<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   Form 10-Q

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended  March 31, 2001
                               ---------------

                                      AND

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934.

                        Commission file number 0-10815
--------------------------------------------------------------------------------

                          Unified Western Grocers, Inc.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                     <C>
                          California                                         95-0615250
----------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)          (I.R.S. Employer
                                                                        Identification No.)
</TABLE>

5200 Sheila Street, Commerce, CA                             90040
--------------------------------------------------------------------------------
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code        (323) 264-5200
                                                   -----------------------------

________________________________________________________________________________
           (Former Name, Former Address and Former Fiscal Year, if
                          Changed Since Last Report)

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 ____
                                       ---

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes ___ No ___


                     APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Outstanding Shares on or about
April 28, 2001:

                Class A Shares                   67,908
                Class B Shares                  414,777
                Class C Shares                       18

                                       1
<PAGE>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements
----------------------------

                UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                                  (UNAUDITED)
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                September 30,   March 31,
                                                                    2000           2001
                                                                -------------------------
<S>                                                             <C>            <C>
ASSETS

Current:
     Cash and cash equivalents                                    $  10,355    $  12,365
     Accounts and notes receivable, net                             190,654      173,413
     Inventories                                                    230,259      227,675
     Prepaid expenses                                                 6,493        7,404
     Deferred taxes                                                  14,210       14,210
                                                                -------------------------
             Total current assets                                   451,971      435,067

Properties, net                                                     123,374      123,873
Investments                                                          43,585       54,612
Notes receivable                                                     46,780       51,386
Goodwill, net                                                        55,745       55,025
Other assets, net                                                    44,395       47,026
                                                                ------------------------
     TOTAL ASSETS                                                 $ 765,850    $ 766,989
                                                                ========================


LIABILITIES AND SHAREHOLDERS' EQUITY

Current:
     Accounts payable                                             $ 214,607    $ 161,445
     Accrued liabilities                                             77,258       85,693
     Current portion of notes payable                                10,760       11,671
     Patrons' excess deposits and estimated patronage dividends      16,428       17,411
                                                                  ----------------------
             Total current liabilities                              319,053      276,220

Notes payable, due after one year                                   259,229      308,547
Long-term liabilities, other                                         62,114       62,621
Patrons' deposits and certificates:
     Patrons' required deposits                                      21,970       20,290
     Subordinated patronage dividend certificates                     5,926        4,056
Shareholders' equity:
     Class A Shares: 67,208 issued and outstanding                   10,899       11,434
     Class B Shares: 414,777 issued and outstanding                  74,870       73,531
     Additional paid in capital                                      18,095       18,095
     Accumulated deficit                                             (5,572)      (8,125)
     Accumulated other comprehensive (loss) earnings                   (734)         320
                                                                  ----------------------
             Total shareholders' equity                              97,558       95,255
                                                                  ----------------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                   $ 765,850    $ 766,989
                                                                  ======================
</TABLE>

       The accompanying notes are an integral part of these statements.

                                       2
<PAGE>

                UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                THIRTEEN WEEKS ENDED         TWENTY-SIX WEEKS ENDED
                                                            --------------------------------------------------------
                                                              April 1,      March 31,       April 1,       March 31,
                                                                2000           2001           2000            2001
                                                            --------------------------------------------------------
<S>                                                         <C>            <C>            <C>              <C>
Net sales                                                   $   742,287    $   705,404    $ 1,561,702      1,445,976
Costs and expenses:
   Cost of sales                                                660,279        628,235      1,395,928      1,287,584
   Distribution, selling and administrative                      74,127         68,520        151,738        138,569
                                                            --------------------------------------------------------
Operating income                                                  7,881          8,649         14,036         19,823
Interest expense                                                  7,303          7,364         14,508         14,837
                                                            --------------------------------------------------------
Earnings (loss) before estimated patronage dividends,
   benefit for income taxes and change in
   accounting principle                                             578          1,285           (472)         4,986
Estimated patronage dividends                                    (3,830)        (2,930)        (6,558)        (7,570)
                                                            --------------------------------------------------------
Loss before benefit for income tax and change in
   accounting principle                                          (3,252)        (1,645)        (7,030)        (2,584)
Benefit for income taxes                                         (1,068)             -         (2,016)             -
                                                            --------------------------------------------------------
Loss before change in accounting principle                       (2,184)        (1,645)        (5,014)        (2,584)
Cumulative effect of adopting SFAS No. 133, net of
   income taxes                                                       -              -              -             31
                                                            --------------------------------------------------------
Net loss                                                         (2,184)        (1,645)        (5,014)        (2,553)
                                                            --------------------------------------------------------

Other comprehensive (loss) earnings, net of income
taxes:
     Cumulative effect of adopting SFAS No. 133                       -              -              -          1,143
     Fair value adjustment interest rate collar agreement             -            135              -           (775)
     Unrealized holding (loss) gains                                (55)           154           (114)           686
                                                            --------------------------------------------------------
Other comprehensive (loss) income                                   (55)           289           (114)         1,054
                                                            --------------------------------------------------------
Comprehensive loss                                          $    (2,239)   $    (1,356)   $    (5,128)   $    (1,499)
                                                            ========================================================
</TABLE>

       The accompanying notes are an integral part of these statements.

                                       3
<PAGE>

                UNIFIED WESTERN GROCERS, INC. AND SUBISIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
            TWENTY-SIX WEEKS ENDED APRIL 1, 2000 AND MARCH 31, 2001
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                             TWENTY-SIX WEEKS ENDED
                                                                         ---------------------------
                                                                          April 1,         March 31,
                                                                            2000             2001
                                                                         ---------------------------
<S>                                                                      <C>                <C>
Cash flows from operating activities:
Net loss                                                                 $ (5,014)          $ (2,553)
   Adjustments to reconcile net loss to net
      cash provided (utilized) by operating activities:
     Depreciation and amortization                                         14,608             12,137
     Gain on disposal of properties                                            (2)               (95)
     Changes in operating assets and liabilities:
        Accounts and notes receivable, net                                 11,730             17,233
        Inventories                                                         4,442              2,584
        Prepaid expenses                                                    3,212               (911)
        Notes receivable                                                   (3,308)            (4,606)
        Accounts payable                                                   19,257            (53,162)
        Accrued liabilities                                               (10,017)             8,435
        Patrons' excess deposits and estimated
           patronage dividends                                                360                983
        Long-term liabilities, other                                        2,322                507
                                                                         ---------------------------
Net cash provided (utilized) by operating activities                       37,590            (19,448)
                                                                         ---------------------------

Cash flows from investing activities:
   Purchase of properties                                                 (13,306)           (10,059)
   Proceeds from sales of properties                                          894              1,004
   Increase in other assets                                                (5,972)            (5,397)
   Investment in securities, net                                           (2,543)            (9,973)
   Proceeds from sale of notes receivable                                   2,511                  -
                                                                         ---------------------------
Net cash utilized by investing activities                                 (18,416)           (24,425)
                                                                         ---------------------------

Cash flows from financing activities:
   Additions to long-term notes payable                                       476             53,900
   Reduction of long-term notes payable                                   (18,871)                 -
   Additions to short-term notes payable                                      106              1,825
   Reduction of short-term notes payable                                   (4,924)            (6,919)
   Redemption of patronage dividend certificates                                -             (1,862)
   Increase (decrease) in members' required deposits                        1,348             (1,680)
   Repurchase of shares from members                                         (701)                 -
   Issuance of shares to members                                              221                619
                                                                         ---------------------------
Net cash (utilized) provided by financing activities                      (22,345)            45,883
                                                                         ---------------------------

Net (decrease) increase in cash and cash equivalents                       (3,171)             2,010
Cash and cash equivalents at beginning of year                             17,057             10,355
                                                                         ---------------------------
Cash and cash equivalents at end of period                               $ 13,886           $ 12,365
                                                                         ===========================

Supplemental disclosure of cash flow information:
Cash paid during the period for:
   Interest                                                              $ 12,932           $ 14,312
   Income taxes                                                                 -                 74

Supplemental disclosure of non-cash item:
   Issuance of subordinated redemption notes to
   repurchase Class B Shares from members                                       -           $  1,423
</TABLE>

       The accompanying notes are an integral part of these statements

                                       4
<PAGE>

                UNIFIED WESTERN GROCERS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.   The consolidated condensed financial statements include the accounts of
Unified Western Grocers, Inc. and all of its subsidiaries (the "Company" or
"Unified"). Intercompany transactions and accounts with subsidiaries have been
eliminated. The interim financial statements included herein have been prepared
by the Company without audit, pursuant to the rules and regulations promulgated
by the Securities and Exchange Commission (the "Commission"). Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to Commission rules and regulations; nevertheless,
management believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's latest annual report filed on Form 10-K. The results of operations
for the interim periods are not necessarily indicative of the results for the
full year.

     The accompanying consolidated condensed financial statements reflect all
adjustments which are, in the opinion of management, both of a normal recurring
nature and necessary for a fair statement of the results of the interim periods
presented. Certain reclassifications have been made to prior period financial
statements to present them on a basis comparable with the current period's
presentation.

2.   On September 27, 1999, the shareholders of Unified and United Grocers, Inc.
("United") each approved the provisions of a merger agreement (the "Merger").
The Merger became effective on September 29, 1999 and was accounted for as a
purchase pursuant to Accounting Principles Board Opinion No. 16, "Business
Combinations."

     As a result of the Merger, Unified now serves a broader geographic region.
The Company serves independent supermarket operators in California, Oregon,
western Washington, western Idaho, Nevada, Arizona, Hawaii, and various
countries in the South Pacific and elsewhere as a wholesale grocery cooperative.
In addition to offering a complete line of food and general merchandise
products, Unified also provides finance, insurance, store design and real estate
services to its patrons.

     In connection with the Merger, the Company established a reserve for the
closure of various facilities. Periodic charges against the reserve represent
lease costs for non-subleased facilities and rental income shortfalls for
subleased facilities. The amount of this reserve and current period charges
against the reserve are presented below.

         Balance at September 30, 2000                          $  4,534,000
         Charges to the reserve                                     (155,000)
                                                                ------------
         Balance at March 31, 2001                              $  4,379,000
                                                                ============

3.   The Company has identified one reportable segment - Wholesale Distribution.
The Company is a grocery wholesaler cooperative serving independent supermarket
operators. As a cooperative, the Company is owned by member-patron shareholders
that are independent supermarket operators and remits a patronage dividend to
its shareholders based on earnings from the wholesale activities with its
owners. The Company's principal business activities are to provide food and
food-related products to member and non-member supermarket operators. Over 93.5%
of its net sales and operating profits are derived from the wholesale
distribution of food and food-related products to supermarket operators.
Additionally, approximately 79.8% of the Company's assets are related to the
wholesale distribution of food and food-related products to supermarket
operators.

     All other activities of the Company are included in the caption "All
Other", and include the aggregation of retail sales, finance, insurance, and
other services provided to independent supermarket operators. None of these
services individually meet the quantitative thresholds of a reportable segment.

                                       5
<PAGE>

     Information about the Company's operations by segment is as follows (in
thousands):

<TABLE>
<CAPTION>
                                          Thirteen Weeks Ended          Twenty-six Weeks Ended
                                        April 1,       March 31,       April 1,      March 31,
                                          2000            2001           2000           2001
                                       --------------------------------------------------------
<S>                                    <C>            <C>            <C>            <C>
Net sales
  Wholesale distribution               $   717,434    $   683,987    $ 1,502,952    $ 1,401,907
  All other                                 54,781         46,889        124,437         98,472
  Intersegment elimination                 (29,928)       (25,472)       (65,687)       (54,403)
                                       --------------------------------------------------------
Total net sales                        $   742,287    $   705,404    $ 1,561,702    $ 1,445,976
                                       --------------------------------------------------------

Operating income (loss)
  Wholesale distribution               $    11,209    $     9,892    $    21,561    $    22,232
  All other                                 (3,328)        (1,243)        (7,525)        (2,409)
                                       --------------------------------------------------------
Total operating income                 $     7,881    $     8,649    $    14,036    $    19,823
                                       --------------------------------------------------------

Interest expense                       $     7,303    $     7,364    $    14,508    $    14,837
Estimated patronage dividends                3,830          2,930          6,558          7,570
                                       --------------------------------------------------------
Loss before benefit for income taxes   $    (3,252)   $    (1,645)   $    (7,030)   $    (2,584)
                                       --------------------------------------------------------

Depreciation and amortization
  Wholesale distribution               $     6,565    $     5,501    $    13,426    $    11,116
  All other                                    585            457          1,182          1,021
                                       --------------------------------------------------------
Total depreciation and amortization    $     7,150    $     5,976    $    14,608    $    12,137
                                       --------------------------------------------------------

Capital expenditures
  Wholesale distribution               $     3,040    $     3,343    $     6,262    $     9,265
  All other                                  1,624            607          7,044            794
                                       --------------------------------------------------------
Total capital expenditures             $     4,664    $     3,950    $    13,306    $    10,059
                                       --------------------------------------------------------

Identifiable assets
  Wholesale distribution               $   596,687    $   611,917    $   596,687    $   611,917
  All other                                148,245        155,072        148,245        155,072
                                       --------------------------------------------------------
Total identifiable assets              $   744,932    $   766,989    $   744,932    $   766,989
                                       --------------------------------------------------------
</TABLE>

4.   The Jerome Lemelson Foundation (the "Foundation"), which asserts ownership
of certain patents relating to bar code technology, issued a demand that the
Company enter into a license agreement with respect to certain patented
technology which the Company is claimed to use and which allegedly infringes
upon patents issued to Jerome Lemelson, which patents, upon the death of Jerome
Lemelson, were assigned to the Foundation. The Company has been advised that the
Foundation has filed an action against the Company and others asserting patent
infringement and seeking damages in unspecified amounts. The Foundation
continues to seek a negotiated settlement of its claim. Due to the early stage
of the proceeding, the Company is unable to assess the merits of the lawsuit or
to determine its potential liability, if any. The Company intends to vigorously
defend the action.

     The United States Environmental Protection Agency ("EPA") notified the
Company in 1993 that, together with others, it was a potentially responsible
party ("PRP") for the disposal of hazardous substances at a landfill site
located in Monterey Park, California. In 1999, the EPA notified the Company
that, together with others, it was a PRP for the disposal of hazardous
substances at a landfill site located in Patterson, California. The Company
believes that its share of cost for the remaining phases of cleanup for these
sites will not exceed the amounts which the Company has reserved.

                                       6
<PAGE>

5.   The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The statement requires that the
Company recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. As amended, this statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.

     Unified makes limited use of hedge agreements, primarily to manage the risk
associated with interest rates of its debt agreement. Additionally, Unified has
invested in convertible bonds. The convertible feature of the bonds constitutes
an embedded derivative, as defined by SFAS No. 133.

     The Company entered into a five-year interest rate collar agreement during
February 1999 in relation to certain borrowings on its variable rate revolving
credit facility. Under the provisions of SFAS No. 133, the fair value of the
collar must be reflected in the Company's financial statements. On October 1,
2000 the Company recognized the fair value of the collar, which totaled
$1,195,000, as a cumulative effect of adopting SFAS No. 133 in other
comprehensive (loss) earnings. Additionally, SFAS No. 133 requires that the fair
value of the collar be adjusted on a quarterly basis with the change in fair
value being recorded as an adjustment to other comprehensive (loss) earnings.
Due to changes in interest rates, the fair market value of the collar was
$420,000 at March 31, 2001; accordingly, the Company recorded a charge against
the fair value of the collar of $775,000 during the first twenty six weeks of
the fiscal year. For the thirteen week period ended March 31, 2001, the Company
recorded an increase in the fair value of the collar of $135,000.

     The Company's Insurance operation holds investments in various marketable
securities and high-grade convertible bonds. Prior to the adoption of SFAS No.
133, the Company classified its convertible bonds as available for sale in its
financial statements. Changes in the fair value of the bonds were recorded in
the accumulated other comprehensive (loss) earnings component of shareholders'
equity in the Company's consolidated condensed balance sheet. With the adoption
of SFAS No. 133, these bonds were reclassified as trading securities. As a
result of adopting SFAS No. 133 and changing the classification of convertible
bonds to trading securities, the Company recognized in its consolidated
condensed statements of operations a cumulative charge of $52,000 to other
comprehensive (loss) earnings. The cumulative adjustment includes $31,000, which
represents the recording of the fair value of the embedded derivative at October
1, 2000 as prescribed by SFAS No. 133. The remaining $21,000 represents the
realization of the previously unrealized holding gains on the convertible bonds
due to the reclassification of the convertible bonds from available for sale to
trading securities. This amount had been previously recorded as a component of
other comprehensive (loss) earnings. Subsequent changes in the fair value of
these convertible bonds will be recorded in the consolidated condensed
statements of operations.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB No.101") which summarizes certain of the
staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. The effective date of SAB No.101 for the
Company is the quarter ending September 29, 2001. Management believes the
application of SAB No.101 will not have a material impact on the Company's
financial position or its results of operations.

     SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," provides accounting and reporting standards
for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial components approach
that focuses on control. This statement is effective for transfers and servicing
of financial assets and extinguishments of liabilities occurring after March 31,
2001 and is to be applied prospectively. Management is in the process of
determining the effect on the Company's financial statements.

                                       7
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
        of Operations
        -------------

Liquidity and Capital Resources

     The Company relies upon cash flow from operations, patron deposits,
shareholdings, and borrowings under the Company's credit lines, to finance
operations. Net cash utilized by operating activities totaled $19.4 million for
the first twenty-six weeks of fiscal 2001 (the "2001 period"), as compared to
net cash provided by operating activities of $37.6 million for the first twenty-
six weeks of fiscal 2000 (the "2000 period"). Net cash utilized for the 2001
period is primarily due to a decrease in accounts payable resulting from the
finalization of integration activities associated with the Company's accounts
payable processing. Cash utilization during the 2001 period was partially offset
by an increase in cash from accounts receivable and inventories resulting from
management's controls over these areas in response to reduced sales volume
during the period. The commencement of integration activity along with an
emphasis on cash management in the 2000 period resulted in higher accounts
payable. The 2000 period also experienced an increase in cash due to
management's efforts to reduce accounts receivable and a reduction in
inventories associated with the consolidation of warehousing facilities in
northern California. At March 31, 2001, working capital was $158.8 million, as
compared to $132.9 million at September 30, 2000, and the Company's current
ratio was 1.6 to 1 at March 31, 2001 and 1.4 to 1 at September 30, 2000.

     The Company issued Patronage Certificates for fiscal years 1993, 1994 and
1995. The outstanding Patronage Certificates have a seven-year term and bear
interest payable on December 15 of each year. In December 2000, the Company
redeemed the Patronage Certificates issued in 1993 for approximately $1.8
million.

     Capital expenditures totaled $10.1 million in the first twenty-six weeks of
fiscal 2001. The fiscal 2001 expenditures were primarily attributable to the
purchase of previously leased warehousing and store equipment.

     Unified has a five-year, $200 million revolving credit facility which
expires October 1, 2004, secured by accounts receivable and inventories.
Borrowings bear interest at either LIBOR plus an applicable margin based on a
funded debt to operating cash flow ratio or the higher of the lender's base rate
or 0.50% above the lender's federal funds borrowing rate. The revolving credit
facility permits advances up to 85% of eligible accounts receivable and 65% of
eligible inventories.

     Unified also has notes outstanding to certain insurance companies and
pension funds which are comprised of $76.1 million of 7.72% senior notes due
April 2008, and $40 million of 8.71% senior notes due October 2009, both of
which are secured by property, plant and equipment.

     The credit agreements contain customary representations, warranties,
covenants and default provisions for these types of financing.

     In December 2000, the Company purchased 80,000 shares of Preferred Stock of
C&K Market, Inc. ("C&K") for $8.0 million. Douglas H. Nidiffer, a director of
the Company, is a shareholder, director and officer of C&K. In connection with
the stock purchase transaction, C&K executed a ten-year Supply Agreement and the
shareholders of C&K granted to the Company a put with respect to the Preferred
Stock, exercisable upon occurrence of designated events including the nonpayment
of permitted dividends or mandatory redemption payments. The Preferred Stock
bears a 9.5% cumulative dividend rate, with cash payment of dividends deferred
until November 15, 2002, and then payable only if permitted by applicable loan
agreements. The Preferred Stock is convertible into 15% of the common stock of
C&K under certain circumstances.

     At March 31, 2001, the Company had net deferred tax assets totaling $22.6
million, of which $15.1 million related to net operating loss carryforwards that
expire in various years through 2020. The Company has established a valuation
allowance of $7.1 million to reduce the net deferred tax assets to their net
realizable value as the Company may not realize the entire net operating loss
carryforwards before their expiration. The valuation allowance is primarily
related to retail store losses which include stores the Company has retained as
a result of the Albertson's agreement.

                                       8
<PAGE>

     The remaining balance of the net deferred tax asset is expected to be
realized through future operating results, reversal of taxable temporary
differences, and tax planning strategies.

     Unified distributes at least 20% of the patronage dividends in cash and
distributes Class B Shares as a portion of the patronage dividends distributed
to its member-patrons. Dairy patronage dividends were paid in cash in the
periods presented. Patrons are generally required to maintain cash subordinated
deposits with Unified and member-patrons may purchase (or acquire as patronage
dividends) Class B Shares to apply against this requirement. In the Merger,
former United members were provided the opportunity to build the minimum
subordinated deposit over time, provided that they agree to assign 80% of
patronage dividends received for this purpose and maintain a supply agreement
with Unified until the minimum deposit condition is satisfied. Upon termination
of patron status, the withdrawing patron will be entitled to recover deposits in
excess of its obligations to Unified if permitted by the applicable
subordination provisions, and a member-patron also will be entitled to have its
shares redeemed, subject to applicable legal requirements, company policies and
credit agreement limitations. With certain exceptions, Unified's current
redemption policy limits the Class B Shares that Unified is obligated to redeem
in any fiscal year to 5% of the number of Class B Shares deemed outstanding at
the end of the preceding fiscal year. For fiscal 2000, this limitation was
exceeded by repurchases of shares in connection with the Merger. In connection
with the Merger, Unified redeemed 71,310 Class B Shares of discontinued members
for a total consideration before set-offs of $13.4 million. As described in the
Form 10-K, Unified is not obligated during fiscal 2001 and 2002 to repurchase
Class B Shares of terminated members until after September 27, 2002.

     Redemption of all capital stock is subject to limitations imposed by the
Articles of Incorporation and Bylaws, credit agreements to which the Company is
a party, and restrictions imposed by law on the ability of a company to redeem
its own shares. As a California corporation, the Company is subject to the
provisions of the California General Corporation Law including Section 500 which
limits the ability of the Company to make distributions, including distributions
to repurchase its own shares and any payments on notes issued to repurchase
Unified shares. Section 500 permits such repurchase and note payments only when
retained earnings calculated in accordance with generally accepted accounting
principles ("GAAP") equal or exceed the amount of any proposed distribution or
an alternative asset/liability ratio test is met. Historically through the
operations of its subsidiaries, the Company has maintained sufficient retained
earnings to accomplish its share repurchase program. As a result of expenses
associated with the Merger with United, current operating losses of subsidiaries
acquired from United as well as operating losses of retail stores owned by the
Company, including stores acquired from Albertson's for resale to members or
others, the Company's retained earnings have been depleted such that they are
currently inadequate to permit repurchase of Company shares. The repurchase test
permitted under Section 500 based on the ratio of assets to liabilities
determined under GAAP with certain adjustments cannot currently be met since the
Company relies heavily on borrowings to finance its operations. The Company is
also a party to credit agreements containing financial and other covenants,
which limit the ability of the Company to make purchases of capital stock under
certain circumstances. The Company has established a trust for the purpose of
facilitating the transfer of shares by Unified members obligated or entitled to
sell shares in accordance with the Company's redemption policy to existing
members or new members who are authorized by the Board of Directors to buy
shares in accordance with the Bylaws, during periods when the Company is legally
unable to buy shares or otherwise elects to cause or permit outstanding shares
to be transferred between members. Funds used to purchase shares from selling
members are exclusively sourced from funds provided by buying members.

                                       9
<PAGE>

Results of Operations

     The following table sets forth selected financial data of the Company
expressed as a percentage of net sales for the periods indicated below:

<TABLE>
<CAPTION>
                                                    For the Thirteen Weeks Ended    For the Twenty-six Weeks Ended
                                                  ------------------------------------------------------------------
                                                       April 1,     March 31,            April 1,    March 31,
                                                         2000          2001                2000         2001
                                                  ------------------------------------------------------------------
<S>                                               <C>               <C>             <C>              <C>
Net sales                                               100.0%       100.00%              100.0%       100.0%
Cost of sales                                            88.9          89.1                89.4         89.0
Distribution, selling and administrative                 10.0           9.7                 9.7          9.6
Operating income                                          1.1           1.2                 0.9          1.4
Interest expense                                          1.0           1.0                 0.9          1.1
Earnings (loss) before estimated patronage
 dividends, benefit for income taxes and change
 in accounting principle                                  0.1           0.2                 0.0          0.3
Estimated patronage dividends                            (0.5)         (0.4)               (0.4)        (0.5)
Loss before  benefit for income taxes and change
 in accounting principle                                 (0.4)         (0.2)               (0.4)        (0.2)
Benefit for income taxes                                 (0.1)          0.0                (0.1)         0.0
Loss before change in accounting principle               (0.3)         (0.2)               (0.3)        (0.2)
Cumulative effect of adopting SFAS No. 133                0.0           0.0                 0.0          0.0
Net loss                                                 (0.3)         (0.2)               (0.3)        (0.2)
</TABLE>

Thirteen Week Period

Net sales

     Net sales totaled $705.4 million for the 2001 period as compared to $742.3
million in the 2000 period. The sales decrease of $36.9 million represents a
5.0% decrease over the 2000 period. The overall decrease in sales is primarily
related to the following:

 .  The Company experienced a reduction in distribution volume of $29.8 million
   due to certain northern California grocery retailers that transitioned to
   other supply arrangements and fifteen store closures of independent
   supermarket owners primarily in the Pacific Northwest.

 .  In the fiscal 2000 period, the Company had $14.2 million of low margin non-
   member activity associated with the former United operations. The Company
   subsequently eliminated this activity as part of its overall profit
   improvement and Merger integration activities.

 .  The Company's owned retail locations had lower volume for the 2001 period as
   compared to the 2000 period by $3.9 million. The reduction is primarily due
   to the closure of three Albertson's divestiture stores ("Divestiture
   Stores"), and an overall volume decline in the remaining store locations due
   to competitive pressures.

 .  Offsetting the declining factors, the Company's membership has added 17 new
   stores during the period, generating $11.0 million in additional wholesale
   volume.

Cost of sales

     In the 2001 period cost of sales was $628.2 million (89.1% of net sales)
compared to $660.3 million (88.9% of net sales) in the 2000 period. The decline
in overall sales, as described above, produced a reduction in total cost of
sales dollars. On a percentage basis, cost of sales was higher by 0.2% in the
2001 period as compared to the 2000 period due to lower wholesale margins and
lower retail sales that generally have higher margins.

                                       10
<PAGE>

Distribution, selling and administrative

     Distribution, selling and administrative expenses were $68.5 million (9.7%
of net sales) in the 2001 period, as compared to $74.1 million (10.0% of net
sales) in the 2000 period. The reduction of expenses is due to several factors.
Certain distribution costs are variable and fluctuate as volume increases or
decreases. The closure of three Company owned retail locations resulted in an
expense reduction of $1.3 million. Additionally, the Company was successful in
realizing cost reductions from the Merger with United through the elimination of
duplicate facilities in northern California and the integration of marketing,
administration and information services activities.

Interest

     Interest expense was $7.4 million (1.0% of net sales) in the 2001 period as
compared to $7.3 million (1.0% of net sales) in the 2000 period. The Company's
effective borrowing rates for the 2001 and 2000 periods were 8.09% and 8.20%
respectively. Higher average borrowing levels of approximately $4.9 million
offset the decrease in interest rates.

Estimated patronage dividends

     Estimated patronage dividends decreased $0.9 million to $2.9 million for
the 2001 period as compared to $3.8 million for the 2000 period. Estimated
patronage earnings for fiscal 2001 are comprised of interim patronage earnings
from the Company's two patronage pools: the cooperative and dairy divisions. For
the 2001 period, the Company had interim patronage earnings of $0.2 million in
the cooperative division and patronage earnings of $2.7 million from the dairy
division. For the 2000 period, the Company had interim patronage earnings of
$1.1 million in the cooperative division and patronage earnings of $2.7 million
from the dairy division.

Net (loss)

     Net loss for the 2001 period was $1.6 million compared to a net loss of
$2.2 million for the 2000 period. The losses experienced for the 2001 and 2000
periods are predominately due to the Company's retail operations. Net losses are
generated by the Company's subsidiaries and nonpatronage activities.

Twenty-six Week Period

Net sales

     Net sales totaled $1.4 billion for the 2001 period as compared to $1.6
billion for the 2000 period. The sales decrease of $115.7 million represents a
7.4% decrease over the 2000 period. The decrease in sales is primarily related
to the following:

 .  The Company experienced a $75.2 million reduction in distribution volume due
   to certain northern California chain store supplemental business that
   transitioned to self-distribution, three grocery retailers that transitioned
   to other supply arrangements and fifteen store closures of independent
   supermarket owners primarily in the Pacific Northwest.

 .  In the fiscal 2000 period, the Company had $30.0 million of low margin, non-
   member activity associated with the former United operations. The Company
   subsequently eliminated this activity as part of its overall profit
   improvement and Merger integration activities.

 .  The Company's owned retail locations had lower volume for the 2001 period as
   compared to the 2000 period by $25.9 million. The closure of three
   "Divestiture Stores", along with an overall volume decline in the remaining
   store locations due to competitive pressures and strong sales in the 2000
   period related to Y2K preparedness which were not repeated in the 2001
   period, contributed to the sales decline.

 .  Offsetting the declining factors, the Company's membership has added 31 new
   stores during the period, generating $15.4 million in additional wholesale
   volume.

                                       11
<PAGE>

Cost of sales

     In the 2001 period, cost of sales was $1.3 billion (89.0% of net sales)
compared to $1.4 billion (89.4% of net sales) in the 2000 period. The decline in
overall cost of sales is due to lower sales volume and increased distribution
margins of the former United operations. The 2000 period had margin shortfalls
from the former United operations that were subsequently corrected. The
resulting margin improvement for the 2001 period was partially offset by the
reduction in the Company's retail sales that normally have higher margins than
distribution activity and softening in the overall economy.

Distribution, selling and administrative

     Distribution, selling and administrative expenses were $138.6 million (9.6%
of net sales) in the 2001 period, as compared to $151.7 million (9.7% of net
sales) in the 2000 period. The reduction of expenses is due to several factors.
Certain distribution costs are variable and fluctuate as volume increases or
decreases. Costs in the Company's retail operations declined $5.9 million in the
2001 period. The Company incurred one time startup costs related to its six
"Divestiture Stores" retail locations in the 2000 period and had lower operating
expenses in the 2001 period due to the closure of three of the "Divestiture
Stores" locations. Additionally, the Company was successful in realizing cost
reductions from the Merger with United through the elimination of duplicate
facilities in northern California and the integration of marketing,
administration and information services activities.

Interest

     Interest expense was $14.8 million (1.1% of net sales) in the 2001 period
as compared to $14.5 million (0.9% of net sales) in the 2000 period. The
Company's effective borrowing rates for the 2001 and 2000 periods were 8.31% and
8.20%, respectively. The increase in interest expense was due to higher interest
rates partially offset by an approximate $1.6 million reduction in average
borrowing levels.

Estimated patronage dividends

     Estimated patronage dividends totaled $7.6 million for the 2001 period as
compared to $6.6 million for the 2000 period. Estimated patronage earnings for
fiscal 2001 are comprised of interim patronage earnings from the Company's two
patronage pools: the cooperative and dairy divisions. For the 2001 period, the
Company had interim patronage earnings of $2.3 million in the cooperative
division and patronage earnings of $5.3 million from the dairy division. For the
2000 period, the Company had interim patronage earnings of $0.9 million in the
cooperative division and $5.7 million of patronage earnings from the dairy
division.

Net (loss) earnings

     Net loss for the 2001 period was $2.6 million compared to net loss of $5.0
million for the 2000 period. The losses experienced for the 2001 and 2000
periods are predominately due to the Company's retail operations. Net losses are
generated by the Company's subsidiaries and nonpatronage activities.

     In the 2001 period, the Company liquidated its Grocers Equipment Company
subsidiary into Unified. The member services previously provided by that
subsidiary are now provided by the Company as a part of its cooperative
division. The Company intends to sell or close unprofitable retail operations
and is evaluating under-performing subsidiary operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
------------------------------------------------------------------

     Unified has only limited involvement with derivative financial instruments.

     Unified entered into a five-year interest rate collar agreement in February
1999 in relation to certain borrowings on its variable rate revolving credit.
The collar agreement was put in place without incurring a fee with respect to
the collar transaction. The hedge agreement is structured such that Unified pays
a variable rate of interest between 6% (cap rate) and 4.94% (floor rate) based
on a notional amount of $50,000,000.

                                       12
<PAGE>

     The weighted average interest rate, prior to lender's margin, on borrowings
on the revolving credit was 5.38% at March 31, 2001. The fair market value of
the collar agreement at March 31, 2001 was $420,000.

     With the adoption of SFAS No. 133, the Company's investments in convertible
bonds were reclassified from available for sale securities to trading
securities. As a result of changing the classification of the convertible bonds,
the Company is subject to market risk associated with fluctuations in interest
rates and the market value of the embedded conversion feature.

PART II. OTHER INFORMATION

Item 4.  Submission of Matters to Vote of the Security Holders.
--------------------------------------------------------------

(a)  Date of Meeting:   February 27, 2001 (Annual Meeting)

(b)  Matters Voted Upon:

     Election of Directors

<TABLE>
     -------------------------------------------------------------------------------------------------
     <S>                                            <C>                   <C>
      Class A Directors                             For                   Withheld Authority
     -------------------------------------------------------------------------------------------------
      Louis A. Amen                                 63,856                2,552
     -------------------------------------------------------------------------------------------------
      David M. Bennett                              63,756                2,652
     -------------------------------------------------------------------------------------------------
      John Berberian                                63,856                2,552
     -------------------------------------------------------------------------------------------------
      Edmund Kevin Davis                            63,756                2,652
     -------------------------------------------------------------------------------------------------
      James F. Glassel                              63,756                2,652
     -------------------------------------------------------------------------------------------------
      Mark Kidd                                     63,956                2,452
     -------------------------------------------------------------------------------------------------
      Jay McCormack                                 63,556                2,852
     -------------------------------------------------------------------------------------------------
      Morrie Nortrica                               63,456                2,952
     -------------------------------------------------------------------------------------------------
      Peter J. O'Neal                               63,566                2,842
     -------------------------------------------------------------------------------------------------
      Michael A. Provenzano, Jr.                    63,356                3,052
     -------------------------------------------------------------------------------------------------
      Gordon E. Smith                               63,577                2,831
     -------------------------------------------------------------------------------------------------
      Robert E. Stiles                              63,856                2,552
     -------------------------------------------------------------------------------------------------
      James R. Stump                                63,756                2,652
     -------------------------------------------------------------------------------------------------
      Kenneth Ray Tucker                            63,856                2,552
     -------------------------------------------------------------------------------------------------
      Richard L. Wright                             63,767                2,641
     -------------------------------------------------------------------------------------------------

     -------------------------------------------------------------------------------------------------
      Class B Directors
     -------------------------------------------------------------------------------------------------
      Darioush Khaledi                             394,063               24,010
     -------------------------------------------------------------------------------------------------
      Douglas A. Nidiffer                          390,381               27,692
     -------------------------------------------------------------------------------------------------
      Mimi R. Song                                 393,422               24,651
     -------------------------------------------------------------------------------------------------
</TABLE>

Item 6.  Exhibits and Reports on Form 8-K.
-----------------------------------------

(a)  Exhibits

     10.49   Form of Severance Agreement for Executive Vice Presidents with
             Three Years or More in an Officer Position executed by Robert M.
             Ling, Jr., Richard J. Martin and Charles J. Pilliter.

     10.50   Form of Severance Agreement for Vice Presidents, Senior Vice
             Presidents and Executive Vice Presidents with Less Than Three Years
             in an Officer Position executed by Philip S. Smith, Rodney L. Van
             Bebber, Daniel J. Murphy, John C. Bedrosian, William O. Cote', Dirk
             T. Davis, Luis de la Mata, Stanley G. Eggink, Joseph L. Falvey,
             Carolyn S. Fox, Don Gilpin, Gary C. Hammett, Gary S. Herman, Joseph
             A. Ney, David A. Woodward.

(b)  Reports on Form 8-K

     None

                                       13
<PAGE>

     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.

Dated: May 14, 2001

                          Unified Western Grocers, Inc.
                          -----------------------------
                                  (Registrant)


                            By /s/ Alfred A. Plamann
                               ---------------------
                                Alfred A. Plamann
                                  President and
                             Chief Executive Officer


                            By /s/ Richard J. Martin
                               ---------------------
                                Richard J. Martin
                            Executive Vice President,
                            Finance & Administration
                           and Chief Financial Officer


                             By /s/ William O. Cote
                                -------------------
                                  William O. Cote
                           Vice President, Controller

                                       14
<PAGE>

                                 EXHIBIT LIST

10.49  Form of Severance Agreement for Executive Vice Presidents with Three
       Years or More in an Officer Position executed by Robert M. Ling, Jr.,
       Richard J. Martin and Charles J. Pilliter.

10.50  Form of Severance Agreement for Vice Presidents, Senior Vice Presidents
       and Executive Vice Presidents with Less Than Three Years in an Officer
       Position executed by Philip S. Smith, Rodney L. Van Bebber, Daniel J.
       Murphy, John C. Bedrosian, William O. Cote', Dirk T. Davis, Luis de la
       Mata, Stanley G. Eggink, Joseph L. Falvey, Carolyn S. Fox, Don Gilpin,
       Gary C. Hammett, Gary S. Herman, Joseph A. Ney, David A. Woodward.

                                       15