Exhibit 13.3

             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.
Businesses  acquired  are included in the results  of  operations
since  their acquisition dates.  Businesses divested are included
in the results of operations until their divestiture dates.

Fiscal-Year  Change - To capture the results of a  full  beverage
season  in  a single fiscal-year period, the Company changed  its
fiscal year to align with the calendar year, beginning January 1,
1996.   The  six-month transition period of July 1, 1995  through
December 31, 1995 ("transition period") precedes the start of the
new fiscal year.  The unaudited financial information for the six
months ended December 31, 1994 ("prior period") is presented  for
comparative purposes and includes any adjustments (consisting  of
normal,  recurring  adjustments) which are,  in  the  opinion  of
management, necessary for a fair presentation.

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 highly inflationary countries, 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 common shareholders' equity, except for those
associated with highly inflationary countries, which are reported
directly in the consolidated income statements.

Futures, Swaps, Options, Caps and Forward Contracts - The Company
enters  into  a  variety  of futures, swaps,  options,  caps  and
forward   contracts  in  its  management  of  foreign   currency,
commodity  price  and  interest  rate  exposures.   Realized  and
unrealized  gains  and  losses  on  purchased  foreign   currency
options,  currency  swaps and foreign exchange forward  contracts
that  are effective as net investment hedges are recognized as  a
component   of   common  shareholders'  equity.    Realized   and
unrealized gains and losses on purchased foreign currency options
that   hedge  exchange  rate  exposure  on  future  raw  material
purchases are deferred in inventory and subsequently included  in
cost  of  goods  sold  as the inventory is  sold.   Realized  and
unrealized  gains  and losses on commodity  options  and  futures
contracts  that  hedge commodity price exposure are  deferred  in
inventory and subsequently included in cost of goods sold as  the
inventory  is sold.  Expenses associated with interest rate  swap
and cap agreements that hedge interest rate exposure are deferred
and  recognized as a component of interest expense over the  term
of each agreement. Other realized and unrealized gains and losses
on   financial  instruments  are  recognized  currently  in   the
consolidated income statements.

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 amounted  to  $64.7
million as of December 31, 1995 and $102.6 million, $53.0 million
and   $45.9  million  as  of  June  30,  1995,  1994  and   1993,
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  inventories
valued using each of the methods were as follows:

                                   As of        
                               December 31,      As of June 30,
                                   1995        1995   1994  1993
                               
   Last-in, first-out (LIFO)        49%         46%    60%   53%
   Average quarterly cost           44%         47%    30%   35%
   First-in, first-out (FIFO)        7%          7%    10%   12%
           

If the LIFO method of valuing these inventories was not used,
total inventories would have been $12.2 million, $10.5 million,
$19.6 million and $17.2 million higher than reported as of
December 31, 1995 and as of June 30, 1995, 1994 and 1993,
respectively.

48

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

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

Intangibles  -  Intangible assets consist principally  of  excess
purchase  price  over net tangible assets of businesses  acquired
(goodwill) and trademarks.  Goodwill is amortized on a  straight-
line basis over periods not exceeding 40 years.

Intangible assets, net of amortization and their estimated useful
lives consist of the following:

<TABLE>
<CAPTION>
                                             Estimated                          
                                               Useful           As of December 31,          As of June 30,
Dollar in millions                         Lives (In Years)            1995            1995       1994       1993
<S>                                                               <C>             <C>          <C>        <C>
Goodwill                                       10 to 40            $1,893.2        $1,869.9     $615.2     $528.0
Trademarks and other                            2 to 40               588.4           576.8       13.7       29.5
Intangible assets                                                   2,481.6         2,446.7      628.9      557.5
Less accumulated amortization                                         172.4           135.6      135.5      126.2
Intangible assets - net of amortization                            $2,309.2        $2,311.1     $493.4     $431.3

</TABLE>

The  carrying value of goodwill as of December 31, 1995  includes
certain   purchase  price  adjustments  related  to  the  Snapple
beverage acquisition.  These adjustments were not significant.

Software   Costs  -  The  Company  defers  significant   software
development project costs.  Software costs of $0.8 million,  $5.3
million  and $5.0 million were deferred during the twelve  months
ended  June  30, 1995, 1994 and 1993, respectively.  No  software
costs  were  deferred  during  the  transition  period.   Amounts
deferred are amortized over a three-year period beginning with  a
project's completion.  Net deferred software costs as of December
31, 1995 were $4.2 million.

Current  and  Pending Accounting Changes - During the  transition
period, the Company adopted FASB Statement #121, "Accounting  for
the  Impairment of Long-Lived Assets and Long-Lived Assets to  be
Disposed  Of."   This Statement requires that long-lived  assets,
including  certain identifiable intangibles and goodwill  related
to  those  assets to be held and used, be reviewed for impairment
whenever  events  or changes in circumstances indicate  that  the
carrying  amount  of  the  asset may not  be  recoverable.   This
Statement  requires  that  a  forecast  of  undiscounted   future
operating  cash flows, including disposal value if any,  produced
by  the  asset  be compared to its carrying amount  to  determine
whether  an impairment exists.  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 should be based on the best
information  available, including considering prices for  similar
assets  and  the results of valuation techniques  to  the  extent
available.

FASB  Statement  #121  also requires that long-lived  assets  and
certain  identifiable intangibles to be disposed of that are  not
covered by APB Opinion No. 30, "Reporting Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary,  Unusual  and Infrequently  Occurring  Events  and
Transactions,"  be reported at the lower of the asset's  carrying
amount  or its fair value less cost to sell.  The Company reports
an asset to be disposed of at the lower of its carrying amount or
its estimated net realizable value.

The   Company  has  evaluated  the  recoverability   of   Snapple
beverages' long-lived assets, including intangible assets, as  of
December 31, 1995 using its best estimates of undiscounted future
cash  flows,  and believes that the net carrying  value  of  $1.9
billion is consistent with the Company's accounting policies  and
the  requirements of this Statement.  The estimate of future cash
flows  is  subject  to change and management's  intention  is  to
periodically assess the recoverability of long-lived assets using
a consistent methodology.

In  October 1995, the FASB issued Statement #123, "Accounting for
Stock-Based Compensation."  The Company is required to adopt this
Statement  no  later  than  December  31,  1996.   The  Statement
encourages companies to recognize expense for stock options at an

49

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

estimated  fair  value  based on an  option  pricing  model.   If
expense  is not recognized for stock options, pro forma  footnote
disclosure is required of what net income and earnings per  share
would  have  been under the Statement's approach of  valuing  and
expensing stock options.  Certain other new disclosures  will  be
required.   The  Company will implement the  provisions  of  this
Statement in 1996, but has decided that it will not recognize the
expense  related  to  stock options in the financial  statements.
The  impact  of  this  Statement  has  not  yet  been  completely
evaluated.

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.  Federal income  taxes
have  been  provided on $138.3 million of the $224.0  million  of
unremitted  earnings from foreign subsidiaries.   Taxes  are  not
provided on earnings expected to be indefinitely reinvested.

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
Acquisitions and Divestitures

The   Company  has  made  significant  changes  in  its  business
portfolio  with  the  fiscal  1995  acquisition  and  divestiture
activities.

On December 6, 1994, the Company purchased Snapple Beverage Corp.
for  a  tender-offer price of $1.7 billion.  The acquisition  was
accounted  for as a purchase and the results of Snapple beverages
are  included in the consolidated financial statements since  the
date of acquisition.  The acquisition was initially financed with
commercial  paper  borrowings.  The  after-tax  proceeds  on  the
fiscal 1995 divestitures of $1.25 billion were used to reduce the
commercial paper borrowings.

The   following  table  presents  unaudited  pro  forma  combined
historical  results as if Snapple Beverage Corp. was acquired  at
the  beginning  of fiscal 1994.  The pro forma  results  are  not
necessarily  indicative of what actually would have  occurred  if
the  acquisition had been completed as of the beginning of fiscal
1994,  nor are they necessarily indicative of future consolidated
results.

Pro Forma Results (Unaudited)

                                                     Fiscal Year Ended June 30,
Dollars in Millions (Except Per Share Data)                1995          1994
Net Sales                                              $6,636.8      $6,652.6
Income before cumulative effect of               
   accounting change                                   $  767.4      $  208.1
Income per common share before          
   cumulative effect of accounting change              $   5.71      $   1.51
            

In  fiscal  1995,  the  Company also purchased  the  Adria  pasta
business  in  Brazil, the Southern Foods oat milling business  in
Australia, and the Nile Spice variety meals-in-a-cup and  Arnie's
bagel  businesses  in  the United States.  In  fiscal  1994,  the
Company purchased the Near East flavored rice business and  three
small  food  service  businesses.  In fiscal  1993,  the  Company
purchased   the   Chico-San  rice  cake  business.    Pro   forma
information  for all these acquisitions was not material  in  the
aggregate.

On  March  14, 1995, the Company completed the sale of its  North
American  pet  food  business to H.J. Heinz  Company  for  $725.0
million  and  realized a gain of $513.0 million.   On  April  24,
1995,  the  Company completed the sale of its European  pet  food

50

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

business to Dalgety PLC for $700.0 million and realized a gain of
$487.2  million.  Other divestitures in fiscal 1995 included  the
Dutch  honey  business  in February 1995, the  Mexican  chocolate
business  in  May 1995 and the U.S. bean and chili businesses  in
June  1995.  The Company realized gains on these divestitures  of
$4.9 million, $74.5 million and $91.2 million, respectively.

The  following table presents sales and operating income from the
businesses divested in fiscal 1995 through the divestiture dates.
Operating   income  includes  certain  allocations  of   overhead
expenses  and  excludes gains on divestitures  and  restructuring
charges in all fiscal years.
                                                    Fiscal Year Ended June 30,
Dollars in Millions                                1995        1994        1993
Sales:                                              
U.S. and Canadian Grocery Products             $  554.6    $  757.3    $  720.8
International Grocery Products                    760.4       876.0       969.8
Sales from divested businesses                 $1,315.0    $1,633.3    $1,690.6
Operating income:                                    
U.S. and Canadian Grocery Products             $   39.3    $   54.2    $   55.6
International Grocery Products                     34.1        50.6        63.7
Operating income from divested businesses      $   73.4    $  104.8    $  119.3

In  fiscal 1994, the Company realized a $9.8 million gain on  the
sale  of  a  business in Venezuela.  In fiscal 1993, the  Company
realized  a  $17.4  million  gain on  the  sale  of  two  Italian
businesses and a $10.4 million gain on the sale of a business  in
the  United  Kingdom.   Sales  and operating  income  from  these
businesses were not material.


Note 3
Restructuring Charges

During the transition period ended December 31, 1995, the Company
recorded  restructuring charges of $40.8 million.  These  charges
included   $24.4  million  to  reduce  the  amount  of   contract
manufacturing capacity in Snapple beverages' supply chain  system
and   $16.4   million  to  realign  the  European  beverage   and
Asia/Pacific  grain-based food businesses.   The  realignment  in
Europe  and Asia/Pacific will result in the elimination of  about
80  positions  and  allow  the  Company  to  focus  on  the  more
attractive  growth  areas in Southern Europe  for  beverages  and
China  for  foods.   Estimated  savings  from  all  restructuring
activities  are  expected  to  be  about  $15  million   annually
beginning  in  1996.   Approximately 90  percent  of  the  annual
savings will be in cash.

In  fiscal  1995, the Company recorded restructuring  charges  of
$76.5  million  for cost-reduction and realignment activities  in
order  to  address the changes in its business portfolio  and  to
allow it to quickly and effectively respond to the needs of trade
customers   and  consumers.   These  changes  resulted   in   the
elimination of approximately 850 positions and primarily included
the  realignment of the corporate, shared services  and  business
unit  structures,  the  European cereal  business  and  the  U.S.
distribution  center  network.   Estimated  savings  from   these
activities  are  expected  to  be  about  $50  million   annually
beginning  in  1996.   Approximately 90  percent  of  the  annual
savings will be in cash.

In  fiscal  1994, the Company recorded restructuring  charges  of
$118.4  million  to eliminate positions at the  headquarters  and
research   and   development  facilities,   a   combination   and
realignment of the U.S. sales force, manufacturing consolidations
for  the  bean  and  chili,  rice  cake  and  Aunt  Jemima  syrup
businesses  and the closing of a Canadian pet food  facility  and
refocusing  of  the  Canadian business, as well  as  other  cost-
reduction  initiatives.  Approximately 1,500 positions have  been
eliminated as a result of these initiatives.  In fiscal 1993, the
Company  recorded  restructuring  charges  of  $48.3  million  to
consolidate production facilities at a U.S. pet food plant and to
implement  European  cost-reduction programs.   Savings  realized
from  fiscal 1994 and 1993 restructuring activities have been  in
line  with expectations.  The 1994 restructuring reserve balances
are considered adequate to cover committed restructuring actions.

51

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

With the divestitures of the North American and European pet food
businesses  during  fiscal 1995, there are no remaining  reserves
and  no  recurring  savings  to be realized  from  the  pet  food
restructuring activities.

Restructuring  provisions  were  determined  based  on  estimates
prepared  at the time the restructuring actions were approved  by
management  and the Board of Directors.  The cost  of  completing
the   restructuring  programs  is  expected  to  approximate  the
original estimates.

The restructuring charges and utilization to date were as
follows:

<TABLE>
<CAPTION>
                                                                                 
Dollars in Millions                                                                   As of December 31, 1995 
                                                       Amounts Charged                   Amounts       Remaining
                                                  Cash    Non-Cash     Total            Utilized        Reserve
<S>                                            <C>         <C>       <C>                 <C>           <C>
Transition Period Ended December 31, 1995                                             
Loss on reduction of contract                   
   manufacturing capacity                       $ 22.5      $  1.9    $ 24.4              $  0.9         $ 23.5
Severance and termination benefits                 7.8          --       7.8                 0.6            7.2
Asset write-offs to consolidate facilities         0.1         3.8       3.9                 0.4            3.5
Contract cancellation fees and other               4.7          --       4.7                 0.1            4.6
Subtotal                                          35.1         5.7      40.8                 2.0           38.8
Fiscal 1995                                            
Severance and termination benefits                41.0          --      41.0                16.4           24.6
Asset write-offs to consolidate facilities          --        19.0      19.0                12.6            6.4
Loss on leases and other                          16.5          --      16.5                 1.1           15.4
Subtotal                                          57.5        19.0      76.5                30.1           46.4
Fiscal 1994                                            
Severance and termination benefits                44.7          --      44.7                41.1            3.6
Asset write-offs and loss on leases                7.6        30.7      38.3                33.1            5.2
Product-line discontinuations                      3.3        32.1      35.4                35.4             --
Subtotal                                          55.6        62.8     118.4               109.6            8.8
Fiscal 1993                                            
Severance and termination benfits                 27.6          --      27.6                27.6             --
Asset write-offs to consolidate facilities          --        20.7      20.7                20.7             --
Subtotal                                          27.6        20.7      48.3                48.3             --
Totals                                          $175.8      $108.2    $284.0              $190.0         $ 94.0
                              

Operating income excluding restructuring charges and gains on divestitures in 
all periods was as follows:

<CAPTION>

Dollars in Millions
                                           Transition Period Ended            Fiscal Year
                                                December 31,                 Ended June 30,
                                                    1995              1995       1994       1993
<S>                                            <C>               <C>         <C>         <C>
Operating income as reported                    $ 105.7          $1,550.3    $ 537.2     $ 575.2
Restructuring charges:
U.S. and Canadian Grocery Products                 24.4              47.1      112.9        38.6
International Grocery Products                     16.4              29.4        5.5         9.7
Subtotal                                           40.8              76.5      118.4        48.3
Gains on divestitures:
U.S. and Canadian Grocery Products                   --            (604.2)        --          --
International Grocery Products                       --            (566.6)      (9.8)      (27.8)
Subtotal                                             --          (1,170.8)      (9.8)      (27.8)
Operating income excluding charges and gains    $ 146.5          $  456.0    $ 645.8     $ 595.7

</TABLE>

52

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

Note 4
Trade Accounts Receivable Allowances
<TABLE>
<CAPTION>
                                            As of December 31,             As of June 30,
Dollars in Millions                               1995                1995      1994      1993  
<S>                                           <C>                  <C>       <C>       <C>
Balance at beginning of period                 $  26.8              $ 17.5    $ 15.0    $ 16.6
Provision for doubtful accounts                    7.9                11.2       7.5       5.7
Provision for discounts and allowances            11.6                19.4      16.6      13.8
Write-offs of doubtful accounts -    
   net of recoveries                              (4.0)               (6.1)     (5.2)     (4.4) 
Discounts and allowances taken                   (15.3)              (15.6)    (13.9)    (13.9)
Effect of acquisitions and divestitures             --                 1.4        --        --
Effect of exchange rate changes                   (0.2)               (1.0)     (2.5)     (2.8)
Balance at end of period                       $  26.8              $ 26.8    $ 17.5     $15.0

</TABLE>

Note 5
Revolving Credit Facilities and Short-term Debt

The Company has revolving credit facilities totaling $1.5 billion
with  various banks that support its commercial paper  borrowings
and  are  also  available for direct borrowings.  The  facilities
consist   of  a  $600.0  million  annually  extendible  five-year
revolving  credit facility and a $900.0 million 364-day  annually
extendible revolving credit facility which may, at the  Company's
option,  be converted into a two-year term loan.  As of  December
31,  1995,  no  direct  borrowings were outstanding.   Under  the
revolving  credit  facilities, the Company and  certain  domestic
subsidiaries must maintain certain financial ratios.

The  Company had an Adjusted Principal Revolving Credit Agreement
(Agreement) through December 29, 1995, at which time the  Company
terminated the Agreement.  The Company borrowed the predetermined
amount available each quarter during the transition period.

Short-term debt consists primarily of commercial paper borrowings
in  the  United  States and notes payable  to  banks  in  foreign
countries.   Commercial  paper  borrowings  outstanding   as   of
December  31, 1995 and June 30, 1995, 1994 and 1993  were  $693.0
million,  $676.9  million,  $78.4  million  and  $142.4  million,
respectively.   Notes payable to banks were $19.4 million,  $21.2
million, $132.9 million and $35.6 million as of December 31, 1995
and  June 30, 1995, 1994 and 1993, respectively.  See Note 6  for
discussion  of reclassification of short-term debt  to  long-term
debt.   Weighted  average interest rates on all  short-term  debt
outstanding as of December 31, 1995 and June 30, 1995, 1994   and
1993  were 6.4 percent, 6.7 percent, 6.1 percent and 4.4 percent,
respectively.   Nominal  interest rates  in  highly  inflationary
countries have been adjusted for currency devaluation to  express
interest rates in U.S. dollar terms.

53

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

Note 6
Long-Term Debt

                                              As of
                                          December 31,        As of June 30,
Dollars in Millions                            1995       1995     1994     1993
7.76% Senior ESOP notes due through 2001   $   71.7   $   74.9  $  80.8  $  85.9
8.0% Senior ESOP notes due through 2001       115.6      125.7    133.9    140.3
8.75% ESOP installment loan due                   
   through 1995                                  --        2.9      5.5      7.9
                                                                   
7.55%-7.9% Series A medium-term notes          
   due through 2000                            56.7       56.7     71.8     86.8
8.45%-9.34% Series B medium-term notes             
   due through 2019                           216.1      216.4    229.6    248.0
6.5%-7.48% Series C medium-term notes              
   due through 2024                           200.0      200.0    200.0       --
6.45%-7.78% Series D medium-term notes                   
   due through 2025                           331.0      212.0       --       --
                                                                   
6.63% deutsche mark swap due 1997              19.4       20.2     17.5     16.3
                                                                   
5.7%-10.75% Industrial Revenue Bonds                               
   due through 2009, tax-exempt                33.4       34.4     34.4     35.6

Non-interest bearing installment note 
   due 2014                                     5.4        5.1      4.5      4.0
Short-term debt to be refinanced               69.0      188.0       --     50.0
Other                                           2.1        5.6     26.9      6.7
Subtotal                                    1,120.4    1,141.9    804.9    681.5
Less current portion of long-term debt         68.6       38.8     45.4     48.9
Long-term debt                             $1,051.8   $1,103.1   $759.5   $632.6
                                 
All maturity dates presented refer to calendar years.

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

Dollars in Millions        1996     1997      1998     1999     2000
Required payments         $68.6    $52.3    $107.7    $93.9    $80.7
                                                    
During fiscal 1994, the Company issued $200.0 million of Series C
medium-term notes bearing interest rates ranging from 6.5 percent
to  7.48  percent per annum with maturities from 10 to 30  years.
The  debt  was  issued under a $600.0 million shelf  registration
filed  with the SEC in January 1990.  In April 1995, the  Company
filed a prospectus supplement with the SEC for the issuance of an
additional  $400.0 million of medium-term notes  under  the  1990
shelf  registration.  As of December 31, 1995,  the  Company  has
issued  $331.0  million  of  Series D medium-term  notes  bearing
interest ranging from 6.45 percent to 7.78 percent per annum with
maturities from three to 30 years.  The Company intends to  issue
the  remaining  $69.0 million of medium-term notes  in  the  near
future.   As  a  result, the consolidated  balance  sheet  as  of
December 31, 1995 included the reclassification of $69.0  million
of  short-term debt to long-term debt.  The consolidated  balance
sheets as of June 30, 1995 and 1993 included the reclassification
of  $188.0 million and $50.0 million, respectively, of short-term
debt  to  long-term  debt, reflecting the  Company's  intent  and
ability to refinance this debt on a long-term basis.

The  non-interest bearing installment note for $55.5 million  has
an  unamortized  discount of $50.1 million, $50.4 million,  $51.0
million  and $51.5 million as of December 31, 1995 and  June  30,
1995,  1994 and 1993, respectively, based on an imputed  interest
rate of 13 percent.

54

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Note 7
Financial Instruments

Financial instruments are primarily used to fund working  capital
requirements  and to reduce the impact of foreign currency  rate,
commodity  price  and  interest  rate  fluctuations.   The   main
financial   instruments   used  are  foreign   exchange   forward
contracts, purchased foreign currency options, commodity  options
and  futures contracts, interest rate swap and cap agreements and
short-term and long-term debt instruments.

The  foreign  currency hedge instruments are used to  reduce  the
risk  that the U.S. dollar value of the net investment  and  cash
flows  of  foreign operations will be reduced as  exchange  rates
fluctuate.   Similarly, commodity hedge instruments are  used  to
reduce  the  risk that raw material purchases will  be  adversely
affected as commodity prices change.  Interest rate swap and  cap
agreements  are used to reduce the risk that interest costs  will
be   increased  as  interest  rates  change.   While  the   hedge
instruments  are subject to the risk of loss from exchange  rate,
commodity  price  or  interest rate  changes,  the  losses  would
generally be offset by expected gains on translation of  the  net
investments,  higher  operating  results,  lower  costs  of   the
purchases being hedged or lower interest costs.  The Company uses
financial  instruments for purposes other than trading  and  does
not use these instruments with the objective of earning financial
gains  on  the  exchange rate, commodity price or  interest  rate
fluctuations   alone,   nor  does  it  utilize   instruments   in
currencies,  commodities  or interest  for  which  there  are  no
underlying  exposures.   Management  believes  that  its  use  of
financial  instruments to reduce risk is in  the  Company's  best
interest.

The  counterparties  to the Company's financial  instruments  are
major  financial institutions.  The Company continually evaluates
the   creditworthiness  of  the  counterparties  and  has   never
experienced, nor does it anticipate, nonperformance by any of its
counterparties.

Balance Sheet Hedges - The Company utilizes net investment hedges
and foreign currency swaps to hedge balance sheet exposures.

Net   Investment   Hedges   -  The  Company's   significant   net
investments,  net hedges and net exposures in foreign  currencies
subject  to the hedging program as of December 31, 1995  were  as
follows:

Dollars in Millions
Currency                  Net Invetment    Net Hedge    Net Exposure
British pound                     $21.0        $ 4.7           $16.3
Canadian dollar                   $54.8        $14.3           $40.5
Dutch guilder                     $11.7        $11.7              --
Deutsche mark                     $16.4        $16.4              --
Italian lira                      $43.3        $40.4           $ 2.9

The  Company actively monitors the net exposures and adjusts  the
hedge amounts as appropriate.  The net hedges are stated above on
an  after-tax basis.  The net exposures are subject  to  gain  or
loss  if  foreign  currency  exchange  rates  fluctuate.   On   a
consolidated  basis, the gain or loss would be recognized  as  an
increase  or  decrease  in the cumulative translation  adjustment
account  in  the consolidated balance sheet, but future  reported
income would not be affected.  In some countries, mainly in Latin
America, foreign currency hedge instruments are not available  or
are  cost  prohibitive.   The exposures in  these  countries  are
addressed  through managing net asset positions and borrowing  or
investing in a combination of local currency and U.S. dollars.

As  of  December 31, 1995 and June 30, 1995, 1994 and  1993,  the
Company had net foreign exchange forward contracts to sell  $74.7
million,  $72.2  million,  $142.5  million  and  $225.5  million,
respectively,  of primarily European and Canadian  currencies  to
hedge  its net investments.  These contracts will mature in 1996,
except  for contracts to sell $7.8 million in British  pounds  in
1997.  Unrealized (losses) gains as of December 31, 1995 and June
30,  1995,  1994  and 1993 were $(1.0) million,  $(9.9)  million,
$(4.0)  million  and $10.3 million, respectively.   The  carrying
value of these contracts approximates fair value.

55

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Foreign  Currency  Swaps - In fiscal 1988,  the  Company  swapped
$15.0 million of long-term debt for 27.9 million in deutsche mark
(DM) denominated long-term debt, effectively hedging part of  the
German  net  investment.   The  DM swap  agreement  requires  the
Company  to  re-exchange 27.9 million DM  for  $15.0  million  in
August  1997  and  to make semiannual interest  payments  of  0.9
million DM through August 1997.  The DM swap was included in long-
term  debt  as of December 31, 1995 and June 30, 1995,  1994  and
1993  for  $19.4 million, $20.2 million, $17.5 million and  $16.3
million, respectively.  The long-term debt is marked to market as
the U.S. dollar/DM exchange rate changes.  Due to the sale of the
European pet food business in fiscal 1995, the net investment  in
Germany  has been reduced to the point where the DM  swap  is  no
longer effective as a net investment hedge, requiring any mark to
market  adjustment to be charged or credited to the  consolidated
income statement.

To  offset  this  charge or credit, the Company  entered  into  a
foreign  exchange  forward contract and the  net  effect  on  the
consolidated income statements for the transition period and  for
fiscal  1995 was not material.  The interest payments are subject
to  exchange  rate fluctuations, but the effect on the  Company's
consolidated income statements was not material.

Income  Statement  Hedges  - The Company  uses  foreign  currency
options and forwards, commodity options and futures, and interest
rate  hedges  to offset gains and losses which are recognized  in
the income statement.

Foreign  Currency  Hedges  - The Company  uses  foreign  currency
options  and  forwards to offset the impact of  foreign  currency
fluctuations recognized in the operating results of the Company's
international  businesses.  Included in the  consolidated  income
statements  were  (losses)  gains  from  foreign  currency  hedge
instruments  of $(2.0) million, $(2.8) million, $1.1 million  and
$6.2  million in the transition period and in fiscal  1995,  1994
and 1993, respectively.

When  necessary, the Company has used options to  hedge  currency
fluctuations  on  certain  anticipated purchases  denominated  in
foreign  currencies,  primarily related to the  Italian  products
business.  In the event of unfavorable currency fluctuations, the
options were exercised resulting in gains which offset the higher
cost  of the purchases.  As of June 30, 1995, 1994 and 1993,  the
Company  had  options  to  sell Italian lire  and  purchase  U.S.
dollars  for  $57.9  million, $77.0 million  and  $91.2  million,
respectively.  These options were sold in the transition  period.
Deferred  unrecognized losses related to these options were  $6.3
million, $9.0 million and $6.9 million as of June 30, 1995,  1994
and  1993.   The  fair  values of outstanding  purchased  foreign
currency  options as of June 30, 1995, 1994 and  1993,  based  on
broker  quotes, were $2.0 million, $2.7 million and $3.3 million,
respectively.

In December 1995, the Company purchased a foreign currency option
to  protect the anticipated proceeds to be received from the sale
of  the  Italian products business against exchange losses.   See
Note  20  for further discussion of this subsequent  event.   The
option  was  sold  on  January 16, 1996 in conjunction  with  the
completion of the sale transaction.

Commodity  Options  and  Futures -  The  Company  uses  commodity
options and futures contracts to reduce its exposure to commodity
price  changes.  The Company regularly hedges purchases of  oats,
corn,   corn   syrup,  wheat,  coffee  beans  and  orange   juice
concentrate.   Of  the  $1.5  billion  in  cost  of  goods  sold,
approximately $100 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  twelve
months.    As   of  December  31,  1995,  and  June   30,   1995,
approximately  54 percent and 33 percent of hedgeable  production
requirements   for   the   next  twelve   months   were   hedged,
respectively.   Deferred unrecognized (losses) gains  related  to
commodity options and futures contracts as of December 31,  1995,
and  June  30,  1995, 1994 and 1993 were $(0.4)  million,  $(0.1)
million, $(4.4) million and $0.4 million, respectively.  Realized
gains  (losses)  charged to cost of goods sold in the  transition
period  and  in  fiscal 1995, 1994 and 1993  were  $2.0  million,
$(5.9)  million, $(0.2) million and $(1.9) million, respectively.
The fair values of these commodity instruments as of December 31,
1995  and  June  30, 1995, 1994 and 1993, based  on  quotes  from
brokers,  were net losses of $0.2 million and $4.3  million,  net
gains   of   $7.3  million  and  net  losses  of  $1.0   million,
respectively.

Interest Rate Hedges - The Company actively monitors its interest
rate  exposure. In fiscal 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.
Included  in  the consolidated balance sheets as of December  31,
1995  and  June  30,  1995 were $10.8 million and  $9.9  million,
respectively,  of prepaid interest expense as settlement  of  all
the interest rate swap agreements.  Prepaid interest expense will
be recognized in the consolidated income statements on a straight-
line basis over the life of the swap agreements, which range from

56

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements

three  to  10 years.  The carrying value of the settled  interest
rate swap agreements approximates fair value. In fiscal 1995, the
Company entered into interest rate cap agreements with a notional
value of $600.0 million to hedge floating interest rate risk.  As
of  December  31, 1995 and June 30, 1995, there were no  interest
rate  cap  agreements in place and no deferred  prepaid  interest
related  to  these agreements.  Included in interest expense  was
$0.9  million  related to the interest rate swap  agreements  and
$1.1 million related to the interest rate swap and cap agreements
in the transition period and in fiscal 1995, respectively.

Debt   Instruments  -  The  carrying  value  of  cash  and   cash
equivalents  and short-term debt approximates fair value  because
of the short-term maturity of the instruments.  The fair value of
long-term  debt was $1.10 billion, $1.16 billion, $779.7  million
and  $730.7  million as of December 31, 1995 and June  30,  1995,
1994  and 1993, respectively, and 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  carrying
value  of  long-term debt as of December 31, 1995  and  June  30,
1995,  1994  and  1993 was $1.05 billion, $1.10  billion,  $759.5
million and $632.6 million, respectively.


Note 8
Capital Stock

In  fiscal  1995, shareholders of record received  an  additional
share of common stock for each share held, pursuant to a two-for-
one stock split-up approved by the Board of Directors.  Per share
data  and  average number of common shares outstanding have  been
retroactively  restated.  As a result of the increase  in  issued
shares,  common stock has been increased and reinvested  earnings
has   been  decreased  by  $420.0  million.   In  November  1994,
shareholders approved an increase in authorized shares  from  200
million to 400 million.

During   fiscal  1995,  0.6  million  shares  of  the   Company's
outstanding common stock were repurchased for $22.5 million under
a 10 million share repurchase program announced in August 1993.

The Company is authorized to issue 10 million shares of preferred
stock  in series, with terms fixed by resolution of the Board  of
Directors.   One million shares of Series A Junior  Participating
Preferred  Stock  have been reserved for issuance  in  connection
with the Shareholder Rights Plan (see Note 11).

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, 1995, 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, 1995.


Note 9
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 as long-term debt on the Company's consolidated  balance
sheets.  See Note 6 for further detail on the ESOP notes.

Deferred  compensation of $189.8 million as of December 31,  1995
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.

57

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


The following table presents the ESOP loan payments:
                                   
                          Transition                   
                         Period Ended               Fiscal Year   
                         December 31,              Ended June 30,
Dollars in Millions          1995           1995       1994       1993
Principal payments         $ 16.2         $ 16.7     $ 13.9     $ 11.6
Interest payments             8.2           16.9       18.4       19.4
Total ESOP payments        $ 24.4         $ 33.6     $ 32.3     $ 31.0

As of December 31, 1995, 5,180,854 shares of common stock and
422,679 shares of preferred stock were held in the accounts of
ESOP participants.


Note 10
Employee Stock Option and Award Plans

In  fiscal 1990, the Company's shareholders approved the adoption
of  The  Quaker  Long Term Incentive Plan of  1990  (Plan).   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 incentive 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.  Twenty-six
million  shares  of common stock have been authorized  for  grant
under the Plan.  Previously, stock options were issued under  the
1984  Long-Term  Incentive Plan, which expired by  its  terms  on
December 31, 1990.

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.
Portions  of the fiscal 1992 and 1993 option awards were  granted
at  exercise prices higher than the fair market value 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, 1995, 661 persons held such options.  Changes
in stock options outstanding are summarized as follows:

                                                        Option Price
                                       Shares            (Per Share)
Balance as of June 30, 1992         4,557,528         $  9.83-88.36
Granted                             1,602,646         $ 63.56-79.45
Exercised                            (780,724)        $  9.83-70.69
Expired or terminated                 (83,303)        $  9.83-88.36
Balance as of June 30, 1993         5,296,147         $ 14.03-88.36
Granted                             1,448,265         $ 68.88-69.06
Exercised                            (312,042)        $ 14.03-70.69
Expired or terminated                (141,635)        $ 26.42-88.36
Balance as of June 30, 1994         6,290,735         $ 17.53-88.36
Adjustment  due to  two-for-one 
   stock split-up                   6,290,735         $  8.77-44.18
Granted                             2,978,450         $ 33.53-40.35
Exercised                            (906,714)        $  8.77-39.73
Expired or terminated              (1,083,665)        $  8.77-44.18
Balance as of June 30, 1995        13,569,541         $ 13.21-44.18
Granted                             4,038,115         $ 33.13-33.31
Exercised                            (523,305)        $ 13.21-35.35
Expired or terminated                (359,537)        $ 19.40-44.18
Balance as of December 31, 1995    16,724,814         $ 13.21-44.18

As  of  December  31,  1995, options for 10,150,528  shares  were
exercisable and the average per share option price of unexercised
options expiring during the period January 1996 to September 2005
was $34.00.

58

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


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 they may not be sold, assigned,  pledged  or
otherwise  encumbered.   The number of shares  of  the  Company's
common stock awarded was 25,646, 49,000, 23,200 and 70,800 in the
transition   period   and  in  fiscal  1995,   1994   and   1993,
respectively.  The fiscal 1995 awards reflect the fiscal 1995 two-
for-one stock split-up.  Restrictions on these awards lapse after
a  period of time designated by the Compensation Committee of the
Board of Directors.


Note 11
Shareholder Rights Plan

The  Company's Shareholder Rights Plan, adopted July 9, 1986  and
amended  July 12, 1989, 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 Shareholder Rights  Plan,  all  common
shareholders  own  one-quarter of a  "Right"  entitling  them  to
purchase from the Company one one-hundredth of a share of  Series
A  Junior  Participating Preferred Stock at an exercise price  of
$300.  The Rights become exercisable:  (1) 10 days after a public
announcement   that  a  person  or  group  has  acquired   shares
representing  20  percent  or more of the  voting  power  of  the
Company's   capital  stock;  (2)  10  business   days   following
commencement of a tender offer for more than 20 percent  of  such
voting power; or (3) 10 business days after a holder of at  least
15  percent  of such voting power is determined to be an  adverse
person  by  the  Board  of Directors.  The time  periods  can  be
extended by the Company.

Unless  the Board of Directors has made a determination that  any
person  is  an adverse person, the Company can redeem the  Rights
for  $0.05  per  Right  at  any  time  prior  to  their  becoming
exercisable.  The Rights will expire on
July 30, 1996, unless redeemed earlier by the Company.

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 20 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 company  with  a
market  value  equal to twice the exercise price of  each  Right.
Alternatively,  if a 20 percent holder acquires  the  Company  by
means  of  a  reverse merger in which the Company and  its  stock
survive,  or  if any person acquires 20 percent or  more  of  the
Company's  voting power or acquires 15 percent of  the  Company's
voting power and is determined by the Board of Directors to be an
adverse   person,  each  Right  not  owned  by  such  20  percent
shareholder or adverse person would, upon exercise of the  Right,
entitle  the holder to common stock of the Company (or in certain
circumstances other consideration) having a market value equal to
twice  the exercise price of the Right.  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 12
Pension Plans

The Company has various pension plans covering substantially all U.S. employees
and certain foreign employees.  Plan 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.

59

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


The components of net pension costs for defined plans were as follows:

                                     Transition
                                    Period Ended              Fiscal Year
                                    December 31,             Ended June 30,
Dollars in Millions                     1995          1995       1994      1993
Service cost (benefits earned 
   during the year)                 $   26.6       $  53.8    $  46.0    $ 41.5
Interest cost on projected                  
   benefit obligation                   33.5          59.5       55.6      51.9
Actual return on plan assets           (36.1)        (65.8)     (64.2)    (64.8)
Net amortization and deferral           (3.6)         (7.4)      (8.8)     (8.5)
Multi-employer plans                     0.2           0.4        0.3       0.2
Net pension costs                   $   20.6       $  40.5    $  28.9    $ 20.3

Reconciliation of the funded status of the Company's U.S. defined plans to the 
(accrued) prepaid pension costs were as follows:

<TABLE>
<CAPTION>                                               
                                                           Overfunded                                 Underfunded
                                          As of                    As of                As of                  As of
                                       December 31,               June 30,           December 31,             June 30,
Dollars in Millions                          1995        1995       1994       1993      1995       1995       1994      1993
<S>                                     <C>         <C>        <C>        <C>        <C>         <C>       <C>       <C>
Vested benefits                          $  658.7    $  551.4   $  505.9   $  459.5   $  59.3     $  52.5   $  52.0   $  47.3
Non-vested benefits                          15.4        11.8       10.8       10.1       1.5         1.2       1.1       0.2
Accumulated benefit obligation              674.1       563.2      516.7      469.6      60.8        53.7      53.1      47.5
Effect of projected future                                                                                              
   salary increases                          75.3        56.7       64.0       62.0      13.9        12.7       4.7       8.9
Projected benefit obligation                749.4       619.9      580.7      531.6      74.7        66.4      57.8      56.4
Plan assets at market value                 783.7       673.0      640.9      637.5      27.1        24.7      22.0      23.3
Projected benefit obligation
   less (greater) than plan assets           34.3        53.1       60.2      105.9     (47.6)      (41.7)    (35.8)    (33.1)
Unrecognized net (gain) loss                (64.3)      (69.5)     (40.6)     (59.6)      1.7        (2.6)     (4.0)     (4.2)
Unrecognized prior service cost              19.0        20.4        6.9        8.1       5.2         5.7       4.9       5.6
Unrecognized net (asset)                                                                                                 
   liability at transition                  (22.1)      (28.1)     (40.7)     (52.9)      1.5         1.8       3.5       4.2
(Accrued) prepaid pension costs          $  (33.1)   $  (24.1)  $  (14.2)  $    1.5   $ (39.2)    $ (36.8)  $ (31.4)  $ (27.5)


Assumptions (reflecting averages across all plans):     Weighted average discount rate:  7.25%.
Rate of future compensation increases:  4.5%.           Long-term rate of return on plan assets:  8.75%.

60

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Reconciliations of the funded status of the company's foreign defined plans to the prepaid (accrued)
pension costs were as follows:

<CAPTION>
                                                        Overfunded                                 Underfunded
                                          As of                    As of                As of                  As of
                                       December 31,               June 30,           December 31,             June 30,
Dollars in Millions                          1995        1995       1994       1993       1995       1995       1994      1993
<S>                                      <C>         <C>        <C>        <C>        <C>         <C>       <C>         <C>
Vested benefits                           $  78.2     $  83.9    $  79.7    $  89.8    $  21.0     $  18.6   $  19.6     $ 18.7
Non-vested benefits                           0.1         0.4       14.5         --        2.2         3.1       4.8        4.5
Accumulated benefit obligation               78.3        84.3       94.2       89.8       23.2        21.7      24.4       23.2
Effect of projected future                                                                
  salary increases                           24.4        25.5       18.9       18.8        0.8         1.4       3.6        3.4
Projected benefit obligation                102.7       109.8      113.1      108.6       24.0        23.1      28.0       26.6
Plan assets at market value                 114.6       120.0      127.6      113.0         --          --        --         --
Projected benefit obligation
   less (greater) than plan assets           11.9        10.2       14.5        4.4      (24.0)      (23.1)    (28.0)     (26.6)
Unrecognized net (gain) loss                 (3.5)        1.3       (4.3)      13.4        0.2        (0.2)     (0.3)      (0.2)
Unrecognized prior service cost               3.9         2.1        2.8        3.1         --         0.8       0.8        0.8
Unrecognized net (asset)                     
   at transition                             (7.9)       (8.6)      (4.2)     (13.5)      (0.1)       (0.2)       --       (0.2)
Prepaid (accrued) pension costs           $   4.4     $   5.0    $   8.8    $   7.4    $ (23.9)    $ (22.7)  $ (27.5)    $(26.2)


Assumptions (reflecting averages across all plans):     Weighted average discount rate:  8.0%.
Rate of future compensation increases:  5.9%.           Long-term rate of return on plan assets:  8.1%.

</TABLE>

Unrecognized prior service cost is being amortized over periods ranging from 10
to 18 years.

The foreign pension plans included unfunded termination indemnity reserves of 
$15.4 million, $14.0 million, $14.1 million and $14.1 million as of 
December 31, 1995 and June 30, 1995, 1994 and 1993, respectively. 


Note 13
Postretirement   Benefits   Other   Than   Pensions   and   Other
Postemployment Benefits

The Company 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 for retired employees who meet certain service-
related  eligibility requirements.  The Company  funds  only  the
plans' annual cash requirements.

Effective July 1, 1992, the Company adopted FASB Statement  #106,
"Employers'  Accounting for Postretirement  Benefits  Other  Than
Pensions."   The  Statement requires that the  expected  cost  of
these  benefits be charged to expense during the years  that  the
employees  render service.  The Statement was adopted  through  a
cumulative  pretax  charge of $205.5 million, or  $125.4  million
after-tax,   which  represents  the  accumulated   postretirement
benefit  obligation  for  years  prior  to  fiscal  1993.    Cash
expenditures are not affected by this accounting change.

The components of postretirement benefit costs were as follows:

                                 Transition                 
                                   Period                  Fiscal Year
                            Ended December 31,            Ended June 30,
Dollars in Millions                  1995           1995      1994       1993
Service cost (benefits 
   earned during the year)         $  3.3         $  7.2   $   7.0    $   6.2
Interest cost on projected    
   benefit obligation                 9.6           19.6      18.4       18.3
Amortization                          0.1            0.1       0.1         --
Total postretirement benefit  
   costs                           $ 13.0         $ 26.9   $  25.5    $  24.5

61

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


The   Company's   unfunded  accumulated  postretirement   benefit
obligations  and  accrued postretirement benefit  costs  were  as
follows:

                              As of December 31,          As of June 30,
Dollars in Millions                  1995           1995       1994       1993
Current retirees                  $ 136.4        $ 132.0    $ 122.1    $ 122.5
Current active employees - 
   fully eligible                    15.8           13.4       12.5       12.0
Current active employees -     
not fully eligible                  113.6           94.4      115.2      100.0
Accumulated postretirement -    
   benefit obligation               265.8          239.8      249.8      234.5
Unrecognized net (loss) gain         (5.5)           7.7      (12.5)     (11.1)
Unrecognized prior service cost      (2.3)          (1.9)      (2.0)        --
Accrued postretirement                  
   benefit costs                  $ 258.0        $ 245.6    $ 235.3    $ 223.4
Assumptions:                                                         
   Weighted average discount rate:  7.25%
   Health care trend rates (varies by plan):        Calendar         Calendar 
                                                      1996       2006 and Beyond
      Pre-age 65                                      9-13%                 4-6%
      Age 65 and over                                 8-13%                 4-6%

If  the  health  care trend rates were increased  one  percentage
point, the current-period postretirement benefit costs would have
been  $2.0  million  higher  and the  accumulated  postretirement
benefit obligation as of December 31, 1995 would have been  $36.6
million higher.

Effective July 1, 1994, the Company adopted FASB Statement  #112,
"Employers'   Accounting   for  Postemployment   Benefits."   The
Statement requires that the expected cost of other postemployment
benefits  be  charged to expense during the years that  employees
render  services.  The cumulative effect of adoption was  a  $6.8
million  pretax charge, or $4.1 million after-tax, in  the  first
quarter  of fiscal 1995.  The adoption of the Statement  did  not
have a material effect on operating results or cash flows in  the
transition period or in fiscal 1995, nor is it expected to have a
material effect in future years.


Note 14
Lease and Other Commitments

Certain equipment and operating properties are rented under  non-
cancelable   operating  leases.   Total  rental   expense   under
operating leases was $16.8 million, $35.2 million, $33.1  million
and  $34.3  million for the transition period ended December  31,
1995  and  the twelve months ended June 30, 1995, 1994 and  1993,
respectively.  The  following is a  schedule  of  future  minimum
annual  rentals (calendar-year basis) on non-cancelable operating
leases,  primarily  for sales offices, distribution  centers  and
corporate headquarters, in effect as of December 31, 1995.

Dollars in Millions       1996    1997    1998   1999   2000  Thereafter   Total
Total payments           $30.5   $27.8   $26.6  $20.8  $19.9       $94.6  $220.2

The Company enters into executory contracts to promote various
products.  As of December 31, 1995, future commitments under
these contracts amounted to $57.1 million.

62
             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Note 15
Supplementary Income Statement Information

                                    Transition          
                                      Period          
                                       Ended                Fiscal Year
                                    December 31,           Ended June 30,
Dollars in Millions                       1995        1995       1994       1993
Advertising, media and production     $  141.0    $  292.9   $  295.3   $  282.0
Merchandising                            518.5     1,382.7    1,291.5    1,193.0
Total advertising and 
   merchandising                      $  659.5    $1,675.6   $1,586.8   $1,475.0
Depreciation expense                  $   59.2    $  125.4   $  133.3   $  129.9
Amortization of intangibles           $   42.8    $   63.8   $   33.9   $   26.3
Research and development              $   16.2    $   52.2   $   56.3   $   52.4


Note 16
Interest Expense
                                       Transition            
                                         Period            
                                          Ended             Fiscal Year
                                      December 31,         Ended June 30,
Dollars in Millions                       1995        1995       1994      1993
Interest expense                      $   61.2    $  119.0   $   99.9   $  66.1
Interest expense capitalized - net        (3.3)       (2.0)      (1.3)     (0.5)
Subtotal                                  57.9       117.0       98.6      65.6
Interest income                           (3.7)       (6.3)      (8.9)    (10.5)
Interest expense - net                $   54.2    $  110.7   $   89.7   $  55.1

Interest paid in the transition period ended December 31, 1995
and the twelve months ended June 30, 1995, 1994 and 1993 was
$51.5 million, $115.9 million, $72.0 million and $74.3 million,
respectively.


Note 17
Income Taxes

The  Company  uses an asset and liability approach  to  financial
accounting and reporting for income taxes in accordance with FASB
Statement #109, "Accounting for Income Taxes."  The Statement was
adopted  effective  July  1, 1992 and the  cumulative  effect  of
adoption was to increase fiscal 1993 net income by $9.9 million.

Provisions for income taxes on income before cumulative effect of
accounting changes were as follows:

                           Transition              
                             Period              
                              Ended               Fiscal Year
                          December 31,           Ended June 30,
Dollars in Millions            1995          1995     1994     1993          
Currently payable:                                                
Federal                      $  7.0       $382.4     $140.1  $129.2
Foreign                        19.8        122.3       23.4    25.0
State                           1.7         64.7       30.3    29.7
Total currently payable        28.5        569.4      193.8   183.9
Deferred - net:                                              
Federal                         4.9        (26.3)     (34.0)   (6.7)
Foreign                       (22.1)        13.0      (13.3)    2.7
State                           0.6         (2.3)       0.7     0.9
Total deferred - net          (16.6)       (15.6)     (46.6)   (3.1)
Provision for income taxes   $ 11.9       $553.8     $147.2  $180.8

63

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


The  components  of  the  deferred income  tax  benefit  were  as
follows:
                             
                                Transition               
                                  Period                
                                   Ended               Fiscal Year
                                December 31,          Ended June 30,
Dollars in Millions                 1995        1995        1994      1993
Accelerated tax  depreciation    $   4.5     $ (26.0)    $  11.2   $  15.0
Postretirement benefits             (3.7)       (2.2)       (8.2)     (5.8)
Accrued expenses including                     
   restructuring charges             9.6        (1.8)      (36.9)     (8.6)
Loss carryforwards                  (1.9)        0.5        (8.3)     (2.2)
Foreign gain deferral              (24.3)       24.3          --        --
Other                               (0.8)      (10.4)       (4.4)     (1.5)
Benefit for deferred        
   income taxes                   $(16.6)    $ (15.6)    $ (46.6)  $  (3.1)

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

                                  Transition                 
                                    Period                 
                                     Ended                   Fiscal Year
                                 December 31,              Ended June 30,
Dollars in Millions                  1995         1995        1994       1993
Continuing operations              $ 11.9      $ 553.8     $ 147.2    $ 180.8
Cumulative effect of            
   accounting changes              $   --      $  (2.7)    $    --    $ (90.0)
Items charged directly to                                     
   common shareholders' equity     $ (3.7)     $  (9.8)    $  (8.1)   $   2.6

The  sources  of  pretax  income  before  cumulative  effect   of
accounting changes were as follows:
                                                      
                               Transition Period              Fiscal Year
                               Ended December 31,            Ended June 30,
Dollars in Millions                   1995              1995      1994      1993
U.S. sources                      $   41.7          $1,029.4  $  365.8  $  389.3
Foreign sources                      (16.1)            330.5      12.9      78.3
Income before income taxes                                  
and cumulative effect of          
accounting changes                $   25.6          $1,359.9  $  378.7  $  467.6

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

<TABLE>
<CAPTION>
                                Transition                          
                                  Period                            Fiscal Year
                             Ended December 31,                    Ended June 30, 
Dollars in Millions                 1995              1995              1994               1993
                                         % of              % of              % of               % of
                                        Pretax            Pretax            Pretax             Pretax
                                Amount  Income    Amount  Income    Amount  Income     Amount  Income
<S>                            <C>              <C>               <C>                <C>
Tax provision based on the
   Federal statutory rate       $  9.0   35.0%   $ 476.0   35.0%   $ 132.5   35.0%    $ 159.0   34.0%
State and local income
   taxes - net of Federal
   income tax benefit              1.5    5.9       40.6    3.0       18.4    4.8        19.7    4.2
Repatriation of foreign    
   earnings                       (0.8)  (3.1)       7.9    0.6       (9.6)  (2.5)       (2.4)  (0.5)
Foreign tax rate differential      3.3   12.9       19.6    1.4        9.0    2.4         1.7    0.4
Miscellaneous items               (1.1)  (4.2)       9.7    0.7       (3.1)  (0.8)        2.8    0.6
                                      
Provision for income taxes      $ 11.9   46.5%   $ 553.8   40.7%   $ 147.2   38.9%    $ 180.8   38.7%

64

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Deferred tax assets and deferred tax liabilities were as follows:

<CAPTION>
                                  As of                                           
                               December 31,                                     As of June 30,
Dollars in Millions                1995                      1995                    1994                     1993
                             Assets   Liabilities       Assets   Liabilities    Assets   Liabilities     Assets   Liabilities

<S>                        <C>           <C>          <C>           <C>       <C>           <C>        <C>           <C>      
Depreciation and           
   amortization             $  58.8       $ 405.6      $  59.7       $ 395.2   $  21.1       $ 219.3    $  14.5       $ 211.0
Postretirement   
   benefits                   100.9            --         97.2            --      94.1            --       85.9            --
Other benefit plans            59.8          20.2         54.9          15.6      52.4          11.5       42.0          13.5
Accrued expenses including            
   restructuring charges      147.9          10.4        155.1          17.7     112.9          21.7       59.1           4.1
Loss carryforwards             13.5            --          8.7            --      24.3            --       20.8            --
Other                          15.9          22.8         15.2          48.5      18.1          33.5       21.8          34.6
Subtotal                      396.8         459.0        390.8         477.0     322.9         286.0      244.1         263.2
Valuation allowance           (20.0)           --        (18.7)           --     (28.1)           --      (18.1)           --
Total                       $ 376.8       $ 459.0      $ 372.1       $ 477.0   $ 294.8       $ 286.0    $ 226.0       $ 263.2
                                                            
</TABLE>

As  of  December  31,  1995, the Company  had  $40.3  million  of
operating  and  capital loss carryforwards  available  to  reduce
future  taxable  income  of  certain international  subsidiaries.
These loss carryforwards must be utilized within the carryforward
periods  of  these international jurisdictions.  The majority  of
loss  carryforwards expire in five years.  A valuation  allowance
has  been  provided  for  a portion of the  deferred  tax  assets
related to the loss carryforwards.

Included  in  other current assets were deferred  tax  assets  of
$151.4  million, $128.4 million, $91.0 million and $52.3  million
as  of  December  31,  1995 and June 30,  1995,  1994  and  1993,
respectively.   Income  taxes paid during the  transition  period
ended  December  31, 1995 and the twelve months  ended  June  30,
1995,  1994 and 1993 were $116.8 million, $367.1 million,  $163.9
million and $213.3 million, respectively.


Note 18
Litigation

The  case entitled Sands, Taylor & Wood v. The Quaker Oats Company,
which  dealt  with the Company's use of the words "thirst  aid"  in
advertising Gatorade thirst quencher, was settled in September 1995
while the case was pending before the U.S. Court of Appeals for the
Seventh  Circuit.  The Company did not incur any additional  charge
above  the  amount  previously recorded  in  connection  with  this
settlement.

On November 1, 1995, the Company filed suit against Borden, Inc. in
Federal  District  Court  in  New York alleging  that  Borden  made
material misrepresentations and committed fraud in connection  with
the  Company's  November  1994 acquisition  of  a  Brazilian  pasta
business  for  $100  million.  The Company  seeks  to  rescind  the
transaction and collect damages.

The  Company  is also 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  recent
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.

65

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements



Note 19
Quarterly Financial Data (Unaudited)

Dollars in Millions (Except Per Share Data)
1995 Transition Period                           First             Second
                                                Quarter          Quarter (a)
Net sales                                     $ 1,553.6          $ 1,179.5
Cost of goods sold                                825.0              704.3
Gross profit                                  $   728.6          $   475.2
Net income (loss)                             $    61.5          $   (47.8)
Per common share:                                 
Net income (loss)                             $    0.45          $   (0.36)
Cash dividends declared                       $   0.285          $   0.285
Market price range:                               
   High                                       $   36             $  37 3/8
   Low                                        $   30 3/4         $  31 1/8

(a)  Includes pretax restructuring charges of $40.8 million  ($24.5
million  after-tax  or  $.18 per share) for  the  Snapple  beverage
supply  chain  cost  reductions and for realignment  activities  in
Europe and Asia/Pacific.



Dollars in Millions (Except Per Share Data)
                            First        Second       Third         Fourth
Fiscal 1995               Quarter(a)     Quarter     Quarter(b)     Quarter(c)
Net sales                  $1,636.4     $1,507.9      $1,633.5       $1,587.4
Cost of goods sold            825.2        791.2         871.0          894.1
Gross profit               $  811.2     $  716.7      $  762.5       $  693.3
Income before cumulative 
   effect of accounting                      
   change                  $   61.4     $   34.4      $  366.1       $  344.2
Net income                 $   57.3     $   34.4      $  366.1       $  344.2
Per common share:                                      
Income before cumulative 
   effect of accounting                  
   change                  $   0.45     $   0.25      $   2.73       $   2.57
Net income                 $   0.42     $   0.25      $   2.73       $   2.57
Cash dividends declared    $  0.285     $  0.285      $  0.285       $  0.285
Market price range:                                    
   High                    $ 42 1/2     $ 38 3/4      $ 36 1/2       $ 37 1/2
   Low                     $35 3/16     $ 29 3/4      $ 30 1/4       $ 32 1/8
                         
                        
(a) Includes an $18.4 million pretax provision ($11.0 million after-
tax  or  $.08  per  share) for estimated litigation  costs.   First
quarter  per  share data have been restated to reflect  the  fiscal
1995 two-for-one stock split-up.

(b) Includes a $513.0 million pretax gain ($322.2 million after-tax
or  $2.41  per share) for the sale of the North American  pet  food
business and a $4.9 million pretax gain ($2.8 million after-tax  or
$.02 per share) for the sale of the Dutch honey business.

(c) Includes a $487.2 million pretax gain ($272.6 million after-tax
or $2.04 per share) for the sale of the European pet food business;
a  $74.5  million pretax gain ($43.9 million after-tax or $.33  per
share)  for  the  sale of the Mexican chocolate business;  a  $91.2
million pretax gain ($53.1 million after-tax or $.40 per share) for
the   sale   of   the  U.S.  bean  and  chili  businesses;   pretax
restructuring charges of $76.5 million ($46.1 million after-tax  or
$.35 per share) for cost-reduction and realignment activities;  and
an  additional $10.6 million pretax provision ($6.2 million  after-
tax or $.05 per share) for estimated litigation costs.

66

             The Quaker Oats Company and Subsidiaries
          Notes to the Consolidated Financial Statements


Dollars in Millions (Except Per Share Data)
                             First      Second     Third     Fourth
Fiscal 1994 (a)             Quarter    Quarter    Quarter   Quarter(b)
                         
Net sales                  $ 1,534.3   $1,353.9   $1,449.2    $1,617.6
Cost of goods sold             749.8      670.1      701.5       804.8
Gross profit               $   784.5   $  683.8   $  747.7    $  812.8
Net income                 $    91.4   $   42.8   $   73.8    $   23.5
Per common share:                                      
Net income                 $    0.66   $   0.31   $   0.54    $   0.17
Cash dividends declared    $   0.265   $  0.265   $  0.265    $  0.265
Market price range:                                    
   High                    $37 15/16   $ 38 1/8   $35 9/16    $     41
   Low                     $  31 1/4   $33 1/16   $30 5/16    $     31
                                        

(a) Per share data reflect the fiscal 1995 two-for-one stock split-up.

(b) Includes pretax restructuring charges of $118.4 million ($72.8
million after-tax or $.55 per share) for work force reductions,
plant consolidations and product discontinuations and a $9.8
million pretax gain (or $.07 per share) for the sale of a business
in Venezuela.


Note 20
Subsequent Event

On  December 6, 1995, the Company announced a definitive  agreement
to  sell  its  Italian  products  business.   The  transaction  was
completed on January 15, 1996.

On  March 12, 1996, the Company announced its intention to sell its
North  American frozen foods business, which includes  Aunt  Jemima
frozen  breakfast products and Celeste frozen pizza products.   The
combined  sales  of  the Aunt Jemima frozen  products  and  Celeste
frozen  pizza  businesses  are  approximately  $175  million.   The
planned  divestiture does not include the Aunt Jemima  syrup,  corn
product and pancake mix businesses.


67





             The Quaker Oats Company and Subsidiaries
                  Report of Independent Auditors
                  




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, 1995 and June 30, 1995, 1994 and 1993, and the related
consolidated statements of income, common shareholders' equity  and
cash  flows  for the six month period ended December 31,  1995  and
years  ended  June  30,  1995,  1994  and  1993.   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, 1995 and June
30,  1995,  1994 and 1993, and the results of their operations  and
their  cash flows for the six month period ended December 31,  1995
and  years  ended  June 30, 1995, 1994 and 1993 in conformity  with
generally accepted accounting principles.

As  indicated  in  Note  13, effective July 1,  1992,  the  Company
changed  their  accounting for postretirement benefits  other  than
pensions  and  effective July 1, 1994, the  Company  changed  their
accounting for postemployment benefits.  As indicated in  Note  17,
effective  July  1, 1992, the Company changed their accounting  for
income taxes.






Chicago, Illinois
February 2, 1996
(Except  with  respect to the matter discussed in Note  20,  as  to
which the date is March 12, 1996)


68




               The Quaker Oats Company and Subsidiaries
                           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.  As a result of its major business
portfolio   and  organizational  changes,  some  of  the  Company's
internal  control systems did not operate as effectively as  before
the  changes.   Management  is not aware of  any  material  control
weaknesses  and  is taking action to improve its  internal  control
systems.

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.

69


             The Quaker Oats Company and Subsidiaries
                     Additional 10-K Information



Description of Property

As  of  December  31, 1995, the Company operated  56  manufacturing
plants  in  19 states and 14 foreign countries and owned or  leased
distribution centers and sales offices in 22 states and 23  foreign
countries.  The number of locations utilized by each segment of the
business was as follows:

                                                                    
                               Owned and      Owned and Leased      Owned and 
                              Leased Mfg.       Distribution       Leased Sales
                               Locations          Centers             Offices
Geographic Segment           U.S.  Foreign      U.S.  Foreign      U.S.  Foreign
                                 
U.S. and Canadian Grocery 
   Products                    30        4        11       --        39        5

International Grocery 
   Products                    --       22        --       18        --       44

Total                          30       26        11       18        39       49

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

Trademarks

The Company and its subsidiaries own a number of trademarks and are
not  aware  of  any circumstances that could 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,
Quaker  Toasted  Oatmeal,  Life, Quaker  100%  Natural  and  Quaker
Oatmeal   Squares  for  breakfast  cereals;  Gatorade  for  thirst-
quenching beverages; Snapple and Made From the Best Stuff on  Earth
for  teas and juice drinks; 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; Nile Spice for  variety
meals-in-a-cup; Golden Grain and Mission for pasta; Quaker and Aunt
Jemima  for  mixes, syrups and corn goods; Aunt Jemima and  Celeste
for  frozen  foods;  Ardmore Farms for  citrus  and  fruit  juices;
Continental, Maryland Club and Continental WB for coffee; and  Mrs.
Richardson's  for ice cream toppings.  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   the
following:  Quaker, Cruesli, Honey Monster, Sugar Puffs and Scott's
for  breakfast cereals, Cuore for edible oils (sold in January 1996
in conjunction with the Italian products divestiture); Coqueiro for
fish;  Toddy  and ToddYnho for chocolate beverages; and  Adria  for
pasta products.


U.S. and Canadian Grocery Products Description

The Company is a major participant in the competitive packaged food
and  beverage  industry in the United States and Canada  and  is  a
leading  manufacturer  of sports beverages, premium  iced  tea  and
single-serve juice drinks, hot cereals, pancake mixes,  grain-based
snacks,  cornmeal, hominy grits and value-added rice products.   In
addition,  the Company is the second-largest manufacturer of syrups
and  value-added  pasta  products and is  among  the  five  largest
manufacturers of ready-to-eat cereals and dry pasta products.   The
Company competes with a significant number of both large and  small
companies  on  the basis of price, value, quality and  convenience,
among  other  attributes.   The  Company's  grocery  products   are
purchased  by  consumers through a wide range of food distributors.
The  Company utilizes both its own and broker sales forces and  has
distribution centers throughout the country, each of which  carries
an  inventory  of  most  of  the Company's  grocery  products.   In
addition, the Company markets a line of over 400 items for the food
service market, including Quaker hot and ready-to-eat cereals; Aunt
Jemima  frozen  breakfast products and mixes; Continental  coffees;
Ardmore  Farms single-serve fruit juices; Gatorade thirst quencher;
a  specialty line of custom-blended dry baking mixes; ready-to-bake
biscuits; Arnie's Bagelicious bagels and Petrofsky's bagels;  Burry
cookies  and  crackers;  and Mrs. Richardson's  syrups,  ice  cream
toppings and condiments.

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              The Quaker Oats Company and Subsidiaries
                      Additional 10-K Information


International Grocery Products Description

The  Company  is  broadly  diversified in  the  packaged  food  and
beverage  industry,  both  geographically  and  by  product   line.
Competitive  conditions vary by country.  The Company manufacturers
and markets its products in many countries throughout Europe, Latin
America and the Asia/Pacific region.  It is the leading hot cereals
producer  in many countries and has other leading market  positions
for  products  in a number of countries, including  the  following:
the  leading pasta manufacturer in Brazil; the leading producer  of
edible  seed  oils  in Italy (sold in January  1996);  the  leading
canned  fish  processor in Brazil; and the leading sports  beverage
distributor in Mexico, Korea, Italy, Argentina, Australia,  Brazil,
Venezuela, Colombia and the Philippine Islands.

Raw Materials

The  raw materials used in manufacturing include oats, wheat, corn,
rice, sweeteners, tea, orange and other juice concentrate, almonds,
coffee  beans,  raisins, beef, chicken, corn  oil,  shortening  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.

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                       The Quaker Oats Company and Subsidiaries
                                Directors and Offices


Directors                                       Officers
                                                          
Members of the                                  Senior
Board of                                        Officers    
Directors                                       

                                                       
Frank C.               Thomas C.                 William D. Smithburg +
Carlucci               MacAvoy                   Age 57
1*,5,6                 1,5,6*                    Chairman,
Chairman               Paul M.                   President and
The Carlyle            Hammaker                  CEO
Group                  Professor of              Joined Quaker
(Banking)              Business                  in 1966.
Washington,            Administration            Elected to          
D.C.                   Darden Graduate           present office in
                       School of Business        November 1995.
Silas S. Cathcart      Administration
2*,3,5                 University of             Luther C.           
Retired                Virginia                  McKinney +          
Chairman               Charlottesville,          Age 64              
Illinois Tool          Virginia                  Senior Vice         
Works                                           President           
(Diversified          Luther C.                 Law and       
Products)             McKinney 3                Corporate     
Chicago,              Senior Vice               Affairs       
Illinois              President                 Joined Quaker 
                      Law and                   in 1974.      
Kenneth I.            Corporate                 Elected to    
Chenault              Affairs                   present       
1,2,4,5                                         office in 1994.
Vice Chairman         Walter J.                                      
American              Salmon                    Douglas J.     
Express               4,5,6                     Ralston +           
Company               Stanley Roth,Sr.          Age 50              
(Financial            Professor of              Senior Vice         
and Travel            Retailing                 President           
Services)             Harvard                   Human        
New York, New         Business                  Resources    
York                  School                    Joined Quaker
                      Boston,                   in 1981.     
Judy C.               Massachusetts             Elected to   
Lewent                                          present    
1,4,5,6               William D.                office in 1992.
Senior Vice           Smithburg 3,5                            
President and         Chairman,                            
Chief                 President and             Robert S.  
Financial             CEO                       Thomason + 
Officer                                         Age 51
Merck & Co.,          William L.                Senior Vice
Inc.                  Weiss                     President 
(Pharmaceutic         2,3,4*,5                  Finance and
als)                  Chairman                  Chief      
Whitehouse            Emeritus                  Financial  
Station,              Ameritech                 Officer    
New Jersey            Corporation               Joined Quaker            
                      (Telecommunica            in 1971.
Vernon R.             tions)                    Elected to
Loucks, Jr.           Chicago,                  present   
2,3,5*                Illinois                  office in 
Chairman and                                    March 1995.
Chief                                                      
Executive                                                      
Officer                                                        
Baxter                           
International                    
Inc.                      
(Medical Care             
Products)        
Deerfield,       
Illinois         
                 
                 
Corporate Staff                                   
Officers                                          Board Committees 
                   
Jeffrey A.            Mary M. Hoskins             1 Audit
Atkins +              Assistant                   2 Compensation
Age 47                Treasurer                   3 Executive
Vice                                              4 Finance
President             R. Thomas Howell Jr.+       5 Nominating
Corporate             Age 53                         (William D. Smithburg
Planning              Vice President                 Ex Officio Member)
Joined Quaker         General Corporate           6 Public Responsibility
in 1977.              Counsel and                 * Denotes Committee
Elected to            Corporate Secretary           Chairman
office in             Joined Quaker         
April 1995.           in 1971. Elected      
                      to present office     
John H.               in 1994.
Calhoun                                     
Vice                  John G. Jartz         
President             Vice                  
International         President             
Law                   Business              
                      Development              
Penelope C. Cate                                            
Vice                  James G. LeGere             
President             Vice                               
Government and        President                               
Community             Information                              
Relations             Services                  
                                    
Michael L.            Mart C. Matthews                    
Cohen                 Vice                    
Vice President        President and                  
Human                 Associate                      
Resources             General                        
                      Corporate
Janet K. Cooper+      Counsel         
Age 42               
Vice                  Kenneth W. Murray 
President and         Vice President       
Treasurer             Internal Auditing
Joined Quaker               
in 1978.              W. Stephen Perry+  
Elected to            Age 53                            
present               Vice President
office in 1992.       Corporate Tax
                      Joined Quaker in
Margaret M.           1994.  Elected to
Eichman               present office
Vice President        in 1994.
Investor
Relations and         Arthur R. Skantz
Corporate             Vice President
Communications        Corporate 
                      Growth
Scott Gantwerker                   
Vice President
Quality Worldwide

Thomas L. Gettings+
Age 39
Vice President
and Corporate
Controller
Joined Quaker
in 1987.  Elected
to present office
in 1992.

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                       The Quaker Oats Company and Subsidiaries
                                Directors and Offices



Officers (Continued)                                  
                                             Worldwide           International
U.S. and                    Worldwide        Quaker              Quaker
Canadian                    Beverages        Food Service        Food Products
Quaker Food                                           
Products                    James F.         A. Stephen          Barbara R.
                            Doyle +          Diamond +           Allen +
Douglas W.                  Age 43           Age 49              Age 43
Mills +                     Executive        Vice                Executive
Age 50                      Vice             President -         Vice
Executive                   President        President           President
Vice                        Joined Quaker    Joined Quaker       Joined Quaker
President                   in 1981.         in 1993.            in 1977.
Joined Quaker               Elected to       Elected to          Elected to
in 1969.                    present          present             present
Elected to                  office in        office in           office in
present                     1994.            September           March 1995.
office in                                    1995.          
1994.                       Donald R.                            Europe
                            Uzzi             Paul V. Baron  
John A. Boynton+            President -      Vice                Franco Cianci
Age 42                      Beverages,       President and       President
Vice                        North America    Business            Italian
President and                                Leader              Products
Chief                       Michael T.       North          
Customer                    Tay              American Food       George F.
Officer                     President -      Service             Sewell
Joined Quaker               Beverages,                           President
in 1981.                    North Asia       Alden B.            Cereals,
Elected to                                   Knowles             Europe
present                     Bernardo         Vice           
office in                   Wolfson          President and       Pacific
1994.                       President -      Business       
                            Beverages,       Leader              William C.
                            Latin America    In-Store Bake       Trotter
Polly B.                    and Southern                         President
Kawalek                     Europe           Gregory W.          Quaker
President -                                  Murray              Pacific
Snacks                      John S.          Vice           
                            Breuer           President and  
David L.                    President -      Business        + also Executive
Morton                      Beverages,       Leader          Officers as 
President and               South Asia       Coffee          defined by
Chief                                        Business Unit   Securities and
Executive                                                    Exchange
Officer                                      Dale W.         Commission
The Quaker                                   Tremblay        regulations.
Oats                                         Vice            Such Executive
Company of                                   President and   Officers serve
Canada                                       Business        at the pleasure
Limited                                      Leader          of the Board of
                                             McDonald's      Directors. All
Mark A. Shapiro                              Business Unit   Executive Officers
President -                                                  (except W. Stephen 
Golden Grain                                                 Perry who joined
                                                             the Company in
Russell A. Young +                                           January 1994 and
Age 47                                                       was formerly a tax
Vice                                                         partner of Coopers
President                                                    & Lybrand and A.
Supply Chain                                                 Stephen Diamond 
Joined Quaker                                                who joined the
in 1970.                                                     Company in August
Elected to                                                   1993 and was former
present                                                      ly President of    
office in                                                    Pillsbury Europe  
March 1995.                                                  and Managing
                                                             Director of 
                                                             Grand Met Food
                                                             Group UK) have
                                                             been employed 
                                                             by The Quaker
                                                             Oats Company in
                                                             an executive
                                                             capacity for 
                                                             five years or 
                                                             more.  

73

  
          The Quaker Oats Company and Subsidiaries
                  Shareholder Information

 

Dividend Reinvestment and Stock Purchase Plan

Owners  of Quaker Oats common stock may use the Company's  Dividend
Reinvestment and Stock Purchase Plan to purchase additional shares,
commission-free,  through  automatic dividend  reinvestment  and/or
optional  cash  investments.  A booklet  describing  the  Plan  and
enrollment procedures is available on request from the Harris Bank.


Dividends

Cash  dividends  on  Quaker common stock  have  been  paid  for  90
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.


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,  dividend  reinvestment accounts  and  other  related
matters by telephoning the Shareholder Hotline toll-free at  1-800-
344-1198.


Form 10-K

This  Transition  Period Report includes all  financial  statements
required by Form 10-K.

74


          The Quaker Oats Company and Subsidiaries
                  Shareholder Information


Investor Relations

Security analysts, investment professionals and shareholders should
direct their business-related inquiries to:

Investor Relations - Suite 27-7
or call (312) 222-7818


Media Relations

Copies  of  press  releases are available at no charge  through  PR
Newswire's Company News On-Call fax service.
1-800-758-5804, extension 103689.

Press and media related inquiries should be addressed to:

Media Relations - Suite 27-6
or call (312) 222-7388


Consumer Affairs

Inquiries 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

75

          The Quaker Oats Company and Subsidiaries
                  Shareholder Information

Corporate Headquarters Mailing Address:      Street Address:
                       The Quaker Oats       Quaker Tower
                       Company               321 North Clark Street
                       P.O. Box 049001       Chicago, Illinois 60610-4714
                       Chicago, Illinois     (312) 222-7111
                       60604-9001
                       
                       
Transfer Agent,        Harris Trust and Savings Bank, Shareholder Services
Registrar and Dividend Division
Disbursing Agent       P.O. Box 755, 311 West Monroe - 14th Floor
                       Chicago, Illinois 60690-0755
                       1-800-344-1198
                       
Dividend Reinvestment  Harris Trust and Savings Bank, Dividend Reinvestment
and                    and Stock Purchase Plan
Stock Purchase Plan    P.O. Box 95894
                       Chicago, Illinois 60690-9938
                       1-800-344-1198
                       
Independent Public     Arthur Andersen LLP
Accountants            33 West Monroe
                       Chicago, Illinois 60603
                       (312) 580-0033
                       
Shares Listed          New York Stock Exchange
                       Chicago Stock Exchange
                       Pacific Stock Exchange
                       The Stock Exchange, London
                       
                       The Quaker Oats Company
                       was incorporated in 1901 under the
                       laws of the state of New Jersey.
                       Ticker Symbol: OAT


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This Notice of Annual Meeting,


Proxy Statement and Form 10-K

is printed on recycled paper.