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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q

    (MARK ONE)

    [X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2003

                                       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 number: 0-13406


                          THE CHALONE WINE GROUP, LTD.
             (Exact Name of Registrant as Specified in Its Charter)


             California                                  94-1696731
   (State or Other Jurisdiction of
   Incorporation or Organization)           (I.R.S. Employer Identification No.)

               621 Airpark Road
               Napa, California                            94558
   (Address of Principal Executive Offices)             (Zip Code)

Registrant's Telephone Number, Including Area Code: 707-254-4200

Indicate by check mark whether the registrant (1) has 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  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                    Yes   X      No
                                       -------     -------

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

                                    Yes          No   X
                                       -------     -------

The number of shares outstanding of Registrant's Common Stock as of November 14,
2003 was 12,077,572.

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<PAGE>

                         PART I - FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS.                                          PAGE

              Consolidated Balance Sheets as of September 30, 2003,
                and December 31, 2002.                                         3

              Consolidated Statements of Income for the three-month
                and nine-month periods ended September 30, 2003 and 2002.      4

              Consolidated Statements of Cash Flows for the nine-month
                periods ended September 30, 2003 and 2002.                     5

              Notes to Consolidated Financial Statements.                      6

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS.                                       8

     ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK.       12

     ITEM 4. CONTROLS AND PROCEDURES.                                         15



                           PART II - OTHER INFORMATION

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                16



                                       2


<PAGE>
<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.
                           CONSOLIDATED BALANCE SHEETS
                (All amounts in thousands, except per share data)

                                     ASSETS

                                                                  September 30,          December 31,
                                                                       2003                  2002
                                                                 -----------------    --------------------
                                                                   (UNAUDITED)
<S>                                                                      <C>                     <C>
Current assets:
  Accounts receivable, net                                                $14,018                 $15,770
  Note receivable                                                             216                     190
  Income tax receivable                                                       223                     223
  Inventory                                                                76,863                  81,272
  Prepaid expenses and other current assets                                   788                   1,000
                                                                 -----------------    --------------------
    Total current assets                                                   92,108                  98,455
Investment in Chateau Duhart-Milon                                         10,618                  10,067
Non-current note receivable                                                   266                     447
Property, plant and equipment, net                                         81,441                  77,953
Goodwill                                                                    8,582                   8,582
Trademarks                                                                  2,867                   2,875
Other assets                                                                1,773                   1,815
                                                                 -----------------    --------------------
    Total assets                                                         $197,655                $200,194
                                                                         ========                ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term obligations                              $7,149                  $2,295
  Current portion of obligation under capital lease                           775                     716
  Revolving bank loan                                                      18,098                  18,523
  Accounts payable and accrued liabilities                                 17,075                  18,935
                                                                 -----------------    --------------------
    Total current liabilities                                              43,097                  40,469
Long-term obligations, less current maturities                             40,454                  46,754
Long-term obligations, convertible subordinated debt                       11,000                  11,000
Obligation under capital lease, less current maturities                     1,063                   1,329
Liability on interest rate swap contract                                    1,116                   1,355
Deferred income taxes                                                       1,019                     923
                                                                 -----------------    --------------------
    Total liabilities                                                      97,749                 101,829

Minority interest                                                           3,074                   3,572

Shareholders' equity:
  Common stock - authorized 25,000,000 shares no par
    value; issued and outstanding: 12,077,572 and
    17,075,101 shares                                                      76,484                  76,474
  Retained earnings                                                        22,673                  21,790
  Accumulated other comprehensive loss                                    (2,325)                 (3,471)
                                                                 -----------------    --------------------
    Total shareholders' equity                                             96,832                  94,793
                                                                 -----------------    --------------------
    Total liabilities and shareholders' equity                           $197,655                $200,194
                                                                         ========                ========
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       3

<PAGE>
<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.
                        CONSOLIDATED STATEMENTS OF INCOME
                (All amounts in thousands, except per share data)

                                                  Three months ended            Nine months ended
                                                 Sep 30,       Sep 30,         Sep 30,      Sep 30,
                                               -------------------------     -----------------------
                                                  2003         2002           2003          2002
                                               -----------   -----------     -----------  ----------
                                               (UNAUDITED)   (UNAUDITED)     (UNAUDITED)  (UNAUDITED)
<S>                                             <C>          <C>             <C>          <C>
Gross revenues                                  $ 16,878     $ 19,312        $ 46,792     $ 48,201
    Excise taxes                                    (492)        (540)         (1,394)      (1,356)
                                               -----------  -----------     -----------  -----------
Net revenues                                      16,386       18,772          45,398       46,845
Cost of wines sold                               (10,912)     (11,839)        (30,303)     (30,380)
                                               -----------  -----------     -----------  -----------
    Gross profit                                   5,474        6,933          15,095       16,465
Other operating income (expense), net                  3         (288)             24         (690)
Selling, general and administrative
  expenses                                        (3,425)      (4,051)        (10,173)      (9,946)
                                               -----------  -----------     -----------  -----------
    Operating income                               2,052        2,594           4,946        5,829
Interest expense, net                             (1,371)      (1,247)         (3,875)      (2,937)
Other income (expense)                                62         (418)            160         (431)
Equity in net income of Chateau Duhart-Milon         (35)          62             418          796
Minority interests                                   (65)          77            (152)        (542)
                                               -----------  -----------     -----------  -----------
    Income before income taxes                       643        1,068           1,497        2,715
Income taxes                                        (264)        (404)           (614)      (1,113)
                                               -----------  -----------     -----------  -----------
    Net income                                  $    379     $    664        $    883     $  1,602
                                               ===========  ===========     ===========  ===========

Earnings per share - basic                      $   0.03     $   0.06        $   0.07     $   0.13
Earnings per share - diluted                    $   0.03     $   0.05        $   0.07     $   0.13

Weighted average number of shares outstanding:
    Basic                                         12,076       12,068          12,075       12,069
    Diluted                                       12,078       12,075          12,079       12,092
</TABLE>


          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       4

<PAGE>
<TABLE>
<CAPTION>
                          THE CHALONE WINE GROUP, LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)

                                                                                       Nine months ended
                                                                      ------------------------ -- ------------------------
                                                                           September 30,               September 30,
                                                                               2003                        2002
                                                                      ------------------------    ------------------------
                                                                            (UNAUDITED)                 (UNAUDITED)
<S>                                                                                   <C>                        <C>
Cash flows from operating activities:
  Net income                                                                          $   883                    $  1,602
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation and amortization                                                     4,432                       4,464
      Gain on disposal of property                                                        (14)                        451
      Equity in net income of Chateau Duhart-Milon                                       (418)                       (796)
      Increase in minority interests                                                      152                         541
    Changes in:
      Accounts and other receivables                                                    1,752                        (977)
      Inventories                                                                       4,409                       3,691
      Prepaid expenses and other assets                                                   254                        (224)
      Deferred income taxes                                                                 -                          43
      Accounts payable and accrued liabilities                                         (1,858)                     (9,100)
                                                                      ------------------------    ------------------------
    Net cash provided by (used in) operating activities                                 9,592                        (305)
                                                                      ------------------------    ------------------------
Cash flows from investing activities:
  Capital expenditures                                                                 (7,920)                     (6,522)
  Property and business acquisitions                                                        -                      (9,390)
  Proceeds from disposal of property and equipment                                         22                       1,502
  Net change of note receivable                                                           155                         130
  Distribution from Chateau Duhart-Milon                                                  870                         108
                                                                      ------------------------    ------------------------
    Net cash used in investing activities:                                             (6,873)                    (14,172)
                                                                      ------------------------    ------------------------
Cash flows from financing activities
  Borrowings on revolving bank loan, net                                                 (425)                      5,512
  Distributions to minority partner                                                      (650)                          -
  Issuance of subordinated debt                                                             -                      11,000
  Net change in capital lease obligation                                                 (207)                       (481)
  Repayment of long-term debt                                                          (1,445)                     (1,499)
  Proceeds (re-purchase of) from issuance of common stock                                   8                         (55)
                                                                      ------------------------    ------------------------
    Net cash (used in) provided by financing activities                                (2,719)                     14,477
                                                                      ------------------------    ------------------------
Net increase (decrease) in cash and equivalents                                             -                           -
Cash and equivalents at beginning of year                                                   -                           -
                                                                      ------------------------    ------------------------
Cash and equivalents at end of year                                                   $     -                      $    -
                                                                                      =======                      ======

Other cash flow information:
  Interest paid                                                                        $3,884                     $ 3,057
  Income taxes paid                                                                       326                         638
Non-cash investing and financing activities:
  Unrealized foreign currency gain                                                     $1,003                       $ 940
  Interest swap fluctuation, net                                                          239                         712
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       5


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

      The unaudited consolidated financial statements of the Chalone Wine Group,
Ltd.  ("the  Company") are prepared in  conformity  with  accounting  principles
generally  accepted  in the  United  States of  America  for  reporting  interim
financial  information,  and the rules and  regulations  of the  Securities  and
Exchange Commission. In the opinion of management, all adjustments necessary for
a fair presentation of the financial  position and results of operations for the
periods  presented  have been  included.  All such  adjustments  are of a normal
recurring nature.  The results of operations for the three and nine months ended
September 30, 2003 are not necessarily  indicative of the operating  results for
the full  accounting  year or any future period.  These  unaudited  consolidated
financial statements should be read in conjunction with the audited consolidated
financial  statements  included  in the  Company's  Form 10-K for the year ended
December 31, 2002.

      The consolidated balance sheet at December 31, 2002, presented herein, has
been derived from the audited  consolidated  financial statements of the Company
for the year then ended, included in the Company's annual report on Form 10-K.


USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

      The preparation of the financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported  financial
statement  amounts  and  related  disclosures  at  the  date  of  the  financial
statements. Actual results could differ from these estimates.



EARNINGS PER SHARE

      Basic earnings  per share  ("EPS")  excludes  dilution  and is computed by
dividing net income  available to common  stockholders  by the weighted  average
number of common  shares  outstanding  for the period.  Diluted EPS reflects the
potential  dilution that could occur if  securities or other  contracts to issue
common stock (e.g.  stock options) were exercised and converted into stock.  For
all periods  presented,  the  difference  between  basic and diluted EPS for the
Company reflects the inclusion of dilutive stock options, the effect of which is
calculated using the treasury stock method.



DERIVATIVE FINANCIAL INSTRUMENTS

      The Company uses derivative  instruments  to manage  exposures to interest
rate  risks in  accordance  with  its  risk  management  policy.  The  Company's
objectives  for holding  derivatives  are to  minimize  the risks using the most
effective  methods  to  eliminate  or  reduce  the  exposure  to  interest  rate
fluctuations.  The Company formally  documents the relationship  between hedging
instruments  and  hedged  items as well as its  risk  management  objective  and
strategy for undertaking its hedging activities. The Company formally designates
derivatives  as  hedging  instruments  on the date the  derivative  contract  is
entered  into.  The Company  assesses,  both at inception of the hedge and on an
ongoing  basis,  whether  derivatives  used as  hedging  instruments  are highly
effective  in  offsetting  the changes in the fair value or cash flows of hedged
items. If it is determined that a derivative is not highly  effective as a hedge
or ceases to be highly  effective,  the Company  discontinues  hedge  accounting
prospectively.

      Changes in the fair value of  derivative  instruments  designated  as cash
flow  hedges,  to the extent the hedges are highly  effective,  are  recorded in
other comprehensive  income, net of related tax effects. The ineffective portion
of the cash flow hedge, if any, is recognized in current-period  earnings. Other
comprehensive  income is relieved  when  current  earnings  are  affected by the
variability of cash flows relating to the derivative  hedged.  During the period
ended September 30, 2003, the Company's  derivative  contracts consisted only of
an interest  rate swap used by the Company to convert a portion of its  variable
rate long-term debt to fixed rate.

      The  Company  does not enter into  financial  instruments  for  trading or
speculative purposes.  Payments or receipts on interest rate swap agreements are
recorded in interest  expense.  Forward  exchange  contracts  are used to manage
exchange  rate  risks on  certain  purchase  commitments,  generally  French oak
barrels,  denominated in foreign  currencies.  Gains and losses relating to firm
purchase  commitments are deferred and are recognized as adjustments of carrying
amounts of assets acquired or in income when the hedged transaction  occurs. The
nominal amounts and related foreign currency  transaction gains and losses,  net
of the  impact  of  hedging,  were not  significant  for the nine  months  ended
September 30, 2003 and 2002.

                                       6

<PAGE>


STOCK BASED COMPENSATION

      The  Company  accounts  for  stock-based  awards  to  employees  using the
intrinsic value based method in accordance with APB No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES and provides the pro forma disclosures  required by SFAS No.
123, ACCOUNTING FOR STOCK-BASED  COMPENSATION.  No compensation expense has been
recognized in the financial statements for employee stock arrangements.
      As of January 1, 2003 the Company  adopted the disclosure  requirements of
SFAS 148,  ACCOUNTING  FOR STOCK BASED  COMPENSATION,  which  amends  Accounting
Principals  Board ("APB") No. 28 by adding to the list of disclosures to be made
for interim reporting periods.
      SFAS 123, Accounting for Stock-Based Compensation, requires the disclosure
of pro forma net income and earnings per share had the Company  adopted the fair
value method as of the  beginning of fiscal year 1995.  Under SFAS 123, the fair
value of stock-based awards to employees is calculated through the use of option
pricing  models,  even though such models were  developed  to estimate  the fair
value  of  freely   tradable,   fully   transferable   options  without  vesting
restrictions, which significantly differ from the Company's stock option awards.
These  models  also  require  subjective  assumptions,  including  future  stock
volatility  and expected time to exercise,  which greatly  affect the calculated
values.  The Company's  calculations  were made using the  Black-Scholes  option
pricing model with the following  weighted average  assumptions:  expected life,
117 months  following  vesting;  stock volatility of 32.7% to 33.9% for the nine
months  ended  September  30,  2003 and 31.9% to 32.6% for the nine  months  end
September  30,  2002,  risk-free  interest  rates of 3.43% to 4.04% for the nine
months  ended  September  30, 2003 and 4.30% to 4.85% for the nine months  ended
September 30, 2002,  and no dividends  during the expected  term.  The Company's
calculations are based on a multiple option  valuation  approach and forfeitures
are recognized as they occur.
      For purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized over the options'  vesting period.  Had the Company's stock
option and stock purchase plan been accounted for under SFAS No. 123, net income
and  earnings  per share  would  have been  reduced to the  following  pro forma
amounts (IN THOUSANDS, EXCEPT PER SHARE DATA).

<TABLE>
<CAPTION>

                                                 Three months ended                      Nine months ended
                                         ----------------------------------      ---------------------------------
Net income:                              Sep 30, 2003        Sep 30, 2002        Sep 30, 2003       Sep 30, 2002
                                         ---------------  -----------------      --------------  -----------------
<S>                                              <C>                <C>                 <C>                <C>
       As reported                               $  379             $  664              $  883             $1,602
       Compensation Expense,
          net of tax                             $  (26)            $ (150)             $ (216)            $(530)
                                         ---------------  -----------------      --------------  -----------------
       Pro forma                                 $  353             $  514              $  667             $1,072
Earnings per share:
       Basic                                     $ 0.03             $ 0.06              $ 0.07             $ 0.13
       Diluted                                   $ 0.03             $ 0.05              $ 0.07             $ 0.13
       Pro forma basic                           $ 0.03             $ 0.04              $ 0.06             $ 0.09
       Pro forma diluted                         $ 0.03             $ 0.04              $ 0.06             $ 0.09

</TABLE>


NOTE 2 - COMPREHENSIVE INCOME

      Comprehensive income includes unrealized foreign currency gains and losses
related to the Company's  investment in Chateau Duhart-Milon and gains or losses
relating to derivative  instruments.  The following is a  reconciliation  of net
income and comprehensive income (IN THOUSANDS):

<TABLE>
<CAPTION>

                                          Three months ended              Nine months ended
                                            September 30,                   September 30,
                                        ----------------------        --------------------------
                                         2003            2002           2003             2002
                                        -----------  ---------        -----------  -------------
<S>                                          <C>        <C>              <C>            <C>
 Net income                                  $ 379      $ 664            $   883        $ 1,602
 Changes in fair value of derivatives;
   net of tax effect                            20       (302)              (158)          (421)
 Reclassification adjustment;
   net of tax effect                           102         29                301             63
 Foreign currency translation gain             137        (98)             1,003            940
                                        -----------  ---------        -----------  -------------
 Comprehensive income                        $ 638      $ 293            $ 2,029        $ 2,184
                                        ===========  =========        ===========  =============
</TABLE>

                                       7
<PAGE>


NOTE 3 - INVENTORIES

Inventories  are  stated at lower of cost  (first-in,  first-out)  or market and
consist of the following (IN THOUSANDS):

                                                Sep 30,        December 31,
                                             --------------------------------
                                                  2003             2002
                                             ---------------  ---------------
                                              (Unaudited)
 Bulk wine                                         $ 26,765         $ 48,312
 Bottled wine                                        49,278           32,171
 Wine packaging supplies                                415              415
 Other                                                  405              374
                                             ---------------  ---------------
 Total                                             $ 76,863         $ 81,272
                                             ===============  ===============


NOTE 4 - RECLASSIFICATION

      In July 2002,  the Company  shifted a major  distribution  channel  from a
broker to a  distributor.  Commissions  and shipping costs incurred for sales to
the broker were recorded as selling,  general and administrative  expenses. Case
prices charged to the distributor  have been reduced by an amount equal to these
commission and shipping costs. This caused a reduction in gross revenues for the
nine months ended  September  30, 2003,  when compared to previous  period.  For
comparability purposes, for the nine months ended September 30, 2002 the Company
reclassified $1,266,000 of commissions and shipping costs from selling,  general
and administrative expenses to gross revenues.



NOTE 5 - COMMITMENTS AND CONTINGENCIES

      Future minimum lease payments (excluding the effect of future increases in
payments  based on  indices  which  cannot be  estimated  at the  present  time)
required under non-cancelable  operating leases with terms in excess of one year
are as follows: (IN THOUSANDS)

                Calendar year:
                (three months remaining)
                         2003                    $    824
                         2004                       1,009
                         2005                         976
                         2006                       1,014
                         2007                         998
                       Thereafter                   5,443
                                             -------------
                         Total                   $ 10,264
                                             =============

      The Company  contracts with various growers and certain wineries to supply
a large portion of its future grape  requirements  and a smaller  portion of its
future bulk wine  requirements.  The Company estimates that it has contracted to
purchase approximately 9,000 to 13,000 tons of grapes per year over the next ten
years. While most of these contracts stipulate that prices will be determined by
current market conditions at the time of purchase,  several long-term  contracts
provide for minimum grape or bulk wine prices.  Purchases  under these contracts
were  $5,925,000  during the three and nine months  ended  September  30,  2003.
Purchases under these contracts were $18,883,000 for the year ended December 31,
2002.


NOTE 6 - LONG LIVED ASSETS HELD FOR SALE

      The Company has entered  into an  agreement  to sell one of its  vineyards
located in the County of Napa, California.  The sale is expected to close in the
fourth quarter of 2003. Gross proceeds are approximately  $7,500,000 and its net
book value is approximately $7,700,000.

                                       8

<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

INTRODUCTION

      In the  ordinary  course of  business,  the  Company  has made a number of
estimates and assumptions relating to the reporting of results of operations and
financial condition in the preparation of its financial statements in conformity
with accounting  principles  generally accepted in the United States of America.
Actual results could differ  significantly  from those estimates under different
assumptions and conditions.  The Company believes that the following  discussion
addresses the Company's most critical accounting policies,  which are those that
are most  important to the  portrayal of the Company's  financial  condition and
results. The Company constantly re-evaluates these significant factors and makes
adjustments where facts and circumstances dictate. Historically,  actual results
have not  significantly  deviated  from  those  determined  using the  necessary
estimates  inherent in the  preparation of financial  statements.  Estimates and
assumptions include, but are not limited to, customer receivables,  inventories,
assets held for sale, fixed asset lives, depletion allowances, contingencies and
litigation. The Company has also chosen certain accounting policies when options
were available, including:

       o  The first-in, first-out (FIFO) method  to  value  a  majority  of  our
          inventories;
       o  The intrinsic value method, or  APB Opinion No. 25, to account for our
          common stock incentive awards; and
       o  We  record  an  allowance  for  credit  losses  based on estimates  of
          customers' ability to pay. If the financial condition of our customers
          were to deteriorate, additional allowances may be required.

      These  accounting  policies  are  applied  consistently  for  all  periods
presented.  Our operating  results would be affected if other  alternatives were
used.


FORWARD LOOKING STATEMENTS

      From time to time, information provided by the Company, statements made by
its employees,  or  information  included in its filings with the Securities and
Exchange Commission  (including this Form 10-Q) may contain statements which are
not historical facts, so called "forward looking  statements" that involve risks
and  uncertainties.  Forward-looking  statements  are made  pursuant to the safe
harbor provisions of the Private Securities  Litigation Reform Act of 1995. When
used in  this  Form  10-Q,  the  terms  "anticipates,"  "expects,"  "estimates,"
"intends,"  "believes," and other similar terms as they relate to the Company or
its management  are intended to identify such forward  looking  statements.  The
Company's  actual future results may differ  significantly  from those stated in
any forward-looking statements. Factors that may cause such differences include,
but are not  limited to (i)  reduced  consumer  spending or a change in consumer
preferences, which could reduce demand for the Company's wines; (ii) competition
from  numerous  domestic  and foreign  wine  producers  which  could  affect the
Company's ability to sustain volume and revenue growth; (iii) interest rates and
other business and economic  conditions which could increase  significantly  the
cost and risks of  borrowings  associated  with  present and  projected  capital
projects;  (iv) the price and  availability in the marketplace of grapes meeting
the  Company's  quality  standards  and other  requirements;  (v) the  effect of
weather,  agricultural  pests and  disease and other  natural  forces on growing
conditions  and, in turn,  the quality  and  quantity of grapes  produced by the
Company;  and (vi)  regulatory  changes which might  restrict or hinder the sale
and/or  distribution of alcoholic  beverages.  Each of these factors,  and other
risks pertaining to the Company,  the premium wine industry and general business
and economic  conditions,  are more fully discussed herein and from time to time
in other  filings with the  Securities  and Exchange  Commission,  including the
Company's annual report on Form 10-K for the year ended December 31, 2002.


                                       9

<PAGE>


DESCRIPTION OF THE BUSINESS

      The Company produces,  markets and sells super premium, ultra premium, and
luxury-priced white and red varietal table wines, primarily Pinot Noir, Cabernet
Sauvignon,  Merlot, Syrah,  Chardonnay and Sauvignon Blanc. The Company owns and
operates  wineries in various  counties of California and Washington  State. The
Company's wines are made primarily from grapes grown at Moon Mountain  Vineyard,
Edna Valley Vineyard, Chalone Vineyard,  Company-owned vineyards adjacent to the
Acacia(TM)  Winery,  Hewitt Vineyard and Suscol Creek Vineyard in California and
the Canoe Ridge Vineyard in Washington State, as well as from purchased grapes.

      The wines are primarily sold under the labels "Provenance  Vineyards(TM),"
"Chalone Vineyards(R)," "Moon Mountain Vineyards(R),"  "Dynamite  Vineyards(R),"
"Edna  Valley  Vineyard(R),"  "Acacia(TM),"  "Canoe  Ridge(R)  Vineyard,"  "Jade
Mountain(R)," "Sagelands Vineyard(R)," and "Echelon(TM)."

      In France, the Company owns a minority interest in fourth-growth  Bordeaux
estate Chateau  Duhart-Milon  ("Duhart-Milon")  in partnership with Les Domaines
Barons de Rothschild (Lafite) ("DBR"). The vineyards of Duhart-Milon are located
adjacent  to  the  world-renowned  Chateau  Lafite-Rothschild  in  the  town  of
Pauillac.

      The Chalone Wine Group, Ltd. was incorporated  under the laws of the State
of California  on June 27, 1969.  The Company  became a publicly held  reporting
company as the result of an initial public offering of common stock in 1984.



RESULTS OF OPERATIONS - THIRD QUARTER AND THREE MONTHS OF 2003 COMPARED TO THIRD
QUARTER AND NINE MONTHS OF 2002
<TABLE>
<CAPTION>

                                        Sept 30,      Sept 30,        Change          Sept 30,     Sept 30,     Change
                                       ------------------------   ------------       ----------------------  ------------
                                         2003          2002       2003 vs 2002         2003         2002     2003 vs 2002
                                       -----------  -----------   ------------       ----------  ----------  ------------
<S>                                     <C>           <C>                 <C>         <C>          <C>              <C>
Net revenues                            100.0%        100.0%              0.0%        100.0%       100.0%           0.0%
Cost of wines sold                      (66.6)%       (63.1)%             5.5%        (66.7)%      (64.9)%          2.8%
                                       -----------  -----------                      ----------  ----------
    Gross profit                         33.4%         36.9%             (9.5)%        33.3%        35.1%          (5.1)%
Other operating expense, net              0.0%         -1.5%            100.0%          0.1%        (1.5)%       (106.7)%
Selling, general and administrativ      (20.9)%       (21.6)%            -3.2%        (22.4)%      (21.2)%          5.7%
                                       -----------  -----------                      ----------  ----------
    Operating income                     12.5%         13.8%             (9.4)%        10.9%        12.4%         (12.1)%
Interest expense, net                    (8.4)%        (6.6)%            27.3%         (8.5)%       (6.3)%         34.9%
Other income                              0.4%         (2.2)%          (118.2)%         0.4%        -0.9%         100.0%
Equity in net income of Chateau Du       -0.2%          0.3%           (166.7)%         0.9%         1.7%         (47.1)%
Minority interests                       (0.4)%         0.0            (200.0)%        (0.3)%       (1.2)%        (75.0)%
                                       -----------  -----------                      ----------  ----------
    Income before income taxes            3.9%          5.7%            (31.6)%         3.3%         5.8%         (43.1)%
Income taxes                             (1.6)%        (2.2)%           (27.3)%        (1.4)%       (2.4)%        (41.7)%
                                       -----------  -----------                      ----------  ----------
    Net income                            2.3%          3.5%            (34.3)%         1.9%         3.4%         (44.1)%
                                       ===========  ===========                      ==========  ==========
</TABLE>


NET REVENUES

      Net  revenues  for the three months  ended  September  30, 2003  decreased
approximately  12.7%,  or  $2,386,000  over  the  corresponding  period  in  the
preceding  year.  Included in the third  quarter 2002 net revenue is the sale of
the Carmenet brand and inventory.  Excluding the Carmenet brand transaction, net
revenues  increased  10.9% due to a 9.2%  increase  in cases sales over the same
period  in the  preceding  year  offset  by  continued  competitive  promotional
allowances within the marketplace.

      Net  revenues  for the nine months  ended  September  30,  2003  decreased
approximately 3.1% or $1,447,000, over the corresponding period in the preceding
year. Excluding the Carmenet brand transaction,  net revenues increased 6.0% due
to a 10.0%  increase in cases sales over the same period in the  preceding  year
offset by continued competitive promotional allowances within the marketplace.



GROSS PROFIT

      Gross profit margin for the three and nine months ended September 30, 2003
decreased 9.5% and 5.1%, respectively,  as compared to the corresponding periods
in the preceding  year.  Excluding  the Carmenet  brand  transaction,  the gross

                                       10

<PAGE>

profit margin for the three and nine months ended  September 30, 2003  decreased
5.6% and 3.5%,  respectively,  as compared to the  corresponding  periods in the
preceding  year.  The respective  decreases  were driven  primarily by continued
pressure to provide competitive promotional allowances within the marketplace.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling,  general and  administrative  expenses for the three months ended
September  30,  2003,  decreased   approximately  $626,000  or  15.5%  over  the
comparable  period in the prior year. The decrease was a result of third quarter
2002 costs associated with the Carmenet brand transaction  offset by an increase
in sales and marketing efforts.

      Selling,  general and  administrative  expenses  for the nine months ended
September 30, 2003, increased approximately $227,000 or 2.3% over the comparable
period in the prior year. This change was primarily a result of higher sales and
marketing  costs due to the  Company's  increased  sales efforts in an ever more
challenging marketplace.

OPERATING INCOME

      Operating  income for the three and nine months ended  September 30, 2003,
decreased $542,000 or 20.9% and $883,000 or 15.1%,  respectively,  over the same
periods last year.  Once again,  excluding the Carmenet brand and inventory sale
from the third  quarter  2002,  operating  income for the three and nine  months
ended  September  30, 2003,  increased  $858,000 or 71.9% and $517,000 or 11.7%,
respectively, over the same periods last year. The increase is due to the growth
in case  shipments  in 2003  compared  to 2002  which  offset  the  increase  in
promotional allowances. Additionally, the Company had minimal bulk wine sales in
2003 as compared to the same time period in 2002.

INTEREST EXPENSE

      Interest  expense for the three and nine months ended  September  30, 2003
increased  $124,000  or 9.9%  and  $938,000  or  31.9%,  respectively,  over the
comparable  periods in the prior  year.  The  increase  occurred  as a result of
several  factors.   The  interest  accrued  on  to  the  Company's   $11,000,000
convertible  subordinated  promissory notes issued in August 2002 contributed to
the greatest  part of the increase.  To a lesser  extent,  amortization  of debt
renewal and restructuring costs incurred at various times in the prior year were
also a contributing factor.

EQUITY IN NET INCOME OF DUHART-MILON

      The Company's 23.5% equity interest in the net income of Duhart-Milon  for
the nine months ended  September 30, 2003  decreased  $378,000 or 47.5% over the
comparable period in the prior year. The decrease was a function of timing based
on the release and shipment of wines and of slower than expected sales.

      The Company monitors its investment in Duhart-Milon  primarily through its
on-going  communication  with DBR.  Such  communication  is  facilitated  by the
presence  of the  Company's  chairman  on DBR's  Board of  Directors,  and DBR's
representation  on the Company's Board of Directors.  Additionally,  various key
employees  of the Company make  periodic  visits to  Duhart-Milon's  offices and
production facilities.

      Since the investment in Duhart-Milon is a long-term investment denominated
in a  foreign  currency,  the  Company  records  the gain or loss  for  currency
translation  in  other   comprehensive   income  or  loss,   which  is  part  of
shareholders' equity.

MINORITY INTEREST

      The financial  statements of Edna Valley Vineyard ("EVV") are consolidated
with the Company's  financial  statements.  The interest in EVV  attributable to
parties  other than the Company is accounted for as a "minority  interest".  The
minority  interest in the net income of EVV for the three months and nine months
ended September 30, 2003 was $65,000 and $152,000 respectively.  The increase in
minority  interest was $142,000  for the three months ended  September  30, 2003
when  compared to the same period last year.  The increase was  primarily due to
the higher case sales offset by promotional allowances. The decrease in minority
interest was $390,000 for the  nine-month  period ended  September 30, 2003 when
compared to the same period last year.  The  decrease was due to the reduced net
income of EVV as compared  to the same  period in the prior  year.  Principally,
competitive  case sales  discounts  contributed  to the  reduction  in EVV's net
income.


NET INCOME AND EARNINGS PER SHARE

      As a result of the factors  discussed  above,  reported net income for the
nine months  ending  September 30, 2003 amounted to $883,000 or $.07 per diluted
share, compared to $1,602,000, or $.13 per diluted share a year ago.


                                       11

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Net working capital decreased $8,975,000 or 15.5% at September 30, 2003. A
decrease  is  anticipated  as  additional  long-  term debt  obligations  become
progressively  current. The Company has historically financed its growth through
increases in borrowings and cash flow from operations.  Management  expects that
the Company's working capital needs will grow  significantly to support expected
future growth in sales volume.  Due to the lengthy aging and  processing  cycles
involved in premium wine production, expenditures for inventory and fixed assets
need to be made one to three years or more in advance of anticipated sales.

      The  Company  expects  to  finance  these  future  capital  needs  through
operations,  securities  offerings,  sale  of  non-core  assets  and  additional
borrowings.  There can be no  assurance  that the Company will be able to obtain
this financing on terms acceptable to the Company.



ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The following  disclosures should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations.  These
disclosures  are intended to discuss  certain  material  risks of the  Company's
business as they appear to  management at this time.  However,  this list is not
exhaustive. Other risks may, and likely will, arise from time to time.


      OUR REVENUES AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY FROM QUARTER TO
QUARTER

      We believe  period-to-period  comparisons of our operating results are not
necessarily  meaningful,  and  cannot be  relied  upon as  indicators  of future
performance.  In addition, there can be no assurance that our revenues will grow
or be  sustained  in  future  periods  or  that  we will  maintain  our  current
profitability   in  the   future.   Significant   factors  in  these   quarterly
fluctuations,  none of which are within our  control,  are  changes in  consumer
demand for our wines,  the effect of weather and other natural forces on growing
conditions  and, in turn,  the quality  and  quantity of grapes  produced by us,
interest rates,  inventory  levels and the timing of releases for certain wines,
among other factors.  Consequently,  we have experienced, and expect to continue
to experience, seasonal fluctuations in revenues and operating results.

      Large  portions of our  expenses  are fixed and  difficult  to reduce in a
short period of time. In quarters  when  revenues do not meet our  expectations,
our  level of fixed  expenses  tends to  exacerbate  the  adverse  effect on net
income.  In quarters when our operating  results are below the  expectations  of
public  market  analysts  or  investors,  the price of our  common  stock may be
adversely affected.

      REDUCED  CONSUMER  SPENDING COULD LESSEN DEMAND FOR OUR WINES AND HARM OUR
BUSINESS

      Consumer  spending trends and changes in consumer tastes has a substantial
impact on the wine industry and our business.  To the extent that wine purchases
are negatively  impacted by economic and other factors, or wine consumers reduce
consumption  of wine in favor of other  beverages,  demand  for our wines  could
decrease.

      OUR BUSINESS IS SEASONAL, WHICH COULD CAUSE OUR MARKET PRICE TO FLUCTUATE

      Our business is subject to seasonal as well as quarterly  fluctuations  in
revenues and operating  results.  Our sales volume tends to increase  during the
summer months and the holiday season and decrease after the holiday season. As a
result,  our sales and earnings are typically highest during the fourth calendar
quarter and lowest in the first calendar  quarter.  Seasonal factors also affect
our level of borrowing.  For example, our borrowing levels typically are highest
during winter when we have to pay growers for grapes harvested and make payments
related to the grape harvest.  These and other factors may cause fluctuations in
the market price of our common stock.

      WE WILL NEED MORE WORKING CAPITAL TO GROW

      The premium wine industry is a capital-intensive  business, which requires
substantial capital expenditures to develop and acquire vineyards and to improve
or expand wine production.  Further, the farming of vineyards and acquisition of
grapes and bulk wine require  substantial amounts of working capital. We project
the  need  for  significant  capital  spending  and  increased  working  capital
requirements  over the next several  years,  which must be financed by cash from
operations and, by additional borrowings or additional equity.

      OUR  ACQUISITIONS AND POTENTIAL  FUTURE  ACQUISITIONS  INVOLVE A NUMBER OF
RISKS

      Our  acquisition  of Provenance  Vineyards,  Hewitt  Ranch,  Suscol Ranch,
Staton Hills Winery  (renamed  Sagelands  Vineyard),  the Jade  Mountain  brand,
enlarging Canoe Ridge Vineyard and buying out our partners, and expansion to the
recently  acquired  winery for the Provenance  Vineyards  (and potential  future
acquisitions)  involve risks associated with assimilating  these operations into

                                       12

<PAGE>

our Company;  integrating,  retaining and motivating key personnel;  integrating
and managing geographically-dispersed  operations integrating the technology and
infrastructures  of disparate  entities;  risks  inherent in the  production and
marketing  wine and  replanting of existing  vineyards from white wine grapes to
red wine grapes.

      We relied on debt financing to purchase Hewitt Ranch, Suscol Ranch, Staton
Hills Winery, the Jade Mountain brand, enlarging Canoe Ridge Vineyard and buying
out our partners and other  vineyard  land and related  assets during the fiscal
year ended December 31, 2001.  Consequently our debt-to-equity  ratio is high in
relation to our historical  standards,  even after the successful  completion of
our rights  offering in November 2001. The interest costs  associated  with this
debt will increase our operating expenses and the risk of negative cash flow.


      OUR  PROFITS  DEPEND  LARGELY ON SALES IN  CERTAIN  STATES AND ON SALES OF
CERTAIN VARIETALS

      In the nine months ended September 30, 2003, approximately 89% of our wine
sales were  concentrated in 18 states.  Changes in national consumer spending or
consumer  spending in these states and other regions of the country could affect
both the  quantity  and price  level of wines  that  customers  are  willing  to
purchase which could harm our business.

      Approximately  84% of our  consolidated  net  revenues  in the nine months
ended  September  30, 2003 were  concentrated  in our four top selling  varietal
wines.  Specifically,  sales of Chardonnay,  Cabernet Sauvignon, Pinot Noir, and
Merlot  accounted for 44%,  15%, 13% and 12% of our net revenues,  respectively.
Changes in  consumer  preferences  with  respect to these  varietal  wines could
adversely affect our business.

      COMPETITION MAY HARM OUR BUSINESS

      The  premium  table wine  industry  is  intensely  competitive  and highly
fragmented.  Our wines  compete in all of the premium wine market  segments with
many other  premium  domestic  and foreign  wines,  with  imported  wines coming
primarily  from the  Burgundy  and  Bordeaux  regions of France and, to a lesser
extent,  Italy,  Chile,  Argentina,  South Africa and Australia.  Our wines also
compete with  popular-priced  generic wines and with other  alcoholic  and, to a
lesser degree, non-alcoholic beverages, for shelf space in retail stores and for
marketing focus by our independent  distributors,  many of which carry extensive
brand portfolios.

      The wine industry has experienced significant  consolidation.  Many of our
competitors have greater  financial,  technical,  marketing and public relations
resources  than we do.  Our sales may be harmed to the extent we are not able to
compete successfully against such wine or alternative beverage producers.


      OUR BUSINESS IS SUBJECT TO A VARIETY OF AGRICULTURAL RISKS

      Winemaking  and grape  growing  are  subject to a variety of  agricultural
risks.  Various diseases,  pests, fungi,  viruses,  drought,  frosts and certain
other weather conditions can affect the quality and quantity of grapes available
to  us,  decreasing  the  supply  of  our  products  and  negatively   impacting
profitability.

      Many  California  vineyards  have  been  infested  in  recent  years  with
phylloxera. Our vineyard properties are primarily planted to rootstocks believed
to be  resistant to  phylloxera.  However,  there can be no  assurance  that our
existing vineyards, or the rootstocks we are now using in our planting programs,
will not become susceptible to current or new strains of phylloxera.

      Pierce's  Disease is a vine bacterial  disease that has been in California
for more than 100 years. It kills  grapevines and there is no known cure.  Small
insects  called   sharpshooters  spread  this  disease.  A  new  strain  of  the
sharpshooter,  the glassy winged,  was discovered in Southern  California and is
believed to be migrating  north.  We are actively  supporting the efforts of the
agricultural  industry  to  control  this pest and are making  every  reasonable
effort to prevent  an  infestation  in our own  vineyards.  We cannot,  however,
guarantee that we will succeed in preventing contamination in our vineyards.

      Future government restrictions regarding the use of certain materials used
in grape growing may increase vineyard costs and/or reduce production.

      Grape growing  requires  adequate water supplies.  We generally supply our
vineyards'  water needs through wells and reservoirs  located on our properties.
We believe that we either have,  or are currently  planning to insure,  adequate
water supplies to meet the needs of all of our vineyards. However, a substantial
reduction in water supplies  could result in material  losses of grape crops and
vines.

                                       13

<PAGE>

      WE MAY NOT BE ABLE TO GROW OR ACQUIRE ENOUGH QUALITY GRAPES FOR OUR WINES

      The adequacy of our grape supply is influenced by consumer demand for wine
in relation to  industry-wide  production  levels.  While we believe that we can
secure  sufficient  supplies of grapes from a combination  of our own production
and from grape supply contracts with independent  growers,  we cannot be certain
that grape  supply  shortages  will not occur.  A shortage in the supply of wine
grapes could  result in an increase in the price of some or all grape  varieties
and a corresponding increase in our wine production costs.

      AN OVERSUPPLY OF GRAPES MAY ALSO HARM OUR BUSINESS

      Current  trends in the domestic and foreign wine  industry  point to rapid
plantings of new vineyards and replanting of old vineyards to greater densities,
with the expected  result of  significantly  increasing the worldwide  supply of
premium wine grapes and the amount of wine which will be produced in the future.
This expected  increase in grape  production has resulted in an excess of supply
over demand and forces us to reduce, or not increase, our prices.

      WE DEPEND ON THIRD PARTIES TO SELL OUR WINE

      We sell  our  products  primarily  through  independent  distributors  and
brokers for resale to retail  outlets,  restaurants,  hotels and  private  clubs
across the United States and in some overseas  markets.  To a lesser degree,  we
rely on direct sales from our wineries,  our wine library and direct mail. Sales
to our  largest  distributor  and  to  our  ten  largest  distributors  combined
represented approximately 35% and 63%, respectively,  of our net revenues during
the nine months ended  September 30, 2003.  Effective  July 1, 2002, the Company
switched  from a single  broker to a  distributor  in  California.  The laws and
regulations of several states  prohibit  changes of  distributors,  except under
certain  limited  circumstances,  making it difficult to terminate a distributor
for  poor  performance  without  reasonable  cause,  as  defined  by  applicable
statutes. Any difficulty or inability to replace distributors,  poor performance
of our major  distributors or our inability to collect accounts  receivable from
our major distributors could harm our business.

      NEW REGULATIONS OR INCREASED REGULATORY COSTS COULD HARM OUR BUSINESS

      The wine  industry is subject to extensive  regulation  by the Alcohol and
Tobacco  Tax and  Trade  Bureau  and  various  foreign  agencies,  state  liquor
authorities  and local  authorities.  These  regulations  and laws  dictate such
matters  as  licensing  requirements,  trade and  pricing  practices,  permitted
distribution  channels,   permitted  and  required  labeling,   advertising  and
relations  with  wholesalers  and  retailers.  Any  expansion  of  our  existing
facilities or development of new vineyards or wineries may be limited by present
and  future  zoning  ordinances,  environmental  restrictions  and  other  legal
requirements.  In addition,  new  regulations  or  requirements  or increases in
excise taxes, income taxes,  property and sales taxes or international  tariffs,
could reduce our profits. Future legal or regulatory challenges to the industry,
either individually or in the aggregate, could harm our business.

      ADVERSE PUBLIC OPINION ABOUT ALCOHOL MAY HARM OUR BUSINESS

      A number of research  studies  suggest  that various  health  benefits may
result from the moderate  consumption of alcohol, but other studies suggest that
alcohol  consumption  does not have any health benefits and may in fact increase
the risk of stroke,  cancer and other  illnesses.  If an  unfavorable  report on
alcohol  consumption gains general support,  it could harm the wine industry and
our business.

      WE USE PESTICIDES AND OTHER  HAZARDOUS  SUBSTANCES IN THE OPERATION OF OUR
BUSINESS

      We use pesticides and other  hazardous  substances in the operation of our
business. If hazardous substances are discovered on, or emanate from, any of our
properties,  and their release presents a threat of harm to public health or the
environment, we may be held strictly liable for the cost of remediation. Payment
of such costs could have a material  adverse  effect on our business,  financial
condition and results of operations.  We maintain  insurance against these kinds
of risks, and others,  under various insurance policies.  However, our insurance
may not be adequate or may not  continue to be  available at a price or on terms
that are satisfactory to us.

      CONTAMINATION OF OUR WINES WOULD HARM OUR BUSINESS

      We are subject to certain  hazards and product  liability  risks,  such as
potential  contamination,  through  tampering or otherwise,  of  ingredients  or
products.  Contamination  of any of our  wines  could  result  in the need for a
product  recall  that could  significantly  damage our  reputation  for  product
quality,  which we believe is one of our principal  competitive  advantages.  We
maintain  insurance  against  these kinds of risks,  and others,  under  various
general  liability  and  product  liability  insurance  policies.  However,  our
insurance  may not be adequate or may not continue to be available at a price or
on terms that are satisfactory to us.

                                       14

<PAGE>

      THE LOSS OF KEY EMPLOYEES WOULD DAMAGE OUR REPUTATION AND BUSINESS

      Our success depends to some degree upon the continued services of a number
of key  employees.  Although some key employees are under  employment  contracts
with us for specific  terms,  the loss of the services of one or more of our key
employees  could harm our business and our  reputation,  particularly  if one or
more of our key  employees  resigns to join a competitor  or to form a competing
company. In such an event, despite provisions in our employment contracts, which
are designed to prevent the unauthorized disclosure or use of our trade secrets,
practices or procedures by such personnel under these  circumstances,  we cannot
be certain  that we would be able to enforce  these  provisions  or prevent such
disclosures.


      SHIFTS IN  FOREIGN  EXCHANGE  RATES OR THE  IMPOSITION  OF  ADVERSE  TRADE
REGULATIONS COULD HARM OUR BUSINESS

      We conduct some of our import and export  activity for wine and  packaging
supplies in foreign currencies.  We purchase foreign currency on the spot market
on an as-needed  basis and engage in limited  financial  hedging  activities  to
offset the risk of exchange rate  fluctuations.  There is a risk that a shift in
certain foreign exchange rates or the imposition of unforeseen and adverse trade
regulations  could adversely impact the costs of these items and have an adverse
impact on our operating results.

      In addition,  the imposition of unforeseen  and adverse trade  regulations
could have an adverse  effect on our  imported  wine  operations.  Export  sales
accounted for approximately 2% of total consolidated revenue for the nine months
ended September 30, 2003. We expect the volume of international  transactions to
increase, which may increase our exposure to future exchange rate fluctuations.

      INFRINGEMENT OF OUR TRADEMARKS MAY DAMAGE OUR BRAND NAMES OR OUR BUSINESS

      Our wines are branded consumer products, and we distinguish our wines from
our  competitors'  by enforcement of our  trademarks.  There can be no assurance
that  competitors  will refrain from  infringing our marks or using  trademarks,
trade names or trade dress which dilute our intellectual  property  rights,  and
any such  actions may require us to become  involved  in  litigation  to protect
these  rights.  Litigation  of this  nature can be very  expensive  and tends to
divert management's time and attention.


      THE MARKET PRICE OF OUR COMMON STOCK FLUCTUATES

      All of the  foregoing  risks,  among others not known or mentioned in this
report,  may have a  significant  effect on the market price of our shares.  The
stock markets have  experienced  extreme price and volume trading  volatility in
recent months and years.  This  volatility  has had a substantial  effect on the
market prices of securities of many companies for reasons  frequently  unrelated
or disproportionate  to the specific company's  operating  performance and could
similarly affect our market price.

      DECREASED CASH FLOW COULD LIMIT OUR ABILITY TO SERVICE OUR DEBT

      As a result of  incurring  debt,  we are  subject  to the  risks  normally
associated  with  debt  financing,  including  the  risk  that  cash  flow  from
operations  will be  insufficient  to meet  required  payments of principal  and
interest.  Our ability to satisfy our  obligations  to pay interest and to repay
debt is dependent on our future performance.  Our performance  depends, in part,
on prevailing  economic  conditions  and  financial,  business and other factor,
including factors beyond our control.



      OUR DEBT FINANCING AGREEMENTS CONTAIN RESTRICTIVE  COVENANTS WITH WHICH WE
MAY NOT BE ABLE TO COMPLY

      Our  existing  line of credit  and  long-term  debt  financing  agreements
contain restrictive financial covenants. These covenants require us, among other
things, to maintain  specified levels of net income,  working capital,  tangible
net worth and financial ratios. Our ability to comply with restrictive financial
covenants  depends upon our future operating  performance.  Our future operating
performance  depends,  in part, on general industry conditions and other factors
beyond our control.



ITEM 4.    CONTROLS AND PROCEDURES

      Within the 90-day  period  prior to the date of this  report,  the Company
carried out an evaluation,  under the supervision and with the  participation of
the  Company's  management,  including  its Chief  Executive  Officer  and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of the
Company's  disclosure  controls and procedures.  Based on that  evaluation,  the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls and  procedures  are  effective in a timely manner to alert
them to material  information  relating to the Company,  which is required to be
disclosed  by the  Company in the  reports  that it files or  submits  under the
Securities  Exchange Act of 1934. There have been no significant  changes in our
internal  controls  or other  factors  that  could  significantly  affect  these
controls  subsequent to the evaluation  date,  including any corrective  actions
with regard to significant deficiencies and material weaknesses.


                                       15

<PAGE>

PART II. - OTHER INFORMATION



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

         31.1 Certification of Chief Financial Officer.
         31.2 Certification of Chief Executive Officer.
         32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
              Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
         32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
              Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

     (b) Reports on Form 8-K.

         On August 4, 2003 the  Company  filed a Form 8-K to  provide  its press
         release announcing its second quarter 2003 financial results.









Pursuant  to the  requirements  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:  NOVEMBER 14, 2003            THE CHALONE WINE GROUP, LTD.
-------------------------            ----------------------------
                                            (Registrant)


                                      /s/ THOMAS B. SELFRIDGE
                                     -------------------------------------------
                                     Thomas B. Selfridge
                                     President and Chief Executive Officer


DATED:  NOVEMBER 14, 2003             /s/ SHAWN M. CONROY BLOM
-------------------------            -------------------------------------------
                                     Shawn M. Conroy Blom
                                     Vice President and Chief Financial Officer



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