<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 June 30, 1997

                               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  July  31,  1997  the Registrant had 4,058,342  shares  of
Common  Stock, $0.01 Par Value, outstanding. This report on  Form
10-Q contains 62 pages.

<PAGE>
                  CELESTIAL  SEASONINGS,  INC.



                              INDEX
                              -----


PART I - FINANCIAL INFORMATION
------------------------------

                                                                      PAGE(S)
                                                                      -------
     ITEM 1.   FINANCIAL STATEMENTS

            Unaudited consolidated statements of operations              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                      8-11


PART II - OTHER INFORMATION
---------------------------

     ITEM 1.   LEGAL PROCEEDINGS                                         12


     ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                          12


     SIGNATURES                                                          13
                                 PAGE 2
<PAGE>
                                
                          CELESTIAL SEASONINGS, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                   Three Months Ended       Nine Months Ended
                                         June 30,                June 30,
                                   ------------------       -----------------
                                   1997          1996       1997         1996
                                  ------        ------     ------       ------ 
<S>                             <C>           <C>        <C>          <C>
Case volume                          656           647      3,586        3,506

Net sales                       $ 11,589      $ 10,829   $ 63,123     $ 58,411

Cost of goods sold                 5,188         4,989     23,129       22,494
                                --------      --------   --------      -------
     Gross profit                  6,401         5,840     39,994       35,917

Operating expenses:
     Selling and marketing         4,915         4,768     27,195       23,675
     General and administrative      945           850      3,064        3,055
     Amortization of intangibles     320           361        967        1,103
                                --------      --------    -------      -------
          Total operating expenses 6,180         5,979     31,226       27,833

Operating income (loss)              221          (139)     8,768        8,084
Interest expense                     101           203        378          674
                                 -------       -------    -------      -------
Income (Loss) before income taxes    120          (342)     8,390        7,410
Income taxes                          46          (206)     3,271        2,853
                                 -------       --------   -------      -------
Net income (loss)                $    74        $ (136)   $ 5,119      $ 4,557
                                 =======       ========   =======      =======
Net income (loss) per
common share                     $  0.02        $(0.03)   $  1.24      $  1.11
                                 =======        =======   =======      =======
Weighted average common shares     4,135         4,131      4,131        4,116
                                 =======        =======   =======      =======
</TABLE>
    See accompanying notes to unaudited consolidated financial statements.

                                     PAGE 3
<PAGE>
                    CELESTIAL  SEASONINGS,  INC.
                    CONSOLIDATED  BALANCE  SHEETS
                           (IN THOUSANDS)
                             (UNAUDITED)
                                
                                ASSETS
<TABLE>
<CAPTION>
                                                     June 30,    September 30,
                                                       1997          1996
                                                    ---------    -------------
<S>                                                  <C>         <C>  <C>
Current assets:
  Cash and cash equivalents                          $  4,696    $    204
  Accounts receivable, net of allowance
  (June - $153 Sept. - $148)                            4,987       8,133
  Inventory                                             8,504       6,808
  Deferred income taxes                                   149           7
  Prepaid income taxes                                     -          470
  Prepaid expenses                                        279         889
                                                      -------     -------
     Total current assets                              18,615      16,511
                                
Property, plant and equipment, net                     16,628      16,871
Intangible assets, net                                 13,184      13,514
Goodwill, net                                           6,220       6,430
Deferred income taxes                                     188         287
Other assets                                              999       1,290
                                                     --------      ------ 
Total assets                                         $ 55,834    $ 54,903
                                                     ========    ========
                                
                   LIABILITIES AND STOCKHOLDERS' EQUITY
                                
Current liabilities:
  Accounts payable                                   $ 2,285     $  3,754
  Accrued liabilities and wages                        3,896        4,462
  Accrued income taxes                                   712          -
  Accrued interest payable                                35           52
  Current portion of long-term debt                      350          361
                                                     -------      -------
     Total current liabilities                         7,278        8,629
                                
Long-term debt                                         6,185        9,057

Commitments

Stockholders' equity:
  Common stock, $.01 par value -
    authorized 15,000,000 shares;
    June - issued 4,060,531 shares,
      outstanding 4,051,631 shares
    Sept. - issued 4,054,472 shares,
      outstanding 4,049,472 shares                        41           41
  Capital surplus                                     33,405       33,290
  Retained earnings                                    9,100        3,981
  Treasury stock,  8,900 and 5,000 shares of common
    stock at cost                                       (175)         (95)
                                                      -------      ------- 
     Total stockholders' equity                       42,371       37,217
                                                      -------      -------
Total liabilities and stockholders' equity           $55,834      $54,903
                                                     ========     ========
</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>
                                
                                                            Nine Months Ended
                                                                 June 30,
                                                            ------------------
                                                             1997        1996
                                                            ------      ------ 
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                $  5,119    $  4,557
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation                                               840         784
    Amortization of intangibles                                967       1,103
    Amortization of financing fees                             147         168
    Deferred income taxes                                      (43)        309
  Changes in operating assets and liabilities:
    Accounts receivable                                      3,146          20
    Inventory                                               (1,696)        138
    Prepaid expenses                                           610         (72)
    Accounts payable                                        (1,469)       (565)
    Accrued liabilities and wages                             (566)     (1,111)
    Accrued income taxes                                     1,182         (37)
    Accrued interest payable                                   (17)        (18)
                                                            -------     -------
Net cash provided by operating activities                    8,220       5,276
                                                            -------     -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                        (597)       (966)
  Increase in intangible assets                               (427)       (485)
  Decrease in other assets                                     144          89
                                                             ------     -------
Net cash used in investing activities                         (880)     (1,362)
                                                             ------     -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from common stock issuance                          115         229
  Acquisition of treasury stock                                (80)         -
  Increase in long-term debt                                 2,285       8,535
  Reduction in long-term debt                               (5,168)    (12,701)
                                                            -------    --------
Net cash used in financing activities                       (2,848)     (3,937)
                                                            -------    --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         4,492         (23)
                                
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD               204         375
                                                           -------     --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $ 4,696     $   352
                                                           =======     ========
CASH PAID FOR INTEREST                                     $   237     $   492
CASH PAID FOR INCOME TAXES                                 $ 2,132     $ 2,581

</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 third fiscal quarter  ends  on
the  last  Saturday  of  June.  For  presentation  purposes,
however,  the  third fiscal quarter is presented  as  if  it
ended on June 30.

     The unaudited consolidated financial statements include
the   accounts   of   the  Company  and  its   subsidiaries.
Intercompany balances have been eliminated in consolidation.

       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,
1996. 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, 1997. The Company believes  that  the
report filed on Form 10-Q is representative of its financial
position,  its results of operations and its cash flows  for
the periods ended June 30, 1997 and 1996 covered thereby.

       Earnings  Per  Share  -  During  February  1997,  the
Financial  Accounting Standards Board  issued  Statement  of
Financial   Accounting  Standards  No.  128  ("SFAS   128"),
"Earnings  per  Share." SFAS 128 establishes  standards  for
computing  and  presenting earnings  per  share  (EPS),  and
supersedes Accounting Principles Board Opinion No. 15  ("APB
15")  and  its  related  interpretations.  It  replaces  the
presentation  of  primary EPS with a presentation  of  basic
EPS, which excludes dilution, and requires dual presentation
of  basic  and  diluted  EPS for all entities  with  complex
capital  structures.  Diluted EPS is computed  similarly  to
fully  diluted EPS pursuant to APB 15. SFAS 128 is effective
for  periods  ending  after  December  15,  1997,  including
interim  periods, and will require restatement of all  prior
period  EPS  data  presented;  earlier  application  is  not
permitted. The following table sets forth pro forma earnings
per  share in accordance with the requirements of  SFAS  128
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                     Three Months Ended      Nine Months Ended
                                          June 30,                June 30,
                                     ------------------      -----------------
                                       1997      1996         1997      1996
                                      ------    ------       ------    ------ 
<S>                                  <C>       <C>          <C>       <C>
Basic earnings per share
  Net income per common share        $  0.02   $ (0.03)     $  1.26   $  1.13
                                     =======   ========     =======   =======
  Weighted average common shares       4,053     4,048        4,052     4,042
                                     =======   ========     =======   =======
Diluted earnings per share
  Net income per common share        $  0.02   $ (0.03)     $  1.24   $  1.11
                                     =======   ========     =======   =======
  Weighted average common shares       4,135     4,131        4,131     4,116
</TABLE>
                                      PAGE 6

<PAGE>

2.   DETAIL OF INVENTORY ACCOUNTS
<TABLE>
<CAPTION>
                                                June 30,        September 30,
                                                  1997              1996
                                                --------        -------------
<S>                                             <C>             <C>
Raw materials and supplies                      $  5,734        $  4,486
Work in process                                    1,369             888
Finished goods                                     1,878           1,665
                                                --------        -------------
                                                   8,981           7,039
Less inventory reserves                              477             231
                                                --------        -------------
Total                                           $  8,504        $  6,808
                                                ========        =============
</TABLE>


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 has appealed the district court's decision to  the
United States Court of Appeals for the Tenth Circuit and the
court has not rendered a decision on the appeal. 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 seven most recent quarters.

<TABLE>
<CAPTION>
                                  
                                      Quarter Ended
                --------------------------------------------------------------
                       Fiscal 1997                      Fiscal 1996
                -------------------------  -----------------------------------
                June 30  Mar. 31  Dec. 31  Sept. 30  June 30  Mar. 31  Dec. 31
                -------  -------  -------  --------  -------  -------  -------
                                     (in thousands)
<S>             <C>      <C>      <C>       <C>      <C>      <C>      <C>
Case sales          656    1,491    1,439       832      647    1,437    1,422
Net sales       $11,589  $25,861  $25,673   $14,587  $10,829  $23,950  $23,632
Gross profit      6,401   16,994   16,599     8,536    5,840   15,195   14,882
Operating income
  (loss)            221    4,969    3,578       906     (139)   4,929    3,294
Operating margin    1.9%    19.2%    13.9%      6.2%    (1.3)%   20.6%    13.9%
Net income
  (loss)        $    74  $ 3,007  $ 2,038   $   466  $  (136) $ 2,841  $ 1,852
Percent of
  fiscal year
  net sales         N/A      N/A      N/A      20.0%    14.8%    32.8%    32.4%
</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 timing and extent  of  such
trade  promotions can have a significant impact on  case  sales  from
period to period.

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 Nine Months     Three Months       Nine Months
                      Ended        Ended           Ended              Ended
                     June 30,     June 30,        June 30,           June 30,
                  1997   1996   1997   1996     1997 to 1996       1997 to 1996
                  ----   ----   ----   ----     ------------       ------------
<S>              <C>    <C>    <C>    <C>            <C>              <C>
Net sales        100.0% 100.0% 100.0% 100.0%         7.0%             8.1%
Cost of goods
  sold            44.8   46.1   36.6   38.5          4.0              2.8
                 -----  -----  -----  -----
Gross profit      55.2   53.9   63.4   61.5          9.6             11.4
Selling and
  marketing       42.4   44.0   43.1   40.6          3.1             14.9
General and
  administrative   8.1    7.9    4.9    5.2         11.2              0.3
Amortization of
  intangibles      2.8    3.3    1.5    1.9        (11.4)           (12.3)
                 -----  -----  -----  -----
Operating income
  (loss)           1.9   (1.3)  13.9   13.8          N/A              8.5
Interest expense   0.9    1.9    0.6    1.1        (50.2)           (43.9)
                 -----  -----  -----  -----
Income (Loss)
  before income
  taxes            1.0  (3.2)   13.3   12.7          N/A             13.2
Income taxes       0.4  (1.9)    5.2    4.9          N/A             14.7
                 -----  -----  -----  -----
Net income
  (loss)           0.6% (1.3)%   8.1%   7.8%         N/A             12.3%
                 =====  =====  =====  =====
</TABLE>
                                PAGE 8

<PAGE>

THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1996

      Net  sales. Net sales for the three months ended June 30,  1997
increased 7.0% to $11.6 million from $10.8 million for the comparable
period  in  fiscal 1996. Case sales increased 1.4% to  656,000  cases
from 647,000 cases. Net sales and case sales growth was the result of
increased  sales of the Company's herb and specialty  black  hot  tea
products. This increase was partially offset by a decrease  in  sales
of  the  Company's  iced  tea products. The  Company's  nutraceutical
products  contributed  net  sales of $0.9 million  during  the  third
quarter  of  fiscal  1997, a 60.4% increase from  fiscal  1996.  This
increase  was  primarily due to the introduction of  a  new  line  of
nutraceutical products, Celestial Herbal Extracts.

      Gross profit. Gross profit for the three months ended June  30,
1997  increased  9.6%  to  $6.4 million from  $5.8  million  for  the
comparable  period in fiscal 1996. The Company's gross profit  margin
increased  to 55.2% from 53.9% for the comparable prior year  period.
The  increase  in  gross margin was primarily  due  to  higher  gross
margins from the Company's nutraceutical products during fiscal 1997,
as compared to fiscal 1996, due to increased operational efficiencies
and more competitive inventory pricing.

      Selling  and marketing expenses. Selling and marketing expenses
for  the  three  months ended June 30, 1997 increased  3.1%  to  $4.9
million  from $4.8 million for the comparable period in fiscal  1996,
but  decreased as a percentage of net sales to 42.4% from 44.0%.  The
increase  in  selling  and marketing expenses primarily  was  due  to
increased  trade promotion and advertising expenses.   This  increase
was partially offset by a decrease in consumer promotion expenses.

      General and administrative expenses. General and administrative
expenses  for  the three months ended June 30, 1997  increased  11.2%
from  the  comparable  period in fiscal  1996,  and  increased  as  a
percentage  of  net  sales  to  8.1% from  7.9%.  This  increase  was
primarily  due  to  costs  incurred for  the  recruitment  of  a  new
executive officer.

       Amortization  of  intangibles.  Amortization  of  intangibles,
including  amortization of goodwill and other intangible assets,  for
the  three  months  ended June 30, 1997 decreased 11.4%  from  fiscal
1996.  Amortization  of intangibles was lower  for  fiscal  1997,  as
compared  to  fiscal 1996, as certain intangible assets became  fully
amortized or were written off. These reductions were partially offset
by  increases in amortization on new additions to artwork and  plates
resulting  from the Company's continued development of  new  products
and improved packaging.

      Operating income. The Company realized operating income of 1.9%
of  net sales for the three months ended June 30, 1997 as compared to
an  operating  loss  of 1.3% of net sales for the  third  quarter  of
fiscal  1996. This increase was primarily due to increased net  sales
and improved gross profit margins.

      Interest  expense. Interest expense for the three months  ended
June  30,  1997 declined 50.2% from the comparable period  in  fiscal
1996  as  a  result  of reduced outstanding borrowings.  The  Company
extinguished  its bank debt during the first quarter of fiscal  1997.
Interest  expense for the three months ended June 30, 1997  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. The Company's effective income tax rate for  the
three  months ended June 30, 1997 was 38.3% as compared to 60.2%  for
the  comparable period in fiscal 1996. The rate decrease was  due  to
the  recognition  in  1996 of tax credits for  prior  years'  amended
income  tax  returns,  during a quarter in  which  the  Company  also
realized a pre-tax loss.
                                PAGE 9
<PAGE>

NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE NINE MONTHS ENDED
JUNE 30, 1996

      Net  sales. Net sales for the nine months ended June  30,  1997
increased 8.1% to $63.1 million from $58.4 million for the comparable
period  in fiscal 1996. Case sales increased 2.3% to 3,586,000  cases
from  3,506,000 cases. Net sales and case sales growth was the result
of  increased sales of the Company's herb and specialty black hot tea
products  in  the Company's traditional channels of distribution,  as
well  as  expansion  in  international  markets.  This  increase  was
partially  offset  by a decrease in sales of the Company's  iced  tea
products.  Fiscal  1997 net sales of the Company's dry  tea  products
also  reflect a price increase which was implemented during the third
quarter   of  fiscal  1996.  The  Company's  nutraceutical   products
contributed net sales of $2.4 million for the nine months ended  June
30, 1997, a 56.5% increase from the comparable period in fiscal 1996.

      Gross  profit. Gross profit for the nine months ended June  30,
1997  increased  11.4% to $40.0 million from $35.9  million  for  the
comparable  period in fiscal 1996. The Company's gross profit  margin
increased  to 63.4% from 61.5% for the comparable prior year  period.
The increase in gross margin was primarily due to increased sales  of
the  Company's higher margin hot herb tea products. In addition,  the
Company realized higher gross margins from its nutraceutical products
during  fiscal  1997, as compared to fiscal 1996,  due  to  increased
operating efficiencies and more competitive inventory pricing.

      Selling  and marketing expenses. Selling and marketing expenses
for  the  nine  months ended June 30, 1997 increased 14.9%  to  $27.2
million from $23.7 million for the comparable period in fiscal  1996,
and  increased as a percentage of net sales to 43.1% from 40.6%.  The
increase  in  selling  and marketing expenses primarily  was  due  to
increased trade promotion and advertising expenses. This increase was
partially offset by a decrease in consumer promotion expenses.

      General and administrative expenses. General and administrative
expenses  for the nine months ended June 30, 1997 remained relatively
unchanged from the comparable period in fiscal 1996, and decreased as
a percentage of net sales to 4.9% from 5.2%.

      Amortization of intangibles. For the nine months ended June 30,
1997, amortization of intangibles, including amortization of goodwill
and  other  intangible  assets, decreased  12.3%  from  fiscal  1996.
Amortization of intangibles was lower for fiscal 1997, as compared to
fiscal  1996, as certain intangible assets became fully amortized  or
were written off. These reductions were partially offset by increases
in amortization on new additions to artwork and plates resulting from
the  Company's  continued development of new  products  and  improved
packaging.

      Operating  income. Operating income for the nine  months  ended
June  30,  1997 increased 8.5% from the comparable period  in  fiscal
1996,  primarily due to increased net sales and improved gross profit
margins.  Operating  income as a percentage  of  net  sales  remained
relatively unchanged.

      Interest  expense. Interest expense for the nine  months  ended
June  30,  1997 declined 43.9% from the comparable period  in  fiscal
1996  as  a  result  of reduced outstanding borrowings.  The  Company
extinguished  its bank debt during the first quarter of fiscal  1997.
Interest  expense for the nine months ended June 30,  1997  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 nine months ended June
30,  1997 increased 14.7% from the comparable period in fiscal  1996.
The increase in income tax expense primarily was due to increased pre-
tax income.
                               PAGE 10

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The operations of the Company historically have been funded with
a  combination of internally generated funds and external borrowings.
Purchases  of  inventory,  marketing  expenditures  and  support   of
accounts  receivable  have historically been,  and  are  expected  to
remain,  the  Company's principal recurring uses  of  funds  for  the
foreseeable  future. The Company's other principal uses of  funds  in
the  future  will  be  the development of new  or  existing  tea  and
nutraceutical  products, the possible acquisition of brands,  product
lines  or other assets and the repurchase of shares of common  stock.
The  Company expects its primary sources of financing for its  future
business  activities  will be funds from operations  plus  borrowings
under  the Company's credit facility. The Company currently  believes
that  funds from operations and funds expected to be available  under
the  Company's  credit facility are likely to be sufficient  to  meet
operating  and capital requirements unless a significant  acquisition
is  made.  The Company currently has $20 million available under  its
credit facility.

     Cash and cash equivalents increased by $4.5 million for the nine
months ended June 30, 1997. Cash provided by operating activities was
$8.2  million for the nine months ended June 30, 1997. The  Company's
investing  activities used cash of $0.9 million for the  nine  months
ended   June   30,   1997.  Investing  activities  included   capital
expenditures  of  approximately $1.0 million during the  nine  months
ended June 30, 1997, including $0.6 million primarily for factory and
computer equipment and $0.4 million for the design and development of
new   packaging  artwork.  The  Company  anticipates  making  capital
expenditures of approximately $1.75 million in fiscal 1997. Financing
activities  of  the Company used cash of $2.8 million  for  the  nine
months  ended  June  30, 1997, principally for the extinguishment  of
bank debt.


OTHER DEVELOPMENTS

     Effective June 16, 1997, the Company appointed Stephen B. Hughes
to the position of President and CEO. Founder, Mo Siegel, will remain
active  with the Company as Chairman. Mr. Hughes comes to the Company
having  most  recently  been  Executive Vice  President  and  General
Manager of Tropicana/Dole USA.

      The  Company incurred legal expenses of approximately  $647,000
during  the nine months ended June 30, 1997 associated with a lawsuit
against a competitor relating to trade dress infringements and unfair
competition claims. On January 13, 1997, judgment was entered in  the
United  States  District  Court for the District  of  Colorado  which
absolved  the  competitor of any claims, and there were  no  monetary
damages  assessed.  The  Company  did  not  incur  any  legal   costs
associated with this lawsuit during the quarter ended June 30, 1997.

      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  "Results  of   Operations,"
"Liquidity  and  Capital Resources" and "Other Developments,"  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,
general  economic conditions, consumer trends, costs and availability
of   raw  materials,  competition  and  the  effect  of  governmental
regulation.
                            PAGE 11

<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 6.  EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
                                  
(a)  Exhibits
     --------
Exhibit      
  No.          
-------
 10.1    -   Employment  Agreement dated June  16,  1997  between
             Registrant and Stephen B. Hughes.
               
 10.2    -   Executive Agreement dated June 16, 1997 between
             Registrant and Mo Siegel.

 10.3    -   Stock  Option Agreement dated June 16, 1997  between
             Registrant and Stephen B. Hughes.

 10.4    -   Option   Agreement  dated  June  13,  1997   between
             Registrant and Mo Siegel.
 
 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 June 30,
1997.
                                PAGE 12

<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)


August 8, 1997           By:  /s/  Darrell F. Askey
                              ---------------------
                              Darrell F. Askey

                              Vice  President  - Finance,  Secretary  and
                              Treasurer
                              (Principal Financial Officer)

                                    PAGE 13

<PAGE>

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

                                                             Sequentially
Exhibit                                                        Numbered
  No.                         Description                        Pages
-------                       -----------                    ------------

 10.1    -  Employment Agreement dated June 16, 1997
            between Registrant and Stephen B. Hughes.            15-33

 10.2    -  Executive Agreement dated June 16, 1997 between      
            Registrant and Mo Siegel.                            34-47

 10.3    -  Stock  Option  Agreement  dated  June  16,  1997     
            between Registrant and Stephen B. Hughes.            48-56

 10.4    -  Option  Agreement  dated June 13,  1997  between     
            Registrant and Mo Siegel.                            57-61

 23.1    -  Report  of Deloitte & Touche LLP on consolidated     
            financial statements.                                 62


                               PAGE 14