FORM 10-K

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

   [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                    For the fiscal year ended January 2, 1999
                                          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 1-7603
                                   HANNAFORD BROS. CO.
                (Exact name of Registrant as specified in its charter)

              Maine                                             01-0085930
   (State or other jurisdiction of                           (I.R.S. Employer
   incorporation or organization)                           Identification No.)

145 Pleasant Hill Road, Scarborough, Maine                           04074
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code:  (207) 883-2911

    Securities registered pursuant to Section 12(b) of the Act:

       Title of each class           Name of each exchange on which registered

  Common Stock, $.75 par value                  New York Stock Exchange
  Preferred Stock Purchase Rights               New York Stock Exchange

  Securities registered pursuant to Section 12(g) of the Act:  None

  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 in the past 90 days. Yes [X] No [ ]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

  The  aggregate  market  value of the Common  Stock,  $.75 par  value,  held by
non-affiliates as of March 3, 1999, was $1,423,557,092. This calculation assumes
that all shares of Common Stock  beneficially  held by directors  and  executive
officers of the Registrant are owned by "affiliates".

  As of March 3, 1999, there were 42,272,475 outstanding shares of Common Stock,
$.75 par value, the only authorized class of common stock of the Registrant.

                         DOCUMENTS INCORPORATED BY REFERENCE
  PART III:  Proxy Statement for Annual Meeting of Shareholders to be held
             on May 19, 1999.
                            Exhibit Index on Page: 58


<PAGE>


FORM 10-K                HANNAFORD BROS. CO. 1-7603   

          JANUARY 2, 1999



                                   PART I

ITEM 1.  BUSINESS

GENERAL DEVELOPMENT OF THE BUSINESS

Hannaford  Bros. Co. (the  "Registrant"  or the "Company") was  incorporated  in
Maine in 1902 as the successor to a business established by the Hannaford family
in 1883. Its principal  executive offices are located at 145 Pleasant Hill Road,
Scarborough, Maine 04074.Its telephone number is (207) 883-2911.

Approximately  25.6% of the outstanding shares of the Registrant's common stock,
par value $.75 per share,  is owned by  certain  members of the Sobey  family of
Stellarton,  Nova Scotia,  and certain  companies and trusts  controlled by them
(the "Sobey Parties").

Fiscal year 1998  consisted of 52 weeks of operations as compared to 53 weeks in
1997 and 52 weeks in 1996.  The Company  closes its fiscal year on the  Saturday
closest to December 31.

Consolidated sales and other revenues for 1998 were $3.324 billion,  an increase
of 3.0% over 1997 sales and other revenues of $3.226  billion.  Identical  store
sales were up 2.2% for fiscal year 1998 compared to an increase of 0.4% in 1997.
Comparable  store sales were up 2.4% for fiscal year 1998.  Both  identical  and
comparable store sales have been adjusted to exclude the 53rd week in 1997.

The  Registrant  ships  food and  food-related  products  from its  distribution
centers to an  additional  19  independent  retail food  stores.  Sales to these
wholesale  accounts amounted to 2.1% of total sales in 1998. Other revenues from
such  activities as home  shopping,  trucking,  real estate and retail  services
amounted to about 1.5% of total sales.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The  Registrant,  through  its  operations  and  those of its  subsidiaries,  is
principally  involved in the retail food business.  The Registrant considers its
business a single  segment under the  applicable  reporting  rules.  See Item 8,
Financial Statements and Supplementary Data.


<PAGE>



NARRATIVE DESCRIPTION OF THE BUSINESS

The Registrant is a multi-regional food retailer,  with 150 supermarkets located
throughout  Maine,  New  Hampshire  and  Vermont,  and in  parts  of  New  York,
Massachusetts,  Virginia,  North  Carolina  and South  Carolina.  Its stores are
operated primarily under the names Shop 'n Save7 and Hannaford7.  The Registrant
offers  consumers  comprehensive  product variety and outstanding  freshness and
quality in  perishables,  at  competitive  prices,  from  modern and  convenient
facilities.  The Registrant also operates 108 pharmacies within the Registrant's
supermarkets and combination stores.

Of the Registrant's  104  supermarkets in the northeastern  region of the United
States,  more than 75% are either new or have been  expanded or relocated in the
past 10 years.  During this period, a number of smaller outdated facilities have
been closed or sold.

The Registrant operates 46 supermarkets located in Virginia,  North Carolina and
South  Carolina.  Eleven of these stores were acquired by the Registrant in July
1994, six were acquired in September 1995 and twenty-nine were newly constructed
since 1995.

The Registrant  operates 124 combination  stores with selling areas ranging from
22,300 to 61,700 square feet. These combination  stores offer under one roof the
traditional  all-department  supermarket,   together  with  other  services  and
expanded lines of general merchandise.






<PAGE>



The following  tables set forth certain  statistical  information  regarding the
Registrant's operations at the dates indicated:

                                            FISCAL YEAR                    
NUMBER OF STORES       1994         1995       1996        1997       1998
                       ----         ----       ----        ----       ----


      Beginning          93          118        134         139        148
      Opened             10           13         13          15         11
      Closed             (5)          (3)        (7)         (6)        (9)
      Sold                0            0         (1)          0          0
      Acquired           20            6          0           0          0
                        ---          ---        ---         ---        ---
      Ending            118          134        139         148        150 
                        ===          ===        ===         ===        ====


AVERAGE SQUARE FEET
  OF SELLING AREA
  PER STORE          30,100       31,100     32,300      33,400     34,500

TOTAL SQUARE FEET
 OF SELLING AREA  3,547,000    4,166,000  4,490,000   4,947,000  5,171,000




<PAGE>



As illustrated by the foregoing  tables,  the Registrant has continued to expand
its food store operations.

During 1998, net selling square footage  increased  4.5%. The Registrant  opened
eight new food stores with  selling  areas  ranging  from 34,100  square feet to
42,300 square feet,  relocated two existing stores to larger, new facilities and
closed seven non-core southeast stores that had limited potential for profitable
growth.

During 1999, the Registrant  expects to open four new food stores,  one of which
will be located in a northeastern market and three in southeastern  markets. The
new stores will have 42,300 square feet of selling  area.  The  Registrant  will
undertake  a number  of major  remodeling  projects  in 1999  that  improve  its
presentation to consumers,  but that do not add square  footage.  It is expected
that net retail selling area will increase approximately 3.7% in 1999.

As part of its ongoing expansion program,  the Registrant will also consider the
acquisition  of  additional  supermarkets,  if attractive  opportunities  become
available.

The  Registrant  owns four  distribution  facilities  which  support  its retail
operations, as follows:

1.  Distribution  facility in South Portland,  Maine,  which primarily  services
certain store locations in Maine, New Hampshire and Massachusetts. This facility
warehouses grocery,  fresh fruits and vegetables,  frozen foods, meat, and dairy
products  in  approximately  521,000  square  feet of floor  area,  and has dock
facilities for 89 highway  trailers.  This  distribution  center, as well as the
others, has a dedicated on-line computerized  warehouse management system, which
efficiently  controls the movement of product through the facility and schedules
labor for greater efficiency and productivity.  Productivity in the distribution
facilities also has been enhanced through the use of employee  incentive payment
programs.

2.  Distribution  center  and  office  facility  in  Schodack,  New York,  which
primarily services certain store locations in New York,  Vermont,  New Hampshire
and  Massachusetts.   This  facility  warehouses   grocery,   fresh  fruits  and
vegetables, meat, dairy and frozen food products in approximately 489,000 square
feet of floor area and has dock  facilities for 129 highway  trailers.  Although
approvals have been received to expand this facility to approximately  1,200,000
square feet,  the  Registrant  has no current plans to do so. This  distribution
center  operates  under a team  management  system  which the  Registrant  calls
Socio-Technical Systems.



<PAGE>



3.  Distribution  center in Butner,  North  Carolina,  which services all of the
Registrant's  store  locations in North  Carolina,  South Carolina and Virginia.
This facility  warehouses  grocery,  fresh fruits and vegetables,  frozen foods,
meat and dairy products in  approximately  431,000 square feet of floor area and
has dock  facilities  for 112  highway  trailers.  This  facility  was opened in
November  1996 and  incorporates  increased  staging areas for  crossdocking,  a
mezzanine for slower moving items and other modern distribution techniques.  The
site on which this  distribution  center is located includes land for additional
expansion of the distribution center to approximately 750,000 square feet.

4. A 200,000 square foot distribution facility in Winthrop, Maine. This facility
distributes  health and beauty care products,  specialty foods,  pharmaceuticals
and some general  merchandise to all of the  Registrant's  retail outlets.  This
facility has converted from a conventional management system to a team-based one
similar to that used in the Schodack, New York, distribution center.

Hannaford Trucking Company, a wholly-owned subsidiary, transports merchandise to
and  from  the  Registrant's  distribution  facilities  and  is  licensed  as an
irregular  route common  carrier  with 48 state  authority.  Hannaford  Trucking
Company also hauls  products for  third-party  customers,  thereby  reducing the
number of miles that its trucks travel empty.

In the Boston,  Massachusetts market the Registrant is continuing to test a home
shopping service called  Hannaford's  HomeRuns7.  Consumers shop from a catalog,
placing  their order via phone,  fax or the  Internet.  Orders are selected at a
dedicated  fulfillment center and delivered the next day. Prices are competitive
with those in local supermarkets.

Innovation  in  operating  systems for  competitive  advantage  is an  important
component  of the  Registrant's  strategy,  and the  Registrant  is committed to
investing in new technology and the  development of new systems.  The Registrant
seeks to be an industry  leader in the application of new technology and systems
to improve customer service, productivity and financial information.

Raw materials, as such, are not essential to the business of the Registrant.

During 1997,  the  Registrant  completed the  conversion of its primary  private
brand from "Shop 'n Save7" to "Hannaford7".

Seasonal  business  affects  the  Registrant's  operations  in  that  sales  are
generally  greater in the second half of the year than in the first. (See Note 9
of Notes to Consolidated Financial Statements.)


<PAGE>



Inventory levels are maintained at distribution centers and all retail locations
in amounts adequate to minimize "out of stock" conditions.

Backlog is not material to the Registrant's business.

No  material   portion  of  the  business  of  the   Registrant  is  subject  to
renegotiation  of profits or  termination  of contracts or  subcontracts  at the
election of the Government.

At the retail level,  the Registrant's  supermarkets  are in direct  competition
with   regional,   national  and  local  food  and  drug  chains,   as  well  as
"supercenters",  some of which have greater  resources than the Registrant,  and
with other independent operators. In addition, certain of the independent stores
served by the  Registrant  as wholesale  customers are located in the same trade
areas as the Registrant's own stores.

In its  wholesale  operations,  the  Registrant  directly  competes  with  other
regional  wholesalers,  some of which supply franchised retail outlets. The loss
of any one or a few of the  wholesale  customers  would  not  have a  materially
adverse effect on the Registrant.

No material  expenditures were made during fiscal 1996, 1997 or 1998 on research
activities relating to new or improved products, services or techniques.

The Registrant does not foresee that material  capital outlays will be needed or
that material  increases in operating  expenses will be incurred for the purpose
of compliance with any statutory requirement respecting environmental quality.

As of January 2, 1999,  the  Registrant had  approximately  7,900  full-time and
15,700 part-time employees.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.

Neither the Registrant nor any of its subsidiaries  engages in any operations in
foreign countries,  nor is a material portion of sales and revenues derived from
retail customers in foreign countries.



<PAGE>



ITEM 2.  PROPERTIES

The  Registrant  owns 58 of its 150 food  stores  and leases  the  remaining  92
locations.  It owns all 4 of its distribution  facilities and leases its general
office facility in Scarborough,  Maine. The Registrant's  properties are located
in Maine, New Hampshire,  Vermont,  northern Massachusetts,  eastern upstate New
York,  southern  Virginia,  North  Carolina and South  Carolina.  The Registrant
believes that its properties are well  maintained  and are  appropriate  for its
business needs.

The number of stores and  facilities  operated  and the square  feet of space at
January 2, 1999, consisted of:

                                                    (In thousands)

                                                 Square       Square Footage
                                                Footage           Selling
                                 Units         Gross Area           Area 

    Stores                        150             7,224            5,171
    Distribution and
      administrative facilities     5             1,860              -- 
                                  ---             -----            -----
          Total                   155             9,084            5,171


The following table sets forth expiration dates of leased  facilities,  assuming
exercise of all renewal options:

                   Lease                                 Administrative
                Expiration          Food stores            Facilities  

                 1999-2008                2
                 2009-2018                4
                 2019-thereafter         86                   1 
                                        ----                 ---
                                         92                   1


Further information concerning the Registrant's  distribution facilities appears
under Item 1 at pages 5-6 above,  which  information is  incorporated  herein by
reference.



<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

There are no material legal  proceedings,  including ordinary routine litigation
incidental to the business,  to which the  Registrant is a party or to which any
of its property is subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters  submitted to a vote of security holders during the fourth
quarter of fiscal 1998.

EXECUTIVE OFFICERS OF THE REGISTRANT

Information  with respect to the  Executive  Officers of the  Registrant  is set
forth below.

Under the by-laws of the Registrant,  all Executive Officers hold office, at the
pleasure of the Board of  Directors,  until the Annual  Meeting of the Directors
next following their election or until others are elected and qualified in their
stead.

There are no family  relationships  between any of the Executive Officers of the
Registrant nor were there any special  arrangements or understandings  regarding
the selection of any officer.
                               SERVED AS AN EXECU-
NAME                        AGE        POSITION          TIVE OFFICER SINCE:

HUGH G. FARRINGTON           54      President                    09/30/77
                                     Chief Executive Officer

Mr.  Farrington  was elected  President in 1984 and designated  Chief  Executive
Officer in 1992. He had held the position of Chief  Operating  Officer from 1984
to 1992. He had been  Executive  Vice  President from 1981 until his election as
President.  He  has  been  employed  by the  Registrant  in  various  operating,
supervisory and executive capacities since 1968.

RICHARD A. ANICETTI          41      Executive Vice President -   08/10/94
                                     Southeast Operations

Mr. Anicetti was elected Executive Vice President - Southeast  Operations in May
1998.  He  had  been  Senior  Vice  President  and  General  Manager,  Southeast
Operations since December 1995, Senior Vice President, Retail Operations for the
southeast  from 1994 to 1995,  and Vice  President  - Retail  Operations/General
Manager, New Hampshire and Massachusetts from 1989 to 1994. He has been employed
by the Registrant since 1980 in various retail management capacities.



<PAGE>


                               SERVED AS AN EXECU-
NAME                      AGE        POSITION            TIVE OFFICER SINCE:

PAUL A. FRITZSON           45     Executive Vice President,      01/02/92
                                  Strategic Development

Mr. Fritzson was elected Executive Vice President - Strategic Development in May
1998.  He  had  been  Senior  Vice  President,   Marketing,   Merchandising  and
Distribution since December 1995, Senior Vice President,  Marketing from 1994 to
1995, Vice President - Marketing from 1992 to 1994 and Vice  President,  General
Merchandise  from 1990 to 1992.  He had served  previously  in various staff and
merchandising capacities since 1978.

ANDREW P. GEOGHEGAN, ESQ.  48     Senior Vice President,         09/14/87
                                  Secretary & General Counsel

Mr.  Geoghegan was elected Senior Vice President,  Secretary and General Counsel
in May 1996. He joined the  Registrant  as Vice  President,  General  Counsel in
September  1987. He was elected  Secretary in 1992.  From 1979 to 1987 he was in
private law practice with the firm of Kassoy, Lopez & Geoghegan Law Corporation,
Beverly Hills, California, specializing in corporate, tax and real estate law.

RONALD C. HODGE            51     Executive Vice President -     08/10/94
                                  Sales & Northeast Operations

Mr. Hodge was elected Executive Vice President - Sales & Northeast Operations in
May 1998. He had been Senior Vice President, Northeast Operations since December
1995,  Senior  Vice  President,  Retail  Operations  from  1994 to 1995 and Vice
President - Retail Operations/General Manager, New York and Vermont from 1989 to
1994.  He has been  employed  by the  Registrant  in various  retail  management
capacities since 1980.

BLYTHE J. MCGARVIE           42      Executive Vice President,    11/14/94
                                     Chief Financial Officer

Ms. McGarvie was elected Executive Vice President and Chief Financial Officer in
May 1998.  She had been Senior Vice President and Chief  Financial  Officer from
1995 to 1998.  She joined the  Registrant as Senior Vice  President - Finance in
November 1994.  From 1991 to 1994 she was Chief  Administrative  Officer for the
Pacific Rim Group of Sara Lee Corporation. From 1985 to 1991 she was employed by
Kraft General Foods in various finance positions.




<PAGE>


                               SERVED AS AN EXECU-
NAME                        AGE        POSITION          TIVE OFFICER SINCE:

MICHAEL J. STROUT            44      Executive Vice President,    12/19/94
                                     Human Resources

Mr. Strout was elected  Executive Vice President - Human  Resources in May 1998.
He had served as Senior Vice  President - Human  Resources  since  rejoining the
Registrant  in December  1994.  From 1990 through  1994 he was Vice  President -
Human  Resources  and later  Senior  Vice  President - Human  Resources  at Tops
Markets, Inc., Buffalo, New York. From 1985 to 1990 Mr. Strout had been employed
by the Registrant in various Human Resource management positions.


<PAGE>



                                    Part II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

The  Common  Stock of the  Registrant  has  been  listed  on the New York  Stock
Exchange since July 18, 1986.  The following  table sets forth the dividends per
share and the high and low  sales  prices  of the  Common  Stock on the New York
Stock Exchange composite tapes during each quarter of 1997 and 1998.



                                    QUARTERLY
                                         SALE PRICE              DIVIDENDS
                                    HIGH               LOW       PER SHARE

1st Quarter, 1998                 $46.438           $38.750        .150
2nd Quarter, 1998                  46.938            43.375        .150
3rd Quarter, 1998                  47.000            41.250        .150
4th Quarter, 1998                  53.000            40.063        .150

1st Quarter, 1997                 $36.000           $33.125        .135
2nd Quarter, 1997                  36.250            30.500        .135
3rd Quarter, 1997                  37.000            32.750        .135
4th Quarter, 1997                  44.125            34.563        .135




There are approximately  17,000 record holders of the Common Stock.  Fiscal 1998
was the fiftieth  consecutive  year that dividends were paid on the Common Stock
and the thirty-sixth consecutive year that the aggregate dividend paid per share
(after  adjusting for stock  splits) has  increased.  On February 12, 1999,  the
Board of Directors  voted to increase the quarterly  dividend to $.165 per share
for the dividend due to be paid on March 25, 1999.  Future dividends will depend
on the Registrant's earnings and financial condition.




<PAGE>



Item 6.  Selected Financial Data

<TABLE>

                                                                                    Fiscal Year                           
                                                            --------------------------------------------------------------
                                                                1998        1997         1996         1995         1994
                                                                         (In thousands except per share amounts)
EARNINGS STATEMENT DATA:
                       
<S>                                                          <C>         <C>          <C>          <C>          <C>
Sales and other revenues.................................    $3,323,588  $3,226,433   $2,957,559   $2,568,061   $2,291,755
Cost of sales............................................     2,480,346   2,427,287    2,242,784    1,951,248    1,728,499
                                                              ---------   ---------    ---------    ---------    ---------

Gross margin.............................................       843,242     799,146      714,775      616,813      563,256
Selling, general and administrative expense..............       664,357     635,355      568,033      481,017      437,548
Impairment loss..........................................             -      39,950            -            -            -
                                                              ---------   ---------    ---------    ---------    ---------

Operating profit.........................................       178,885     123,841      146,742      135,796      125,708
Interest expense, net....................................        26,577      26,425       22,204       19,368       21,360
                                                              ---------   ---------    ---------    ---------    ---------

Earnings before income taxes.............................       152,308      97,416      124,538      116,428      104,348
Income taxes.............................................        57,661      37,769       49,333       46,227       42,060
                                                              ---------   ---------    ---------    ---------    ---------
Net earnings.............................................    $   94,647  $   59,647   $   75,205   $   70,201   $   62,288
                                                              =========   =========    =========    =========    =========

Per common share:

   Basic earnings per share..............................    $     2.24  $     1.41   $     1.78   $     1.67   $     1.50
                                                              =========   =========    =========    =========    =========

   Diluted earnings per share............................    $     2.21  $     1.40   $     1.76   $     1.66   $     1.49
                                                              =========   =========    =========    =========    =========

   Cash dividends........................................    $      .60  $      .54   $      .48   $      .42   $      .38
                                                              =========   =========    =========    =========    =========

                                                               January     January      December     December     December
                                                               2, 1999     3, 1998      28, 1996     30, 1995     31, 1994
BALANCE SHEET DATA:                                              (Dollar amounts in thousands except per share data)
Working capital..........................................    $   36,279  $   20,873   $   21,796   $   23,512   $   42,707
Total assets.............................................     1,284,538   1,227,190    1,183,727      961,830      877,605
Current maturities:
   Long-term debt........................................        19,296      18,155       14,213       11,246       14,409
   Obligations under capital leases......................         2,108       1,873        1,775        1,467        1,382
Long-term debt, excluding current maturities.............       220,130     235,850      227,525      150,648      153,687
Obligations under capital leases, excluding current
  maturities.............................................        73,866      75,687       75,198       69,747       69,552
Shareholders' equity.....................................       663,350     601,029      569,156      518,677      454,475
Book value per share.....................................    $    15.70  $    14.22   $    13.46   $    12.26   $    10.88

</TABLE>


<PAGE>


FORM 10-K              HANNAFORD BROS. CO. 1-7603           JANUARY 2, 1999



ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
            AND FINANCIAL CONDITION

This analysis of the Company's  results of  operations  and financial  condition
should  be read in  conjunction  with the  accompanying  consolidated  financial
statements,  including the notes thereto,  and the information  presented in the
summary of selected  financial  data.  All footnote  references  are to Notes to
Consolidated Financial Statements.

RESULTS OF OPERATIONS

Overview

Sales and other  revenues for 1998  amounted to $3.324  billion,  an increase of
3.0% over last year's sales and other revenues of $3.226 billion. Fourth quarter
sales and other revenues in 1998 were $850 million, as compared to $871 million,
a decrease of 2.4%. Identical store sales,  adjusted to exclude the 53rd week in
1997,  were up 2.2% in the fourth  quarter and up 1.3% for the year.  Comparable
store sales, also adjusted for the 53rd week in 1997, were up 2.4% in the fourth
quarter and 1.9% for the year 1998.

Consolidated net earnings in 1998 were up 12.1% and fourth quarter earnings were
up 7.0% over 1997, before  consideration of a 1997 pre-tax,  non-cash accounting
charge of $40 million. On a reported basis, consolidated net earnings for fiscal
year 1998 were $95 million,  which  represents an increase of 58.7% over the $60
million reported last year. Diluted net earnings per common share were $2.21, as
compared to $1.40 last year. For the fourth quarter,  consolidated  net earnings
were $28 million,  as compared to the $1 million reported last year. Diluted net
earnings per common  share in the quarter  were $.65 this year  compared to $.03
for the same period in 1997.




<PAGE>



The following table sets forth, for the years indicated,  the percentages  which
selected items in the consolidated statements of earnings are to sales and other
revenues  and the  percentage  change  in the  dollar  values  of such  items as
compared to the indicated prior year:

                                                    YEAR-TO-YEAR PERCENTAGE
   PERCENTAGE OF SALES                              CHANGE IN DOLLAR VALUES
    AND OTHER REVENUES                                 1998        1997
 EXCEPT PER SHARE AMOUNTS                          Compared to  Compared to
 1998     1997      1996                               1997        1996     

  100.0%   100.0%   100.0%  Sales and other revenues       3.0%       9.1%
  =====    =====    =====

   25.4     24.8     24.2   Gross margin                   5.5       11.8

                            Selling, general and
   20.0     19.7     19.2     administrative expenses      4.6       11.9
      -      1.3        -   Impairment loss             (100.0)         -
  -----    -----    -----

    5.4      3.8      5.0   Operating profit              44.5      (15.6)

    0.8      0.8      0.8   Interest expense, net          0.6       19.0
  -----    -----    -----

    4.6      3.0      4.2   Earnings before income taxes  56.3      (21.8)

    1.7      1.2      1.7   Income taxes                  52.7      (23.4)
  -----    -----    -----

    2.9%     1.8%     2.5%  Net earnings                  58.7      (20.7)
  =====    =====    =====

                            Earnings per share:
  $2.24    $1.41    $1.78     Basic                       58.9      (20.8)
   ====     ====     ====

  $2.21    $1.40    $1.76     Diluted                     57.9      (20.5)
   ====     ====     ====

  $ .60    $ .54    $ .48   Cash dividends per share      11.1       12.5
   ====     ====     ====




<PAGE>


Sales

Sales and other  revenues rose 3.0% in 1998, to $3.324  billion,  an increase of
$97 million over 1997 results. Fiscal year 1998 contained 52 weeks of operations
as  compared  to  53  weeks  in  1997.   This   additional  week  accounted  for
approximately  $58 million of additional sales in 1997. The Company's real sales
growth in 1998 exceeded 6.7% after  adjusting for the 53rd week of sales in 1997
and the 1997 sales  attributable  to seven  non-core  southeastern  supermarkets
closed in January 1998. Sales from  supermarkets  that were open in both periods
presented,  adjusted to exclude the 53rd week of sales in 1997 ("identical store
sales"),  increased  $39 million or 1.3%.  Additional  supermarket  sales of $53
million  resulted  from the net impact of new,  expanded,  relocated  and closed
stores offset by the 53rd week of sales in 1997. Other sales and revenues, which
include wholesale, trucking, home delivery, real estate and miscellaneous retail
operations,  increased $5 million. Comparable store sales, which include results
from expanded and relocated  stores on a 52-week basis in both years  presented,
increased 1.9% in 1998.

Identical  store  sales  were up  2.2%  in the  fourth  quarter  of  1998  while
comparable store sales were up 2.4% in the quarter. The Company attributes these
increases to a strong holiday sales season.

In 1997,  sales and other  revenues  were  $3.226  billion,  an increase of $269
million or 9.1% over 1996 results.  Retail sales increased $259 million or 9.0%.
Identical store sales reflected an increase of 0.4% while comparable store sales
increased 2.3%.  Other sales and revenues,  which include  wholesale,  trucking,
home delivery,  real estate and miscellaneous  retail operations,  increased $10
million.

Gross Margin

Gross  margins  increased  in 1998 to 25.4%  of  sales  and  other  revenues  in
comparison to 24.8% in 1997. The 1998 increase is the result of improved selling
margins  in most of the  Company's  marketing  territories.  A  portion  of this
increase was the result of an inventory  shrinkage  reduction  initiative  which
combined store level associates and vendor partners using integrated information
technology.  The Company continues to focus on maintaining a competitive pricing
strategy.

Gross  margins  increased  in 1997 to 24.8%  of  sales  and  other  revenues  in
comparison  to 24.2% in 1996.  This  increase is the result of improved  selling
margins in certain of the Company's  marketing  territories  coupled with better
operations in the Southeast,  including the Company's new distribution  facility
which began product delivery in November 1996.


<PAGE>


Selling, General and Administrative Expenses

Selling,  general and  administrative  expenses  increased to 20.0% of sales and
other revenues in 1998 as compared to 19.7% in 1997. Payroll and payroll related
expenses,  which exceeded 50% of selling, general and administrative expenses in
both years,  increased as a percentage of sales in the current year. In addition
to increased direct labor costs, the Company incurred increased costs related to
its employee benefit plans (Note 6).

Selling,  general and  administrative  expenses  increased to 19.7% of sales and
other  revenues  in 1997 as  compared  to 19.2% in 1996.  In  addition to rising
payroll  costs,  the  1997  increase  reflects  higher   advertising  costs  and
depreciation charges. The increases in these components of selling,  general and
administrative expenses reflect the high level of store openings in 1997 coupled
with  the  continuing  costs  of  establishing  the  Company's  position  in the
Southeast.

Impairment Loss

The Company  recorded a non-cash  charge of $40 million in the fourth quarter of
fiscal 1997 (Note 4). Expressed as a percentage of sales the impairment loss was
1.3% of sales and other  revenues.  Approximately  $24 million of the impairment
loss  relates to  supermarket  assets and related  costs for seven  southeastern
stores in non-core  markets that were closed in January 1998.  The remaining $16
million  relates  to  supermarket  assets  which  continue  to be  used  in  the
operations of the Company.

Interest Expense, Net

Net interest  expense  expressed as a percentage of sales and other revenues was
0.8% in all years presented.

Net  interest  expense in 1998 was $27  million,  an  increase of 0.6% from 1997
interest expense of $26 million. This slight increase is primarily the result of
a decrease in capitalized interest from reduced construction  activity offset by
a decrease in average debt levels.



<PAGE>


Net interest expense in 1997 was $26 million, an increase of 19.0% from 1996 net
interest  expense of $22 million.  This  increase is primarily  the result of an
increase in average debt levels  coupled with a decrease in invested  cash which
is reflected as a decrease in interest income.

Income Taxes

The provision for income taxes includes both federal and state income taxes. The
effective  tax rate  decreased  in 1998 to 37.9% from 38.8% in 1997 and 39.6% in
1996.  These  lower  effective  tax rates are the  result of  reductions  in the
Company's overall state income tax rate. In addition,  the 1998 reduced rate was
positively  impacted by a tax benefit related to the Company's  donation of food
products.  Assuming  there are no federal or state income tax rate changes,  the
Company  expects the  effective  tax rate for 1999 and  thereafter  to be in the
37.8% to 38.2% range.

Net Earnings and Earnings Per Common Share

Net earnings  increased  58.7% in 1998 to $95 million or 2.9% of sales and other
revenues,  an increase of $35 million  from 1997 net  earnings of $60 million or
1.8% of sales and other  revenues.  Before the 1997  fourth  quarter  impairment
loss, net earnings for 1998 increased by 12.1% over 1997 results.  This increase
is the result of increased  sales and gross margin coupled with a reduced income
tax  provision,  partially  offset  by  an  increase  in  selling,  general  and
administrative expenses.

Net earnings for the fourth  quarter of 1998 were $28 million versus 1997 fourth
quarter  net  earnings of $1 million.  Basic and  diluted  earnings  exhibited a
similar  increase to $.66 per common share for the fourth quarter of 1998 versus
$.03 per common share for the fourth quarter of 1997. This increase is primarily
the result of the impairment loss.  Before the impairment loss, net earnings for
the fourth quarter of 1998 were up 7.0% over 1997 results.

Net earnings  decreased  20.7% in 1997 to $60 million or 1.8% of sales and other
revenues,  a decrease  of $15 million  from 1996 net  earnings of $75 million or
2.5% of sales and other  revenues.  This decrease is primarily the result of the
impairment  loss that was  booked in the  fourth  quarter  of 1997.  Before  the
impairment  loss,  net earnings for 1997 were $84 million,  an increase of 12.3%
over the $75 million  reported in 1996. This increase is the result of increased
sales and gross margin,  partially offset by an increase in selling, general and
administrative expenses.

Basic earnings per common share in 1998 were $2.24 as compared to $1.41 in 1997,
an increase of 58.9%.  Diluted earnings per common share (Note 1J) were $2.21 in
1998, an increase of 57.9% from $1.40  reported for 1997.  Before the impairment
charge,  diluted  earnings  per common  share were $2.24 in 1998 as  compared to
$1.99 in 1997, an increase of 12.6%. Management estimates that the extra week of
operations in the fourth quarter of 1997 increased net earnings by approximately
$0.04 per share.



<PAGE>


Basic earnings per common share in 1997 were $1.41 as compared to $1.78 in 1996,
a decrease of 20.8%.  Diluted  earnings per common share (Note 1J) were $1.40 in
1997,  a  decrease  of 20.5%  from the  $1.76  reported  for  1996.  Before  the
impairment  charge,  basic  earnings  per common share were $2.00 as compared to
$1.78 in 1996, an increase of 12.4%.

The  Company  is  continuing  to test a home  shopping  service  in the  Boston,
Massachusetts  market  called  Hannaford's  HomeRuns(R).  The  majority  of  its
customer  orders  are  generated  from  an   internet-based,   virtual  shopping
experience.  This service generated a net loss of approximately  $0.16 per share
in 1998,  $0.11 in 1997 and $.05 per share in 1996.  Management will continue to
test this business venture in 1999.

Year 2000 Issues

Year 2000 (Y2K) issues arise from the inability of some  computer-based  systems
to properly  recognize and process dates after December 31, 1999. The Company is
dependent on computer hardware,  software,  systems and processes ("IT Systems")
and non-information  technology  systems,  such as telephones,  clocks,  scales,
refrigeration controllers and other equipment containing embedded microprocessor
technology ("Facilities Systems"). Most of the Company's key business processes,
such as product procurement,  warehousing, product delivery, inventory and labor
management,  retail sales and financial information  reporting,  depend on these
systems.

In 1996,  the  Company  initiated a  readiness  plan to address Y2K issues.  The
readiness plan addresses two major segments: (1) IT Systems including mainframe,
PC-desktop and in-store systems; and (2) Facilities Systems including all retail
stores,  distribution  centers,  corporate  offices and other owned real estate.
Phases of the  readiness  plan common to each segment  include data  collection,
assessment  and  prioritization,  resolution,  testing and  implementation,  and
monitoring  ongoing  compliance.  The Company  currently expects to complete all
phases of its readiness plan as follows:

         IT Systems
              Mainframe                                       Completed
              Network                                         March 1999
              PC-Desktop                                      August 1999
              In-store                                        August 1999

         Facilities Systems                                   June 1999

More than 40% of the Company's IT Systems utilize a standard  calendar  routine.
This routine has been reprogrammed to be Y2K compliant. In addition, the Company
is extending this calendar routine to nearly all IT

<PAGE>


Systems where it was not previously  used. This  standardization  has simplified
the  Company's  remediation  efforts and has  reduced the cost of the  readiness
plan. As a final step, the Company will test systems deemed  critical by running
them in a fully  integrated Y2K environment.  Critical systems include,  but are
not limited to, product  procurement  systems for  supermarkets  and warehouses,
in-store  retail  sales  systems and  centralized  financial  systems  including
payroll and banking activities. The Company has used outside consultants to help
with various phases of the readiness  plan.  However,  the Company is relying on
its own associates to verify all test results prior to implementation.

The readiness plan for all IT Systems is progressing on schedule.  The Company's
mainframe applications have been remediated and tested in a Y2K environment.  In
addition, all mainframe systems software has been tested with an actual calendar
rollover from 1999 to 2000. The Company has completed all mainframe Y2K work and
will continue to monitor ongoing compliance.

Facilities  Systems work has been  completed at all retail  stores and corporate
offices.  The Y2K readiness plan for  Distribution  Centers and other owned real
estate is currently scheduled to be completed by June 1999.

In addition to the readiness  plan  addressing IT and  Facilities  Systems,  the
Company  contacted  critical  business  partners  (product  suppliers,   service
providers,  and those with which the Company  exchanges  information) in January
1999,  requesting  information  regarding  the  status of their  individual  Y2K
compliance plans. This effort will also consist of analyzing  specific partners'
responses and personally contacting those deemed most critical, for verification
of their  status.  The Company  currently  expects  that all  critical  business
partners will have been contacted and Y2K readiness verified by June 1999.

Based on current  information,  management  expects  that the  Company  will not
experience  significant  disruption  in  operations  as a result of Y2K  issues.
Management  believes it has  identified  the  principal  hardware  and  software
modifications  that must be made in order to address  the most  significant  Y2K
issues.  The Company is currently in the process of  establishing  a contingency
plan to address mission critical processes in the event of a Y2K caused failure.
Management  will  establish  the plan  based on actual  testing  experience  and
assessment of outside risks. The Company currently anticipates that it will have
a fully developed  contingency plan by June 1999. This plan will be reviewed and
updated throughout the balance of 1999.


<PAGE>



Because the Company's Y2K  compliance is partially  dependent  upon key business
partners also being Y2K  compliant on a timely basis,  there can be no guarantee
that the Company's overall efforts will prevent a material adverse impact on its
results  of  operations,  financial  condition  and  cash  flows.  The  possible
consequences to the Company of not being fully Y2K compliant  include  temporary
supermarket closings, delays in the delivery of merchandise,  errors in purchase
orders and other financial transactions and the inability to efficiently process
customer purchases. In addition, business disruptions could result from the loss
of power or the loss of communication links between supermarkets, warehouses and
headquarters  locations.  However,  management believes that the Company's store
base is broad enough to minimize the impact of isolated disruptions.

The total cost associated with anticipated Y2K  modifications is not material to
the Company's  results of  operations,  financial  condition or cash flows.  The
total  estimated  cost of the  readiness  plan,  including  the cost of internal
resources,  is  approximately  $4 to $5  million,  of which  approximately  $3.5
million  has  been  incurred  through  the end of  1998.  Most of the  Company's
additional  budgeted Y2K expenditures are earmarked for completion of Facilities
Systems testing,  PC-desktop  remediation,  and for continuing  interaction with
business partners.  These costs do not include amounts capitalized in the normal
course  of  business  to  replace  or  upgrade  older,  outdated  systems  whose
replacement was not accelerated due to Y2K issues. All costs are being funded by
operating cash flows,  and the costs of the readiness plan are being expensed as
incurred.  Management  does  not  anticipate  deferring  any  technology-related
projects due to these costs or the  implementation  of its readiness  plan.  The
cost  of the  conversions  and the  projected  completion  dates  are  based  on
management's  current best  estimates  and are subject to revision as additional
information becomes available.


<PAGE>



Other Items and Impact of Inflation

Seasonal  business affects the Company's  operations in that sales are generally
greater in the second half of the year (Note 9).

In recent years, the impact of inflation on the Company's  operating results has
been minimal,  reflecting generally lower rates of inflation in the economy. The
Company's  business is  characterized  by large purchases and high sales volumes
extended  across diverse  product lines,  rapid  inventory  turns and low profit
margins.  In this  environment,  vendor price changes are typically passed on to
the  customer.   The  Company  does  not  believe  inflation  or  deflation  has
significantly affected its competitive position in the industry.  However, since
price changes do cause sales dollars to fluctuate, the use of the LIFO method of
accounting  for  inventories  reduces the impact of price changes on earnings by
matching current costs with current revenues.

CAPITAL RESOURCES AND LIQUIDITY

Overview

Measures of liquidity at the end of the last three fiscal years were as follows:
                                            (Dollars in millions)
                                   1998           1997           1996    
                                 ----------   ------------   ------------

Cash and cash equivalents            $60            $58            $43
Working capital (FIFO inventory)     $56            $39            $39
Unused lines of revolving credit     $58            $54            $48
Unused lines of short-term credit    $ 1            $30            $35
Current ratio (FIFO inventory)       1.22           1.15           1.16



<PAGE>



The Company continued to maintain a strong capital position at the end of fiscal
1998. Cash and cash  equivalents  increased $2 million to $60 million at the end
of the  year.  This  increase  was the  result  of cash  provided  by  operating
activities offset by cash used in financing and investing  activities.  Lines of
credit  represent a continuing  source of capital and are available for purposes
of  short-term  financing.  At January  2, 1999,  the  Company  had $34  million
outstanding  on its  revolving  lines  of  credit.  The  Company  is in a  solid
financial  position to carry out its current  internal  expansion  and potential
external growth plans in 1999.

In February 1999, the Company renewed a stock repurchase program authorizing the
repurchase  of up to $100 million in shares of  Hannaford  common stock over the
next three  years.  The  program  authorizes  purchases  on the open  market and
through privately negotiated transactions. Shares repurchased by the Company are
held as treasury  shares and are available to the Company for use in funding its
stock-based  benefit plans and, when authorized,  for other corporate  purposes.
During 1998, the Company reacquired 360,000 shares at a cost of $15 million, all
of which were used to fund issuances under stock-based benefit plans.

Cash Flows from Operating Activities

Cash  provided  by  operating  activities  was $184  million  in 1998,  a slight
decrease  from the $190  million  provided in 1997.  This  decrease is primarily
attributable  to  an  increase  in  inventories,  receivables  and  prepayments,
partially offset by an increase in deferred taxes. The fluctuations within these
accounts are part of the Company's normal business operations.

Cash  provided by operating  activities  was $190 million in 1997, a decrease of
$11 million from the $201 million  provided in 1996.  This decrease is primarily
attributable  to a reduction in cash flows provided by net working capital items
partially offset by an increase in depreciation and amortization. The impairment
loss was a non-cash  charge.  Although it impacted  certain  components  of cash
flows  from  operating  activities,  it had no net  impact on cash  provided  by
operating activities.

Cash Flows from Investing Activities

Cash used in  investing  activities  decreased  $24 million  during 1998 to $133
million from $157 million in 1997.  This decrease is the result of the Company's
reduced capital  investment  coupled with the increased net book value of assets
sold during the year.  During 1998,  the Company  completed  the sale of certain
assets  relating to  supermarkets  that were closed in January  1998 and written
down to their estimated fair values in 1997.

<PAGE>


Capital  investments  totaled  $143  million in 1998 and were  composed  of $136
million in additions to property,  plant and  equipment,  $6 million in computer
software  costs and deferred  charges and $1 million in non-cash  capital  lease
additions. These 1998 capital investments consist primarily of costs incurred in
building and equipping new,  expanded and remodeled  stores and for improvements
necessary in maintaining current facilities and systems.

Net retail  selling space for  supermarkets  increased 4.5% in 1998 to 5,171,000
square feet at year-end,  an increase of 224,000  square feet over 1997 year-end
sales area.  During 1998, the Company  opened  fourteen  supermarkets  including
eight new stores,  two  relocations  and four  expansions.  In January 1998, the
Company  closed  seven  southeastern  stores in non-core  markets  with  limited
opportunity for profitable growth.

The number of supermarkets and square footage of selling area at year-ends 1998,
1997 and 1996 are summarized below:

                                 SUPERMARKETS
                         Number of         Square Footage
                           Units            Selling Area 

           1998            150                5,171,000
           1997            148                4,947,000
           1996            139                4,490,000



<PAGE>



New,  relocated and expanded  supermarkets  in 1998,  together with their square
footage of selling area, are listed below:

                                                   Square Footage
                            Location                Selling Area  

  Northeast
                      Machias, ME (expansion)          18,000
                      Lincoln, ME (expansion)          19,000
                      Rindge, NH                       39,000
                      Herkimer, NY                     41,000
                      Hampstead, NH                    34,000
                      St. Albans, VT (expansion)       40,000

  Southeast
                      Rocky Mount, NC                  41,000
                      Gastonia, NC                     42,000
                      Richmond, VA (expansion)         34,000
                      York County, VA                  41,000
                      Virginia Beach, VA               40,000
                      Portsmouth, VA                   41,000
                      Southport, NC (relocation)       30,000
                      Wilmington, NC (relocation)      34,000

During 1998,  the Company also opened a number of  remodeled  supermarkets.  The
growth in the  Company's  square  footage of selling  area does not reflect this
investment to remodel twelve  existing  stores,  significantly  modernizing  the
store  formats.  By the end of 1999,  approximately  two-thirds of the Company's
supermarkets will have been newly constructed,  expanded or remodeled within the
last five years.

Cash used in  investing  activities  decreased  $60 million  during 1997 to $157
million from $217 million in 1996.  This decrease is primarily the result of the
Company's reduced capital investment in 1997 following the construction of a new
distribution facility in the Southeast in 1996. Capital investments totaled $168
million in 1997 and were  composed of $153  million in  additions  to  property,
plant and equipment, $10 million in deferred charges and computer software costs
and $5 million in non-cash capital lease additions.




<PAGE>



Cash Flows from Financing Activities

Cash used in financing  activities  was $49 million in 1998,  as compared to $17
million in 1997.  This  reduction in cash flows of $32 million is primarily  the
result of  increased  payments of long-term  debt coupled with reduced  proceeds
from the  issuance of long-term  debt.  During  1998,  the Company  received $20
million of proceeds from a senior uncollateralized debt financing.  During 1997,
the Company received $20 million of proceeds from a senior uncollateralized debt
financing  and $7 million of proceeds from  borrowings on its revolving  line of
credit.  In 1998, the Company made $35 million in payments on its long-term debt
as compared to $14 million in 1997.  This  increase of $21 million is the result
of the Company,  during 1998, making $12 million in prepayments on its long-term
debt obligations coupled with the repayment of $4 million on its revolving lines
of credit  (Note 2). In 1998,  the Company  purchased  418,000  shares of common
stock at a cost of $18 million.  The majority of this repurchased stock was used
to fund the  Company's  stock based benefit plans with the balance being held in
treasury. This amount was offset by proceeds of $11 million received during 1998
from the issuance of 392,000 shares of treasury stock.

The  Company  paid $25  million in  dividends  to common  shareholders  in 1998.
Quarterly cash dividends  declared during 1998 totaled $.60 per common share, an
increase of 11.1% over the $.54 per share  declared  during  1997.  This was the
thirty-sixth consecutive year that the aggregate dividend paid per common share,
after  adjustment for stock splits and stock  dividends,  has increased.  Common
stock dividend payments in 1998 represented  26.8% of net earnings  available to
common  shareholders.  In  February  1999,  the Company  declared  an  increased
quarterly  dividend on its common  stock of $.165 per share,  payable  March 25,
1999.  The new quarterly  dividend of $.165 per share  represents an increase of
10.0% over the $.15 per share paid in each quarter of 1998.

Cash used in  financing  activities  was $17  million in 1997 as compared to $51
million of cash provided by financing  activities in 1996. This decrease in cash
flows of $68  million is  principally  the result of reduced  proceeds  from the
issuance of long-term debt.



<PAGE>



1999 Capital Program

Total  capital  expenditure  commitments  are  projected to be in excess of $160
million  in 1999,  primarily  for new store  constructions,  store  relocations,
expansions  and  remodels,  equipment,  vehicles  and other asset  expenditures.
During 1999,  this program  will be subject to  continuing  change and review as
conditions  warrant.  Net square  footage of retail selling space is expected to
increase by  approximately  3.7% during 1999. A number of projects  scheduled to
start in 1999 will not be  completed  until 2000.  The 1999  capital  program is
expected  to be financed  by  internally  generated  funds,  long-term  debt and
leases.

FORWARD-LOOKING STATEMENTS

From time to time, information provided by the Company or statements made by its
associates may contain  forward-looking  information,  as defined in the Private
Securities  Litigation  Reform Act of 1995.  Examples of such statements in this
report  include those  concerning  the Year 2000 issue,  the Company's  expected
future tax rates,  construction schedules and capital expenditures.  The Company
cautions  investors  that  there can be no  assurance  that  actual  results  or
business conditions will not differ materially from those projected or suggested
in such  forward-looking  statements  as a result of various  factors  and risks
including, but not limited to, the following:

(1) Hannaford's future operating results are dependent on its ability to achieve
increased  sales and to control  expenses.  Factors such as lower than  expected
inflation,  product cost  fluctuations  particularly  in perishable  categories,
changes in product mix or the use of promotional items, both of which may affect
pricing  strategy,  continued or increased  competitive  pressures from existing
competitors  and  new  entrants,   including  price  cutting   strategies,   and
deterioration in general or regional  economic  conditions are all factors which
could adversely affect sales projections.  Other components of operating results
could be adversely  affected by state or federal  legislation or regulation that
increases costs, interest rates or the Company's cost of borrowing, by increases
in labor rates due to low unemployment or other factors,  by unanticipated costs
related to the  opening  and  closing of stores or by the  inability  to control
various expense categories.

(2)  Hannaford's  future growth is dependent on its ability to expand its retail
square footage,  either de-novo or through  acquisitions.  Increases in interest
rates or the Company's cost of capital,  the unavailability of funds for capital
expenditures  and the inability to develop new stores or convert existing stores
as rapidly as planned are all risks to projected future expansion.



<PAGE>


(3) Adverse determinations with respect to pending or future litigation or other
material claims against Hannaford could affect actual results.

Furthermore,  the market  price of  Hannaford  common  stock could be subject to
fluctuations in response to quarter to quarter  variations in operating results,
changes in analysts' earnings estimates, market conditions in the retail sector,
especially in the supermarket  industry,  as well as general economic conditions
and other factors external to Hannaford.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Presented below are the Registrant's  Consolidated Balance Sheets,  Consolidated
Statements  of Earnings,  Consolidated  Statements  of Changes in  Shareholders'
Equity,  Consolidated  Statements  of  Cash  Flows  and  accompanying  Notes  to
Consolidated Financial Statements.



<PAGE>







                      REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors and Shareholders of
Hannaford Bros. Co.:

In our opinion,  the consolidated  financial statements listed in Item 8 of this
Form 10-K present fairly, in all material  respects,  the financial  position of
Hannaford Bros. Co. and Subsidiaries at January 2, 1999 and January 3, 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended  January 2, 1999,  in  conformity  with  generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


s/PricewaterhouseCoopers, LLP


Portland, Maine
January 21, 1999



<PAGE>



                     HANNAFORD BROS. CO. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS


                                    ASSETS

                                                      (In thousands)
                                               January 2,        January 3,
                                                  1999              1998    
                                              ------------      ------------

Current assets:
    Cash and cash equivalents                  $   59,722        $   57,663
    Accounts receivable, net                       22,869            14,918
    Inventories (note 1C)                         201,219           188,767
    Prepaid expenses                                6,116             7,801
    Deferred income taxes (note 8)                  5,952             6,912
                                                ---------         ---------
       Total current assets                       295,878           276,061

Property, plant and equipment, net
   (notes 1D, 2 and 4)                            823,368           777,909

Leased property under capital leases, net          54,911            58,516
   (note 3)
Other assets:
    Goodwill, net (notes 1F and 4)                 63,517            67,552
    Deferred charges, net (note 1G)                25,074            28,724
    Computer software costs, net (note 1H)         19,318            16,551
    Miscellaneous assets                            2,472             1,877
                                                ---------         ---------
       Total other assets                         110,381           114,704
                                                ---------         ---------

                                               $1,284,538        $1,227,190




See accompanying notes to consolidated financial statements.




<PAGE>


                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS
                    LIABILITIES AND SHAREHOLDERS' EQUITY

                                     (In thousands except per share amounts)
                                                January 2,     January 3,
                                                   1999           1998    
                                               ------------   ------------
Current liabilities:
   Current maturities of long-term debt (note 2) $   19,296     $   18,155
   Obligations under capital leases (note 3)          2,108          1,873
   Accounts payable                                 186,626        182,252
   Accrued payroll                                   27,254         25,526
   Other accrued expenses                            23,873         24,553
   Income taxes                                         442          2,829
                                                  ---------      ---------
      Total current liabilities                     259,599        255,188

Deferred income tax liabilities (note 8)             28,859         18,265

Other liabilities                                    38,734         41,171

Long-term debt (note 2)                             220,130        235,850

Obligations under capital leases (note 3)            73,866         75,687

Shareholders' equity (notes 5 and 7):

   Class A Serial Preferred stock, no par,
     authorized 2,000 shares                              -              -
   Class B Serial Preferred stock, par value
     $.01 per share, authorized 28,000 shares             -              -
   Common stock, par value $.75 per share:
     Authorized 110,000 shares;
     42,338 and 42,338 shares
     issued.                                         31,754         31,754
   Additional paid-in capital                       109,664        115,130
   Preferred stock purchase rights                      423            423
   Retained earnings                                525,344        456,063
                                                  ---------      ---------
                                                    667,185        603,370
   Less common stock in treasury
     85 and 59 shares                                 3,835          2,341
                                                  ---------      ---------
        Total shareholders' equity                  663,350        601,029
                                                  ---------      ---------
                                                 $1,284,538     $1,227,190

See accompanying notes to consolidated financial statements.


<PAGE>



                     HANNAFORD BROS. CO. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF EARNINGS

                                     (In thousands except per share amounts)
                                                     FISCAL YEAR           
                                           1998         1997        1996   
                                       -----------   ----------  ----------

Sales and other revenues                $3,323,588   $3,226,433  $2,957,559
Cost of sales                            2,480,346    2,427,287   2,242,784
                                         ---------    ---------   ---------

Gross margin                               843,242      799,146     714,775
Selling, general and administrative
  expenses                                 664,357      635,355     568,033
Impairment loss (note 4)                         -       39,950           -
                                         ---------    ---------   ---------

Operating profit                           178,885      123,841     146,742

Interest expense, net (notes 1I and 2)      26,577       26,425      22,204
                                         ---------    ---------   ---------

Earnings before income taxes               152,308       97,416     124,538

Income taxes (note 8)                       57,661       37,769      49,333
                                         ---------    ---------   ---------

   Net earnings                         $   94,647   $   59,647  $   75,205
                                         =========    =========   =========

Earnings per share (note 1J):

   Basic                                $     2.24   $     1.41  $     1.78
                                         =========    =========   =========
   Diluted                              $     2.21   $     1.40  $     1.76
                                         =========    =========   =========

Cash dividends per share                $      .60   $      .54  $      .48
                                         =========    =========   =========

Weighted average number of common shares
  outstanding                   Basic       42,277       42,287      42,298
                                         =========    =========   =========
                                Diluted     42,884       42,732      42,621
                                         =========    =========   =========


See accompanying notes to consolidated financial statements.



<PAGE>

<TABLE>


                                                      HANNAFORD BROS. CO. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                 (In thousands)

                                   Additional
                                              Common Stock     Paid-in   Preferred Stock  Retained  Treasury Stock
                                             Shares   Amount   Capital   Purchase Rights  Earnings  Shares  Amount
<S>                                          <C>      <C>      <C>            <C>         <C>       <C>   <C>
Balance, December 30, 1995                   42,298   $31,724  $121,974       $423        $364,556

     Net earnings                                                                           75,205
     Cash dividends on common stock                                                        (20,302)
     Shares issued to certain shareholders
       per agreement                             20        15       484
     Shares issued under employee
       benefit plans                             20        15    (3,059)                             410  $12,250
     Treasury stock purchases                                                                       (468) (14,129)
                                             ------   -------  --------       ----        --------  ----  -------

Balance, December 28, 1996                   42,338    31,754   119,399        423         419,459  ( 58)  (1,879)

     Net earnings                                                                           59,647
     Cash dividends on common stock                                                        (23,043)
     Shares issued under employee
       benefit plans                                             (4,269)                             399   13,917
     Treasury stock purchases                                                                       (400) (14,379)
                                             ------   -------  --------       ----        --------  ----  -------

Balance, January 3, 1998                     42,338    31,754   115,130        423         456,063   (59)  (2,341)

     Net earnings                                                                           94,647
     Cash dividends on common stock                                                        (25,366)
     Shares issued under employee
       benefit plans                                             (5,466)                             392   16,514
     Treasury stock purchases                                                                       (418) (18,008)
                                             ------   -------  --------       ----        --------  ----  -------

Balance, January 2, 1999                     42,338   $31,754  $109,664       $423        $525,344  ( 85) $(3,835)
                                             ======   =======  ========       ====        ========  ====  =======


See accompanying notes to consolidated financial statements.

</TABLE>


<PAGE>


FORM 10-K              HANNAFORD BROS. CO. 1-7603           JANUARY 2, 1999


                     HANNAFORD BROS. CO. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    (In thousands)
                                               1998      1997      1996  
Cash flows from operating activities:
  Net income                                 $ 94,647  $ 59,647  $ 75,205
  Adjustments to reconcile net
   income to net cash provided
   by operating activities:
     Impairment loss                                -    39,950         -
     Depreciation and amortization             96,739    93,953    77,420
     (Increase) decrease in inventories       (12,452)    2,891   (33,689)
     (Increase) decrease in receivables and
      prepayments                              (6,202)      599      (805)
     Increase in accounts payable and
      accrued expenses                          2,986       440    77,889
     Increase (decrease) in income
      taxes payable                            (2,387)      297     2,532
     Increase (decrease) in deferred taxes     11,554    (7,815)    2,523
     Other operating activities                (1,081)     (446)       96
                                             --------  --------  --------
        Net cash provided by
         operating activities                 183,804   189,516   201,171

Cash flows from investing activities:
  Acquisition of property, plant
   and equipment                             (135,904) (152,862) (215,067)
  Sale of property, plant and equipment, net    9,156     6,143     5,958
  Increase in computer software costs          (7,262)   (6,205)   (5,933)
  (Increase) decrease in deferred charges         911    (4,054)   (1,930)
        Net cash used in investing
         activities                          (133,099) (156,978) (216,972)

Cash flows from financing activities:
  Principal payments under capital
   lease obligations                           (1,740)   (1,788)   (1,493)
  Proceeds from issuance of long-term debt     20,000    26,600   106,500
  Payments of long-term debt                  (34,580)  (14,418)  (28,994)
  Issuance of common stock                     11,048     9,648     9,707
  Purchase of treasury stock                  (18,008)  (14,379)  (14,129)
  Dividends paid                              (25,366)  (23,043)  (20,302)
                                             --------  --------  --------
        Net cash (used in) provided by
         financing activities                 (48,646)  (17,380)   51,289
                                             --------  --------  --------

Net increase in cash and cash equivalents       2,059    15,158    35,488
Cash and cash equivalents at beginning
   of year                                     57,663    42,505     7,017
                                             --------  --------  --------
Cash and cash equivalents at end of year     $ 59,722  $ 57,663  $ 42,505
                                             ========  ========  ========

See accompanying notes to consolidated financial statements.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

Supplemental disclosure of cash flow information

                                                      (In thousands)

                                                1998       1997       1996
                                                ----       ----       ----

Cash paid during the year for:
       Interest (net of amount capitalized,
         $1,935 in 1998, $3,463 in 1997 and
         $3,357 in 1996)                      $27,397    $26,396    $22,765

       Income taxes                            47,658     41,202     42,577

Supplemental disclosure of noncash investing and financing activities

    Capital lease obligations  totalling  $1,166,000,  $4,550,000 and $7,652,000
    were incurred  during 1998,  1997 and 1996,  respectively,  when the Company
    entered into real estate leases.



<PAGE>



                     HANNAFORD BROS. CO. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.  NATURE OF BUSINESS

The Company and its  subsidiaries  are principally  involved in the distribution
and  retail  sale of food,  prescription  drugs  and  related  products  through
supermarkets and combination  stores. The Company's stores are located in Maine,
New  Hampshire,  Vermont,  Massachusetts,  upstate  New  York,  Virginia,  North
Carolina and South Carolina.

B.  PRINCIPLES OF CONSOLIDATION

The  Company's  fiscal year ends on the  Saturday  closest to  December  31. The
consolidated  financial  statements  include the accounts of the Company and its
wholly-owned  subsidiaries  as of  January 2,  1999,  for  fiscal  year 1998 (52
weeks), January 3, 1998, for fiscal year 1997 (53 weeks), and December 28, 1996,
for fiscal year 1996 (52  weeks).  All  significant  intercompany  accounts  and
transactions have been eliminated in consolidation.

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting periods. Actual results could differ from those estimates.

C.  INVENTORIES

Inventories consist primarily of groceries,  meat, produce,  general merchandise
and  pharmaceuticals.  The  majority  of  grocery,  pharmaceutical  and  general
merchandise  inventories  are  valued  at the lower of cost,  determined  on the
last-in,  first-out (LIFO) method,  or market.  Approximately 87% of inventories
were valued  using the LIFO  method in 1998 as  compared  to 84% in 1997.  Other
inventories are stated at the lower of cost (first-in, first-out) or market. The
current cost of groceries,  general merchandise and pharmaceuticals exceeded the
LIFO valuation by $19,583,000 at January 2, 1999, $18,037,000 at January 3, 1998
and $17,076,000 at December 28, 1996. LIFO expense charged to cost of goods sold
was $1,546,000 in 1998, $961,000 in 1997 and $1,468,000 in 1996.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

D.  PROPERTY, PLANT AND EQUIPMENT

Property,  plant and  equipment  is recorded at cost and  depreciated  using the
straight-line  method over the estimated  useful lives of the assets.  Leasehold
interests and  improvements are amortized on the  straight-line  method over the
shorter  of  estimated  useful  life or lease  term.  The costs of  repairs  and
maintenance are expensed as incurred;  renewals and betterments are capitalized.
Upon sale or  retirement,  the cost and  related  accumulated  depreciation  are
eliminated  from  the  respective  accounts  and any  resulting  gain or loss is
included in the results of operations. Property, plant and equipment consists of
the following:

  AVERAGE
DEPRECIATION                                             (In thousands)
   RATE                                              1998           1997  
------------                                       --------       --------
    3%       Land and improvements               $  141,706     $  129,752
    3%       Buildings                              300,708        279,310
   13%       Furniture, fixtures and equipment      506,512        454,564
    4%       Leasehold interests and improvements   324,106        277,560
             Construction in progress                 8,790         29,124
                                                  ---------      ---------
                                                  1,281,822      1,170,310
             Less accumulated depreciation
             and amortization                       458,454        392,401
                                                  ---------      ---------
                                                 $  823,368     $  777,909
                                                  =========      =========

E.  STORE OPENING COSTS

The  noncapital  expenditures  incurred  in  opening  new  stores or  remodeling
existing stores are expensed as they are incurred.

F.  GOODWILL

Goodwill,  which represents the excess of costs of assets acquired over the fair
value of their net assets at dates of  acquisition,  is being  amortized  on the
straight-line  method over various  periods not exceeding 20 years.  The Company
evaluates,  on an ongoing basis,  the carrying value of goodwill and will make a
specific provision when impairment is identified (Note 4). Goodwill amortization
expense  charged to operations  was  $4,035,000 in 1998,  $5,534,000 in 1997 and
$5,140,000 in 1996.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

G.  DEFERRED CHARGES

Deferred  charges  consist  primarily  of costs of  obtaining  new store  sites,
covenants-not-to-compete,  tradenames and initial  direct lease costs.  Costs of
obtaining  new  store  sites,  if  ultimately  developed,  are  capitalized  and
depreciated  over the  estimated  useful  lives  of the  related  assets.  Other
intangible  assets acquired in connection with acquisitions are amortized on the
straight-line  method over periods  ranging from five to ten years.  Lease costs
are amortized on the straight-line method over the base lease term.

Amortization  expense related to these deferred  charges was $3,715,000 in 1998,
$3,599,000 in 1997 and $3,246,000 in 1996.

H.  CAPITALIZED COMPUTER SOFTWARE COSTS

Capitalized  computer  software  costs  consist of costs to purchase and develop
software. The Company capitalizes internally developed software costs based on a
project-by-project  analysis of each project's  significance  to the Company and
its  estimated  useful life.  The  majority of  capitalized  software  costs are
amortized on a  straight-line  method over a period of five years.  Amortization
expense  charged to operations  was  $4,495,000 in 1998,  $3,312,000 in 1997 and
$2,338,000 in 1996.

In March 1998, the Accounting  Standards Executive Committee issued Statement of
Position (SOP) 98-1, Accounting For the Costs of Computer Software Developed For
or  Obtained  For  Internal-Use.  The SOP  will  be  effective  for the  Company
beginning   January  3,  1999   (fiscal   1999).   SOP  98-1  will  require  the
capitalization  of certain  costs  incurred in  connection  with  developing  or
obtaining software for internal use. Amounts  capitalized in fiscal 1999 must be
adjusted to conform to SOP 98-1. The Company does not anticipate that there will
be a material  impact on its results of operations or financial  position  after
SOP 98-1 is adopted.




<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

I.  CAPITALIZED INTEREST

The  Company  capitalizes  interest  as  part  of  the  cost  of  acquiring  and
constructing  certain  assets.  Capitalized  interest  was  $1,935,000  in 1998,
$3,463,000 in 1997 and $3,357,000 in 1996.

J.  EARNINGS PER COMMON SHARE

Basic  earnings per share of common stock have been  determined  by dividing net
earnings by the weighted  average  number of shares of common stock  outstanding
during the year.  Diluted earnings per share reflect the potential dilution that
would occur if existing stock options were exercised and have been determined by
dividing net earnings by the weighted average number of diluted shares of common
stock outstanding during the year.

K.  FAIR VALUE DISCLOSURES ABOUT FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

    Cash and cash equivalents,  accounts  receivable and notes  receivable:  The
      carrying amounts reported in the balance sheet for these items approximate
      their fair values.

    Long-term  debt:  The  fair  values  of the  Company's  long-term  debt  are
      estimated  using  discounted  cash flow  analyses,  based on the Company's
      current  incremental  borrowing  rates  for  similar  types  of  borrowing
      arrangements.  The  carrying  amount  of  the  Company's  long-term  debt,
      including current maturities, was approximately $239,426,000 at January 2,
      1999. The fair value of the long-term debt is estimated to be $249,549,000
      at January 2, 1999.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

L.  ACCOUNTING PRONOUNCEMENTS

    In June  1997,  the  Financial  Accounting  Standards  Board  (FASB)  issued
    Statement  Of  Financial  Accounting  Standards  (SFAS) No. 130 -  Reporting
    Comprehensive  Income,  which requires the separate reporting of all changes
    to shareholders' equity, and SFAS No. 131 - Disclosures about Segments of an
    Enterprise and Related Information,  which revises existing guidelines about
    the level of financial disclosure of a company's operations. Both statements
    were effective for financial  statements  issued for fiscal years  beginning
    after December 15, 1997. The Company has determined that these new standards
    do not necessitate any changes to existing financial reporting.

    In June 1998,  the FASB  issued  SFAS No. 133 -  Accounting  for  Derivative
    Instruments and Hedging  Activities,  which requires  entities to report all
    derivatives at fair value as assets or  liabilities  in their  statements of
    financial  position.  This  statement is effective for financial  statements
    issued for fiscal  periods  beginning  after June 15, 1999. The Company does
    not  currently  have any  derivative  instruments  or hedging  activities to
    report under this standard.




<PAGE>


                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

2.  EXTERNAL FINANCING

At January 2, 1999,  the Company had  revolving  credit lines with several banks
totalling  $92,000,000  with interest  rates  determined by different  borrowing
options including prime, quoted money market or LIBOR plus a premium. At January
2, 1999,  there were  $34,100,000 of outstanding  borrowings  under these credit
lines with a weighted-average  interest rate of 5.8%. The agreements provide for
conversion of revolving  credit loans to term loans with principal  payments due
in  quarterly  installments  over a period of four  years.  The loan  agreements
contain certain  restrictive  covenants,  which among other provisions,  require
maintenance of certain levels of working  capital,  debt and tangible net worth.
The lines require a commitment  fee of 0.21% on the unused  portion of the line.
There are no compensating balances required during the commitment period.

In  addition,  the Company had an unused,  uncommitted  short-term  bank line of
credit  of  $11,000,000  at  January  2,  1999.  Of this  amount,  approximately
$10,295,000 is reserved to support  outstanding  standby letters of credit which
guarantee payment of certain insurance claims and premiums.

In April 1998,  the  Company  received  the  proceeds  of a  $20,000,000  senior
uncollateralized  debt  financing.  The  term of the  debt is 10  years  with an
average life of 7 years and an interest rate of 6.3%.

At  January  2,  1999,  real  estate  and  equipment  with a net  book  value of
approximately  $79,490,000  served  as  collateral  for  debt  of  approximately
$60,897,000.



<PAGE>


                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

Net interest expense was as follows:
                                              (In thousands)

                                       1998       1997       1996
                                       ----       ----       ----

Interest on debt                     $19,012    $20,108    $17,460
Capital lease interest                 9,630      9,902      9,351
Capitalized interest                  (1,935)    (3,463)    (3,357)
Interest income                         (130)      (122)    (1,250)
                                      ------     ------     ------
                                     $26,577    $26,425    $22,204
                                      ======     ======     ======


Long-term debt consists of the following:

                                                         (In thousands)
                                                        1998         1997   

   Uncollateralized senior notes due in varying
   annual installments through 2016 with interest
   from 6.2% to 9.0%.                                 $139,600      $136,250

   Collateralized by real estate, due in
   varying installments through 2011 with
   interest from 7.5% to 10.3%                          59,619        70,665

   Uncollateralized revolving credit loans with
   interest from 5.6% to 6.5%                           34,100        38,100

   Collateralized by equipment, due in 1999 with
   interest from 6.3% to 7.4%.                           1,278         2,983

   Other                                                 4,829         6,007
                                                       -------       -------

                                                       239,426       254,005

   Less current portion                                 19,296        18,155
                                                       -------       -------
                                                      $220,130      $235,850
                                                       =======       =======


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

The   uncollateralized   senior  note  agreements  contain  certain  restrictive
covenants,  which among other  provisions,  limit total debt and require minimum
levels of tangible net worth.

Maturities of long-term debt at January 2, 1999, are as follows:

                                                    (In thousands)
                              1999                      $ 19,296
                              2000                        24,791
                              2001                        25,581
                              2002                        26,229
                              2003                        25,650
                              2004 and thereafter        117,879
                                                         -------
                                                        $239,426



<PAGE>


                    HANNAFORD BROS. CO. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

3.  LEASED ASSETS AND LEASE COMMITMENTS

The Company's  financial  structure  includes leases of certain  stores,  office
facilities, and equipment. Initial lease terms range from 3 to 45 years with the
majority  of lease  terms  between  20 and 25 years.  Substantially  all  leases
contain renewal  options.  Certain leases contain a provision for the payment of
contingent  rentals  based on a  percentage  of sales in  excess  of  stipulated
amounts.  Most of the real  estate  leases  provide  that the Company pay taxes,
insurance and maintenance applicable to the leased premises.

The Company's investment in real property under capital leases was as follows:
                                                     (In thousands)
                                                  1998            1997
                                                  ----            ----

Real property                                   $82,500         $84,494
Less accumulated amortization                    27,589          25,978
                                                 ------          ------
Net real property under capital leases          $54,911         $58,516
                                                 ======          ======

Amortization of property under capital leases was $4,217,000 in 1998, $4,381,000
in 1997 and $4,004,000 in 1996.

Future minimum rental  payments  under capital lease  obligations  and operating
leases at January 2, 1999, are as follows:
                                                      (In thousands)
                                                  Capital      Operating
                                                   Leases        Leases 

                      1999                       $ 11,784       $ 21,541
                      2000                         11,900         19,979
                      2001                         11,769         18,668
                      2002                         11,997         18,132
                      2003                         12,139         16,975
                      2004 and thereafter         110,541        171,055
                                                  -------        -------

               Total minimum lease payments       170,130       $266,350

               Less:
                 Imputed interest (at rates
                   from 6.50% to 21.13%)           94,156
               Present value of net mini-
                 mum lease payments                75,974
               Less current portion                 2,108
               Long-term portion of obligations  $ 73,866



<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)


Minimum  payments  for capital  and  operating  leases have not been  reduced by
minimum sublease rentals of $2,507,000 and $8,797,000,  respectively, due in the
future  under  noncancellable  subleases.  They also do not  include  contingent
rentals that may be payable under certain leases.

Total rent expense, net of executory costs, was as follows:

                                               (In thousands)

                                    1998           1997           1996   
                                 ----------     ----------     ----------

Capital leases:
   Contingent rentals             $   123        $   194        $   169
                                   ------         ------         ------

Operating leases:
   Minimum rentals                 21,439         20,584         19,019
   Contingent rentals                   2            714            491
   Rentals from subleases          (1,843)        (1,492)          (690)
                                   ------         ------         ------
                                   19,598         19,806         18,820
                                   ------         ------         ------
                                  $19,721        $20,000        $18,989
                                   ======         ======         ======





<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

4.  IMPAIRMENT LOSS

In December 1997, the Company  determined that certain of its supermarket assets
and identifiable  intangibles,  including  goodwill,  were impaired.  Based on a
review of Company  locations and considering  the expected  operating cash flows
along with the  estimated  market value of the assets as if they were to be sold
or disposed of, an impairment loss of $39,950,000 was recognized.  Approximately
$24,000,000  of the asset  impairment  loss  related to  supermarket  assets and
associated  costs for stores that were closed in January 1998 and being held for
sale or  disposal,  and  $15,950,000  related to  supermarket  assets  which the
Company  continued to use in its  operations.  In 1997 the  operating  losses of
these closed supermarkets were not material.





<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

5.  CAPITAL STOCK

In December  1997,  the Company  adopted a Shareholder  Rights Plan which became
effective upon the expiration of the Company's  existing rights plan on February
4, 1998. The replacement plan is  substantially  identical to the previous plan,
except for modification to the exercise and redemption prices of the new rights,
and the term of the rights  plan.  The terms of the plan  provide for a dividend
distribution of one right for each share of Hannaford common stock to holders of
record at the close of  business  on  February  4, 1998.  The rights will become
exercisable  only in the event an acquiring  party  (excluding the Sobey Parties
under certain  circumstances and certain other persons)  accumulates 20% or more
of Hannaford  voting stock,  or if a party announces an offer which would result
in it owning 30% or more of Hannaford  voting  stock.  The rights will expire on
February 4, 2001. Each right will entitle the holder to buy one one-hundredth of
a share of a series of junior  participating  preferred  stock of Hannaford at a
price of $60. In addition,  upon the  occurrence  of a merger or other  business
combination,  certain self-dealing  transactions with an owner of 20% or more of
Hannaford voting stock or the acquisition by a person or group of 30% or more of
Hannaford  voting  stock,  holders of the rights  will be  entitled  to purchase
either  participating  preferred  stock of Hannaford or shares in an  "acquiring
entity" at half of market value. Hannaford will be entitled to redeem the rights
at 1 cent per right any time until the tenth day following the acquisition by an
acquiring person or group of a 20% position in its voting stock.

In May 1997,  the  shareholders  of the  Company  approved an  amendment  to the
Hannaford Bros. Co.  Employee Stock Purchase Plan. This amendment  increased the
total  authorized  shares for this Plan by an additional  750,000 shares thereby
permitting continued use of the Plan in future years.



<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

In May 1996, the Company amended and extended its existing standstill  agreement
with certain shareholders ("the Sobey Parties").  The amendment extends the term
of the standstill  agreement to December 31, 1998,  subject to automatic renewal
for  successive  one-year  periods (but not beyond  December 31, 2000) unless by
July 31 of a given year  either the  Company or any of the Sobey  Parties  gives
written  notice of an intention not to further extend the term of the standstill
agreement. The amendment also made technical changes to the agreement which will
allow the Company  greater  flexibility in the use of common stock to compensate
employees and directors and permitted  adoption of a new Shareholder Rights Plan
through  February 4, 2001, on  substantially  the same terms as the prior Rights
Plan.   The  amendment   maintains  the  Sobey  Parties'   ownership   limit  at
approximately   25.6%  of  the  Company's   voting  stock,   except  in  certain
circumstances  specified by the  agreement.  Under the  agreement,  whenever the
Company  issues  shares  of voting  stock to third  parties,  the Sobey  Parties
generally  have the right to  purchase  sufficient  shares  from the  Company to
maintain a 25.6% level of ownership.  In 1996,  the Company issued 19,600 common
shares  to the  Sobey  Parties  pursuant  to their  purchase  rights  under  the
agreement.  All sales to the Sobey Parties pursuant to the standstill  agreement
have been made at market prices.  Due to the Company's share repurchase  program
to fund stock-based benefit plans no new shares were issued by the Company,  and
so the Sobey Parties purchased no additional shares in 1997 or 1998.




<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

6.  EMPLOYEE BENEFIT PLANS

The Company maintains a non-contributory,  defined benefit pension plan covering
approximately 50% of its employees.  The plan provides for payment of retirement
benefits  on the  basis of  employees'  length  of  service  and  earnings.  The
Company's  policy is to fund the plan  based  upon  legal  requirements  and tax
regulations. Plan assets consist of common stocks, cash and cash equivalents and
fixed income  investments.  The Board of Directors  approved an amendment to the
plan which  converted it to a cash balance plan effective  January 1, 1998. This
resulted in the  remeasurement of the plan's projected benefit  obligation.  The
accrued  pension costs as of January 2, 1999 and January 3, 1998,  together with
the 1998 and 1997 net pension expense, reflect the plan's remeasurement.

In February 1998, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 132 - Employers'  Disclosures  about
Pensions  and  Other  Postretirement  Benefits  which  changes  the  disclosures
previously  required  by SFAS No. 87 and SFAS No.  106.  The Company has adopted
SFAS  No.  132  and  has   restated  its   disclosures   of  pension  and  other
postretirement benefits for the years ended January 2, 1999 and January 3, 1998.
The Company also maintains an unfunded  supplemental  executive  retirement plan
that  provides  benefits in excess of those  limited in the cash balance plan by
maximum compensation and benefit limitations.

The Company also provides a defined  contribution  401(k) plan to  substantially
all employees. Amounts charged to expense for this plan were $6,561,000 in 1998,
$2,916,000  in 1997 and  $3,076,000  in 1996.  Effective  for 1998,  the Company
increased the percentage of its matching contribution to this 401(k) plan.

In  addition,  the  Company  provides  certain  health  care and life  insurance
benefits for retired employees  ("postretirement  benefits").  Substantially all
employees may become  eligible for these  benefits if they reach early or normal
retirement age and accrue 10 years of service while working for the Company. The
postretirement  health  care plan is  contributory  for most  participants  with
retiree  contributions  adjusted  annually.  Life  insurance  benefits  are  not
available for employees who retired after January 1, 1996.



<PAGE>

                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

The  following  tables set forth the change in plans'  benefit  obligations  and
assets as well as the plans' funded status  reconciled with the amounts shown in
the  Company's  financial  statements  at  January  2, 1999 (1998 plan year) and
January 3, 1998 (1997 plan year):

<TABLE>
                                                        (In thousands)
                                           Pension Benefits     Postretirement Benefits

                                             1998    1997           1998      1997
                                             ----    ----           ----      ----
<S>                                        <C>      <C>            <C>       <C>
Change in benefit obligation:
  Benefit obligation at beginning of year  $84,201  $ 71,057       $3,118    $ 5,380
  Service cost                               4,690     3,128           36         35
  Interest expense                           6,247     5,793          228        248
  Amendments                                     -         -         (369)       (12)
  Actuarial loss (gain)                      8,462     7,182          571     (1,882)
  Benefits paid                             (5,608)   (2,959)        (439)      (651)
                                            ------   -------        -----     ------
  Benefit obligation at end of year        $97,992  $ 84,201       $3,145    $ 3,118
                                            ======   =======        =====     ======

Change in plan assets:
  Fair value of plan assets at beginning
    of year                                $88,385  $ 70,391       $    0    $     0
  Actual return on plan assets               3,123    20,074            0          0
  Employer contribution                      4,818       879          439        651
  Benefits paid                             (5,608)   (2,959)        (439)      (651)
                                            ------   -------        -----     ------
  Fair value of plan assets at end of year $90,718  $ 88,385       $    0    $     0
                                            ======   =======        =====     ======

  Funded status                            $(7,274) $  4,184      $(3,145)  $(3,118)
  Unrecognized transition obligation (ass     (227)     (258)       7,381     8,283
  Unrecognized prior service cost            2,549     2,873            0         0
  Unrecognized net actuarial loss (gain)     3,192   (12,662)      (5,149)   (6,273)
  Accrued benefit cost                     $(1,760) $ (5,863)     $  (913)  $(1,108)

</TABLE>


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

For measurement  purposes, a 5.5% annual rate of increase in the per capita cost
of covered  health care  benefits was assumed for 1999.  The rate was assumed to
decrease gradually to 5.0% for 2000 and remain at that level thereafter.

<TABLE>


                                                        (In thousands)
                                          Pension Benefits     Postretirement Benefits

                                        1998    1997    1996       1998    1997     1996 
                                        ----    ----    ----       ----    ----     -----
<S>                                  <C>      <C>     <C>         <C>     <C>      <C>
Components of net periodic benefit cost:
  Service cost                        $ 4,690  $3,128  $4,709      $ 36    $ 35     $ 70
  Interest expense                      6,247   5,793   5,155       228     248      438
  Expected return on plan assets      (10,162) (7,062) (7,194)        0       0        0
  Amortization of transition
    obligation (asset)                    (31)    (31)    (31)      533     552      553
  Amortization of prior service cost      322     322     322         0       0        0
  Recognized net actuarial loss (gain)   (318)     28   1,371      (553)   (612)    (386)
                                      -------   -----  ------      ----    ----     ----
                                     $    748  $2,178 $ 4,332     $ 244   $ 223    $ 675
                                      =======   =====  ======      ====    ====     ====

Weighted-average assumptions as of
  September 30 (the plans measurement
      date):
    Discount rate                       6.50%   7.50%   8.25%     6.50%   7.50%    8.25%
    Expected return on plan assets     10.50%  10.50%   9.50%        -       -        -
    Rate of compensation increase       4.50%   4.50%   4.50%        -       -        -
</TABLE>


The projected  benefit  obligation and  accumulated  benefit  obligation for the
unfunded  supplemental  executive retirement plan were $2,192,000 and $2,176,000
respectively as of January 2, 1999 and $2,259,000 and $2,257,000 respectively as
of January 3, 1998. The projected  benefit  obligation  for the defined  benefit
plan was $95,800,000  with a fair value of plan assets of $90,718,000 at January
2, 1999.

A 1%  change  in the  assumed  health  care cost  trend  rates  would not have a
material effect on the benefit obligation or expense of postretirement benefits.





<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

7. EMPLOYEE STOCK PLANS

The 1988 and 1998 Stock Plans provide for the granting to officers and other key
employees  options to purchase  common  stock at 100% of the market price on the
date of grant.  Under the 1988 Stock Plan 2,800,000  shares were  authorized for
grant and under the 1998 Stock Plan 6,000,000  shares were authorized for grant.
The 1988 and 1998 Stock Plans allow the granting of both incentive stock options
and  non-qualified  stock  options.  Under the 1988 and 1998 Stock  Plans,  both
incentive stock options and non-qualified stock options may have various vesting
schedules,  but generally none are exercisable until at least one year following
the grant.  All options may be  exercised  for cash or by  exchanging  currently
owned  shares,  or both.  Under the 1988 and 1998  Plans,  exchanged  shares may
trigger the granting of  non-qualified  "reload"  options for the balance of the
original  option term.  Original option grants expire ten years from the date of
grant.  Incentive  stock option  activity for the last three fiscal years was as
follows:
<TABLE>

                                          (Share Amounts in Thousands)
                                1998                  1997                 1996
                                    Weighted              Weighted             Weighted
                                    Average               Average              Average
                                    Exercise              Exercise             Exercise
                         Shares       Price     Shares     Price     Shares     Price 

<S>                       <C>        <C>         <C>      <C>         <C>      <C>
Outstanding at
  beginning of year       1,512      $27.57      1,422    $24.91      1,362    $22.37
Granted                     520       44.70        367     34.63        359     30.39
Exercised                  (224)      24.76       (261)    22.85       (287)    19.63
Cancelled                   (48)      37.47        (16)    30.89        (12)    26.74
                          -----                  -----                -----
Outstanding at end
  of year                 1,760       32.72      1,512     27.57      1,422     24.91
Exercisable at end
  of year                   921       26.01        912     24.02        902     22.42

</TABLE>


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)
<TABLE>

Non-qualified stock option activity was as follows:

                                            (Share Amounts in Thousands)
                                1998                  1997                 1996
                                    Weighted              Weighted             Weighted
                                    Average               Average              Average
                                    Exercise              Exercise             Exercise
                         Shares       Price     Shares     Price     Shares     Price 

<S>                      <C>         <C>          <C>     <C>          <C>     <C> 
Outstanding at
  beginning of year        470       $30.29       366     $28.18       218     $24.60
Granted                     92        44.82       117      35.57       189      31.30
Exercised                  (52)       30.82       (13)     27.89       (35)     19.96
Cancelled                   (4)       41.07         -          -        (6)     29.01
                           ---                   ----                  ---
Outstanding at end
  of year                  506        32.55       470      30.02       366      28.18
Exercisable at end
  of year                  290        28.67       252      26.68       151      24.60


Available for future
  grants (all plans)     5,444            -        92          -       569          -
</TABLE>

Exercise prices for options outstanding as of January 2, 1999 ranged from $18.81
to $50.63. The weighted-average  remaining  contractual life of these options is
approximately 7.6 years.

The Employee  Stock  Purchase Plan enables  participating  employees to purchase
common stock through payroll deduction of up to 5% of eligible compensation. The
Company pays interest on the accumulated withholdings. These amounts may be used
to purchase  shares of company  stock at the option price (lesser of: (a) 85% of
the fair  market  value at the date of grant or (b) the  greater  of the  market
price at the close of business on the exercise date or $10.00 per share). During
1997,  employees  purchased 117,000 shares, for which $2,596,000 was paid to the
Company.  During 1998,  employees purchased 112,000 shares, for which $2,941,000
was paid to the Company.  On May 12, 1997,  shareholders  approved an additional
750,000  shares of common stock to be  allocated to this plan.  As of January 2,
1999,  grants had been  exercised by employees for the purchase of 98,000 shares
and  723,000  shares  remained  available  for  issuance  under the Plan.  As of
February  1999,  $3,089,000  had been  received by the Company upon  issuance of
these shares and the balance of shares available for future issuance was reduced
to 625,000.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

Statement of Financial Accounting Standards (SFAS) No. 123 requires a fair value
based  method of  accounting  for  employee  stock  options and would  result in
expense  recognition  for the Company's  employee stock plans. It also permits a
Company to  continue  to measure  compensation  expense for such plans using the
intrinsic  value based  method as  prescribed  by  Accounting  Principles  Board
Opinion No. 25 (APB 25). The Company has elected to follow APB 25 in  accounting
for its employee stock plans,  and  accordingly,  no compensation  cost has been
recognized.

Had compensation cost for the Company's stock plans been determined based on the
fair value  requirements  of SFAS No. 123,  the  Company's  net income and basic
earnings  per share would have been reduced to the  proforma  amounts  indicated
below:

                                (In thousands except earnings per share)
                                             1998        1997      1996

Net earnings              As reported      $94,647     $59,647    $75,205
                          Proforma          90,585      56,436     72,567

Basic earnings per share  As reported       $2.24       $1.41      $1.78
                          Proforma           2.14        1.33       1.71

The fair  value of each stock  option  grant has been  estimated  on the date of
grant  using  the   Black-Scholes   option  pricing  model  with  the  following
weighted-average assumptions:
                                     1998            1997           1996
                                     ----            ----           ----

Risk-free interest rate              5.65%           6.85%          7.03%
Dividend yield                       1.40%           1.55%          1.54%
Expected volatility                 20.17%          19.42%         19.44%
Expected life                        4.4 yrs.        4.5 yrs.       4.9 yrs.

The weighted-average grant date fair values of options granted during 1998, 1997
and 1996 were $10.33, $8.84 and $8.28, respectively.


<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)

8.  INCOME TAXES

The components of the provision for income taxes were as follows:

                                            (In thousands)

                                   1998              1997            1996  
                                 --------          --------        --------
Current
  Federal                         $39,944           $37,028         $38,842
  State                             6,135             4,790           7,969
                                   ------            ------          ------
                                   46,079            41,818          46,811
                                   ------            ------          ------
Deferred
  Federal                          10,514            (2,801)          2,276
  State                             1,068            (1,248)            246
                                   ------            ------          ------
                                   11,582            (4,049)          2,522
                                   ------            ------          ------
Total income tax expense          $57,661           $37,769         $49,333
                                   ======            ======          ======


    The  reconciliation  of income tax  computed  at the United  States  Federal
statutory tax rates to income tax expense was as follows:

                                         (In thousands)

                           1998               1997               1996   
                         --------           --------           ---------


Tax at U.S.
 statutory rate     $53,307   35.00%   $34,096   35.00%   $43,588   35.00%
State income taxes,
 net of federal tax
 benefit              4,630    3.04      3,487    3.58      5,280    4.24
Other - net            (276)   (.18)       186     .19        465     .37
                     ------   -----     ------   -----     ------   -----

                    $57,661   37.86%   $37,769   38.77%   $49,333   39.61%
                     ======   =====     ======   =====     ======   =====



<PAGE>



                    HANNAFORD BROS. CO. AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (continued)



Deferred  income taxes arise because of  differences  in the treatment of income
and expense items for financial  reporting and income tax purposes.  Significant
components of the Company's  deferred tax assets and  liabilities  at the end of
the last two fiscal years were as follows:

                                                       (In thousands)

                                                    1998           1997
                                                    ----           ----

Deferred Tax Liabilities:

  Depreciation and amortization                   $43,824        $33,238
  Other                                             2,880          3,427
                                                  -------        -------
                                                   46,704         36,665

Deferred Tax Assets:

  Capital leases                                   (8,027)        (7,588)
  Insurance reserves                              (10,314)       (10,380)
  Associate benefit plans                          (4,681)        (4,736)
  Other                                              (775)        (2,608)
                                                  -------        -------
                                                  (23,797)       (25,312)

                                                   22,907         11,353

Net current deferred tax assets                     5,952          6,912
                                                  -------        -------

Net non-current deferred tax liabilities          $28,859        $18,265
                                                  =======        =======


The Company expects to realize the deferred tax assets in the ordinary course of
business operations in subsequent years, and, accordingly, has not established a
valuation reserve relative to these amounts.




<PAGE>
<TABLE>


                                                              HANNAFORD BROS. CO. AND SUBSIDIARIES

                                                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                          (continued)

9.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

    The following is a presentation  of selected  financial data for each of the
four quarters of fiscal years 1998, 1997 and 1996.

                                                          (In thousands except per share amounts)

                                                    First               Second             Third               Fourth
                                                   Quarter             Quarter            Quarter             Quarter
1998                                                                                                                  
<S>                                               <C>                 <C>                <C>                 <C>
Sales and other revenues..........                $788,296            $830,371           $854,675            $850,246
Gross margin......................                 198,317             207,614            217,649             219,662
Net earnings......................                  17,815              23,019             25,832              27,981
Earnings per share:
     Basic........................                $    .42            $    .54           $    .61            $    .66
     Diluted......................                $    .42            $    .54           $    .60            $    .65


1997                                                                                                                  

Sales and other revenues..........                $759,923            $775,687           $820,115            $870,708
Gross margin......................                 185,650             194,615            203,060             215,821
Net earnings......................                  15,590              19,878             22,797               1,382
Earnings per share:
     Basic........................                $    .37            $    .47           $    .54            $    .03
     Diluted......................                $    .37            $    .47           $    .53            $    .03


1996                                                                                                                  

Sales and other revenues..........                $690,525            $729,081           $773,271            $764,682
Gross margin......................                 167,836             176,345            184,093             186,501
Net earnings......................                  14,674              19,509             19,898              21,124
Earnings per share:
     Basic........................                $    .35            $    .46           $    .47            $    .50
     Diluted......................                $    .35            $    .46           $    .46            $    .49


</TABLE>


<PAGE>




ITEM 9:  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None

                                  Part III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         This  item,  except  for  certain  information  relating  to  Executive
         Officers  included  in Part  I, is  incorporated  by  reference  to the
         Registrant's  definitive  proxy  statement  for the  Annual  Meeting of
         Shareholders to be held on May 19, 1999.

ITEM 11. EXECUTIVE COMPENSATION

         This item is incorporated by reference to the  Registrant's  definitive
         proxy  statement for the Annual Meeting of  Shareholders  to be held on
         May 19, 1999.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         This item is incorporated by reference to the  Registrant's  definitive
         proxy  statement for the Annual Meeting of  Shareholders  to be held on
         May 19, 1999.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         This item is incorporated by reference to the  Registrant's  definitive
         proxy  statement for the Annual Meeting of  Shareholders  to be held on
         May 19, 1999.



<PAGE>



                                   Part IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following documents are filed as a part of this report:

(a) 1., 2.  Consolidated Financial Statements and Related
            Schedules                                                  PAGES

    Report of Independent Accountants.............................       29

    Consolidated Balance Sheets - January 2, 1999 and
       January 3, 1998............................................     30-31

    Consolidated Statements of Earnings - Fiscal Years Ended,
       Janaury 2, 1999, January 3, 1998 and December 28, 1996.....       32

    Consolidated Statements of Changes in Shareholders'
       Equity - Fiscal Years Ended, January 2, 1999,
       January 3, 1998 and December 28, 1996......................       33

    Consolidated Statements of Cash Flows
       - Fiscal Years Ended, January 2, 1999,
       January 3, 1998 and December 28, 1996......................     34-35

    Notes to Consolidated Financial Statements....................     36-57


Schedules I, II, III and IV are not included as they are not applicable.

3. Exhibits Required by Item 601 of Regulation S-K
                                                               SEQUENTIAL
                                                               PAGE NUMBER
                                                             IN ORIGINAL 10-K

   3.1 - Articles of Incorporation                                 68-83

   3.2 - By-Laws of the Registrant
         Incorporated by reference to Exhibit 3.2 to the         
         Registrant's  Annual  Report on Form  10-K for 
         the  fiscal  year  ended January 1, 1994 
         (SEC File No. 1-7603).


<PAGE>



                                                                       PAGES
        

  4.1 -  Instruments Defining the Rights of                     Included in
         Security Holders                                        Exhibit 3

  4.2 -  There are incorporated herein by reference (i) a Rights
         Agreement dated as of February 4, 1988 between the
         Registrant and The First National Bank of Boston, as Rights
         Agent, a copy of which was filed as Exhibit 2 to the
         Registrant's Current Report on Form 8-K, dated February 16,
         1988 (SEC File No. 1-7603) and (ii) an Appointment and
         Amendment Agreement dated September 22, 1992 to said Rights
         Agreement, substituting Continental Stock Transfer & Trust
         Company as Rights Agent, a copy of which was filed as
         Exhibit 4.3 to the Registrant's Annual Report on Form 10-K
         for the fiscal year ended January 2, 1993 (SEC File No.
         1-7603).

  4.3 -  There are incorporated herein by reference a (i) Rights
         Agreement dated as of February 4, 1998 between the
         Registrant and Continental Stock Transfer & Trust Company,
         as Rights Agent, a copy of which was filed as Exhibit 4.1
         to the Registrant's Registration Statement on Form 8-A,
         dated January 23, 1998 (SEC File No. 1-7603).

 10.1  - There are incorporated herein by reference (i) an Amended
         and Restated Agreement, dated as of February 4, 1988, among
         the Registrant and various Sobey Parties, a copy of which
         was filed as Exhibit 1 to the Registrant's Current Report on
         Form 8-K, dated February 16, 1988 (SEC File No. 1-7603);
         (ii) an Amendment Agreement dated as of January 1, 1992 to
         said Agreement with the Sobey Parties, substituting certain
         Sobeys Inc. employee benefit plans as parties thereto, a
         copy of which was filed as Exhibit 10.2 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January
         2, 1993 (SEC File No. 1-7603) and (iii) a Second Amendment
         Agreement dated as of May 14, 1996, which extends the term of
         the agreement and makes other technical changes, a copy of
         which was filed as Exhibit 1 to the Registrant's current report
         on Form 8-K, dated May 14, 1996 (SEC File No. 1-7603).

  NOTE:  Compensatory plans and arrangements and management contracts are
  filed as Exhibits 10.2 through 10.27 below.


<PAGE>



                                                                       PAGES

 10.2  - There are incorporated herein by reference (i) the amended
         and restated Hannaford Bros. Co. Employees' Retirement Plan,
         a copy of which was filed as Exhibit 10.4 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January
         2, 1993 (SEC File No. 1-7603); (ii) the First Amendment
         to said Plan, a copy of which was filed as Exhibit 10.4 to
         the Registrant's Annual Report on Form 10-K for the fiscal
         year ended January 1, 1994 (SEC File No. 1-7603); (iii) the
         Second Amendment to said Plan, a copy of which was filed as
         Exhibit 10.3 to the Registrant's Annual Report on Form 10-K
         for the fiscal year ended December 31, 1994 (SEC File No.
         1-7603); (iv) the Third Amendment to said Plan, a
         copy of which was filed as Exhibit 10.3 to the Registrant's
         Quarterly Report on Form 10-Q for the fiscal quarter ended
         September 30, 1995 (SEC File No. 1-7603) and (v) the Fourth
         Amendment to said Plan, a copy of which was filed as Exhibit
         10.1 to the Registrant's Quarterly Report on Form 10-Q for
         the fiscal quarter ended June 28, 1997 (SEC File No. 1-7603).

 10.3  - The Hannaford Cash Balance Plan (formerly known as the Amended
         and Restated Hannaford Bros. Co. Employees' Retirement Plan),
         effective January 1, 1998.                                   84-163

 10.4  - There is incorporated  herein by reference the First 
         Amendment to The Cash  Balance  Plan,  a copy of which was 
         filed as Exhibit  10.1 to the Registrant's Quarterly Report
         on Form 10-Q for the fiscal quarter ended July 4, 1998.

 10.5  - There are incorporated herein by reference (i) the amended and
         restated Supplemental Executive Retirement Plan, a copy of
         which was filed as Exhibit 10.5 to the Registrant's Annual
         Report on Form 10-K for the fiscal year ended January 2,
         1993 (SEC File No. 1-7603); (ii) the First Amendment to said
         Plan, a copy of which was filed as Exhibit 10.5 to the
         Registrant's Annual Report on Form 10-K for the fiscal
         year ended December 31, 1994 (SEC File No. 1-7603) and (iii)
         the Second Amendment to said Plan, which was filed as
         Exhibit 10.4 to the Registrant's Quarterly Report on Form
         10-Q for the fiscal quarter ended September 30, 1995 (SEC
         File No. 1-7603).

10.6   - The Amended and Restated Hannaford Bros. Co. Supplemental
         Executive Retirement Plan, effective January 1, 1998.       164-174


<PAGE>



                                                                      PAGES

 10.7  - There are incorporated herein by reference (i) the Amended
         and Restated Hannaford Bros. Co. Employee Stock Purchase
         Plan, a copy of which was filed as Exhibit 10.6 to the
         Registrant's Annual Report on Form 10-K for the fiscal
         year ended December 31, 1994 (SEC File No. 1-7603); (ii)
         the First Amendment to said Plan, a copy of which was
         filed as Exhibit 10.1 to the Registrant's Quarterly Report
         on Form 10-Q for the fiscal quarter ended July 1, 1995
         (SEC File No. 1-7603); (iii) the Second Amendment to
         said Plan, a copy of which was filed as Exhibit 10.1
         to the Registrant's Quarterly Report on Form 10-Q for
         the fiscal quarter ended September 30, 1995 (SEC File
         No. 1-7603); (iv) the Third Amendment to said Plan,
         a copy of which was filed as Exhibit 10.1 to the
         Registrant's Quarterly Report on Form 10-Q for the fiscal
         quarter ended September 28, 1996 (SEC File No. 1-7603)
         and (v) the Fourth Amendment to said Plan, a copy of
         which was filed as Exhibit 10.6 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended
         December 28, 1996 (SEC File No. 1-7603).

 10.8  - There are incorporated herein by reference (i) the
         Registrant's 1993 Long Term Incentive Plan, a copy of
         which was filed as Exhibit 10.8 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended
         January 1, 1994 (SEC File No. 1-7603); (ii) the
         First Amendment to said Plan, a copy of which was
         filed as Exhibit 10.9 to the Registrant's Annual
         Report on Form 10-K for the fiscal year ended January
         1, 1994 (SEC File No. 1-7603); (iii) the Second
         Amendment to said Plan, a copy of which was filed as
         Exhibit 10.8 to the Registrant's Annual Report on
         Form 10-K for the fiscal year ended December 28, 1996
         (SEC File No. 1-7603) and (iv) the Third Amendment to
         said Plan, a copy of which was filed as Exhibit 10.8
         to the Registrant's Annual Report on Form 10-K for the
         fiscal year ended January 3, 1998.

 10.9    - There is  incorporated  herein by reference  the Amended
         and Restated Hannaford  Bros. Co. 1993 Long Term Incentive
         Plan, a copy of which was filed as Exhibit 10.9 to the 
         Registrant's  Annual  Report on Form 10-K for the fiscal
         year ended January 3, 1998.



<PAGE>



                                                                      PAGES

 10.10   - There is  incorporated  herein by reference  the Amended
         and Restated Hannaford Bros. Co. Annual Incentive Plan, 
         effective December 7, 1995, a copy of which was filed as
         Exhibit  10.8 to the  Registrant's  Annual Report on Form
         10-K For the fiscal  year ended  December  30, 1995 (SEC
         File No. 1-7603).

 10.11   - There is  incorporated  herein by  reference  an Amended
         and Restated Employment Continuity Agreement between the
         Registrant  and Hugh G. Farrington, a copy of which was
         filed as Exhibit 10.13 to the Registrant's Annual Report
         on Form 10-K for the fiscal year ended January 3, 1998.

 10.12   - There is incorporated herein by reference an Amended
         and Restated Standard Form of Employment Continuity 
         Agreement between the Registrant and various of its
         executive officers, a copy of which was filed as Exhibit
         10.15 to the Registrant's Annual Report on Form 10-K
         for the fiscal year ended January 3, 1998.

 10.13   - There is incorporated herein by reference a standard
         form Deferred Compensation Agreement available to outside
         directors of the Registrant, a copy of which was filed
         as Exhibit 10.2 to the Registrant's Annual Report on 
         Form 10-K for the fiscal year ended December 29, 1984
         (SEC File No. 1-7603).

 10.14   - There are incorporated herein by reference (i) the
         Amended and Restated Hannaford Bros. Co. Savings and
         Investment Plan, a copy of which was filed as Exhibit
         10.17 to the Registrant's Annual Report on Form 10-K 
         for the fiscal year ended January 2, 1993 (SEC File No.
         1-7603); (ii) the First Amendment to said Plan, which
         was filed as Exhibit 10.19 to the Registrant's Annual
         Report on Form 10-K for the fiscal year ended  December
         31, 1994 (SEC File No. 1-7603); (iii) the Second Amendment
         to said Plan, a copy of which was filed as Exhibit 10.2
         to the Registrant's Quarterly Report on Form 10-Q for
         the fiscal quarter ended July 1, 1995 (SEC File No.
         1-7603); (iv) the Third Amendment to said Plan, a copy
         of which was filed as Exhibit 10.3 to the Registrant's


<PAGE>



                                                                      PAGES

         Quarterly Report on Form 10-Q for the fiscal quarter
         ended July 1, 1995 (SEC File No. 1-7603) and (v) the
         Fourth Amendment to said Plan (renamed the Hannaford
         Northeast Savings and Investment Plan), a copy of which
         was filed as Exhibit 10.2 to the Registrant's Quarterly
         Report on Form 10-Q for the fiscal quarter ended
         September 30, 1995 (SEC File No. 1-7603).

 10.15   - There is incorporated herein by reference (i) the 
         Hannaford Southeast Savings and Investment Plan, a 
         copy of which was filed as Exhibit 4.5 to the Registrant's
         Registration Statement on Form S-8, dated June 8, 1995
         (SEC Registration No. 33-60119), (ii) the First Amendment
         to said Plan, a copy of which was filed as Exhibit 10.1
         to the Registrant's Quarterly Report on Form 10-Q for 
         the fiscal quarter ended March 29, 1997 (SEC File No.
         1-7603); and (iii) the Second Amendment to said
         Plan, a copy of which was filed as Exhibit 10.4 to
         the Registrant's Quarterly Report on Form 10-Q for the
         fiscal quarter ended June 28, 1997 (SEC File No. 1-7603).

 10.16 - The Hannaford Savings and Investment Plan (merging and      175-264
         amending the Hannaford Northeast Savings and Investment
         Plan and the Hannaford Southeast Savings and Investment
         Plan), effective January 1, 1998.

 10.17   - There is incorporated herein by reference the Hannaford
         Bros. Co. Nonqualified Savings and Investment Plan,
         effective January 1, 1998, a copy of which was filed as
         Exhibit 10.5 to the Registrant's Quarterly Report on
         Form 10-Q for the fiscal quarter ended June 28, 1997 (SEC
         File No. 1-7603).

 10.18   - There are incorporated herein by reference (i) the
         Registrant's Amended and Restated Deferred Compensation
         Plan available to certain management employees of the
         Registrant, a copy of which was filed as Exhibit 10.24
         to the Registrant's Annual Report on Form 10-K for the
         fiscal  year ended January 2, 1988 (SEC File No. 1-7603)
         and (ii) the First Amendment said Plan, a copy of which
         was filed as Exhibit 10.18 to the Registrant's Annual 
         Report on Form 10-K for the  fiscal  year
         ended January 1, 1994 (SEC File No. 1-7603).



<PAGE>


                                                                      PAGES

 10.19   - There is incorporated herein by reference the Amended
         and Restated Hannaford Bros. Co. Deferred Compensation
         Plan for Officers, effective January 1, 1998, a copy of
         which was filed as Exhibit 10.1 to the Registrant's 
         Quarterly Report on Form 10-Q for the fiscal quarter ended
         September 27, 1997 (SEC File No. 1-7603).

 10.20   - There is incorporated herein by reference a standard 
         form of Deferred Compensation Agreement available to
         certain management employees pursuant to the Registrant's
         Amended and Restated Deferred Compensation Plan, a copy 
         of which was filed as Exhibit 10.19 to the Registrant's
         Annual Report on Form 10-K for the fiscal year ended  
         January 2, 1993 (SEC File No. 1-7603).

 10.21   - There is incorporated herein by reference the Amended 
         and Restated Hannaford Bros. Co. 1988 Stock Plan, a copy
         of which was filed as Exhibit 4.5 to the Registrant's
         Registration Statement on Form S-8, dated June 27, 1995
         (SEC Registration No. 33-60655).

 10.22   - There is incorporated herein by reference the Hannaford
         Bros. Co. 1998 Stock Option Plan, a copy of which was 
         filed as Exhibit 10.25 to the Registrant's Annual Report
         on Form 10-K for the fiscal year ended January 3, 1998.

 10.23   - There is incorporated herein by reference the Hannaford
         Bros. Co. 1998 Restricted Stock Plan, a copy of which was 
         filed as Exhibit 10.26 to the Registrant's Annual Report
         on Form 10-K for the fiscal year ended January 3, 1998.

 10.24   - There is incorporated herein by reference (i) the 
         Hannaford Bros. Co. Stock Ownership Plan for Outside
         Directors, approved by shareholders May 24, 1995 and
         effective January 1, 1996, a copy of which was filed
         as Exhibit 4.5 to the Registrant's Registration Statement
         on Form S-8, dated June 27, 1995 (SEC Registration No.
         33-60691) and (ii) the First Amendment to said Plan,  
         a copy of which was filed as Exhibit  10.21 to the 
         Registrant's Annual Report on Form 10-K for the fiscal 
         year ended December 28, 1996 (SEC File No. 1-7603).



<PAGE>


                                                                      PAGES


 10.25   - There are incorporated herein by reference (i) an 
         Agreement, dated February 11, 1991, between the Registrant
         and James L. Moody, Jr., a copy of which was filed as
         Exhibit 10.26 to the Registrant's Annual Report on 
         Form 10-K for the fiscal year ended December 29, 1990
         (SEC File No. 1-7603) and (ii) an Amendment to said
         Agreement, dated May 14, 1992, a copy of which was filed
         as Exhibit 10.24 to the Registrant's Annual Report on
         Form 10-K for the fiscal  year ended  January 2, 1993
         (SEC File No. 1-7603).

 10.26   - There is incorporated herein by reference a Letter
         Agreement between the Registrant and James J. Jermann,
         dated July 8, 1996, a copy of which was filed as Exhibit
         10.1 to the Registrant's Quarterly Report on Form 10-Q
         for the fiscal quarter ended June 29, 1996 (SEC File No.
         1-7603).

 10.27   -  There is incorporated herein by reference a Consulting
         and Non-Competition Agreement between the Registrant 
         and Larry A. Plotkin, dated June 11, 1998, a copy of
         which was filed as Exhibit 10.2 to the Registrant's
         Quarterly Report on Form 10-Q for the fiscal quarter ended
         July 4, 1998 (SEC File No. 1-7603).

 21    - Subsidiaries of the Registrant............................        265

 23    - Consents of Accountants...................................        266

 27    - Financial Data Schedule                                        267-268

(b)      No reports on Form 8-K were filed during the last quarter
         of the period covered by this report.




<PAGE>


                                  SIGNATURES

    Pursuant to the requirements of Section 13 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.

HANNAFORD BROS. CO.


 s/Blythe J. McGarvie  
Blythe J. McGarvie
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
March 11, 1999

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


 s/Walter J. Salmon       s/Robert D. Bolinder        s/William T. End      
Walter J. Salmon         Robert D. Bolinder          William T. End
Chairman of the Board    Director                    Director
Director                 March 11, 1999              March 11, 1999
March 11, 1999

                          s/Richard K. Lochridge      s/Renee M. Love       
 s/Blythe J. McGarvie    Richard K. Lochridge        Renee M. Love
Blythe J. McGarvie       Director                    Director
Exec. Vice President,    March 11, 1999              March 11, 1999
Chief Financial Officer
(Principal Accounting Officer)
March 11, 1999

                          s/Claudine B. Malone        s/Robert J. Murray    
                         Claudine B. Malone          Robert J. Murray
 s/Hugh G. Farrington    Director                    Director
Hugh G. Farrington       March 11, 1999              March 11, 1999
President
Chief Executive Officer
Director                  s/David F. Sobey            s/John R. Sobey
March 11, 1999           David F. Sobey              John R. Sobey
                         Director                    Director
                         March 11, 1999              March 11, 1999


                          s/Robert L. Strickland      s/Robert J. Tarr, Jr. 
Bruce G. Allbright       Robert L. Strickland        Robert J. Tarr, Jr.
Director                 Director                    Director
                         March 11, 1999              March 11, 1999

<PAGE>