Chalone Wine Group, Ltd.

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International Guild of Hospitality & Restaurant Managers

Chalone Wine Group, Ltd. (NasdaqNM:CHLN)

Chalone Wine Group, Ltd., incorporated on June 27, 1969 , produces, markets and sells super premium, ultra premium, and luxury-priced white and red varietal table wines, primarily Pinot Noir, Cabernet Sauvignon, Merlot, Syrah, Chardonnay and Sauvignon Blanc. The Company owns and operates wineries in various counties of California and Washington State . The Company's wines are made primarily from grapes grown at Moon Mountain Vineyard, Carmenet Vineyards, Edna Valley Vineyard, Chalone Vineyard, Company-owned vineyards adjacent to the Acacia Winery, Hewitt Vineyard and Suscol Creek Vineyard in California and the Canoe Ridge Vineyard in Washington State , as well as from purchased grapes. In France , the Company owns a minority interest in fourth-growth Bordeaux estate Chateau Duhart-Milon in partnership with Les Domaines Barons de Rothschild (Lafite). With the exception of Chateau Duhart-Milon, the Company manages and operates all of its wine-producing properties. The wines are primarily sold under the labels Provenance Vineyards, Chalone Vineyards, Edna Valley Vineyard, Carmenet, Acacia, Canoe Ridge Vineyard, Jade Mountain , Sagelands Vineyard and Echelon.

The Chalone Vineyard has been producing Chardonnay, Pinot Blanc, Pinot Noir, and small quantities of Chenin Blanc since 1969. It has also begun growing Syrah, and will release its first vintage in 2002. All wines sold under this label are produced from grapes grown at the Chalone Vineyard, is estate bottled, and bear the Chalone appellation. Chalone Vineyard sales represented 11.3% of the Company's consolidated revenues and 6.6% of its consolidated case sales for the nine months ended December 31, 2001 .

The Company produces Bordeaux-style red and white wines under the Carmenet label. The Carmenet Moon Mountain Reserve is made from Cabernet Sauvignon, Merlot and Cabernet Franc grapes grown at the Carmenet Winery, is estate bottled, and bears the Sonoma Valley AVA designation. The Carmenet white wine is made from Sauvignon Blanc and Semillon grapes purchased from Paragon Vineyard Co., Inc. under a grape purchase agreement, and bears the Edna Valley appellation. The Company also produces wines under the Dynamite label, which are made from Cabernet Sauvignon, Merlot, Sauvignon Blanc and Semillon grapes and bulk wine purchased from vineyards located in the North Coast AVA of California. Carmenet Winery sales represented 18.1% of the Company's consolidated revenues and 16.3% of its consolidated case sales for the nine months ended December 31, 2001 .

The Edna Valley Vineyard has been producing mostly Chardonnay and Pinot Noir wines since 1980. The majority of wines sold under the Edna Valley Vineyard label is produced from grapes grown by Paragon Vineyard Company, the Company's partner in the Edna Valley Vineyard Joint Venture, and is estate bottled. Edna Valley Vineyard sales represented 23.7% of the Company's consolidated revenues and 24.7% of consolidated case sales for the nine months ended December 31, 2001 .

The Acacia Winery produces Chardonnay and Pinot Noir wines under the Acacia label. The grapes for the production of Pinot Noir and Chardonnay come from the Carneros region. Approximately 50% of this production comes from Company-owned vineyards and Company-leased vineyards. Acacia Winery sales represented 14.6% of the Company's consolidated revenues and 11.8% of its consolidated case sales for the nine months ended December 31, 2001 .

The Canoe Ridge Vineyard commenced operation in 1994 and produces Merlot, Cabernet Sauvignon and Chardonnay wines under the Canoe Ridge Vineyard label. Most of the grapes for these wines are grown at the Company's estate vineyard and wines bear the Columbia Valley AVA designation. Canoe Ridge Vineyard sales represented 4.8% of the Company's consolidated revenues and 3.8% of its consolidated case sales for the nine months ended December 31, 2001 .

The 1997 vintage was the first to be released under the Echelon label, which features Chardonnay, Cabernet Sauvignon, Merlot, Viognier, Pinot Noir and Syrah. Most varieties have a Central Coast appellation. The 2000 Viognier features the designation of Esperanza Vineyard, from the Clarksburg AVA. Echelon sales represented 16.6% of the Company's consolidated revenues and 27% of it's consolidated case sales for the nine months ended December 31, 2001 .

On June 15, 1999 , the Company purchased Staton Hills Winery and its adjacent vineyards in Yakima County , Washington . The Staton Hills facility was renamed Sagelands Vineyard and the new brand was launched in January 2000, focusing primarily on Cabernet Sauvignon and Merlot and bearing the Columbia Valley AVA designation. The Company retained the Staton Hills Winery brand and continues to produce wines under this mark. Sagelands Vineyard represented 1.7% of the Company's consolidated revenues and 2.7% of the consolidated case sales for the nine months ended December 31, 2001 .

Custom brands consist primarily of Chardonnay, Cabernet Sauvignon and Merlot. Quantities of custom brand bottling are highly dependent upon grape supply and availability. As grapes become more scarce, the focus of the Company's production shifts away from custom brands as they are relatively lower margin products. The Company uses custom brands primarily as a means of marketing and selling its label wines and does not intend to focus its efforts in this line of business.

Nine percent of the Company's consolidated revenues and 7% of its consolidated case sales in the nine months ended December 31, 2001 were primarily comprised of import wines and, to a lesser degree, domestic wines purchased for resale purposes.

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The data included within the Financial section is solely for information and does not construe a recommendation and/or endorsement by IGHRM or its members to invest funds with any of the companies listed. You are strongly advised to obtain professional advice with qualified individuals or corporations for any investments of funds.

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