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

                       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, 2001

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

The number of shares  outstanding  of  Registrant's  Common Stock on November 7,
2001 was 10,301,479.

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<PAGE>


                          THE CHALONE WINE GROUP, LTD.

                         PART I. - FINANCIAL INFORMATION

                                                                            PAGE

ITEM 1. FINANCIAL STATEMENTS

        Consolidated Balance Sheets as of September 30, 2001,
        and March 31, 2001.                                                   3

        Consolidated Statements of Income for the three-month
        and six-month periods ended September 30, 2001 and 2000.              4

        Consolidated Statements of Cash Flows for the six-month
        periods ended September 30, 2001 and 2000.                            5

        Notes to Consolidated Financial Statements.                           6

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



                          PART II. - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                     15


<PAGE>

<TABLE>
<CAPTION>


                          THE CHALONE WINE GROUP, LTD.


                           CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)
                                     ASSETS


                                                                              September 30,                 March 31,
                                                                                   2001                       2001
                                                                              ---------------------------------------
                                                                               (unaudited)

<S>                                                                              <C>                        <C>

Current assets:
    Cash and equivalents                                                         $       -                  $      56
    Accounts receivable, net                                                         9,215                     10,128
    Inventory                                                                       59,738                     59,333
    Prepaid expenses and other                                                         656                        533
    Deferred income taxes                                                            1,360                        897
                                                                                 ---------                  ---------
        Total current assets                                                        70,969                     70,947
Investment in Chateau Duhart-Milon                                                   8,494                      7,824
Property, plant and equipment - net                                                 72,383                     67,197
Goodwill and trademarks - net of accumulated
    amortization of $2,499 and $2,161, respectively                                 10,461                     10,581
Other assets                                                                         1,252                      1,342
                                                                                 ---------                  ---------
        Total assets                                                             $ 163,559                  $ 157,891
                                                                                 =========                  =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable and accrued liabilities                                     $   9,606                  $   7,517
    Revolving bank loan                                                             23,441                     19,999
    Current maturities of related party note payable                                    18                         18
    Current maturities of long-term borrowings                                       2,034                      2,032
                                                                                 ---------                  ---------
        Total current liabilities                                                   35,099                     29,566
Long-term borrowings, less current maturities                                       47,573                     48,608
Related party note payable, net of current portion                                     892                        882
Deferred income taxes                                                                1,012                      1,012
                                                                                 ---------                  ---------
        Total liabilites                                                            84,576                     80,068
                                                                                 ---------                  ---------

Minority interest                                                                    2,973                      2,689

Shareholders' equity:
    Common stock - authorized 15,000,000 shares no par value;
        issued and outstanding: 10,301,479 and 10,248,491 shares,
        respectively                                                                61,773                     61,578
    Retained earnings                                                               18,841                     17,901
    Accumulated other comprehensive loss                                            (4,604)                    (4,345)
                                                                                 ---------                  ---------
        Total shareholders' equity                                                  76,010                     75,134
                                                                                 ---------                  ---------
        Total liabilities and shareholders' equity                               $ 163,559                  $ 157,891
                                                                                 =========                  =========


                 The accompanying notes are an integral part of the consolidated financial statements

</TABLE>


                                       3


<PAGE>

<TABLE>
<CAPTION>


                          THE CHALONE WINE GROUP, LTD.


                        CONSOLIDATED STATEMENTS OF INCOME
                (unaudited, in thousands, except per share data)


                                                          Three months ended                    Six months ended
                                                            September 30,                        September 30,
                                                     ---------------------------          ---------------------------
                                                       2001              2000               2001              2000
                                                     --------          ---------          --------          ---------
<S>                                                  <C>               <C>                <C>               <C>

Gross revenues                                       $ 13,396          $ 14,211           $ 27,299          $ 28,729
     Excise taxes                                        (344)             (374)              (719)             (762)
                                                     --------          --------           --------          --------
Net revenues                                           13,052            13,837             26,580            27,967
Cost of wines sold                                     (7,547)           (9,522)           (15,629)          (18,240)
                                                     --------          --------           --------          --------
     Gross profit                                       5,505             4,315             10,951             9,727
Other operating revenues, net                              (2)               27                 29                38
Selling, general and administrative expenses           (3,576)           (4,094)            (7,414)           (7,762)
                                                     --------          --------           --------          --------
     Operating income                                   1,927               248              3,566             2,003
Interest expense, net                                  (1,032)           (1,059)            (2,059)           (1,947)
Equity in net income of Chateau Duhart-Milon              183               215                382               533
Other income                                                -               848                  -               848
Minority interests                                       (187)              154               (296)             (102)
                                                     --------          --------           --------          --------
     Income before income taxes                           891               406              1,593             1,335
Income taxes                                             (366)             (166)              (653)             (547)
                                                     --------          --------           --------          --------
     Net income                                      $    525          $    240           $    940          $    788
                                                     ========          ========           ========          ========

     Earnings per share-basic & diluted              $   0.05          $   0.02           $   0.09          $   0.08

Weighted average number of shares outstanding:
     Basic                                             10,302            10,233             10,282            10,229
     Diluted                                           10,381            10,233             10,355            10,229


       The accompanying notes are an integral part of the consolidated financial statements

</TABLE>


                                       4


<PAGE>

<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (unaudited, in thousands)


                                                                Six months ended
                                                                  September 30,
                                                                ------------------
                                                                  2001       2000
                                                                -------    -------
<S>                                                             <C>        <C>

Cash flows from operating activities:
    Net income                                                  $   940    $   788
    Adjustments to reconcile net income to net cash provided
      by operating activites:
    Depreciation and amortization                                 2,916      1,959
    Equity in net income of  Chateau Duhart-Milon                  (382)      (533)
    Increase (decrease) in minority interests                       296        102
    Loss (gain) on sale of assets                                    (8)      (837)
    Changes in:
      Deferred income taxes                                        (463)         -
      Accounts receivable                                           913       (540)
      Inventory                                                    (405)     3,361
      Prepaid expenses and other assets                             (33)       511
      Accounts payable and accrued liabilities                    1,545         73
                                                                -------    -------
    Net cash provided by operating activities                     5,319      4,884
                                                                -------    -------

    Cash flows from investing activities:
      Capital expenditures                                       (8,111)    (7,541)
      Property and business acquisitions                              -     (3,518)
      Proceeds from disposal of property and equipment              122      7,419
      Distributions from Chateau Duhart-Milon                         -        564
                                                                -------    -------
        Net cash used in investing activities                    (7,989)    (3,076)
                                                                -------    -------

    Cash flows from financing activities:
      Borrowings (repayments) on revolving bank loan - net        3,442    (21,107)
      Distributions to minority interests                             -       (400)
      Proceeds from private placement financing                       -     30,000
      Repayment of long-term and other debt                      (1,023)   (10,261)
      Proceeds from issuance of common stock                        195          -
                                                                -------    -------
        Net cash provided by (used in) financing activities       2,614     (1,768)
                                                                -------    -------

    Net increase (decrease) in cash and equivalents                 (56)        40
    Cash and equivalents at beginning of period                      56          -
                                                                -------    -------
    Cash and equivalents at end of period                       $     -    $    40
                                                                =======    =======

    Other cash flow information:
      Interest paid                                             $ 2,149    $ 1,867
      Income taxes paid                                              83        139


The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>


                                       5


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

      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.  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 March 31, 2001.

         The consolidated balance sheet at March 31, 2001, presented herein, has
been derived from the audited  consolidated  financial statements of the Company
for the fiscal year then ended,  included in the Company's annual report on Form
10-K.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standard  (SFAS) No. 142,  Goodwill and Other  Intangible
Assets.  SFAS No. 142  addresses  the initial  recognition  and  measurement  of
intangible  assets  subsequent to their acquisition and provides that intangible
assets with finite useful lives be amortized.  The statement  also provides that
goodwill and other intangible assets with indefinite lives not be amortized, but
tested at least annually for impairment. The Company will adopt SFAS No. 142 for
its fiscal year  beginning  January 1, 2002.  Upon adoption of SFAS No. 142, the
Company  will  discontinue  the  amortization  of goodwill  with an expected net
carrying value of  approximately  $10,346,000 at the date of adoption and annual
amortization  of $361,000 that resulted  from  business  combinations  completed
prior to the adoption.

     The  Financial  Accounting  Standards  Board issued  Statement of Financial
Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations.
SFAS No. 143 requires  that an  obligation  associated  with the  retirement  of
tangible  long-lived  assets  and  the  associated  asset  retirement  costs  be
recognized as a liability when incurred. Upon initial recognition of a liability
for an asset  retirement  obligation,  an entity would  capitalize  that cost by
recognizing an increase in the carrying amount of the related  long-lived  asset
by the same amount as the liability.  An entity would subsequently allocate that
asset retirement cost to expense using a systematic and rational method over its
useful life. The Company will adopt SFAS No. 143 for its calendar year beginning
January 1, 2003. The adoption of SFAS No. 143 should not have a material  effect
on the Company's operating results or financial position.

     The  Financial  Accounting  Standards  Board issued  Statement of Financial
Accounting Standard (SFAS) No. 144, Accounting for the Impairment or Disposal of
Long-Lived  Assets.  SFAS No. 144 requires that a long-lived asset be considered
held and used until it is disposed of. For the long-lived  assets to be disposed
of by sale,  the  accounting  model retains the  requirement of Statement 121 to
measure  a  long-lived  asset  classified  as held for sale at the  lower of its
carrying  amount  or fair  value  less  cost to sell and to cease  depreciation.
Therefore,  discontinued  operations are no longer  measured on a net realizable
value basis, and future operating  losses are no longer  recognized  before they
occur.  The  Company  will adopt SFAS No. 144 for its  calendar  year  beginning
January 1, 2002. The adoption of SFAS No. 144 should not have a material  effect
on the Company's operating results or financial position.


                                       6


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


NOTE 3 - COMPREHENSIVE INCOME (LOSS)

     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 (loss) (IN THOUSANDS):

                                                       Six months ended
                                                         September 30,
                                                     --------------------
                                                         2001       2000
                                                     --------- ----------
 Net income                                             $ 940      $ 788
 Cumulative effect of adopting SFAS No. 133              (188)         -
 Changes in fair value of derivatives                    (374)         -
 Transition adjustment reclassified in earnings            15          -
 Foreign currency translation gain (loss)                 288       (803)
                                                     --------- ----------
 Comprehensive income (loss)                            $ 681      $ (15)
                                                     ========= ==========

NOTE 4 - EARNINGS PER SHARE ("EPS")

     Basic EPS represents  net income divided by the weighted  average number of
common shares  outstanding  for the period.  Diluted EPS  represents  net income
divided by the weighted average number of common shares  outstanding  while also
giving effect to 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. This effect is calculated using the treasury stock method.

NOTE 5 - DERIVATIVE INSTRUMENTS

     Effective  April 1,  2001,  the  Company  adopted  Statement  of  Financial
Accounting  Standards ("SFAS") No. 133,  "Accounting for Derivative  Instruments
and  Hedging  Activities."  SFAS 133 as  amended  by SFAS 138,  "Accounting  for
Certain Derivative  Instruments and Certain Hedging  Activities",  requires that
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  be recorded as assets or liabilities,  measured at fair value.
For each period, changes in fair value are reported in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge  transaction.  SFAS No. 133
also  requires  the  Company to  formally  document,  designate,  and assess the
effectiveness  of transactions  that receive hedge  accounting  treatment.  Upon
adoption  of SFAS No.  133,  the  Company  recorded a  derivative  liability  of
$319,000  and,  as  other  comprehensive  income,  $188,000  ($319,000  pre-tax)
representing the cumulative effect of this change in accounting  principle.  The
fair value of this  derivative  (an interest rate swap) as of September 30, 2001
was  $953,000.  The  change in the swap's  carrying  value from April 1, 2001 to
September  30, 2001 is reflected as a reduction to other  comprehensive  loss in
shareholders' equity.

     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, 2001, 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.


                                       7


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


NOTE 6-SUBSEQUENT EVENTS

     On October 9, 2001, Les Domaines Barons de Rothschild  (Lafite) ("DBR") and
SFI Intermediate Ltd ("SFI"),  our two major  shareholders,  extended short-term
loans to the Company.  The aggregate  amount of the loans is up to $8.5 million,
of which  $6.8  million  has been  funded.  The loans are  unsecured  and accrue
interest at a rate of 5.0% per year.  Proceeds from the loans are being used for
working  capital  until  the  Company  receives  the  proceeds  from the  rights
offering.  The loans are due and  payable on the  earlier of two  business  days
after (a) the closing of the rights  offering  initiated  on October 12, 2001 or
(b) the withdrawal and  termination of the rights offering prior to its closing.
In  connection  with these  loans,  DBR and SFI also  agreed  that if the rights
offering  does not close by  November  30,  2001 and we have not  withdrawn  the
registration  statement related to the rights offering,  then they shall provide
us with an additional $6.0 million of financing on commercially reasonable terms
that the parties shall negotiate in good faith.

     We are conducting a rights  offering  under which each of our  shareholders
has received pro rata rights to purchase  additional shares of our common stock.
On September 14, 2001, we filed with the  Securities  and Exchange  Commission a
registration  statement on Form S-3 in connection with this rights offering.  On
October 10, 2001, we filed an amendment to the registration statement.  Proceeds
from the rights offering are expected to retire the short-term  loans from DBR &
SFI  and for  additional  working  capital.  Under  this  rights  offering  each
shareholder  has been given the right to buy shares of our common stock at $8.50
per share.  Shareholders have also been given an  oversubscription  privilege to
purchase  shares for which  rights  have not been  exercised.  The  Company  has
offered rights to purchase up to $15 million of its common stock.  As both DBR &
SFI have committed to exercise their  respective basic  subscription  privileges
and  oversubscription  privileges  in full,  the Company  expects to realize the
entire $15 million of the rights offering.



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

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.  In
particular,  statements  made  in  this  Item  2,  relating  to  projections  or
predictions  about the  Company's  future  investments  in  vineyards  and other
capital  projects are 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;  (vi)
regulatory  changes which might restrict or hinder the sale and/or  distribution
of alcoholic  beverages and (vii) the risks  associated with the assimilation of
acquisitions.  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 March 31, 2001.


DESCRIPTION OF THE BUSINESS


     The Company produces,  markets and sells super premium,  ultra premium, and
luxury-priced white and red varietal table wines,  primarily  Chardonnay,  Pinot
Noir,  Cabernet Sauvignon,  Merlot,  Syrah 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 the Carmenet Winery,
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


                                       8


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


State, as well as from purchased grapes.  The wines are primarily sold under the
labels  "Chalone   Vineyard(R),"  "Edna  Valley   Vineyard(R),"   "Carmenet(R),"
"Acacia(TM),"   "Canoe  Ridge  Vineyard(R),"   "Jade  Mountain(R),"   "Sagelands
Winery(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 DBR.  The
vineyards of Duhart-Milon  are located  adjacent to the  world-renowned  Chateau
Lafite-Rothschild in the town of Pauillac.

<TABLE>
<CAPTION>


RESULTS OF OPERATIONS - SECOND QUARTER AND SIX MONTHS OF FISCAL 2001 COMPARED TO
SECOND QUARTER AND SIX MONTHS OF FISCAL 2000

                                                  Three months ended         Percent           Six months ended        Percent
                                                     September 30,            Change             September 30,          Change
                                               --------------------------------------------------------------------------------
                                                   2001          2000       2001 vs 2000      2001         2000    2001 vs 2000
                                               ------------  ------------ --------------- ------------  ---------- ------------
<S>                                                <C>           <C>          <C>           <C>           <C>          <C>

 Net revenues                                      100.0 %       100.0 %         0.0 %      100.0 %       100.0 %        0.0 %
 Cost of sales                                     (57.8)%       (68.8)%       (16.0)%      (58.8)%       (65.2)%       (9.8)%
                                               ------------  ------------                 ----------  ------------
    Gross profit                                    42.2 %        31.2 %        35.3 %       41.2 %        34.8 %       18.4 %
 Other operating revenues, net                       0.3 %         0.2 %        50.0 %        0.2 %         0.1 %      100.0 %
 Selling, general and admin. expenses              (27.8)%       (29.6)%        (6.1)%      (28.0)%       (27.8)%        0.7 %
                                               ------------  ------------                 ----------  ------------
    Operating income                                14.7 %         1.8 %       716.6 %       13.4 %         7.1 %       88.7 %
 Interest expense                                   (7.9)%        (7.7)%         2.6 %       (7.7)%        (7.0)%       10.0 %
 Equity in net income of Chateau Duhart-Milon        1.4 %         1.6 %       (12.5)%        1.4 %         1.9 %      (26.3)%
 Other Income                                        0.0 %         6.1 %      (100.0)%        0.0 %         3.0 %     (100.0)%
 Minority interests                                 (1.4)%         1.1 %      (227.3)%       (1.2)%        (0.4)%      200.0 %
                                               ------------  ------------                 ------------  -----------
    Income before income taxes                       6.8 %         2.9 %       134.4 %        5.9 %         4.6 %       28.3 %
 Income taxes                                       (2.8)%        (1.2)%       133.3 %       (2.4)%        (2.0)%       20.0 %
                                               ------------  ------------                 ----------  ------------
    Net income                                       4.0 %         1.7 %       135.3 %        3.5 %         2.6 %       34.6 %
                                               ============  ============                 ==========  ============
</TABLE>

NET REVENUES

     Net revenues for the three months and six months ended  September  30, 2001
decreased  approximately 6% and 5%,  respectively over the comparable periods in
the prior  year.  This  decrease  was caused by lower  average  revenue-per-case
caused by changes in product mix and lower sales volume primarily due to product
availability.

GROSS PROFIT

     Gross profit margin for the three months and six months ended September 30,
2001,  increased by approximately 28% and 13%,  respectively over the comparable
periods in the prior year.  This  percentage  increase  primarily  resulted from
lower costs attributable to the release and sale of 2000 vintage wines.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling,  general and administrative  expenses for the three months and six
months ended September 30, 2001,  decreased  approximately  $518,000 or 13%, and
$348,000 or 4%,  respectively,  over the  comparable  periods in the prior year.
This change was primarily a result of lower selling costs and a postponement  of
other  promotional  activities as compared with the timing of similar efforts in
the prior year.

OPERATING INCOME

     Operating  income for the three  months and six month ended  September  30,
2001,  increased  $1.7 million or 677%,  and $1.6 million or 78%,  respectively,
primarily  due to the lower costs  attributable  to the release of 2000  vintage
wines and lower selling, general and administrative expenses.


                                       9


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


INTEREST EXPENSE

     Interest expense decreased $27,000 for the three months ended September 30,
2001,  primarily due to lower interest rates, and increased $112,000 for the six
months  then  ended due to higher  average  outstanding  borrowings  which are a
result  of  business  and  property  acquisitions  during  fiscal  year 2001 and
continuing capital expenditures related to winery-expansion.

EQUITY IN NET INCOME OF DUHART-MILON

     The Company's 23.5% equity  interest in the net income of Duhart-Milon  for
the three  months and six months  ended  September  30,  2001 are  $183,000  and
$382,000  respectively.  This change was  primarily a result of delayed  product
releases as compared to the prior year.

     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 six months
ended September 30, 2001 was $187,000 and $296,000 respectively. The increase in
minority interest was $341,000,  or 221%, and $194,000, or 190%, for each of the
three and six  month  periods  ended  September  30,  2001,  respectively,  when
compared  to the  same  periods  last  year.  These  increases  were  due to the
elimination of the Canoe Ridge minority  interest when the Company purchased the
remaining 49.5% interest in Canoe Ridge on February 7, 2001.

NET  INCOME

     Net income for the three  months and six months ended  September  30, 2001,
was $525,000 and $940,000  respectively,  reflecting an increase of 119% and 19%
over the comparable  periods in the prior year.  This increase was primarily due
to the lower cost of sales attributable to the release of 2000 vintage wines and
lower selling, general and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

     Working capital decreased  approximately $5.5 million during the six months
ended  September  30,  2001  primarily  as a result of a  decrease  in  accounts
receivable  and  increased  payables and revolving  bank debt to fund  property,
plant and equipment expenditures and other cash requirements.

     The net increase in the revolving bank loan  borrowings  from $19.9 million
at March 31, 2001 to $23.4 million at September 30, 2001, reflect the funding of
capital  expenditures and other cash requirements.  At September 30, 2001, there
were additional  borrowings of  approximately  $1.6 million  available under the
revolving bank loan.

     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,  security  offerings  and  additional  borrowings.  There  can be no
assurance  that the  Company  will be able to  obtain  this  financing  on terms
acceptable to the Company.


                                       10


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


DISCLOSURES ABOUT RISK


     You should read the following  disclosures 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 affect 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.

     A large  portion 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 have 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.

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

     In the six months ended September 30, 2001,  approximately  89% of our wine
sales were  concentrated in 20 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  87% of our consolidated net revenues in the six months ended
September 30, 2001 were  concentrated  in our four top selling  varietal  wines.
Specifically,  sales of Chardonnay,  Cabernet Sauvignon,  Pinot Noir, and Merlot
accounted for 47%, 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.


                                       11


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


     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.

     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.

     The weather  phenomenon  commonly  referred to as "El Nino"  produced heavy
rains and cooler weather  during the spring of 1999 and 1998,  which resulted in
colder and wetter  soils than are  typical  during  California's  grape  growing
season. Consequently, the 1999 and 1998 harvests were postponed by approximately
four to six weeks  depending  on the  geographic  location  and  varietals.  The
unusual  weather  conditions  resulting  from El Nino  impacted the quantity and
quality  of our 1998  estate  harvest.  The size of our most  significant  crops
ranged  from  normal-sized  yields to 50% of  normal  yields  (depending  on the
varietal and particular estate).

     Despite the reduction in the yield,  harvested estate crops, in combination
with contracted  grape  purchases,  are expected to permit us to meet originally
anticipated  sales  projections  from  our 1999  and  1998  vintage  Chardonnay,
Cabernet,  and Merlot  varietals.  Together,  these varietals have  historically
comprised between 80% and 85% of our aggregate annual production.


     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 could result in an excess of supply
over demand and force 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


                                       12


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


wineries, our wine library and direct mail. Sales to our largest distributor and
to our nineteen largest distributors  combined represented  approximately 5% and
44%, respectively, of our net revenues during the six months ended September 30,
2001.  Sales to our nineteen  largest  distributors  are expected to continue to
represent a  substantial  portion of our net  revenues  in the future.  We use a
single broker to sell our wines within  California.  Such sales represent 42% of
our net revenues  during the six months ended  September 30, 2001.  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 Federal Bureau
of Alcohol,  Tobacco and Firearms  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.

     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.

     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  which 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.

     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.


                                       13


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


     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 4% of total consolidated  revenue for the six months
ended Septmber 30, 2001. 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,
tradenames 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.


     OUR ACQUISITIONS AND POTENTIAL FUTURE ACQUISITIONS INVOLVE A NUMBER OF
RISKS

     Our  acquisition of Staton Hills Winery  (renamed  Sagelands  Winery),  the
possible  construction  of a new winery on the Suscol Ranch property we recently
acquired  and  potential  future  acquisitions  involve  risks  associated  with
assimilating  these  operations  into our company;  integrating,  retaining  and
motivating  key  personnel;  integrating  and managing  geographically-dispersed
operations  because Staton Hills is in Washington State and we are headquartered
in  California;  integrating  the technology  and  infrastructures  of disparate
entities;  producing wine in, and marketing  wine from,  Washington  State;  and
replanting 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 and other vineyard land and related assets
during the fiscal year ended March 31,  2001.  Consequently  our  debt-to-equity
ratio is high in  relation  to our  historical  standards.  The  interest  costs
associated  with this debt will increase our operating  expenses and the risk of
negative cash flow.

     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.


                                       14


<PAGE>


                          THE CHALONE WINE GROUP, LTD.


PART II. - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

         None.

     (b) Reports on Form 8-K.

         The  Company  filed a report on Form 8-K (Item 5),  dated  October  19,
         2001, to report the Company's  announcement of a new price, record date
         and expiration date for the Company's rights offering.

         The Company  filed a report on Form 8-K (Item 5), dated  September  28,
         2001,  to report the Company's  announcement  of its plans for a rights
         offering to its shareholders.

         The Company  filed a report on Form 8-K (Item 5), dated  September  21,
         2001, to report that the Company's two largest shareholders had entered
         into a voting agreement.

         The Company filed a report on Form 8-K (Item 5), dated August 31, 2001,
         to  report  the  Company's   announcement   of  W.  Philip   Woodward's
         resignation as chairman of the board.




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, 2001          THE CHALONE WINE GROUP, LTD.
--------------------------          ----------------------------
                                          (Registrant)


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




Dated:  November 14, 2001           /s/ SHAWN CONROY BLOM
-------------------------           --------------------------------------------
                                   Shawn Conroy Blom
                                   Vice President and Chief Financial Officer


                                       15