UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D. C. 20549
 
                     ----------------------

                            FORM 10-K

                FOR ANNUAL AND TRANSITION REPORTS
             PURSUANT TO SECTIONS 13 OR 15 (d) OF THE 
                 SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended December 29, 1996

                            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 1-8452

                     ----------------------

                    THE VONS COMPANIES, INC.
     (Exact name of registrant as specified in its charter)

             Michigan                             38-1623900
 (State or other jurisdiction of             (I.R.S. Employer
  incorporation or organization)              Identification No.)

         618 Michillinda Avenue, Arcadia, California 91007
       (Address of principal executive offices and zip code)
 
Registrant's telephone number, including area code (818) 821-
7000

                     ---------------------- 

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

Title  of each class  Name of each exchange on which registered
--------------------  -----------------------------------------
Common Stock, $.10 
par value per share              New York Stock Exchange
 
                     ---------------------- 
Securities registered pursuant to section 12(g) of the Act:

              6-5/8% Senior Subordinated Debentures
              9-5/8% Senior Subordinated Notes
              8-3/8% Senior Subordinated Notes

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

     Aggregate market value of voting stock held by non-
affiliates of the registrant as of March 10, 1997:  Common
Stock, par value $.10 per share - $1,972,545,355.
 
      The number of shares of Common Stock outstanding as of
March 10, 1997 - 44,174,285.

      Documents incorporated by reference:  To the extent
required to be filed, the registrant will file an amendment to
this Form 10-K within 120 days of the end of its fiscal year to
provide the information required by Part III of this Form 10-K.


<PAGE>
<PAGE>

                              PART I

ITEM 1: BUSINESS

General

     The Vons Companies, Inc. ("Vons" or the "Company") 
is the second largest supermarket chain in Southern 
California based on sales.  As of December 29, 1996, 
Vons operated 320 supermarket and food and drug combination
stores.  Vons also operates a fluid milk processing facility, 
an ice cream plant, a bakery and distribution facilities 
for meat, grocery, produce and general merchandise.  The
Company's stores operate under the  "Vons"  and "Pavilions"
names.  The Company's marketing platform is built on offering 
the customer greater value than found elsewhere by combining
competitive pricing with superior service, quality, selection 
and convenience. 

     Vons grocery business was founded in 1906.  From 1969
until December 1985, it was owned, along with certain other
merchandising businesses, by Household International, Inc.  
In 1985, these merchandising businesses were acquired in 
a leveraged buyout by a newly-formed corporation which kept 
the grocery business and sold all of the other merchandising
businesses.  The newly-formed corporation was subsequently 
merged in 1987 with and into Allied Supermarkets, Inc., a
Michigan corporation ("Allied"), and the surviving corporation
was renamed The Vons Companies, Inc., a Michigan corporation.
Simultaneously with the merger, substantially all of the 
business previously operated by Allied was sold to a 
company organized by the former management of Allied, 
leaving the Company with operations located only in 
Southern California, as they existed prior to the merger. 

     On August 29, 1988, the Company purchased substantially all
of the Southern California operations of Safeway, Inc.
("Safeway").  At the time of the acquisition (the "Safeway
Acquisition"), these operations included 162 supermarkets and
manufacturing and distribution facilities.  As a result of the
Safeway Acquisition and other purchases of Vons common stock,
Safeway, through a wholly owned subsidiary, is Vons largest
shareholder, with approximately 34.3% of the outstanding 
shares of Vons common stock.  Safeway is currently an 
affiliate of Kohlberg Kravis Roberts & Co.

     The Proposed Merger 

     On December 15, 1996, Vons entered into an Agreement 
and Plan of Merger, as amended (the "Merger Agreement"), 
with Safeway for a business combination in which, among 
other things, Safeway will issue 1.425 shares of Safeway 
common stock for each share of Vons common stock that 
Safeway does not currently own and Vons will be merged 
with and into a wholly owned subsidiary of Safeway (the
"Merger").  The transaction, which was unanimously approved 
by a special committee of the Vons Board of Directors, 
comprised of directors who are not affiliated with Safeway, 
is subject to approval by a majority of the outstanding 
Vons common shares not held by Safeway and its affiliates, 
and certain other conditions.  The combined company will be 
the second largest grocery chain in North America, with 
1,377 stores and sales in excess of $22 billion.  The 
proposed merger is expected to close early in the second 
quarter of 1997.  Safeway, Inc. is one of the world's 
largest food retailers, operating 1,052 stores in the 
United States and Canada at the end of fiscal 1996.

Store Formats

     The Company operates its stores under the Vons and 
Pavilions formats. Each format is designed for a different
customer segment as evidenced by the store location, 
appearance and product offerings.  A key strategy of the 
Company is to tailor its store and merchandise offerings 
to reflect its diverse customer base. 

     The Company supports its stores with centralized 
functions for marketing, advertising, buying, real 
estate development, management information systems, 
distribution, manufacturing, accounting and administration 
to maximize operating leverage and profitability.

     Both store formats, Vons and Pavilions, offer 
extensive assortments of food products, including departments 
for dry groceries, produce, meat, seafood, dairy, wine 
and liquor.  The majority of stores also offer service
departments such as hot bakeries, service floral, 
delicatessens, service meat departments and banking 
facilities.  Selected Pavilions stores offer an expanded 
greeting card department, a health and beauty care 
department including cosmetics, a sausage and smoke shop, 
bagel shop, sushi bar and high quality prepared Chinese 
food.  Approximately one-third of the Company's stores 
offer full-service pharmacies.

New Store Openings and Store Remodel Projects

     The Company expects to continue to augment sales 
growth through the continuation of its new store opening 
program and ongoing chainwide remodel program.  The 
Company currently plans to open 13 new stores, including 
5 replacement stores, in 1997, subject to changes by 
Safeway following the proposed Merger.  In 1996, the 
Company maintained its goal of having 80% of its stores 
either newly opened or remodeled within the preceding five 
years.

     Store remodel projects enable Vons to present a store
appearance consistent with Vons evolving store formats and 
to continuously update the store base through the 
introduction, where possible, of service departments and 
new merchandising modules, which are intended to generate 
higher gross margins and build store traffic.  Vons 
remodeling program includes remerchandising to reflect 
a contemporary design and decor package including 
selected fixture replacements.  The Company completed 68, 
37 and 14 store remodeling projects in fiscal 1996, 1995 
and 1994, respectively.

     Vons capital expenditures for store projects were 
$185.4 million and $130.5 million in fiscal 1996 and 1995,
respectively.  It is anticipated that 1997 capital 
expenditures for Vons store projects will be funded out 
of cash provided by operations, revolving debt and/or 
through operating leases.  The capital expenditure program 
has substantial flexibility and is subject to revision based 
on various factors, including but not limited to 
business conditions, changing time constraints, cash 
flow requirements and competitive factors.

     The following table shows, by store format, the 
number of Vons stores in operation at the end of each of 
the years indicated and the number of stores opened, 
closed or converted during each year:<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                VONS     PAVILIONS    TIANGUIS     EXPO      TOTAL 
                               ------    ---------    --------    ------    ------
<S>                            <C>       <C>          <C>         <C>       <C> 
1994:
Beginning store count......       305           32           3         5       345     
Stores opened..............         6            -           -         -         6
Stores closed or sold......       (17)           -           -         -       (17)
Store format conversions...        (1)           1          (3)        3         -
                               ------    ---------    --------    ------    ------
Ending store count.........       293           33           0         8       334
                               ------    ---------    --------    ------    ------
1995:
Stores opened..............        13            -           -         -        13
Stores closed or sold......       (11)           -           -        (8)      (19) 
                               ------    ---------    --------    ------    ------
Ending store count.........       295           33           0         0       328
                               ------    ---------    --------    ------    ------
1996:
Stores opened..............        10            -           -         -        10  
Stores closed or sold......       (17)          (1)          -         -       (18)
                               ------    ---------    --------    ------    ------
Ending store count.........       288           32           0         0       320
                               ------    ---------    --------    ------    ------
                               ------    ---------    --------    ------    ------
Average gross square
  feet per store at 
  December 29, 1996........    36,200       43,300           -         -    36,900
                               ------    ---------    --------    ------    ------
                               ------    ---------    --------    ------    ------

</TABLE>
<PAGE>
The Company closes stores based on replacement strategies 
or lease renewals.  Following completion of the Merger, 
Vons management expects to continue these types of store 
closures in the future. 

Marketing and Competition

     Southern California is one of the largest and most
competitive markets for retail grocery sales in the 
United States.  Vons store network ranges from Fresno 
on the north to the Mexican border on the south and 
from the Pacific Ocean on the west to Clark County, Nevada 
on the east.  This market area includes Fresno, Imperial, 
Inyo, Kern, Los Angeles, Madera, Mono, Orange, Riverside, 
San Bernardino, San Diego, San Luis Obispo, Santa Barbara, 
Tulare and Ventura counties in California as well as Clark
County, Nevada. 

     Vons faces a number of major as well as smaller 
competitors in its market.  The Company believes that in 
recent years the increase in the number of competitors' 
stores and the addition of convenience stores, drug stores, 
mass merchandisers, specialty stores, warehouse stores,
membership stores as well as discount stores and fast 
food and other restaurants which compete for the same 
customers has resulted in intensified competition.  This 
trend is expected to continue.  

     Both of the Company's store formats utilize 
promotional buying opportunities to pass along special 
values to their customers.  Also, stores offer customers
 additional savings through the use of double coupons, 
advertised weekly specials and a free membership loyalty 
club known as VonsClub.  This club offers customers 
special values and programs and enables the Company and 
its vendors to target specific customer segments and 
better understand household buying behavior.  Vons is 
the only operator in its market area with an established 
free membership loyalty club offered to its customers.  
Vons marketing and communication strategy is based on a
combination of direct mail, newspaper, television and 
radio.

     The principal competitive factors in the retail 
supermarket business include price, fast, friendly 
service, quality of products, breadth of product 
assortment, store condition and store location.  Vons 
believes that customers are placing greater emphasis on 
price and overall value.  The Company's marketing campaign 
has incorporated the slogan "Vons Is Value" since 1994.  
These campaigns emphasize the Vons Value formula which 
combines competitive prices with customer service and 
high quality products.  Low prices, advertised weekly 
specials, free membership club savings and double coupons 
are integral parts of the Vons offering.  Another 
important component of the Vons Value offering is the 
amount of labor allocated for customer service and 
check-out which the Company believes has increased customer
satisfaction.  Vons believes that its strength is its 
ability to deliver a high value shopping experience 
through a blend of high quality products, superior 
customer service and product assortments at competitive 
prices combined with VonsClub, double coupons and 
advertised weekly specials.

Merchandising and Store Operations

     An average store offers approximately 30,000 to 
40,000 merchandise items.  Vons carries a full assortment 
of brand-name grocery products and emphasizes quality and
 freshness in its produce, meat and seafood selections.  
Brand name items are complimented by an extensive line of 
private brand products in all categories.  In addition to 
its proprietary Jerseymaid line of dairy products, the 
Company carries the private brand "SELECT."  This upscale 
private brand was first introduced in 1994.  The Company 
intends to increase its private brand penetration as a 
percent of sales by marketing its branded items and 
introducing additional private brand items, including 
those under the "SELECT" label.  In 1996, private brand 
sales accounted for approximately 19% of sales.

     Vons is committed to being the low cost operator 
in the market areas it serves.  Vons strategy is to continue 
to decrease its operating costs through aggressive buying,
introduction and maintenance of various merchandising and
technological innovations and stringent cost controls.

     As part of its effort to improve efficiency and 
reduce operating costs, the Company is actively pursuing 
an industry-wide effort known as Efficient Consumer 
Response ("ECR").  This effort includes a review of the 
Company's products by category to achieve an efficient 
assortment which reduces the number of products offered without
compromising customer satisfaction.  A neighborhood-specific
product assortment with efficient space management improves 
in-stock conditions and reduces inventory.  The Company 
has also implemented systems to allow for more efficient
replenishment of inventory such as continuous replenishment
systems and electronic ordering and invoicing.

     In addition, the Company is committed to neighborhood
marketing and merchandising to serve the diverse needs of 
its customer base.  Over the past few years, Vons has 
developed systems to give store managers more control over 
store merchandising needs.  The Company improves the 
consistency of store operations through its policy to 
develop store managers internally.  All store managers
participate in a bonus program which is based primarily 
upon their individual store sales and profit and are 
included in the Company's stock option program.

     Through technological innovation, Vons has experienced
improved operational efficiency.  All Vons stores are 
equipped with an electronic receiving system for products
delivered directly to stores by vendors, electronic time 
and attendance reporting and computerized labor scheduling.  
Vons central buying office monitors warehouse inventory 
levels and product movement daily for buyer analysis and 
action.  Vons utilizes a category management system which
combines the buying and merchandising functions.  The 
Company has upgraded these systems to enable category 
managers to more effectively analyze data.  

Support and Other Services

     The Company operates a fluid milk processing facility,
an ice cream plant and a central bakery.

     Vons operates two distribution facilities in Southern
California.  The Company utilizes computerized inventory 
and labor management systems throughout its distribution 
network.  As of December 29, 1996, Vons operated a fleet 
of 414 tractors and 1,162 trailers, of which 105 and 322,
respectively, were leased and the remainder were owned.  
The Company's transportation department utilizes on-board
electronic trip recorders to monitor travel times and a
sophisticated computerized routing system.  Approximately 
75% of store sales in 1996 represented inventories 
supplied by these distribution facilities, and the balance 
was delivered directly to the stores by vendors.

Governmental Regulation

     Vons is subject to regulation by a variety of governmental
agencies, including the California Department of Alcoholic
Beverage Control, the California State Board of Pharmacy, the
California Department of Agriculture, the U.S. Food and Drug
Administration, the U.S. Department of Agriculture and state and
local health departments and weights and measures agencies. 

     In connection with the 1988 Safeway Acquisition, Vons,
Safeway and certain other parties entered into a consent 
order (the "Consent Order") with the Federal Trade 
Commission (the "FTC") whereby Vons divested three retail 
grocery stores and Safeway divested nine retail grocery 
stores to competitors in Southern California.  The Consent 
Order, among other things, also limits for ten years the
acquisition by Vons of existing supermarkets from any 
other party in certain trade areas where both Vons and 
Safeway operated stores prior to the Safeway Acquisition,
allowing a specified number of such acquisitions within 
any 12-month period in some areas and prohibiting 
acquisitions in others.

     In 1992, in connection with the Williams Bros. 
acquisition, the Company entered into a consent order with 
the FTC whereby the Company divested one of the Williams 
Bros. store locations and among other things, agreed to 
seek FTC approval before acquiring any supermarket, or 
any interest in any company owning a supermarket, in 
San Luis Obispo County for ten years.

Employees

     At December 29, 1996, Vons employed approximately 
11,100 full-time and 19,300 part-time employees as follows:

<TABLE>
<CAPTION>
                                             Non-
                                Union       Union        Total
                                ------      ------      -------
<S>                             <C>         <C>         <C>
Hourly..................        28,600         500       29,100
Salaried................             -       1,300        1,300
                                ------      ------      -------
Total Employees.........        28,600       1,800       30,400
                                ------      ------      -------
                                ------      ------      -------

</TABLE>

     In the fall of 1994, the Company negotiated a four-year
contract with the International Brotherhood of Teamsters'
Union which will expire on September 13, 1998. 

     In the fall of 1995, the Company negotiated a four-year
contract with the United Food and Commercial Workers'
International Unions which will expire on October 3, 1999.

     Like its major competitors, pursuant to its various
collective bargaining agreements, Vons contributes to Taft-
Hartley multi-employer, joint pension plans.  Under pertinent
law, a participating employer which totally or partially
withdraws from such a pension plan could be liable for unfunded
vested benefits, which could be substantial.

Insurance

     Vons carries insurance which it believes to be 
customary in the supermarket industry to protect the 
Company against catastrophic loss, including earthquake
insurance.  The Company is approved in both California 
and Nevada to self-insure workers' compensation and 
general liability exposures and maintains third-party 
insurance for loss exposures in excess of self-insured 
retentions and deductibles. 

Executive Officers of the Registrant

     Set forth below is certain information concerning 
the executive officers of the Company as of March 27, 1997:

<TABLE>
<CAPTION>

Name                       Age        Position
----                       ---        --------
<S>                        <C>        <C>

Lawrence A. Del Santo      63         Chairman of the Board
                                      and Chief Executive Officer

Richard E. Goodspeed       60         President and Chief
                                      Operating Officer

Susan M. Klug              37         Senior Vice President
                                      Marketing

Pamela K. Knous            42         Executive Vice President,
                                      Chief Financial Officer and
                                      Treasurer

Terry R. Peets             52         Executive Vice President

Harold E. Rudnick          48         Senior Vice President
                                      Retail Purchasing

Terrence J. Wallock        52         Executive Vice President,
                                      General Counsel and
                                      Secretary
</TABLE>

     Officers are elected annually and are subject to removal at
any time, with or without cause, by the Company's Board of
Directors, subject to all rights under employment contracts, if
any.

     Mr. Del Santo was appointed Chairman of the Board in May
1995.  He served as Director and Vice Chairman of the Board from
April 1994 to May 1995.  Mr. Del Santo continues to serve as
Chief Executive Officer of the Company, a position he has held
since April 1994.  Prior to joining the Company, Mr. Del Santo
was Senior Executive Vice President and Chief Operating Officer -
Food of American Stores Company from March 1993 to April 1994. 
From April 1989 to March 1993, Mr. Del Santo was Chairman of
Lucky Stores, Inc.

     Mr. Goodspeed was elected a Director of the Company in
February 1996.  Mr. Goodspeed also continues in the position
of President and Chief Operating Officer of the Company, to
which he was appointed in April 1994.  Prior to joining the
Company, Mr. Goodspeed was Executive Vice President - Food of
American Stores Company and President and Chief Operating Officer
of Lucky Stores, Inc. a position he held since September 1988.

     Ms. Klug was appointed Senior Vice President, Marketing of
the Company in October 1994.  Prior to joining the Company, Ms.
Klug had been with Catalina Marketing in various positions since
1989, rising to the position of Vice President of Western United
States.

     Ms. Knous was appointed Treasurer of the Company in December
1995 and continues in the position of Executive Vice President
and Chief Financial Officer of the Company, which she has held
since May 1995.  Ms. Knous served as Senior Vice President and
Chief Financial Officer from July 1994 to May 1995.  Ms. Knous
was Group Vice President, Finance of the Company from November
1993 to July 1994.  From April 1991 to November 1993, 
Ms. Knous was Vice President, Finance of the Company.

     Mr. Peets was appointed Executive Vice President of the
Company in September 1995.  Prior to joining the Company, Mr.
Peets had been with Ralphs Grocery Company in various positions
since 1977, rising to the position of Executive Vice President.

     Mr. Rudnick was appointed Senior Vice President, Retail
Purchasing of the Company in May 1995.  Mr. Rudnick served as
Senior Vice President, Procurement of the Company from April 1994
to May 1995.  Mr. Rudnick was Group Vice President, National
Accounts of the Company from June 1992 to April 1994.  From
October 1985 to June 1992, Mr. Rudnick was Vice President,
Grocery/Frozen Food Service of the Company.

     Mr. Wallock was appointed Executive Vice President and
General Counsel of the Company in November 1993 and continues in
the position of Secretary of the Company which he has held since
March 1991.  Mr. Wallock was Senior Vice President, Chief Legal
and Security Officer of the Company from August 1991 to November
1993.  

ITEM 2: PROPERTIES

     As of December 29, 1996, the Company leased 228 of its
stores and owned 92 of its stores.  At December 29, 1996, 195 of
the Company's leases provided for contingent rental payments
based on a percentage of such rental property's sales over
specified amounts, which typically range from 1.0% to 1.5% 
of total gross sales, less amounts expended for common area
maintenance, real estate taxes and insurance; the balance had 
no percentage rent clauses.  Store leases have various 
expiration dates through 2021.  Renewal options range up to 
40 years.  The following table lists the number of such 
store leases for open stores that are due to expire 
(assuming exercise of all renewal options) in each of the
specified periods:

<TABLE>
<CAPTION>
                                        Number of
              Calendar Years         Expiring Leases
              --------------         ---------------
              <S>                    <C>             
              1997-2001..........                  7
              2002-2006..........                 13
              2007-2011..........                 20
              2012-2016..........                 21
              2017-2021..........                 29
              2022 and thereafter                138

</TABLE>

     The Company has a $110.8 million mortgage loan on 
51 properties requiring monthly principal and interest 
payments of approximately $1.0 million with a one-time 
principal and interest payment of $110.7 million in 
July 1997.  The Company has other real estate notes and 
mortgages covering seven properties totaling $23.8 million 
due in varying monthly installments with maturity dates 
from 1997 to 2009.

     The Company's stores are usually located in active 
shopping centers and generally have several co-tenants, 
which typically include a drugstore; although the newer 
stores, which are usually food and drug combination stores, 
tend to be in shopping centers without drugstores.

     The Company owns distribution and manufacturing 
facilities in El Monte, California, which are located 
on approximately 63 acres of land.  The El Monte 
facilities include two warehouses with an aggregate of 
764,000 square feet and a meat cooking facility, including 
a warehouse with an aggregate of 256,000 square feet.

     The Company leases a distribution facility located in
Santa Fe Springs, California.  This distribution facility
includes several warehouses and a maintenance operation.  
The facility covers approximately 1,040,000 square feet 
located on approximately 78 acres of land.  The lease for 
such facility expires in 2000 with two five-year and one 
one-year options to extend.

     The Company operates a 450,000-square-foot forward buy
warehouse located in the City of Industry, California under 
a lease which expires in 1999, with one three-year option 
to extend.  The Company also leases a 95,000-square-foot 
frozen food distribution facility in Ontario, California 
under a lease which expires in March 1998.  The Company 
closed its owned distribution facility in San Diego, 
California in third quarter 1995.  The Company is in the 
process of disposing of this property.  See Note 15 to 
the Consolidated Financial Statements included elsewhere 
herein.

     The Company owns a 244,000-square-foot building in 
Arcadia, California, used for its corporate administrative
offices.

     The manufacturing operations consist of a fluid milk
processing facility, an ice cream plant and a bakery, all
leased and located in the City of Commerce, California.  
The leases for the fluid milk processing facility and 
ice cream plant expire in 2001, with one five-year option 
to extend.  The lease for the bakery expires in 1997 with 
three five-year options to extend.

ITEM 3: LEGAL PROCEEDINGS

     In addition to routine litigation incidental to 
the conduct of its business, the Company has been named 
in a number of lawsuits in state and Federal courts 
in Washington, Nevada, Idaho and California arising 
from claims of food-borne illness that allegedly was 
contracted from the consumption of hamburgers at certain 
Jack-In-The-Box restaurants in early 1993.  The restaurants
involved were either directly operated by Jack-In-The-Box, 
a division of Foodmaker, Inc. ("Foodmaker"), or through
franchisees.  The suits allege that the hamburger patties 
in question were processed by the Company before being 
cooked and served by a Jack-In-The-Box outlet.  The 
plaintiffs in these actions seek unspecified damages 
for illnesses ranging from minor diarrhea to serious 
kidney and intestinal infection.  Several deaths are 
alleged to have resulted from the incidents and, in 
those cases, the plaintiffs seek damages for wrongful 
death.  The Company is insured against various losses, 
including those for bodily injury.

     The Company also has been named as a defendant in 
a suit filed on July 2, 1993, in the Superior Court of 
the State of California for the County of San Diego, 
by franchisees of Foodmaker who operate Jack-In-The-Box 
outlets in various states.  Also named as defendants 
were Foodmaker and a number of meat suppliers and
slaughterhouses.  The complaint seeks an estimated $100 
million for lost profits and compensation for an alleged
reduction in the value of the franchisees' businesses, 
as well as unspecified damages for alleged emotional 
distress.  On July 19, 1993, Foodmaker filed a cross-complaint
against the Company and subsequently voluntarily dismissed 
a separate action which it had previously brought.  The 
cross-complaint asserts various tort and contract theories 
and seeks, among other things, indemnity as well as lost 
profits and compensation for a reduction in Foodmaker's 
stock price.  Foodmaker's cross-complaint seeks unspecified
damages, although the Company has been advised that 
Foodmaker may potentially claim damages of approximately 
$400 million, including the aforesaid claims of the 
franchisees. 

     The Company is vigorously contesting the lawsuits 
against it and has filed its own cross-complaint against
Foodmaker and certain of its franchisees seeking damages 
in an amount substantially higher than the amount of 
damages claimed by Foodmaker.  Trial is currently 
scheduled to commence in July of 1997.

     On September 13, 1996, a class action lawsuit titled
McCampbell, et al. v. Ralphs Grocery Company, et al. was 
----------------------------------------------------
filed in the Superior Court of the State of California, 
County of San Diego, against the Company and two other 
grocery store chains operating in the Southern California 
area.  The complaint alleges, among other things, that 
the Company and others conspired to fix the retail price 
of eggs in Southern California.  The plaintiffs claim 
that the defendants' actions violate provisions of the 
California Cartwright Act and constitute  unfair 
competition.  Plaintiffs seek damages they purport to 
have sustained as a result of the defendants' alleged 
actions, which damages may be trebled under the 
applicable statute, and an injunction from future acts 
in restraint of trade and unfair competition.  Because 
the case was recently filed, discovery has just 
commenced.  Management of the Company intends to defend 
this action vigorously and the Company has filed an 
answer to the complaint denying the plaintiffs' 
allegations and setting forth several defenses.

     The Company believes that the above-described 
lawsuits are unlikely to result in liability which would 
be material to the consolidated financial position of 
the Company.

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

     There were no matters submitted to the security holders of
the Company for a vote during the quarter ended December 29,
1996.

<PAGE>

                             PART II

ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
        SHAREHOLDER MATTERS

     Vons common stock is listed on the New York Stock 
Exchange, Inc. ("NYSE") (Symbol-VON).  The shares have 
been listed on the NYSE since March 20, 1986.  As of 
February 20, 1997, there were approximately 6,311 
shareholders of record.  The table below sets
forth the high and low sales prices for Vons common stock 
as reported on the NYSE Composite Tape during the 
fiscal periods specified:

<TABLE>
<CAPTION>

                      52 Weeks Ended         52 Weeks Ended
                       December 29,            December 31,
                           1996                    1995
                     -----------------      -----------------
                       High      Low          High      Low
                       ----      ---          ----      ---
<S>                  <C>       <C>          <C>       <C>
First quarter.....   $33       $25          $20 3/4   $17 5/8
Second quarter....    38 3/4    29 7/8       21 7/8    19 1/4
Third quarter.....    44 3/8    34           24 3/8    20 1/4
Fourth quarter....    57 7/8    40 1/8       28 1/4    22 7/8



</TABLE>

     The Company paid no dividends on its common stock in 
fiscal years 1996, 1995, and 1994.  Certain Company debt
agreements restrict the Company from paying cash dividends 
or making other distributions on stock under certain
circumstances.  Under its most restrictive debt agreement,
the Company had $119.0 million available for dividends 
and distributions at December 29, 1996.  See "Management's
Discussion and Analysis of Financial Condition and 
Results of Operations - Liquidity and Capital Resources" 
and Note 7 to the Consolidated Financial Statements 
contained in the Company's Annual Report to Shareholders 
for the fiscal year ended December 29, 1996 included 
elsewhere herein.

ITEM 6: SELECTED FINANCIAL DATA

Five-Year Selected Financial Data

     The following five-year selected financial data 
should be read in conjunction with the Consolidated 
Financial Statements. 

     The operations acquired from Williams Bros. are 
included in operating results from January 28, 1992.  
During 1992, the Company implemented the provisions of 
Statement of Financial Accounting Standards No. 106, 
"Employers' Accounting for Postretirement Benefits Other 
Than Pensions," effective January 3, 1993.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                                             As of and
                                                                             for the 53
                                As of and for the 52 Weeks Ended            Weeks Ended 
(in millions of     -----------------------------------------------------  ------------
 dollars except     December 29,  December 31,   January 1,    January 2,    January 3,
 share data)            1996          1995          1995          1994          1993
                    ------------  ------------  ------------  -----------  ------------
<S>                 <C>           <C>           <C>           <C>           <C>
Summary of 
 Operations:
  Sales             $    5,407.4  $    5,070.7  $    4,996.6  $    5,074.5  $    5,595.5
  Restructuring 
    charges                   -             -           33.0          56.9            -   
  Operating 
    income                 241.1         194.1         125.8         135.8         219.1  
  Interest
    expense, net            55.6          67.3          70.8          66.0          71.5  
  Income before 
    income tax
    provision              185.5         126.8          55.0          69.8         147.6  
  Income before
    extraordinary
    item and 
    cumulative
    effect of
    change in
    accounting
    for retiree 
    medical 
    benefits               104.7          68.1          26.6          33.0          82.1

  Income before
    cumulative
    effect of
    change in 
    accounting
    for retiree
    medical 
    benefits               104.7          68.1          26.6          31.6          69.3
  Net income               104.7          68.1          26.6          31.6          53.8

  Income
    applicable to
    common 
    shareholders           104.7          68.1          26.6          31.6          53.8
  Income per 
    common and
    common equivalent
    share before
    extraordinary
    item and
    cumulative 
    effect of
    change in
    accounting
    for retiree
    medical 
    benefits                2.34          1.55           .61           .76          1.89
  Income per 
    common and
    common equivalent
    share before
    cumulative 
    effect of
    change in
    accounting
    for retiree
    medical 
    benefits                2.34          1.55           .61           .73          1.60
  Net income per
    common and
    common equivalent
    share                   2.34          1.55           .61           .73          1.24
  Dividends paid
    on common 
    stock                     -             -             -             -             -

Financial
 Position:
  Working capital
    (deficit)             (294.9)       (141.1)        (96.1)        (69.3)        (74.9)
 Total assets            2,185.4       2,186.5       2,222.0       2,249.5       2,066.0
    Long-term debt: 
    Capital lease
      obligations           50.3          53.4          58.0          62.7          56.4
    Senior debt             15.0         298.8         426.2         497.2         389.2
    Subordinated 
      debt, net            284.5         305.7         319.6         322.1         342.5
   Common
    shareholders'
    equity                 738.4         623.3         552.4         524.9         493.2
   Shareholders'
    equity per  
    common share           16.79         14.32         12.73         12.11         11.38

Other Data:
  Weighted
    average
    common 
    shares during
    year, 
    including 
    common share
    equivalents       44,800,000    43,900,000    43,600,000    43,500,000    43,500,000
  Outstanding
    common 
    shares at
    year end          43,987,000    43,533,000    43,383,000    43,342,000    43,335,000
 

</TABLE>

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

Results of Operations

<TABLE>

     The following table sets forth the consolidated statements of 
operations data (in millions of dollars and as a percentage of sales 
except share data):

<CAPTION>
                                                Fifty-Two Weeks Ended
                                                ---------------------
                              December 29, 1996   December 31, 1995    January 1, 1995
                              -----------------   -----------------   -----------------
<S>                           <C>         <C>     <C>         <C>     <C>         <C>
Sales                         $5,407.4    100.0%  $5,070.7    100.0%  $4,996.6    100.0%
Costs and expenses:
  Cost of sales, buying 
    and occupancy              4,032.7     74.5    3,790.2     74.8    3,767.2     75.4   
  Selling and
    administrative
    expenses                   1,118.6     20.7    1,071.4     21.1    1,055.5     21.1   
  Amortization of excess
    cost over net assets
    acquired                      15.0       .3       15.0       .3       15.1       .3   
  Restructuring charges                                 -        -        33.0       .7   
Operating income                 241.1      4.5      194.1      3.8      125.8      2.5 
Interest expense, net             55.6      1.1       67.3      1.3       70.8      1.4 
Income before income
  tax provision                  185.5      3.4      126.8      2.5       55.0      1.1 
Income tax provision              80.8      1.5       58.7      1.2       28.4       .6

Net income                       104.7      1.9       68.1      1.3       26.6       .5
Income per common and
  common equivalent
  share:
    Net income                    2.34                1.55                 .61
/TABLE
<PAGE>
<PAGE>

Overview

     On December 15, 1996, Vons entered into a Merger 
Agreement with Safeway for a business combination in which, 
among other things, Safeway will issue 1.425 shares of 
Safeway common stock for each share of Vons common stock 
that Safeway does not currently own and Vons will be merged 
with and into a wholly owned subsidiary of Safeway (the
 "Merger").  The transaction, which was unanimously approved 
by a special committee of the Vons Board of Directors, 
comprised of directors who are not affiliated with 
Safeway, is subject to approval by a majority of the 
outstanding Vons common shares not held by Safeway and 
its affiliates, and certain other conditions.  The 
combined company will be the second largest grocery chain 
in North America based on sales, with 1,377 stores and 
revenues in excess of $22 billion.  The proposed merger 
is expected to close early in the second quarter of 1997.
Safeway, Inc. is one of the world's largest food 
retailers, operating 1,052 stores in the United States 
and Canada at the end of fiscal 1996.

Cautionary Statement for Purposes of "Safe Harbor 
Provisions" of the Private Securities Litigation Reform 
Act of 1995

     Certain statements contained in the following discussion 
and elsewhere in this Form 10-K are "forward-looking 
statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are thus prospective.  
Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual 
results to differ materially from future results expressed 
or implied in such forward-looking statements.  Potential 
risks and uncertainties include, but are not limited to,
competitive pressures from other major supermarket 
operators and economic conditions in the Company's 
primary markets, the risks associated with the proposed 
merger involving Safeway and the other uncertainties 
detailed from time-to-time in the Company's filings 
with the Securities and Exchange Commission. 

Comparison of Fifty-Two Weeks Ended December 29, 1996 with
Fifty-Two Weeks Ended December 31, 1995

     Sales.  Sales for 1996 were $5,407.4 million, an 
increase of $336.7 million, or 6.6%, over 1995.  Same store 
sales increased 4.9% over 1995 sales.  The increase in 
sales reflects the favorable consumer response to superior
customer service, the "Vons Is Value" marketing campaign and 
a strengthening economy in Southern California.  In 1996, 
the Company opened ten new stores, closed 18 stores and 
completed 68 store remodel projects.

     Costs and Expenses.  Costs and expenses for 1996 were
$5,166.3 million, an increase of $289.7 million, or 5.9%, 
over the comparable 1995 period.

     Cost of sales and buying and occupancy expenses as a
percentage of sales for 1996 were 74.5%, a decrease of 0.3 
of a percentage point from 1995.  The cost of increased
promotional activities in 1996 was offset by benefits 
achieved from category management and increased private 
brand sales.  The improvement in cost of sales and 
buying and occupancy expenses as a percentage of sales 
also reflects decreased occupancy costs.

     Selling and administrative expenses as a percentage 
of sales were 20.7% in 1996, compared with 21.1% in 1995.  
The cost of maintaining store service levels was more than 
offset by a more efficient mix of store labor and improved 
sales per labor hour.  The improvement in selling and
administrative expenses also reflects the success of 
continued efforts to control expenses as a percentage of 
sales.

     Operating Income.  Operating income for 1996 was 
$241.1 million, an increase of $47.0 million, or 24.2%, 
over 1995.  Operating margin increased to 4.5% in 1996 
versus 3.8% in 1995.  These increases primarily reflect 
an increase in gross margin and a reduction in selling
administrative expenses as a percentage of sales.  
Operating income before depreciation and amortization 
of property, amortization of goodwill and other assets, 
LIFO charge, earthquake deductible and restructuring 
charges ("FIFO EBITDA") was $361.9 million, or 6.7% of 
sales, in 1996 compared with $315.0 million, or 6.2% of 
sales, in 1995.

     Interest Expense.  Net interest expense for 1996 was 
$55.6 million, a decrease of $11.7 million, or 17.4%, from 
1995.  This decrease was due to lower average revolving 
debt borrowings.  The ratio of FIFO EBITDA to net interest
expense increased to 6.5 times in 1996 versus 4.7 times 
in 1995.

     Income Tax Provision.  The income tax provision in 
1996 was $80.8 million, or a 43.6% effective tax rate.  
The income tax provision in 1995 was $58.7 million, or a 
46.3% effective tax rate.  The decrease in the 1996 
effective tax rate reflects the increase in income before 
income tax provision.  The effective tax rate is impacted 
by amortization of excess of cost over net assets acquired, 
the majority of which is not deductible for tax purposes.

     Income.  Net income for 1996 was $104.7 million, or 
$2.34 per share, compared with net income of $68.1 million, 
or $1.55 per share, for 1995.  Net income increased due to 
the factors described above.
 
Comparison of Fifty-Two Weeks Ended December 31, 1995 with
Fifty-Two Weeks Ended January 1, 1995

     Sales.  Sales for 1995 were $5,070.7 million, an 
increase of $74.1 million, or 1.5%, over 1994.  Same store 
sales increased 3.5% over 1994 sales.  The increase in 
sales reflects the favorable consumer response to improved
customer service, the "Vons Is Value" marketing campaign 
and the slowly improving economic environment in Southern
California offset by competitive new store, remodel and
conversion activity.  In 1995, the Company opened 13 new 
stores, closed 19 stores and completed 37 store remodel 
projects.

     Costs and Expenses.  Costs and expenses for 1995 were
$4,876.6 million, an increase of $5.8 million, or 0.1%, 
over the comparable 1994 period.

     Cost of sales and buying and occupancy expenses 
as a percentage of sales for 1995 were 74.8%, a decrease 
of 0.6 of a  percentage point from 1994.  The impact of 
lower prices has been more than offset by decreased 
product costs achieved through better utilization of 
category management, more effective promotional offerings 
and increased private brand sales.

     Selling and administrative expenses as a percentage 
of sales were 21.1% in 1995, comparable to 1994, which 
included a $5.0 million insurance deductible charge 
related to the Northridge earthquake.  This reflects 
higher service levels in the stores as well as negotiated 
union wage rate increases which were offset by a more 
efficient mix of store labor.

     The Company recorded restructuring charges of $33.0 
million, or $.45 per share, in 1994 (see Note 15 to the
Consolidated Financial Statements included elsewhere 
herein).  

     Operating Income.  Operating income for 1995 was 
$194.1 million, an increase of $68.3 million, or 54.3%, 
over 1994.  Operating margin increased to 3.8% in 1995 
versus 2.5% in 1994.  Excluding the 1994 restructuring 
charges, results for 1994 were $158.8 million, or 3.2% of
sales.  These increases primarily reflect an increase in
gross margin.  FIFO EBITDA was $315.0 million, or 6.2% of
sales, in 1995 compared with $284.3 million, or 5.7% of sales,
in 1994.

     Interest Expense.  Net interest expense for 1995 was
$67.3 million, a decrease of $3.5 million, or 4.9%, from
1994.  This decrease was due to lower average revolving
debt borrowings partially offset by higher weighted
average interest cost on revolving debt.  The ratio of
FIFO EBITDA to net interest expense increased to 4.7 times
in 1995 versus 4.0 times in 1994.

     Income Tax Provision.  The income tax provision in 
1995 was $58.7 million, or a 46.3% effective tax rate.  
The income tax provision in 1994 was $28.4 million, or a 
51.6% effective tax rate.  Excluding the restructuring 
charge, the effective tax rate for 1994 was 48%.  The 
decrease in the 1995 effective tax rate reflects the 
increase in income before income tax provision.  The 
effective tax rate is impacted by amortization of excess 
of cost over net assets acquired, the majority of which 
is not deductible for tax purposes.

     Income.  Net income for 1995 was $68.1 million, or 
$1.55 per share, compared with net income of $26.6 
million, or $.61 per share, for 1994.  In addition 
to improved operating results, this increase reflects 
the impact of the 1994 restructuring charges of $33.0 
million, or $.45 per share. 

Liquidity and Capital Resources

     The Company's primary sources of liquidity are cash 
flows from  operations and available credit under its 
revolving debt.  Management believes that these sources
 adequately provide for its working capital, capital 
expenditure and debt service needs. 

     Net cash provided by operating activities was $260.4 
million in 1996 compared with $239.4 million in 1995.  
This change primarily reflects an increase in net income.  
The ratio of current assets to current liabilities was 
0.61 to 1 at December 29, 1996 compared with 0.76 to 1 
at December 31, 1995.  The decrease in the ratio of current
assets to current liabilities reflects the maturity of the
Company's $110.8 million mortgage in July 1997.

     Net cash used for investing activities was $99.3 
million in 1996 compared with $91.2 million in 1995.  
Total capital expenditures in 1996, including the present 
value of commitments under operating leases, were $193.5 
million.

     Subject to completion of the proposed Merger with 
Safeway, the Company currently anticipates that total 
1997 capital expenditures will be approximately $215 
million, of which approximately $150  million will be 
cash capital expenditures and approximately $65  million 
will represent the present value of commitments under 
operating leases.  This capital expenditure level 
contemplates the opening of approximately 13 new 
stores, including five replacement stores, and the 
completion of approximately 24 store remodeling projects.  
The capital expenditure program has substantial flexibility 
and is subject to revision based on various factors; 
including, but not limited to, business conditions, 
changing time constraints, cash flow requirements and 
competitive factors, as well as Safeway's plans following 
the Merger.

     Subject to completion of the proposed Merger with 
Safeway, the Company currently anticipates that 1997 cash 
capital expenditures will be funded out of cash provided 
by operations, the Revolving Loan, and/or through operating
leases.  In the near term, if Vons were to reduce 
substantially or postpone its capital expenditure program, 
Vons believes that there would be no substantial impact 
on current operations.  In the long-term, if these programs 
were substantially reduced, in the Company's opinion, 
its operating business and ultimately its cash flow would 
be adversely impacted.

     Net cash used by financing activities was $161.2 
million in 1996 compared with $147.8 million in 1995.  
The level of borrowings under the Company's revolving 
debt is dependent primarily upon cash flows from operations
and capital expenditure requirements.

     At December 29, 1996, the Company's revolving 
debt borrowings totaled $6.0 million and the Company 
had available unused credit of $616.8 million.  The 
weighted average interest cost for 1996 on the 
Company's revolving debt was 7.0% excluding commitment 
fees on unused borrowings.  At December 29, 1996, the 
corresponding bank prime rate was 8.25%.

     The Company's involvement with derivative financial
instruments has been limited to interest rate cap 
contracts to reduce the potential impact of increases in 
interest rates on revolving debt.

     On March 24, 1997, the Company requested the 
redemption of all outstanding 9-5/8% Senior Subordinated 
Notes effective April 28, 1997.  The Company's liquidity 
and capital resources are likely to change significantly
following completion of the proposed Merger.

Impact of Changing Prices

     Vons primary costs, inventory and labor, are affected 
by a number of factors that are beyond the Company's 
control, including availability and price of merchandise, 
the competitive climate and regional economic conditions.  
As is typical of the supermarket industry, the Company has
generally been able to maintain margins by adjusting its 
retail prices, but competitive conditions may from time to 
time render it unable to do so while maintaining its 
market share.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial statements and supplementary data are as set 
forth in the Index to Consolidated Financial Statements 
beginning immediately following signatures.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURES

     None.
<PAGE>
                             PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     To the extent required to be filed, the registrant will
file an amendment to this Form 10-K within 120 days of the 
end of its fiscal year to provide the information required 
by Part III of this Form 10-K.

ITEM 11: EXECUTIVE COMPENSATION

     To the extent required to be filed, the registrant 
will file an amendment to this Form 10-K within 120 days 
of the end of its fiscal year to provide the information 
required by Part III of this Form 10-K.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 
         AND MANAGEMENT

     To the extent required to be filed, the registrant 
will file an amendment to this Form 10-K within 120 days 
of the end of its fiscal year to provide the information 
required by Part III of this Form 10-K.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      To the extent required to be filed, the registrant 
will file an amendment to this Form 10-K within 120 days 
of the end of its fiscal year to provide the information 
required by Part III of this Form 10-K.

                          PART IV

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

     (a)  Exhibits and Financial Statements and Schedules

          (1)   Financial Statements
                See Index to Consolidated Financial Statements.

          (2)   Schedules
   
                  Schedules are omitted because of the 
                  absence of the conditions under which 
                  they are required.

          (3)   Exhibits

                  See Index to Exhibits immediately following
                  Notes to Consolidated financial Statements.

     (b)  Reports on Form 8-K

          A report on Form 8-K dated December 15, 1996 was 
filed by the Registrant to disclose that the Registrant 
had entered into an Agreement and Plan of Merger, dated 
as of December 15, 1996 by and among the Registrant, Safeway 
Inc. and SSCI Merger Sub., Inc.<PAGE>
<PAGE>
                           SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                       THE VONS COMPANIES, INC.
 
                               /S/ LAWRENCE A. DEL SANTO
                       By:     --------------------------------
                                   Lawrence A. Del Santo
                                   Chairman of the Board and
                                   Chief Executive Officer

                       Date:   March 28, 1997
                                     
     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 in the capacities and on the
dates indicated.

      Signature                       Title              Date
      ---------                       -----              ----


/S/ LAWRENCE A. DEL SANTO         Chairman        March 28, 1997
---------------------------------  of the Board         
    Lawrence A. Del Santo          and Chief 
                                   Executive
                                   Officer 

/S/ PAMELA K. KNOUS               Executive Vice  March 28, 1997
---------------------------------  President,           
    Pamela K. Knous                Chief Financial
                                   Officer (Chief 
                                   Accounting
                                   Officer) and
                                   Treasurer

/S/ STEVEN A. BURD                Member-Board    March 28, 1997
---------------------------------  of Directors         
    Steven A. Burd

/S/ WILLIAM S. DAVILA             Member-Board    March 28, 1997
---------------------------------  of Directors         
    William S. Davila

/S/ FRITZ L. DUDA                 Member-Board    March 28, 1997
---------------------------------  of Directors         
    Fritz L. Duda 

/S/ RICHARD E. GOODSPEED          Member-Board    March 28, 1997
---------------------------------  of Directors         
    Richard E. Goodspeed


/S/ JAMES H. GREENE, JR.          Member-Board    March 28, 1997
---------------------------------  of Directors         
    James H. Greene, Jr.

/S/ JOHN M. LILLIE                Member-Board    March 28, 1997
---------------------------------  of Directors         
    John M. Lillie

/s/ ROBERT I. MACDONNELL          Member-Board    March 28, 1997
---------------------------------  of Directors         
    Robert I. MacDonnell

/S/ PETER A. MAGOWAN              Member-Board    March 28, 1997
---------------------------------  of Directors         
    Peter A. Magowan

/S/ CHARLES E. RICKERSHAUSER, JR. Member-Board    March 28, 1997
---------------------------------  of Directors         
    Charles E. Rickershauser, Jr.

/S/ ROGER E. STANGELAND           Member-Board    March 28, 1997
---------------------------------  of Directors         
    Roger E. Stangeland

                                  Member-Board    March   , 1997
---------------------------------  of Directors         
    William Y. Tauscher
<PAGE>
              THE VONS COMPANIES, INC. AND SUBSIDIARIES

              INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report................................ F-1

Financial Statements:
  Consolidated Statements of Operations for
    the fiscal years ended December 29, 1996, 
    December 31, 1995, and January 1, 1995.................. F-2

  Consolidated Balance Sheets as of 
    December 29, 1996 and December 31, 1995 ................ F-3

  Consolidated Statements of Shareholders' Equity for the 
    fiscal years ended December 29, 1996, 
    December 31, 1995 and January 1, 1995 .................. F-4

  Consolidated Statements of Cash Flows for the fiscal 
    years ended December 29, 1996, December 31, 1995 and 
    January 1, 1995 ........................................ F-5

  Notes to the Consolidated Financial Statements............ 1


<PAGE>
[This page appears on KPMG Peat Marwick letterhead.]


     INDEPENDENT AUDITORS' REPORT 


     The Board of Directors  
     The Vons Companies, Inc.
 
     We have audited the accompanying consolidated balance 
sheets of The Vons Companies, Inc. and subsidiaries as of
December 29, 1996 and December 31, 1995, and the related
consolidated statements of operations, shareholders' 
equity and cash flows for the fifty-two week periods 
ended December 29, 1996, December 31, 1995 and January 1, 
1995.  These consolidated financial statements are the
responsibility of the Company's management.  Our 
responsibility is to express an opinion on these 
consolidated financial statements based on our audits. 

     We conducted our audits in accordance with generally
accepted auditing standards.  Those standards 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.  An audit also includes assessing 
the accounting principles used and significant estimates 
made by management, as well as evaluating the overall 
financial statement presentation.  We believe that our 
audits provide a reasonable basis for our opinion. 

     In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, 
the financial position of The Vons Companies, Inc. and
subsidiaries at December 29, 1996 and December 31, 1995 
and the results of their operations and cash flows 
for the fifty-two week periods ended December 29, 1996, 
December 31, 1995 and January 1, 1995, in conformity 
with generally accepted accounting principles. 

     As described in note 13 to the consolidated financial
statements, the Company adopted the provisions of Financial 
Accounting Standards Board Statement of Financial Accounting 
Standards No. 123, "Accounting for Stock-Based Compensation."

/S/ KPMG Peat Marwick LLP

January 17, 1997, except for the
penultimate sentence in paragraph
five of note 7 which is
as of March 27, 1997  

                                         F-1<PAGE>
<PAGE>
 
<TABLE> 
THE VONS COMPANIES, INC. AND SUBSIDIARIES 
----------------------------------------- 

     Consolidated Statements of Operations 

 

<CAPTION> 
 
                                                           Fiscal Year Ended 
                                               ----------------------------------------- 
All amounts except per share data              December 29,   December 31,    January 1,
in millions of dollars                             1996           1995          1995 
                                               -------------  ------------  ------------ 
<S>                                            <C>            <C>           <C>  
Sales                                          $     5,407.4  $    5,070.7  $    4,996.6 
                                               -------------  ------------  ------------ 
Costs and expenses: 
  Cost of sales, buying and  
    occupancy                                        4,032.7       3,790.2       3,767.2 
  Selling and administrative  
    expenses                                         1,118.6       1,071.4       1,055.5 
  Amortization of excess cost  
    over net assets acquired                            15.0          15.0          15.1 
  Restructuring charges                                   -             -           33.0
                                               -------------  ------------  ------------ 
                                                     5,166.3       4,876.6       4,870.8 
                                               -------------  ------------  ------------ 
Operating income                                       241.1         194.1         125.8 
Interest expense, net                                   55.6          67.3          70.8 
                                               -------------  ------------  ------------ 
Income before income tax provision                     185.5         126.8          55.0 
Income tax provision                                    80.8          58.7          28.4 
                                               -------------  ------------  ------------ 
Net income                                     $       104.7  $       68.1  $       26.6 
                                               -------------  ------------  ------------  
                                               -------------  ------------  ------------ 
Income per common and common
  equivalent share: 
  Net income                                   $        2.34  $       1.55  $        .61 
                                               -------------  ------------  ------------ 
                                               -------------  ------------  ------------ 
Weighted average common and  
  common equivalent shares                              44.8          43.9          43.6 
                                               -------------  ------------  ------------ 
                                               -------------  ------------  ------------ 
Dividends paid on common stock                     None           None          None 
                                               -------------  ------------  ------------ 
                                               -------------  ------------  ------------ 
<FN> 
See accompanying notes to these consolidated financial statements. 
</TABLE> 

                                            F-2
 
<PAGE> 
<TABLE> 
THE VONS COMPANIES, INC. AND SUBSIDIARIES 
----------------------------------------- 

     Consolidated Balance Sheets 
  
 
<CAPTION> 
                                                         December 29,      December 31, 
All amounts except share data in millions of dollars         1996             1995     
                                                         ------------     ------------ 
<S>                                                      <C>              <C> 
Assets 
Current assets: 
  Cash                                                   $        9.3     $        9.4 
  Accounts receivable                                            45.0             31.7  
  Inventories                                                   335.3            350.7 
  Deferred taxes                                                 32.5             30.9
  Other                                                          42.8             29.6 
                                                         ------------     ------------ 
    Total current assets                                        464.9            452.3 
Property and equipment, net                                   1,194.2          1,192.5 
Excess of cost over net assets acquired, 
  net of accumulated amortization of $133.7
  million and $118.7 million, respectively                      467.8            482.8 
Other                                                            58.5             58.9 
                                                         ------------     ------------ 
  Total Assets                                           $    2,185.4     $    2,186.5 
                                                         ------------     ------------ 
                                                         ------------     ------------ 
Liabilities and Shareholders' Equity 
Current liabilities: 
  Current maturities of capital lease  
    obligations and long-term debt                       $      154.9     $       25.7 
  Accounts payable                                              339.2            304.2 
  Accrued liabilities                                           265.7            263.5 
                                                         ------------     ------------ 
    Total current liabilities                                   759.8            593.4 
Accrued self-insurance                                          143.4            128.0 
Deferred income taxes                                           131.7            118.9 
Other noncurrent liabilities                                     62.3             65.0 
Capital lease obligations                                        50.3             53.4 
Senior debt                                                      15.0            298.8 
Subordinated debt, net                                          284.5            305.7 
                                                         ------------     ------------ 
  Total liabilities                                           1,447.0          1,563.2 
                                                         ------------     ------------ 
Shareholders' equity: 
  Preferred stock - $.01 par value;  
    authorized 20,000,000 shares; 
    issued and outstanding - none                                  -                - 
  Common stock - $.10 par value; authorized  
    100,000,000 shares; issued and 
    outstanding - December 29, 1996: 
    43,987,000 shares; December 31, 1995: 
    43,533,000 shares                                             4.4              4.3 
  Paid-in capital                                               353.5            343.2 
  Retained earnings                                             380.6            275.9 
  Notes receivable for stock                                      (.1)             (.1) 
                                                         ------------     ------------ 
    Total shareholders' equity                                  738.4            623.3 
                                                         ------------     ------------ 
  Total Liabilities and Shareholders' Equity             $    2,185.4     $    2,186.5 
                                                         ------------     ------------ 
                                                         ------------     ------------ 
<FN> 
See accompanying notes to these consolidated financial statements. 
</TABLE> 

                                            F-3

<PAGE> 
<TABLE> 
THE VONS COMPANIES, INC. AND SUBSIDIARIES 
----------------------------------------- 

     Consolidated Statements of Cash Flows 

 
<CAPTION> 
                                                       Fiscal Year Ended 
                                      -------------------------------------------------- 
                                      December 29,        December 31,        January 1,
All amounts in millions of dollars        1996               1995               1995 
                                      ------------       ------------       ------------ 
<S>                                   <C>                <C>                <C>   
Cash flows from operating 
  activities: 
Net income                            $      104.7       $       68.1       $       26.6 
Adjustments to reconcile net 
  income to net cash provided by 
  operating activities: 
    Restructuring charges                       -                  -                33.0
    Depreciation and  
      amortization of property 
      and capital leases                      99.6              100.0              102.1 
    Amortization of excess cost 
      over net assets acquired 
      and other assets                        16.4               16.0               16.1
    Amortization of debt 
      discount and deferred 
      financing costs                          6.2                6.8                6.2 
    LIFO charge                                4.8                4.9                2.3 
    Deferred income taxes                     11.2                1.5               (1.5)
    Change in assets and 
      liabilities: 
        (Increase) decrease in 
          accounts receivable                (13.3)              13.7               (9.1)
        (Increase) decrease in  
          inventories at FIFO 
          costs                               10.6                3.7               21.9  
        (Increase) decrease in 
          other current assets                 1.7              (10.9)               3.2 
        (Increase) decrease in  
          noncurrent assets                   (3.6)              (7.5)              (9.3) 
        Increase (decrease) in  
          accounts payable                     7.2               11.7              (25.5) 
        Increase (decrease) in 
          accrued liabilities                  2.2               16.7               23.3  
        Increase (decrease) in 
          noncurrent liabilities              12.7               14.7               (9.5) 
                                      ------------       ------------       ------------ 
Net cash provided by operating 
  activities                                 260.4              239.4              179.8  
                                      ------------       ------------       ------------ 
Cash flows from investing 
  activities: 
    Addition of property, plant  
      and equipment                         (117.8)            (110.2)            (128.0)
    Disposal of property, plant  
      and equipment                           18.5               19.0               10.5 
                                      ------------       ------------       ------------ 
Net cash used by investing  
  activities                                 (99.3)             (91.2)            (117.5) 
                                     ------------       ------------       ------------ 
Cash flows from financing  
  activities:  
    Net payments on revolving
      debt                                  (171.8)            (122.1)             (67.9) 
    Redemption and repurchases 
      of senior subordinated 
      debentures                             (15.6)              (2.4)              (6.2) 
    Increase (decrease) in net 
      outstanding drafts                      27.8              (15.9)              19.4
    Payments on other debt and  
      capital lease obligations              (12.0)              (8.2)              (8.0) 
    Other                                     10.4                 .8                 .9  
                                      ------------       ------------       ------------ 
Net cash used by  
  financing activities                      (161.2)            (147.8)             (61.8)
                                      ------------       ------------       ------------
Net cash increase (decrease)                  (0.1)                .4                 .5
Cash at beginning of year                      9.4                9.0                8.5
                                      ------------       ------------       ------------ 
Cash at end of year                   $        9.3       $        9.4       $        9.0
                                      ------------       ------------       ------------
                                      ------------       ------------       ------------
Supplemental disclosures of  
  cash flow information: 
    Cash paid during the year for:    
      Interest                        $       51.3       $       59.8       $       64.9
                                      ------------       ------------       ------------
                                      ------------       ------------       ------------
      Income taxes                    $       72.0       $       56.0       $       33.7
                                      ------------       ------------       ------------
                                      ------------       ------------       ------------
<FN> 
See accompanying notes to these consolidated financial statements. 
</TABLE> 

                                            F-4
 
<PAGE> 
<TABLE> 
THE VONS COMPANIES, INC. AND SUBSIDIARIES 
----------------------------------------- 

     Consolidated Statements of Shareholders' Equity


<CAPTION> 
                            Number          
                              of      Common    Paid-In    Retained  
All amounts in millions     Shares    Stock     Capital    Earnings     Notes     Total 
                            ------    ------    -------    ---------    ------    ------ 
<S>                         <C>       <C>       <C>        <C>          <C>       <C> 

Balance at January 2,  
  1994                        43.3    $  4.3    $ 339.5    $   181.2    $  (.1)   $524.9 

Net income                      -         -          -          26.6        -       26.6 
Stock options exercised         .1        -          .9           -         -         .9
                            ------    ------    -------    ---------    ------    ------ 
Balance at January 1,   
  1995                        43.4       4.3      340.4        207.8       (.1)    552.4 

Net income                      -         -          -          68.1        -       68.1 
Stock options exercised         .1        -         2.8           -         -        2.8 
                            ------    ------    -------    ---------    ------    ------ 
Balance at December 31,   
  1995                        43.5       4.3      343.2        275.9       (.1)    623.3 

Net income                      -         -          -         104.7        -      104.7
Stock options exercised         .5       0.1       10.3           -         -       10.4
                            ------    ------    -------    ---------    ------    ------ 

Balance at December 29, 
  1996                        44.0    $  4.4    $ 353.5    $   380.6    $  (.1)   $738.4
                            ------    ------    -------    ---------    ------    ------ 
                            ------    ------    -------    ---------    ------    ------ 
<FN> 
See accompanying notes to these consolidated financial statements. 
</TABLE> 

                                            F-5<PAGE>
<PAGE> 

THE VONS COMPANIES, INC. AND SUBSIDIARIES 
----------------------------------------- 
     
     Notes to the Consolidated Financial Statements 

     Note 1. Basis of Presentation 

     At December 29, 1996, the Company operated 320 
supermarkets and food and drug combination retail 
stores under the names Vons and Pavilions.  The Company's
marketing territory includes Southern and Central 
California and Clark County, Nevada.  The Company also 
operates a fluid milk processing facility, an ice cream 
plant, a bakery, and distribution facilities for meat, 
grocery, produce and general merchandise to support 
the store network. 

     The Company's fiscal year is based on a 52-53 week 
fiscal year ending on the Sunday closest to December 31.  
Fiscal years 1996, 1995 and 1994 included 52 weeks which 
ended on December 29, 1996, December 31, 1995 and 
January 1, 1995, respectively.  

     Note 2. Summary of Significant Accounting Policies 

     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 and the disclosure of contingent assets and
 liabilities as of December 29, 1996 and the reported 
amounts of income and expenses for the fiscal year ended 
December 29, 1996.  Actual results could differ from 
those estimates.

     Basis of Consolidation.  The consolidated 
financial statements include the accounts of the Company 
and its subsidiaries.  All significant intercompany 
accounts and transactions are eliminated in consolidation.

     Revenue Recognition.  Sales are recorded when 
payment is tendered at check-out.

     Inventories.  Inventories are stated at the lower of 
cost or market.  The cost of substantially all inventories 
is determined using the last-in, first-out (LIFO) method.
 
     Property and Depreciation.  Property and equipment, 
including assets under capital leases, are recorded at 
cost and depreciated or amortized over forty years for 
buildings, up to ten years for fixtures and equipment and
generally between fifteen and twenty-five years, but 
not to exceed the lease term, for leasehold improvements 
using principally the straight-line method for financial
reporting purposes and accelerated methods for tax 
purposes.  Major renewals and improvements are 
capitalized.  Maintenance and repairs which do not 
improve or extend the life of the respective assets 
are charged to expense. 
 
     Amortization of Intangible Assets.  The excess of 
cost over net assets acquired is amortized on a 
straight-line basis over forty years.  The Company 
assesses the recoverability of the excess of cost over 
net assets acquired based on forecasted operating income.
Other noncurrent assets include an agreement not to 
compete acquired in connection with the 1992 acquisition 
of the Williams Bros. Markets, Inc. supermarket 
business.  The agreement not to compete is amortized 
on a straight-line basis over five years. 
     
     Income Tax Provision.  The income tax provision 
includes amounts related to current taxable income and 
deferred income taxes.  A deferred income tax asset or 
liability is determined by applying currently enacted 
tax laws and rates to the expected reversals of the 
cumulative temporary differences between the carrying 
value of assets and liabilities for financial statement 
and income tax purposes.  The deferred income tax 
provision is measured by the change in the net deferred 
income tax asset or liability during the year.  The 
Company accounts for general business tax credits using 
the flow-through method. 
 
     Income per Common and Common Equivalent Share.  
Income per common and common equivalent share is based 
on the weighted average number of common shares 
outstanding during each year and common equivalent 
shares arising from stock options when the effect is 
dilutive. 

     Disclosure About Fair Value of Financial 
Instruments.  The fair value of the Company's financial
instruments is based on the quoted market prices for the 
same or similar issues or on the current rates offered 
to the Company for financial instruments of the same 
remaining maturities. 

     Derivatives.  Premiums paid for purchased interest 
rate cap contracts are amortized to interest expense 
over the terms of the contracts.  Unamortized 
premiums are included in other assets in the 
accompanying consolidated balance sheets.  Amounts 
earned under the interest rate cap contracts are  
reflected as a reduction of interest expense.

     Note 3. Proposed Merger

    On December 15, 1996, Vons entered into an Agreement 
and Plan of Merger, as amended (the "Merger Agreement"), 
with Safeway for a business combination in which, among 
other things, Safeway will issue 1.425 shares of Safeway 
common stock for each share of Vons common stock that 
Safeway does not currently own and Vons will be merged 
with and into a wholly owned subsidiary of Safeway 
(the "Merger").  The transaction, which was unanimously 
approved by a special committee of the Vons Board of 
Directors, comprised of directors who are not affiliated 
with Safeway, is subject to  approval by a majority of 
the outstanding Vons common shares not held by Safeway 
and its affiliates, and certain other conditions.  The 
combined company will be the second largest grocery 
chain in North America, with 1,377 stores and sales in 
excess of $22 billion.  The proposed merger is expected 
to close early in the second quarter of 1997.  

     Note 4. Inventories 

     The excess of estimated current cost over LIFO 
carrying value of inventories was $37.1 million and 
$32.3 million at December 29, 1996 and December 31, 
1995, respectively.  Application of the LIFO method 
resulted in a charge to cost of sales, buying and 
occupancy of $4.8 million, $4.9 million and $2.3 
million for 1996, 1995 and 1994, respectively. 

     Note 5. Property and Equipment 

     The components of property and equipment at 
December 29, 1996 and December 31, 1995 were as 
follows (in millions of dollars): 

<TABLE> 
<CAPTION> 

                                    December 29,    December 31, 
                                        1996           1995 
                                    ------------   ------------ 
<S>                                 <C>            <C> 
Land                                $      237.5   $      225.3 
Buildings                                  412.1          386.6 
Leasehold improvements                     329.6          319.1 
Fixtures and equipment                     738.6          714.6 
                                    ------------   ------------ 
                                         1,717.8        1,645.6 
Less: accumulated depreciation  
  and amortization                        (563.4)        (496.6) 
                                    ------------   ------------ 
  Net property owned                     1,154.4        1,149.0 
                                    ------------   ------------ 
Capital leases                              68.9           69.4 
Less: accumulated amortization             (29.1)         (25.9)
                                    ------------   ------------ 
  Net capital leases                        39.8           43.5 
                                    ------------   ------------ 
    Property and equipment, net     $    1,194.2   $    1,192.5 
                                    ------------   ------------ 
                                    ------------   ------------ 
</TABLE> 

     Note 6. Accrued Current Liabilities 

     The components of accrued current liabilities at 
December 29, 1996 and December 31, 1995 were as follows 
(in millions of dollars): 
 
<TABLE> 
<CAPTION> 
                                    December 29,    December 31, 
                                        1996           1995 
                                    ------------   ------------ 
<S>                                 <C>            <C> 
Accrued payroll, benefits and  
  related taxes                     $      147.8   $      134.6 
Accrued self-insurance                      33.2           37.2 
Other                                       84.7           91.7 
                                    ------------   ------------ 
  Accrued current liabilities       $      265.7   $      263.5 
                                    ------------   ------------ 
                                    ------------   ------------ 
</TABLE> 
 
     Note 7. Senior and Subordinated Debt 

     Senior and subordinated debt as of December 29, 1996 
and December 31, 1995 were as follows (in millions of dollars):

<TABLE> 
<CAPTION> 
                                    December 29,    December 31, 
                                        1996           1995 
                                    ------------   ------------ 
<S>                                 <C>            <C>
Senior debt: 
  Revolving Loan, interest at      
    prime or Eurodollar rate plus
    designated amounts, due 2000    $        6.0   $      177.8
  Mortgage, 9.25%, secured by  
    real property, due in monthly 
    installments of $1.0 million 
    including interest, due 1997           110.8          113.0 
  Mortgages, 6.00% to 11.50%, 
    secured by real property, due 
    in varying monthly  
    installments with maturity 
    dates from 1997 to 2009                 23.8           13.5 
                                    ------------   ------------ 
      Total                                140.6          304.3 
  Less: current portion                    125.6            5.5 
                                    ------------   ------------ 
    Long-term portion               $       15.0   $      298.8 
                                    ------------   ------------ 
                                    ------------   ------------ 
Subordinated debt: 
  Senior subordinated  
    debentures, 6-5/8%, less 
    unamortized discount of 
    $3.6 million and $7.2
    million at December 29, 1996 
    and December 31, 1995, 
    respectively, based on an 
    effective interest rate of 
    12.5%, interest due in 
    semiannual installments         $       58.9   $       70.9 
  Senior subordinated notes, 
    9-5/8%, interest due in  
    semiannual installments                150.0          150.0 
  Senior subordinated notes, 
    8-3/8%, interest due in  
    semiannual installments                100.0          100.0 
                                    ------------   ------------ 
      Total                                308.9          320.9 
  Less: current portion                     24.4           15.2
                                    ------------   ------------ 
    Long-term portion               $      284.5   $      305.7
                                    ------------   ------------ 
                                    ------------   ------------ 
</TABLE> 

     On February 17, 1995, the Company entered into an 
agreement with a group of banks for a $625 million 
Revolving Loan Agreement (the "Revolving Loan").  The 
Revolving Loan expires on February 17, 2000; however, it 
provides that the Company may request that the banks 
extend the maturity date by one year beginning in 
September 1997 and each year thereafter.  Interest 
for the revolving debt is at prime or Eurodollar 
rate plus designated amounts.  At the Company's option, 
the revolving debt may be used to support commercial 
paper borrowings, other unsecured bank borrowings and 
standby letters of credit outside the revolving debt.  
At December 29, 1996, borrowings under the 
Revolving Loan were $6.0 million and available unused 
credit under the Revolving Loan was $616.8 million.  
Weighted average interest costs for 1996, for the 
Revolving Loan were 7.0% excluding commitment 
fees on unused borrowings.  At December 29, 1996, 
the corresponding bank prime rate was 8.25%.  Commitment 
fees under the Revolving Loan and Revolving Credit and 
Term Loan Facilities were $.8 million, $1.2 million and 
$1.5 million for 1996, 1995 and 1994, respectively.

     The Company's involvement with derivative financial
instruments has been limited to interest rate cap contracts 
to reduce the impact of increases in interest rates on 
revolving debt.  The contracts were purchased in 1992 to 
hedge principal amounts of $250 million for 1994, $200 million
for 1995, and $100 million for 1996 and 1997 of interest
rate exposure in excess of an approximate 8.225% 
effective borrowing rate under the revolving debt.  The 
Company records interest expense or interest income 
related to interest rate cap contracts on a monthly basis.  

     The Company's $110.8 million mortgage loan requires 
monthly principal and interest payments of approximately 
$1 million with a one-time principal and interest 
payment of $110.7 million in July 1997. 

     The indenture related to the 6-5/8% Senior 
Subordinated Debentures (the "6-5/8% Debt") provides 
for mandatory redemptions.  As of December 29, 1996, 
$25.0 million and $37.5 million are due on May 15, 1997, 
and May 15, 1998, respectively.  Interest on the 6-5/8%
Debt is payable semiannually on May 15 and November 15.  
The 6-5/8% Debt may be redeemed at any time at 100% of 
the principal amount plus accrued interest.  The 6-5/8% 
Debt was issued at a discount which is being amortized 
over the related term of the indebtedness. 
 
     The indenture related to the 9-5/8% Senior 
Subordinated Notes (the "9-5/8% Debt") due April 1, 2002,
provides for principal repayment at maturity.  Interest 
on the 9-5/8% Debt is payable semiannually on April 1 and 
October 1.  The 9-5/8% Debt may be redeemed at the 
Company's option any time on or after April 1, 1997,
at varying percentages above par of the principal 
amount plus accrued interest.  On March 24, 1997, the 
Company requested the redemption of all outstanding 
9-5/8% Debt effective April 28, 1997.  The Company is 
not required to make mandatory redemption or sinking
fund payments with respect to the 9-5/8% Debt prior 
to maturity. 

     The indenture related to the 8-3/8% Senior 
Subordinated Notes (the "8-3/8% Debt") due 
October 1, 1999, provides for principal repayment 
at maturity.  Interest on the 8-3/8% Debt is payable 
semiannually on April 1 and October 1.  The 8-3/8% 
Debt may be redeemed at the Company's option any time 
on or after October 1, 1997, at 100% of the principal 
amount plus accrued interest.  The Company is not 
required to make mandatory redemption or sinking 
fund payments with respect to the 8-3/8% Debt 
prior to maturity. 

     At December 29, 1996, and December 31, 1995, 
the carrying value of all financial instruments 
approximated fair value.

     The Company's debt agreements contain 
various restrictions on the incurrence of additional
indebtedness, payment or prepayment of senior subordinated 
and subordinated debt, investments, acquisitions, capital
 expenditures, dividends, common stock redemptions and 
purchases and dispositions of assets.  The covenants also 
require the Company to meet certain shareholders' 
equity levels, debt leverage levels and fixed 
charge coverage ratios which can vary each fiscal 
year.  The Company is in compliance with these 
covenants as of December 29, 1996.  Under its 
most restrictive debt agreement, the Company had 
$119.0 million available for dividends and distributions 
at December 29, 1996.  

     Principal payments required in future years are as 
follows (in millions of dollars): 

<TABLE> 
<CAPTION> 
                                               Principal  
                                                Payments
                                               ---------- 
<S>                                            <C> 
1997                                           $    150.6
1998                                                 38.5
1999                                                101.1
2000                                                  7.2
2001                                                  1.3
2002-2006                                           153.7
2007-2011                                              .7
                                               ----------
  Total principal payments                          453.1
Less: current portion                               150.6
                                               ----------
  Long-term portion                            $    302.5
                                               ----------
                                               ----------
</TABLE> 

     Standby letters of credit, primarily for
self-insurance purposes, not reflected in the 
accompanying consolidated financial statements, 
were approximately $72.2 million and $73.3 million 
at December 29, 1996 and December 31, 1995 respectively.

  
     Note 8. Leases 

     The Company currently leases certain of its 
stores, distribution facilities, vehicles and equipment 
for periods up to 50 years with various renewal options.  
The majority of such leases are noncancellable operating 
leases.  Certain operating and capital leases require 
contingent rentals based upon a percentage of sales 
over a specified amount.  Rental expense under operating 
leases was as follows (in millions of dollars): 
 
<TABLE> 
<CAPTION> 
                                 Fiscal Year Ended 
                    ------------------------------------------
                    December 29,   December 31,    January 1,
                        1996           1995           1995 
                    ------------   ------------   ------------
<S>                 <C>            <C>            <C>    
Minimum rentals     $       57.1   $       55.7   $       60.9
Contingent rentals           7.8            7.3            7.5
Sublease rentals     
  received                  (7.8)          (6.4)          (4.7)
                    ------------   ------------   ------------
  Rental expense,
    net             $       57.1   $       56.6   $       63.7 
                    ------------   ------------   ------------ 
                    ------------   ------------   ------------ 
</TABLE> 

     Capital lease obligations, relating primarily to 
buildings, vary in amounts with interest rates ranging 
from 7.5% to 12.5%.  Contingent rentals associated with 
capital leases were $1.6 million, $1.5 million 
and $1.4 million for 1996, 1995 and 1994, respectively. 

     Future minimum lease payments under noncancellable 
operating and capital leases, together with the present 
value of the net minimum lease payments, at December 29, 
1996 were as follows (in millions of dollars): 
 
<TABLE> 
<CAPTION> 
                                   Operating       Capital 
                                     Leases         Leases  
                                   ---------       ------- 
<S>                                <C>             <C>     
1997                               $    62.1       $   9.8
1998                                    61.7           7.9
1999                                    60.1           7.3
2000                                    57.6           7.2
2001                                    54.3           6.0
2002-2006                              247.6          29.8
2007-2011                              158.2          20.2
2012-2016                               81.5          11.2
2017-2021                                9.6           5.4
Thereafter                               1.5            -
                                   ---------       -------
  Total minimum lease 
    commitments                    $   794.2         104.8
                                   --------- 
                                   --------- 
Less: interest portion                                49.6
                                                   ------- 
  Present value of net minimum 
    lease commitments                                 55.2
Less: current portion                                  4.9 
                                                   ------- 
  Long-term portion                                $  50.3
                                                   ------- 
                                                   ------- 
 
</TABLE> 
 
     Minimum sublease rentals to be received in the future 
under noncancellable operating and capital leases totaled 
$76.6 million at December 29, 1996. 

     Effective September 1993, the Company became a partner 
of a California general partnership.  This partnership has
obligations for 16 retail leases for periods up to 21 years 
with various renewal options.  It is the partnership's 
intent to assign or sublease its leasehold interest in 
all of these sites.  Future minimum lease payments 
of the partnership under noncancellable operating 
leases at December 29, 1996 were as follows 
(in millions of dollars): 

<TABLE> 
<CAPTION> 

                                             December 29,
                                                1996 
                                             ------------
<S>                                          <C> 
1997                                         $        3.4
1998                                                  3.5
1999                                                  3.4
2000                                                  3.1
2001                                                  2.9
2002-2006                                            12.8
2007-2011                                             7.7
2012-2016                                             2.8
                                             ------------
  Total minimum lease commitments            $       39.6
                                             ------------ 
                                             ------------
</TABLE> 

     Minimum sublease rentals to be received by the 
partnership under noncancellable operating leases totaled 
$25.2 million at December 29, 1996.

     Note 9. Employee Benefit Plans 

     The Company sponsors a defined benefit pension plan for 
all nonunion employees.  An employee's benefit is based on 
years of credited service and the employee's final average 
pay calculated on the highest five years of compensation 
during the last ten years of employment.  The Company's 
funding policy is to contribute at least the minimum 
annual contribution required by Internal Revenue 
Service regulations. 

     The following table sets forth the defined benefit 
pension plan's funded status and amounts recognized in 
the Company's consolidated balance sheets at December 29, 1996
and December 31, 1995 (in millions of dollars): 
 
<TABLE> 
<CAPTION> 
                                   December 29,     December 31,
                                       1996            1995 
                                   ------------    ------------
<S>                                <C>             <C>  
Actuarial present value of 
  benefit obligation: 
  Accumulated benefit obligation, 
    including vested benefit of 
    $47.9 million at December 29,
    1996 and $44.1 million at 
    December 31, 1995              $       50.0    $       46.2 
                                   ------------    ------------ 
                                   ------------    ------------ 
Projected benefit obligation for 
  service rendered to date         $      (68.0)   $      (63.6) 
Plan assets at fair value, 
  primarily listed stocks and  
  U.S. bonds                               64.2            56.4 
                                   ------------    ------------ 
  Projected benefit obligation  
    in excess of plan assets               (3.8)           (7.2)
Unrecognized net (gain) loss from  
  past experience different from  
  that assumed, unrecognized  
  prior service cost and effects 
  of changes in assumptions                10.2            15.0 
                                   ------------    ------------ 
  Pension asset included in other 
    noncurrent assets              $        6.4    $        7.8 
                                   ------------    ------------ 
                                   ------------    ------------ 
</TABLE> 

     The discount rate used in determining the actuarial 
present value of the projected benefit obligation was 
7.25% at December 29, 1996 and December 31, 1995.  The 
expected long-term rate of return on assets and rate of 
increase in compensation levels were 9.0% and 4.5%, 
respectively, at December 29, 1996 and December 31, 1995.
Net pension cost under the defined benefit pension plan 
for 1996, 1995 and 1994 included the following components 
(in millions of dollars): 

<TABLE> 
<CAPTION> 
                               Fiscal Year Ended 
                  --------------------------------------------
                  December 29,     December 31,    January 1,
                      1996            1995            1995 
                  ------------    ------------    ------------
<S>               <C>             <C>             <C>  
Service cost      $        2.9    $        2.3    $        3.4
Interest cost on  
  projected 
  benefit  
  obligation               4.5             4.0             4.0
Actual return on   
  plan assets             (8.3)          (10.6)             .9  
Net amortization 
  and deferral             3.9             6.9            (4.4)
                  ------------    ------------    ------------ 
  Net pension 
    cost          $        3.0    $        2.6    $        3.9 
                  ------------    ------------    ------------ 
                  ------------    ------------    ------------ 
</TABLE> 

    The Company's supplemental executive retirement plan 
provides supplemental income payments for certain officers 
during retirement.  Total pension expense for all plans was 
$4.3 million, $3.4 million and $5.1 million for 1996, 1995 
and 1994, respectively. 

     The Company's contributory profit sharing plan for 
nonunion employees qualifies under Section 401(k) of the 
Internal Revenue Code.  In 1996, the Company's contribution 
was five percent of each eligible employee's pay plus a 
one percent matching contribution for each eligible employee 
who elected to contribute at least one percent of their pay.  
For 1996, 1995, and 1994 total expense related to the 
Company's profit sharing plan was $6.3 million, $7.6 million 
and $5.3 million, respectively. 

     The Company sponsors a retiree medical plan covering
substantially all nonunion employees who retire under 
certain age and service requirements.  The retiree medical 
plan provides outpatient, inpatient and various other 
covered services.  Participants in the retiree medical 
plan who retire after June 30, 1990 receive a benefit 
based upon years of service and a benefit value determined 
by the Company at the time of retirement.  Effective 
December 31, 1995, the Company adopted modifications in
its retiree medical plan which reduced the net retiree
medical plan cost.  Unused benefits may be indexed each 
year to the social security cost of living, up to a maximum 
of 4.0%.  Such benefits are funded from the Company's 
general assets.  The Company has the right to modify or 
terminate the plan. 

     The accumulated postretirement benefit obligation 
for the retiree medical plan as of December 29, 1996 
and December 31, 1995 was as follows (in millions 
of dollars): 

<TABLE> 
<CAPTION> 
                                     December 29,  December 31, 
                                         1996          1995 
                                     ------------  ------------ 
<S>                                  <C>           <C>  
Accumulated retiree medical benefit 
  obligation: 
    Retirees                         $       10.7  $       10.4
    Fully eligible active plan  
      participants                            1.5           1.7 
    Other active plan participants            5.7           5.9 
Unrecognized net gain from 
 unrecognized prior service
 cost and changes in  assumptions            13.3          13.5 
                                     ------------  ------------ 
  Accrued retiree medical benefit  
    obligation                       $       31.2  $       31.5 
                                     ------------  ------------  
                                     ------------  ------------ 
</TABLE> 

     For measurement purposes, a 6.0% annual increase 
in the cost of covered retiree medical benefits was 
assumed.  A 1.0% increase in the retiree medical cost 
trend rate would increase the retiree medical benefit 
obligation at December 29, 1996 by $.6 million and the 
1996 annual expense by $.1 million.  The weighted 
average discount rate used in determining the accumulated 
retiree medical benefit obligation was 7.25% at December 29, 
1996 and December 31, 1995.  The net retiree medical plan 
cost for 1996, 1995 and 1994 included the following 
components (in millions of dollars): 

<TABLE> 
<CAPTION> 
                                   Fiscal Year Ended 
                     ------------------------------------------
                     December 29,    December 31,   January 1, 
                         1996           1995           1995
                     ------------   ------------   ------------
<S>                  <C>            <C>            <C> 
Service cost         $         .3   $         .3   $        1.2
Interest cost                 1.2            1.3            2.1
Net amortization
  and deferral                (.7)           (.9)            -
                     ------------   ------------   ------------
  Net retiree 
   medical plan 
   costs             $         .8   $         .7   $        3.3
                     ------------   ------------   ------------
                     ------------   ------------   ------------

</TABLE> 

     The Company contributes to multi-employer joint 
pension plans and health and welfare plans administered 
by various trustees.  Contributions to these plans are based 
upon negotiated labor contracts.  The pension plans may 
be deemed to be defined benefit plans.  Information 
relating to accumulated benefits and fund assets as they 
may be allocable to the Company at December 29, 1996 
is not available.  Total pension expense for the union 
plans was $42.0 million, $19.8 million and $22.3 million
for 1996, 1995 and 1994,  respectively.  The health and 
welfare plans provide medical, dental and other benefits 
to certain employees covered by union contracts.  Total 
health and welfare expense for these plans was $108.7 
million, $108.6 million and $125.9 million for 1996, 
1995 and 1994, respectively.<PAGE>

     Note 10.  Income Taxes 

<TABLE> 
     The provision for income taxes for 1996, 1995 and 1994 was comprised 
of the following amounts (in millions of dollars): 
 
<CAPTION> 
                                                    Fiscal Year Ended 
                                      -------------------------------------------- 
                                      December 29,     December 31,    January 1, 
                                          1996            1995            1995 
                                      ------------    ------------    ------------
<S>                                   <C>             <C>             <C>  
Current: 
  Federal                             $       55.5    $       44.5    $       24.7 
  State                                       14.1            12.7             5.2
                                      ------------    ------------    ------------ 
    Total current income tax  
      provision                               69.6            57.2            29.9 
                                      ------------    ------------    ------------ 
Deferred: 
  Federal                                      8.1              .7             (.7)
  State                                        3.1              .8             (.8) 
                                      ------------    ------------    ------------ 
    Total deferred income tax  
      provision                               11.2             1.5            (1.5)
                                      ------------    ------------    ------------ 
      Total income tax provision      $       80.8    $       58.7    $       28.4 
                                      ------------    ------------    ------------ 
                                      ------------    ------------    ------------ 
</TABLE> 

<TABLE> 

     Reconciliation of the Federal statutory rate and effective rate for 1996, 1995 and 
1994 was as follows (in millions of dollars): 
 
<CAPTION> 
                                                          Fiscal Year Ended 
                                             ------------------------------------------ 
                                             December 29,    December 31,   January 1, 
                                                 1996           1995           1995 
                                             ------------   ------------   ------------ 
<S>                                          <C>            <C>            <C> 
Federal statutory expected provision         $       64.9   $       44.4   $       19.3 
Amortization of excess of cost over net  
  assets acquired                                     5.2            5.0            5.0 
State income taxes, net of Federal income 
  tax benefit                                        10.3            8.1            3.1 
Other                                                  .4            1.2            1.0 
                                             ------------   ------------   ------------ 
  Total income tax provision                 $       80.8   $       58.7   $       28.4 
                                             ------------   ------------   ------------ 
                                             ------------   ------------   ------------ 
</TABLE> 
<PAGE>
<TABLE> 

    Deferred income taxes consisted of future tax liabilities (assets) attributable to 
the following (in millions of dollars): 

<CAPTION>   
                                                           December 29,      December 31, 
                                                               1996             1995 
                                                           ------------     ------------ 
<S>                                                        <C>              <C>  
Deferred tax liabilities: 
  Excess of book over tax bases                            $      146.9     $      143.8
  Excess of tax over book depreciation                             95.2             92.8 
                                                           ------------     ------------ 
    Deferred tax liabilities                                      242.1            236.6 
                                                           ------------     ------------ 
Deferred tax assets:  
  Cash versus accrual basis                                      (138.7)          (144.0) 
  Other, net                                                       (4.2)            (4.6) 
                                                           ------------     ------------ 
    Deferred tax assets                                          (142.9)          (148.6) 
                                                           ------------     ------------ 
  Deferred income taxes, net                               $       99.2     $       88.0 
                                                           ------------     ------------ 
                                                           ------------     ------------ 
/TABLE
<PAGE>
     The Federal tax returns for all of the Company's 
fiscal periods ended subsequent to and including 
December 31, 1989 are open for examination by the 
Internal Revenue Service (the "IRS").  Additionally, 
certain tax returns of entities acquired by the 
Company for earlier tax years are open for examination 
by the IRS.  Management believes that any adjustments 
arising out of the examinations for which the Company 
would be liable would not have a material effect on 
the Company's consolidated financial position.
   
     Note 11. Related Party Transactions 

     Prior to July 1996, the Company leased a distribution
facility from a California general partnership whose 
general partners are Vons and a Texas general partnership, 
of which a director of the Company is a general partner.  
Vons and the Texas general partnership each had a 50% 
interest in the California general partnership.  In 
June 1996, the Company paid the Texas general partnership 
$2.9 million to acquire the Texas general partnership's 
interest in the assets of the California general 
partnership and the California general partnership 
was dissolved.  During 1996, 1995 and 1994, the Company 
paid rent of $.8 million, $1.9 million and $1.9 million,
respectively from which the partnership distributed 
$80,000, $250,000 and $70,000 to the Texas general 
partnership in such years, respectively.  This distribution
facility was closed in third quarter 1995.  See Note 15
to the Consolidated Financial Statements.

     A wholly owned subsidiary of Safeway owns approximately
34.3% of the outstanding voting stock of the Company.  
Safeway and its affiliates sold certain inventory and other 
items to the Company for an aggregate amount during 1996, 
1995 and 1994 of approximately $25.5 million, $27.0 million 
and $21.3 million, respectively.  During 1995 and 1994, the
Company sold certain inventory items to Safeway and its
affiliates for an aggregate amount of approximately $6.4
million and $6.6 million, respectively.  In 1996, the 
Company entered into a purchasing joint venture with 
Safeway and purchased $28.4 million of certain inventory 
and other items from the joint venture.  Three directors 
of the Company are also directors of Safeway and a fourth
director of the Company is both a director and an officer
of Safeway.  

     The Company leases eight properties from a partnership 
that is 80% owned by a subsidiary of Safeway and 20% owned 
by the principal stockholder of Safeway.  The rentals under 
the leases were $.5 million, $.6 million and $.7 million 
in 1996, 1995 and 1994, respectively.  In addition, the 
Company is secondarily liable to this partnership under 
four leases for which the annual minimum rental is 
$.2 million, all of which is currently being paid by 
assignees.

     A director of the Company borrowed a total of $118,000 
from the Company for the purchase of 5,000 shares of 
the Company's common stock by notes dated January 3, 1992 
and July 22, 1992.  The notes are secured by a pledge 
of the 5,000 shares of common stock.  The notes accrue 
interest at the Federal midterm rate in effect under 
Internal Revenue Code Section 1274(d), compounded 
semiannually.  All payments of principal and interest are 
due and payable on December 31, 1997. 

     Note 12. Contingencies 

     The Company is a party to several pending legal 
proceedings and claims.  Although the outcome of such 
proceedings and claims cannot be determined with 
certainty, management believes that their final 
outcome should not have a material adverse effect on 
the Company's consolidated financial position. 

     As a result of the disposal of certain leasehold 
interests by the Company and by a partnership of which 
the Company is a general partner, the Company is 
contingently liable to certain landlords.
 
     Note 13. Shareholders' Equity 

     The Company has various stock option plans.  Options 
under the 1987 Stock Option Plan are fully vested.  Options 
under the 1990 Stock Option Plan vest as determined by the
Compensation Committee of the Board of Directors.  
Generally, options vest 25% one year from the date of 
grant and 25% per year thereafter.  However, options 
granted in May 1995 vest 15% per year beginning one year 
from the date of grant and 15% per year thereafter 
until the options are 100% vested.  Options granted in 
May 1996 vest 15% per year beginning two years from the 
date of grant and 15% per year through the sixth year 
and 25% in the seventh year.  Additionally, a limited 
number of options vest 20% at the date of grant and 20% 
per year thereafter and others vest 33-1/3% per year 
beginning one year after grant.  Options under the 
Directors' Stock Option Plan vest 25% six months from 
the date of grant and 25% on the anniversary of the 
date of grant thereafter.  For all plans, the options 
expire ten years from the date of grant.
 
     The Company has elected to follow Accounting 
Principles Board Opinion No. 25, "Accounting for Stock 
Issued to Employees" ("APB25") and related Interpretations 
in accounting for its employee stock options.  Under 
APB25, if the exercise price of the Company's employee
stock options equals the market price of the underlying 
stock on the date of grant no compensation expense 
is recognized. In 1996, the Company issued employee 
stock options with an exercise price below the market 
price of the underlying stock on the date of grant.  
In accordance with APB25, $1.3  million, $1.4 million 
and $1.5 million has been charged against income in 1996, 
1995 and 1994, respectively.

     Pro forma information regarding net income and earnings per 
share is required by Statement of Financial Accounting Standards 
"Accounting for Stock-Based Compensation", ("SFAS No. 123"), and 
has been determined as if the Company had accounted for its
employee stock options under the fair value method of that
Statement.  The fair value for these options was estimated 
at the date of grant using a Black-Scholes option pricing 
model with the following weighted average assumptions 
for 1996 and 1995, respectively:  risk-free interest 
rates of 6.54% and 6.69%; dividend yields of 0% and 0%;
volatility factors of the expected market price of the 
Company's common stock of 28.0% and 31.1% and a 
weighted-average expected life of the option of 6 years 
and 6 years.

For purposes of pro forma disclosures, the estimated 
fair value of the options is amortized to expense over 
the option vesting period.  The Company's pro forma 
information follows (in millions except for earnings 
per share information):

<TABLE>
<CAPTION> 
                                             1996       1995
                                           --------   --------
<S>                                        <C>        <C>
Net Income                   As reported   $  104.7   $   68.1 
                             Pro forma     $  104.3   $   67.8

Primary earnings per share   As reported   $   2.34   $   1.55
                             Pro forma     $   2.33   $   1.54

The effects of applying SFAS No. 123 for pro forma 
disclosure purposes are not likely to be representative 
of the effects on future years disclosure due to the 
timing of option vesting.

                             
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION> 

    Information regarding the Company's stock option plans is 
summarized below:

                        1987    Weighted                Weighted                Weighted
                        Stock    Average      1990       Average   Directors'    Average
                       Option   Exercise  Stock Option  Exercise  Stock Option  Exercise
                        Plan     Price        Plan       Price        Plan        Price
                      --------  --------  ------------  --------  ------------  -------- 
<S>                   <C>       <C>       <C>           <C>       <C>           <C>  
Shares authorized      175,227               4,000,000                 225,000 
                      --------            ------------            ------------  
                      --------            ------------            ------------  

Shares under option: 
  Outstanding at 
   January 2, 1994      48,519  $   9.28     1,991,229  $  23.34        99,043  $  23.81
    Granted                 -         -      1,164,009     13.77        52,028     15.83
    Exercised            7,000      9.28        34,240      2.50            - 
    Forfeited               -         -        416,142     23.11        20,144     25.32
                      --------  --------  ------------  --------  ------------  -------- 

  Outstanding at 
   January 1, 1995      41,519  $   9.28     2,704,856  $  19.53       130,927  $  20.41
    Granted                 -         -        500,040     20.16        47,140     17.64
    Exercised           22,801      9.28       130,666      8.28            -
    Forfeited               -         -        273,922     23.33            -
                      --------  --------  ------------  --------  ------------  -------- 

  Outstanding at 
   December 31, 1995    18,718  $   9.28     2,800,308  $  19.79       178,067  $  19.68
    Granted                 -         -        515,030     31.55        22,458     28.83
    Exercised           15,843      9.28       434,945     23.75            -         -
    Forfeited               -         -         50,135     20.99            -         -
                      --------  --------  ------------  --------  ------------  -------- 

  Outstanding at 
   December 29, 1996     2,875  $   9.28     2,830,258  $  21.30       200,525  $  20.70
                      --------  --------  ------------  --------  ------------  -------- 
                      --------  --------  ------------  --------  ------------  --------

Weighted-average fair
  value of options 
  granted during the 
  year:
  1995                          $     -                 $   8.96                $   9.83 
  1996                          $     -                 $  20.18                $  14.64
 
Options exercisable: 
  At January 1, 1995    40,394               1,143,966                  62,864
  At December 31, 1995  17,593               1,372,726                 109,290
  At December 29, 1996   2,875               1,439,816                 147,678            

</TABLE> 

     The following table summarizes information about stock options 
outstanding at December 29, 1996:

<TABLE>
<CAPTION>
                                  Options Outstanding               Options Exercisable
                             ---------------------------------   -----------------------
                                Number                             Number
                             Outstanding   Weighted   Weighted    Exercisable   Weighted
                                  At        Average    Average        At         Average
                             December 29,  Remaining  Exercise-   December 29,  Exercise
Range of Exercise Prices         1996         Life      Price         1996        Price
------------------------     ------------  ---------  ---------   ------------  --------
<S>                          <C>           <C>        <C>         <C>           <C>
$ 4.00 -  6.00                    272,500  7.3 years  $    4.15        181,666  $   4.15
  9.00 - 13.50                      2,875   .6             9.28          2,875      9.28
 14.23 - 21.35                  1,390,115  7.2            18.13        675,565     17.97
$21.89 - 33.00                  1,368,168  7.1            27.85        730,263     25.92
                             ------------                         ------------ 
                                3,033,658  7.2            21.25      1,590,369     20.03
                             ------------                         ------------ 
                             ------------                         ------------ 

/TABLE
<PAGE>
     The Company's Employee Stock Purchase Plan (the "Stock
Purchase Plan") allows employees to purchase the Company's 
stock through payroll deductions.  The source of stock is 
weekly open market purchases by a third party administrator.
Administrative and purchase commission costs associated 
with the Stock Purchase Plan are borne and paid by the 
Company according to the agreement with the third party
administrator. 

     Note 14. Advertising Expense

     The Company expenses the costs of advertising as 
incurred.  Total advertising expense was $40.3 million, 
$44.1 million and $42.8 million in 1996, 1995 and 1994,
respectively.

     Note 15. Restructuring Charges

     During 1993, the Company recorded a restructuring 
charge of $56.9 million, or $.77 per share.  The 1993 
charge reflected anticipated costs associated with a 
program to accelerate the closing of underperforming 
facilities, including 11 stores, and to eliminate 
approximately 300 administrative and support positions, 
which included 18 officers.  The 1993 restructuring charge
included $42.7 million for expenses relating to facility 
closures and $14.2 million for severance and other related
expenses. 

     In late 1994, the Company determined that the facility
closures and reductions in work force undertaken in 1993 
would not achieve the Company's cost reduction goals.  
The Company undertook additional restructuring initiatives
resulting in further facility closures and reductions in 
work force.  During 1994, the Company recorded restructuring
charges of $33.0 million, or $.45 per share.  The 1994
restructuring charges included $27.4 million for expenses 
related to facility closures, including 16 stores and the 
San Diego distribution facility.  The remaining $5.6 
million of the charges relates to severance and other 
costs associated with the elimination of approximately 
400 administrative and support positions.

     All of the cost containment and strategic 
restructuring initiatives have been executed.  Of the 
total $89.9 million restructuring reserve, $83.9 million 
of costs and payments have been charged against the 
reserve as of December 29, 1996, representing asset 
write-offs and lease obligations for closed facilities 
of $64.1 million and severance and other related 
expenses of $19.8 million.<PAGE>
<PAGE>
     Note 16. Quarterly Financial Data (Unaudited) 

<TABLE> 

     The results of operations for 1996 and 1995 were as follows 
(in millions except per share data): 

<CAPTION>  
                            First        Second         Third        Fourth 
                           Quarter       Quarter       Quarter       Quarter 
Fiscal Year 1996         (12 Weeks)    (12 Weeks)    (16 Weeks)    (12 Weeks) 
                         -----------   -----------   -----------   ----------- 
<S>                      <C>           <C>           <C>           <C>           
Sales                    $   1,205.6   $   1,261.0   $   1,676.6   $   1,264.2    
Gross profit (1)               307.3         323.6         419.9         323.9
Amortization of excess 
  cost over net assets 
  acquired                       3.5           3.4           4.7           3.4
Operating income                45.3          53.1          68.2          74.5
Interest expense, net           13.5          13.3          16.6          12.2
Net income               $      17.5   $      22.7   $      29.4   $      35.1
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   ----------- 
Income per common
  and common 
  equivalent share:
  Net income             $       .39   $       .51   $       .66   $       .78
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   ----------- 
Weighted average 
  common and common
  equivalent shares             44.5          44.6          44.7          45.0
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   ----------- 
</TABLE> 

<TABLE>
<CAPTION> 
                            First        Second         Third        Fourth 
                           Quarter       Quarter       Quarter       Quarter 
Fiscal Year 1995         (12 Weeks)    (12 Weeks)    (16 Weeks)    (12 Weeks) 
                         -----------   -----------   -----------   ----------- 
<S>                      <C>           <C>           <C>           <C>           
Sales                    $   1,142.5   $   1,139.5   $   1,565.3   $   1,223.4         
Gross profit (1)               291.5         289.6         390.7         308.7
Amortization of excess 
  cost over net assets 
  acquired                       3.4           3.5           4.7           3.4
Operating income                42.2          42.8          54.4          54.7
Interest expense, net           16.1          15.7          20.1          15.4
Net income               $      14.0   $      14.5   $      18.5   $      21.1
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   ----------- 
Income per common
  and common equivalent
  share:
  Net income             $       .32   $       .33   $       .42   $       .48    
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   ----------- 
Weighted average 
  common and common
  equivalent shares             43.8          43.8          44.0          44.3
                         -----------   -----------   -----------   ----------- 
                         -----------   -----------   -----------   -----------  

<FN> 
(1) Gross profit represents sales net of cost of sales, buying and occupancy costs. 
 
</TABLE> <PAGE>
<PAGE>
                   THE VONS COMPANIES, INC. AND SUBSIDIARIES

                               INDEX TO EXHIBITS

The following exhibits are filed as a separate section of this report:

Exhibit
  No.    Description of Exhibit        Sequentially Numbered Page
-------  ----------------------        --------------------------

24      Independent Auditors' Consent.

27      Financial Data Schedule.

        Management Contracts or
        Compensatory Plans or
        Arrangements:

          10.7.2  Amendment dated 
                  December 13, 1996
                  to 1990 Stock Option
                  and Restricted Stock 
                  Plan dated January 24,
                  1990.
<PAGE>
                   THE VONS COMPANIES, INC. AND SUBSIDIARIES

                               INDEX TO EXHIBITS

The following exhibits are incorporated herein by reference:

Exhibit
  No.         Description of Exhibit         Incorporated By Reference From
-------       ----------------------         ------------------------------
2.1       Agreement and Plan of Merger       Exhibit 2.1 to Registrant's 
          dated as of December 15, 1996      Report on Form 8-K dated
          by and among Safeway, Inc.,        December 15, 1996.
          SSCI Merger Sub, Inc. and
          The Vons Companies, Inc.

2.1.1     Amendment to Agreement and         Exhibit 2.1 to Safeway, Inc.
          Plan of merger dated as of         Report on Form 8-K dated
          December 15, 1996 by and           January 8, 1997.
          among Safeway, Inc.,
          SSCI Merger Sub, Inc. and
          The Vons Companies, Inc.

3.1       Amended Restated Articles of       Exhibit 3.1 to Registrant's
          Incorporation of the Registrant    Annual Report on Form 10-K for
          as amended on May 13, 1992.        fiscal year ended January 3,
                                             1993.

3.2       By-Laws of the Registrant as       Exhibit 3.2 to Registrant's
          amended on November 28, 1990.      Annual Report on Form 10-K for
                                             fiscal year ended December 30,
                                             1990.

4.1       Indenture by and among the         Exhibit 4.2 to Registrant's
          Registrant and Chemical Bank,      Statement No. 33-45430 on Form
          as Trustee, dated February 15,     S-3.
          1992.

4.1.1     Officers' Certificate and Note     Exhibits 4.1 and 4.2 to
          regarding the 9-5/8% Senior        Registrant's Report on Form
          Subordinated Notes due April 1,    8-K dated March 17, 1992.
          2002.

4.1.2     Officers' Certificate and Note     Exhibits 4.1 and 4.3
          regarding the 8-3/8% Senior        to Registrant's Report on Form
          Subordinated Notes due             8-K dated September 24, 1992.
          October 1, 1999.

4.2       Indenture between Registrant       Exhibit 2 to Registrant's
          and National Bank of Detroit,      Report on Form 8-K dated
          as Trustee, dated May 15, 1986,    May 15, 1986.
          including form of 6-5/8% Senior
          Subordinated Debentures due
          1998 attached as Exhibit A
          thereto.

10.1      Revolving Loan Agreement           Exhibit 10.1.6 to Registrant's 
          dated February 17, 1995            Quarterly Report on Form 10-Q
          by and among the Registrant,       for quarter ended March 26, 1995.
          the banks named therein, and 
          Bank of America NT & SA
          and The Chase Manhattan Bank,
          N.A. as managing agents.

10.1.1    Amendment to Revolving Loan        Exhibit 10.1.7 to Registrant's 
          Agreement dated February 17,       Quarterly Report on Form 10-Q
          1995 by and among the              for quarter ended October 8,
          Registrant, the banks named        1995.
          therein, and Bank of America
          NT & SA and The Chase 
          Manhattan Bank, N.A. as
          managing agents.

10.2      Metropolitan Life Insurance        Exhibit 10.13 to Registrant's
          Company loan to the Registrant     Annual Report on Form 10-K for
          represented by Deed of Trust       fiscal year ended January 3,
          and Security Agreement             1988.
          Assignment of Rents and
          Fixture Filing dated July 22,
          1987 by and among the 
          Registrant, as Trustor,
          Ticor Title Insurance
          Company, as Trustee and 
          Metropolitan Life Insurance
          Company, as Beneficiary.

10.3      Standstill Agreement dated         Exhibit 10.20 to Registrant's
          December 3, 1987 by and among      Annual Report on Form 10-K for
          the Registrant, Safeway            fiscal year ended January 3,
          Southern California, Inc.,         1988.
          Safeway Stores, Incorporated,
          Kohlberg Kravis Roberts & 
          Co., Safeway U.S. Holdings,
          Inc., and KKR Associates.

10.3.1    Amendment to Standstill            Exhibit 28.7 to Registrant's
          Agreement dated December 3,        Quarterly Report on Form 10-Q
          1987 by and among the              for quarter ended June 18,
          Registrant, Safeway Stores,        1989.
          Incorporated and other parties
          thereto, dated April 5, 1989.

10.3.2    Amendment to Standstill            Exhibit 10.13.2 to Registrant's
          Agreement dated December 3,        Annual Report on Form 10-K for
          1987 by and among the              fiscal year ended December 30,
          Registrant, Safeway Inc.,          1990.
          and other parties thereto,
          dated December 21, 1990.

10.4      Registration Rights Agreement      Exhibit 28.8 to Registrant's 
          with Roger Stangeland dated        Quarterly Report on Form 10-Q
          April 7, 1989.                     for quarter ended March 26,
                                             1989.

10.5      Registration Rights Agreement      Exhibit 28.9 to Registrant's
          with Fritz Duda dated              Quarterly Report on Form 10-Q
          April 7, 1989.                     for quarter ended March 26,
                                             1989.

          Management Contracts or
          Compensatory Plans or Arrangements:

10.6        Management Stock Option Plan     Exhibit 10.3 to Registrant's
            of the Registrant dated          Annual Report on Form 10-K for
            July 22, 1987.                   fiscal year ended January 3,
                                             1988.

10.7        1990 Stock Option and            Appendix A to Registrant's 
            Restricted Stock Plan dated      Proxy Statement for Annual
            January 24, 1990.                Meeting of Shareholders on  
                                             May 17, 1990.

10.7.1      Amendment dated February 17,     Exhibit 10.13.1 to Registrant's
            1993 to 1990 Stock Option        Quarterly Report on Form 10-Q
            and Restricted Stock Plan        for the quarter ended March 28,
            dated January 24, 1990.          1993.

10.8        Directors' Stock Option Plan     Appendix A to Registrant's
            dated September 17, 1991.        Proxy Statement for Annual
                                             Meeting of Shareholders on 
                                             May 13, 1992.

10.9        Severance Agreement between      The Registrant's Proxy 
            the Registrant and Senior        Statement for Annual Meeting of
            Management and Key Employees     Shareholders on May 13, 1992,
            dated February 19, 1992.         where it appears under the 
                                             caption "Compensation through
                                             Plans - Severance Agreements."

10.9.1      The Vons Companies, Inc.         Exhibit 10.9.1 to Registrant's 
            Amended and Restated Severance   Quarterly Report on Form 10-Q 
            Plan for Senior Management and   for quarter ended October 6,
            Key Employees dated July 15,     1996.
            1996.

10.10       1992 Supplemental Executive      Exhibit 10.19 to Registrant's
            Retirement Plan by and among     Annual Report on Form 10-K for
            the Registrant and certain       fiscal year ended January 3,
            officers effective April 30,     1993.
            1992.



10.11       The Vons Companies, Inc.         Exhibit 10.27 to Registrant's
            401(k) Wrap-Around Plan          Annual Report on Form 10-K
            effective October 18, 1993.      for fiscal year ended
                                             January 2, 1994.

10.11.1     Amendment 1994-1 dated           Exhibit 10.11.1 to Registrant's
            December 23, 1994 to The         Annual Report on Form 10-K for
            Vons Companies, Inc. 401(k)      fiscal year ended December 31,
            Wrap-Around Plan effective       1995.
            October 18, 1993.

10.11.2     Amendment 1996-1 dated           Exhibit 10.11.2 to Registrant's
            February 20, 1996 to The         Quarterly Report on Form 10-Q
            Vons Companies, Inc., 401(k)     for quarter ended March 24, 1996.
            Wrap-Around Plan effective
            January 1, 1996.

10.12       Employment Agreement between     Exhibit 10.28 to Registrant's
            the Registrant and Lawrence A.   Quarterly Report on Form 10-Q
            Del Santo dated April 26, 1994.  for quarter ended June 19, 1994.

10.13       Employment Agreement between     Exhibit 10.29 to Registrant's
            the Registrant and Richard E.    Quarterly Report on Form 10-Q
            Goodspeed dated April 26, 1994.  for quarter ended June 19, 1994.

10.14       Retirement Agreement             Exhibit 10.31 to Registrant's 
            confirming employment and        Quarterly Report on Form 10-Q
            retirement agreements            for quarter ended October 9,
            between the Registrant and       1994. 
            Roger E. Stangeland, dated
            July 28, 1994.

10.15       Employment Arrangement           Exhibit 10.24 to Registrant's 
            between the Registrant           Quarterly Report on Form 10-Q
            and Terry R. Peets               for quarter ended October 8,
            dated September 6, 1995.         1995. 

10.16       Severance Agreement              Exhibit 10.25 to Registrant's 
            between the Registrant           Quarterly Report on Form 10-Q
            and Terry R. Peets               for quarter ended October 8,
            dated September 6, 1995.         1995. 

10.17       The Vons Companies, Inc. 1996    Exhibit 10.17 to Registrant's
            Officer and Administrative       Annual Report on Form 10-K for
            Bonus Plan.                      fiscal year ended December 31,
                                             1995.