nonrecurring operating expenses,  net of tax, of approximately  $2,852,000
      related to inefficiencies resulting from the integration of the West Coast
      wineries,  of which $2,412,000 has been recorded as a component of cost of
      goods sold and $440,000 has been  recorded as  nonrecurring  restructuring
      expense.  In addition,  the Company recorded,  net of tax,  $1,470,000 for
      employee  bonuses  and  $1,270,000,  net of tax,  of  other  non-recurring
      expenses.


                     The accompanying notes to consolidated
                      financial statements are an integral
                             part of this schedule.



<PAGE>

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

     Not Applicable.

<PAGE>

                                    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 22,
1997, under that section of the proxy statement titled  "Nomination and Election
of Directors,"  and under a caption titled "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 22, 1997,  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.


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 22, 1997,  under those
sections of the proxy statement  titled  "Beneficial  Ownership" and "Nomination
and Election of Directors,"  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 22, 1997,  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, 1997 and February
                    29, 1996

                    Consolidated   Statements  of  Income  for  the  year  ended
                    February  28, 1997,  for the six months  ended  February 29,
                    1996 and  February  28, 1995  (unaudited)  and for the years
                    ended August 31, 1995 and 1994

                    Consolidated  Statements of Changes in Stockholders'  Equity
                    for the year ended  February  28,  1997,  for the six months
                    ended  February  29, 1996 and for the years ended August 31,
                    1995 and 1994

                    Consolidated  Statements  of Cash  Flows for the year  ended
                    February  28, 1997,  for the six months  ended  February 29,
                    1996 and  February  28, 1995  (unaudited)  and for the years
                    ended August 31, 1995 and 1994

                    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
non-current  indebtedness,  not guaranteed by the Registrant, in excess of 5% of
total consolidated assets.

<PAGE>

      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).

<PAGE>

          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  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  November  30,  1995 and  incorporated  herein  by
               reference).

          4.1  Specimen of  Certificate  of Class A Common  Stock of the Company
               (filed as Exhibit 1.1 to the Company's  Registration Statement on
               Form  8-A  dated  April  28,  1992  and  incorporated  herein  by
               reference).

          4.2  Specimen of  Certificate  of Class B Common  Stock of the Company
               (filed as Exhibit 1.2 to the Company's  Registration Statement on
               Form  8-A  dated  April  28,  1992  and  incorporated  herein  by
               reference).

          4.3  Indenture  dated as of December 27, 1993 among the  Company,  its
               Subsidiaries  and  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).

          4.4  First Supplemental Indenture dated as of August 3, 1994 among the
               Company,  Canandaigua  West,  Inc.  and  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).

          4.5  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 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).

<PAGE>

          4.6  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).

          10.1 The  Canandaigua  Wine  Company,  Inc.  Stock  Option  and  Stock
               Appreciation  Right Plan  (filed as  Appendix B of the  Company's
               Definitive   Proxy   Statement   dated   December  23,  1987  and
               incorporated herein by reference).

          10.2 Amendment  No. 1 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation  Right Plan (filed as Exhibit 10.1
               to the  Company's  Annual Report on Form 10-K for the fiscal year
               ended August 31, 1992 and incorporated herein by reference).

          10.3 Amendment  No. 2 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation Right Plan (filed as Exhibit 28 to
               the  Company's  Quarterly  Report  on Form  10-Q  for the  fiscal
               quarter  ended  November  30,  1992 and  incorporated  herein  by
               reference).

          10.4 Amendment  No. 3 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation  Right Plan (filed as Exhibit 10.4
               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 Amendment  No. 4 to 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  November  30,  1993 and  incorporated  herein  by
               reference).

          10.6 Amendment  No. 5 to 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  February  28,  1994 and  incorporated  herein  by
               reference).

          10.7 Amendment  No. 6 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation  Right Plan (filed as Exhibit 10.7
               to the  Company's  Annual Report on Form 10-K for the fiscal year
               ended August 31, 1995 and incorporated herein by reference).

          10.8 Amendment  No. 7 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation  Right Plan (filed as Exhibit 10.8
               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).


<PAGE>

          10.9 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).

          10.10Barton 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).

          10.11Ellis 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).

          10.12Barton 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).

          10.13Marvin 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).

          10.14Third Amended and Restated Credit Agreement  between the Company,
               its principal operating subsidiaries, and certain banks for which
               The  Chase  Manhattan  Bank  (successor  by  merger  to The Chase
               Manhattan Bank, N.A.) acts as Administrative  Agent,  dated as of
               September 1, 1995 (filed as Exhibit 2(b) to the Company's Current
               Report on Form 8-K, dated August 29, 1995 and incorporated herein
               by reference).

          10.15Amendment  No. 1, dated as of December 20, 1995, to Third Amended
               and Restated Credit Agreement between the Company,  its principal
               operating  subsidiaries,  and  certain  banks for which The Chase
               Manhattan Bank  (successor by merger to The Chase Manhattan Bank,
               N.A.) acts as Administrative  Agent (filed as Exhibit 10.1 to the
               Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
               ended November 30, 1995 and incorporated herein by reference).

          10.16Amendment  No. 2, dated as of January 10, 1996,  to Third Amended
               and Restated Credit Agreement between the Company,  its principal
               operating  subsidiaries,  and  certain  banks for which The Chase
               Manhattan Bank  (successor by merger to The Chase Manhattan Bank,
               N.A.) acts as Administrative  Agent (filed as Exhibit 10.2 to the
               Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
               ended November 30, 1995 and incorporated herein by reference).


<PAGE>
 
          10.17Letter  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).

          10.18Amendment  No. 3, dated as of May 17, 1996,  to Third Amended and
               Restated  Credit  Agreement  between the Company,  its  principal
               operating  subsidiaries,  and  certain  banks for which The Chase
               Manhattan Bank  (successor by merger to The Chase Manhattan Bank,
               N.A.) acts as Administrative Agent (filed as Exhibit 10.24 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).

          10.19Amendment  No. 4, dated as of May 17, 1996,  to Third Amended and
               Restated  Credit  Agreement  between the Company,  its  principal
               operating  subsidiaries,  and  certain  banks for which The Chase
               Manhattan Bank  (successor by merger to The Chase Manhattan Bank,
               N.A.) acts as Administrative  Agent (filed as Exhibit 10.3 to the
               Company's  Quarterly Report on Form 10-Q for the quarterly period
               ended May 31, 1996 and incorporated herein by reference).

          10.20Amendment  No. 5, dated as of October 10, 1996,  to Third Amended
               and Restated Credit Agreement between the Company,  its principal
               operating  subsidiaries,  and  certain  banks for which The Chase
               Manhattan Bank  (successor by merger to The Chase Manhattan Bank,
               N.A.) acts as Administrative Agent (filed as Exhibit 10.26 to the
               Company's  Registration  Statement on Form S-4  (Registration No.
               333-17673) and incorporated herein by reference).

          10.21Amendment  No. 8 to the  Canandaigua  Wine  Company,  Inc.  Stock
               Option and Stock  Appreciation Right Plan (filed as Exhibit 10.27
               to the Company's Registration Statement on Form S-4 (Registration
               No. 333-17673) and incorporated herein by reference).

          11.1 Statement of 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 (filed herewith).

<PAGE>

(b)  Reports on Form 8-K

     The  following  Report  on Form  8-K was  filed  by the  Company  with  the
     Securities  and  Exchange  Commission  during  the  fourth  quarter  of the
     Company's  fiscal year ended February 28, 1997: Form 8-K dated December 19,
     1996. This Form 8-K reported information under Item 5 (Other Events).


<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.

                                    CANANDAIGUA WINE COMPANY, INC.


Dated:   May 29, 1997               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 Accounting
                                      Officer)
Dated:  May 29, 1997                  Dated:  May 29, 1997


/s/ Marvin Sands                      /s/ Robert Sands
----------------                      ----------------
Marvin Sands, Chairman of the Board   Robert Sands, Director
Dated:  May 29, 1997                  Dated:  May 29, 1997


/s/ George Bresler                    /s/ James A. Locke, III
------------------                    -----------------------
George Bresler, Director              James A. Locke, III, Director
Dated:  May 29, 1997                  Dated:  May 29, 1997


/s/ Bertram E. Silk
-------------------
Bertram E. Silk, Director
Dated:  May 29, 1997


<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, 1997                              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.



/s/ Ned Cooper
--------------
Ned Cooper, President
(Principal Executive Officer)
Dated:  May 29, 1997


/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997


/s/ Richard Sands
-----------------
Richard Sands, Director
Dated:  May 29, 1997


/s/ Robert S. Sands
-------------------
Robert S. Sands, Director
Dated:  May 29, 1997


<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, 1997                    BISCEGLIA BROTHERS WINE CO.


                                        By:  /s/ Richard Sands
                                             -----------------
                                             Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997



/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997


<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, 1997                CALIFORNIA PRODUCTS COMPANY


                                     By:  /s/ Richard Sands
                                          -----------------
                                          Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997



/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997


<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, 1997                  CANANDAIGUA WEST, INC.


                                      By:  /s/ Richard Sands
                                           -----------------
                                           Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997



/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997



<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, 1997                  GUILD WINERIES & DISTILLERIES, INC.


                                      By: /s/  Richard Sands
                                          ------------------
                                          Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997



/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997



<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, 1997                    VINTNERS INTERNATIONAL COMPANY, INC.


                                        By:  /s/ Richard Sands
                                             -----------------
                                             Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997



/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997



<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, 1997                     WIDMER'S WINE CELLARS, INC.


                                         By:  /s/ Richard Sands
                                              -----------------
                                              Richard Sands, 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.



/s/ Richard Sands
-----------------
Richard Sands, President and Director
(Principal Executive Officer)
Dated:  May 29, 1997



/s/ Thomas S. Summer
--------------------
Thomas S. Summer, Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Dated:  May 29, 1997


/s/ Robert Sands
----------------
Robert Sands, Director
Dated:  May 29, 1997



<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, 1997                  BARTON INCORPORATED


                                       By:  /s/ Ellis M. Goodman
                                            --------------------
                                            Ellis M. Goodman, Chairman of
                                            the Board of Directors 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/ Ellis M. Goodman                         /s/ Raymond E. Powers
--------------------                         ---------------------
Ellis M. Goodman, Chairman of the            Raymond E. Powers, Executive Vice
Board of Directors and Chief Executive       President, Treasurer, Assistant 
Officer (Principal Executive Officer)        Secretary and Director (Principal 
Dated:  May 29, 1997                         Financial Officer and Principal
                                             Accounting Officer)
                                             Dated: May 29, 1997

/s/ Alexander L. Berk                        /s/ William F. Hackett
---------------------                        ----------------------
Alexander L. Berk, Director                  William F. Hackett, Director
Dated:  May 29, 1997                         Dated:  May 29, 1997


/s/ Edward L. Golden
--------------------
Edward L. Golden, Director
Dated:  May 29, 1997



<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, 1997               BARTON BRANDS, LTD.


                                   By:  /s/ Ellis M. Goodman
                                        --------------------
                                        Ellis M. Goodman, Chairman of
                                        the Board of Directors

     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/ Ellis M. Goodman                  /s/ Raymond E. Powers
--------------------                  ---------------------
Ellis M. Goodman, Chairman of the     Raymond E. Powers, Executive Vice
the Board of Directors (Principal     President, Treasurer and Assistant 
Executive Officer)                    Secretary(Principal Financial Officer and 
Dated:  May 29, 1997                  Principal Accounting Officer)
                                      Dated:  May 29, 1997

/s/ Alexander L. Berk                 /s/ Edward L. Golden
---------------------                 --------------------
Alexander L. Berk, Director           Edward L. Golden, Director
Dated:  May 29, 1997                  Dated:  May 29, 1997




<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, 1997                  BARTON BRANDS OF CALIFORNIA, INC.


                                      By:  /s/ Ellis M. Goodman
                                           --------------------
                                           Ellis M. Goodman, 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.

/s/ Ellis M. Goodman                   /s/ Raymond E. Powers
--------------------                   ---------------------
Ellis M. Goodman, President and        Raymond E. Powers, Executive Vice
Director (Principal Executive Officer) President, Treasurer, Assistant Secretary
Dated:  May 29, 1997                   and Director (Principal Financial Officer
                                       and Principal Accounting Officer)
                                       Dated:  May 29, 1997

/s/ Alexander L. Berk                  /s/ Edward L. Golden
---------------------                  --------------------
Alexander L. Berk, Director            Edward L. Golden, Director
Dated:  May 29, 1997                   Dated:  May 29, 1997

<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, 1997            BARTON BRANDS OF GEORGIA, INC.


                                By:  /s/ Ellis M. Goodman
                                     --------------------
                                     Ellis M. Goodman, 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.

/s/ Ellis M. Goodman                    /s/ Raymond E. Powers
--------------------                    ---------------------
Ellis M. Goodman, President and         Raymond E. Powers, Executive Vice
Director (Principal Executive Officer)  President, Treasurer and Assistant 
Dated:  May 29, 1997                    Secretary (Principal Financial Officer 
                                        and Principal Accounting Officer)
                                        Dated: May 29, 1997

/s/ Alexander L. Berk                   /s/ Edward L. Golden
---------------------                   --------------------
Alexander L. Berk, Director             Edward L. Golden, Director
Dated:  May 29, 1997                    Dated:  May 29, 1997



<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, 1997               THE VIKING DISTILLERY, INC.


                                   By:  /s/ Ellis M. Goodman
                                        --------------------
                                        Ellis M. Goodman, 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.

/s/ Ellis M. Goodman                    /s/ Raymond E. Powers
--------------------                    ---------------------
Ellis M. Goodman, President and         Raymond E. Powers, Executive Vice
Director (Principal Executive Officer)  President, Treasurer and Assistant 
Dated:  May 29, 1997                    Secretary (Principal Financial Officer 
                                        and Principal Accounting Officer)
                                        Dated:  May 29, 1997

/s/ Alexander L. Berk                   /s/ Edward L. Golden
---------------------                   --------------------
Alexander L. Berk, Director             Edward L. Golden, Director
Dated:  May 29, 1997                    Dated:  May 29, 1997


<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, 1997                  BARTON DISTILLERS IMPORT CORP.


                                      By:  /s/ Ellis M. Goodman
                                           --------------------
                                           Ellis M. Goodman, 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.

/s/ Ellis M. Goodman
--------------------
Ellis M. Goodman, President and Director (Principal
Executive Officer)
Dated:  May 29, 1997

/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, 1997

/s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated:  May 29, 1997



<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, 1997                 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.

/s/ Raymond E. Powers
---------------------
Raymond E. Powers, President, Secretary
and Director (Principal Executive Officer)
Dated:  May 29, 1997


/s/ Charles T. Schlau
---------------------
Charles T. Schlau, Treasurer and Director
(Principal Financial Officer and Principal
Accounting Officer)
Dated:  May 29, 1997

<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, 1997                    BARTON BEERS, LTD.


                                        By:  /s/ Ellis M. Goodman
                                             --------------------
                                             Ellis M. Goodman, Chairman of
                                             the Board of Directors

     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/ Ellis M. Goodman                     /s/ Raymond E. Powers
--------------------                     ---------------------
Ellis M. Goodman, Chairman of the        Raymond E. Powers, Executive Vice
Board of Directors (Principal Executive  President, Treasurer and Assistant 
Officer)                                 Secretary (Principal Financial Officer 
Dated:  May 29, 1997                     and Principal Accounting Officer)
                                         Dated:  May 29, 1997

/s/ Alexander L. Berk                    /s/ William F. Hackett
---------------------                    ----------------------
Alexander L. Berk, Director              William F. Hackett, Director
Dated:  May 29, 1997                     Dated:  May 29, 1997                  



<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, 1997                MONARCH IMPORT COMPANY


                                    By:  /s/ Ellis M. Goodman
                                         --------------------
                                         Ellis M. Goodman, President and
                                         Chairman of the Board of Directors

     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/ Ellis M. Goodman
--------------------
Ellis M. Goodman, President and Chairman
of the Board of Directors
(Principal Executive Officer)
Dated:  May 29, 1997

/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, 1997

/s/ Alexander L. Berk
---------------------
Alexander L. Berk, Director
Dated:  May 29, 1997


<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, 1997              STEVENS POINT BEVERAGE CO.


                                  By:  /s/ Ellis M. Goodman
                                       --------------------
                                       Ellis M. Goodman, Chairman of the
                                       Board of Directors

     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/ James P. Ryan                        /s/ Raymond E. Powers
-----------------                        ---------------------
James P. Ryan, Chief Executive Officer,  Raymond E. Powers, Executive Vice
President and Director                   President, Treasurer, Assistant 
(Principal Executive Officer)            Secretary and Director (Principal 
Dated:  May 29, 1997                     Financial Officer and Principal 
                                         Accounting Officer)
                                         Dated: May 29, 1997

/s/ Ellis M. Goodman                    /s/ Alexander L. Berk
--------------------                    ---------------------
Ellis M. Goodman, Chairman              Alexander L. Berk, Director
of the Board of Directors               Dated:  May 29, 1997
Dated:  May 29, 1997                    


<PAGE>


                                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


<PAGE>


     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  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
     November 30, 1995 and incorporated herein by reference).

4.1  Specimen of  Certificate  of Class A Common Stock of the Company  (filed as
     Exhibit 1.1 to the Company's Registration Statement on Form 8-A dated April
     28, 1992 and incorporated herein by reference).

4.2  Specimen of  Certificate  of Class B Common Stock of the Company  (filed as
     Exhibit 1.2 to the Company's Registration Statement on Form 8-A dated April
     28, 1992 and incorporated herein by reference).

4.3  Indenture dated as of December 27, 1993 among the Company, its Subsidiaries
     and 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).

4.4  First Supplemental  Indenture dated as of August 3, 1994 among the Company,
     Canandaigua  West,  Inc.  and  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).

4.5  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 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).

4.6  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


<PAGE>


     Registration   Statement  on  Form  S-4  (Registration  No.  333-17673  and
     incorporated herein by reference).

10.1 The  Canandaigua  Wine Company,  Inc.  Stock Option and Stock  Appreciation
     Right Plan (filed as Appendix B of the Company's Definitive Proxy Statement
     dated December 23, 1987 and incorporated herein by reference).

10.2 Amendment  No. 1 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right  Plan  (filed as Exhibit  10.1 to the  Company's
     Annual  Report on Form 10-K for the fiscal  year ended  August 31, 1992 and
     incorporated herein by reference).

10.3 Amendment  No. 2 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right  Plan  (filed  as  Exhibit  28 to the  Company's
     Quarterly  Report on Form 10-Q for the fiscal  quarter  ended  November 30,
     1992 and incorporated herein by reference).

10.4 Amendment  No. 3 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right  Plan  (filed as Exhibit  10.4 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 Amendment  No. 4 to 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  November 30,
     1993 and incorporated herein by reference).

10.6 Amendment  No. 5 to 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  February 28,
     1994 and incorporated herein by reference).

10.7 Amendment  No. 6 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right  Plan  (filed as Exhibit  10.7 to the  Company's
     Annual  Report on Form 10-K for the fiscal  year ended  August 31, 1995 and
     incorporated herein by reference).

10.8 Amendment  No. 7 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right  Plan  (filed as Exhibit  10.8 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).

10.9 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


<PAGE>


     Form 10-K for the fiscal year ended August 31, 1993 and incorporated herein
     by reference).

10.10Barton  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).

10.11Ellis 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).

10.12Barton 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).

10.13Marvin 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).

10.14Third  Amended and  Restated  Credit  Agreement  between the  Company,  its
     principal  operating  subsidiaries,  and certain  banks for which The Chase
     Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.) acts
     as  Administrative  Agent,  dated as of September 1, 1995 (filed as Exhibit
     2(b) to the Company's Current Report on Form 8-K, dated August 29, 1995 and
     incorporated herein by reference).

10.15Amendment  No. 1, dated as of  December  20,  1995,  to Third  Amended  and
     Restated  Credit  Agreement  between the Company,  its principal  operating
     subsidiaries,  and  certain  banks  for  which  The  Chase  Manhattan  Bank
     (successor  by  merger  to  The  Chase  Manhattan   Bank,   N.A.)  acts  as
     Administrative  Agent  (filed as Exhibit  10.1 to the  Company's  Quarterly
     Report on Form 10-Q for the fiscal  quarter  ended  November  30,  1995 and
     incorporated herein by reference).

10.16Amendment  No. 2,  dated as of  January  10,  1996,  to Third  Amended  and
     Restated  Credit  Agreement  between the Company,  its principal  operating
     subsidiaries,  and  certain  banks  for  which  The  Chase  Manhattan  Bank
     (successor  by  merger  to  The  Chase  Manhattan   Bank,   N.A.)  acts  as
     Administrative  Agent  (filed as Exhibit  10.2 to the  Company's  Quarterly
     Report on Form 10-Q for the fiscal  quarter  ended  November  30,  1995 and
     incorporated herein by reference).

10.17Letter 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


<PAGE>


     Period from September 1, 1995 to February 29, 1996 and incorporated  herein
     by reference).

10.18Amendment  No. 3, dated as of May 17, 1996,  to Third  Amended and Restated
     Credit Agreement between the Company, its principal operating subsidiaries,
     and certain banks for which The Chase  Manhattan Bank  (successor by merger
     to The Chase Manhattan Bank, N.A.) acts as  Administrative  Agent (filed as
     Exhibit  10.24 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).

10.19Amendment  No. 4, dated as of May 17, 1996,  to Third  Amended and Restated
     Credit Agreement between the Company, its principal operating subsidiaries,
     and certain banks for which The Chase  Manhattan Bank  (successor by merger
     to The Chase Manhattan Bank, N.A.) acts as  Administrative  Agent (filed as
     Exhibit  10.3  to the  Company's  Quarterly  Report  on Form  10-Q  for the
     quarterly period ended May 31, 1996 and incorporated herein by reference).

10.20Amendment  No. 5,  dated as of  October  10,  1996,  to Third  Amended  and
     Restated  Credit  Agreement  between the Company,  its principal  operating
     subsidiaries,  and  certain  banks  for  which  The  Chase  Manhattan  Bank
     (successor  by  merger  to  The  Chase  Manhattan   Bank,   N.A.)  acts  as
     Administrative Agent (filed as Exhibit 10.26 to the Company's  Registration
     Statement on Form S-4 (Registration No. 333-17673) and incorporated  herein
     by reference).

10.21Amendment  No. 8 to the  Canandaigua  Wine Company,  Inc.  Stock Option and
     Stock  Appreciation  Right Plan  (filed as Exhibit  10.27 to the  Company's
     Registration  Statement  on  Form  S-4  (Registration  No.  333-17673)  and
     incorporated herein by reference).

11.1 Statement of 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 (filed herewith).