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

                        SECURITIES & 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 June 30, 2000

                                       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 August 11, 2000
was 10,228,304.

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<PAGE>

                          THE CHALONE WINE GROUP, LTD.


                         PART I. - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS                                                PAGE

        Consolidated Balance Sheets as of June 30, 2000, and
        March 31, 2000.                                                       3

        Consolidated Statements of Income for the three-month
        periods ended June 30, 2000 and 1999.                                 4

        Consolidated Statements of Cash Flows for the three-month
        periods ended June 30, 2000 and 1999.                                 5

        Notes to Consolidated Financial Statements.                           6

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

ITEM 3. DISCLOSURES ABOUT MARKET RISK                                        12

                          PART II. - OTHER INFORMATION

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

<PAGE>

<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.


                          CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS


                                                                  June 30,        March 31,
                                                                    2000             2000
                                                                 (unaudited)
                                                                 -----------      ---------
<S>                                                              <C>              <C>

Current assets:
   Cash and equivalents                                          $    492          $      -
   Accounts receivable, less allowance for doubtful
      accounts of $150 and $129, respectively                       9,256             9,836
   Notes receivable-affiliate                                         168               119
   Income tax receivable                                              943             1,178
   Inventory                                                       49,991            51,826
   Prepaid expenses                                                   148               579
   Deferred income taxes                                              894               894
                                                                 --------          --------
      Total current assets                                         61,892            64,432
Investment in Chateau Duhart-Milon                                  8,749             9,146
Property, plant and equipment - net                                66,187            64,134
Goodwill and trademrks - net of accumulated
   amortization of $1,850 and $1,743, respectively                 10,013             7,220
Other assets                                                          476               733
                                                                 --------          --------
      Total assets                                               $147,317          $145,665
                                                                 ========          ========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable and accrued liabilities                      $  5,028          $  5,650
   Revolving bank loan                                             29,274            27,017
   Current maturities of long-term borrowings                       2,266             1,784
                                                                 --------          --------
      Total current liabilities                                    36,568            34,451
Long-term borrowings, less current maturities                      30,188            31,041
Deferred income taxes                                               1,743             1,743
                                                                 --------       -----------
      Total liabilities                                            68,499            67,235

Minority interest                                                   4,614             4,758
Shareholders' equity:
   Common stock - authorized 15,000,000 shares no par value;
   issued and outstanding: 10,226,306 and 10,224,521 shares,
   respectively                                                    61,378            61,377
   Retained earnings                                               16,399            15,851
   Accumulated other comprehensive loss                            (3,573)           (3,556)
                                                                 --------          --------
      Total shareholders' equity                                   74,204            73,672
                                                                 --------          --------
      Total liabilities and shareholders' equity                 $147,317          $145,665
                                                                 ========          ========

</TABLE>

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

                                       3

<PAGE>

<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.


                        CONSOLIDATED STATEMENTS OF INCOME
                (UNAUDITED, IN THOUSANDS, EXCEPT PER-SHARE DATA)


                                                       Three Months Ended
                                                            June 30,
                                                  ----------------------------
                                                      2000              1999
                                                  ------------ ---------------
<S>                                                 <C>             <C>

Gross revenues                                      $ 14,518        $ 10,828
    Excise taxes                                        (388)           (259)
                                                    --------        --------
Net revenues                                          14,130          10,569
Cost of wines sold                                    (8,718)         (5,538)
                                                    --------        --------
    Gross profit                                       5,412           5,031
Revenues from other operations, net                       11              83
Selling, general and administrative expenses          (3,668)         (3,086)
                                                    --------        --------
    Operating income                                   1,755           2,028
Interest expense                                        (888)           (493)
Equity in Chateau Duhart-Milon                           318             337
Minority interests                                      (256)           (304)
                                                    --------        --------
    Income before income taxes                           929           1,568
Income taxes                                            (381)           (642)
                                                    --------        --------
    Net income                                      $    548        $    926
                                                    ========        ========

Net income per common share
    Earnings per share - basic                     $    0.05        $   0.10
    Earnings per share -diluted                    $    0.05        $   0.10

Weighted average number of shares outstanding:
    Basic                                             10,226           9,221
    Diluted                                           10,226           9,341

</TABLE>


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

                                       4

<PAGE>

<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED, IN THOUSANDS)

                                                                Three Months Ended June 30,
                                                                ---------------------------
                                                                 2000                 1999
                                                                ------               ------
<S>                                                             <C>                  <C>

Cash flows from operating activities:
   Net income                                                   $   548              $   926
   Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation and amortization                                 973                  674
      Equity in net income of Chateau Duhart-Milon                 (318)                (337)
      Increase in minority interest                                 256                  304
      Loss on sale of equipment                                       -                    4
      Changes in:
         Accounts and other receivables                             766                   (6)
         Inventory                                                2,435                 (925)
         Prepaid expenses and other assets                          689                 (171)
         Accounts payable and accrued liabilities                  (622)               2,812
                                                                -------              -------
      Net cash provided by operating activities                   4,727                3,281
                                                                -------              -------

Cash flows from investing activities:
   Capital expenditures                                          (2,910)              (2,069)
   Property and Business Acquisitions                            (3,509)              (6,127)
   Proceeds from disposal of property and equipment                   -                    5
   Distributions from Duhart-Milon                                  698                  738
                                                                -------              -------
      Net cash used in investing activities                      (5,721)              (7,453)
                                                                -------              -------

Cash flows from financing activities:
   Borrowings on revolving bank loan - net                        2,257                7,280
   Distributions to minority interests                             (400)                (300)
   Repayment of long-term debt                                     (371)              (2,337)
   Proceeds from issuance of common stock                             -                   22
                                                                -------              -------
      Net cash provided by financing activities                   1,486                4,665
                                                                -------              -------
Net increase in cash and equivalents                                492                  493
Cash and equivalents at beginning of period                           -                1,670
                                                                -------              -------
Cash and equivalents at end of period                           $   492              $ 2,163
                                                                =======              =======
Other cash flow information:
   Interest paid                                                $   655              $   776
   Income taxes paid                                                 81                1,109

</TABLE>

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

                                       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  principals
generally  accepted  in  the  United  States  of  America,  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, 2000.

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.


RECLASSIFICATIONS

     Certain  prior-period  amounts have been  reclassified  in order to conform
with the current period presentation.

NOTE 3 - COMPREHENSIVE INCOME

     Comprehensive  income  includes  foreign  currency  translation  gains  and
losses. The following is a reconciliation of net income and comprehensive income
(IN THOUSANDS):

<TABLE>
<CAPTION>

                                              Three months ended
                                                   June 30,
                                             --------------------
                                               2000       1999
                                             --------    --------
      <S>                                      <C>        <C>

      Net income                               $ 548      $ 926
      Foreign currency translation loss          (17)      (462)
                                             --------    --------
      Comprehensive income                     $ 531      $ 464
                                             ========    ========

</TABLE>

NOTE 4 - EARNINGS PER SHARE

     Basic EPS represents the income available to common shareholders divided by
the weighted average number of common shares outstanding for the period. Diluted
EPS  represents  the  income  available  to common  shareholders  divided by the
weighted  average 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.  For
all periods  presented,  the  difference  between  basic and diluted EPS for the
Company is due to the  dilutive  effect of stock  options and stock  warrants as
shown below. This effect is calculated using the treasury stock method.

                                       6

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


NOTE 4 - EARNINGS  PER SHARE (CONTINUED)

The following is a reconciliation of share information used to compute basic EPS
and diluted EPS:

<TABLE>
<CAPTION>

                      (IN THOUSANDS, EXCEPT PER-SHARE DATA)

                                                                                 Diluted EPS
                                                                                 ------------
                                       Basic EPS                                    Income
                                      ------------      Effect of dilutive       available to
                                         Income             securities              common
                                      available to     ---------------------     shareholders
                                         common                      Stock       and assumed
                                      shareholders     Warrants     options       conversion
                                      ------------     --------     --------     ------------
<S>                                   <C>              <C>           <C>         <C>

Three months ended June 30, 2000:
   Income                               $   548          -             -            $   548
   Shares                                10,226          -             -             10,226
                                        -------                                     -------
   EPS                                  $  0.05                                     $  0.05
                                        =======                                     =======
Three months ended June 30, 1999:
   Income                               $   926          -             -            $   926
   Shares                                 9,221          120           -              9,341
                                        -------                                     -------
   EPS                                  $  0.10                                     $  0.10
                                        =======                                     =======

</TABLE>

NOTE 5 - ACQUISITION OF  JADE MOUNTAIN BRAND NAME RIGHTS AND INVENTORY

     On April 4, 2000,  the Company  purchased  exclusive  brand name rights and
inventory of Jade Mountain Winery, a vineyard located in Napa County, California
producing Rhone varietal wines. The acquisition price of $3.5 million, which was
financed with the Company's available  revolving credit facility,  was allocated
to an intangible asset in the amount of $2.9 million representing the brand name
rights with the  remaining  $600,000  allocated to inventory  based on estimated
fair values. The brand name rights will be amortized over 20 years. In addition,
the Company has entered into a 10 year  contract with the owner of Jade Mountain
to purchase at market price Syrah, Viognier, Grenache and Merlot grapes produced
from a related vineyard.

NOTE 6 - SUBSEQUENT EVENT

       On July 14, 2000,  the Company  sold the 10,000  square foot Hewitt House
and four surrounding  landscaped acres located in Napa Valley's Rutherford Bench
area for $7,740,000 resulting in a gain of approximately  $800,000. The property
was  originally  acquired  in the  Company's  fiscal  year  2000  as part of its
acquisition of the Hewitt Ranch.

                                       7

<PAGE>

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 or purchased 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, 2000.


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 partially from grapes grown at the Carmenet Winery,
Edna Valley Vineyard, Chalone Vineyard,  Company-owned vineyards adjacent to the
Acacia Winery in California and the Canoe Ridge Vineyard in Washington 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 Les Domaines
Barons de Rothschild (Lafite) ("DBR"). The vineyards of Duhart-Milon are located
adjacent to the world-renowned Chateau Lafite-Rothchild in the town of Pauillac.

                                       8

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


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

RESULTS OF  OPERATIONS - FIRST  QUARTER OF FISCAL 2001 COMPARED TO FIRST QUARTER
OF FISCAL 2000

The following  table  represents  financial data as a percentage of net revenues
for the indicated periods:

<TABLE>
<CAPTION>

                                               Three months ended             Percent
                                                    June 30,                  Change
                                          -----------------------------    ---------------
                                              2000            1999          2000 vs 1999
                                          -------------    ------------    ---------------
<S>                                          <C>              <C>               <C>

 Net revenues                                100.0 %          100.0 %           33.7 %
 Cost of sales                               (61.7)%          (52.4)%           57.4 %
                                          -------------    ------------
    Gross profit                              38.3 %           47.6 %            7.6 %
 Other revenues from operations                0.1 %            0.8 %          (86.7)%
 Selling, general and admin. expenses        (26.0)%          (29.2)%           18.9 %
                                          -------------    ------------
    Operating income                          12.4 %           19.2 %          (13.5)%
 Interest Expense                             (6.3)%           (4.7)%           80.1 %
 Equity in Chateau Duhart-Milon                2.3 %            3.2 %           (5.6)%
 Minority interest                            (1.8)%           (2.9)%          (15.8)%
                                          -------------    ------------
    Income before income taxes                 6.6 %           14.8 %          (40.8)%
 Income taxes                                 (2.7)%           (6.1)%          (40.7)%
                                          -------------    ------------
    Net Income (loss)                          3.9 %            8.7 %          (40.8)%
                                          =============    ============

</TABLE>

NET REVENUES

Net revenues  increased by $3.6 million or 34% reflecting a 50% increase in case
sales offset by lower average revenue-per-case due to changes in product mix.

COST OF WINES SOLD

Cost of wines sold increased by $3.1 million or 57%, reflecting  increased sales
volume and a shift in product mix sold to more wines with higher  average  costs
per case as a percentage of selling price.

GROSS PROFIT

As a result of the above factors gross profit as a percentage of sales decreased
from 47.6% to 38.3%.

REVENUE FROM OTHER OPERATIONS, NET

Revenue from other  operations,  net consists  primarily of processing and other
revenue obtained from other wineries,  net of related  expenses,  and net profit
from  sales  of  bulk  wine.  This  aspect  of the  Company's  operation  is not
significant  although the Company cannot predict the effect on future  operating
results,  as  this  source  of  revenue  is  highly  unpredictable  and  largely
contingent on other wineries'  demand for extra production  capacity,  which can
and does vary  significantly  from year to year and  quarter  to  quarter.  Such
revenues decreased $72,000 to $11,000,  which was entirely  attributable to less
custom-bottling activities.

                                       9

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


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


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased $582,000 or 19% primarily
as a result of (i) increased selling efforts normally  associated with increased
sales volumes (ii) launching of the new Sagelands brand name and (iii) other new
promotional efforts.

OPERATING INCOME

Operating  income decreased  $273,000 or 13%,  primarily due to the increases in
selling, general and administrative expenses as discussed above partially offset
by increased gross profit.

INTEREST EXPENSE

Interest expense increased $395,000 primarily due to higher average  outstanding
borrowings  which are a result of (i) the  Sagelands  Winery  acquisition  which
occurred in June,  1999;  (ii) the  acquisition  of the Hewitt  Ranch and Suscol
Ranch  properties  that  occurred  during the fourth  quarter of the 2000 fiscal
year;  (iii) the Jade Mountain  brand-name  acquisition  that occurred in April,
2000 and (iv) continuing capital expenditures  related to winery-expansion  over
the past two years.

EQUITY IN NET INCOME OF DUHART-MILON

The Company's  23.5% equity  interest in the net income of Chateau  Duhart-Milon
("Duhart-Milon") for the three months ended June 30, 2000 and June 30, 1999, was
$318,000 and $337,000, respectively. These results are primarily driven by sales
of the 1997 vintage of Duhart-Milon, which are consistent with sales of the 1996
vintage reflected in the prior-year results.

The Company  monitors  its  investment  in  Duhart-Milon  primarily  through its
on-going   communication   with  Domaines  Barons  de  Rothschild   (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 productions 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")  and Canoe  Ridge
Vineyard,  LLC ("CRV") are consolidated with the Company's financial statements.
The interest in the equity and net income of EVV and CRV attributable to parties
other than the Company is accounted for as a "minority  interest".  The minority
interest  in the net income of EVV and CRV for the three  months  ended June 30,
2000 and 1999 consisted of the following (IN THOUSANDS):

<TABLE>
<CAPTION>

                                                                          Three months ended
                                                                                 June 30,
                                                             Minority     ------------------
Venture                       Minority Owner                 Percent       2000       1999
------------                  ------------------             --------     ------     ------
<S>                           <C>                            <C>          <C>        <C>

Edna Valley Vineyard          Paragon Vineyard Co., Inc.     50.00%       $ 215      $ 205
Canoe Ridge Vineyard, LLC     Various                        49.50%          41         99
                                                                          ------     ------
                                                                          $ 256      $ 304
                                                                          ======     ======

</TABLE>

The  minority  interest  in the net income of EVV and CRV  decreased  $48,000 or
(16%)  during the three  months  ended June 30,  2000 when  compared to the same
period last year as a result of decreased sales volumes.

                                       10

<PAGE>

                          THE CHALONE WINE GORUP, LTD.


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

NET  INCOME

Net income decreased $378,000, a decrease of 41% primarily as a result of higher
interest expense and selling,  general and administrative  expenses,  which were
partially offset by higher gross profits.

LIQUIDITY AND CAPITAL RESOURCES

Working capital  decreased by $4.7 million to $25.3 million for the three months
ended June 30,  2000 from  $30.0  million at March 31,  2000,  primarily  due to
increased  borrowing under the Company's revolving bank loan agreement and lower
inventories  resulting  from first quarter  sales.  The  Company's  cash balance
increased  to $.4  million  since  March 31,  2000 as cash from  operations  and
borrowings  exceeded  cash needed for capital  expenditures  and  investment  in
vineyards.

The Company has  historically  financed its growth  through  borrowings and cash
flow from  operations.  During the three months ended June 30, 2000, the Company
used these  sources of financing  to fund a $2.9  million  increase in property,
plant and equipment and a $3.5 million acquisition of Jade Mountain's brand name
rights and inventory.

On March 31, 1999, the Company entered into a credit  agreement with Cooperative
Centrale  Raiffeisen-Borenleenbank  B.A., "Rabobank  Nederland," New York branch
("Rabobank").  The Rabobank credit facility  provides for a total of $70 million
of unsecured financing,  consisting of a seven-year, $30 million term loan and a
two-year,  $40  million  revolving  loan  facility.  The  Company  is  currently
negotiating a private placement of debt which would restructure a portion of its
Rabobank debt.

The  Company is not aware of any  potential  impairments  to its  liquidity  and
believes its capital  resources are adequate to meet current and historic levels
of capital  expenditures  and its  liquidity  needs for at least the next twelve
months.

                                       11

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


ITEM 3.  DISCLOSURES ABOUT MARKET RISK


     You should read the following  disclosures in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations,  which
have been drafted in compliance  with  regulations of the SEC concerning the use
of "Plain  English." 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 and other  business and economic  conditions.  Additionally,  our
sales volume tends to be affected by price  increases,  distributors'  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.

     OUR BUSINESS IS SEASONAL

     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 for  harvest  costs  and may  have to make
contractual  payments  to grape  growers.  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 three  months  ended June 30,  2000,  approximately  71% 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.

     Approximately  89% of our  consolidated  net  revenues in the three  months
ended June 30, 2000 were  concentrated  in our top four selling  varietal wines.
Specifically,  sales of Chardonnay,  Pinot Noir,  Cabernet  Sauvignon and Merlot
accounted for 47%, 13%, 15% and 14% of our net revenues, respectively.

     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.

                                       12

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


ITEM 3.   DISCLOSURES ABOUT MARKET RISK  (CONTINUED)


     BAD WEATHER, PESTS AND PLANT DISEASES COULD HARM OUR BUSINESS

     Winemaking  and grape  growing  are  subject to a variety  of  agricultural
risks.  Various diseases and pests and extreme weather conditions can materially
and  adversely  affect the quality and quantity of grapes  available to us. This
could reduce the quality or amount of wine we produce.  A  deterioration  in the
quality of our wines could harm our brand name, and a decrease in our production
could reduce our sales and profits. 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 we 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.

     Many California vineyards, including vineyards in Northern California, have
been infested  with  Phylloxera,  a root louse that renders a vine  economically
unproductive  within a few  years  after  infestation.  The  current  strain  of
Phylloxera  primarily  affects vines of a certain type. Our vineyard  properties
are  primarily  planted to  rootstocks  believed to be resistant to  Phylloxera.
However,  we cannot be certain that our existing  vineyards or the rootstocks we
are now using in our planting  and  replanting  programs  will not in the future
become  susceptible  to current or new strains of  Phylloxera,  plant insects or
diseases, any of which could harm our business.

     It is also possible that the vineyards  could be infested by new strains of
Phylloxera, insects, fungi, viruses or similar perils. For example, a new strain
of the sharpshooter  (glassy winged),  a flying insect that is believed to carry
Pierces'  Disease and can kill vines with which it comes into contact,  recently
was discovered in Southern California and is believed to be migrating north.

     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 harvest was postponed by approximately
four to six weeks - depending on the  geographical  location and varietals.  The
unusual weather conditions  resulting from El Nino impacted quantity and quality
of the Company's 1998-estate harvest. The size of the Company's most significant
crops ranged from normal-sized  yields to 50% of normal yields (depending on the
varietal and the particular estate).

     Despite  the  foregoing  reduction  in the  yield  of  certain  crops,  the
harvested  estate crops, in combination with contracted grape purchases (most of
which are tonnage-based),  are expected to permit the Company to meet originally
anticipated sales-projections for its 1999 and 1998 vintage Chardonnay, Cabernet
and Merlot varietals which,  together,  have historically  comprised between 80%
and 85% of its 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.


     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 wineries to reduce, or not increase, prices.

                                       13

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


ITEM 3.   DISCLOSURES ABOUT MARKET RISK  (CONTINUED)



     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  nineteen  largest   distributors   combined,
represented  approximately 4% and 39%, respectively,  of our net revenues during
the three months ended June 30, 2000. 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  in order  to sell  our  wines  within
California.  Such sales represent 33% of our net revenues during the three month
period ended June 30, 2000. The laws and  regulations of several states prohibit
changes of distributors,  except under certain limited circumstances,  making it
difficult to terminate a distributor  without  reasonable  cause,  as defined by
applicable   statutes.   The  resulting   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 or additional borrowings or other financing.

     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 principle  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 CHALONE WINE GROUP, LTD.


ITEM 3.   DISCLOSURES ABOUT MARKET RISK  (CONTINUED)


     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, the Company
cannot be certain that it would be able to enforce  these  provisions or prevent
such disclosures.

     SHIFTS IN FOREIGN EXCHANGE RATES OR THE IMPOSITION OF ADVERSE TRADE REGULA-
     TIONS 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  6% of total  consolidated  revenue  for the three
months  ended June 30,  2000 and the  volume of  international  transactions  is
increasing and may increase these risks in the future.

     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) and the
possible  construction  of a new winery on the Suscol Ranch property we recently
acquired  (and  potential  future  acquisitions)  involve  risks  which  include
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 our  Company  is
headquartered in California;  integrating the technology and  infrastructures of
disparate  entities;  risks inherent in the production of wine in, and marketing
of wine from,  Washington  State; and the 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 and other vineyard land and related assets
during the fiscal year ended March 31,  2000.  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.  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.  These broad
market fluctuations may reduce the market price of our shares.

                                       15

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


PART II. - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

         Exhibit Number
         --------------

               27          Financial Data Schedule

     (b) Reports.

                  None

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: August 14, 2000             THE CHALONE WINE GROUP, LTD.
----------------------             ----------------------------
                                                      (Registrant)


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




Dated: August 14, 2000                /s/ PAUL R. OGORZELEC
----------------------             --------------------------------------------
                                   Paul R. Ogorzelec
                                   Principal Financial and Accounting Officer




                                       16