The Chalone Wine Group has reported that total case sales for the first quarter 2004 reached 120,621 versus 138,228 for the same quarter the prior year.

The fall meant that for the quarter the company reported a net loss of US$607,000 compared to a net income of US$64,000 in the same period of 2003.

President and CEO Tom Selfridge said: "In January 2004 our sales division, Chalone Wine Estates, switched from a calendar year to a fiscal year ending on March 31. This created a three-month stub period of January 1 through March 31, 2004 that, coming after our distributor network posted record sales in December, contributed to our decrease in case shipments.

"Depletions, which are the amount of cases sold by our distributors to the marketplace, were strong with the first quarter posting a 12% increase over the prior year. We have already seen significant sales increases in April as Chalone Wine Estates began its new fiscal period and we expect to make up and exceed the shortfall experienced this quarter.

"Our revenue is affected not only by the downward price pressure that is being felt by the entire wine industry but also by the start-up costs for our three new wineries," said Selfridge.

"We've completely remodeled the winery we purchased for Provenance Vineyards; in April we launched Orogeny Vineyards with a cool-climate Pinot Noir from the Green Valley of the Russian River Valley, and this month is the inaugural release of Hewitt Vineyard, our single-estate Cabernet Sauvignon from Rutherford. In the short term, these growing pains increase our cost of sales but in the long run, these wines will add significant profit to our bottom line."