<PAGE>
                                                                 
                         UNITED  STATES
              SECURITIES  AND  EXCHANGE  COMMISSION
                     Washington, D.C.  20549
                                                                 
                           FORM  10-Q


     [x]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934

          For the quarterly period ended March 31, 1998

                               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 0-22018

                  CELESTIAL  SEASONINGS,  INC.
     (Exact name of Registrant as specified in its charter)


              Delaware                         84-1097571
   (State or other jurisdiction of          (I.R.S. Employer
   incorporation or organization)         Identification No.)
                                                    

          4600 Sleepytime Drive, Boulder CO  80301-3292
  (Address of principal executive offices, including zip code)

                         (303) 530-5300
      (Registrant's telephone number, including area code)


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 [ ]

As  of  May 1, 1998 the Registrant had 4,142,446 shares of Common
Stock,  $0.01  Par Value, outstanding. This report on  Form  10-Q
contains 16 pages.

<PAGE>
                    CELESTIAL  SEASONINGS,  INC.



                              INDEX



PART I - FINANCIAL INFORMATION 
------------------------------
                                                           PAGE(S)
                                                           ------- 
     
     ITEM 1. FINANCIAL STATEMENTS

             Unaudited consolidated income statements         3
            
             Unaudited consolidated balance sheets            4
            
             Unaudited consolidated statements of cash flows  5
            
             Notes  to unaudited consolidated financial 
             statements                                      6-7


    ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS    8-12


PART II - OTHER INFORMATION

    ITEM 1. LEGAL PROCEEDINGS                                 13


    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
            HOLDERS                                           13


    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                  13


    SIGNATURES                                                14

                              PAGE 2

<PAGE>

                     CELESTIAL SEASONINGS, INC.
                  CONSOLIDATED INCOME STATEMENTS
              (in thousands, except per share amounts)
                          (unaudited)
<TABLE>
<CAPTION>
                              Three Months Ended      Six Months Ended
                                  March 31,              March 31,
                              ------------------      ----------------
                                1998      1997         1998      1997
                               ------    ------       ------    ------
<S>                           <C>       <C>           <C>      <C>
Case volume                     1,611     1,491         3,102    2,930

Net sales                     $32,329   $25,861       $59,729  $51,534
Cost of goods sold             11,198     8,883        21,329   17,957
                              -------   -------       -------  -------
  Gross profit                 21,131    16,978        38,400   33,577

Operating expenses:
  Selling and marketing        13,723    10,549        25,342   22,264
  General and administrative    1,516     1,139         3,091    2,119
  Amortization of intangibles     343       321           663      647
                              -------   -------       -------  -------
    Total operating expenses   15,582    12,009        29,096   25,030

Operating income                5,549     4,969         9,304    8,547
Interest expense                  116        96           232      277
                              -------   -------       -------  -------
Income before income taxes      5,433     4,873         9,072    8,270
Income taxes                    2,092     1,866         3,493    3,225
                              -------   -------       -------  -------
Net income                    $ 3,341   $ 3,007       $ 5,579  $ 5,045
                              =======   =======       =======  =======
Earnings per share:
  Net income per common share $  0.81   $  0.74       $  1.36  $  1.25
                              =======   =======       =======  =======
  Weighted average common
    shares                      4,128     4,051         4,103    4,051
                              =======   =======       =======  =======
Earnings per share-assuming dilution:
  Net income per common share $  0.77   $  0.73       $  1.30  $  1.22
                              =======   =======       =======  =======
  Weighted average common
    shares                      4,346     4,133         4,308    4,129
                              =======   =======       =======  =======
</TABLE>
                            
See accompanying notes to unaudited consolidated financial statements.
    
                                PAGE 3

<PAGE>
                     CELESTIAL  SEASONINGS,  INC.
                    CONSOLIDATED  BALANCE  SHEETS
                          (in thousands)
                           (unaudited)

                              ASSETS
<TABLE>
<CAPTION>
                                              March 31,      September 30,
                                                1998             1997
                                             ----------      -------------
<S>                                           <C>              <C>
Current assets:
  Cash and cash equivalents                   $  2,300         $  2,829
  Accounts receivable, net of allowance
    (Mar. - $349 Sept. -$165)                   15,920            7,755
  Inventory                                     15,651            8,410
  Deferred income taxes                            478              200
  Prepaid expenses                               1,213              641
                                              --------         --------
     Total current assets                       35,562           19,835

Property, plant and equipment, net              17,039           17,085
Intangible assets, net                          12,884           13,236
Goodwill, net                                    6,010            6,150
Deferred income taxes                              301              263
Other assets                                     1,705            1,802
                                              --------         --------
Total assets                                  $ 73,501         $ 58,371
                                              ========         ========

                LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                            $  9,295         $  4,160
  Accrued liabilities and wages                  6,834            4,584
  Accrued income taxes                           1,487               99
  Accrued interest payable                          30               31
  Current portion of long-term debt                371              373
                                              --------         --------
    Total current liabilities                   18,017            9,247

Long-term debt                                   5,906            6,073

Stockholders' equity:
  Common stock, $.01 par value -
    authorized 15,000,000 shares;
    Mar. - issued 4,146,050 shares,
      outstanding 4,137,150 shares
    Sept. - issued 4,068,491 shares,
      outstanding 4,059,591 shares                  41               41
  Capital surplus                               34,488           33,540
  Retained earnings                             15,224            9,645
  Treasury stock, 8,900 shares of common 
    stock at cost                                 (175)            (175)
                                                -------          -------
      Total stockholders' equity                49,578           43,051
                                                -------          -------
Total liabilities and stockholders' equity    $ 73,501         $ 58,371
                                                =======          =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.

                                PAGE 4
<PAGE>

                         CELESTIAL SEASONINGS, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)
                               (unaudited)
<TABLE>
<CAPTION>
                                                  Six Months Ended
                                                       March 31,
                                                  -----------------
                                                   1998      1997
                                                  ------    ------
<S>                                              <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                       $ 5,579   $ 5,045
  Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
    Depreciation                                     643       509
    Amortization of intangibles                      663       647
    Amortization of financing fees                    97        98
    Deferred income taxes                           (316)     (161)
  Changes in operating assets and liabilities:
    Accounts receivable                           (8,165)   (1,587)
    Inventory                                     (7,241)     (554)
    Prepaid expenses                                (572)      390
    Accounts payable                               5,135       939
    Accrued liabilities and wages                  2,250       516
    Accrued income taxes                           1,388     1,843
    Accrued interest payable                          (1)      (23)
                                                   ------    ------
Net cash (used in) provided by operating
   activities                                       (540)     7,662
                                                   ------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                              (597)      (386)
  Increase in intangible assets                     (171)      (350)
  Decrease in other assets                             -        145
                                                   -------    -------
Net cash used in investing activities               (768)      (591)
                                                   -------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from common stock issuance                948         34
  Increase in long-term debt                           -      2,285
  Reduction in long-term debt                       (169)    (5,082)
                                                   -------   -------
Net cash provided by (used in) financing activities  779     (2,763)
                                                   -------   -------

NET (DECREASE) INCREASE IN CASH AND CASH 
EQUIVALENTS                                         (529)     4,308

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   2,829        204
                                                   -------   --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD       $ 2,300    $ 4,512
                                                   =======   ========
CASH PAID FOR INTEREST                           $   117    $   196
CASH PAID FOR INCOME TAXES                       $ 2,421    $ 1,543

</TABLE>

See accompanying notes to unaudited consolidated financial statements.

                                PAGE 5

<PAGE>
                       CELESTIAL  SEASONINGS,  INC.
        NOTES  TO  UNAUDITED  CONSOLIDATED  FINANCIAL  STATEMENTS


1.   GENERAL

      Basis  of Presentation - Each fiscal quarter  includes
thirteen weeks. The Company's second fiscal quarter ends  on
the  last  Saturday  of  March. For  presentation  purposes,
however,  the second fiscal quarter is presented  as  if  it
ended on March 31.

     The unaudited consolidated financial statements include
the   accounts   of   the  Company  and  its   subsidiaries.
Intercompany balances have been eliminated in consolidation.
Certain  reclassifications have been made to  the  Company's
fiscal  1997 financial statements to conform them to  fiscal
1998 classifications.

       Interim   Financial  Information  -   The   financial
information  contained herein is unaudited but includes  all
normal  and  recurring adjustments which, in the opinion  of
management,  are necessary to present fairly the information
set  forth.  The unaudited consolidated financial statements
should   be   read  in  conjunction  with  the  consolidated
financial  statements which are included  in  the  Company's
Annual Report on Form 10-K for the year ended September  30,
1997. The Company's business is seasonal; therefore, results
for  interim  periods  are  not  necessarily  indicative  of
results  to  be expected for the fiscal year of the  Company
ending  September 30, 1998. The Company believes  that  this
Quarterly  Report  on  Form 10-Q is  representative  of  its
financial position, its results of operations and  its  cash
flows  for the periods ended March 31, 1998 and 1997 covered
thereby.

      Earnings  Per Share - In accordance with Statement  of
Financial  Accounting  Standards  No.  128,  "Earnings   per
Share,"  the  increase in weighted average common  shares  -
assuming  dilution is due to the application of the treasury
share  method for outstanding stock options. The application
of  the  treasury  share method resulted  in  an  additional
218,000  and  82,000 weighted average shares for  the  three
months  ended March 31, 1998 and 1997, respectively, and  an
additional  205,000 and 78,000 weighted average  shares  for
the six months ended March 31, 1998 and 1997, respectively.

2.   DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
                                        March 31,      September 30,
                                          1998             1997
                                        --------       -------------
<S>                                    <C>               <C>
Raw materials and supplies             $  9,556          $  4,924
Work in process                           2,308             1,393
Finished goods                            4,636             2,431
                                        --------         ---------
                                         16,500             8,748
Less inventory reserves                     849               338
                                        --------         ---------
Total                                  $ 15,651          $  8,410
                                        ========         =========
</TABLE>

                                   PAGE 6

<PAGE>

3.   LEGAL  PROCEEDINGS

      On May 5, 1995, a purported stockholder of the Company
filed a lawsuit, Schwartz v. Celestial Seasonings, Inc.  et.al., 
                 -----------------------------------------------
in the United States District Court for the District of
Colorado  (Civil Action Number:  95-K-1045),  in  connection
with  disclosures  by the Company concerning  the  Company's
license agreement with Perrier Group of America, Inc.  which
was  terminated  on  January 1, 1995.  In  addition  to  the
Company,  the complaint names as defendants certain  of  the
Company's   present  and  former  directors  and   officers,
PaineWebber,  Inc.,  Shearson/Lehman  Brothers,  Inc.,   and
Vestar/Celestial   Investment   Limited   Partnership.   The
complaint,  which was pled as a class action  on  behalf  of
persons  who acquired the Company's common stock  from  July
12, 1993 through May 18, 1994, sought money damages from the
Company and the other defendants for the class in the amount
of  their  loss on their investment in the Company's  common
stock,  punitive damages, costs and expenses of the  action,
and such other relief as the court may order.

     On November 6, 1995, the federal district court granted
a  motion by the Company and the other defendants to dismiss
the  case.  The court's order became final on  December  11,
1995,  after  the  plaintiff failed to amend  the  complaint
within the time permitted by the district court.

     The plaintiff appealed the district court's decision to
the United States Court of Appeals for the Tenth Circuit. On
September  5,  1997,  the  court  of  appeals  reversed  the
decision  of the district court. The court of appeals  found
that  the plaintiff's complaint alleged sufficient facts  to
support  his  claim.  The  case has  been  returned  to  the
district   court  for  further  proceedings.  Due   to   the
uncertainties  inherent  in  the  litigation  process,   the
Company is unable to predict the outcome of this matter.

                               PAGE 7

<PAGE>

                    CELESTIAL  SEASONINGS,  INC.
       MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
               CONDITION  AND  RESULTS  OF OPERATIONS

SEASONALITY

      The Company's business is seasonal and its quarterly results of
operations reflect the results of increased demand for the  Company's
hot  tea  products  in the cooler months of the year.  The  following
table  sets forth selected unaudited quarterly consolidated financial
and operational data for the six most recent quarters.
<TABLE>
<CAPTION>
     
                                     Quarter Ended
             ----------------------------------------------------------       
                       Fiscal 1998                   Fiscal 1997
             -----------------------  -----------------------------------
                   Mar. 31  Dec. 31   Sept. 30  June 30  Mar. 31  Dec. 31
                   -------  -------   --------  -------  -------  -------      
                                        (in thousands)
<S>                <C>      <C>        <C>      <C>      <C>      <C>
Case volume          1,611    1,491        855      656    1,491    1,439
Net sales          $32,329  $27,400    $15,916  $11,589  $25,861  $25,673
Gross profit        21,131   17,269      9,439    6,417   16,978   16,599
Operating income     5,549    3,755        898      221    4,969    3,578
Operating margin      17.2%    13.7%       5.6%     1.9%    19.2%    13.9%
Net income         $ 3,341  $ 2,238    $   545   $   74  $ 3,007  $ 2,038
Percent of fiscal
  year net sales       N/A      N/A       20.1%    14.7%    32.7%    32.5%
</TABLE>

The  Company  has experienced quarterly fluctuations in sales  volume
and operating results when compared to previous years due to a number
of factors, including the timing of trade promotions, advertising and
consumer promotional expenditures. The Company, as is common  in  the
tea  industry,  offers trade promotions for limited time  periods  on
specific  items in order to provide incentives for the  purchase  and
promotion of products. The impact on case sales from period to period
due  to  the  timing  and  extent of such  trade  promotions  can  be
significant.

NEW PRODUCT LINES 

      The Company has developed and recently introduced a new line of
dietary  supplement products, which include herbs such as  echinacea,
ginkgo,  ginseng and St. John's wort. Sales of the new  product  line
increased  the Company's net sales and marketing expenses during  the
quarter  ended  March 31, 1998.  However,  because   the
Company's  sales  are primarily to retail accounts  such  as  grocery
stores, natural foods stores, drug stores and mass merchandisers, the
increase  in  net  sales, caused primarily by initial  sales  of  the
product  line to the Company's customers, does not indicate that  the
new  products  have  been  or  will  be  successful  with  individual
customers.

      The  Company's experience with dietary supplement  products  is
limited.  The  dietary  supplement market is highly  competitive.  In
addition,  the  dietary  supplement  market  is  driven  by  consumer
preferences and overall industry sales are volatile. As a result, the
Company's  sales of it's dietary supplement products are  subject  to
the  risks  relating to the future trend of overall  industry  sales,
competition, whether the Company's products will achieve customer and
consumer  acceptance  and other risks normally  associated  with  the
introduction  of  new  products.  There  is  no  assurance  that  the
Company's dietary supplement products will be successful.

                               PAGE 8

<PAGE>

RESULTS OF OPERATIONS

      The  following  table is derived from the  Company's  unaudited
consolidated income statements for the periods indicated and presents
(i)  the results of operations as a percentage of net sales and  (ii)
the  percentage change in the dollar amounts of each  item  from  the
prior period.

<TABLE>
<CAPTION>
                                                    Period-to-Period
                       Percentage of Net Sales  Percentage Increase/(Decrease)
                       -----------------------  ------------------------------
                       Three Months Six Months  Three Months     Six Months   
                          Ended       Ended        Ended           Ended
                        March  31,   March 31,   March  31,       March 31,
                      1998   1997  1998   1997  1998 to 1997     1998 to 1997
                      ----   ----  ----   ----  ------------     ------------
<S>                  <C>    <C>    <C>    <C>       <C>              <C>  
Net sales            100.0% 100.0% 100.0% 100.0%    25.0 %           15.9 %
Cost of goods sold    34.6   34.4   35.7   34.8     26.1             18.8
                      ----   ----  -----  ----- 
Gross profit          65.4   65.6   64.3   65.2     24.5             14.4
Selling and marketing 42.5   40.8   42.4   43.2     30.1             13.8
General and 
  administrative       4.7    4.4    5.2    4.1     33.1             45.9
Amortization of
  intangibles          1.0    1.2    1.1    1.3      6.9              2.5
                      -----  -----  -----  ----- 
Operating income      17.2   19.2   15.6    16.6    11.7              8.9
Interest expense       0.4    0.4    0.4     0.5    20.8            (16.2)
                      -----  -----  -----  ------
Income before income
  taxes               16.8   18.8   15.2    16.1    11.5              9.7
Income taxes           6.5    7.2    5.9     6.3    12.1              8.3
                      -----  -----  -----  ------
Net income            10.3%  11.6%   9.3%    9.8%   11.1%             10.6 %
                      =====  =====  =====  ======  
</TABLE>

                                 PAGE 9

<PAGE>

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1997

      Net  sales. Net sales for the three months ended March 31, 1998
increased  25.0%  to  $32.3  million  from  $25.9  million  for   the
comparable  period  in fiscal 1997. Net sales of  the  Company's  tea
products increased 6.1% primarily due to the sales of a new  line  of
green tea products. The Company also introduced a new line of dietary
supplement  products  which contributed net  sales  of  $5.9  million
during  the  second  quarter of fiscal 1998, a 530.2%  increase  from
fiscal 1997.

      Gross profit. Gross profit for the three months ended March 31,
1998  increased  24.5% to $21.1 million from $17.0  million  for  the
comparable  period  in fiscal 1997, primarily due  to  increased  net
sales.  The  Company's gross profit margin decreased  to  65.4%  from
65.6%  for  the comparable prior year period. The decrease  in  gross
margin  was primarily due to increased sales of the Company's dietary
supplement  products which have lower margins than the Company's  dry
tea products.

      Selling  and marketing expenses. Selling and marketing expenses
for  the  three months ended March 31, 1998 increased 30.1% to  $13.7
million from $10.5 million for the comparable period in fiscal  1997,
and  increased as a percentage of net sales to 42.5% from 40.8%.  The
increase  in  selling  and marketing expenses primarily  was  due  to
increased   personnel   costs,  consumer   promotion   expenses   and
advertising expenses.

      General and administrative expenses. General and administrative
expenses  for  the three months ended March 31, 1998 increased  33.1%
from  the  comparable  period in fiscal  1997,  and  increased  as  a
percentage of net sales to 4.7% from 4.4%. The increase was primarily
due  to legal fees associated with a shareholder's lawsuit (see  note
3) and increased personnel costs.

       Amortization  of  intangibles.  Amortization  of  intangibles,
including  amortization of goodwill and other intangible assets,  for
the  three  months  ended March 31, 1998 increased 6.9%  from  fiscal
1997. The increase in amortization was primarily due to new additions
to  artwork  and plates associated with the Company's development  of
dietary supplement and green tea products.

      Operating  income. Operating income for the three months  ended
March 31, 1998 increased 11.7% to $5.5 million from $5.0 million  for
the  comparable period in fiscal 1997, primarily due to increased net
sales.  Operating  income as a percentage of net sales  decreased  to
17.2%  from  19.2% primarily due to increased selling  and  marketing
expenses.

      Interest  expense. Interest expense for the three months  ended
March  31, 1998 increased 20.8% from the comparable period in  fiscal
1997,  primarily as a result of higher interest rates  on  Industrial
Revenue  Bonds which are secured by the Company's facility.  Interest
expense  for the three months ended March 31, 1998 primarily  relates
to   Industrial  Revenue  Bonds  and  fees  relating   to   continued
availability of the Company's bank credit facility.

      Income  taxes.  Income tax expense for the three  months  ended
March  31, 1998 increased 12.1% from the comparable period in  fiscal
1997 due to increased  pre-tax income.

                             PAGE 10

<PAGE>

SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO THE SIX MONTHS ENDED
MARCH 31, 1997

      Net  sales. Net sales for the six months ended March  31,  1998
increased  15.9%  to  $59.7  million  from  $51.5  million  for   the
comparable  period  in  fiscal 1997. Case volume  increased  5.9%  to
3,102,000  cases  from  2,930,000 cases. Net sales  and  case  volume
growth  was primarily the result of increased sales of the  Company's
dietary  supplement products and the introduction of a  new  line  of
green   tea  products.  The  Company's  dietary  supplement  products
contributed  net sales of over $6.8 million for the six months  ended
March  31,  1998,  a  319.4% increase from the comparable  period  in
fiscal 1997.

      Gross  profit. Gross profit for the six months ended March  31,
1998  increased  14.4% to $38.4 million from $33.6  million  for  the
comparable  period  in fiscal 1997, primarily due  to  increased  net
sales.  The  Company's gross profit margin decreased  to  64.3%  from
65.2%  for  the comparable prior year period. The decrease  in  gross
margin  is primarily due to increased sales of the Company's  dietary
supplement  products which have lower margins than the Company's  dry
tea products.

      Selling  and marketing expenses. Selling and marketing expenses
for  the  six  months ended March 31, 1998 increased 13.8%  to  $25.3
million from $22.3 million for the comparable period in fiscal  1997,
but  decreased as a percentage of net sales to 42.4% from 43.2%.  The
increase  in  selling  and marketing expenses primarily  was  due  to
expenses  incurred  in  connection  with  the  introduction  of   the
Company's  dietary  supplements line, increased personnel  costs  and
trade  and  consumer promotion expenses. This increase was  partially
offset by a decrease in advertising expenses.

      General and administrative expenses. General and administrative
expenses for the six months ended March 31, 1998 increased 45.9% from
the  comparable period in fiscal 1997, and increased as a  percentage
of  net  sales  to 5.2% from 4.1% for the same period  of  the  prior
fiscal year. The increase was primarily due to  legal fees associated
with  a shareholder's lawsuit (see note 3), increased personnel costs
and  expenses  incurred in connection with the Company's  acquisition
efforts.

       Amortization  of  intangibles.  Amortization  of  intangibles,
including  amortization of goodwill and other intangible assets,  for
the  six months ended March 31, 1998 increased 2.5% from fiscal 1997.
The  increase  in amortization was primarily due to new additions  to
artwork  and  plates  associated with the  Company's  development  of
dietary supplement and green tea products.

      Operating  income. Operating income for the  six  months  ended
March  31, 1998 increased 8.9% to $9.3 million from $8.5 million  for
the  comparable period in fiscal 1997, primarily due to increased net
sales.  Operating  income as a percentage of net sales  decreased  to
15.6% from 16.6% primarily due to lower gross margins.

      Interest  expense. Interest expense for the  six  months  ended
March  31,  1998 declined 16.2% from the comparable period in  fiscal
1997  as  a  result  of reduced outstanding borrowings.  The  Company
extinguished  its bank debt during the first quarter of fiscal  1997.
Interest  expense for the six months ended March 31,  1998  primarily
relates  to  Industrial  Revenue  Bonds  which  are  secured  by  the
Company's facility and fees relating to continued availability of the
Company's bank credit facility.

      Income taxes. Income tax expense for the six months ended March
31,  1998  increased 8.3% from the comparable period in fiscal  1997
due to increased pre-tax income.

                             PAGE 11

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The operations of the Company historically have been funded with
a  combination of internally generated funds and external borrowings.
Other than funding ongoing operations, the Company's principal   uses
of funds in the future will be the development of new or existing tea
and  dietary  supplement  products, and the possible  acquisition  of
brands,  product  lines  or other assets.  The  Company  expects  its
primary sources of financing for its future business activities  will
be funds from operations plus borrowings under credit facilities. The
Company  currently  believes that funds  from  operations  and  funds
expected  to  be available under the Company's credit facilities  are
likely  to  be  sufficient to meet operating and capital requirements
unless  a significant acquisition is made. If necessary, the  Company
believes it can increase availability under its credit facilities.

      Cash  and cash equivalents decreased $0.5 million for  the  six
months  ended  March 31, 1998. Cash used in operating activities  was
$0.5  million for the six months ended March 31, 1998. During the 
current fiscal year, the Company has experienced increased working
capital requirements, primarily in the form of accounts receivable
and inventory, associated with the introduction of its new line of 
dietary supplement products. The  Company's
investing  activities used cash of $0.8 million for  the  six  months
ended  March  31, 1998, while financing activities provided  cash  of
$0.8 million for the six months ended March 31, 1998.

      The  Company  incurred  capital expenditures  of  approximately
$768,000  during  the  six  months ended March  31,  1998,  including
$597,000  primarily for factory and computer equipment  and  $171,000
for  the design and development of new packaging artwork. The Company
anticipates making capital expenditures of approximately $2.9 million
in fiscal 1998.

      The  statements contained in this Quarterly Report on Form 10-Q
which  are  not  historical facts, including,  but  not  limited  to,
statements  found  under  the  captions "Seasonality,"  "New  Product
Lines,"   "Results  of  Operations,"  and  "Liquidity   and   Capital
Resources"  above,  are  forward-looking statements  that  involve  a
number  of risks and uncertainties. The actual results of the  future
events  described  in  such forward-looking statements  could  differ
materially  from  those  stated in such  forward-looking  statements.
Among   the  factors  that  could  cause  actual  results  to  differ
materially  are  the  risks  and  uncertainties  discussed  in   this
Quarterly Report, including, without limitation, the portions of such
reports  under  the captions referenced above, and the  uncertainties
set  forth  from  time  to  time in the Company's  filings  with  the
Securities and Exchange Commission, and other public statements. Such
risks  and  uncertainties  include, without limitation,  seasonality,
interest  in  the  Company's  products, consumer  acceptance  of  new
products,  general  economic conditions, consumer trends,  costs  and
availability  of  raw  materials,  competition  and  the  effect   of
governmental regulation.

                               PAGE 12

<PAGE>

PART II   OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS
--------------------------

The  information  in  Note 3 to the Unaudited Consolidated  Financial
Statements included in Part I is incorporated herein.

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

The  annual  meeting  of  stockholders of the  Company  was  held  on
February 12, 1998. The following matters were submitted to a vote  of
the stockholders:

(a)  Election of directors - Three Class I directors were elected  to
serve  until the 2001 annual meeting of stockholders and until  their
successors are elected.


                     Total Votes          Total Votes
                         For                Withheld
                     -----------          -----------
Stephen B. Hughes     2,988,572             109,385
Marina Hahn           2,625,983             471,974
Leonard Lieberman     2,989,505             108,452

Incumbent  Class II directors with terms expiring in 1999 are  Ronald
V. Davis and John D. Howard. Incumbent Class III directors with terms
expiring in 2000 are Mo Siegel and James P. Kelley.

(b)   Approval  of  an  amendment to the  Company's  1993  Long  Term
Incentive  Plan  - The proposal was approved by a vote  of  1,534,106
shares in favor, 665,657 shares against, and 5,561 shares abstaining.

(c)   Approval  of  an amendment to the Company's  1994  Non-Employee
Director Compensation Plan - The proposal was approved by a  vote  of
2,267,336  shares in favor, 783,839 shares against, and 6,091  shares
abstaining.

(d)  Appointment of independent auditors - The proposal to ratify the
appointment  of  Deloitte  & Touche LLP as  the  Company's  certified
public accountants for the fiscal year ending September 30, 1998  was
approved  by  a  vote  of 3,079,386 shares in  favor,  14,879  shares
against, and 3,653 shares abstaining.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
                                  
(a)  Exhibits
     --------
Exhibit No.                       Description
-----------                       -----------   
23.1    - Report   of  Deloitte  &  Touche  LLP  on  consolidated
          financial statements
        

(b) Reports on Form 8-K
    -------------------
     There were no reports on Form 8-K for the quarter ended March
     31, 1998.

                                 PAGE 13

<PAGE>

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



                    CELESTIAL SEASONINGS, INC.
                    (Registrant)


     May 8, 1998    By:  /s/  Darrell F. Askey
                         ---------------------
                         Darrell F. Askey
                         Vice President - Finance and Chief Financial
                         Officer
                         (Principal Financial Officer)

                              PAGE 14

<PAGE>

                          INDEX TO EXHIBITS
                                  
                                  
The following exhibits are filed pursuant to Item 601 of Regulation S-K.

                                                  Sequentially
Exhibit                                             Numbered
  No.                  Description                    Pages
--------               -----------               --------------
  23.1     - Report of Deloitte & Touche LLP on        
             consolidated financial statements        16
                                                      


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