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

                       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 ACTS OF 1934

                  For the quarterly period ended March 31, 2004

                                       OR

     [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
              SECURITIES EXCHANGE ACTS OF 1934

       For the transition period from                to

                         Commission file number: 0-13406


                          THE CHALONE WINE GROUP, LTD.

             (Exact Name of Registrant as Specified in Its Charter)




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

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

Registrant's Telephone Number, Including Area Code: 707-254-4200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                          Yes     X     No
                                              --------     --------

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).
                                          Yes           No    X
                                              --------     ---------

The number of shares  outstanding of  Registrant's  Common Stock on May 10, 2004
was 12,082,857.

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

<PAGE>


                          The Chalone Wine Group, Ltd.

                         PART I. - FINANCIAL INFORMATION
<TABLE>
<CAPTION>

     ITEM 1. FINANCIAL STATEMENTS                                                                                  PAGE

<S>                                                                                                                 <C>
              Consolidated Balance Sheets as of March 31, 2004, and December 31, 2003.                               3

              Consolidated Statements of Income for the three-month periods ended
              March 31, 2004 and 2003.                                                                               4

               Consolidated Statements of Cash Flows for the three-month periods ended
               March 31, 2004 and 2003.                                                                              5

              Notes to Consolidated Financial Statements.                                                            6

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                   9

     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                             12

     ITEM 4. CONTROLS AND PROCEDURES                                                                                16




                          PART II. - OTHER INFORMATION

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

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

                           ASSETS

                                                                       March 31,         December 31,
                                                                         2004                2003
                                                                      -----------        ------------
                                                                      (unaudited)
<S>                                                                     <C>                 <C>
Current assets:
  Accounts receivable, net                                              $ 12,935            $ 19,753
  Note receivable                                                            221                 218
  Income tax receivable                                                      232                 232
  Inventory                                                               82,023              84,840
  Prepaid expenses and other current assets                                  660                 405
                                                                      -----------        ------------
    Total current assets                                                  96,071             105,448
Investment in Chateau Duhart-Milon                                        10,938              11,278
Non-current note receivable                                                  154                 210
Property, plant and equipment, net                                        71,350              72,494
Goodwill                                                                   8,582               8,582
Trademarks                                                                 2,861               2,864
Other assets                                                               1,652               1,719
                                                                      -----------        ------------
    Total assets                                                       $ 191,608           $ 202,595
                                                                      ===========        ============

            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term obligations                            $ 7,154             $ 7,154
  Current portion of obligations under capital lease                         806                 791
  Revolving bank loan                                                     18,975              13,800
  Accounts payable and accrued liabilities                                11,435              25,805
                                                                      -----------        ------------
    Total current liabilities                                             38,370              47,550
Long-term obligations, less current maturities                            39,041              39,759
Long-term obligations, convertible subordinated debt                      11,000              11,000
Obligations under capital lease, less current maturities                     652                 859
Liability on interest rate swap contract                                     891               1,084
Deferred income taxes                                                      1,259               1,180
                                                                      -----------        ------------
    Total liabilities                                                     91,213             101,432

Minority interest                                                          3,227               3,165

Shareholders' equity:
  Common stock - authorized 15,000,000 shares no
    par value; issued and outstanding: 12,082,857
    and 12,075,503 shares                                                 76,476              76,472
  Retained earnings                                                       22,557              23,164
  Accumulated other comprehensive loss                                    (1,865)             (1,638)
                                                                      -----------        ------------
    Total shareholders' equity                                            97,168              97,998
                                                                      -----------        ------------
    Total liabilities and shareholders' equity                         $ 191,608           $ 202,595
                                                                      ===========        ============
</TABLE>


  See accompanying notes to consolidated financial statements

                                       3

<PAGE>
<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.

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

                                                                  Three months ended
                                                           March 31,            March 31,
                                                          ----------------------------------
                                                              2004                2003
                                                          --------------       -------------
                                                           (Unaudited)          (Unaudited)
<S>                                                        <C>                  <C>
Gross revenues                                             $     12,715         $    13,925
  Excise taxes                                                     (364)               (417)
                                                          --------------       -------------
Net revenues                                                     12,351              13,508
Cost of wines sold                                               (8,411)             (8,913)
                                                          --------------       -------------
  Gross profit                                                    3,940               4,595
Other operating expense, net                                         19                  (5)
Selling, general and administrative expenses                     (3,308)             (2,939)
                                                          --------------       -------------
  Operating income                                                  651               1,651
Interest expense, net                                            (1,480)             (1,375)
Depreciation and amortization                                      (200)               (181)
Other income                                                         62                  53
Equity in net income of Chateau Duhart-Milon                          -                   -
Minority interests                                                  (62)                (39)
                                                          --------------       -------------
  Income before income taxes                                     (1,029)                109
Income taxes                                                        422                 (45)
                                                          --------------       -------------
  Net income                                               $       (607)         $       64
                                                          ==============       =============

Earnings per share - basic and diluted                     $      (0.05)         $     0.01

Weighted average number of shares outstanding:
  Basic                                                          12,083              12,075
  Diluted                                                        12,112              12,079

</TABLE>

      See accompanying notes to consolidated financial statements

                                       4

<PAGE>
<TABLE>
<CAPTION>

                          THE CHALONE WINE GROUP, LTD.

             CONSOLIDATED STATEMENTS OF CASHFLOWS
                  (All amounts in thousands)
                                                                         Three months ended
                                                                       March 31,        March 31,
                                                                      ---------------------------
                                                                         2004             2003
                                                                      -------------  ------------
<S>                                                                     <C>            <C>
Cash flows from operating activities:                                 (Unaudited)     (Unaudited)
  Net income                                                            $     (607)    $      64
  Adjustments to reconcile net income to net cash provided
    by operating activities:
      Depreciation and amortization                                          1,524         1,492
      Equity in net income of Chateau Duhart-Milon                               -             -
      Increase in minority interests                                            63            39
      Deferred income taxes                                                      -            54
      Other                                                                      -             -
    Changes in:
      Accounts and other receivables                                         6,818         3,927
      Inventories                                                            2,817         4,028
      Prepaid expenses and other assets                                       (188)           95
      Accounts payable and accrued liabilities                             (14,371)      (10,490)
                                                                      -------------  ------------
    Net cash used in operating activities                                   (3,944)         (791)
                                                                      -------------  ------------
Cash flows from investing activities:
  Capital expenditures                                                        (377)         (977)
  Proceeds from disposal of property and equipment                               -             -
  Net changes of notes receivable                                               53            52
                                                                      -------------  ------------
    Net cash used in investing activities                                     (324)         (925)
                                                                      -------------  ------------
Cash flows from financing activities:
  Borrowings on revolving bank loan-net                                      5,175         2,574
  Distributions to minority partner                                              -          (650)
  Net change in capital lease obligation                                      (193)         (195)
  Repayment of long-term debt                                                 (718)          (15)
  Proceeds (re-purchase of) from issuance of common stock                        4             2
                                                                      -------------  ------------
    Net cash provided by financing activities                                4,268         1,716
                                                                      -------------  ------------
Net increase (decrease) in cash and equivalents                                  -             -
Cash and equivalents at beginning of period                                      -             -
                                                                      -------------  ------------
Cash and equivalents at end of period                                   $        -     $       -
                                                                      =============  ============
Other cash flow information:
  Interest paid                                                         $    1,438     $   1,311
  Income taxes paid                                                              -            62
Non-cash investing & financing activities:
  Unrealized foreign currency gain (loss)                               $     (340)    $     304
  Interest swap fluctuation, net                                               114            78

</TABLE>

           See accompanying notes to consolidated financial statements

                                        5

<PAGE>

                         THE CHALONE WINE GROUP, LTD.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES



BASIS OF PRESENTATION

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

      The consolidated balance sheet at December 31, 2003, presented herein, has
been derived from the audited  consolidated  financial statements of the Company
for the year then ended, included in the Company's annual report on Form 10-K.


USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

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

EARNINGS PER SHARE

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



DERIVATIVE FINANCIAL INSTRUMENTS

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

     Changes in the fair value of derivative instruments designated as cash flow
hedges,  to the extent the hedges are highly  effective,  are  recorded in other
comprehensive income, net of related tax effects. The ineffective portion of the
cash flow  hedge,  if any,  is  recognized  in  current-period  earnings.  Other
comprehensive  income is relieved  when  current  earnings  are  affected by the
variability of cash flows relating to the derivative hedged.  During the quarter
ended March 31, 2004, the Company's  derivative  contracts  consisted only of an
interest rate swap used by the Company to convert a portion of its variable rate

                                       6

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


long-term debt to fixed rate.

      The  Company  does not enter into  financial  instruments  for  trading or
speculative purposes.  Payments or receipts on interest rate swap agreements are
recorded in interest  expense.  Forward  exchange  contracts  are used to manage
exchange  rate  risks on  certain  purchase  commitments,  generally  French oak
barrels,  denominated in foreign  currencies.  Gains and losses relating to firm
purchase  commitments are deferred and are recognized as adjustments of carrying
amounts of assets acquired or in income when the hedged transaction  occurs. The
nominal amounts and related foreign currency  transaction gains and losses,  net
of the impact of hedging,  were not significant for the three months ended March
31, 2004 and 2003.


STOCK BASED COMPENSATION

      The  Company  accounts  for  stock-based  awards  to  employees  using the
intrinsic value based method in accordance with APB No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES and provides the pro forma disclosures  required by SFAS No.
123, ACCOUNTING FOR STOCK-BASED  COMPENSATION.  No compensation expense has been
recognized in the financial statements for employee stock arrangements.
      As of January 1, 2003 the Company  adopted the disclosure  requirements of
SFAS 148,  ACCOUNTING  FOR STOCK BASED  COMPENSATION,  which  amends  Accounting
Principals  Board ("APB") No. 28 by adding to the list of disclosures to be made
for interim reporting periods.
      SFAS 123, Accounting for Stock-Based Compensation, requires the disclosure
of pro forma net income and earnings per share had the Company  adopted the fair
value method as of the  beginning of fiscal year 1995.  Under SFAS 123, the fair
value of stock-based awards to employees is calculated through the use of option
pricing  models,  even though such models were  developed  to estimate  the fair
value  of  freely   tradable,   fully   transferable   options  without  vesting
restrictions, which significantly differ from the Company's stock option awards.
These  models  also  require  subjective  assumptions,  including  future  stock
volatility  and expected time to exercise,  which greatly  affect the calculated
values.  The Company's  calculations  were made using the  Black-Scholes  option
pricing model with the following  weighted average  assumptions:  expected life,
117 months  following  vesting;  stock  volatility of 34.7% for the three months
ended  March  31,  2004 and  32.7% for the  three  months  end  March 31,  2003,
risk-free  interest rates of 4.27% for the three months ended March 31, 2004 and
3.83% for the three  months ended March 31,  2003,  and no dividends  during the
expected  term.  The  Company's  calculations  are  based on a  multiple  option
valuation approach and forfeitures are recognized as they occur.
      For purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized over the options'  vesting period.  Had the Company's stock
option and stock purchase plan been accounted for under SFAS No. 123, net income
and  earnings  per share  would  have been  reduced to the  following  pro forma
amounts (IN THOUSANDS, EXCEPT PER SHARE DATA).


                                                   Three months ended
                                           --------------------------------
Net income (loss):                         March 31, 2004    March 31, 2003
                                           --------------    --------------
       As reported                         $       (607)     $          64
       Compensation Expense,
          net of tax                       $        (30)     $         (23)
                                           --------------    --------------
       Pro forma                           $       (637)     $          41
Earnings (loss) per share:
       Basic                               $      (0.05)     $        0.01
       Diluted                             $      (0.05)     $        0.01
       Pro forma basic                     $          -      $           -
       Pro forma diluted                   $          -      $           -



                                       7

<PAGE>


                          THE CHALONE WINE GROUP, LTD.


NOTE 2 - COMPREHENSIVE INCOME

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

                                                          Three months ended
                                                              March 31,
                                                     ---------------------------
                                                          2004          2003
                                                     -------------- ------------
                                                      (Unaudited)    (Unaudited)

 Net income (loss)                                   $    (607)       $     64
 Changes in fair value of derivatives; net of tax
   effect                                                   22              28
 Reclassification adjustment; net of tax effect             92              50
 Foreign currency translation gain (loss)                 (340)            304
                                                     -------------- ------------
 Comprehensive income (loss)                         $    (833)       $    446
                                                     ============== ============



NOTE 3 - INVENTORIES

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

                                        March 31,       December 31,
                                     ----------------------------------
                                          2004              2003
                                     ---------------- -----------------
                                       (Unaudited)
 Bulk wine                            $       49,401    $       50,502
 Bottled wine                                 32,235            33,955
 Wine packaging supplies                         165               165
 Other                                           222               218
                                     ---------------- -----------------
 Total                                $       82,023    $       84,840
                                     ================ =================


NOTE 4 - COMMITMENTS AND CONTINGENCIES

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

                     Calendar year:
                     (nine months remaining)
                                2004             $     758
                                2005                   999
                                2006                 1,026
                                2007                   958
                                2008                   731
                                Thereafter           3,150
                                              -------------
                                 Total           $   7,622
                                              =============

      The Company  contracts with various growers and certain wineries to supply
a large portion of its future grape  requirements  and a smaller  portion of its
future bulk wine  requirements.  The Company estimates that it has contracted to
purchase approximately 9,000 to 13,000 tons of grapes per year over the next ten
years. While most of these contracts stipulate that prices will be determined by
current market conditions at the time of purchase,  several long-term  contracts
provide for minimum grape or bulk wine prices.  Purchases  under these contracts
were $18,994,000 for the year ended December 31, 2003.

                                       8

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


NOTE 7-SUBSEQUENT EVENTS

      In May  2004,  the  Company  successfully  completed  the  renewal  of its
revolving bank loans with Rabobank and a group of syndicated  lenders to provide
for an  additional  three  years.  In  addition,  the  Company  amended the loan
documents on its  revolving  bank loan and senior notes to modify the  financial
covenants.   Management  expects  that  these  covenant   modifications  provide
reasonable business  measurements which correspond to current economic trends as
well as to provide for our anticipated liquidity requirements.





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



INTRODUCTION

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

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

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


FORWARD LOOKING STATEMENTS

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

                                       9

<PAGE>

                             THE CHALONE WINE GROUP


Company;  and (vi)  regulatory  changes which might  restrict or hinder the sale
and/or  distribution of alcoholic  beverages.  Each of these factors,  and other
risks pertaining to the Company,  the premium wine industry and general business
and economic  conditions,  are more fully discussed herein and from time to time
in other  filings with the  Securities  and Exchange  Commission,  including the
Company's annual report on Form 10-K for the year ended December 31, 2003.


DESCRIPTION OF THE BUSINESS

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

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

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

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


RESULTS OF OPERATIONS - FIRST QUARTER OF 2004 COMPARED TO FIRST QUARTER 2003

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

<TABLE>
<CAPTION>

                                                                   Three months ended                  Percent change
                                                              March 31,            March 31,         Increase/(decrease)
                                                              -------------------------------        -------------------
                                                                 2004                 2003              2004 vs 2003
                                                              ---------------  --------------        -------------------
<S>                                                              <C>                 <C>                       <C>
Net revenues                                                     100.0%              100.0%                    0.0%
                                                              ---------------  --------------
Cost of wines sold                                                (68.1)%             (66.0)%                  3.2%
    Gross profit                                                  31.9%               34.0%                    (6.2)%
Other operating expense, net                                       0.2%                 0.0                    0.0%
Selling, general and administrative expenses                      (26.8)%             (21.8)%                 22.9%
                                                              ---------------  --------------
    Operating income                                               5.3%               12.2%                   (56.6)%
Interest expense, net                                             (12.0)%             (10.2)%                 17.6%
Depreciation and amortization expense                              (1.6)%              (1.3)%                 23.1%
Other income                                                       0.5%                0.4%                   25.0%
Minority interests                                                 (0.5)%              (0.3)%                 66.7%
                                                              ---------------  --------------
    Income (loss) before income taxes                             -8.3%                0.8%                (1,137.5)%
Income taxes                                                        0.0                (0.3)%              (1,233.3)%
                                                              ---------------  --------------
    Net income (loss)                                             -4.9%                0.5%                (1,080.0)%
                                                              ===============  ==============
</TABLE>

                                       10

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


NET REVENUES

      Net  revenues  for the  three  months  ended  March  31,  2004,  decreased
$1,157,000 or 8.6%,  reflecting a 12.7%  decrease in case sales offset by a 4.9%
increase in revenue per case when compared to the same period in the prior year.
The decrease in case sales is primarily due to our sales  division's  conversion
to a fiscal year  commencing  in April.  This  conversion  combined  with strong
shipments  in the fourth  quarter of 2003  resulted  in less cases than the same
time period in the prior  year.  We  anticipate  we will see  variations  in our
historical  seasonality  as we convert  our  distributors  back to a fiscal year
ending  March 31. For  financial  reporting  purposes  the Company  remains on a
calendar year.

      The  increase in revenue per case is due to new luxury wine  releases  and
continued growth of our Provenance brand.




GROSS PROFIT

      Gross profit  margin for the three months ended March 31, 2004,  decreased
by $655,000 or 14% when compared to the same period in the prior year. The gross
profit percentage  decreased 2.1 percent when compared to the same period in the
prior year. The decrease is due to continued  discount  pressure  experienced in
the  marketplace  combined with the growth of wines with both higher net revenue
and cost per case.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling,  general and  administrative  expenses for the three months ended
March 31, 2004,  increased  approximately  $371,000 or 12.6% over the comparable
period  in the  prior  year.  The  increase  was due to the  certain  sales  and
marketing  programs  related  to  new  releases.  Additionally,   rising  worker
compensation  and health  care costs  contributed  to the  increase  in selling,
general and administration.

OPERATING INCOME

      Operating  income for the three  months  ended March 31,  2004,  decreased
$1,002,000 or 61% from $1,653,000 for the three months ended March 31, 2003. The
decrease  occurred  due to the decrease in case  shipments,  increase in program
allowances and in selling and administrative expenses.

INTEREST EXPENSE

      Interest  expense for the three  months  ended March 31,  2004,  increased
$105,000  or 7.6% over the  comparable  period in the prior year.  The  increase
occurred as a result in the reduction of capitalized  interest.  Currently,  the
company has minimal vineyards in development which, in the prior year, generated
capitalized interest.

EQUITY IN NET INCOME OF DUHART-MILON

      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 ended March 31,
2004,  was  approximately   $62,000.  The  increase  in  minority  interest  was
approximately  $23,000 when compared to the same period last year.  The increase
was due to strong outside processing  revenues as compared to the same period in
the prior year.

                                       11

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


NET INCOME(LOSS) AND EARNINGS PER SHARE

      As a result of the factors  discussed above, the Company reported net loss
amounted to $607,000,  or ($.05) per diluted  share,  compared to a reported net
income of $64,000, or $.01 per diluted share for the same period a year ago.



LIQUIDITY AND CAPITAL RESOURCES

      Net working capital  remained  essentially  unchanged for the three months
ended March 31, 2004. The Company has  historically  financed its growth through
increases in borrowings and cash flow from operations.  Management  expects that
the Company's working capital needs will grow  significantly to support expected
future growth in sales volume.  Due to the lengthy aging and  processing  cycles
involved in premium wine production, expenditures for inventory and fixed assets
need to be made one to three years or more in advance of anticipated sales.

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



ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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




      OUR REVENUES AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY FROM QUARTER TO
QUARTER

      We believe  period-to-period  comparisons of our operating results are not
necessarily  meaningful,  and  cannot be  relied  upon as  indicators  of future
performance.  In addition, there can be no assurance that our revenues will grow
or be sustained in future periods or that we will maintain  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.

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


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

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

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

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

                                       12

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


      WE WILL NEED MORE WORKING CAPITAL TO GROW

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

      OUR  ACQUISITIONS AND POTENTIAL  FUTURE  ACQUISITIONS  INVOLVE A NUMBER OF
RISKS

      Our acquisition of Provenance Vineyards, Hewitt Ranch, Staton Hills Winery
(renamed  Sagelands  Vineyard),  the Jade Mountain brand,  enlarging Canoe Ridge
Vineyard and buying out our  partners,  and  expansion to the recently  acquired
winery for the Provenance Vineyards (and potential future acquisitions)  involve
risks   associated  with   assimilating   these  operations  into  our  Company;
integrating,  retaining and motivating key personnel;  integrating  and managing
geographically-dispersed    operations;    integrating    the   technology   and
infrastructures  of disparate  entities;  risks  inherent in the  production and
marketing of wine and replanting of existing vineyards from white wine grapes to
red wine grapes.

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

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

      In the three months ended March 31,  2004,  approximately  90% of our wine
sales were  concentrated in 19 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  90% of our  consolidated  net  revenues in the three months
ended March 31, 2004 were  concentrated in our four top selling  varietal wines.
Specifically,  sales of Chardonnay,  Cabernet Sauvignon,  Pinot Noir, and Merlot
accounted for 41%, 18%, 16% and 16% of our net revenues,  respectively.  Changes
in consumer  preferences  with respect to these varietal  wines could  adversely
affect our business.

      COMPETITION MAY HARM OUR BUSINESS

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

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

                                       13

<PAGE>



      OUR BUSINESS IS SUBJECT TO A VARIETY OF AGRICULTURAL RISKS

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

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

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

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

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


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

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

      AN OVERSUPPLY OF GRAPES MAY ALSO HARM OUR BUSINESS

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

      WE DEPEND ON THIRD PARTIES TO SELL OUR WINE

      We sell  our  products  primarily  through  independent  distributors  and
brokers for resale to retail  outlets,  restaurants,  hotels and  private  clubs
across the United States and in some overseas  markets.  To a lesser degree,  we
rely on direct sales from our wineries,  our wine library and direct mail. Sales
to our  largest  distributor  and  to  our  ten  largest  distributors  combined
represented  approximately  28% and 58% of our net revenues for the three months
ended March 31,  2004.  Sales to our ten largest  distributors  are  expected to
continue to represent a  substantial  portion of our net revenues in the future.
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.

                                       14

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


      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.

      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.


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

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

      In addition,  the imposition of unforeseen  and adverse trade  regulations
could have an adverse  effect on our  imported  wine  operations.  Export  sales
accounted for  approximately  2.5% of total  consolidated  revenue for the three
months ended March 31, 2004. We expect the volume of international  transactions
to  increase,   which  may  increase  our  exposure  to  future   exchange  rate
fluctuations.

                                       15

<PAGE>

                          THE CHALONE WINE GROUP, LTD.


      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.


      THE MARKET PRICE OF OUR COMMON STOCK FLUCTUATES

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

      DECREASED CASH FLOW COULD LIMIT OUR ABILITY TO SERVICE OUR DEBT

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



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

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



     ITEM 4.  CONTROLS AND PROCEDURES

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


                                       16

<PAGE>

PART II. - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits.

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

     (b) Reports on Form 8-K.

         On March, 5 2004 the  Company  filed  a Form 8-K to  provide  its press
         release announcing its year end 2003 financial results.









Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

Dated:  May 14, 2004             THE CHALONE WINE GROUP, LTD.
--------------------             ----------------------------
                                        (Registrant)


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


Dated:  May 14, 2004                /s/ SHAWN M. CONROY BLOM
--------------------             --------------------------------------------
                                 Shawn M. Conroy Blom
                                 Vice President and Chief Financial Officer



                                       17