EXHIBIT 13
                           ANNUAL REPORT TO SHAREHOLDERS
                              THE QUAKER OATS COMPANY
                        FOR THE YEAR ENDED DECEMBER 31, 1999

Management's Discussion and  Analysis

Operating Results

The following discussion addresses the operating results and financial condition
of  the  Company for the years ended December 31, 1999 (current year)  and  1998
(prior  year).  The Company divested a number of businesses in  1999,  1998  and
1997,  including  a  Brazilian pasta business, a soup-cup  business,  five  food
service  businesses  and Snapple beverages.  As a result of these  divestitures,
year-to-year financial comparisons do not easily provide an understanding of the
operating  results  of  ongoing businesses.  To assist in  the  understanding of
operating results,  this  discussion  will  address  total  consolidated Company
results, describe the  impact  of  divested businesses and review the results of
ongoing businesses by operating segment. Previously reported  amounts have  been
restated to conform to the current presentation.

The  discussion of business results by operating segment is consistent with  the
way the Company's management assesses performance.   The Company reports results
by  Foods,  Beverages and Divested operating segments. U.S.  and Canadian  Foods
includes  hot and ready-to-eat cereals, snacks, flavored rice and pasta,  mixes,
syrups and corn products. Latin American Foods includes Quaker brand cereals and
snacks,  Coqueiro  brand canned fish and Toddy, ToddYnho and  FrescaAvena  brand
beverages and beverage powders. Other Foods includes the combined results of the
European  and Asia/Pacific foods businesses. U.S. and Canadian Beverages,  Latin
American  Beverages and Other Beverages, the combined European and  Asia/Pacific
businesses,  all  include results from Gatorade thirst  quencher  products.  The
Divested Businesses segment includes historical results for businesses that have
been sold by the Company.


<Graph>
[CAPTION]
1999 Net Sales (Ongoing Businesses)
Dollars in Millions
[S]
U.S. and Canadian Foods               [C]
     Hot Cereals                      $   485.5
     Ready-to-Eat Cereals             $   724.5
     Flavored Rice and Pasta          $   344.3
     Grain-based Snacks               $   304.6
     Other (syrup, mixes, corn
       products, Canada and other)    $   500.6
Latin American Foods                  $   308.4
European and Asia/Pacific Foods       $   215.4
U.S. and Canadian Beverages           $ 1,502.3
Latin American Beverages              $   229.1
European and Asia/Pacific Beverages   $   103.8
</Graph>



In determining the operating  income or  loss  of  each  segment,  restructuring
charges,  asset  impairment  losses, divestiture  gains and  losses  and certain
other expenses, such as income  taxes, general  corporate expenses and financing
costs, are not allocated to  operating segments.

1999 Compared with 1998

Consolidated  volume  was even with the prior year and  net  sales  decreased  2
percent, due to business divestitures and weaker exchange rates, particularly in
Brazil.   For ongoing businesses, volume and net sales increased 7 percent and 4
percent,  respectively, primarily driven by double-digit growth in the U.S.  and
Canadian  Gatorade business.  Excluding the impact of foreign currency  exchange
rate  changes,  net  sales  from ongoing businesses  increased  approximately  6
percent.  Price changes did not significantly affect the comparison of 1999  and
1998 net sales.

<TABLE>
<CAPTION>

Ongoing Businesses
Sales Growth by Operating Segment

1999
<S>                                     <C>
U.S. and Canadian Foods                   4%
Latin American Foods                    -17%
Other Foods                               6%
Total Foods                               1%
U.S. and Canadian Beverages              12%
Latin American Beverages                -14%
Other Beverages                           1%
Total Beverages                           7%
Total                                     4%
</TABLE>



The  consolidated gross profit margin expanded to 54.8 percent in 1999  compared
to 51.0 percent in 1998.  More than one-half of the gross margin improvement was
driven  by  ongoing  businesses, primarily due to lower raw material  costs  and
supply  chain cost-reduction efforts.  The remaining margin improvement reflects
the divestiture of low-margin businesses.

Selling,  general and administrative (SG&A) expenses increased $31.6 million  to
$1.90  billion.  The  largest  component of  SG&A  expense  is  advertising  and
merchandising (A&M), which totaled $1.32 billion in 1999.  Increased  investment
in  brand-building activities, such as media and new product marketing  support,

<Page 25>


led to an $81.9 million  increase  in A&M spending over  the prior  year.  Total
Company A&M  expenses as a  percent of  sales  increased to 28.0 percent in 1999
compared to 25.6 percent  in 1998.  The  increase in  A&M expenses  was  largely
offset by: lower overheads  due  to business divestitures; savings  from  prior-
year  restructuring actions; and other cost-reduction efforts.

Consolidated  operating results also included a combined  pretax  gain  of  $2.3
million  in 1999 and a combined pretax loss of $128.5 million in 1998 for  gains
and losses on divestitures and restructuring and asset impairment charges.   The
$2.3 million gain in 1999 was the sum of a divestiture gain, reserve adjustments
and current-year restructuring actions.

A  $5.1 million pretax divestiture gain was recognized when the Company sold its
Brazilian pasta business on March 1, 1999.  Pretax adjustments were recorded  in
1999 to reduce prior restructuring and divestiture reserves by $8.8 million  and
$1.1 million, respectively.  These adjustments were primarily due to higher than
anticipated proceeds on the sale of closed facilities and certain other  changes
from estimates. Current-year pretax restructuring charges totaled $12.7 million.
Two  sales  offices were closed, and approximately 45 positions were eliminated,
resulting in restructuring charges of $4.7 million for severance and termination
benefits,  asset write-offs and losses on leases. Annual savings resulting  from
this  action  are  expected to be about $4 million to $5  million  and  will  be
reflected  in the U.S. and Canadian Foods and Beverages businesses beginning  in
2000.   The Company also recorded  $8.0 million of pretax restructuring  charges
related   to   a  three-year  project  that  began  in  1999.   Several   cereal
manufacturing  lines  were  consolidated and early  retirement  was  offered  to
certain employees to eliminate approximately 68 positions.

In  September  1999,  the  Company began a three-year  project  to  upgrade  and
optimize  its  manufacturing  and distribution  capabilities  in  its  U.S.  and
Canadian  businesses  (Supply  Chain  Reconfiguration  project).   The   project
involves the rationalization of U.S. and Canadian Foods operations, an expansion
of  U.S. beverage manufacturing and a reconfiguration of the Company's food  and
beverage  logistics  network.  This project is expected to  significantly  lower
operating costs by removing inefficient assets, building operating scale in  key
product  lines, and integrating foods and beverages warehousing.   Actions  will
include plant closures, line consolidations and selective outsourcing of product
manufacturing  and logistics. The Company expects the project  to  result  in  a
series of pretax restructuring and impairment charges, totaling in the  range of
$225  million   to $250  million,  $8.0 million of which was recognized in 1999.
Targeted  savings  for   the project  are  in  the  range  of $40 million to $50
million in 2001,  rising to  $60 million  to  $70  million beginning in 2002 and
going forward. In 2000, the Company   announced   further  developments  related
to the Supply Chain Reconfiguration project and other restructuring actions. See
"Subsequent Events"  on  page 33 for  additional  information.  The Company will
continue  to  review  its strategies and to implement specific plans, which will
result in future charges.

Net financing costs (net interest expense and foreign exchange losses) decreased
$2.2  million in 1999.  Lower interest expense, which resulted from  lower  debt
levels,  was  partly  offset by higher net foreign exchange losses.  In  Brazil,
losses increased  $6.9 million due to the 1999 currency devaluation.

In  1999,  the  Company  adjusted its tax accruals and  tax  assets  to  reflect
developments and information received during the current year.  The  net  effect
of  these  adjustments  was to reduce the current year tax  provision  by  $59.3
million.  Excluding these tax adjustments and the tax impact of gains and losses
on divestitures,  restructuring charges and asset impairments, the effective tax
rate was 36.1 percent in 1999 versus 36.3 percent in 1998.

Operating Segment Results

Total segment operating income increased 13 percent, or $82.7 million, to $710.2
million  in  1999.  Business segment operating margin expanded to 15 percent  of
sales from 13 percent of sales in the prior year.

<TABLE>
<CAPTION>

Segment Operating Income (Loss)

Dollars in Millions                1999         1998
<S>                            <C>          <C>
U.S. and Canadian Foods        $  399.8     $  369.8
Latin American Foods               26.2         28.2
Other Foods                        21.1         (1.2)
Total Foods                       447.1        396.8
U.S. and Canadian Beverages       253.9        214.9
Latin American Beverages           16.5         25.6
Other Beverages                    (7.3)        (7.4)
Total Beverages                   263.1        233.1
Divested Businesses                  --         (2.4)
Total                          $  710.2     $  627.5
</TABLE>



<Page 26>


Foods

<Graph>
U.S. and Canadian Foods
50% of Total Sales
</Graph>

U.S.  and Canadian Foods - The Company's largest business segment reported  1999
operating  income  of $399.8 million, an increase of $30.0 million  compared  to
1998.    Volume and sales increased 1 percent and 4 percent, respectively. Sales
increased  in  virtually all major food product lines, led by 13  percent  sales
growth  in  Quaker  oatmeal, driven by new product introductions  and  effective
advertising.   Ready-to-eat cereal sales increased 2 percent, and  profitability
improved.   Total  U.S. flavored rice and pasta sales grew  1  percent,  despite
increased  competition in the category.  U.S. snacks sales grew on the  strength
of  Quaker  Chewy granola bars and Quaker Fruit  &  Oatmeal cereal  bars,  while
rice  cakes  sales  declined  11 percent.  Gross  margins  improved  across  all
product  lines  due  to lower raw material costs and supply  chain  cost-savings
initiatives. Increased sales and expanded gross margins enabled the business  to
invest  in  new  products and increased advertising, while delivering  operating
income  growth of 8 percent. A&M increases were focused on investments  for  hot
cereals,snacks and flavored rice and pasta.

<Graph>
U.S. and Canadian Foods-1999 Net Sales
Dollars in Millions
[S]                       [C]            [C]
Hot Cereals               $485.5         13% growth
Ready-to-Eat Cereals      $724.5          2% growth
Flavored Rice and Pasta   $344.3          1% growth
Grain-based Snacks        $304.6          5% growth
Other                     $500.6         <1% growth
</Graph>



<Graph>
Latin American Foods
6% of Total Sales
</Graph>

Latin  American Foods - Financial results were negatively affected by  a  severe
currency  devaluation and recession in Brazil, lowering 1999 sales substantially
and  impacting  operating income to a lesser extent.  Although 1999  volume  was
even  with  the  prior  year,  sales declined  $64.5  million,  or  17  percent.
Operating  income of $26.2 million decreased $2.0 million from the  prior  year,
or  7  percent.    Declines in Brazil, Latin American Foods'  largest  business,
were  partly  offset by double-digit sales and operating income  growth  in  the
smaller  Mexican  and  Caribbean  businesses,  and  by  savings  from prior-year
restructuring actions.  The recession in Brazil continues to affect the  current
outlook for this business.


<Graph>
Other Foods
5% of  Total Sales
</Graph>

Other  Foods - The combined European and Asia/Pacific Foods businesses  reported
operating income of $21.1 million, a $22.3 million improvement, primarily due to
savings  from  the  1998 restructuring of the Asia business.  Volume  and  sales
increased  5  percent  and 6 percent, respectively, reflecting  growth  in  both
businesses.   In  Europe,  sales and profit increased,  driven  by  new  cereals
products.   In Asia, extensive restructuring and increased sales of hot  cereals
allowed  this business to operate at a modest profit, following several years of
operating losses.

Beverages

<Graph>
U.S. and Canadian Beverages
32% of Total Sales
</Graph>

U.S.  and  Canadian Beverages - Volume, sales and operating income all  grew  at
double-digit rates for the second consecutive year, reflecting the  strength  of
the  Gatorade brand. In 1999, Gatorade volume and sales increased 16 percent and
12  percent,  respectively, driven by new flavors, such as Gatorade Fierce,  and
new  packaging,  such  as a redesigned sports bottle and a  20-ounce  wide-mouth
bottle.   Gatorade   continued  to  grow  through  expanded   distribution   and
availability  outside  traditional retail channels.  Operating  income  grew  18
percent  to  $253.9 million, an increase of $39.0 million from the  prior  year,
reflecting strong sales growth and SG&A overhead efficiencies, partly offset  by
increased A&M spending.


<Graph>
Latin American Beverages
5% of Total Sales
</Graph>

Latin  American  Beverages  -  Financial results  were  negatively  affected  by
currency  devaluations  and  recessions in Brazil  and  Colombia,  resulting  in
volume,  sales  and  operating income declines. Volume and  sales  decreased  10
percent  and  14 percent, respectively. Depressed sales and demand  due  to  the
recessions  in  Brazil  and  Colombia more than offset  double-digit  growth  in
Mexico.   As a result,  1999 operating income declined  $9.1  million  to  $16.5
million.  The  recession in Brazil and Colombia continue to affect  the  current
outlook for this business.

<Page 27>


<Graph>
Other Beverages
2% of Total Sales
</Graph>

Other  Beverages  -  The combined European and Asia/Pacific Gatorade  businesses
reported  volume and sales growth of 3 percent and 1 percent, respectively.  The
Company  significantly restructured its Asia Gatorade business in 1998 to  focus
on building the brand in China.  In China, volume and sales increased due to new
flavors  and  packaging, which were supported by increased media  spending.   In
Europe,  Gatorade sales declined modestly compared to the prior year.  Operating
losses  in the Asia/Pacific business more than offset profits from the  European
business,  totaling to a loss of $7.3 million in 1999 compared to  $7.4  million
in 1998.

Divested

Operating results from divested businesses reflect the Brazilian pasta  business
through  its March 1, 1999, divestiture date. 1998 includes operating results of
the  Ardmore  Farms,  Continental Coffee, Nile Spice  and  Liqui-Dri  businesses
through  their  divestiture dates, and a full year of operating results  of  the
Brazilian pasta business.

1998 Compared with 1997

Consolidated  net sales decreased 3 percent in 1998 because of  the  absence  of
divested  businesses.  For ongoing businesses, volume and net sales were  up  10
percent  and 4 percent, respectively, primarily driven by the U.S. and  Canadian
and  Latin  American Beverages segments.  Weaker exchange rates affected  sales,
particularly in the Canadian, Latin American and Asia/Pacific businesses.  Price
changes did not significantly affect the comparison of 1998 and 1997 net  sales.

<TABLE>
<CAPTION>

Ongoing Businesses
Sales Growth by Operating Segment

                                   1998
<S>                                <C>
U.S. and Canadian Foods             -1%
Latin American Foods                 0%
Other Foods                         -1%
Total Foods                         -1%
U.S. and Canadian Beverages         13%
Latin American Beverages            15%
Other Beverages                      0%
Total Beverages                     13%
Total                                4%
</TABLE>



The  consolidated gross profit margin was 51.0 percent in 1998, compared to 48.9
percent  in  1997, reflecting improvements across all ongoing business  segments
and the divestiture of low-margin businesses in 1998.

SG&A expenses decreased $66.4 million due to the absence of divested businesses.
For ongoing businesses, SG&A increased $66.7 million, or 4 percent, driven by  a
6  percent  increase in A&M expenses, which was partly offset by  lower  general
corporate  expenses.  Total Company A&M expenses were 25.6 percent of sales,  up
from  24.5 percent in 1997, reflecting increased spending levels to support  new
snacks growth and competitive pressures in ready-to-eat cereals in the U.S.  and
Canadian Foods segment.

During   1998,  the  Company  initiated  numerous  actions  to  improve   future
profitability.  These actions resulted in $89.7 million in restructuring charges
and   were   divided  into  three  categories:  organization  alignment,   plant
consolidations  and  Asia  reorganization.  Charges for  organization  alignment
activities  totaled $41.5 million.  The Company aligned its foods and  beverages
businesses,  combining sales, supply chain and certain administrative  functions
to  realize  synergies  and  maximize scale.   These  actions  resulted  in  the
elimination  of approximately 550 positions worldwide, as a layer  of  executive
management  was removed and sales and administrative offices and functions  were
consolidated.   Plant  consolidations in the United  States  and  Latin  America
resulted  in  charges of $18.3 million and $0.9 million, respectively,  and  the
elimination   of   approximately  300   positions.  In  light   of disappointing
performance and a weak economic environment, the Company revised its operational
strategy  for Asia.  The going-forward  focus  was  shifted  toward building the
Gatorade  business  in China.  Asia reorganization resulted  in $29.0 million in
charges for plant and sales and administrative office closures, restructuring of
certain joint ventures and the elimination of approximately 450 positions.

The  1998 restructuring charges were composed of severance and other termination
benefits, asset write-offs, losses on leases and other shut-down costs.  Savings
from  these actions primarily began in 1999 and were estimated to be $65 million
annually, with approximately 90 percent of the savings in cash.

<Page 28>


In  1997,  the  Company  initiated several restructuring  actions  resulting  in
charges  of $65.9 million.  Manufacturing consolidation activities in  the  U.S.
and  Canadian  businesses resulted in two foods plant closures  and  charges  of
$47.4  million.  A Latin American Foods' pasta plant was closed, which  resulted
in  charges of $10.7 million.  Other actions included an office closure  in  the
Asia/Pacific business and staff reductions in the U.S. and Canadian  businesses,
and resulted in charges of $1.1 million and $6.7 million, respectively.

In  1998,  the Company recorded $38.1 million of pretax asset impairment  losses
related to ongoing businesses.  In conjunction with the Company's ongoing review
of  underperforming  businesses, certain assets  were  reviewed  for  impairment
pursuant  to the provisions of SFAS No. 121.  During 1998, the China  foods  and
Brazilian pasta businesses were determined to be impaired.  Accordingly,  pretax
losses  of  $15.1  million  and  $23.0 million on  these  impaired  Chinese  and
Brazilian  businesses,  respectively, were  recorded  in  order  to  adjust  the
carrying value of the long-lived assets of these businesses to fair value.   The
estimated  fair  value  of  these  assets was based  on  various  methodologies,
including  a  discounted value of estimated future cash  flows  and  liquidation
analyses.

Charges  for  asset impairment losses related to divested businesses  were  also
recorded  in  1998.  The Company divested the following U.S. food businesses  in
1998 for a total of $192.7 million and recognized a combined pretax loss of $0.7
million, including related impairment losses:

<TABLE>
<CAPTION>

                          Divestiture  Impairment (Gains) Losses           Total
Dollars in Millions              Date      Losses        on Sale  (Gains) Losses
<S>                    <C>                <C>           <C>             <C>
Ardmore Farms juice       August 1998     $    --       $   (2.5)       $   (2.5)
Continental Coffee     September 1998        40.0           (5.1)           34.9
Nile Spice soup cup     December 1998        25.4            3.1            28.5
Liqui-Dri biscuit       December 1998          --          (60.2)          (60.2)
Total Losses (Gains)                      $  65.4       $  (64.7)       $    0.7
</TABLE>



In 1997, the Company recorded a pretax asset impairment loss of $39.8 million to
reduce  the  carrying  value of the long-lived assets  of  the  Brazilian  pasta
business  to fair value.  Separately, the Company received a $35.0 million  cash
litigation  settlement related to this business.  The combined  charge  of  $4.8
million was not included in operating segment results.

Consolidated  1997 operating results include a pretax loss of $1.41  billion  on
the  sale  of the Snapple beverages business in May 1997.  As a result  of  this
transaction,  the  Company  recognized a tax benefit  related  to  the  expected
recovery of taxes paid on previous capital gains from divestitures.  In December
1997,  the  Company completed the sale of the Richardson toppings and condiments
business  and  signed  a  definitive agreement to sell its  food  service  bagel
businesses.   These transactions resulted in a combined pretax  charge  of  $5.8
million, reflecting the sale and a write-down of assets to fair value.

Net financing costs (net interest expense and foreign exchange losses) decreased
$19.4  million in 1998, due to lower interest expense and higher interest income
as a result of lower debt levels and higher cash balances.  Debt levels declined
by  $125.4  million and cash balances increased by $242.4 million from  December
31,  1997.   The  changes were primarily due to proceeds  from  divestitures,  a
$240.0  million  tax  recovery related to the 1997 divestiture  of  the  Snapple
beverages business and cash flow from operations.

Excluding the tax impact of restructuring charges, asset impairments, and losses
and  gains  on  divestitures, the effective tax rate was 36.3  percent  in  1998
versus  38.1  percent in 1997.  The decrease primarily was  due  to  lower  non-
deductible  goodwill  amortization as a result of business  divestitures  and  a
reduction in effective state tax rates in 1998.

<Page 29>


Operating Segment Results

Total segment operating income increased 11 percent, or $60.7 million, to $627.5
million  in  1998. Business segment operating margin expanded to 13  percent  of
sales in 1998 from 11 percent of sales in 1997.

<TABLE>
<CAPTION>

Segment Operating Income (Loss)

Dollars in Millions                1998              1997
<S>                            <C>              <C>
U.S. and Canadian Foods        $  369.8         $   390.3
Latin American Foods               28.2              34.0
Other Foods                        (1.2)             (9.9)
Total Foods                       396.8             414.4
U.S. and Canadian Beverages       214.9             182.7
Latin American Beverages           25.6              19.3
Other Beverages                    (7.4)            (15.0)
Total Beverages                   233.1             187.0
Divested Businesses                (2.4)            (34.6)
Total                          $  627.5         $   566.8
</TABLE>



Foods

U.S.  and Canadian Foods - Volume and sales decreased 1 percent as increases  in
ready-to-eat cereals, granola bars and new snacks sales were offset by  declines
in  hot cereals and rice cakes.  The sales decline in hot cereals was driven  by
unusually   mild  winter  weather  and  a  change  in  merchandising   strategy.
Competitive  pressure in the snacks category continued to adversely affect  rice
cakes  sales,  although  profitability improved due to lower  A&M  expenses  and
supply chain efficiencies.  In addition, sales in Canada were adversely affected
by  a  weaker  exchange  rate.  The sales increase in new snacks  reflected  the
introduction  of  a new snacks product, Quaker Fruit & Oatmeal bars.   Operating
income decreased 5 percent from 1997 due to the sales decline and increased  A&M
spending,  reflecting support of new snacks growth and competitive pressures  in
ready-to-eat cereals.

Latin  American  Foods - Volume  was up 4 percent and sales  were  up  slightly,
reflecting   sales  increases  in  Brazilian  canned  fish  and   ready-to-drink
beverages, partly offset by a weaker exchange rate.  Operating income  decreased
17 percent, or $5.8 million, primarily reflecting increased A&M spending.

Other  Foods - Volume  and  net  sales  were  down  7  percent  and  1  percent,
respectively,  primarily due to declines in Asia/Pacific Foods, particularly  in
China.    Operating   losses   decreased  $8.7  million,   reflecting   improved
profitability  in the European cereals business, while losses continued  in  the
Asia/Pacific  region.   Restructuring  actions  were  taken  to  improve  future
profitability.

Beverages

U.S.  and  Canadian  Beverages - Volume and sales increased 17  percent  and  13
percent,  respectively.  New packaging and flavors, strong  growth  outside  the
traditional retail market and more favorable weather versus 1997 contributed  to
the  volume  and sales increase, which resulted in market share  gains.   Strong
sales  growth  and  supply chain efficiencies drove an 18  percent  increase  in
operating income.

Latin  American  Beverages  -  Volume and  sales increased  22  percent  and  15
percent,  respectively, reflecting improved cold-channel  distribution  and  the
successful new product launch of Gatorade X-plosive.  Operating income increased
$6.3 million, driven by strong volumes and lower supply chain costs.

Other  Beverages - Volume was up 5 percent on nearly flat sales.  Warmer weather
contributed  to  a  sales gain in Europe, while lower volumes,  particularly  in
China,  and weaker exchange rates led to lower sales in the Asia/Pacific region.
An  operating  income  increase in European beverages was more  than  offset  by
continued losses in Asia/Pacific beverages.

Divested

1998  and  1997  operating  results from divested businesses  were  restated  to
include  a  full  year  of  operating results of the  Brazilian  pasta  business
divested in 1999. 1998 also includes the Ardmore Farms, Continental Coffee, Nile
Spice  and  Liqui-Dri  businesses through their 1998  divestiture  dates.   1997
includes  operating  results  from  Snapple  beverages  through  its  May   1997
divestiture date and a full year of results from certain food service businesses
and the businesses divested in 1998 and 1999.

<Page 30>


Liquidity and Capital Resources

Net  cash  provided  by  operating  activities  was  $631.1  million in 1999, an
increase  of  $117.6 million  compared  to   1998,  primarily   due  to improved
operating  profitability. Net cash provided by operating activities  in 1998 and
1997 was $513.5 million and $490.0 million, respectively.

Capital expenditures were $222.4 million, $204.7 million and $215.7 million  for
1999,  1998  and  1997,  respectively.  Capital  expenditures  are  expected  to
increase  by about $50 million to $100 million in 2000, as the Company plans  to
expand Gatorade  production  capacity and increase investment  in cost-reduction
projects  in  the  United  States  and  Canada.  The   Company   expects capital
expenditures and cash dividends to be financed through  cash flow from operating
activities.

Cash  proceeds  from  business divestitures in 1999, 1998 and  1997  were  $14.3
million,  $265.9 million and $300.0 million, respectively.  Over the last  three
years,  cash proceeds from business divestitures were primarily used  to  reduce
total  debt  and  repurchase shares of the Company's outstanding  common  stock.
Cash  proceeds  of  $73.2  million from the 1997 sale of  certain  food  service
businesses and $240.0 million from the recovery of Federal income taxes paid  on
previous  capital gains related to the 1997 divestiture of the Snapple beverages
business were received in 1998.

Financing  activities  used cash of  $516.3 million,  $556.6 million  and $593.4
million  in  1999,  1998  and  1997,  respectively,  primarily   reflecting  the
Company's stock repurchase programs and the reduction of total debt in all three
years.   The Company's activity in share repurchase programs used cash of $373.2
million, $377.3 million and $50.0 million in 1999, 1998 and 1997, respectively.

During  1999,  the  Company repurchased 5.8 million shares  of  its  outstanding
common  stock  for  $369.9  million  under the  $1  billion  repurchase  program
announced in March  1998.  As of December 31, 1999, the  Company had repurchased
$634.9 million under the $1 billion share repurchase program.

As  of  December  31, 1999, total debt was $869.5 million, a decrease  of  $62.1
million from $931.6 million as of December 31, 1998.  Total debt at December 31,
1997, was $1.06 billion.  The total debt-to-total-capitalization ratio was  79.8
percent,  84.4 percent and 81.0 percent as of December 31, 1999, 1998 and  1997,
respectively.

The  Company's current debt and commercial paper ratings remained unchanged from
the  prior  year, and are as follows:  Standard & Poor's (BBB+ and A2);  Moody's
(Baa1 and P2); and Fitch (BBB+ and F2).

The  Company  currently  has  a  $335.0 million  annually  extendible  five-year
revolving  credit  facility and a $165.0 million, 364-day  extendible  revolving
credit facility which may, at the Company's option, be converted into a two-year
term  loan.   Both  facilities are with various banks.  Amounts available  under
credit facilities obtained by the Company have decreased significantly over  the
last  three  years  as commercial paper borrowings supported  by  the  revolving
credit facilities were reduced.  Credit facilities are also available for direct
borrowings.   There were no direct borrowings in 1999 or in 1998. The  Company's
levels of revolving credit facilities at December 31, 1998 and 1997, were $500.0
million and $675.0 million, respectively.

<Graph>
Total Debt
Dollars in Millions

                Long-term debt     Short-term debt
1999                    $715.0              $154.5
1998                    $795.1              $136.5
1997                    $887.6              $169.4
</Graph>

<Page 31>


Derivative Financial and Commodity Instruments

The  Company actively monitors its exposure to commodity price, foreign currency
exchange  rate  and  interest  rate  risks and  uses  derivative  financial  and
commodity  instruments  to manage the impact of certain  of  these  risks.   The
Company  uses  derivatives only for purposes of managing  risk  associated  with
underlying  exposures.  The Company does not trade or use instruments  with  the
objective  of earning financial gains on the commodity price, exchange  rate  or
interest  rate fluctuations alone, nor does it use instruments where  there  are
not underlying exposures.  Complex instruments involving leverage or multipliers
are  not  used.   Management believes that its use of derivative instruments  to
manage risk is in the Company's best interest.

The  Company has estimated its market risk exposures using sensitivity analyses.
Market  risk  exposure  has  been defined as the  change  in  fair  value  of  a
derivative commodity or financial instrument assuming a hypothetical 10  percent
adverse  change  in  market prices or rates.  Fair value  was  determined  using
quoted  market prices, if available.  Actual changes in market prices  or  rates
may differ from hypothetical changes presented in sensitivity analyses.

Foreign  Exchange  -  The  Company  uses foreign  currency  forward  and  option
contracts and currency swap agreements to manage foreign currency exchange  rate
risk related to certain cash flows from foreign entities and net investments  in
foreign  subsidiaries.  The Company's market risk exposure to  foreign  currency
exchange  rates exists primarily with the following currencies versus  the  U.S.
dollar:  Brazilian  real, Canadian dollar, Chinese renmimbi,  Euro  and  Mexican
peso.   The foreign exchange sensitivity analysis included currency forward  and
option  contracts  and other financial instruments affected by foreign  exchange
risk,  including  cash and foreign currency denominated debt.   The  sensitivity
analysis  excluded  the  underlying projected  cash  flows  and  net  investment
exposures,  which have a high degree of inverse correlation with  the  financial
instruments  used  to  hedge  them.  Based on the  results  of  the  sensitivity
analysis, the estimated quarter-end market risk exposure on an average, high and
low  basis was $2.1 million, $7.6 million and zero during 1999 and $2.1 million,
$2.9 million and $0.9 million during 1998, respectively.

Commodities  -  The Company uses commodity futures and options to  manage  price
exposures  on  commodity  inventories or anticipated commodity  purchases.   The
Company  typically  purchases  certain commodities  such  as  oats,  corn,  corn
sweetener  and  wheat.  The commodity instruments sensitivity analysis  excludes
the underlying commodity positions that are being hedged by derivative commodity
instruments, which have a high degree of inverse correlation with changes in the
fair  value  of  the  commodity  instruments.   Based  on  the  results  of  the
sensitivity  analysis,  the  estimated quarter-end market  risk  exposure on  an
average,  high  and low basis was $2.4 million, $3.7  million and   $0.7 million
during  1999  and  $4.0 million,   $6.7 million  and $1.2 million  during  1998,
respectively.

Interest  Rates - The Company uses interest rate swap agreements to  manage  its
exposure  to fluctuations in interest rates.  In 1999, the Company entered  into
fixed-to-floating  interest rate  swap  agreements  to  increase  floating  rate
exposure.   The  Company's interest rate related financial  instruments  consist
primarily  of  debt.     Based on the results of the sensitivity  analysis,  the
estimated  market risk exposure for interest rate related financial  instruments
was  approximately $40 million and $42 million as of December 31, 1999 and 1998,
respectively.  Derivative financial instruments related to  interest  rate  risk
outstanding  as  of December 31, 1999 were not material to the results  of  this
sensitivity analysis.

Current and Pending Accounting Changes

In  June  1998,  the  FASB  issued  SFAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities."  This statement establishes accounting  and
reporting standards requiring that all derivative instruments (including certain
derivative  instruments imbedded in other contracts) be recorded in the  balance
sheet  as  either  an  asset or a liability measured at its  fair  value.   This
statement  requires  that changes in the derivative's fair value  be  recognized
currently  in earnings unless specific hedge accounting criteria are  met.   The
accounting  provisions  for qualifying hedges allow  a  derivative's  gains  and
losses to offset related results on the hedged item in the income statement, and
require  that  the  Company  must formally document, designate  and  assess  the
effectiveness  of transactions that qualify for hedge accounting.   The  Company
has not determined its method or timing of adopting this statement, but will  be
required  to  adopt  it  by January 2001.  When adopted,  this  statement  could
increase volatility in reported earnings and other comprehensive income.

<Page 32>


Year 2000

The Company spent approximately $12 million to address issues with the year 2000
date change.  The Company has not  experienced  business  disruption or incurred
significant expenses in 2000 related to the date change.

Subsequent Events

In January and February of 2000, the Company announced its plans  to  close  two
cereals manufacturing  facilities  and  two distribution  centers  in the United
States, a further development  of  the Supply Chain Reconfiguration project. The
Company also announced  a  restructuring  of  its  human resources organization,
plans to close an administrative office in  California  and the decentralization
of certain customer service functions to the sales offices. As a result of these
actions,  the Company  expects  to recognize  restructuring and asset impairment
charges in the range of $175 million to $225 million during the first quarter of
2000.

In February of 2000, the Company announced that it entered into a  joint venture
agreement with Novartis Consumer Health, Inc. to form  Altus  Food Company, LLC,
which plans to develop and market functional food brands  in  North America. The
Company will hold a 50 percent interest in this new company.

Cautionary Statement on Forward-Looking Statements

Forward-looking statements, within the meaning of Section 21E of the  Securities
Exchange  Act  of  1934,  are made throughout this Management's  Discussion  and
Analysis.  Statements that are not historical facts, including statements  about
expectations   or  projected  results,  are  forward-looking  statements.    The
Company's  results may differ materially from those suggested  by  the  forward-
looking  statements.   Forward-looking  statements  are  based  on  management's
current  views and assumptions, and involve risks and uncertainties  that  could
significantly  affect expected results.  For example, operating results  may  be
affected  by  factors  such  as: actions of competitors;  changes  in  laws  and
regulations  (including changes in governmental interpretations  of  regulations
and  changes  in accounting standards); customer and consumer demand  (including
customer  and  consumer  responses  to marketing);  effectiveness  of  spending,
investments or programs (including cost-reduction projects); changes  in  market
prices  or  rates;  fluctuations in the cost and availability  of  supply  chain
resources;  foreign economic conditions (including currency rate  fluctuations);
weather;  the  ability of the Company to effectuate manufacturing,  distribution
and  outsourcing initiatives and plant consolidations; and costs related to  the
year  2000  issue, which may arise during the remainder of 2000.   In  addition,
capital  expenditures and cash dividends may be affected by the amount  of  cash
flow  from operating activities; and the Company's market risk exposures may  be
affected  by  actual  changes  in  market prices  of  derivative  financial  and
commodity  instruments  if actual changes differ from the  hypothetical  changes
used  in sensitivity analyses.  Forward-looking statements speak only as of  the
date they were made, and the Company undertakes no obligation to update them.

<Page 33>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>

<S>                                                               Dollars in Millions (Except Per Share Data)
Consolidated      Year Ended December 31                                              1999      1998     1997
Statements of                                                                     <C>       <C>      <C>
Income            <S>
                  Net Sales                                                       $4,725.2  $4,842.5 $5,015.7
                  Cost of goods sold                                               2,136.8   2,374.4  2,564.9
                  Gross profit                                                     2,588.4   2,468.1  2,450.8
                  Selling, general and administrative expenses                     1,904.1   1,872.5  1,938.9
                  (Gains) losses on divestitures, restructuring charges
                   and asset impairments - net                                        (2.3)    128.5  1,486.3
                  Interest expense                                                    61.9      69.6     85.8
                  Interest income                                                    (11.7)    (10.7)    (6.7)
                  Foreign exchange loss - net                                         18.1      11.6     10.8
                  Income (Loss) Before Income Taxes                                  618.3     396.6 (1,064.3)
                  Provision (Benefit) for income taxes                               163.3     112.1   (133.4)
                  Net Income (Loss)                                                  455.0     284.5   (930.9)
                  Preferred dividends - net of tax                                     4.4       4.5      3.5
                  Net Income (Loss) Available for Common                          $  450.6  $  280.0 $ (934.4)
                  Per Common Share:
                   Net income (loss)                                              $   3.36  $   2.04 $  (6.80)
                   Net income (loss) - diluted                                    $   3.23  $   1.97 $  (6.80)
                   Dividends declared                                             $   1.14  $   1.14 $   1.14
                  Average  Number of Common Shares Outstanding (in thousands)      134,027   137,185  137,460
                  See accompanying notes to the consolidated financial statements.
                  </TABLE>



<Page 34>


<TABLE>
<CAPTION>

                                                                                          Dollars in Millions
Consolidated        Year Ended December 31                                      1999        1998         1997
Statements of
Cash Flows          <S>
                    Cash Flows from Operating Activities:                   <C>         <C>         <C>
                      Net income (loss)                                     $  455.0    $  284.5    $  (930.9)
                      Adjustments to reconcile net income (loss)
                          to net cash provided by operating activities:
                        Depreciation and amortization                          123.8       132.5        161.4
                        Deferred income taxes                                   14.2       (31.1)       (12.0)
                        (Gains)  losses  on divestitures - net of tax
                          of $1.7, $(27.4) and $(269.0) in 1999,
                          1998 and 1997, respectively                           (4.5)      (26.7)     1,151.4
                        Restructuring charges                                    3.9        89.7         65.9
                        Asset impairment losses                                   --        38.1         39.8
                        Loss on disposition of property and equipment           12.9        11.9         41.6
                        Decrease (increase) in trade accounts receivable        14.8         5.6        (61.0)
                        Increase in inventories                                (15.3)      (32.8)       (24.5)
                        Decrease (increase) in other current assets             20.3       (15.1)       (11.6)
                        Increase (decrease) in trade accounts payable           49.7       (20.0)        (3.2)
                        (Decrease) increase in other current liabilities      (107.1)       21.3          9.8
                        Change in deferred compensation                         32.0        32.2         20.1
                        Other items                                             31.4        23.4         43.2
                            Net Cash Provided by Operating Activities          631.1       513.5        490.0
                    Cash Flows from Investing Activities:
                      Additions to property, plant and equipment              (222.4)     (204.7)      (215.7)
                      Business divestitures                                     14.3       265.9        300.0
                      Purchase of marketable securities                       (185.1)     (165.5)          --
                      Proceeds from sale of marketable securities              219.0       143.1           --
                      Proceeds  from sale of property, plant
                        and equipment                                           13.8         7.7           --
                      Capital gains tax recovery                                  --       240.0           --
                            Net Cash (Used in) Provided by
                              Investing Activities                            (160.4)      286.5         84.3
                    Cash Flows from Financing Activities:
                      Cash dividends                                          (156.2)     (159.7)      (159.4)
                      Change in short-term debt                                 34.2       (17.2)      (452.9)
                      Proceeds from long-term debt                               1.2         1.9          8.3
                      Reduction of long-term debt                              (95.8)     (108.7)       (54.4)
                      Issuance of common treasury stock                         82.6       112.0        121.2
                      Repurchases of common stock                             (373.2)     (377.3)       (50.0)
                      Repurchases of preferred stock                            (9.1)       (7.6)        (6.2)
                            Net Cash Used in Financing Activities             (516.3)     (556.6)      (593.4)
                    Effect of Exchange Rate Changes on Cash and
                      Cash Equivalents                                           1.9        (1.0)        (7.2)
                    Net (Decrease) Increase in Cash and
                      Cash Equivalents                                         (43.7)      242.4        (26.3)
                    Cash and Cash Equivalents - Beginning of Period            326.6        84.2        110.5
                    Cash and Cash Equivalents - End of Period               $  282.9    $  326.6    $    84.2
                    See accompanying notes to the consolidated financial statements.
                    </TABLE>


<Page 35>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>
                                                                 Dollars in Millions
Consolidated           December 31                                 1999         1998
Balance Sheets         <S>                                     <C>          <C>
                       Assets
                       Current Assets
                         Cash and cash equivalents             $  282.9     $  326.6
                         Marketable securities                      0.3         27.5
                         Trade accounts receivable -
                           net of allowances                      254.3        283.4
                         Inventories
                           Finished goods                         186.6        189.1
                           Grains and raw materials                50.0         48.4
                           Packaging materials and supplies        29.6         23.9
                             Total inventories                    266.2        261.4

                         Other current assets                     193.0        216.1
                             Total Current Assets                 996.7      1,115.0

                       Property, Plant and Equipment
                         Land                                      28.2         24.1
                         Buildings and improvements               407.6        390.2
                         Machinery and equipment                1,416.1      1,404.5
                         Property, plant and equipment          1,851.9      1,818.8
                         Less: Accumulated depreciation           745.2        748.6
                           Property - Net                       1,106.7      1,070.2

                       Intangible Assets -
                         Net of Amortization                      236.9        245.7
                       Other Assets                                55.9         79.4
                       Total Assets                           $ 2,396.2    $ 2,510.3

                       See accompanying notes to the consolidated financial statements.
</TABLE>



<Page 36>


<TABLE>
<CAPTION>


                                                      Dollars in Millions (Except Per Share Data)
                       December 31                                             1999         1998
                       <S>
                       Liabilities and Shareholders' Equity
                       Current Liabilities                                <C>          <C>
                         Short-term debt                                  $    73.3    $    41.3
                         Current portion of long-term debt                     81.2         95.2
                         Trade accounts payable                               213.6        168.4
                         Accrued payroll, benefits and bonus                  139.1        131.4
                         Accrued advertising and merchandising                138.7        125.6
                         Income taxes payable                                  40.1         63.7
                         Other accrued liabilities                            252.3        383.5
                            Total Current Liabilities                         938.3      1,009.1

                       Long-term Debt                                         715.0        795.1
                       Other Liabilities                                      523.1        533.4

                       Preferred Stock, Series B, no par value,
                         authorized 1,750,000 shares; issued
                         1,282,051 of $5.46 cumulative convertible
                         shares (liquidating preference of $78
                         per share)                                           100.0        100.0
                       Deferred Compensation                                  (38.5)       (48.4)
                       Treasury Preferred Stock, at cost, 366,069 and
                       302,969 shares, respectively                           (39.0)       (29.9)

                       Common Shareholders' Equity
                         Common stock, $5 par value, authorized
                           400 million shares                                 840.0        840.0
                         Additional paid-in capital                           100.7         78.9
                         Reinvested earnings                                  854.6        555.8
                         Accumulated other comprehensive income               (95.1)       (80.1)
                         Deferred compensation                                (45.5)       (67.6)
                         Treasury common stock, at cost                    (1,457.4)    (1,176.0)
                         Total Common Shareholders' Equity                    197.3        151.0
                            Total Liabilities and Shareholders' Equity    $ 2,396.2    $ 2,510.3
</TABLE>

<Page 37>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>

Consolidated
Statements of Common                                                               Common Stock Issued    Common Shares
Shareholders' Equity                                                               Shares       Amount      Outstanding
                    <S>                                                       <C>            <C>            <C>
                    Balance as of December 31, 1996                           167,978,792    $   840.0      136,093,065
                       Net loss
                       Other comprehensive income:
                          Foreign currency translation adjustments -
                             net of allocated income tax provision of $0.4
                    Total comprehensive income
                    Cash dividends declared on common stock
                    Cash dividends declared on preferred stock
                    Common stock issued for stock purchase and incentive plans                                3,707,667
                    Repurchases of common stock                                                                (987,632)
                    Deferred compensation
                    Other
                    Balance as of December 31, 1997                           167,978,792    $   840.0      138,813,100
                       Net income
                          Other comprehensive income:
                          Foreign currency translation adjustments -
                             net of allocated income tax benefits of $0.3
                          Unrealized gain on investments (b)
                    Total comprehensive income
                    Cash dividends declared on common stock
                    Cash dividends declared on preferred stock
                    Common stock issued for stock purchase and incentive plans                                3,375,088
                    Repurchases of common stock                                                              (6,865,680)
                    Deferred compensation
                    Other
                    Balance as of December 31, 1998                           167,978,792    $   840.0      135,322,508
                    Net income
                       Other comprehensive income:
                          Foreign currency translation adjustments -
                          net of allocated income tax provision of $2.4
                          Reclassification of unrealized gain (b)
                    Total comprehensive income
                    Cash dividends declared on common stock
                    Cash dividends declared on preferred stock
                    Common stock issued for stock purchase and incentive plans                                2,392,609
                    Repurchases of common stock                                                              (5,779,663)
                    Deferred compensation
                    Other
                    Balance as of December 31, 1999                           167,978,792   $    840.0      131,935,454

<FN>
                    (a) Cumulative translation  adjustments  as of  December 31,
                    1996,  1997,  1998 and  1999,  were  $(68.2) million, $(82.4)
                    million, $(80.5)  million and $(95.1) million, respectively.
                    (b) Reflects  the  Company's  investment in  preferred stock
                    that  was classified as marketable securities in the balance
                    sheet as of  December 31,  1998,  and  was reclassified to a
                    realized  gain  during the  twelve months ended December 31,
                    1999.   Estimated   income    taxes   were   not   material.
                    See accompanying notes to the consolidated financial
                    statements.
</FN>
</TABLE>

<Page 38>


<TABLE>
<CAPTION>
                                                                              Dollars in Millions


Additional                                                       Accumulated Other
   Paid-In  Reinvested     Deferred         Treasury Common Stock    Comprehensive
   Capital    Earnings Compensation        Shares          Amount           Income (a)      Total
<C>         <C>           <C>          <C>              <C>               <C>           <C>
$       --  $  1,521.3    $  (103.4)   31,885,727       $  (959.8)        $  (68.2)     $ 1,229.9
                (930.9)                                                                 $  (930.9)


                                                                             (14.2)         (14.2)
                                                                                        $  (945.1)
                (155.9)                                                                    (155.9)
                  (3.5)                                                                      (3.5)
      11.2                             (3,707,667)          111.2                           122.4
                                          987,632           (50.0)                          (50.0)
                               12.4                                                          12.4
      17.8                                                                                   17.8
$     29.0  $    431.0    $   (91.0)   29,165,692       $  (898.6)        $  (82.4)     $   228.0
                 284.5                                                                  $   284.5


                                                                               1.9            1.9
                                                                               0.4            0.4
                                                                                        $   286.8
                (155.2)                                                                    (155.2)
                  (4.5)                                                                      (4.5)
      15.7                             (3,375,088)          109.3                           125.0
                                        6,865,680          (386.7)                         (386.7)
                               23.4                                                          23.4
      34.2                                                                                   34.2
$     78.9  $    555.8    $   (67.6)   32,656,284       $(1,176.0)        $  (80.1)     $   151.0
                 455.0                                                                  $   455.0


                                                                             (14.6)         (14.6)
                                                                              (0.4)          (0.4)
                                                                                        $   440.0
                (151.8)                                                                    (151.8)
                  (4.4)                                                                      (4.4)
      (1.0)                            (2,392,609)           88.5                            87.5
                                        5,779,663          (369.9)                         (369.9)
                               22.1                                                          22.1
      22.8                                                                                   22.8
$    100.7  $    854.6    $   (45.5)   36,043,338       $(1,457.4)        $  (95.1)     $   197.3
</TABLE>

<Page 39>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>                                                                         Dollars in Millions (Except Per Share Data)
Operating Segment                                                    Net Sales (a)                Operating Income (Loss) (b)
Information
                 Year Ended December 31                       1999        1998        1997         1999       1998       1997
                 <S>
                 Foods:                                  <C>         <C>         <C>           <C>        <C>        <C>
                   U.S. and Canadian                     $ 2,359.5   $ 2,274.1   $ 2,287.8     $  399.8   $  369.8   $  390.3
                   Latin American                            308.4       372.9       371.4         26.2       28.2       34.0
                   Other (c)                                 215.4       202.9       205.7         21.1       (1.2)      (9.9)
                 Total Foods                               2,883.3     2,849.9     2,864.9        447.1      396.8      414.4
                 Beverages:
                   U.S. and Canadian                       1,502.3     1,338.2     1,183.3        253.9      214.9      182.7
                   Latin American                            229.1       267.7       232.2         16.5       25.6       19.3
                   Other (c)                                 103.8       103.1       103.0         (7.3)      (7.4)     (15.0)
                 Total Beverages                           1,835.2     1,709.0     1,518.5        263.1      233.1      187.0
                 Total Ongoing Businesses                  4,718.5     4,558.9     4,383.4        710.2      629.9      601.4
                 Total Divested Businesses (d)                 6.7       283.6       632.3           --       (2.4)     (34.6)
                 Total Sales/Operating Income            $ 4,725.2   $ 4,842.5   $ 5,015.7     $  710.2   $  627.5   $  566.8
                 Less: (Gains) losses on divestitures,
                         restructuring charges,
                         asset impairments
                         and other - net (e)(f)(g)(h)                                              (2.3)     128.5    1,491.1
                       General corporate expenses                                                  25.9       31.9       50.1
                 Interest expense - net                                                            50.2       58.9       79.1
                 Foreign exchange loss - net                                                       18.1       11.6       10.8
                 Income (Loss) before income taxes                                                618.3      396.6   (1,064.3)
                 Provision (Benefit) for income taxes (i)                                         163.3      112.1     (133.4)
                 Net Income (Loss)                                                             $  455.0   $  284.5   $ (930.9)
                 Per Common Share:
                  Net income (loss)(e)(f)(g)(h)(i)                                             $   3.36   $   2.04   $  (6.80)
                  Net income (loss) - diluted                                                  $   3.23   $   1.97   $  (6.80)


<FN>
                 (a) Intersegment revenue is not material.
                 (b) Operating results exclude restructuring and asset impairment charges,  gains  and  losses  on divestitures
                 and certain  other expenses  not  allocated  to operating segments such as income taxes, general corporate
                 expenses and financing costs.
                 (c) Other includes European and Asia/Pacific businesses.
                 (d) 1999 includes net sales and operating results (through the divestiture date) for the Brazilian pasta
                 business.  1998 includes net sales and operating results (through the divestiture date) for the  Ardmore  Farms,
                 Continental Coffee, Nile Spice and Liqui-Dri businesses  and the business divested in 1999.  1997 includes  net
                 sales and operating results (through the divestiture date) for the Snapple  beverages  and certain food service
                 businesses  and  the businesses divested in 1999 and 1998.
                 (e) 1999 includes pretax restructuring charges of $12.7 million, or  $0.06 per share, a pretax divestiture gain
                 of $5.1 million, or $0.03  per share, and pretax adjustments of $9.9 million, or $0.04 per share, to reduce prior
                 restructuring  and   divestiture reserves.
                 (f) 1998 includes pretax restructuring charges of $89.7 million, or  $0.38  per  share,  pretax asset impairment
                 losses  of  $38.1 million,  or  $0.18  per share, and a combined pretax  divestiture loss of  $0.7  million, or
                 a gain of $0.20  per  share,  due  to certain tax benefits.
                 (g) 1997  includes pretax restructuring charges of $65.9 million, or  $0.27 per share, a pretax net charge of
                 $4.8 million, or $0.02 per  share, for an asset impairment loss partly offset by a cash litigation  settlement,
                 and a combined  pretax  loss  of  $1.42 billion, or $8.41 per share, for business divestitures.
                 (h) See Notes 2 and 3 to the consolidated financial statements for further discussion of 1997 through 1999
                 restructuring  and impairment charges and gains and losses on divestitures.
                 (i) 1999 includes reductions in the provision for income taxes of $59.3  million, or $0.44 per share, related to
                 previously recorded tax accruals and tax assets.
</FN>
</TABLE>

<Page 40>


<TABLE>
<CAPTION>
                                                                                                             Dollars in Millions
Operating
Segment                                                Identifiable                      Capital                Depreciation
Data                                                      Assets                      Expenditures            and Amortization
              Year Ended December 31             1999       1998       1997      1999     1998     1997     1999    1998    1997
              <S>                           <C>        <C>        <C>         <C>      <C>      <C>      <C>     <C>     <C>
              Foods:
                U.S.and Canadian            $ 1,124.6  $ 1,187.0  $ 1,056.9   $  70.6  $ 102.7  $  76.6  $  66.9 $  65.2 $  69.4
                Latin American                  174.0      167.7      122.4       9.6     13.2     15.6      5.9     6.7     5.9
                Other (a)                       110.1       92.1      121.5       3.7      5.7     18.0      3.5     6.3     5.7
              Total Foods                     1,408.7    1,446.8    1,300.8      83.9    121.6    110.2     76.3    78.2    81.0
              Beverages:
                U.S.and Canadian                522.7      464.2      364.5     106.0     57.6     55.1     36.2    31.5    28.7
                Latin American                  105.4       94.6       81.9      25.4     12.1      5.6      5.0     5.8     6.5
                Other (a)                        79.6      109.5       98.2       7.1      5.5     24.2      5.4     4.7     4.2
              Total Beverages                   707.7      668.3      544.6     138.5     75.2     84.9     46.6    42.0    39.4
              Total Ongoing Businesses        2,116.4    2,115.1    1,845.4     222.4    196.8    195.1    122.9   120.2   120.4
              Total Divested Businesses (b)        --       37.5      335.9        --      7.9     20.6       --    11.4    39.3
              Total Operating Segments        2,116.4    2,152.6    2,181.3     222.4    204.7    215.7    122.9   131.6   159.7
              Corporate (c)                     279.8      357.7      515.7        --       --       --      0.9     0.9     1.7
              Total Consolidated            $ 2,396.2  $ 2,510.3  $ 2,697.0   $ 222.4  $ 204.7  $ 215.7  $ 123.8 $ 132.5 $ 161.4

              <FN>
              (a) Other includes European and Asia/Pacific businesses.
              (b) Includes  the following Divested Businesses: in  1999, the Brazilian
              pasta  business;  in  1998, Ardmore Farms, Continental  Coffee,  Nile
              Spice,  Liqui-Dri and the business divested in 1999; in 1997, Snapple,
              certain  food service businesses and the businesses divested in  1999
              and 1998.
              (c) Includes  corporate  cash  and  cash  equivalents,   short-term
              investments and miscellaneous receivables and investments.
              <FN>
              </TABLE>

<Page 41>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>

                                                                                Dollars in Millions
Enterprise Information    Year Ended December 31                    1999         1998          1997
                          <S>                                  <C>          <C>           <C>
                          Net Sales (a)
                          U.S. Hot Cereals                     $   485.5    $   430.8     $   462.0
                          U.S. Ready-to-Eat Cereals                724.5        711.9         692.9
                          U.S. Grain-based Snacks                  304.6        290.8         268.5
                          U.S. Flavored Rice and Pasta             344.3        340.5         343.1
                          U.S. Other Foods                         306.0        318.3         327.6
                          Total U.S. Foods                       2,164.9      2,092.3       2,094.1
                          Canadian Foods                           194.6        181.8         193.7
                          Latin American Foods                     308.4        372.9         371.4
                          European and Asia/Pacific Foods          215.4        202.9         205.7
                          Total Foods                            2,883.3      2,849.9       2,864.9
                          U.S. Beverages                         1,469.0      1,306.8       1,153.2
                          Canadian Beverages                        33.3         31.4          30.1
                          Latin American Beverages                 229.1        267.7         232.2
                          European and Asia/Pacific Beverages      103.8        103.1         103.0
                          Total Beverages                        1,835.2      1,709.0       1,518.5
                          Total Ongoing Businesses               4,718.5      4,558.9       4,383.4
                          U.S. Divested                               --        206.7         545.5
                          Foreign Divested                           6.7         76.9          86.8
                          Total Divested Businesses                  6.7        283.6         632.3
                          Total Consolidated                   $ 4,725.2    $ 4,842.5     $ 5,015.7
                          </TABLE>

                          [FN]
                          (a)  Represents net sales to unaffiliated customers.
                          </FN>

<Page 42>


<TABLE>
<CAPTION>

                                                                          Dollars in Millions
Geographic Information    Year Ended December 31            1999           1998          1997
                          <S>                          <C>            <C>           <C>
                          Net Sales (a)
                          Total U.S.                   $ 3,633.9      $ 3,605.8     $ 3,792.8
                          Total Foreign                  1,091.3        1,236.7       1,222.9
                          Total Consolidated           $ 4,725.2      $ 4,842.5     $ 5,015.7



                          Year Ended December 31            1999           1998          1997
                          Long-lived Assets (b)
                          Total U.S.                   $ 1,111.5      $ 1,078.1     $ 1,227.2
                          Total Foreign                    232.1          237.8         288.0
                          Total Consolidated           $ 1,343.6      $ 1,315.9     $ 1,515.2


<FN>
                          (a) Represents net sales to unaffiliated customers.
                          (b) Long-lived assets include  net  intangible  assets  and
                          net  property,  plant  and equipment. 1998  assets  include
                          assets  related  to  the business divested  in  1999;  1997
                          assets  include  assets related to businesses  divested  in
                          1999 and 1998.
</FN>
</TABLE>


<Page 43>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>

Six-Year       Year Ended December 31                             1999       1998       1997       1996       1995       1994
Selected       Operating Results(a)(b)(c)(d)(e)(f)(g)(h)(i)
Financial Data <S>                                            <C>        <C>        <C>        <C>        <C>        <C>
               Net sales                                      $4,725.2   $4,842.5   $5,015.7   $5,199.0   $5,954.0   $6,211.1
               Gross profit                                    2,588.4    2,468.1    2,450.8    2,391.5    2,659.6    3,088.4
               Income (loss) before income taxes and
                 cumulative effect of accounting changes         618.3      396.6   (1,064.3)     415.6    1,220.5      320.4
               Provision (benefit) for income taxes              163.3      112.1     (133.4)     167.7      496.5      127.3
               Income (loss) before cumulative effect of
                 accounting changes                              455.0      284.5     (930.9)     247.9      724.0      193.1
               Cumulative effect of accounting
                 changes - net of tax                               --         --         --         --         --       (4.1)
               Net income (loss)                              $  455.0   $  284.5   $ (930.9)  $  247.9   $  724.0   $  189.0
               Per common share:
                 Income (loss) before cumulative effect of
                   accounting changes                         $   3.36   $  2.04    $  (6.80)  $   1.80   $   5.39   $   1.41
                 Cumulative effect of accounting changes            --         --         --         --         --      (0.03)
                 Net income (loss)                            $   3.36   $   2.04   $  (6.80)  $   1.80   $   5.39   $   1.38
                 Net income (loss) - diluted                  $   3.23   $   1.97   $  (6.80)  $   1.78   $   5.23   $   1.36
               Dividends declared:
                 Common stock                                 $  151.8   $  155.2   $  155.9   $  153.3   $  150.8   $  145.8
                 Per common share                             $   1.14   $   1.14   $   1.14   $   1.14   $   1.14   $   1.10
                 Convertible preferred and redeemable
                   preference stock                           $    4.4   $    4.5   $    3.5   $    3.7   $    4.0   $    4.0
               Average number of common shares
                 outstanding (in thousands)                    134,027    137,185    137,460    135,466    134,149    133,709

               <FN>
               (a) 1999 operating results include pretax restructuring charges of $12.7 million, or $0.06 per share,
               a pretax gain of $5.1 million, or $0.03 per share, for a business divestiture, pretax
               adjustments of $9.9 million, or $0.04 per share, to reduce prior restructuring and divestiture reserves,
               and reductions in the provision for income taxes of $59.3 million,  or $0.44 per share, related to
               previously recorded tax accruals and tax assets.
               (b) 1998 operating results include pretax restructuring charges of $89.7 million, or $0.38 per share,
               pretax asset impairment losses of $38.1 million, or $0.18 per share, and a combined pretax divestiture
               loss of $0.7 million, or a gain of $0.20 per share, due to certain tax benefits.
               (c) 1997 operating results include pretax restructuring charges of $65.9 million, or $0.27 per share,
               and a combined pretax loss of $1.42 billion, or $8.41 per share, for business divestitures.
               (d) 1996 operating results include pretax restructuring charges of $23.0 million, or $0.14 per share,
               and pretax gains of $136.4 million, or $0.60 per share, for business divestitures.
               (e) 1995 operating results include pretax restructuring charges of $117.3 million, or $0.53 per share,
               and pretax gains of $1.17 billion, or $5.20 per share, for business divestitures.
               (f) 1994 operating results include pretax restructuring charges of $118.4 million, or $0.55 per share,
               and a pretax gain of $9.8 million, or $0.07 per share, for a business divestiture.
               (g) See Notes 2 and 3 to the consolidated financial statements for further discussion of 1997 through
               1999 restructuring and asset impairment charges and losses and gains on divestitures.
               (h) 1994 cumulative effect of accounting changes includes an after-tax charge of $4.1 million for the
               adoption of SFAS No.112.
               (i) Per share data and average number of common shares outstanding reflect the 1994 two-for-one stock
               split-up.
               </FN>
               </TABLE>



<Page 44>


<TABLE>
<CAPTION>

                                                                                   Dollars in Millions (Except Per Share Data)
                Year Ended December 31                           1999       1998       1997       1996        1995        1994
                <S>                                          <C>        <C>        <C>        <C>         <C>        <C>
                Financial Statistics
                Current ratio                                     1.1        1.1        1.2        0.7         0.6         0.5
                Working capital                              $   58.4   $  105.9   $  187.3   $ (465.0)   $ (621.6)  $(1,616.9)
                Property, plant and equipment - net          $1,106.7   $1,070.2   $1,164.7   $1,200.7    $1,167.8   $ 1,333.1
                Depreciation expense                         $  114.0   $  116.3   $  122.0   $  119.1    $  115.3   $   133.1
                Total assets                                 $2,396.2   $2,510.3   $2,697.0   $4,394.4    $4,620.4   $ 5,061.1
                Long-term debt                               $  715.0   $  795.1   $  887.6   $  993.5    $1,051.8   $ 1,025.9
                Convertible preferred stock (net of
                   deferred compensation) and redeemable
                   preference stock                          $   22.5   $   21.7   $   20.5   $   19.0    $   17.7   $    17.0
                Common shareholders' equity                  $  197.3   $  151.0   $  228.0   $1,229.9    $1,079.3   $   452.7
                Net cash provided by operating activities    $  631.1   $  513.5   $  490.0   $  410.4    $  407.1   $   415.8
                Operating return on assets (a)                   33.3%      29.0%      17.8%      10.6%        7.9%       16.0%
                Gross profit as a percentage of sales            54.8%      51.0%      48.9%      46.0%       44.7%       49.7%
                Advertising and merchandising as a
                   percentage of sales                           28.0%      25.6%      24.5%      23.1%       24.6%       27.2%
                Income (loss) before cumulative effect
                   of accounting changes as a percentage
                   of sales                                       9.6%       5.9%     (18.6%)      4.8%       12.2%        3.1%
                Total debt-to-total-capitalization ratio (b)     79.8%      84.4%      81.0%      55.6%       61.7%       86.3%
                Common dividends per share as a percentage of
                    income (loss) available for common shares
                    (excluding cumulative effect of
                    accounting changes)                          33.9%      55.9%     (16.8%)     63.3%       21.2%       78.0%
                Number of common shareholders                  24,727     26,352     27,838     29,690      30,353      28,142
                Number of employees worldwide                  11,666     11,860     14,123     14,800      16,100      20,753
                Market price range of common stock:
                    High (c)                                 $ 71       $ 65 9/16   $ 55 1/8   $ 39 1/2    $ 37 1/2   $  42 1/2
                    Low (c)                                  $ 50 7/8   $ 48 1/2    $ 34 3/8   $ 30 3/8    $ 30 1/4   $  29 3/4


                <FN>
                (a) Operating income divided by average identifiable assets of the consolidated total (excluding corporate).
                (b) Total debt divided by total debt plus total shareholders' equity including convertible preferred
                stock (net of deferred compensation) and redeemable preference stock.
                (c) Per share data reflect the 1994 two-for-one stock split-up.
                </FN>
                </TABLE>


<Page 45>


The Quaker Oats Company and Subsidiaries

<TABLE>
<CAPTION>

Eleven-Year
Selected Financial Data
                                                                                          Year Ended December 31
                                                                                        1999        1998         1997
               Operating Results(a)(b)(c)(d)(e)(f)(g)(h)(i)(j)(k)(l)(m)
               <S>                                                                 <C>         <C>         <C>
               Net sales                                                           $ 4,725.2   $ 4,842.5   $  5,015.7
               Gross profit                                                          2,588.4     2,468.1      2,450.8
               Income (loss) from continuing operations before income taxes and
                 cumulative effect of accounting changes                               618.3       396.6     (1,064.3)
               Provision (benefit) for income taxes                                    163.3       112.1       (133.4)
               Income (loss) from continuing operations before cumulative
                 effect of accounting changes                                          455.0       284.5       (930.9)
               (Loss) income from discontinued operations - net of tax                    --          --           --
               Cumulative effect of accounting changes - net of tax                       --          --           --
               Net income (loss)                                                   $   455.0   $   284.5   $   (930.9)

               Per common share:
                 Income (loss) from continuing operations before cumulative
                   effect of accounting changes                                    $    3.36   $    2.04   $    (6.80)
                 (Loss) income from discontinued operations                               --          --           --
                 Cumulative effect of accounting changes                                  --          --           --
                 Net income (loss)                                                 $    3.36   $    2.04   $    (6.80)
                 Net income (loss) - diluted                                       $    3.23   $    1.97   $    (6.80)

               Dividends declared:
                 Common stock                                                      $   151.8   $   155.2   $    155.9
                 Per common share                                                  $    1.14   $    1.14   $     1.14
                 Convertible preferred and redeemable preference stock             $     4.4   $     4.5   $      3.5
               Average number of common shares outstanding (in thousands)            134,027     137,185      137,460

               <FN>
               (a) 1999 operating results include pretax restructuring charges of $12.7 million, or $0.06 per share,
               a pretax gain of $5.1 million, or $0.03 per share, for a business divestiture, pretax adjustments of
               $9.9 million, or $0.04 per share, to reduce prior restructuring and divestiture reserves, and reductions
               in the provision for income taxes of $59.3 million, or $0.44 per share, related to previously recorded
               tax accruals and tax assets.
               (b) 1998 operating results include pretax restructuring charges of $89.7 million, or $0.38 per share,
               pretax asset impairment losses of $38.1 million, or $0.18 per share, and a combined pretax divestiture
               loss of $0.7 million, or a gain of $0.20 per share, due to certain tax benefits.
               (c) 1997 operating results include pretax restructuring charges of $65.9 million, or $0.27 per share,
               and a combined pretax loss of $1.42 billion, or $8.41 per share, for business divestitures.
               (d) See Notes 2 and 3 to the consolidated financial statements for further discussion of 1997 through
               1999 restructuring and impairment charges and gains and losses on divestitures.
               (e) 1996 operating results include pretax restructuring charges of $23.0 million, or $0.14 per share,
               and pretax gains of $136.4 million, or $0.60 per share, for business divestitures.
               (f) 1995 transition period reflects only six months of operating results.
               (g) 1995 transition period operating results include pretax restructuring charges of $40.8 million, or
               $0.18 per share.
               </FN>
               </TABLE>

<Page 46>


<TABLE>
<CAPTION>

                                                               Dollars in Millions (Except Per Share Data)
       Year    Transition      Fiscal
      Ended  Period Ended  Year Ended
December 31   December 31     June 30
       1996          1995        1995       1994        1993        1992        1991        1990        1989
  <C>           <C>         <C>        <C>         <C>         <C>         <C>         <C>         <C>
  $ 5,199.0     $ 2,733.1   $ 6,365.2  $ 5,955.0   $ 5,730.6   $ 5,576.4   $ 5,491.2   $ 5,030.6   $ 4,879.4
    2,391.5       1,203.8     2,983.7    3,028.8     2,860.6     2,745.3     2,652.7     2,350.3     2,229.0

      415.6          25.6     1,359.9      378.7       467.6       421.5       411.5       382.4       239.1
      167.7          11.9       553.8      147.2       180.8       173.9       175.7       153.5        90.2

      247.9          13.7       806.1      231.5       286.8       247.6       235.8       228.9       148.9
         --            --          --         --          --          --       (30.0)      (59.9)       54.1
         --            --        (4.1)        --      (115.5)         --          --          --          --
  $   247.9     $    13.7   $   802.0  $   231.5   $   171.3   $   247.6   $   205.8   $   169.0   $   203.0


  $    1.80     $    0.09   $    6.00  $    1.68   $    1.96   $    1.63   $    1.53   $    1.47   $    0.94
         --            --          --         --          --          --       (0.20)      (0.40)       0.34
         --            --       (0.03)        --       (0.79)         --          --          --          --
  $    1.80     $    0.09   $    5.97  $    1.68   $    1.17   $    1.63   $    1.33   $    1.07   $    1.28
  $    1.78     $    0.09   $    5.80  $    1.65   $    1.14   $    1.59   $    1.30   $    1.05   $    1.25


  $   153.3     $    75.7   $   150.8  $   140.6   $   136.1   $   128.6   $   118.7   $   106.9   $    95.2
  $    1.14     $    0.57   $    1.14  $    1.06   $    0.96   $    0.86   $    0.78   $    0.70   $    0.60
  $     3.7     $     2.0   $     4.0  $     4.0   $     4.2   $     4.2   $     4.3   $     3.6          --
    135,466       134,355     133,763    135,236     143,948     149,762     151,808     153,074     158,614


<FN>
(h) Fiscal 1995 operating results include pretax restructuring charges of $76.5 million, or $0.35 per share,
and pretax gains of $1.17 billion, or $5.20 per share, for business divestitures.
(i) Fiscal 1994 operating results include pretax restructuring charges of $118.4 million, or $0.55 per share,
and a pretax gain of $9.8 million, or $0.07 per share, for a business divestiture.
(j) Fiscal 1995 cumulative effect of accounting changes includes an after-tax charge of $4.1 million for the
adoption of SFAS No. 112.
(k) Fiscal 1993 cumulative effect of accounting changes includes an after-tax charge of $125.4 million for
the adoption of SFAS No. 106 and a $9.9 million tax benefit for the adoption of SFAS No. 109.
(l) Fiscal  1989  operating results include pretax  restructuring  charges  of $124.3  million,  or  $0.50
per share, for plant  consolidations  and  overhead reductions  and  a  pretax charge of $25.6 million, or
$0.10 per  share,  for  a change  to  the  LIFO method of accounting for the majority of  U.S.  Foods  and
Beverages inventories.
(m) Per share data and average number of common shares outstanding reflect the fiscal 1995 two-for-one stock
split-up.
</FN>
</TABLE>



<Page 47>


The Quaker Oats Company and Subsidiaries


<TABLE>
<CAPTION>

Eleven-Year
Selected Financial Data
                                                                                            Year Ended December 31
                                                                                           1999         1998         1997
                     <S>                                                              <C>          <C>          <C>
                     Financial Statistics (a)(b)(c)
                     Current ratio                                                          1.1          1.1          1.2
                     Working capital                                                  $    58.4    $   105.9    $   187.3
                     Property, plant and equipment - net                              $ 1,106.7    $ 1,070.2    $ 1,164.7
                     Depreciation expense                                             $   114.0    $   116.3    $   122.0
                     Total assets                                                     $ 2,396.2    $ 2,510.3    $ 2,697.0
                     Long-term debt                                                   $   715.0    $   795.1    $   887.6
                     Convertible preferred stock (net of deferred compensation)
                       and redeemable preference stock                                $    22.5    $    21.7    $    20.5
                     Common shareholders' equity                                      $   197.3    $   151.0    $   228.0
                     Net cash provided by operating activities                        $   631.1    $   513.5    $   490.0
                     Operating return on assets (d)                                        33.3%        29.0%        17.8%
                     Gross profit as a percentage of sales                                 54.8%        51.0%        48.9%
                     Advertising and merchandising as a percentage of sales                28.0%        25.6%        24.5%
                     Income (loss) from continuing operations before cumulative
                       effect of accounting changes as a percentage of sales                9.6%         5.9%       (18.6%)
                     Total debt-to-total-capitalization ratio (e)                          79.8%        84.4%        81.0%
                     Common dividends per share as a percentage of income (loss)
                       available for common shares (excluding cumulative effect of
                       accounting changes)                                                 33.9%        55.9%       (16.8%)
                    Number of common shareholders                                         24,727      26,352       27,838
                    Number of employees worldwide                                         11,666      11,860       14,123
                    Market price range of common stock:
                       High (f)                                                       $  71        $  65 9/16   $  55 1/8
                       Low (f)                                                        $  50 7/8    $  48 1/2    $  34 3/8

                    <FN>
                    (a) Income-related statistics exclude the results of businesses reported as discontinued operations.
                    Balance sheet amounts and related statistics have not been restated
                    for discontinued operations, other than Fisher-Price, due to materiality.
                    (b) 1995 transition period reflects only six months of results.
                    (c) Effective fiscal 1991, common shareholders' equity and the number of employees worldwide were
                    reduced as a result of the Fisher-Price spin-off.
                    </FN>
                    </TABLE>



<Page 48>


<TABLE>
<CAPTION>

                                                                               Dollars in Millions (Except Per Share Data)
        Year    Transition        Fiscal
       Ended  Period Ended    Year Ended
 December 31   December 31       June 30

        1996          1995          1995          1994          1993          1992         1991         1990         1989
   <C>           <C>           <C>           <C>           <C>           <C>          <C>          <C>          <C>
         0.7           0.6           0.7           1.0           1.0           1.2          1.3          1.3          1.8
   $  (465.0)    $  (621.6)    $  (496.3)    $    (5.5)    $   (37.5)    $   168.7    $   317.8    $   342.8    $   695.8
   $ 1,200.7     $ 1,167.8     $ 1,113.4     $ 1,214.2     $ 1,228.2     $ 1,273.3    $ 1,232.7    $ 1,154.1    $   959.6
   $   119.1     $    59.2     $   125.4     $   133.3     $   129.9     $   129.7    $   125.2    $   103.5    $    94.2
   $ 4,394.4     $ 4,620.4     $ 4,826.9     $ 3,043.3     $ 2,815.9     $ 3,039.9    $ 3,060.5    $ 3,377.4    $ 3,125.9
   $   993.5     $ 1,051.8     $ 1,103.1     $   759.5     $   632.6     $   688.7    $   701.2    $   740.3    $   766.8

   $    19.0     $    17.7     $    18.8     $    15.3     $    11.4     $     7.9    $     4.8    $     1.8           --
   $ 1,229.9     $ 1,079.3     $ 1,128.8     $   445.8     $   551.1     $   842.1    $   901.0    $ 1,017.5    $ 1,137.1
   $   410.4     $    84.3     $   475.5     $   450.8     $   558.2     $   581.3    $   543.2    $   460.0    $   408.3
        10.6%          3.3%         12.4%         23.9%         21.8%         18.8%        19.1%        19.8%        19.5%
        46.0%         44.0%         46.9%         50.9%         49.9%         49.2%        48.3%        46.7%        45.7%
        23.1%         24.1%         26.3%         26.6%         25.7%         26.0%        25.6%        23.8%        23.4%

         4.8%          0.5%         12.7%          3.9%          5.0%          4.4%         4.3%         4.6%         3.1%
        55.6%         61.7%         59.0%         68.8%         59.0%         48.7%        47.4%        52.3%        44.2%


        63.3%        633.3%         19.0%         63.1%         48.9%         52.9%        58.9%        65.1%        46.9%
      29,690        30,353        29,148        28,197        33,154        33,580       33,603       33,859       34,347
      14,800        16,100        17,300        20,000        20,200        21,100       20,900       28,200       31,700

   $  39 1/2     $  37 3/8     $  42 1/2     $ 41          $ 38 1/2      $ 37 7/8     $ 32 7/16    $ 34 7/16    $ 33 1/8
   $  30 3/8     $  30 3/4     $  29 3/4     $ 30 15/16    $ 28 1/16     $ 25 1/8     $ 20 7/8     $ 22 9/16    $ 21 5/16

 <FN>
 (d) Operating income divided by average identifiable assets of the consolidated total (excluding corporate).
 (e) Total debt divided by total debt plus total shareholders' equity including
 convertible preferred stock (net of deferred compensation) and redeemable
 preference stock.
 (f) Per share data reflect the fiscal 1995 two-for-one stock split-up.
 </FN>
 </TABLE>



<Page 49>


The Quaker Oats Company and Subsidiaries

Notes to the Consolidated Financial Statements

Note 1
Summary of Significant Accounting Policies

Consolidation - The consolidated financial statements include  The  Quaker  Oats
Company and all of its subsidiaries (the Company).  All significant intercompany
transactions  have  been eliminated.  Divested businesses are  included  in  the
results of operations until their divestiture dates.

Cash  and Cash Equivalents - Cash equivalents are composed of all highly  liquid
investments with an original maturity of three months or less.  As a  result  of
the  Company's  cash management system, checks issued but not presented  to  the
banks  for  payment  may  create  negative book cash  balances.   Such  negative
balances  are included in trade accounts payable and totaled $55.0  million  and
$40.8 million as of December 31, 1999 and 1998, respectively.

Inventories - Inventories  are valued at  the lower of  cost  or  market,  using
various  cost  methods,  and  include  the cost  of  raw  materials,  labor  and
overhead.   The percentages of year-end inventories valued  using  each  of  the
methods were as follows:

<TABLE>
<CAPTION>

December 31                         1999                         1998
<S>                                 <C>                          <C>
Last-in, first-out (LIFO)            54%                          52%
Average quarterly cost               44%                          46%
First-in, first-out (FIFO)            2%                           2%
</TABLE>


If  the LIFO method of valuing these inventories was not used, total inventories
would  have been $1.8 million lower and $5.9 million higher than reported as  of
December 31, 1999 and 1998, respectively.

Long-lived  Assets - Long-lived assets  are comprised of intangible  assets  and
property,   plant   and   equipment.   Long-lived  assets,   including   certain
identifiable  intangibles and goodwill related to those assets to  be  held  and
used,  are  reviewed for impairment whenever events or changes in  circumstances
indicate  that  the  carrying amount of the asset may not  be  recoverable.   An
estimate  of  undiscounted  future cash flows produced  by  the  asset,  or  the
appropriate  grouping of assets, is compared to the carrying value to  determine
whether  an  impairment  exists, pursuant to the provisions  of  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of."  If an asset is determined to be impaired, the loss is measured
based on quoted market prices in active markets, if available.  If quoted market
prices  are  not  available,  the estimate of fair value  is  based  on  various
valuation  techniques,  including a discounted value of  estimated  future  cash
flows and fundamental analysis.  The Company reports an asset to be disposed  of
at the lower of its carrying value or its estimated net realizable value.

Intangibles - Intangible assets  consist  principally of excess  purchase  price
over  net  tangible  assets  of businesses acquired (goodwill)  and  trademarks.
Intangible assets are amortized on a straight-line basis over periods  primarily
ranging from two to 40 years.

Intangible    assets,   net   of amortization, and their estimated useful  lives
consisted of the following at December 31, 1999 and 1998:

<TABLE>
<CAPTION>

                                        Estimated Useful
Dollars in Millions                     Lives (In Years)           1999           1998
<S>                                     <C>                     <C>            <C>
Goodwill                                10 to 40                $ 370.3        $ 385.3
Trademarks and other                     2 to 40                   19.5           25.4
Intangible assets                                                 389.8          410.7
Less:  Accumulated amortization                                   152.9          165.0
Intangible assets - net of amortization                         $ 236.9        $ 245.7
</TABLE>



Property  and Depreciation - Property, plant and equipment are carried  at  cost
and  depreciated primarily on a straight-line basis over their estimated  useful
lives.   Useful  lives range from 20 to 50 years for buildings and  improvements
and from three to 17 years for machinery and equipment.

Software  Costs - The Company  defers significant software  development  project
costs  and  amortizes them over a three-year period beginning with the project's
completion. As of December 31, 1999 and 1998, all deferred software  costs  were
fully amortized.

Derivative  Financial and Commodity Instruments - The Company uses a variety  of
futures,  swaps,  options  and forward contracts in its  management  of  foreign
currency   exchange   rate,  commodity  price  and  interest   rate   exposures.
Instruments  used  as hedges must be effective at reducing the risks  associated
with  the underlying exposure and must be designated as a hedge at the inception
of the contract.

<Page 50>


Accordingly,  changes in the market value of the instruments must  have  a  high
degree of inverse correlation with changes in the market value or cash flows  of
the  underlying  hedged  item.   Summarized below are  the  specific  accounting
policies by market risk category.

Foreign  Currency  Exchange  Rate  Risk - The Company  uses  forward  contracts,
purchased  options  and  currency swap agreements  to  manage  foreign  currency
exchange  rate  risk  related  to  certain projected  cash  flows  from  foreign
operations  and net investments in foreign subsidiaries.  The fair value  method
is  used  to  account for these instruments.  Under the fair value  method,  the
instruments  are carried at fair value in the consolidated balance sheets  as  a
component   of  other  current  assets  (deferred  charges)  or  other   accrued
liabilities  (deferred  revenue).   Changes in  the  fair  value  of  derivative
instruments  that  are  used to manage exchange rate risk  in  foreign  currency
denominated cash flows and net investments in highly inflationary economies  are
recognized in the consolidated statements of income as foreign exchange loss  or
gain.   Changes  in the fair value of such instruments used to  manage  exchange
rate  risk on net investments in economies that are not highly inflationary  are
recognized  in  the  consolidated balance sheets as a component  of  accumulated
other  comprehensive income in common shareholders' equity.  To  the  extent  an
instrument is no longer effective as a hedge of a net investment due to a change
in  the  underlying exposure, losses and gains are recognized currently  in  the
consolidated statements of income as foreign exchange loss or gain.

Commodity Price Risk - The Company uses commodity futures and options to  reduce
price   exposures   on  commodity  inventories  or  anticipated   purchases   of
commodities.  The deferral method is used to account for those instruments  that
effectively  hedge  the  Company's price exposures.  For hedges  of  anticipated
transactions,  the  significant characteristics and  terms  of  the  anticipated
transaction  must  be  identified,  and the  transaction  must  be  probable  of
occurring to qualify for deferral method accounting.  Under the deferral method,
gains  and  losses  on derivative instruments are deferred in  the  consolidated
balance  sheets  as a component of other current assets (if  a  loss)  or  other
accrued  liabilities (if a gain) until the underlying inventory being hedged  is
sold.   As  the  hedged  inventory is sold, the deferred gains  and  losses  are
recognized  in the consolidated statements of income as a component of  cost  of
goods sold.  Derivative instruments that do not meet the above criteria required
for deferral treatment are accounted for under the fair value method, with gains
and  losses recognized currently in the consolidated statements of income  as  a
component of cost of goods sold.

Interest  Rate Risk - The Company uses interest rate swap agreements  to  manage
its  exposure to changes in interest rates and to balance the mix of  its  fixed
and  floating rate debt.  The settlement costs of terminated swap agreements are
reported  in the consolidated balance sheets as a component of other assets  and
are  amortized over the life of the original swap agreements.  The  amortization
of  the  settlement amounts is reported in the consolidated statements of income
as a component of interest expense.

Foreign  Currency Translation - Assets and liabilities of the Company's  foreign
subsidiaries,  other  than those located in highly inflationary  countries,  are
translated at current exchange rates, while income and expense are translated at
average  rates for the period.  For entities in countries designated  as  highly
inflationary, a combination of current and historical rates is used to determine
foreign   currency   gains  and  losses  resulting  from   financial   statement
translation.   Translation  gains and losses are  reported  as  a  component  of
accumulated  other comprehensive income in common shareholders'  equity,  except
for those associated with countries designated as highly inflationary, which are
reported directly in the consolidated statements of income.

Advertising  Costs - In accordance with SOP No. 93-7, "Reporting on  Advertising
Costs," the Company expenses all advertising expenditures as incurred except for
production costs which are deferred and expensed when advertisements run for the
first  time.   The  amount  of production costs deferred  and  included  in  the
consolidated  balance sheets as of December 31, 1999 and 1998, was $7.7  million
and $5.6 million, respectively.

Income  Taxes  - The Company uses an asset and liability approach  to  financial
accounting  and reporting for income taxes.  Deferred income taxes are  provided
when  tax  laws  and financial accounting standards differ with respect  to  the
amount  of  income for a year and the bases of assets and liabilities.   Current
deferred  tax  assets  and  liabilities are netted in the  consolidated  balance
sheets as are long-term deferred tax assets and liabilities.  Income taxes  have
been  provided  on  $147.6 million of the $148.7 million of unremitted  earnings
from  foreign subsidiaries.  Taxes are not provided on earnings expected  to  be
indefinitely reinvested.  Income taxes have also been provided for potential tax
assessments and the related tax accruals are in the consolidated balance sheets.
To  the  extent  tax  accruals differ from actual payments or  assessments,  the
accruals will be adjusted through the provision for income taxes.

<Page 51>


Segment  Reporting  -  The  Company reports segments  consistent  with  the  way
management assesses segment performance. The Company reports results  by  Foods,
Beverages and Divested operating segments.  U.S. and Canadian Foods includes hot
and  ready-to-eat  cereals, snacks, flavored rice and pasta, mixes,  syrups  and
corn  products.  Latin American Foods includes Quaker brand cereals and  snacks,
Coqueiro  brand canned fish and Toddy, ToddYnho and FrescaAvena brand  beverages
and  beverage  powders.    Other  Foods includes the  combined  results  of  the
European and Asia/Pacific foods businesses.  U.S. and Canadian Beverages,  Latin
American  Beverages and Other Beverages, the combined European and  Asia/Pacific
businesses,  all  include results from Gatorade thirst quencher  products.   The
Divested Businesses segment includes historical results for businesses that have
been  sold by the Company. In determining the operating income or loss  of  each
segment,  restructuring charges, asset impairment losses, divestiture gains  and
losses  and  certain  other  expenses, such as income taxes,  general  corporate
expenses and financing costs, are not allocated to operating segments.

Current  and  Pending  Accounting  Changes - In  January  1998,  SOP  No.  98-1,
"Accounting  for  the  Costs  of Computer Software  Developed  or  Obtained  for
Internal  Use,"  was issued.  This SOP provides guidance on the  accounting  for
computer  software costs.  In April 1998, SOP No. 98-5, "Reporting on the  Costs
of  Start-Up Activities," was issued.  This SOP provides guidance on  accounting
for  the cost of start-up activities. The Company's adoption of these Statements
in January 1999 did not materially affect the Company's financial statements.

In  June  1998,  the  FASB  issued  SFAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities."  This statement establishes accounting  and
reporting standards requiring that all derivative instruments (including certain
derivative  instruments imbedded in other contracts) be recorded in the  balance
sheet  as  either  an  asset or a liability measured at its  fair  value.   This
statement  requires  that changes in the derivative's fair value  be  recognized
currently  in earnings unless specific hedge accounting criteria are  met.   The
accounting  provisions  for qualifying hedges allow  a  derivative's  gains  and
losses to offset related results of the hedged item in the income statement  and
require  that  the  Company  must formally document, designate  and  assess  the
effectiveness  of transactions that qualify for hedge accounting.   The  Company
has not determined its method or timing of adopting this statement, but will  be
required  to  adopt  it  by January 2001.  When adopted,  this  statement  could
increase volatility in reported earnings and other comprehensive income.

Estimates  and  Assumptions  -  The  preparation  of  financial  statements   in
conformity  with  generally  accepted  accounting  principles  (GAAP)   requires
management to make estimates and assumptions that affect the reported amounts of
assets  and  liabilities and disclosure of contingent assets and liabilities  at
the  date  of the financial statements and the reported amounts of revenues  and
expenses  during the reporting period.  Actual results could differ  from  those
estimates.

Note 2
Restructuring Charges

In  1999,  the  Company recorded $12.7 million of pretax restructuring  charges.
Two  sales  offices were closed, and approximately 45 positions were eliminated,
resulting in restructuring charges of $4.7 million for severance and termination
benefits,  asset write-offs and losses on leases. Annual savings resulting  from
this  action  are  expected to be about $4 million to $5  million  and  will  be
reflected  in the U.S. and Canadian Foods and Beverages businesses beginning  in
2000.   The Company also recorded  $8.0 million of pretax restructuring  charges
related   to   a  three-year  project  that  began  in  1999.   Several   cereal
manufacturing  lines  were  consolidated and early  retirement  was  offered  to
certain employees to eliminate approximately 68 positions.

In  September  1999,  the  Company began a three-year  project  to  upgrade  and
optimize  its  manufacturing  and distribution  capabilities  in  its  U.S.  and
Canadian  businesses  (Supply  Chain  Reconfiguration  project).   The   project
involves the rationalization of U.S. and Canadian Foods operations, an expansion
of  U.S. beverage manufacturing and a reconfiguration of the Company's food  and
beverage  logistics  network.  This project is expected to  significantly  lower
operating costs by removing inefficient assets, building operating scale in  key
product  lines, and integrating foods and beverages warehousing.   Actions  will
include plant closures, line consolidations and selective outsourcing of product
manufacturing  and logistics. The Company expects the project  to  result  in  a
series of pretax restructuring and impairment charges, totaling in the range  of
$225  million  to  $250 million, $8.0 million of which was recognized  in  1999.
Targeted savings for the project are in the range of $40 million to $50  million
in  2001,  rising  to $60 million to $70 million beginning  in  2002  and  going
forward.

<Page 52>


In  2000, the Company announced further developments related to the Supply Chain
Reconfiguration  project  and other restructuring  actions.   See  Note  18  for
additional information.  The Company will continue to review its strategies  and
to implement specific plans, which will result in future charges.

During   1998,  the  Company  initiated  numerous  actions  to  improve   future
profitability.  These actions resulted in $89.7 million in restructuring charges
and   were   divided  into  three  categories:  organization  alignment,   plant
consolidations  and  Asia  reorganization.  Charges for  organization  alignment
activities  totaled $41.5 million.  The Company aligned its foods and  beverages
businesses,  combining sales, supply chain and certain administrative  functions
to  realize  synergies  and  maximize scale.   These  actions  resulted  in  the
elimination  of approximately 550 positions worldwide, as a layer  of  executive
management  was removed and sales and administrative offices and functions  were
consolidated.   Plant  consolidations in the United  States  and  Latin  America
resulted  in  charges of $18.3 million and $0.9 million, respectively,  and  the
elimination   of  approximately  300  positions.   In  light  of   disappointing
performance and a weak economic environment, the Company revised its operational
strategy  for  Asia.  The going-forward focus was shifted towards  building  the
Gatorade business in China.  This Asia reorganization resulted in $29.0  million
in charges for plant and sales and administrative office closures, restructuring
of certain joint ventures and the elimination of approximately 450 positions.

The  1998 restructuring charges were composed of severance and other termination
benefits, asset write-offs, losses on leases and other shut-down costs.  Savings
from these actions primarily began in 1999, and were estimated to be $65 million
annually, with approximately 90 percent of the savings in cash.

In  1997,  the  Company  initiated several restructuring  actions  resulting  in
charges  of $65.9 million.  Manufacturing consolidation activities in  the  U.S.
and  Canadian  businesses resulted in two foods plant closures  and  charges  of
$47.4  million.  A Latin American Foods' pasta plant was closed, which  resulted
in  charges of $10.7 million.  Other actions included an office closure  in  the
Asia/Pacific business and staff reductions in the U.S. and Canadian  businesses,
and resulted in charges of $1.1 million and $6.7 million, respectively.

Savings realized from the 1998 and 1997 restructuring actions have been in  line
with  expectations.  However, there are no recurring savings to be realized from
restructuring activities related to the divested Brazilian pasta business.

Restructuring provisions were determined based on estimates prepared at the time
the  restructuring  actions  were  approved  by  management  and  the  Board  of
Directors.   In  1999, the Company recorded pretax adjustments to  reduce  prior
restructuring reserves by $8.8 million. These adjustments were primarily due  to
higher  than anticipated proceeds on the sales of closed facilities and  certain
other  changes  from estimates. The remaining 1999, 1998 and 1997  restructuring
reserve  balances  are  considered  adequate to  cover  committed  restructuring
actions.

The restructuring reserves and utilization to date were as follows:

<TABLE>
<CAPTION>

                                                                             As of December 31, 1999
                                             Amounts Charged             Amounts     Amounts    Remaining
Dollars in Millions                    Cash     Non-Cash    Total       Utilized    Adjusted      Reserve
1999
<S>                                 <C>         <C>       <C>          <C>         <C>          <C>
Severance and termination benefits  $   2.1     $     --  $   2.1      $      --   $      --    $     2.1
Asset write-offs                         --          5.6      5.6           (2.8)         --          2.8
Loss on leases and other                2.8          2.2      5.0           (2.5)         --          2.5
Subtotal                                4.9          7.8     12.7           (5.3)         --          7.4
1998
Severance and termination benefits     41.3           --     41.3          (36.2)       (0.2)         4.9
Asset write-offs                         --         29.6     29.6          (22.7)       (3.2)         3.7
Loss on leases and other               17.8          1.0     18.8           (3.7)       (0.1)        15.0
Subtotal                               59.1         30.6     89.7          (62.6)       (3.5)        23.6
1997
Severance and termination benefits     12.6           --     12.6          (10.0)       (2.4)         0.2
Asset write-offs                         --         49.1     49.1          (46.2)       (2.9)          --
Loss on leases and other                4.2           --      4.2           (2.8)         --          1.4
Subtotal                               16.8         49.1     65.9          (59.0)       (5.3)         1.6
Total                               $  80.8     $   87.5  $ 168.3      $  (126.9)  $    (8.8)   $    32.6
</TABLE>



<Page 53>


Note 3
Divestitures and Asset Impairments

In 1999, the Company divested its Brazilian pasta business for $14.3 million and
recognized a pretax divestiture gain of $5.1 million. The Company recorded  $1.1
million  in  pretax adjustments to reduce prior divestiture reserves to  reflect
changes from estimates.

In  1998, the Company recorded $38.1 million of asset impairment losses  related
to  ongoing  businesses.  In conjunction with the Company's  ongoing  review  of
underperforming businesses, certain assets are reviewed for impairment, pursuant
to  the  provisions of SFAS No. 121.  During 1998, the China foods and Brazilian
pasta businesses were determined to be impaired.  Accordingly, pretax losses  of
$15.1  million  and  $23.0  million  on these  impaired  Chinese  and  Brazilian
businesses, respectively, were recorded in order to adjust the carrying value of
the  long-lived  assets of these businesses to fair value.  The  estimated  fair
value of these assets was based on various methodologies, including a discounted
value of estimated future cash flows and liquidation analyses.

The  Company  took  numerous actions in 1997 relative  to  its  Brazilian  pasta
business,  which was divested in 1999.  During the Company's operating  planning
process,  an  updated review of the strategies, actions taken to  date  and  the
expected financial prospects of this business was undertaken.  As a part of this
review,  the  Company evaluated the recoverability of the long-lived  assets  of
this  business  pursuant to SFAS No. 121 and recorded a  pretax  loss  of  $39.8
million  to reduce the carrying value of the long-lived assets of the  Brazilian
pasta  business  to fair value.  The estimated fair value was based  on  various
methodologies, including a discounted value of estimated future cash flows and a
fundamental analysis of the business' value.  Separately, the Company received a
$35.0 million cash litigation settlement related to this business.  The combined
charge of $4.8 million was not included in operating segment results.

Charges  for  asset impairment losses related to divested businesses  were  also
recorded  in  1998.  The Company divested the following U.S. food businesses  in
1998  for a total of $192.7 million and realized a combined pretax loss of  $0.7
million, including related asset impairment losses:

<TABLE>
<CAPTION>

                                                         (Gains)      Total
                           Divestiture    Impairment      Losses    (Gains)
Dollars in Millions               Date        Losses     on Sale     Losses
<S>                     <C>                  <C>         <C>        <C>
Ardmore Farms juice        August 1998       $    --     $  (2.5)   $  (2.5)
Continental Coffee      September 1998          40.0        (5.1)      34.9
Nile Spice soup cup      December 1998          25.4         3.1       28.5
Liqui-Dri biscuit        December 1998            --       (60.2)     (60.2)
Total Losses (Gains)                         $  65.4     $ (64.7)   $   0.7
</TABLE>



During 1997, the Company divested the Snapple beverages, Richardson toppings and
condiments  and food service bagel businesses for a total of $373.2 million  and
realized a combined pretax loss of $1.42 billion.

<TABLE>
<CAPTION>


                      Divestiture    Impairment        Losses       Total
Dollars in Millions          Date        Losses       on Sale      Losses
<S>                 <C>               <C>             <C>       <C>
Snapple beverages        May 1997     $ 1,404.0       $  10.6   $ 1,414.6
Richardson/Bagels   December 1997            --           5.8         5.8
Total Losses                          $ 1,404.0       $  16.4   $ 1,420.4
</TABLE>



Note 4
Trade Accounts Receivable Allowances
<TABLE>
<CAPTION>


Dollars in Millions                                            1999       1998
<S>                                                          <C>        <C>
Balance at beginning of year                                 $ 21.2     $ 22.3
Provision for doubtful accounts                                 6.0        4.0
Provision for discounts and allowances                         41.8       30.0
Write-offs of doubtful accounts - net of recoveries            (2.5)      (3.6)
Discounts and allowances taken                                (40.6)     (31.0)
Effect of divestitures                                          0.1       (0.3)
Effect of exchange rate changes and other                      (1.5)      (0.2)
Balance at end of year                                       $ 24.5     $ 21.2
</TABLE>



<Page 54>


Note 5
Financial Instruments

The  Company uses various financial instruments in the course of its operations,
including  certain  components  of  working  capital  such  as  cash  and   cash
equivalents, trade accounts receivable and trade accounts payable.  In addition,
the  Company  uses short-term and long-term debt to fund operating  requirements
and  derivative  financial and commodity instruments to manage its  exposure  to
foreign  currency exchange rate, commodity price and interest rate  risks.   The
counterparties  to  the  Company's  financial instruments  are  primarily  major
financial  institutions.  The Company continually evaluates the creditworthiness
of  these  major financial institutions and has never experienced, nor  does  it
anticipate, nonperformance by any of these institutions.

Marketable Securities
During  1999  and  1998, the Company made investments in marketable  securities.
These  marketable securities were available for sale and primarily consisted  of
investments  in mutual funds and preferred stock.  These investments  were  held
less  than 12 months and classified as marketable securities in the consolidated
balance  sheets.  Realized gains on the sales of marketable securities  of  $7.1
million and $4.7  million   in 1999 and 1998,   respectively,  were  included in
selling,  general and  administrative  expenses.   The Company's  investment  in
preferred  stock, outstanding   as   of  December  31,  1998, matured  in  1999.
Accordingly,  the unrealized gain of $0.4  million included in accumulated other
comprehensive  income as  of  December 31,  1998,  was reclassified during 1999.
As  of  December 31, 1999, the  Company's  investments in  marketable securities
totaled $0.3 million and approximated  fair value.

Debt Instruments
Revolving  Credit Facilities and Short-term Debt - The Company currently  has  a
$335.0  million  annually extendible five-year revolving credit facility  and  a
$165.0  million, 364-day extendible revolving credit facility which may, at  the
Company's  option, be converted into a two-year term loan.  Both facilities  are
with  various banks. Amounts available under credit facilities obtained  by  the
Company  have  decreased significantly over the last three years  as  commercial
paper  borrowings  supported by the revolving credit  facilities  were  reduced.
Credit facilities are also available for direct borrowings. There were no direct
borrowings  in  1999  or in 1998.  The revolving credit facilities  require  the
Company and certain domestic subsidiaries to maintain certain financial ratios.


Short-term  debt consists of notes payable to banks in foreign countries,  which
totaled  $73.3  million  and $41.3 million as of December  31,  1999  and  1998,
respectively.  The carrying value of short-term debt approximates fair value due
to  the short-term maturity of the instruments.  Weighted average interest rates
on  all  short-term debt outstanding as of December 31, 1999 and 1998, were  6.7
percent and 9.6 percent, respectively.  This decrease in rates primarily was due
to  a  change  in the mix of countries with outstanding debt.  Nominal  interest
rates  in  countries designated as highly inflationary have  been  adjusted  for
currency devaluation to express interest rates in U.S. dollar terms.

Long-term  Debt  -  The  carrying  value of long-term  debt,  including  current
maturities, as of December 31, 1999 and 1998, is summarized below:


<TABLE>
<CAPTION>

Dollars in Millions                                                         1999           1998
<S>                                                                    <C>             <C>
7.76% Senior ESOP notes due through 2001                               $    38.5       $   48.4
8.00% Senior ESOP notes due through 2001                                    39.0           62.1

7.80% - 7.90% Series A medium-term notes due through 2000                   10.0           25.5
8.63% - 9.34% Series B medium-term notes due through 2019                  121.2          166.4
6.50% - 7.48% Series C medium-term notes due through 2024                  200.0          200.0
6.45% - 7.78% Series D medium-term notes due through 2026                  350.0          350.0

11.70% Chinese renmimbi notes due 2001                                       4.8            4.8
5.70%-6.63% Industrial Revenue Bonds due through 2009, tax-exempt           19.4           19.4

Non-interest bearing installment note due 2014                               9.0            7.9
Other                                                                        4.3            5.8
Subtotal                                                                   796.2          890.3
Less:  Current portion of long-term debt                                    81.2           95.2
Long-term debt                                                         $   715.0       $  795.1
</TABLE>



The  fair  value  of  long-term debt, including current maturities,  was  $785.6
million and $1.01 billion as of December 31, 1999 and 1998, respectively.   Fair
value  was  based  on market prices for the same or similar issues,  or  on  the
current rates offered to the Company for similar debt of the same maturities.

The  non-interest bearing installment note due 2014, with a face value of  $55.5
million,  had an unamortized discount of $46.5 million and $47.6 million  as  of
December 31, 1999 and 1998, respectively, based on an imputed interest  rate  of
13 percent.

<Page 55>


Total required payments for long-term debt maturing over the next five years are
as follows:

<TABLE>
<CAPTION>


Dollars in Millions    2000    2001    2002    2003     2004
<S>                   <C>     <C>     <C>     <C>      <C>
Required payments     $81.2   $54.5   $46.9   $27.8    $47.3
</TABLE>



Derivative Instruments
The  primary  derivative instruments used by the Company  are  foreign  exchange
forward  contracts,  purchased foreign currency  options,   interest  rate  swap
agreements  and  commodity options and futures contracts.  The Company  actively
monitors  its  exposure to foreign currency exchange rate, commodity  price  and
interest  rate risks and uses derivative financial and commodity instruments  to
manage  the impact of certain of these risks.  The Company's policy  is  to  use
derivatives  only  for  purposes  of managing risk  associated  with  underlying
exposures.   The  Company  does  not trade or use  these  instruments  with  the
objective  of earning financial gains on the exchange rate, commodity  price  or
interest  rate fluctuations alone, nor does it use instruments where  there  are
not underlying exposures.  Complex instruments involving leverage or multipliers
are  not  used.   Management believes that its use of derivative instruments  to
manage risk is in the Company's best interest.

During 1999, the Company executed certain hedging instruments to manage exposure
to  Canadian, European, Brazilian and Mexican currency movements.   The  Company
will  continue to use foreign currency hedge instruments, where appropriate,  to
manage  exposure to potentially significant currency movements.   Where  hedging
opportunities  are not available, the exposures are addressed  through  managing
net  asset  positions  and  borrowing or investing in  a  combination  of  local
currency and U.S. dollars.

Balance Sheet Hedges
Net  Investment Hedges - The Company's significant net investment hedges and the
related  foreign currency net investments and net exposures as of  December  31,
1999, were as follows:

<TABLE>
<CAPTION>

Dollars in Millions   Net Investment        Net Hedge      Net Exposure
<S>
Currency:                     <C>              <C>               <C>
   Dutch guilders             $ 15.1           $  9.1            $  6.0
   German marks               $ 18.3           $ 11.9            $  6.4
</TABLE>



The Company actively monitors its net exposures and adjusts the hedge amounts as
appropriate.   The  net  hedges  are stated on  an  after-tax  basis.   The  net
exposures  are  subject  to  gain  or loss if foreign  currency  exchange  rates
fluctuate.

As of December 31, 1998, the Company had net foreign exchange forward contracts,
which  matured  in 1999, to sell various European currencies and Brazilian  real
for $18.9 million to hedge its net investments.  Unrealized gains as of December
31, 1998, were $0.2 million.  The carrying value of these contracts approximated
fair  value, except for the Brazilian real contracts, which had a fair value  of
$0.8 million less than the book value at December 31, 1998.  The Company had  no
outstanding balance sheet forward contract hedges as of December 31, 1999.

Income Statement Hedges
Foreign  Currency Hedges - The Company uses foreign currency options and forward
contracts  to  manage the impact of foreign currency fluctuations recognized  in
the  Company's  operating results.  Included in the consolidated  statements  of
income  were  losses  (gains) from foreign currency hedge  instruments  of  $1.0
million,  $(0.8) million and $2.5 million in 1999, 1998 and 1997,  respectively.
As  of  December  31, 1999, the Company had $50.8 million in  forward  contracts
outstanding  to manage exposure to foreign currency movements.  These  contracts
mature in 2000.

Commodity  Options and Futures - The Company uses commodity options and  futures
contracts  to  manage  price exposures on commodity inventories  or  anticipated
purchases of commodities.  The Company regularly hedges purchases of oats, corn,
corn  sweetener  and  wheat.   Of  the $2.14 billion  in  cost  of  goods  sold,
approximately $120 million to $150 million is in commodities that may be hedged.
The Company's strategy is typically to hedge certain production requirements for
various  periods  up  to  12  months.   As  of  December  31,  1999  and   1998,
approximately  55 percent and 28 percent, respectively, of hedgeable  production
requirements  for the next 12 months were hedged.  Deferred unrecognized  losses
related  to commodity options and futures contracts as of December 31, 1999  and
1998, were $0.9 million and $0.2 million, respectively.  Realized losses (gains)
charged  to  cost of goods sold in 1999, 1998 and 1997 were $2.5 million,  $13.5
million and $(6.6) million, respectively.

<Page 56>


The fair values of these commodity instruments as of December 31, 1999 and 1998,
based  on quotes from brokers, were net losses of $1.0 million and $2.2 million,
respectively.

Interest Rate Hedges - The Company actively monitors its interest rate exposure.
In 1999, the Company entered into cancelable interest rate swap agreements  with
a notional  value of $80.0 million,  to exchange  fixed  for floating-rate debt.
The  Company  uses  swap agreements to manage its exposure  to  fluctuations  in
interest rates. The counterparties have options to cancel these  agreements that
expire in  November  and December 2000; otherwise, they will mature in  2003 and
2005  for $20.0 million and $60.0 million, respectively.  Interest differentials
to  be  received  or  paid  on  the  swaps  are  recognized in  the consolidated
statements  of  income  as  a  reduction  or  increase   in   interest  expense,
respectively.

In  1995, the Company entered into interest rate swap agreements with a notional
value  of $150.0 million.  The swap agreements were used to hedge fixed interest
rate  risk  related  to  anticipated  issuance  of  long-term  debt.   The  swap
agreements were subsequently terminated at a cost of $11.9 million as  long-term
debt was issued.  Included in the consolidated balance sheets as of December 31,
1999  and  1998,  were $4.5 million and $5.7 million, respectively,  of  prepaid
interest  expense  as  settlement  of the 1995 interest  rate  swap  agreements.
Prepaid interest expense is recognized in the consolidated statements of  income
on  a  straight-line basis over the original term of the swap agreements,  which
ranged from three to 10 years.  The carrying value of the settled interest  rate
swap  agreements approximates the fair value of the swap at the settlement  date
less  amortized interest.  Amounts included in interest expense related  to  the
interest  rate swap agreements were $1.2 million, $1.4 million and $1.8  million
in 1999, 1998 and 1997, respectively.

Note 6
Capital Stock

During  1999,  the  Company repurchased 5.8 million shares  of  its  outstanding
common  stock  for  $369.9  million  under its  $1  billion  repurchase  program
announced  in  March  1998.  As of December 31, 1999,  the  Company  repurchased
$634.9 million under the $1 billion share repurchase program.

The  Company  is  authorized to issue 10 million shares of  preferred  stock  in
series,  with terms fixed by resolution of the Board of Directors. Four  million
shares  of Series C Junior Participating Preferred Stock have been reserved  for
issuance in connection with the Shareholder Rights Plan.  See Note 9 for further
discussion.

An  additional 1,750,000 shares of Series B Employee Stock Ownership Plan (ESOP)
Convertible Preferred Stock (Series B Stock) have been reserved for issuance  in
connection  with the Company's ESOP.  As of December 31, 1999, 1,282,051  shares
of  the  Series  B  Stock had been issued and are each convertible  into  2.1576
shares  of  the Company's common stock.  The Series B Stock will be issued  only
for the ESOP and will not be traded on the open market.

The  Company  is  also  authorized to issue one  million  shares  of  redeemable
preference stock, none of which had been issued as of December 31, 1999.

Note 7
Deferred Compensation

The  ESOP was established to issue debt and to use the proceeds of such debt  to
acquire   shares  of  the  Company's  stock  for  future  allocation   to   ESOP
participants.   The  ESOP  borrowings are included  in  long-term  debt  in  the
Company's  consolidated balance sheets.  See Note 5 for  further  discussion  of
ESOP notes.

Deferred  compensation  of  $84.0 million as of  December  31,  1999,  primarily
represents the Company's payment of future compensation expense related  to  the
ESOP.    As   the  Company  makes  annual  contributions  to  the  ESOP,   these
contributions, along with the dividends accumulated on the common and  preferred
stock  held by the ESOP, are used to repay the outstanding loans.  As the  loans
are  repaid,  common and preferred stock are allocated to ESOP participants  and
deferred compensation is reduced by the amount of the principal payments on  the
loans.

The following table presents the ESOP loan payments:

<TABLE>
<CAPTION>


Dollars in Millions
                             1999                 1998
<S>                      <C>                   <C>
Principal payments       $   33.0              $  29.2
Interest payments             8.5                 10.9
Total ESOP payments      $   41.5              $  40.1
</TABLE>



As of December 31, 1999, 4,692,095 shares of common stock and 591,262  shares of
preferred stock were held in the accounts of ESOP participants.

<Page 57>


Note 8
Employee Stock Option and Award Plans

In  May  1998, the Company's shareholders adopted The Quaker Long Term Incentive
Plan of 1999 (Plan) to replace the Quaker Long Term Incentive Plan of 1990.  The
purpose  of  the  Plan  is  to promote the interests  of  the  Company  and  its
shareholders  by providing the officers and other key employees with  additional
incentives  and  the  opportunity, through stock ownership,  to  increase  their
proprietary interest in the Company and their personal interest in its continued
success.   The  Plan provides for benefits to be awarded in a variety  of  ways,
with  stock options being used most frequently.  Approximately 12 million shares
of common stock have been authorized for grant under the Plan.

Stock  options may be granted for the purchase of common stock at  a  price  not
less  than the fair market value on the date of grant.  Generally, the  exercise
price of each stock option equals the market price of the Company's stock on the
date  of  grant.  Options are generally exercisable after one or more years  and
expire no later than 10 years from the date of grant.  As of December 31,  1999,
625 persons held such options.

The  Company  has  elected to disclose the pro forma effects of  SFAS  No.  123,
"Accounting  for Stock-Based Compensation."  As allowed under the provisions  of
this  statement,  the  Company will continue to apply APB  Opinion  No.  25  and
related  interpretations in accounting for the stock options awarded  under  the
Plan.   Accordingly, no compensation cost has been recognized  for  these  stock
options.

Had compensation cost for the Plan been determined consistent with SFAS No. 123,
the  Company's net income (loss) and net income (loss) per share would have been
the pro forma amounts indicated below:

<TABLE>
<CAPTION>

Dollars  in Millions (Except per  Share Data)       1999       1998            1997
<S>
Net income (loss):                              <C>        <C>           <C>
  As reported                                   $  455.0   $  284.5      $   (930.9)
  Pro forma                                     $  439.0   $  272.5      $   (940.7)
Net income (loss) per share:
  As reported                                   $   3.36   $   2.04      $    (6.80)
  Pro forma                                     $   3.24   $   1.95      $    (6.87)
Net income (loss) per share - diluted:
  As reported                                   $   3.23   $   1.97      $    (6.80)
  Pro forma                                     $   3.12   $   1.89      $    (6.87)
</TABLE>



The  fair value of each option granted during the year is estimated on the  date
of  grant using the Black-Scholes option-pricing model with the following  range
of assumptions:

<TABLE>
<CAPTION>

                                            1999               1998            1997
<S>                                <C>                <C>             <C>
Dividend yield                      1.7% -  2.1%       1.9% -  2.0%    2.4% -  3.1%
Expected volatility                26.2% - 30.3%      18.6% - 20.8%   16.3% - 22.5%
Risk-free interest rates            5.0% -  6.0%       4.7% -  5.7%    5.9% -  6.7%
Expected lives                      3 to 9 years       3 to 8 years    3 to 8 years
</TABLE>



A summary of the status of the Company's option activity is presented below:

<TABLE>
<CAPTION>

                                      1999                       1998                         1997
                                           Weighted-                  Weighted-                    Weighted-
                                            Average                    Average                      Average
                                           Exercise                   Exercise                     Exercise
                                Shares        Price        Shares        Price          Shares        Price
<S>
Outstanding at              <C>              <C>       <C>              <C>         <C>              <C>
  beginning of year         11,608,894       $40.88    13,017,621       $36.25      14,264,030       $34.42
Granted                      2,041,050       $53.49     2,399,000       $57.16       3,205,250       $40.61
Exercised                    2,261,364       $34.87     3,326,292       $33.88       3,661,269       $33.00
Forfeited                      397,921       $48.14       481,435       $45.13         790,390       $36.05
Outstanding at end of year  10,990,659       $44.20    11,608,894       $40.88      13,017,621       $36.25
Exercisable at end of year   6,861,634       $39.22     7,842,314       $36.44       9,403,675       $35.70
Weighted-average fair
  value of options
  granted during the year                    $15.42                     $13.84                       $ 9.03
</TABLE>



The following summarizes information about stock options outstanding at December
31, 1999:

<TABLE>
<CAPTION>

                              Options Outstanding                   Options Exercisable
                                      Average    Weighted-                       Weighted-
Range of                            Remaining     Average                         Average
Exercise                          Contractual    Exercise                        Exercise
Prices                    Shares         Life       Price            Shares         Price
<S>                   <C>          <C>             <C>            <C>              <C>
$22.79 - $35.35        2,995,863   4.44 Years      $33.17         2,995,863        $33.17
$37.25 - $48.03        4,068,897   5.80 Years      $41.57         3,271,516        $41.53
$53.34 - $67.84        3,925,899   8.75 Years      $55.35           594,255        $57.07
$22.79 - $67.84       10,990,659   6.48 Years      $44.20         6,861,634        $39.22
</TABLE>



<Page 58>


Under  the  Plan,  restricted stock awards grant shares of the Company's  common
stock  to key officers and employees.  These shares are subject to a restriction
period from the date of grant, during which time they may not be sold, assigned,
pledged  or  otherwise encumbered.  The number of shares or stock units  of  the
Company's  common stock awarded in 1999, 1998 and 1997 were 87,046,  55,981  and
178,475,  respectively.  Restrictions on these awards lapse after  a  period  of
time designated by the Compensation Committee of the Board of Directors.

Note 9
Shareholder Rights Plan

The  Company's Shareholder Rights Plan is designed to deter coercive  or  unfair
takeover  tactics and to prevent a person or group from gaining control  of  the
Company  without offering a fair price to all shareholders.  Under the terms  of
the  Plan,  all  common  shareholders own one "Right" per outstanding  share  of
common stock entitling them to purchase from the Company one one-hundredth of  a
share  of Series C Junior Participating Preferred Stock at an exercise price  of
$150.  The Rights become exercisable 10 days after a public announcement that  a
person  or  group has acquired shares representing 15 percent  or  more  of  the
outstanding  shares of common stock, or 15 business days following  commencement
of  a  tender offer for 15 percent or more of such outstanding shares of  common
stock.

The Company can redeem the Rights for $0.01 per Right at any time prior to their
becoming  exercisable.  The Rights will expire on July 31, 2006, unless redeemed
earlier by the Company or exchanged for common stock.

If  after  the Rights become exercisable the Company is involved in a merger  or
other  business combination at any time when there is a holder of 15 percent  or
more of the Company's stock, the Rights will then entitle holders, upon exercise
of  the  Rights, to receive shares of common stock of the acquiring or surviving
company  with  a market value equal to twice the exercise price of  each  Right.
There  is  an exemption for any issuance of common stock by the Company directly
to  any  person,  even if that person would become the beneficial  owner  of  15
percent  or more of the common stock, provided that such person does not acquire
any  additional shares of common stock.  The Rights described in this  paragraph
shall  not  apply to an acquisition merger, or consolidation which is determined
by  a  majority of the Company's independent directors, after consulting one  or
more investment banking firms, to be fair and otherwise in the best interest  of
the Company and its shareholders.


Note 10
Pension and Postretirement Plans

The  Company has various pension plans covering substantially all U.S. employees
and  certain foreign employees.  Plan benefits (Pension Benefits) are  based  on
compensation paid to employees and their years of service.  Company policy is to
make  contributions to its U.S. plans within the maximum amount  deductible  for
Federal income tax purposes.  Plan assets consist primarily of equity securities
and government, corporate and other fixed-income obligations.

The   Company  also  has  various  postretirement  health  care  plans  covering
substantially  all  U.S.  employees and certain  foreign  employees.  The  plans
provide  for  the  payment  of certain health care and life  insurance  benefits
(Postretirement Benefits) for retired employees who meet certain service-related
eligibility  requirements.   The  Company funds  only  the  plans'  annual  cash
requirements.

Total  Company Benefit Costs - The components of net periodic benefit costs  for
the plans were as follows:

<TABLE>
<CAPTION>

                                                      Pension Benefits
Dollars in Millions                              1999        1998      1997
<S>                                            <C>         <C>       <C>
Components of net periodic benefit costs:
  Service cost                                 $ 34.2      $ 33.7    $ 28.9
  Interest cost                                  80.1        76.3      74.5
  Expected return on plan assets               (112.8)     (102.5)    (86.3)
  Amortization of prior service cost              3.2         4.2       4.2
  Amortization of transitional asset             (0.9)       (0.9)    (10.7)
  Recognized net actuarial gain                  (0.2)       (0.8)     (0.1)
  Multi-employer plans                            0.4         0.3       0.5
  Termination benefits/curtailment losses         2.2         1.1        --
Net periodic benefit costs                     $  6.2      $ 11.4    $ 11.0
</TABLE>



<TABLE>
<CAPTION>


                                                   Postretirement Benefits
Dollars in Millions                              1999        1998      1997
<S>                                            <C>         <C>       <C>
Components of net periodic benefit costs:
  Service cost                                 $  7.1      $  7.2    $  6.3
  Interest cost                                  19.2        19.5      18.6
  Amortization of prior service cost              0.5         0.6       0.5
  Recognized net actuarial gain                  (0.1)       (0.1)     (0.1)
  Gain from curtailment                          (0.1)       (0.1)       --
Net periodic benefit costs                     $ 26.6      $ 27.1    $ 25.3
</TABLE>



<Page 59>


The Company  incurred $3.6 million, $5.3 million and $5.5  million in  costs  in
1999,  1998  and  1997,  respectively, for defined contribution  benefit  plans.
These  costs  are not included in the net periodic benefit costs  summarized  on
page 59.

Domestic  Obligations and Funded Status - The changes in the benefit obligations
and the reconciliations of the funded status of the Company's domestic plans  to
the statement of financial position were as follows:

<TABLE>
<CAPTION>

                                                  Pension Benefits     Postretirement Benefits
Dollars in Millions                                1999         1998         1999        1998
<S>                                           <C>          <C>           <C>         <C>
Change in benefit obligations:
  Benefit obligation at beginning of year     $ 1,049.8    $   993.0     $  292.5    $  271.3
  Service cost                                     27.0         25.6          6.8         6.8
  Interest cost                                    70.3         65.8         18.6        18.9
  Benefits paid                                   (49.5)       (48.6)       (17.3)      (15.0)
  Actuarial (gain) loss                          (142.8)        14.0        (38.5)        9.2
  Plan participant contributions                     --           --          1.2         1.3
  Plan amendments                                  10.6           --           --          --
Benefit obligation at end of year             $   965.4    $ 1,049.8     $  263.3    $  292.5
Change in plan assets:
  Fair value of plan assets
    at beginning of year                      $ 1,141.4    $ 1,075.1     $     --    $     --
  Actual return on assets                         173.9        109.9           --          --
  Company contributions                             3.6          5.0         16.1        13.7
  Benefits paid                                   (49.5)       (48.6)       (17.3)      (15.0)
  Plan participant contributions                     --           --          1.2         1.3
Fair value of plan assets at end of year      $ 1,269.4    $ 1,141.4     $     --    $     --
Fair value of plan assets greater (less)
  than benefit obligation                     $   304.0    $    91.6     $ (263.3)   $ (292.5)
Unrecognized net actuarial (gain)loss            (415.5)      (199.7)       (33.7)        4.9
Unrecognized prior service cost                    22.0         14.3          3.4         3.8
Unrecognized net liability at transition            0.5          0.6           --          --
Net amounts recognized                        $   (89.0)   $   (93.2)    $ (293.6)   $ (283.8)
Net amounts recognized consist of:
  Accrued benefit liability                   $   (89.0)   $   (93.2)    $ (293.6)   $ (283.8)
Net amounts recognized                        $   (89.0)   $   (93.2)    $ (293.6)   $ (283.8)
</TABLE>



The projected benefit obligation, accumulated benefit obligation  and fair value
of  plan  assets for the defined benefit pension plans with accumulated  benefit
obligations in excess of plan assets were $60.5 million, $43.4 million and zero,
respectively,  as  of December 31, 1999, and $95.2 million,  $82.1  million  and
$31.4 million, respectively, as of December 31, 1998.

<TABLE>
<CAPTION>

                                                    Pension Benefits    Postretirement Benefits
Weighted average assumptions as of December 31       1999       1998            1999       1998
<S>                                                 <C>        <C>             <C>        <C>
Discount rate                                       8.00%      6.75%           8.00%      6.75%
Expected long-term rate of return on plan assets    9.75%      9.75%             N/A        N/A
Rate of future compensation increases               4.50%      4.50%             N/A        N/A
N/A: Not applicable
</TABLE>



For  measurement  purposes, a 6.5 percent annual rate of  increase  in  the  per
capita cost of covered health care benefits was assumed for 2000.  The rate  was
assumed  to decrease gradually to 4.5 percent for 2005 and remain at that  level
beyond.

If the health care trend rate was increased one percentage point, postretirement
benefit costs for the year ended December 31, 1999, would have been $4.1 million
higher, and the accumulated postretirement benefit obligation as of December 31,
1999,  would have been $35.0 million higher.  If the health care trend rate  was
decreased one percentage point, postretirement benefit costs for the year  ended
December  31,  1999,  would have been $3.3 million lower,  and  the  accumulated
postretirement benefit obligation as of December 31, 1999, would have been $29.1
million lower.

<Page 60>


Foreign  Obligations and Funded Status - The changes in the benefit  obligations
and  the reconciliations of the funded status of the Company's foreign plans  to
the statement of financial position were as follows:

<TABLE>
<CAPTION>

                                                     Pension Benefits         Postretirement Benefits
Dollars in Millions                                   1999         1998             1999         1998
<S>
Change in benefit obligations:                     <C>          <C>              <C>          <C>
  Benefit obligation at beginning of year          $ 169.0      $ 139.6          $  10.1      $   9.4
  Service cost                                         7.2          8.1              0.3          0.4
  Interest cost                                        9.8         10.5              0.6          0.6
  Benefits paid                                      (10.8)       (10.9)            (0.2)        (0.2)
  Actuarial (gain)loss                                (1.9)        23.2             (2.9)         0.1
  Plan participant contributions                       0.6          0.6               --           --
  Plan amendments                                      1.5           --               --          0.6
  Foreign currency exchange rate change               (4.3)        (2.9)             0.5         (0.7)
  Plan curtailments                                     --          0.8               --         (0.1)
Benefit obligation at end of year                  $ 171.1      $ 169.0          $   8.4      $  10.1
Change in plan assets:
  Fair value of plan assets at beginning of year   $ 158.3      $ 144.1          $    --      $    --
  Actual return on assets                             15.8         20.3               --           --
  Company contributions                                7.4          7.4              0.2          0.2
  Benefits paid                                      (10.8)       (10.9)            (0.2)        (0.2)
  Plan participant contributions                       0.5          0.5               --           --
  Foreign currency exchange rate changes              (2.5)        (3.1)              --           --
Fair value of plan assets at end of year           $ 168.7      $ 158.3          $    --      $    --
Fair value of plan assets less than
  benefit obligation                               $  (2.4)     $ (10.7)         $  (8.4)     $ (10.1)
Unrecognized net actuarial (gain) loss                (3.0)         5.8             (4.2)        (1.3)
Unrecognized prior service cost                        4.8          3.4              0.8          0.9
Unrecognized net asset at transition                  (4.0)        (4.9)              --           --
Net amounts recognized                             $  (4.6)     $  (6.4)         $ (11.8)     $ (10.5)
Net amounts recognized consist of:
  Accrued benefit liability                        $ (13.0)     $ (13.9)         $ (11.8)     $ (10.5)
  Prepaid benefit costs                                8.4          7.5               --           --
Net amounts recognized                             $  (4.6)     $  (6.4)         $ (11.8)     $ (10.5)
</TABLE>



The  projected benefit obligation, accumulated benefit obligation and fair value
of  plan  assets for the defined benefit pension plans with accumulated  benefit
obligations in excess of plan assets were $6.5 million, $5.9 million  and  zero,
respectively,  as  of December 31, 1999, and $28.5 million,  $27.9  million  and
$19.0 million, respectively, as of December 31, 1998.

<TABLE>
<CAPTION>


                                                      Pension Benefits    Postretirement Benefits
<S>                                                     <C>      <C>               <C>      <C>
Weighted average assumptions as of December 31           1999     1998              1999     1998
Discount rate                                           6.00%    5.50%             7.50%    6.25%
Expected long-term rate of return on plan assets        6.70%    7.60%               N/A      N/A
Rate of future compensation increases                   3.90%    4.00%               N/A      N/A
N/A: Not applicable
</TABLE>



For  measurement  purposes, a 7.0 percent annual rate of  increase  in  the  per
capita cost of covered health care benefits was assumed for 2000.  The rate  was
assumed  to decrease gradually to 5.0 percent for 2002 and remain at that  level
beyond.

If the health care trend rate was increased one percentage point, postretirement
benefit costs for the year ended December 31, 1999, would have been $0.2 million
higher, and the accumulated postretirement benefit obligation as of December 31,
1999,  would have been $1.6 million higher.  If the health care trend  rate  was
decreased one percentage point, postretirement benefit costs for the year  ended
December  31,  1999,  would have been $0.2 million lower,  and  the  accumulated
postretirement benefit obligation as of December 31, 1999, would have been  $1.3
million lower.

<Page 61>


Note 11
Lease and Other Commitments

Certain  equipment and operating properties are rented under non-cancelable  and
cancelable operating leases.  Total rental expense under  operating  leases  was
$45.0 million, $38.5 million and $38.0 million for the  years ended December 31,
1999, 1998 and 1997, respectively.

The  following  is a schedule of future minimum annual rentals on non-cancelable
operating  leases,  primarily  for  sales  offices,  distribution  centers   and
corporate headquarters, in effect as of December 31, 1999.

<TABLE>
<CAPTION>


Dollars in Millions     2000    2001    2002    2003    2004   Thereafter   Total
<S>                    <C>     <C>     <C>     <C>     <C>          <C>    <C>
Total payments         $23.8   $22.5   $17.6   $14.0   $13.7        $31.5  $123.1
</TABLE>



The  Company  enters  into executory contracts to obtain inventory  and  promote
various  products.   As  of  December 31, 1999, future commitments  under  these
contracts were $862.1 million.

Note 12
Supplementary Income Statement Information

<TABLE>
<CAPTION>

Dollars in Millions                           1999         1998         1997
<S>                                     <C>           <C>          <C>
Advertising, media and production       $    345.9    $   281.9    $   292.7
Merchandising                                977.8        959.9        933.7
Total advertising and merchandising     $  1,323.7    $ 1,241.8    $ 1,226.4
Depreciation expense                    $    114.0    $   116.3    $   122.0
Amortization of intangibles             $      9.8    $    12.8    $    35.6
Research and development                $     28.8    $    31.0    $    34.9
</TABLE>



Note 13
Interest Expense

<TABLE>
<CAPTION>

Dollars in Millions                 1999         1998         1997
<S>                              <C>          <C>          <C>
Interest expense                 $  65.1      $  72.0      $  89.8
Interest expense capitalized        (3.2)        (2.4)        (4.0)
Subtotal                            61.9         69.6         85.8
Interest income                    (11.7)       (10.7)        (6.7)
Interest expense - net           $  50.2      $  58.9      $  79.1
</TABLE>



Interest paid  in  the  years ended  December  31,  1999,  1998  and  1997,  was
$62.8 million, $68.8 million, and $83.2 million, respectively.

Note 14
Income Taxes

The  Company  uses an asset and liability approach to financial  accounting  and
reporting  for  income  taxes in accordance with SFAS No. 109,  "Accounting  for
Income Taxes."  Income tax provisions (benefits) were as follows:

<TABLE>
<CAPTION>


Dollars in Millions                       1999          1998          1997
<S>                                    <C>           <C>          <C>
Currently payable (receivable):
   Federal                             $  88.1       $ 147.4      $ (140.1)
   Foreign                                15.6          21.2          21.9
   State                                  16.0          27.0           4.2
Total currently payable (receivable)     119.7         195.6        (114.0)
Deferred - net:
   Federal                                40.7         (62.7)         (3.0)
   Foreign                                (4.7)        (12.6)        (13.6)
   State                                   7.6          (8.2)         (2.8)
Total deferred - net                      43.6         (83.5)        (19.4)
Income tax provision (benefit)         $ 163.3       $ 112.1      $ (133.4)
</TABLE>



<Page 62>


In  1998,  as  a  result  of  the loss on the 1997 divestiture  of  the  Snapple
business, the Company recovered $240.0 million in Federal taxes paid on previous
capital gains from business divestitures.

Income  taxes  paid (refunded) during 1999, 1998 and 1997 were  $159.2  million,
$(110.4)  million and $92.9 million, respectively.  The net amount  refunded  in
1998  includes  the $240.0 million recovery of Federal taxes  paid  on  previous
capital gains.

The components of the deferred income tax provision (benefit) were as follows:


<TABLE>
<CAPTION>


Dollars in Millions                                 1999         1998        1997
<S>                                               <C>         <C>         <C>
Accelerated tax depreciation                      $ 13.0      $ (10.9)    $  12.8
Postretirement benefits                             (4.3)        (3.9)       (8.4)
Accrued expenses including
  restructuring charges                             16.7        (34.6)         --
Loss carryforwards, net of valuation allowances      2.9          4.4        (4.6)
Foreign gain deferral                               (1.8)        (3.7)       (4.3)
Asset impairment losses                             (0.6)       (39.8)       (1.6)
Other                                               17.7          5.0       (13.3)
Provision (benefit) for deferred income taxes     $ 43.6      $ (83.5)    $ (19.4)
</TABLE>



Total income tax provisions (benefits) were allocated as follows:

<TABLE>
<CAPTION>

Dollars in Millions                       1999        1998        1997
<S>                                    <C>         <C>        <C>
Continuing operations                  $ 163.3     $ 112.1    $ (133.4)
Items charged directly to common
   shareholders' equity                $ (30.7)    $ (43.8)   $  (21.0)
</TABLE>



The sources of pretax income (loss) were as follows:

<TABLE>
<CAPTION>


Dollars in Millions                         1999       1998         1997
<S>                                     <C>        <C>        <C>
U.S. sources                            $  579.2   $  435.3   $ (1,087.7)
Foreign sources                             39.1      (38.7)        23.4
Income (loss) before income taxes       $  618.3   $  396.6   $ (1,064.3)
</TABLE>



Reconciliations of the statutory Federal income tax rates to the effective
income tax rates were as follows:

<TABLE>
<CAPTION>


Dollars in Millions                        1999                  1998                  1997
<S>                                 <C>       <C>         <C>       <C>        <C>        <C>
                                                % of                  % of                  % of
                                              Pretax                Pretax                Pretax
                                     Amount   Income       Amount   Income       Amount     Loss
Tax provision (benefit) based
   on the Federal statutory rate    $ 216.4     35.0%     $ 138.8     35.0%    $ (372.5)    35.0%
State and local income tax
   provision (benefit) - net of
   Federal income taxes                19.7      3.2          9.2      2.3         (7.1)     0.7
Repatriation of foreign earnings       (6.6)    (1.1)        (2.9)    (0.7)         1.9     (0.2)
Foreign tax rate   differential         4.9      0.8          3.5      0.9          0.1       --
Capital loss valuation allowance       (2.4)    (0.4)       (25.4)    (6.4)       253.1    (23.8)
Miscellaneous items                   (68.7)   (11.1)       (11.1)    (2.8)        (8.9)     0.8
Income tax provision (benefit)      $ 163.3     26.4%     $ 112.1     28.3%    $ (133.4)    12.5%
</TABLE>



In  1999,  the  Company  adjusted its tax accruals and  tax  assets  to  reflect
developments and information received during the year. The net effect  of  these
adjustments, which are included above in miscellaneous items, was to reduce  the
1999 income tax provision by $59.3 million.

Deferred tax assets and deferred tax liabilities were as follows:

<TABLE>
<CAPTION>

Dollars in Millions                        1999                             1998
                                    Assets   Liabilities             Assets   Liabilities
<S>                               <C>            <C>              <C>             <C>
Depreciation and amortization     $   38.6       $ 211.5          $    37.4       $ 183.2
Postretirement benefits              122.8            --              118.4            --
Other benefit plans                   60.0           5.8               62.8           5.8
Accrued expenses including
  restructuring charges               86.4          14.5              122.5           9.7
Loss carryforwards                   301.7            --              316.7            --
Other                                 11.0           4.8               12.0           9.0
Subtotal                             620.5         236.6              669.8         207.7
Valuation allowance                 (296.3)           --             (314.0)           --
Total                             $  324.2       $ 236.6          $   355.8       $ 207.7
</TABLE>



<Page 63>


Included  in other current assets were deferred tax assets of $73.8 million  and
$116.6  million  as  of December 31, 1999 and 1998, respectively.   Included  in
other  assets were deferred tax assets of $13.8 million and $31.5 million as  of
December 31, 1999 and 1998, respectively.

As of December 31, 1999 and 1998, the Company had approximately $710 million and
$760  million, respectively, of capital loss carryforwards available  to  reduce
future  capital gains in the United States.  The capital loss carryforwards  are
primarily  the result of the Company's 1997 loss on divestiture of  the  Snapple
beverages business.  Therefore, the majority of those capital loss carryforwards
expire in 2002.  During 1999, the amount of available capital loss carryforwards
decreased  as  a result of prior  business divestitures.  A valuation  allowance
has been provided for the full value of the deferred tax assets related to these
carryforwards.

As  of December 31, 1999, the Company had $68.6 million of operating and capital
loss  carryforwards  available  to  reduce  future  taxable  income  of  certain
international  subsidiaries.  The majority of international  loss  carryforwards
have  no  expiration restrictions.  Those with restrictions expire primarily  in
five  years.   A  valuation  allowance has been provided  for  approximately  50
percent of the deferred tax assets related to the loss carryforwards.

Note 15
Litigation

The  Company  is  a  party  to a number of lawsuits  and  claims,  which  it  is
vigorously  defending.  Such matters arise out of the normal course of  business
and relate to the Company's past acquisition activity and other issues.  Certain
of these actions seek damages in large amounts.  While the results of litigation
cannot  be predicted with certainty, management believes that the final  outcome
of  such  litigation will not have a material adverse effect  on  the  Company's
consolidated   financial  position  or  results  of  operations.    Changes   in
assumptions,  as  well as actual experience, could cause the estimates  made  by
management to change.

Note 16
Earnings per Share

Reconciliations  of  basic  earnings per share (EPS)  to  diluted  EPS  were  as
follows:

<TABLE>
<CAPTION>


Dollars in Millions (Except Per Share Data) and Shares in Thousands
Year ended December 31                  1999                      1998                    1997
                                 Income      Shares        Income     Shares       Income        Shares
<S>                             <C>         <C>           <C>        <C>         <C>            <C>
Net income (loss)               $ 455.0                   $ 284.5                $ (930.9)
Less:  Preferred dividends          4.4                       4.5                     3.5
Net income (loss) available
  for common                    $ 450.6     134,027       $ 280.0    137,185     $ (934.4)      137,460
Net income (loss) per
   common share                 $  3.36                   $  2.04                $  (6.80)
Net income (loss) available
  for common                    $ 450.6     134,027       $ 280.0    137,185     $ (934.4)      137,460
Effect of dilutive securities:
     Stock options                   --       3,625            --      3,613           --            --
     ESOP Convertible
       Preferred Stock              2.0       2,042           2.0      2,180           --            --
     Non-vested awards               --         226            --        219           --            --

                                $ 452.6     139,920       $ 282.0    143,197     $ (934.4)      137,460
Net income (loss) per
   common share - diluted       $  3.23                   $  1.97                $  (6.80)
</TABLE>



As  of December 31, 1999 and 1998, certain stock options were excluded from  the
computation  of  diluted EPS because the exercise prices were  higher  than  the
average  market price.  At the end of 1997, all exercise prices were lower  than
the  average  market  price.   See Note 8 for more  information  on  outstanding
options.   Historical adjustments for potentially dilutive  securities  are  not
necessarily indicative of future trends.

As  the Company incurred a net loss for the year ended December 31, 1997,  there
was  no  adjustment for potentially dilutive securities as the adjustment  would
have  been  antidilutive.  Adjustments to income and shares for such potentially
dilutive  securities  in  1997, had the Company earned net  income,  would  have
resulted  in a $2.9 million increase to net income available for common  and  an
increase of 5.1 million shares.

<Page 64>


Note 17
Quarterly Financial Data (Unaudited)


<TABLE>
<CAPTION>

Dollars in Millions (Except Per Share Data)
                                First          Second            Third          Fourth
1999                          Quarter(a)      Quarter(b)       Quarter(c)      Quarter(d)
<S>                         <C>             <C>              <C>              <C>
Net sales                   $ 1,074.6       $ 1,317.5        $ 1,384.0        $  949.1
Cost of goods sold              488.3           594.1            600.9           453.5
Gross profit                $   586.3       $   723.4        $   783.1        $  495.6
Net income                  $    86.7       $   172.0        $   137.3        $   59.0
Per common share:
  Net income                $    0.63       $    1.27        $    1.02        $   0.44
  Net income - diluted      $    0.61       $    1.22        $    0.98        $   0.42
  Cash dividends declared   $   0.285       $   0.285        $   0.285        $  0.285
  Market price range:
    High                    $ 63  3/8       $ 70  3/4        $ 71             $ 71
    Low                     $ 50  7/8       $ 59  1/2        $ 60  1/2        $ 59 5/16


<FN>
(a)  Includes a pretax divestiture gain of $5.1 million ($3.4 million  after-tax
or  $0.03 per share) on the divestiture of the Brazilian pasta business,  pretax
adjustments  of  $3.3  million ($2.0 million after-tax or $0.01  per  share)  to
reduce  prior  restructuring and divestiture reserves,  and  reductions  in  the
provision  for  income  taxes  of  $8.4 million ($0.06  per  share)  related  to
previously recorded tax accruals and tax assets.
(b)  Includes  reductions in the provision for income  taxes  of  $37.7  million
($0.28 per share) related to previously recorded tax accruals.
(c)  Includes pretax restructuring charges of $6.7 million ($4.0 million  after-
tax or $0.03 per share)  for the Supply Chain Reconfiguration project and pretax
adjustments of $0.1 million ($0.2 million after-tax and not material per  share)
to reduce prior  divestiture reserves.
(d)  Includes pretax restructuring charges of $6.0 million ($3.6 million  after-
tax  or  $0.03  per  share)  for  the Supply Chain Reconfiguration  project  and
customer  organization  alignment,  pretax adjustments  of  $6.5  million  ($3.9
million  after-tax  or $0.03 per share) to reduce prior restructuring  reserves,
and  reductions  in the provision for income taxes of $13.2 million  ($0.10  per
share) related to previously recorded tax accruals.
</FN>
</TABLE>



[S]
Dollars in Millions (Except Per Share Data)

<TABLE>
<CAPTION>

                                       First          Second           Third         Fourth
1998                                 Quarter(a)      Quarter(b)      Quarter(c)     Quarter(d)
<S>                                <C>             <C>             <C>             <C>
Net sales                          $ 1,092.3       $ 1,381.7       $ 1,405.2       $  963.3
Cost of goods sold                     552.2           676.5           663.4          482.3
Gross profit                       $   540.1       $   705.2       $   741.8       $  481.0
Net  income                        $    47.0       $    56.5       $   107.8       $   73.2
Per common share:
   Net income                      $    0.33       $    0.41       $    0.78       $   0.52
   Net income - diluted            $    0.32       $    0.40       $    0.75       $   0.50
   Cash dividends declared         $   0.285       $   0.285       $   0.285       $  0.285
   Market price range:
     High                          $ 60  3/8       $ 58  7/16      $ 63            $ 65 9/16
     Low                           $ 48  1/2       $ 50  5/8       $ 51  3/4       $ 55 1/8

<FN>
(a)  Includes pretax restructuring charges of $9.1 million ($5.5 million  after-
tax or $0.04 per share) for organization alignment.
(b)  Includes pretax impairment losses of $63.0 million ($39.4 million after-tax
or  $0.28  per  share)  related to the Continental Coffee  and  Brazilian  pasta
businesses,  and  pretax restructuring charges of $15.6 million  ($11.1  million
after-tax or $0.08 per share) for organization alignment.
(c)  Includes pretax impairment losses of $40.5 million ($24.3 million after-tax
or  $0.18  per  share) related to the Nile Spice and China foods  businesses,  a
combined pretax gain of $7.6 million ($7.6 million after-tax or $0.05 per share)
for  the sale of the Ardmore Farms and Continental Coffee businesses, and pretax
restructuring  charges  of $9.0 million ($5.4 million  after-tax  or  $0.04  per
share) for organization alignment.
(d) Includes pretax restructuring charges of $56.0 million ($30.1 million after-
tax  or  $0.22 per share)  for organization alignment, plant  consolidations and
Asian  reorganization, a  pretax loss of $3.1 million ($1.9 million after-tax or
$0.01 per  share)  for the sale of the Nile Spice business  and a pretax gain of
$60.2 million  ($60.2 million after-tax  or $0.44 per share) for the sale of the
Liqui-Dri business.
</FN>
</TABLE>



Note 18
Subsequent Events

In  January and February of 2000, the Company announced its plans to  close  two
cereals  manufacturing  facilities and two distribution centers  in  the  United
States,  a further development of the Supply Chain Reconfiguration project.  The
Company  also  announced  a restructuring of its human  resources  organization,
plans  to  close an administrative office in California and the decentralization
of  certain  customer service functions to the sales offices.  As  a  result  of
these  actions,  the  Company  expects  to  recognize  restructuring  and  asset
impairment charges in the range of $175 million to $225 million during the first
quarter of 2000.

In  February of 2000, the Company announced that it entered into a joint venture
agreement  with Novartis Consumer Health, Inc. to form Altus Food Company,  LLC,
which  plans to develop and market functional food brands in North America.  The
Company will hold a 50 percent interest in this new company.

<Page 65>


Additional 10-K Information

Description of Property
As  of  December 31, 1999, the Company operated 39 manufacturing  plants  in  11
states  and  13 foreign countries and owned or leased distribution  centers  and
sales offices in 16 states and 16 foreign countries.

<TABLE>
<CAPTION>

                                            Foods   Beverages   Shared       Total
Owned and Leased Manufacturing Locations:
<S>                                            <C>          <C>     <C>         <C>
U.S. and Canadian                              10           8       --          18
Latin American                                  8           3        1          12
Other                                           6           3       --           9
Owned and Leased Distribution Centers:
U.S. and Canadian                               1          --        8           9
Latin American                                  3           1       16          20
Other                                           2           3       --           5
Owned and Leased Sales Offices:
U.S. and Canadian                               7           4        7          18
Latin American                                  2          --       14          16
Other                                           4           5       --           9
</TABLE>



The  Company owns a research and development laboratory in Barrington, Illinois,
and  leases  corporate  office space in downtown Chicago, Illinois.   Management
believes  manufacturing,  distribution and office space  owned  and  leased  are
suitable  and  adequate for the business.  Production capacity is  appropriately
utilized.


Trademarks
The  Company  and its subsidiaries (the Company) own a number of trademarks  and
are  not  aware of any circumstances that could materially adversely affect  the
continued  use  of these trademarks.  Among the most important of  the  domestic
trademarks owned by the Company are:  Quaker, Cap'n Crunch, Life, Quaker Toasted
Oatmeal,  Quaker 100% Natural and Quaker Oatmeal Squares for breakfast  cereals;
Gatorade,  Gatorade  Frost  and Gatorade Fierce for thirst-quenching  beverages;
Quaker  and Quaker Chewy for grain-based snacks; Rice-A-Roni and Near  East  for
value-added  rice and grain products; Pasta Roni for value-added  pasta;  Golden
Grain  and  Mission for pasta; and Quaker and Aunt Jemima for mixes, syrups  and
corn goods.  Many of the grocery product trademarks owned by the Company in  the
United  States  are registered in foreign countries in which  the  Company  does
substantial  business.  Internationally, key trademarks owned  include:  Quaker,
Quaker  Oatso  Simple,  Cruesli, Honey Monster,  Sugar  Puffs  and  Scott's  for
breakfast   cereals;  Coqueiro  for  fish;  Toddy  and  ToddYnho  for  chocolate
beverages; and Gatorade for thirst-quenching beverages.

U.S. and Canadian Foods Description
The Company is a major participant in the competitive packaged food industry  in
the  United  States  and Canada and is a leading manufacturer  of  hot  cereals,
pancake syrups, grain-based snacks, cornmeal, hominy grits and value-added  rice
products.   In addition, in the United States, the Company is the second-largest
manufacturer  of pancake mixes and value-added pasta products and is  among  the
four largest manufacturers of ready-to-eat cereals.  The Company competes with a
significant  number of large and small companies on the basis of  price,  value,
innovation, quality and convenience, among other attributes.  The Company's food
products  are purchased by consumers through a wide range of distributors.   The
Company  utilizes  both  its  own  and broker  sales  forces  and  has  multiple
distribution  centers throughout the United States, each  of  which  carries  an
inventory of most of the Company's food products.

<Page 66>


Latin American Foods Description
The  Company manufactures and markets its products in many countries  throughout
Latin  America  and is broadly diversified by product line.  It is  the  leading
brand-name hot cereals producer in many countries and has other leading category
positions for products in a number of countries.  In Brazil, the Company is  the
leading  producer of ready-to-drink chocolate beverages and the  leading  canned
fish processor.

Other Foods Description
The Company is broadly diversified, both geographically and by product line,  in
the  packaged food industry.  The Company manufactures and markets its  products
in  many  countries  throughout Europe and Asia.  It is  the  leading  oat-based
cereal producer in many European countries.

U.S. and Canadian Beverages Description
The  Company is the leading manufacturer and distributor of sports beverages  in
the  United States and Canada and accounts for more than 80 percent of sales  in
the  sports  drink  category.  The Company uses both its own  and  broker  sales
forces  to  sell  Gatorade thirst quencher and has distribution centers  in  the
United  State  and Canada. More than 65 percent of Gatorade sales occur  in  the
second and third quarters during the spring and summer beverage season.

Latin American and Other Beverages Description
The  Company  also  manufactures and markets Gatorade thirst quencher  in  Latin
America, Europe and Asia.  Gatorade is sold in more than 55 countries outside of
North  America and is the leading sports drink distributor in Mexico, Argentina,
Brazil, Venezuela, Colombia, the Philippine Islands and Italy.  Gatorade is also
one  of the leading sports drink brands in Korea and Australia, where it is sold
through license arrangements.

Raw Materials
Raw materials used in manufacturing include oats, wheat, corn, rice, sweeteners,
almonds, fruit, cocoa, vegetable oil and fish, as well as a variety of packaging
materials.  These products are purchased mainly in the open market.  Supplies of
all raw materials have been adequate and continuous.

<Page 67>


Corporate Social Responsibility

Social Responsibility

Quaker is committed to supporting  the communities in which we  manufacture  and
market products.    Through  The  Quaker  Oats  Foundation, corporate  community
relations and volunteer  programs, the Company  supports groups and   activities
that strengthen the  community, develop a diverse work force and supplier  base,
and build positive relationships  with  community  groups and   neighbors.   The
primary areas for support in 1999  were nutrition education, hunger  relief  and
minority education.

In  1999,   The Quaker Oats Company  and The Quaker Oats Foundation  contributed
approximately $3.0 million in  cash grants and $17.8  million  in  food  product
donations to support our communities.

Quaker was recognized as one of America's 50 top profit-sharers (as measured  by
charitable  giving  as  a  percent  of  pre-tax  income)   in  Worth  magazine's
December/January 2000 issue, which profiled  America's most generous  companies.
The magazine surveyed 500 of America's largest corporations  in  a joint project
with the Council on Economic  Priorities (CEP), a  public  service  organization
dedicated to analyzing the  social  and  environmental  records of corporations.
CEP publishes its findings  annually in the  book "Shopping for a Better World,"
a consumer guide to socially responsible shopping.

The  Quaker  Oats Foundation  -  In 1999,  the  Foundation  made   contributions
totaling more than $1.9 million.   Direct grants  were made to 59 organizations,
totaling $896,500. Ninety percent of those dollars benefited  communities  where
Quaker has a facility. Examples of  the  Foundation's  grants  during  the  year
include support to: the  National  Hispanic  Scholarship  Fund,  the NAACP,  the
NAACP ACT-SO scholarship awards program, City of Chicago  Gospel  Festival,  the
American Indian College Fund, the Chinese American Service  League, the  Greater
Chicago  Food  Depository,  Junior  Achievement,   the  Chicago  Public Schools'
Partners Program, and CARE.

The Foundation contributed about  $82,000 in scholarships for children of Quaker
employees  through  the  National  Merit  Scholarship  Program. It also provided
substantial support to local United  Way  campaigns.  In 1999, the  Foundation's
contributions to 18 United Way campaigns throughout the country  totaled  nearly
$380,000.   Combined  with  Quaker  employee  contributions of nearly  $946,000,
employees and the Foundation contributed more  than $1.3 million  to  United Way
in 1999.

In addition to direct grants, The Quaker Oats Foundation encourages and enhances
the philanthropic activity of our employees through a Matching Gifts Program. In
1999, 970  not-for-profit organizations received more than $560,000 in  matching
gifts through Quaker's Foundation and more than $544,000 from Quaker  employees,
for a total of $1.1 million.

Community Relations and Volunteer Programs -  Around the block  and  around  the
country, Quaker supports  communities where it  does  business.   Support ranges
from  financial  contributions  and  product donations to  volunteer efforts  by
Quaker employees. In 1999, Quaker provided nearly $950,000 in company support to
various not-for-profit organizations throughout the country.   Examples include:
the  League of  United Latin  American Citizens,  the United Negro College Fund,
Chicago Urban League, Cabrini-Green Tutoring Program,  Chicago  Cares  Volunteer
Program,  Chicago  Foundation  for  Women,  YMCA,  Spanish  Coalition  for Jobs,
Metropolitan Family Services, Boys  and Girls Clubs, and the National Council of
LaRaza.

Quaker  has  a  long  history  of encouraging and supporting employee  volunteer
programs, both at our corporate headquarters and at local facilities  throughout
the United States.   Employee  volunteer  efforts  are  wide-ranging,  including
tutoring and school  mentoring programs  and  a  variety  of  walks and runs for
causes such as  the  March  of  Dimes'  WalkAmerica,  the  Greater Chicago  Food
Depository's Walk  for  Hunger  and  various  marathons  that  support  research
efforts on behalf of AIDS,  cancer,  diabetes and  heart disease.   In addition,
many Quaker employees  work at food banks,  solicit donors  for  blood and bone-
marrow drives, work with Boy and Girl Scouts, staff shelters and food  pantries,
and provide food, clothing and toys to various not-for-profit organizations.

Corporate Social Responsibility
The  Quaker  Oats  Foundation  publishes an annual report and the  Company  also
makes  available  several  reports  detailing  its  community outreach  efforts.
To receive copies, please contact:

The Quaker Oats Company
Public Affairs-Suite 27-3
P.O. Box 049001
Chicago, Illinois 60604-9001
or call (312) 222-7377.

<Page 68>


Diversity Management:  Vision and Initiatives

We   believe  every  competitive  advantage  begins  with  people.   People  are
different. Differences create opportunity. That's diversity, and that's  Quaker.
We are committed to developing a culture at Quaker that maximizes the  strengths
of our employees to accelerate profitable growth. We are committed to  providing
equal opportunity and advancement for  all  qualified  employees.   We strive to
provide a workplace that  fosters  productivity and inspires  each  employee  to
realize his or her fullest potential. By accomplishing this,  we  believe Quaker
builds a competitive advantage in the marketplace.

Diversity Management - The  Quaker  Oats  Company  recognizes  that  recruiting,
retaining and advancing a diverse group of talented  people  is  strongly linked
to business performance.  Given our domestic and global  marketplaces,  shifting
populations, workplace demographic  trends and the rapidly  changing  nature  of
our customer and consumer base,  a diversity management strategy is important to
maintaining  a  competitive  advantage in  the  marketplace.   Core  initiatives
include:  focused  college  and  professional recruiting, mentoring programs and
skill-based diversity training.

Quaker's diversity management initiatives also include innovative and nationally
recognized  family  and  work-life  programs,  designed  to   promote  increased
productivity   by   helping  employees  balance  their  work  and  home   lives.
Among these are QuakerFlex   (a flexible benefits  program    capable  of  being
tailored to the employee's needs) and a variety of flexible work schedules in  a
number of Company locations. Other programs provide guidance and  information on
child education, child care, elder care, adoption and other topics.

An important element of Quaker's  overall diversity  management  strategy is the
continued  development  of  partnerships with  qualified and  qualifiable  small
business suppliers, including those owned and operated by diverse  constituents.

Equal Employment  Opportunity  and  Affirmative Action  -  Quaker  is  an  equal
opportunity and  affirmative action employer,  committed to the  employment  and
advancement of qualified employees  without  regard to  race,  color,  religion,
gender, national origin, age, veteran status, physical or  mental  disabilities,
sexual orientation, marital status or other non job-related characteristics.  As
a Federal government contractor, the Company has an affirmative action plan   at
each of our facilities for  women,  minorities,  persons with  disabilities  and
Vietnam-era veterans.

Health, Safety and Environmental Programs

Quaker is committed to conducting our  business  responsibly  and  in  a  manner
designed to protect employees,  consumers,  public  health  and the environment.
Ensuring that we meet these commitments is the responsibility of every    Quaker
employee.

Safety and Health  -  Quaker's  goal is to continue to minimize risks associated
with work-related  injuries  and  illnesses  through  a  systematic  process  of
identifying, evaluating and controlling  on-site risks,  employee  training  and
awareness programs, as well as internal assessments.   As a result,  we continue
to make ongoing improvements in the effectiveness of our safety and health  risk
management efforts.

Health Promotion  -  Our  widely  acclaimed  LiveWell-BeWell program  encourages
employees to live healthy lifestyles and  offers  U.S. employees  many  ways  to
identify and manage their  health risks.   If  Quaker  employees  in  the United
States pledge to exercise at least three times a week and are non-smokers,  they
are rewarded with financial incentives tied to Company benefits.    Results from
Quaker's programs show a reduction in overall  employee  health risks,  which is
reflected  in  substantially  lower  lifestyle-related  health  care  claims for
Quaker employees compared to industry norms.   The  majority  of employee health
risks  (related to smoking, exercise,  eating habits, etc.)  have  been  reduced
significantly over time.

In  1999,  Quaker  received  the  Gold Well  Work Place Award from the  National
Wellness Councils of America for documented excellence in health promotion.  The
awards are given every three years for outstanding achievement in creating  work
environments  that  allow employees to lead  a  healthy lifestyle.   This is the
third gold award Quaker has received since 1992, making the  Company  the  first
triple  award or "three-peat" winner in Illinois  and the  second  triple  award
winner in the United States.

Environment  -  Quaker  is  committed  to practicing  responsible  environmental
stewardship  through  regulatory  compliance  and  environmental  sustainability
efforts.

Given the nature of our manufacturing processes and products,  Quaker is focused
on three major areas with regard to environmental sustainability:  energy, water
and solid waste.   In  these  areas,  Quaker  continues to refine our  long-term
strategic approach to effectively conserving energy, reducing  water  usage  and
wastewater generation, and minimizing the  amount  of  waste  generated  by  our
operations and packaging. Quaker is also committed to ongoing re-evaluation  and
continuous improvement in our approach to environmental matters.

<Page 69>


Members of the
Board of Directors

Frank C. Carlucci 1*,3,4
Age 69
Chairman
The Carlyle Group
(Banking)
Washington, D.C.

Armando M. Codina 1,5
Age 53
Chairman and
Chief Executive Officer
Codina Group Inc.
(Real Estate Development)
Coral Gables, Florida

W. James Farrell 1,3,4
Age 57
Chairman and
Chief Executive Officer
Illinois Tool Works Inc.
(Component Manufacturer)
Glenview, Illinois

Judy C. Lewent 1,3,5
Age 51
Senior Vice President and
Chief Financial Officer
Merck & Co., Inc.
(Pharmaceuticals)
Whitehouse Station,
New Jersey

J. Michael Losh 1,2,5
Age 53
Executive Vice President
and Chief Financial Officer
General Motors Corporation
(Automotive Manufacturing)
Detroit, Michigan

Vernon R. Loucks, Jr. 2,3*,5
Age 65
Chairman
InLight, Inc.
(Medical Care Services)
Deerfield, Illinois

Robert S. Morrison 2,4
Age 57
Chairman, President and
Chief Executive Officer

Walter J. Salmon 2*,5
Age 69
Stanley Roth, Sr.
Professor of Retailing,
Emeritus
Harvard Business School
Boston, Massachusetts

William L. Weiss 2,3,4,5*
Age 70
Chairman Emeritus
Ameritech Corporation
(Telecommunications)
Chicago, Illinois


Board Committees
1 Audit
2 Board Affairs
  (Robert S. Morrison
  Ex Officio Member)
3 Compensation
4 Executive
5 Finance
*Denotes Committee Chairman

Operating Committee

Robert S. Morrison+
Age 57
Chairman, President
and Chief Executive Officer
Joined Quaker in
October 1997.
Elected to present
office in October 1997.

Cassian K.S. Cheung+
Age 44
Vice President and President
Quaker Asia
Joined Quaker in 1994.
Elected to present
office in March 1998.

Harry M. Dent+
Age 42
Vice President and President
Ready-To-Eat Cereals
Joined Quaker in 1983.
Elected to present
office in March 1998.

Margaret M. Eichman+
Age 41
Vice President
Investor Relations
and Corporate Affairs
Joined Quaker in 1980.
Elected to present
office in July 1997.

Pamela S. Hewitt+
Age 47
Senior Vice President
Human Resources
Joined Quaker in 1992.
Elected to present
office in May 1998.

John G. Jartz+
Age 46
Senior Vice President
General Counsel, Business
Development and
Corporate Secretary
Joined Quaker in 1980.
Elected to present
office in July 1997.

Polly B. Kawalek+
Age 45
Vice President and President
Hot Breakfast
Joined Quaker in 1979.
Elected to present
office in March 1998.

Charles I. Maniscalco+
Age 46
Vice President and President
Convenience Foods
Joined Quaker in 1980.
Elected to present
office in January 2000.

<Page 70>


Terence D. Martin+
Age 56
Senior Vice President and
Chief Financial Officer
Joined Quaker in 1998.
Elected to present
office in November 1998.

Terrence B. Mohr+
Age 56
Senior Vice President
Customer Organization
Joined Quaker in 1987.
Elected to present
office in March 1998.

David L. Morton
Age 55
President and
Chief Executive Officer
The Quaker Oats Company
of Canada, Ltd.
Joined Quaker in 1973.

George Sewell
Age 53
President
Cereals, Europe
Joined Quaker in 1972.

Mark A. Shapiro+
Age 44
Senior Vice President
Corporate Strategy
and Development
Joined Quaker in 1983.
Elected to present
office in January 2000.

Susan D. Wellington+
Age 41
Vice President and President
U.S. Beverages
Joined Quaker in 1981.
Elected to present
office in March 1998.

Bernardo Wolfson+
Age 46
Vice President and President
Quaker Latin America
Joined Quaker in 1983.
Elected to present
office in March 1998.

Russell A. Young+
Age 51
Senior Vice President
Supply Chain
Joined Quaker in 1971.
Elected to present
office in March 1998.

Corporate Staff
Officers

Michael D. Annes
Vice President
Business Development
and Counsel Law

William G. Barker+
Age 41
Vice President and
Corporate Controller
Joined Quaker in 1996.
Elected to present
office in January 2000.

Penelope C. Cate
Vice President
Public Affairs

Thomas L. Gettings+
Age 43
Vice President
Treasurer and Tax
Joined Quaker in 1987.
Elected to present
office in May 1998.

Richard M. Gunst+
Age 43
Vice President
Planning, Analysis
and Controls
Joined Quaker in 1992.
Elected to present
office in January 2000.

Douglas A. James
Assistant Treasurer

James E. LeGere
Vice President
Information Services

Kenneth W. Murray
Vice President
Audit Services and
Chief Ethics Officer

Michael T. Welch
Vice President
Legal Services

+also Executive Officers as defined by
Securities and Exchange Commission
regulations.  Such Executive Officers
serve at the pleasure of the Board of
Directors.  All Executive Officers (except
Robert S. Morrison, who joined the
Company in October 1997, and was
formerly the Chairman and CEO of
Kraft Foods, Inc. North America of
Philip Morris Companies, Inc. [1994-
1997] and President of General Foods
U.S.A. of Philip Morris Companies, Inc.
[1991-1994], Terence D. Martin, who
joined the Company in November
1998, and was formerly the Executive
Vice President and Chief Financial
Officer of General Signal Corporation
[1995-1998] and Chief Financial Officer
of American Cyanamid Company
[1991-1995], and William G. Barker who
joined the Company in January 1996,
and was formerly the Assistant
Treasurer, International for Fruit of the
Loom, Inc. [1994-1995]), have been
employed by The Quaker Oats
Company in an executive capacity for
five years or more.


<Page 71>


Report of Independent Public Accountants

To the Shareholders of The Quaker Oats Company:


We have audited the accompanying consolidated balance sheets  of The Quaker Oats
Company (a New Jersey corporation) and subsidiaries as of  December 31, 1999 and
1998,  and  the related consolidated  statements of income, common shareholders'
equity  and cash  flows  for the  years ended  December 31, 1999, 1998 and 1997.
These  financial  statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on  these financial statements based
on our audits.

We  conducted   our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those  standards  require  that  we  plan  and perform  the audit to
obtain  reasonable  assurance about whether the financial statements are free of
material  misstatement.   An audit includes examining, on a test basis, evidence
supporting the  amounts and  disclosures  in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made  by  management,  as  well  as  evaluating  the overall financial statement
presentation.  We  believe  that  our  audits provide a reasonable basis for our
opinion.

In our opinion, the financial  statements referred  to  above present fairly, in
all  material  respects, the  financial  position of The Quaker Oats Company and
subsidiaries  as  of  December 31,  1999 and 1998,  and  the  results  of  their
operations and their  cash flows for the years ended December 31, 1999, 1998 and
1997, in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP
Chicago, Illinois
January 27, 2000
(except with respect to the matters discussed in
Note 18, as to which the date is February 15, 2000.)


Report of Management

Management  is  responsible  for  the preparation and integrity of the Company's
financial   statements.   The   financial  statements  have   been  prepared  in
accordance with generally accepted accounting principles and necessarily include
some amounts that are based on management's estimates and judgment.

To fulfill its responsibility, management's goal  is to maintain strong  systems
of  internal  controls,  supported by formal policies  and  procedures  that are
communicated throughout the Company.  Management regularly evaluates its systems
of internal controls, with an eye toward improvement.  Management also maintains
a staff of internal auditors who evaluate the adequacy of  and  investigate  the
adherence to these controls, policies and procedures.

Our  independent   public  accountants,  Arthur Andersen LLP,  have  audited the
financial  statements  and  have  rendered  an  opinion as  to  the  statements'
fairness  in   all  material  respects.  During  the   audit,  they   obtain  an
understanding of the Company's internal control systems  and perform  tests  and
other  procedures  to  the  extent  required  by   generally  accepted  auditing
standards.

The Board of Directors pursues its oversight role with  respect to the Company's
financial  statements  through the Audit Committee,  which is composed solely of
non-management  directors.  The  Audit  Committee  meets  periodically  with the
independent public accountants, internal auditors  and management to assure that
all  are  properly  discharging  their  responsibilities.  The  Audit  Committee
approves  the  scope  of  the annual audit and  reviews the  recommendations the
independent public accountants have  for improving internal accounting controls.
The  Board  of Directors, on recommendation  of the Audit Committee, engages the
independent public accountants, subject to shareholder approval.

Both Arthur Andersen LLP  and  the internal auditors have unrestricted access to
the Audit Committee.


<Page 72>


Corporate Headquarters
Mailing Address:
The Quaker Oats Company
P.O. Box 049001
Chicago, Illinois 60604-9001

Street Address:
Quaker Tower
321 North Clark Steet
Chicago, Illinois 60610-4714
(312) 222-7111

Internet Web Site Address
www.quakeroats.com

Consumer Affairs
Inquires regarding our products
should be addressed to:
Consumer Affairs
The Quaker Oats Company
P.O. Box 049003
Chicago, Illinois 60604-9003
or call 1-800-494-7843

Media Relations
Copies of press releases are available at
PR Newswire's Company News On-Call
fax service, 1-800-758-5804, extension
103689 or at www.quakeroats.com

News media-related inquires
should be addressed to:
Corporate Communications - Suite 27-6
or call (312) 222-7399

Shareholder Services
Harris Trust and Savings Bank acts
as transfer agent and registrar for the
Company stock and maintains all primary
shareholder records.  Shareholders may
obtain information relating to their share
positions, dividends, stock transfer
requirements, lost certificates and
other related matters by telephoning
the Shareholder Hotline toll-free at
1-800-344-1198.

For General Correspondence
Harris Trust and Savings Bank
Shareholder Services
P.O. Box A3504
Chicago, Illinois 60690-3504

For Securities Transfer
Harris Trust and Savings Bank
Stock Transfer
P.O. Box 3480
Chicago, Illinois 60690-3480

Harris Trust and Saving Bank
Internet Web Site Address
www.harrisbank.com

Harris DOCS (Direct Ownership of
Corporate Shares) Program
This program is a means for dividend
reinvestment and stock purchases.
Your initial investment may be made
through this program.  Additional
shares may then be purchased
through the reinvestment of dividends,
automatic checking/savings account
debits (EFT), and/or optional cash
investments.  A brochure describing
the program and an enrollment form
are available by calling 1-800-524-8580.
Current shareholders should call
Harris Bank directly at 1-800-344-1198.

Harris DOCS
The Quaker Oats Company
Administrator
P.O. Box A3309
Chicago, Illinois 60690-3309
1-800-344-1198

Investor Relations
Security analysts, investment
professionals and shareholders should
direct their business-related inquires to:
Investor Relations - Suite 27-7
or call (312) 222-7818

Annual Meeting
Shareholders are cordially invited to
attend the Annual Meeting, which will be
held at the Civic Opera House, 20 North
Wacker Drive, in Chicago, Illinois,
May 10, 2000, at 9:30 a.m. (CDT).

Dividends
Cash dividends on Quaker common
stock have been paid for 94 consecutive
years.  Dividends are generally declared
on a quarterly basis, with holders as of
the record date being entitled to receive
the cash dividend on the payable date.

Shares Listed
New York Stock Exchange
Chicago Stock Exchange


Ticker Symbol:  OAT



The Quarter Oats Company was
incorporated in 1901 under
the laws of the State of New Jersey.

<Page 73>