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

                 Annual Report Pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934
                                                  

                 For the fiscal year ended September 27, 1996
                      Commission File Number 2-60487

                           UNITED GROCERS, INC.

               OREGON                           93-0301970


                  6433 S.E. Lake Road (Milwaukie, Oregon)
              Post Office Box 22187, Portland, Oregon  97222


Registrant's telephone number, including area code:  (503) 833-1000

Securities registered pursuant to Section 12(b) of the Act:     None

Securities registered pursuant to Section 12(g) of the Act:     None

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes  X .    No    .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __X__

State the aggregate market value of the voting stock held by non-affiliates of
the registrant.

$38,706,820 (computed on basis of 1996 offering price and number of shares
outstanding at December 22, 1996).

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

622,897 shares of common stock, $5 par value, as of December 22, 1996.

Documents incorporated by reference:   None <PAGE>
                           PART 1
Item 1. Business

    The registrant, United Grocers, Inc.  ("United" or "the Company"), is an
Oregon business corporation primarily engaged in the wholesale grocery and
food service distribution business. The Company was organized in 1915 and
operates and is taxed as a cooperative.

    The Company supplies groceries and related products to independent retail
grocers located in Oregon, Western Washington and California. In addition, the
Company and certain of its wholly owed subsidiaries, provides many services
needed for the operation of a modern, successful grocery business. These
services include marketing assistance, engineering, accounting, financing.

    The Company's food service distribution business is conducted through its
Cash & Carry food service division, and its wholly owned subsidiary, Rich &
Rhine, Inc. The Company's Cash & Carry division sells grocery and related
products to non member retail stores, restaurants, and other institutional
entities through its 38 stores located in Oregon, Washington, California, and
Idaho. Rich & Rhine distributes tobacco and candy products to other non member
retail businesses.

    The Company is also engaged in providing multiple line insurance and
related insurance to the grocery industry in 29 states through various wholly
owned subsidiaries. These subsidiaries include Grocers Insurance Company,
Grocers Insurance Agency, Inc., UGIC, Ltd., United Work Place Consultants,
Inc., and Grocers Insurance Group, Inc.

    In December, 1995, United acquired the assets and related business of the
wholesale division of Bay Area Foods, Inc., doing business as Market Wholesale
Grocery ("Market Wholesale").  The acquired operations increased the Company's
business in California. Annual revenues in 1996 from the acquired operations
were approximately $249 million. 

    Financial data regarding the Company's industry segments is included in
the financial statements appearing in Item 6.

Membership

    Independent retail grocers within United's market area are eligible to
apply for membership.  All applicants for membership are subject to approval
by United's board of directors on the basis of financial responsibility and
operational ability.  On approval, applicants are required to purchase shares
of United's common stock.  United has approximately 248 members operating a
total of approximately 353 retail grocery stores.  

    By pooling the buying power of its members, United is able to purchase
goods in large quantities at prices lower than the prices generally available
to independent retail grocers.  The savings from the bulk purchases are passed
along to members in the form of rebates, allowances and patronage dividends.

    United also pays its members annual patronage dividends based on the
overage, or excess of revenues over expenses, on sales to members for the
year.  Each year United's board of directors determines the portion of the
overage which is to be distributed as patronage dividends.  Decisions
concerning the portion of the overage to be retained are based upon various
factors including United's future capital needs and the amount of earnings
available from operations not qualifying for distribution as patronage 
dividends.  The patronage dividends are allocated among the members in
proportion to the contribution to United's gross profit (before rebates and
allowances) attributable to their purchases from United.  The patronage
dividends are paid partly in cash and partly in Membership Stock.

    No member or other customer of United accounts for as much as 10 percent
of its sales.  Management believes that the loss of any one or a few of its
members or other customers would not have a material effect on its business or
financial condition.
<PAGE>
Member Services

    United provides a number of retail services to its members.  Services
which do not carry a specific fee or charge include marketing information,
merchandising assistance, competitive retail price reporting and developmental
services such as store site selection, design and engineering.

    United also offers its members, at a fee, complete bookkeeping,
accounting and tax services for their retail operations.  A computerized
payroll service is also available.  Other miscellaneous retail services which
generally carry a scheduled fee assessment include customized retail pricing,
retail shelf "unit pricing," and retail information service products.

    Members can receive finance services from United's subsidiary, United
Resources, Inc. United Resources makes loans and provides other financial
services to members.  Loans to members are generally made at one and three
quarters to two and one quarter percentage points over the prime interest
rate.  Such loans generally are for terms of one to ten years.  Loan funds are
obtained under a note purchase agreement with National Consumer Cooperative
Bank at rates varying with market interest rates.  At September 27, 1996, the
aggregate principal amount of member loans outstanding due the subsidiary was
$27,515,354.  The subsidiary's interest income for the year then ended was
approximately $2,572,000. In the normal course of its activities, United
Resources, Inc., acquires retail stores through foreclosure or purchase and
operates them on a temporary basis.  United Resources owned three such stores
at September 27, 1996.  During 1996, United Resources acquired two stores
through foreclosure, and disposed of three stores through sale or closure.

    United, where appropriate, leases retail space and subleases the space to
qualified members to enable them to obtain prime commercial space.  At
September 27, 1996, United was obligated on 51 such leases.  During 1996, the
Company changed its policy of requiring lease insurance on subleases whereby
United is the main lessee, and replaced the lease insurance with a program
whereby United recognizes profits on its subleases to compensate the Company
for its sublease risk.  See Notes to Consolidated Financial Statements for
more information on these subleases. 
    
Technology

    During 1996 United Grocers strategically focused its Information Services
group on building systems platforms to allow for future growth. The Inventory
and Distribution Management system in use by United Grocers was updated to the
DCS2000 system provided by British American Consulting Group (BAcg).  This
system is a full multi-warehouse distribution system with a complete set of
modules to support purchasing and warehousing functions. Another key strategic
project this year was the migration of UG's Finance and Accounting system from
the mainframe to a client-server financial package provided by Oracle. The
combination of these two systems helps position United Grocers for maximum
flexibility and capability for business expansion.

    In the Retail Systems area, United Grocers has continued to build
strategic computer system platforms that will greatly assist in the success of
independent retail grocers while competing in today's marketplace against the
large chains.  To take advantage of the economies of scale enjoyed by retail
chains with the development, purchase, implementation, and support of computer
systems, United Grocers has taken a strong leadership role in providing a
high-quality, standard computing package for its retail customers. This
standard platform has been marketed under the name Project Enterprise.

    Project Enterprise bundles software, hardware, network connections, and
maintenance together into a single product offering. This entire system is
placed in the retail location; store personnel are trained by United Grocers
staff. The retailer's only financial responsibility is to pay a weekly fee for
the use of the system. Project Enterprise has allowed United Grocers to make a
strong computing system affordable to its retailers while allowing for volume
discounts for hardware and maintenance. United Grocers can now leverage and
build upon these systems in a similar fashion as a standardized chain
environment.  The Project Enterprise platform includes an integrated store
processor (I.S.P.), UG's U-Link family of services, a laser printer, and UG's
Ready Pay electronic payment system.  In a mass rollout effort, the  UG Retail
Systems group has implemented over 160 of these Project Enterprise systems
this year.

Food Service Distribution

    The Company's food service distribution operations generate significant
annual volume for its distribution segment, as well as a prominent source of
potential growth in the future.  The main source of food service volume is the
Company's Cash & Carry wholesale outlets.  These outlets provide a convenient,
low cost method of purchasing groceries and institutional products for non
member grocers, restaurants, and institutional buyers.  Cash & Carry customers
select their merchandise at the outlet much in the same manner that a customer
at a retail grocery store would.  Cash & Carry customers provide their own
transportation.

    At September 27, 1996, the Cash & Carry outlets generated $233 million in
sales, an increase of 13% over 1995 sales of $206 million.  In 1997, the
Company is scheduled to open six new locations, for a total capital investment
of approximately $6 million.

    In addition to Cash & Carry operations, the Company's food service
distribution includes Rich & Rhine, Inc., which contributed $38.9 million to
distribution segment sales in 1996.
 
Insurance

Overview

    Grocers Insurance Group, Inc. was formed on October 25, 1990, and is the
holding company for the Company's insurance-related subsidiaries.  Grocers
Insurance Group, Inc. assists in marketing insurance-related services offered
by those subsidiaries.

    Grocers Insurance Agency, Inc., is an insurance agency offering
commercial and personal lines coverages.

    United Workplace Consultants, Inc. offers consulting and rehabilitation
services to corporate clients including members of the Group.

    UGIC, Ltd. provides reinsurance services for property and casualty lines.

    Grocers Insurance Company, Inc., is a commercial lines underwriter rated 
A- by A.M. Best. 

Operations

    The following analysis of insurance operations is limited to Grocers
Insurance Company (GIC),   the significant underwriting subsidiary of the
company.

Premiums Written

    An analysis of GIC's premiums written during the past three years is
shown in the following table.
          
                          ($ in thousands)
                     Direct     Reinsurance   Reinsurance      Net
Year                 Written      Assumed       Ceded          Written

1994                $23,992         $ 861       $6,652          $18,201
1995                 27,809           698        7,364           21,143
1996                 28,988           567        8,185           21,370


      The three states accounting for the largest amounts of direct premiums
written for the year ending September 30, 1996, were Oregon with 33%,
California with 24%, and Washington with 10%.  No other state accounted for
more than 7% of such premiums.  In 1996 there were no significant changes in
business, geographic mix or types of risks assumed.

Underwriting Results

      A commonly used industry measurement of property and casualty insurance
underwriting results is the combined loss and expense ratio.  This ratio is
the sum of the ratio of net incurred losses and related loss adjustment
expenses to net premiums earned (loss ratio) plus the ratio of underwriting
expenses to premiums written (expense ratio). The loss ratio, expense ratio
and combined ratio for GIC for the last three calendar years are as follows:

                           Loss         Expense          Combined
Year                       Ratio         Ratio            Ratio

1993                        89.6%         13.0%           102.6%
1994                        79.0%         21.9%           100.9%
1995                        82.9%         21.1%           104.0%  

      These ratios compare to industry composite combined ratios of 105.7% for
1993, 107.1% for 1994 and 105.0% for 1995.

      There have been no unusually large gains or losses from underwriting or
investment operations during the year.  There are no effects from currency
fluctuations, with all business being transacted within the United States.

Claim Operations

      Net Unpaid Loss and Loss Adjustment Expenses (LAE) for the last three
fiscal years are:
                  

                            ($ in thousands)  
                                                             Increase
Year                  Losses        LAE        Total       or (Decrease)

1994                   22,968       4,671      27,639         (2.7%)
1995                   24,534       4,819      29,353          6.2%
1996                   23,676       4,981      28,657         (2.4%) 

      For additional historical information on loss reserve development and
reconciliation of claim reserves, please refer to Appendix 1 and Appendix 2 to
this report.

Reinsurance

      GIC reinsures limits above $100,000 per risk through a treaty
reinsurance program with upper limits of $20 million for workers' compensation
and liability exposures, and limits up to $3 million for property risks. 
Facultative reinsurance is purchased for property risks written with limits
above $3 million.  Current reinsurers on the main working layers are all rated
A- or better by A.M. Best.

Risk Based Capital / IRIS

      The National Association of Insurance Commissioners (NAIC) has adopted,
effective December 31, 1994, a risk-based capital formula for property and
casualty companies which will be used by insurance regulators in assessing the
capital adequacy of insurance companies. 

      The ratio for GIC as determined at December 31, 1995, was significantly
above the levels which would require regulatory action.  Regulatory total
adjusted capital was $15.7 million; authorized control level risk based
capital was $1.9 million.

      The NAIC produces an annual evaluation, the Insurance Regulatory
Information System (IRIS), utilizing data from the statutory annual statements
filed as of each December 31 with state insurance departments. 

      GIC had no ratios designated as an "unusual value" in its IRIS Report
for the year ended December 31, 1995.


Competition

      The grocery industry is characterized by intense competition. United's
wholesale grocery marketing area is comprised of Oregon, California and
Western Washington. United's principal competitors are two national grocery
wholesalers (which because of their operations in other areas are larger than
United) and four regional grocery wholesalers.

      Other competitors include a number of local grocery wholesalers, many of
whom are limited to special product lines, such as candy or produce, or sell
only to limited market segments, such as restaurants or institutions.  United
also competes with a significant number of producers which market their
products directly to retailers and with several chain store organizations
which control both their wholesale and retail operations. 

      Based on information available to it, United estimates that its members,
many of whom are in competition with one another, account for approximately
14% of the retail grocery market within United's marketing area.  Although
members are free to purchase from sources other than United,  members
generally purchase goods (except goods which United does not supply (such as
beer and wine) principally from United.  United does not account for a
significant percentage of the national wholesale grocery market.

      Recent trends in the results of the Company's member stores have
continued. In general, members outside major metropolitan areas, and those
operating newer stores, price oriented or super store formats registered
various gains in volume.  Members operating average-sized conventional stores
generally registered small volume losses overall.  As a result of these
trends, the Company's member unit volume in the distribution segment decreased
approximately 1%.

      Like the grocery industry, the insurance industry is highly competitive.
Grocers Insurance Group is well positioned to serve the retail food industry.
Due to its specialization in the retail food business, Grocers Insurance Group
generally operates on lower expense ratios than most of its competitors,
allowing it to offer competitive prices for its policies.

Employees

      United employed approximately 2,000 persons at September 27, 1996. 
Approximately 880 of its employees are members of Teamster or other unions.  

      United's collective bargaining agreements expired in April, 1996, and
new contracts have been ratified. The Company considers its employee relations
to be satisfactory.

Supplies

      United purchases goods from a wide variety of sources ranging from local
farmers to large multinational corporations.  United attempts to obtain the
lowest possible price by pooling the buying power of its members.  United is
not dependent on any single supplier and the loss of any single supplier would
not have a material effect on its business.

      United is one of the five stockholders of Western Family Holding
Company, a corporation which pools the buying power of its stockholders in
order to obtain lower cost merchandise.  Purchases from Western Family Holding
Company, which account for about 11% of United's total purchases, are
distributed under labels such as "Western Family" and "Cottage."

      United's operations are not of a type which ordinarily result in the
discharge of significant quantities of pollutants.  United believes that its
operations substantially meet or exceed all applicable environmental
regulations.


Income Taxes

      United operates and is taxed as a cooperative.  Accordingly, patronage
dividends are not included in United's taxable income but are instead taxed to
the individual members receiving the patronage dividends.  The Internal
Revenue Code of 1986, as amended ("Code") requires that not less than 20
percent of each member's patronage dividend be paid in cash.  United's
patronage dividend policy meets that requirement, providing for cash payments
of up to 100% of dividends based on ratios of the value of stock holdings by
member stores to their average weekly purchases, and total number of shares of
stock owned.  Patronage dividends not paid in cash are paid in additional
Membership Stock.  Members are required to agree to abide by all United's
bylaw provisions, including those applicable to federal income taxation of
patronage dividends.  Accordingly, members must report as taxable income the
total amount of patronage dividends, whether paid in cash or Membership Stock,
in the year such patronage dividends are received, and such amounts are not
taxable to United.  

      United is taxed on income which does not qualify for distribution as
patronage dividends and on the portion of overage which is not distributed to
members.  United's subsidiaries retain all profits (or losses) from their
operations and are part of the consolidated federal income tax return.


Government Contract Business

      The Company does not generate significant business based upon contracts
with local, state or federal government entities.


Item 2.  Properties

      United owns and operates two distribution centers.  Its main
distribution center, located in Milwaukie, Oregon, contains over 815,000
square feet of warehouse space situated on a 62-acre site owned by United. 
Also at this location are 84,900 square feet of office space, a 20,000-square-
foot truck repair shop, and a 114,000-square-foot frozen food distribution
center.

      United's southern Oregon division distribution center, located in
Medford, Oregon, contains approximately 200,000 square feet of warehouse
space, plus related office and maintenance areas.

      United's distribution center warehouses are of modern, one-floor,
sprinklered, concrete construction.  The warehouses are subject to various
mortgages, the terms of which are summarized in the Notes to the Consolidated
Financial Statements.  

      United and its subsidiaries operate a truck fleet consisting of 228
tractor cabs and 417 dry freight and refrigerated semitrailers, including both
owned and leased units.

      United leases a mainframe computer, together with related peripheral
equipment, under various leases expiring in April, 1997.  The leases call for
annual rental of approximately $797,000.

      United, as described under "Services," is also the prime lessee of
retail stores, which are subleased to members, totaling approximately 1.2
million square feet.  Further, United and its subsidiaries are the lessees and
operators of two retail stores acquired through foreclosure and purchase
totaling an additional 90,000 square feet.  United owns an additional retail
store occupying approximately 38,000 square feet.

      Additionally, United owns five Cash & Carry stores ranging in size from
10,800 to 23,520 square feet.

      United rents several warehouse and cash and carry stores with lease
terms and rents as follows:

    
                                    Area in           Lease       Monthly
Facility Type     Location          Square Feet       Expiration  Rent
-------------     --------          -----------       ----------- ----
Warehouse         Santa Rosa, CA    244,000            7/27/05    $80,250
                  Modesto, CA       275,000            7/27/05    $74,250
                  Tracy, CA         160,166            7/27/05    $84,888
                  Portland, OR       18,000            9/30/98    $ 5,000
                  Milwaukie, OR       9,600            9/30/00    $ 2,836
                  Woodland, CA       68,400           10/01/05    $24,640

Cash & Carry
  Stores          Aloha, OR          20,500            2/28/97    $ 6,970 
                  Bend, OR           18,460            4/21/07    $ 5,532
                  Coos Bay, OR       14,250            8/31/97    $ 2,262
                  Gresham, OR        18,220           12/31/96    $ 5,830
                  Newport, OR        16,000           11/30/07    $ 6,700
                  Portland, OR       17,508            7/01/01    $ 6,000
                  Portland, OR       20,000            5/31/01    $ 7,948
                  The Dalles, OR     16,400            6/02/02    $ 2,419
                  Arcata, CA         23,000           10/31/97    $ 8,288
                  Redding, CA        25,380           10/31/00    $ 8,882
                  Olympia, WA        17,780            9/02/99    $ 8,150
                  Seattle, WA        23,500            5/22/99    $11,280 
                  Seattle, WA        23,764            7/24/99    $12,000
                  Tacoma, WA         20,400            9/01/99    $ 8,976
                  Clackamas, OR      21,000            6/01/01    $ 7,600 
                  Bellingham, WA     20,000           11/30/99    $ 8,800 
                  Portland, OR       20,600            3/31/01    $ 9,475
                  Salem, OR          19,600            9/04/06    $ 7,812
                  Warrenton, OR      14,700            4/21/07    $ 4,434
                  Everett, WA        18,750           10/31/00    $ 9,000
                  Kent, WA           18,896            3/31/06    $10,012 
                  Federal Way, WA    21,453            9/12/08    $11,048
                  Lynnwood, WA       22,200            6/12/08    $15,000
                  Bellevue, WA       18,000           12/14/03    $10,500
                  Sacramento, CA     23,120            1/14/09    $ 8,092
                  Medford, OR        22,150            6/06/10    $ 8,938
                  Yuba City, CA      26,871            6/15/10    $19,616
                  Ballard, WA        15,000            5/31/00    $ 6,000 
                  Bremerton, WA      10,000            4/30/00    $ 2,250
                  Tukwila, WA        21,000            4/30/00    $ 6,720
                  Boise, ID          21,094            3/31/16    $13,950
                  Chico, CA          20,680            7/04/06    $ 6,204
                  Oakland, CA        25,709            6/10/15    $11,260  

Item 3.  Legal proceedings

      The Company is regularly a party to routine legal proceedings not
expected to have a material effect on its business.  


Item 4.  Submission of Matters to a Vote of Security Holders        None.


                                  PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

      There is no market for United's Common Stock, which is non-transferable. 
The approximate number of holders of United's Membership Stock as of December
24, 1996, was 248.

      United's earnings are distributed only in the form of patronage
dividends.  Accordingly, no earnings are available for the purpose of paying
dividends on Membership Stock.

Item 6.  Selected Financial Data


     Consolidated revenues by principal product lines and services appear in
the following table:
<TABLE>
<CAPTION>

                                     For Fiscal Year Ended
                   September 27, 1996  September 29, 1995   September 30, 1994
                   ==================  ==================   ==================
                                     (dollars in thousands)                    
                              Percentage        Percentage         Percentage
                               of Total          of Total           of Total
Product or            Revenue  Revenue   Revenue Revenue   Revenue  Revenue
Service           
----------            -------  --------  ------- -------   -------  -------
<S>                   <C>      <C>      <C>      <C>      <C>       <C>  
Grocery<F1>            670,746  51.54    432,499   42.48   399,803   41.87
Dairy & Deli           113,094   8.69    105,263   10.34   105,336   11.04
Meat                    76,850   5.90     83,227    8.17    86,893    9.11
Produce                 48,456   3.72     49,108    4.82    47,709    5.00
Frozen Foods            71,602   5.50     53,992    5.30    53,803    5.64
Gen. Merchandise        48,396   3.72     45,165    4.44    45,285    4.75
Institutional<F2>      232,913  17.90    206,312   20.26   179,422   18.81
Retail Services         18,249   1.40     18,284    1.80    14,169    1.49
Store Finance            2,572    .20      3,117     .30     3,846     .41
Distribution Segment 1,282,878  98.57    996,967   97.91   936,266   98.12
Insurance Segment       18,629   1.43     21,281    2.09    17,954    1.88
  TOTAL             $1,301,507 100.00 $1,018,248  100.00  $954,220  100.00

<FN>
<F1> Grocery revenues include sales from retail stores operated on a temporary
basis.
<F2> Institutional revenues include sales of all product lines.
</TABLE>


      The following balance sheet data at September 27, 1996 and September 29,
1995 and the income statement data for the years ended September 27, 1996,
September 29, 1995, and September 30, 1994 have been derived from audited
consolidated financial statements and notes thereto appearing elsewhere in
this Annual Report on Form 10-K.  The balance sheet data at September 30,
1994, October 1, 1993, and October 2, 1992 and income statement data for the
years ended October 1, 1993 and October 2, 1992 have been derived from audited
financial statements not required to be included in this report.  The data
should be read in conjunction with the consolidated financial statements and
related notes included elsewhere herein.

                                                   Fiscal Years           
                           Sept 27    Sept 29   Sept 30     Oct 1    Oct  2 
                              1996       1995      1994      1993      1992
                            -------    -------    -----     -----    ------- 
                            (Dollars in thousands, except per share amounts)

Income Statement:
 Net sales and operations $1,301,507 $1,018,248 $954,220  $876,587  $896,587
 Income before members' 
 patronage dividends, 
 income taxes
 and accounting change         4,227    10,503    11,294    11,291    13,314
 Patronage dividends           4,000     8,350     8,730     9,000    10,211
 Net income                      152     1,379     1,563     1,714     2,723
Balance Sheet:
  Working capital             59,224    52,510    45,258    41,819    53,326
  Total assets               384,144   322,456   306,836   285,342   261,289
  Long-term liabilities      143,134   115,624   114,669   105,539   104,645
  Members' equity             41,459    42,357    40,425    39,112    39,141

  Adjusted book value per 
  share                        61.53     62.15    59.50     57.00     53.94


Notes to Selected Financial Data
      A.    Data concerning net income per common share and cash dividends per
      common share is omitted because United is a cooperative.

      B.    Adjusted book value per share is computed by subtracting from
      total members' equity at year end, stock to be issued from patronage and
      paid-in capital on such stock, unrealized gain on investments, and
      undistributed equity from investments accounted for on the equity method
      and dividing the resulting number by shares outstanding at year end.

Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations

Overview

            During fiscal year 1996, net sales and operations increased 27.8 %
to $1,301.5 million.  This compares to an 6.7% increase in 1995 to $1,018.2
million.  Income before members' allowances, patronage dividends, and income
taxes decreased $6.2 million to $15.8 million (1.22 % of sales).  This
compares to $22.0 million (2.16% of sales) and $22.7 million (2.38% of sales)
in 1995 and 1994 respectively.

            In December, 1995, United acquired the assets and related business
of the wholesale division of Bay Area Foods, Inc., doing business as Market
Wholesale Grocery ("Market Wholesale").  In December 1995, United acquired
operations were approximately $249.2 million. Total assets at year end from
the acquired operations amounted to $47.6 million, and the Company's net
investment in the assets was approximately $34.0 million. 

      During 1996, the increase in net sales and operations was primarily
attributable to the distribution segment which enjoyed increased food service
distribution unit volume and increased sales from the Company's acquisition of
Market Wholesale.  These gains were off set by decreased premium income in the
insurance segment, lower volume from member owned retail stores, and lower
unit volume in the distribution segment's member business.

            In 1996, the Company had increased profits within its distribution
segment from its food service and other nonmember distribution segment
operations, and lower operating losses at company-owned retail stores.  Within
the insurance segment, profits increased from the agency and underwriting
operations.  These profit gains were offset by increased operating expenses in
the distribution segment due to cost inflation and system integration
activities. Profit gains were also impacted  by higher interest expenses due
to increased average levels of debt caused by the acquisition of Market
Wholesale and increased software investments.

      
      During 1995, the increase in net sales and operations was primarily
attributable to the distribution segment.  In addition, the insurance segment
generated increased sales primarily due to increased premium volume from
growth in policies issued.  These gains in sales were offset by lower sales
from company-owned retail stores.  In 1995, the Company had increased profits
within its distribution segment from its Cash & Carry and other nonmember
distribution segment operations, and lower operating losses at company-owned
retail stores.  Within the insurance segment, profits increased from agency
operations and lease insurance activities.  These profit gains were offset by
higher interest expenses, increased operating expenses in the distribution
segment, and increased property losses in Grocers Insurance Company.

Net Sales and Operations

            During 1996, sales of the Company's distribution segment increased
30.5% to $1,275.0 million. The sales gain was primarily due to volume realized
from acquired operations and increased food service distribution unit volume.
Price changes during 1996 impacted warehouse sales by approximately 2.1 %.

            Food service distribution increased 15.4% to $271.8 million
compared to $235.5 million in 1995.  Sales at new units and businesses
acquired in 1995 contributed 9.1% to the sales increase. Sales at company-
owned retail stores, which are primarily acquired as a result of store finance
operations, decreased $20.1 million to $22.4 million.  During the year, the
company acquired two stores and disposed of three stores.  As a net result,
the number of company-owned retail stores decreased by one store.

            In 1996, the insurance segment's net insurance premiums,
commissions, and fees decreased $2.7 million to $20.1 million. The decrease
was primarily attributed to increased unearned premium reserves in the
Company's workman's compensation business, and increased reinsurance expenses
associated with the increase in business mix towards larger volume accounts.
Policy premiums increased approximately $1.1 million despite declining rates
in workman's compensation, and flat rates in property and casualty lines of
business.

Gross Operating Income

            Gross operating income increased to $174.3 million (13.4% of
sales) in 1996 from $148.2 million (14.6% of sales) in 1995, and $137.5
million (14.4% of sales) in 1994.  Gross operating income from the acquired
operations of Market Wholesale contributed $26.6 million to gross operating
income. The Company's gross operating income also increased due to higher unit
sales in food service distribution, and improved loss experience in Grocers
Insurance Company. These improvements were off set by lower gross operating
income from retail stores owned by the Company due to a lower number of
stores. 

            In 1996, loss and loss adjustment expenses were 68.7% of total
premium income, compared to 74.7% and 64.7% in 1995 and 1994, respectively.
The improvement in loss experience resulted from the absence of major property
and casualty losses during the year, and continued improvement in loss
experience in the workman's compensation area. 

Operating, Selling, and Administrative Expenses

            In 1996, operating, selling, and administrative expenses increased
$29.3 million to $141.2 million (11.0% of sales).  In 1995 and 1994, these
expenses were $111.8 million (11.0% of sales), and $103.5 million (10.9% of
sales), respectively. Operating expenses associated with the acquired
operations of Market Wholesale were $23.7 million of the increase.

The components of these expenses are summarized below:


                                     Percent of Total Sales
                                    1996        1995        1994
                                    ----        ----        ----
Salaries & Wages                    5.8          6.1         6.0
Rents, Maintenance, and Repairs     1.8          1.7         1.7
Taxes, Other Than Income            0.9          0.8         0.9
Utilities, Supplies, & Services     1.2          1.1         1.6
Other Expenses                      1.1          1.0         0.5
Provision for Doubtful Accounts     0.2          0.2         0.2
                                    ---         ----        ----
Total                              11.0         11.0        10.9
                                   ====         ====        ====

            During 1996, total operating, selling, and administrative expenses
increased primarily due to higher unit volume in both the distribution and the
insurance segments, and as a result of the acquired operations of Market
Wholesale. Operating expenses associated with the acquired operations of
Market Wholesale were $23.7 million of the increase in total operating,
selling, and administrative expenses. Excluding the impact from Market
Wholesale, operating, selling, and administrative expenses changed due to
increases in salaries, telephone, temporary labor, maintenance and repairs,
and other taxes.

            Insurance segment operating expenses increased to 38.5% of segment
net sales and operations.  In 1995 and 1994, insurance segment operating
expenses were 32.3% and 36.3% of segment net sales and operations,
respectively. Operating expenses increased due to the opening of new offices
in other states during the year.

            Provision for doubtful accounts was $2.1 million (0.2% of sales)
in 1996.  This compares to $1.9 million (0.2% of sales) and $2.0 million (0.3%
of sales) in 1995 and 1994, respectively.

            Interest expense increased $2.0 million to $14.8 million (1.1% of
sales) in 1996.  This increase was primarily due to the debt associated with
the Market Wholesale acquisition.

Member Allowances and Dividends

            In 1996, total member allowances and dividends decreased $4.3
million  to $15.6 million (1.2% of sales).  In 1995, total member allowances
and dividends decreased 1.6% to $19.9 million (2.0% of sales).

            Total member allowances and dividends as a percent of member sales
decreased to 2.15% in 1996, compared to 2.84% in 1995, and 2.90% in 1994.

Net Income and Income Taxes

            In 1996, income before taxes was $0.2 million compared to $2.2
million (0.2% of sales) in 1995 and $2.6 million (0.3% of sales) in 1994.

            Net income after taxes was $0.2 million  in 1996, a decrease of
$1.2 million from $1.4 million (0.1% of sales) and $1.6 million (0.2% of
sales) in 1995 and 1994, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flow From Operating Activities

      In 1996, the Company generated  $6.2 million in cash in its operating
activities.  Increases in accounts receivable, inventories, and information
services platform investments were the major factors contributing to the use
of cash in operations.

Cash Flow From Investing Activities

      In 1996, the Company used $40.2 million in its investing activities, a
increase of $37.3 million from the $2.9 million used in 1995. The acquisition
of Market Wholesale accounted for $34.0 million in 1996. Purchases of property
and equipment increased to $16.2 million in 1996 from $10.4 million in 1995.

      In fiscal year 1996, anticipated capital expenditures will approximate
$7.0 million, representing $1.0 million in replacement assets, $3.0 million
for new Cash & Carry units, and $3.0 million in continuing investments in
upgraded operations software.

Cash Flow From Financing Activities

      In 1995, the Company provided $37.5 million from its financing
activities by increasing its levels of senior debt to fund its operations.

<PAGE>
Capital Structure and Resources
     The following table summarizes the Company's capital structure for the
last two years:





                                         Year Ended
                        -------------------------------------------------
                        September 27, 1996      September 29, 1995      
                        $000         %          $000        %
                        ------------------     ------------------
Average Short Term
Borrowings              $ 56,740    22.7        $ 42,632     20.6

End of Year Amounts
Senior Term Debt        $ 95,027    38.0        $ 68,135     32.9
Subordinated Debt       $ 57,181    22.8        $ 53,844     26.0
Equity                  $ 41,259    16.5        $ 42,357     20.5

Total                   $250,207   100.0        $206,968    100.0

      In 1996, the Company's working capital increased $6.7 million to $59.2
million.  The Company's main sources of funds include earnings, member capital
stock, capital investment notes, bank debt, and note purchase programs.  As of
September 27, 1996, the Company had $14.5 million in unused credit lines
available.  In addition, the Company had $10.7 million available under its
Note Purchase Agreement.

      The Company purchased the net assets of the wholesale operations of Bay
Area Foods, Inc., on December 14, 1995, for approximately $21 million. 
Funding for the acquisition was provided by increased bank credit.  The
Company anticipates refinancing with asset reductions or the securitization of
eligible trade accounts receivable.

      Grocers Insurance Company investments are held to support the payment of
claims.  These investments are not available to the Company to meet its
capital needs due to restrictions imposed by insurance regulators regarding
intercompany loans and advances.

      In addition, state regulators require that Grocers Insurance Company
maintain minimum amounts of capital and surplus.  As a result of these
regulatory requirements, $5.0 million of Grocers Insurance Company's equity
may not be paid as dividends to the Company.

      At September 27, 1996, the Company was not in compliance with its fixed
charge financial covenant.  The Company will be working with its senior
creditors to establish a plan to return to compliance with this ratio, and
will request the necessary waivers of the covenant.  In connection with the
above, certain terms and conditions of the senior credit agreements could
change.

<PAGE>
Item 8.  Financial Statements and Supplementary Data

                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------

               AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

              FOR THE THREE FISCAL YEARS ENDED SEPTEMBER 27, 1996
              ---------------------------------------------------

                               TABLE OF CONTENTS
                               -----------------

                                                                        Page
                                                                        ----

Independent auditor's report on financial statements                       1
----------------------------------------------------


Consolidated financial statements
---------------------------------

  Balance sheets                                                         2-3

  Statements of income                                                     4

  Statements of members' equity                                            5

  Statements of cash flows                                               6-7

  Notes to financial statements                                         8-32

Independent auditor's report on supplemental
--------------------------------------------
 information                                                              33
 -----------

Supplemental information
------------------------

  Pro forma consolidated schedules of income
   for the years ended September 27, 1996 and 
   September 29, 1995                                                     34

Independent auditor's report on financial
-----------------------------------------
 statement schedules                                                      35
 -------------------
Financial statement schedules included
--------------------------------------

  Schedule I        -   Condensed financial information
                         of registrant                                 36-39
  Schedule II   -   Valuation and qualifying accounts                  40-41

  Schedule V    -   Supplementary information concerning
                         property-casualty insurance                      
                         operations                                       42

Financial statement schedules not included              Reason          
------------------------------------------            ----------
  Schedule III  -   Real Estate and
                         Accumulated Depreciation    Not applicable

  Schedule IV   -   Mortgage Loans on Real 
                         Estate                      Not applicable
<PAGE>
Board of Directors
United Grocers, Inc. 


             INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
             ----------------------------------------------------


We have audited the accompanying consolidated balance sheets of United
Grocers, Inc. and subsidiaries as of September 27, 1996 and September 29,
1995, and the related consolidated statements of income, members' equity and
cash flows for each of the three years in the period ended September 27, 1996. 
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 consolidated financial position of United Grocers,
Inc. and subsidiaries as of September 27, 1996 and September 29, 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 27, 1996, in conformity with
generally accepted accounting principles.

As discussed in Note 1.f. to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other
than pensions in 1995-96.  Also, as discussed in Notes 1.g. and 1.h.
respectively, the Company changed its method of accounting for investments in
1994-95 and for reinsurance in 1993-94. 


                                          /s/ DeLap, White & Raish




Portland, Oregon
December 12, 1996


















                                                                        1
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                          CONSOLIDATED BALANCE SHEETS
                   SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
                   -----------------------------------------

                                       
                                    ASSETS
                                    -------

                                                 1996              1995    
                                             ------------      -----------
Current assets:
 Cash and cash equivalents                   $ 16,509,866      $ 13,045,456
 Investments maintained for
  insurance reserves (Note 1.g. & j. 
  & 2)                                         46,828,893        40,809,762
 Accounts and notes receivable 
  (Note 3)                                     78,571,016        70,706,049
 Inventories (Note 1.i.)                      105,420,187        81,477,754
 Other current assets                           4,814,449         3,870,703
 Deferred income taxes (Note 8)                 2,317,772         2,537,323
                                             ------------      ------------
                                                               
  Total current assets                        254,462,183       212,447,047
                                             ------------      ------------
  
Non-current assets:
 Notes receivable (Note 3)                     24,715,039        21,950,478
 Investment in and accounts with 
  affiliated companies (Note 1.c. & 15)        12,477,107         8,392,281
 Other receivables and investments              6,363,865         6,869,895
 Other non-current assets (Note 4)             17,223,023        11,668,590
                                             ------------      ------------
                                             
  Total non-current assets                     60,779,034        48,881,244
                                             ------------      ------------

Property, plant and equipment - (net 
 of accumulated depreciation) (Note 5)         68,902,737        61,127,772
                                             ------------      ------------

  Total                                      $384,143,954      $322,456,063
                                             ============      ============




















The accompanying notes are an integral part of this financial statement.




                                                                    2
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                    CONSOLIDATED BALANCE SHEETS - CONTINUED
                   SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
                   -----------------------------------------


                        LIABILITIES AND MEMBERS' EQUITY
                        -------------------------------

                                                 1996              1995    
                                             -----------       ------------
Current liabilities:
 Notes payable - bank (Note 6)               $ 61,173,867      $ 48,515,543
 Accounts payable                              82,076,707        60,461,117
 Insurance reserves supported by
  investments (Note 1.j. and 2)                29,561,657        29,958,678
 Compensation and taxes payable                 5,021,977         3,118,827
 Other accrued expenses                         5,130,182         3,662,495
 Members' patronage payable (Note 9)            3,200,110         6,646,867
 Current installments of long-term
  liabilities (Note 7)                          9,073,983         7,573,215
                                             ------------      ------------
                                             
  Total current liabilities                   195,238,483       159,936,742
                                             
Long-term liabilities (Note 7)                143,134,105       115,623,670

Deferred income taxes (Note 8)                  3,312,267         3,651,247

Deferred income (Note 13)                       1,000,026           886,917   
                                             ------------      ------------

  Total liabilities                           342,684,881       280,098,576
                                             ------------      ------------

Commitments and contingencies (Note 18)

Members' equity:
 Common stock (authorized, 10,000,000
  shares at $5.00 par value; issued
  and outstanding, 638,451 shares in
  1996 and 655,663 shares in 1995)
  (shares owned by a member in excess
  of 4,000 are subject to repurchase
  Note 1.o. & p.)                               3,192,255         3,278,315
 Additional paid-in capital                    24,224,262        23,956,797
 Retained earnings                             13,842,966        14,923,491
 Unrealized gain on investments (Note 2)          199,590           198,884
                                             ------------      ------------
                                             
  Total members' equity                        41,459,073        42,357,487
                                             ------------      ------------
                                             
  Total                                      $384,143,954      $322,456,063
                                             ============      ============







The accompanying notes are an integral part of this financial statement.




                                                                    3
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                       CONSOLIDATED STATEMENTS OF INCOME
  YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
  --------------------------------------------------------------------------


                                   1996            1995            1994    
                              -------------   --------------   --------------

Net sales and operations      $1,301,506,666  $1,018,248,456   $954,220,350
                              --------------  --------------   ------------

Costs and expenses:
 Cost of sales (Note 1.i.)     1,127,188,263     870,097,228    816,721,077
 Operating expenses              126,205,437     101,029,068     93,991,529
 Selling and administrative 
  expenses                        14,989,440      10,872,432      9,533,741
 Depreciation (Note 1.k. & 5)      6,629,240       5,952,576      5,609,779
 Interest:
  Interest expense                14,825,357      12,773,947      9,156,822
  Interest income                 (4,162,561)     (4,494,053)    (3,535,802)
                              --------------  --------------   ------------
   Interest expense, net          10,662,796       8,279,894      5,621,020
                              --------------  --------------   ------------

   Total costs and expenses    1,285,675,176     996,231,198    931,477,146
                              --------------  --------------   ------------

Income before members' allowances 
 and patronage dividends, and 
 income taxes                     15,831,490      22,017,258     22,743,204

Members' allowances              (11,604,949)    (11,513,784)   (11,449,305)

Members' patronage dividends 
 (Note 9)                         (4,000,000)     (8,350,000)    (8,730,168)
                              --------------   -------------   ------------

Income before income taxes           226,541       2,153,474      2,563,731
 
Provision for income taxes 
 (Note 8)                            (74,229)       (774,469)    (1,000,341)
                              --------------   -------------   ------------

   Net income                 $      152,312   $   1,379,005   $  1,563,390
                              ==============   =============   ============















The accompanying notes are an integral part of this financial statement.



                                                                          4
<PAGE>
<TABLE>
<CAPTION>
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
                      CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
      YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
      --------------------------------------------------------------------------

                                   Additional               Unrealized
                           Common    paid-in     Retained     gain on
                           stock     capital     earnings   investments   Total   
                        ---------------------- -----------  ----------------------
<S>                     <C>        <C>         <C>          <C>        <C>
Balances, October 1, 1993$ 3,285,755$21,006,563$14,820,084  $      --  $39,112,402

Stock:
 Issued                     148,090  1,515,656        --           --    1,663,746
 Repurchased               (334,440)     (1,757,412) (1,687,261)       -- (3,779,113)
Patronage dividends         156,675  1,707,757        --           --    1,864,432
Net income                     --         --     1,563,390         --    1,563,390
                        ---------------------- -----------  ----------------------

Balances, September 30, 1994  3,256,080 22,472,564 14,696,213       --  40,424,857 
   
Stock:                             
 Issued                     115,780  1,260,324        --           --    1,376,104
 Repurchased               (230,585) (1,342,184) (1,151,727)       --   (2,724,496)
Patronage dividends         137,040  1,566,093        --           --    1,703,133
Net income                     --         --     1,379,005         --    1,379,005
Change in accounting principle
 (Note 1.g.)                   --         --          --        (45,693)    (45,693)
Change in unrealized gain       --        --          --        244,577    244,577
                        ---------------------- -----------  ----------------------

Balances, September 29, 1995  3,278,315 23,956,797 14,923,491    198,884 42,357,487   

Stock:
 Issued                      93,620  1,059,512        --           --    1,153,132
 Repurchased               (244,680) (1,526,937) (1,232,837)       --   (3,004,454)
Patronage dividends          65,000    734,890        --           --      799,890
Net income                     --         --       152,312         --      152,312
Change in unrealized gain       --        --          --            706        706
                        ---------------------- -----------  ----------------------

Balances, September 27, 1996$ 3,192,255$24,224,262$13,842,966$   199,590$41,459,073
                        ====================== ===========  ======================
</TABLE>

Common stock share information:
                                                     Number
                              Description           of shares  
                              -----------           ---------

Balance, October 1, 1993                              632,312
 Issued                                                54,457*
 Repurchased                                          (66,888)
                                                    ---------

Balance, September 30, 1994                           619,881
 Issued                                                81,899*
 Repurchased                                          (46,117)
                                                    ---------

Balance, September 29, 1995                           655,663
 Issued                                                31,724*
 Repurchased                                          (48,936)
                                                    ---------

Balance, September 27, 1996                           638,451
                                                    =========

*  Includes prior year patronage dividends to be issued.

The accompanying notes are an integral part of this financial statement.

                                                               5
<PAGE>
<TABLE>
<CAPTION>
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
      YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
      --------------------------------------------------------------------------

                                          1996            1995           1994   
                                      -----------     -----------    -----------
<S>                                   <C>             <C>            <C>
Cash flows from operating activities:
 Net income                           $   152,312     $ 1,379,005    $ 1,563,390
 Adjustments to reconcile net 
  income to net cash provided by 
  (used in) operating activities:
   Depreciation                         6,629,240       5,952,576      5,609,779
   Provision for doubtful accounts
   and notes                            2,063,041       1,894,189      1,992,589
   Patronage dividends payable
    in common stock                       799,890       1,703,133      1,864,432
   Loss on sale of assets                 342,092         402,634        174,927
   Equity in loss (earnings) of 
   affiliated companies                  (567,701)         46,989        191,760
   Deferred income taxes                 (119,429)        181,729        474,889
   (Increase) decrease in non-cash
   current assets:
     Accounts and notes receivable     (2,312,952)    (11,087,908)   (15,343,787)  
     Inventories                       (3,146,910)     (7,170,332)      (441,006)
    Other current assets                 (403,181)      1,496,592       (642,531)
   Increase (decrease) in non-cash
   current liabilities:
    Accounts payable and
      insurance reserves                7,858,525      (6,248,023)     5,018,583
    Compensation and taxes payable        403,007         166,293        264,397
    Other accrued expenses              1,467,687         502,595       (552,204)
    Members' patronage payable         (3,446,757)       (218,869)      (349,191)
   (Increase) decrease in other 
   non-current assets                  (3,564,825)     (3,908,777)    (2,598,160)
                                      -----------     -----------    -----------
      Net cash provided by (used in)
       operating activities             6,154,039     (14,908,174)    (2,772,133)
                                      -----------     -----------    -----------
                                      
Cash flows from investing activities:
 Loans to members                     (22,512,203)    (18,578,568)   (17,768,465)
 Collections on loans to members       10,625,597       7,758,425      6,325,619
 Proceeds from sale of member loans    10,549,302      20,803,339      8,606,739
 Sale of investments                      600,798       3,607,299        843,718
 Redemption of investments              6,784,264       4,630,686      4,747,745
 Purchase of investments              (13,403,487)    (11,909,285)    (8,133,459)
 Investment in affiliated companies      (267,125)       (606,786)    (6,094,315)
 Sale of property, plant
  and equipment                         6,883,519       1,738,326        408,777
 Purchase of property, plant           
  and equipment                       (16,231,137)    (10,371,740)    (5,254,582)
 Purchase of business combination     (23,251,791)           --             --  
                                      -----------     -----------    -----------

  Net cash used in investing
       activities                     (40,222,263)     (2,928,304)   (16,318,223)
                                      -----------     -----------    -----------
                                      
</TABLE>
The accompanying notes are an integral part of this financial statement.




                                                                            6
<PAGE>
<TABLE>
<CAPTION>
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
                   CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
      YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
      --------------------------------------------------------------------------

                                           1996              1995             1994    
                                        -----------      -----------      -----------
<S>                                     <C>              <C>              <C>
Cash flows from financing activities:
 Sale of common stock                   $ 1,153,132      $ 1,376,104      $ 1,663,746
 Repurchase of common stock              (3,004,454)      (2,724,496)      (3,779,113)
 Proceeds of long-term liabilities:
  Revolving bank lines of credit      1,043,200,000      689,100,000      807,500,000
  Mortgages and notes                    30,310,851       25,640,393       12,104,717
  Redeemable notes and certificates      18,056,500       19,529,600       22,395,400
 Repayment of long-term liabilities:
  Revolving bank lines of credit     (1,030,541,677)    (671,605,124)    (801,209,733)
  Mortgages and notes                    (6,923,218)     (23,925,822)      (2,789,206)
  Redeemable notes and certificates     (14,718,500)     (19,492,749)     (22,618,900)
                                        -----------      -----------      -----------
      Net cash provided by 
       financing activities              37,532,634       17,897,906       13,266,911
                                        -----------      -----------      -----------
      
Net increase (decrease) in cash
 and cash equivalents                     3,464,410           61,428       (5,823,445)

Cash and cash equivalents: 
 Beginning of year                       13,045,456       12,984,028       18,807,473
                                        -----------      -----------      -----------

      End of year                       $16,509,866      $13,045,456      $12,984,028  

                                        ===========      ===========      ===========

</TABLE>

























The accompanying notes are an integral part of this financial statement.




                                                                            7
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


1.    Summary of significant accounting policies
      ------------------------------------------

  a.  Reporting year

      United Grocers, Inc. (the Parent) and subsidiaries (the Company) reports
      on a fiscal year of 52 or 53 weeks which is the fiscal year of the
      distribution segment.  The Parent's fiscal closing date is the Friday
      nearest September 30.  The fiscal year of the subsidiaries included in
      the insurance segment ends on September 30.

  b.  Organization and nature of operations

      The Company has two operating segments.  See Note 11 for segment
      details.  The Parent operates primarily as a wholesale grocery
      cooperative.  The Parent's stock is owned by its member customers. 
      Sales to these members account for approximately 80% of the wholesale
      grocery sales.

  c.  Principles of consolidation

      The consolidated financial statements include the accounts of United
      Grocers, Inc. and its wholly-owned subsidiaries as follows:  Grocers
      Insurance Group, Inc., Grocers Insurance Agency, Inc., UGIC, Ltd.,
      Grocers Insurance Company, United Workplace Consultants, Inc., Western
      Passage Express, Inc., Northwest Process, Inc., UG Resources, Inc.,
      United Resources, Inc., Premier Consulting, Inc., Western Security
      Services, Ltd., and Rich and Rhine, Inc.  All intercompany balances and
      transactions have been eliminated upon consolidation.  Investment in
      affiliated companies is stated at cost plus the Company's share of
      undistributed earnings since acquisition (see Note 15).

  d.  Business combination

      On December 14, 1995 the Company acquired, using the purchase method of
      accounting, certain assets of the Market Wholesale (Market) grocery
      division operations of Bay Area Foods, Inc. (Bay Area Foods), for a cash
      purchase price of approximately $21 million.  The Company assumed
      certain liabilities including obligations under certain real and
      personal property leases relating to Bay Area Foods, including three
      leased warehouse locations and leased equipment.  The operations of
      Market are included in the consolidated  statement of income beginning
      December 3, 1995.



















                                                                       8
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


1.    Summary of significant accounting policies (continued)
      ------------------------------------------------------

  d.  Business combination (continued)

      The approximate values allocated to the assets acquired, amount of
      liabilities assumed, and net value of assets acquired, are stated below:
      
      Acquired assets                                          Amount  
      ---------------                                       -----------
         Accounts receivable and customer loans             $12,290,000
         Inventories                                         20,796,000
         Deposits and other assets                            1,541,000
         Equipment including capitalized leases               5,286,000
         Goodwill amortized over 15 years                       484,000
                                                            -----------
         Total acquired assets                               40,397,000
                                                            -----------
      Assumed liabilities                                   
         Accounts payable                                    13,360,000
         Customer rebates and employee accruals               1,500,000
         Capitalized lease payable                            2,286,000
                                                            -----------
         Total assumed liabilities                           17,146,000
                                                            -----------

         Net value of assets acquired                       $23,251,000
                                                            ===========

      In connection with the acquisition, the Company entered into a five year
      supply agreement with Bay Area Foods and some of their retail stores. 
      The agreement calls for normal rebates, other than year-end patronage,
      that is available to other customers.  These retail stores account for
      approximately 20 percent of the total warehouse volume of the acquired
      operations.

      Funding for the acquisition was provided by increased short-term bank
      credit.  The Company anticipates refinancing the additional bank credit
      with new senior debt, or the securitization of eligible trade accounts
      receivable.

      The assets acquired include all owned warehouse equipment, furniture,
      and fixtures of the Market operations, such as forklifts, warehouse
      racking, office equipment and computers, and software.  The Company
      intends to continue to utilize these assets in the wholesale grocery
      distribution business in substantially the same manner as used by Bay
      Area Foods.

  e.  Use of estimates

      The preparation of financial statements in conformity with generally
      accepted accounting principles 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.





                                                                      9
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------
  

1.    Summary of significant accounting policies (continued)
      ------------------------------------------------------

  f.  Accounting changes

      Beginning in 1995-96, the Company adopted Statement of Financial
      Accounting Standards (SFAS) No. 106, EMPLOYERS' ACCOUNTING FOR
      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.  SFAS No. 106 requires that
      companies accrue the projected future cost of providing postretirement
      benefits during the period that employees render the services necessary
      to be eligible for such benefits.  While the adoption of this standard
      does have an impact on the Company's reported net income, it does not
      impact the Company's cash flow because the Company intends to continue
      its current practice of paying the cost of postretirement benefits as
      incurred.  The Company has elected to recognize the effect of the change
      to SFAS No. 106 by amortizing the transition obligation of $3,668,682
      over 20 years (see Note 13).
      
  g.  Investments

      Beginning in 1994-95, the Company accounts for investments in accordance
      with Statement of Financial Accounting Standards (SFAS) No. 115,
      ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES.  The
      Company's investments are primarily in non-equity securities and their
      intent is to hold most of these securities until maturity.  Sales and
      redemptions of investments are primarily the result of maturities.  Any
      realized gains or losses are usually the result of immaterial
      differences between the called amount and amortized cost.  The market
      value of these investments at September 27, 1996 and September 29, 1995
      is $46,966,058 and $41,610,228, respectively (see Note 2).

  h.  Reinsurance 

      Beginning in 1993-94 the Company adopted the Statement of Financial
      Accounting Standards (SFAS) No. 113, ACCOUNTING AND REPORTING FOR
      REINSURANCE OF SHORT-DURATION AND LONG-DURATION CONTRACTS.  The
      Statement requires that transactions relating to reinsurance
      transactions be reported at gross amounts rather than net amounts.  The
      effect on the consolidated financial statements of the Company is to
      gross up the insurance liabilities by reclassifying the ceded
      reinsurance amounts for reinsurance recoverables and prepaid reinsurance
      premiums as assets.  There is no effect or change to the consolidated
      statement of income as classifications did not change.  Net premiums
      earned continue to be reported as net sales and operations while net
      losses and loss adjustment expenses continue to be reported as cost of
      sales.
















                                                                     10 
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------

1.    Summary of significant accounting policies (continued)
      ------------------------------------------------------

  h.  Reinsurance (continued)
      
      In the normal course of business, the Company seeks to reduce the losses
      that may arise from catastrophes or other events that cause unfavorable
      underwriting results by reinsuring certain levels of risk in various
      areas of exposure with other insurance enterprises or reinsurers. 
      Amounts recoverable from reinsurers are estimated in a manner consistent
      with the claim liability associated with the reinsured policy.  Amounts
      paid for prospective reinsurance are reported as prepaid reinsurance
      premiums and amortized over the remaining contract period in proportion
      to the amount of insurance protection provided.

  i.  Inventories and cost of sales

      Inventories relate primarily to the distribution segment and are valued
      at the lower of cost or market.  The cost of these inventories is
      determined under the first-in, first-out (FIFO) method.

      Cost of sales includes primarily the cost of distribution and insurance
      operations.  The distribution segment costs include the purchases of
      product net of allowances paid and received, less the net advertising
      department margins, plus the handling allowances made to members based
      upon the cost of servicing their accounts.  The insurance segment costs
      include losses reported, a provision for losses incurred but not
      reported and premium refunds.

  j.  Restricted assets and net assets

      Restricted assets and net assets that may not be transferred to the
      Parent in the form of loans, advances, or cash dividends by the
      insurance subsidiary without the consent of state insurance agencies as
      of September 27, 1996 are as follows:

         Cash and cash equivalents                    $   410,903   
         Investments                                   16,417,243
                                                      -----------

         Total                                        $16,828,146
                                                      ===========

      In addition, although not formally restricted, the balance of the
      investments of $30,212,060 represent assets that have been accumulated
      for the possible payment of claims against the insurance reserves.

  k.  Property, plant and equipment

      Property, plant and equipment is carried at cost and includes
      expenditures for new facilities and those which substantially increase
      the useful lives of the existing plant and equipment.  The Company
      capitalizes interest when applicable as a component of the cost of
      significant construction projects.  No interest was capitalized for the
      three years ended September 27, 1996.








                                                                      11
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


1.    Summary of significant accounting policies (continued)
      ------------------------------------------------------

  k.  Property, plant and equipment (continued)

      Depreciation is computed using the straight-line method over the
      estimated useful lives of the respective assets.  Estimated useful lives
      are generally as follows:

         Buildings                                    40-75 years
         Building improvements                        Balance of building life
         Warehouse equipment                          5-20 years
         Truck equipment                              3-8 years
         Office equipment                             5-10 years

  l.  Amortization

      Long-term liability loan costs, software costs, goodwill, and non-
      competition agreements are being amortized and charged to operating
      expenses on a straight-line basis over five to twenty years.
  
  m.  Income taxes

      The Company and its subsidiaries file a consolidated federal income tax
      return.  Income tax expense is allocated among those companies with
      taxable income.  The Company operates and is taxed as a cooperative. 
      Accordingly, amounts distributed as patronage dividends are not included
      in its taxable income but are instead taxed to the individual members
      receiving the patronage dividends.  Deferred income taxes are recorded
      to reflect the tax consequences on future years of differences between
      the tax bases of assets and liabilities and their financial reporting
      amounts at each year end based on enacted tax laws and statutory tax
      rates applicable to the years in which the differences are expected to
      affect taxable income.  In 1996 a valuation allowance of approximately
      $500,000 was considered necessary for the insurance reserves and the
      state NOL carryovers to reduce the deferred tax asset to the amount
      expected to be realized.  Income tax expense is the combination of the
      tax payable for the year and the change during the year in net deferred
      tax assets and liabilities.  See Note 9 for details.  

  n.  Earnings per common share

      The Company's policy is to distribute earnings only in the form of
      patronage dividends.  No dividends have ever been declared on the common
      stock of the Company, and all earnings not distributed as patronage
      dividends have been retained.  Earnings per common share are not shown
      because no earnings are available for the purpose of paying dividends on
      the common stock.














                                                                      12
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


1.    Summary of significant accounting policies (continued)
      ------------------------------------------------------

  o.  Treasury stock

      The Company uses the par value method of accounting for treasury stock. 
      Under Oregon corporation law, treasury stock must be canceled upon
      redemption.

  p.  Common stock

      The Company's board policy, subject to change without notice, requires
      the Company to repurchase on request the number of shares a member owns
      in excess of 4,000 shares.  The excess shares are repurchased over a
      five year period at the current adjusted book value each year, payable
      in cash.  At September 27, 1996 and September 29, 1995, there were
      19,926 and 18,229 shares, respectively, subject to repurchase in the
      amount of $1,238,202 and $1,084,626, respectively.  At September 27,
      1996 and September 29, 1995, there were 2,779 and 1,471 shares,
      respectively, held for possible redemption in the amount of $172,687 and
      $87,525, respectively.

  q.  Advertising costs

      The Company expenses the production costs of advertising the first time
      the advertising takes place.  Advertising expense for 1996, 1995 and
      1994 was $2,593,450, $1,191,436 and $1,027,214, respectively.

  r.  Statement of cash flows

      For purposes of the statement of cash flows, the Company considers all
      highly liquid debt instruments purchased with a maturity of three months
      or less to be cash equivalents.

  s.  Reclassifications

      Certain reclassifications have been made to prior year balances to
      conform to the current year classification.
                                       
2.    Investments
      -----------

  Investments are classified and accounted for as follows: 

      -  Held-to-maturity securities are reported at amortized cost.
      -  Trading securities are reported at fair value, with unrealized gains
         and losses included in earnings.
      -  Available-for-sale securities are reported at fair value, with
         unrealized gains and losses excluded from earnings and reported in a
         separate component of members' equity.












                                                                      13
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------

2.    Investments (continued)
      -----------------------

  The amortized cost and estimated fair market values of investments in debt
  securities and other investments at the balance sheet date are as follows:

                                                     Carrying 
                                                    amount and       
                                       Number        amortized       Market
  Name of issuer and                 of shares       cost of        value of
  title of each issue                 or units      each issue     each issue 
                                     ---------      ----------     ----------
  1996:
   United States Government 
    and its agencies                35,295,000      $35,714,257    $35,918,833

  Any state of the United
   States and its agencies           2,520,000        2,619,934      2,644,354

  Political subdivision of 
   a state of the United
   States and its agencies           4,100,000        4,198,701      4,283,334

  Corporate bonds                    4,060,000        4,094,930      4,106,350
                                    ----------       ----------    -----------
      Subtotal - debt securities    46,627,822       46,952,871

  Corporate stock                          298            1,481         13,187
                                                     ----------    -----------
      Subtotal                                       46,629,303     46,966,058

  Unrealized gain on available-
   for-sale securities                                  199,590           --  
                                                     ----------    -----------

      Total                                         $46,828,893    $46,966,058
                                                    ===========    ===========
  1995:
   United States Government
       and its agencies             25,350,000      $25,769,781    $26,506,490

      Any state of the United
       States and its agencies       2,840,000        2,979,132      3,018,919

      Political subdivision of
       a state of the United
       States and its agencies       5,995,000        6,201,500      6,319,852

      Corporate bonds                5,610,000        5,658,984      5,756,735
                                                    -----------    -----------
          Subtotal - debt securities                 40,609,397     41,601,996

      Corporate stock                      298            1,481          8,232
                                                    -----------    -----------
           Subtotal                                  40,610,878     41,610,228

      Unrealized gain on available-
       for-sale securities                              198,884            --  
                                                    -----------    -----------

          Total                                     $40,809,762    $41,610,228
                                                    ===========    ===========

                                                                    14
<PAGE>
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                     --------------------------------------------

2.    Investments (continued)
      -----------------------

  Investments of debt securities by classification under SFAS No. 115 at
  September 27, 1996 are as follows:
<TABLE>
<CAPTION>
                                            Gross          Gross        Aggregate
                            Amortized     unrealized     unrealized       fair
                              cost          gains          losses         value   
                           -----------   -----------    -----------    -----------
      <S>                  <C>           <C>            <C>            <C>
      Held-to-maturity     $36,246,674   $   502,829    $   377,370    $36,372,133
      Available-for-sale    10,381,148       209,817         10,227     10,580,738
                           -----------   -----------    -----------    -----------
  
         Total             $46,627,822   $   712,646    $   387,597    $46,952,871
                           ===========   ===========    ===========    ===========
</TABLE>
  For the years ended September 27, 1996 and September 29, 1995 (initial year
  of application) the gross proceeds from the sales of securities available-
  for-sale were $1,104,720 and $3,607,299, respectively.  The gross realized
  gains from these sales were $4,226 and $142,257, respectively, and gross
  realized losses were nil.  The method used to determine cost when
  calculating the realized gains was the amortized cost of the specific
  security sold.  There are no gains or losses included in earnings as a
  result of transfers of securities between categories.  There were no
  securities classified as trading securities during the initial year.

  During the initial year of 1994-95, because of changing market conditions,
  management decided to transfer certain securities from the held-to-maturity
  category to the available-for-sale category.  The amortized cost of these
  securities at the time of transfer was $4,751,807 with a related net
  unrealized gain of $386,834.

  The amortized cost and estimated market value of debt securities at the
  balance sheet date, by contractual maturity, are shown below.  Expected
  maturities will differ from contractual maturities because borrowers may
  have the right to call or prepay obligations with or without call or
  prepayment penalties.

<TABLE>
<CAPTION>
                                      1996                         1995       
                           
                           -------------------------    -------------------------
                            Amortized        Market      Amortized       Market
                              cost           value         cost          value   
                           -----------    -----------   -----------   -----------
  <S>                      <C>            <C>           <C>           <C>
  Due in one year or less  $ 4,929,669    $ 4,915,145   $ 5,210,406   $ 5,303,554
  Due after one year 
   through five years       27,091,870     27,210,376    19,066,319    19,415,921
  Due after five years 
   through ten years        13,445,579     13,658,945    15,783,193    16,324,879  
  Due after ten years        1,160,704      1,168,405       549,479       557,642
                           -----------    -----------   -----------   -----------

      Total                $46,627,822    $46,952,871   $40,609,397   $41,601,996
                           ===========    ===========   ===========   ===========
</TABLE>

  <PAGE>
When SFAS No. 115 was adopted in 1994-95 it was not applied retroactively to
  the prior years' financial statements.  The cumulative effect of the change in
  accounting principle as of October 1, 1994 was an unrealized loss of $45,693
  charged to retained earnings.






























































                                                                      15
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


3.    Accounts and notes receivable
      -----------------------------

  These consist of amounts due principally from members at the balance sheet
  date as follows:
                                                        1996         1995   
                                                    -----------  -----------
   Accounts receivable                              $64,638,621  $59,229,982
  Insurance premiums and related balances            12,237,565    8,509,160
   Less allowance for doubtful accounts              (1,140,724)  (1,176,767)
                                                    -----------  -----------
   Net accounts receivable                           75,735,462   66,562,375
                                                    -----------  -----------

   Notes receivable - current portion                 3,072,175    4,224,381
   Less allowance for doubtful notes                   (236,621)     (80,707)
                                                    -----------  -----------
   Net current notes receivable                       2,835,554    4,143,674
                                                    -----------  -----------

   Net current accounts and
    notes receivable                                $78,571,016  $70,706,049
                                                    ===========  ===========

   Notes receivable - non-current portion           $25,588,062  $22,378,000
   Less allowance for doubtful notes                   (873,023)    (427,522)
                                                    -----------  -----------

   Net non-current notes receivable                 $24,715,039  $21,950,478
                                                    ===========  ===========

  The notes receivable from members are generally for periods of two years to
  ten years at interest rates of 3.00% to 11.00%.  The annual maturities for
  each of the next five fiscal years following September 27, 1996 are as
  follows:

          Year                               Amount  
          -----                           -----------
          1997                            $ 2,325,916
          1998                              2,666,459
          1999                              2,890,812
          2000                              2,933,663
          2001                              2,825,431
          Thereafter                       15,017,956

  The Company performs ongoing credit evaluations of its members' financial
  condition and maintains allowances for potential credit losses.  Actual
  losses and allowances have been within management's expectations.  The
  provision for doubtful accounts and notes charged to operating expenses for
  the three years ended September 27, 1996 amounted to $2,063,041,
  $1,894,189, and $1,992,589, respectively.











                                                                      16
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


4.    Other non-current assets
      ------------------------

  Other non-current assets at the balance sheet date consists of the
  following:
                                                      1996            1995   
                                                   -----------    -----------
  Covenant not to compete - net 
   of accumulated amortization of
   $1,485,557 in 1996 and $1,232,869
   in 1995                                         $ 1,238,727    $ 1,641,813
  Software - net of accumulated 
   amortization of $2,440,207 in 
   1996 and $1,737,639 in 1995                       2,070,007      1,582,531
  Loan fees - net of accumulated 
   amortization of $700,109 in
   1996 and $682,199 in 1995                           529,818        425,189
  Goodwill - net of accumulated
   amortization of $291,609 in 1996
   and $114,613 in 1995                              1,951,246      1,413,557
  Software in progress                              10,172,326      5,162,152
  Deposits                                           1,082,439        494,252
  Other                                                178,460        949,096
                                                   -----------    -----------

      Total                                        $17,223,023    $11,668,590
                                                   ===========    ===========

5.    Property, plant and equipment (at cost)
      ---------------------------------------

  Property, plant and equipment as of the balance sheet date consists of the
  following:
                                                       1996           1995   
                                                   -----------    -----------

  Land                                             $ 3,424,677    $ 3,580,477
  Buildings and improvements                        57,907,740     54,103,086
  Warehouse and truck equipment                     33,110,049     37,627,830
  Office equipment                                  13,621,540     11,104,702
  Construction in progress                           4,528,122      1,323,492
                                                   -----------    -----------
      Total property, plant and
       equipment                                   112,592,128    107,739,587
  Less accumulated depreciation                    (43,689,391)  
(46,611,815)                                       
                                                   -----------    -----------

      Net property, plant and
       equipment                                   $68,902,737    $61,127,772
                                                   ===========    ===========

  Depreciation expense for 1996, 1995 and 1994 was $6,629,240, $5,952,576 and
  $5,609,779, respectively.

6.    Notes payable - bank
      --------------------

  Notes payable - bank consists of borrowings on bank lines of credit at a
  weighted average interest rate of 6.41% at September 27, 1996 and 6.75% at
  September 29, 1995.

                                                                      17
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


6.    Notes payable - bank (continued)
      --------------------------------

  At September 27, 1996 and September 29, 1995, the Company had unused lines
  of credit totaling $14,400,000 and $24,500,000, respectively.

  In April of 1993, the Company entered into a three year reverse interest
  swap agreement with a bank.  Under the agreement, the Company receives a
  fixed rate of 4.40% on $20 million (notional amount) and pays a floating
  rate based on LIBOR, as determined in six month intervals.  The transaction
  effectively changes a portion of the Company's interest rate exposure from
  a fixed rate to a floating rate basis, accordingly, all gains or losses
  have been recognized as adjustments to interest expense.  This swap
  agreement has been entered into with a major financial institution which is
  expected to fully perform under the terms of the agreement thereby further
  mitigating the risk from the transaction.

7.    Long-term liabilities
      ---------------------

  Long-term liabilities at the balance sheet date consists of the following:

                                                  1996            1995    
                                              ------------    -----------
  Notes payable - bank:
  
     Credit agreement notes maturing 
      on April 30, 1998 with interest 
      rates of 6.24% per annum at 
      September 27, 1996 and 6.70% per 
      annum at September 29, 1995.  The 
      interest rates ranged from 6.02% 
      to 6.74% in 1996 and from 5.95% 
      to 7.00% in 1995.                       $ 44,400,000    $ 17,000,000

  Notes payable - insurance companies:

      Senior notes payable to seven
      insurance companies with interest 
      rates of 8.42% and 9.15% per annum.  
      Interest payable monthly.  Principal 
      repayments annually commencing 
      October 1, 1992 in the amount of 
      $3,336,000 and each October 1 
      thereafter in the amount of 
      $3,333,000 until 2000; and 
      $4,000,000 due annually beginning
      in 2001, maturing in full 2005.           36,665,000      39,998,000














                                                                  18
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------

7.    Long-term liabilities (continued)
                                                      1996           1995    
                                                  -----------    -----------
  Notes payable - other:

      Capital stock residual notes, payable
      in twenty quarterly installments with
      a variable interest rate based on the
      current capital investment note rate.       $  4,225,006   $ 4,239,958

      A discounted note payable in the
      original amount of $1,741,265 without
      interest, discounted at 9.90%, payable
      in two installments of $641,265 in
      1996 and $1,100,000 in 1997.                     935,000     1,528,170

      A covenant not-to-compete in the
      original amount of $1,072,008 with
      interest at 9.90%, payable in 
      monthly installments of $42,500
      until 2004.                                      951,312     1,022,795

      Four notes with interest at 7.50%
      per annum payable in monthly 
      installments of $23,017 beginning
      October 1995 (secured by equipment).             951,780     1,217,712

      Five notes with interest at 7.50% 
      per annum payable in monthly 
      installments of $24,108 beginning 
      October 1995 (secured by equipment).             997,084          --

      Several capitalized equipment leases,
      payable in monthly installments of
      $43,853 including interest at 12% to
      20% over seven to ten years until
      2005 (secured by equipment).                   2,123,571          --

      A real property contract for the 
      purchase of an office building,
      payable in 180 monthly installments
      of $2,346 including interest at
      12.5% per annum until 1999 (secured
      by real property).                                66,872        85,386

      Other note payable                                  --           2,292

  Mortgage notes (secured by real property):

      A note payable in monthly installments
      of $41,449 including interest at 9%
      until 1996.                                         --         442,243









                                                                         19
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


7.    Long-term liabilities (continued)
      ---------------------------------
                                                      1996           1995    
                                                  -----------    -----------
  Mortgage notes (secured by real 
  property) - continued:

      A note payable in monthly installments
      of $31,615 including interest at 7.25%
      until 2013.                                 $  3,710,663   $  3,816,529

  Redeemable notes and certificates:

      Capital investment notes 
      (subordinated), interest ranging
      from 6.25% to 8%.  Maturity dates 
      range from 1996 to 2005 which is 
      ten years from dates of issue.                54,018,200     50,619,400

      Registered redeemable building
      notes (subordinated), interest
      at 8%.  No fixed maturity date.                3,138,300      3,199,100

      Redeemable transferable notes, 
      (subordinated), interest at 
      6.50%.  No fixed maturity.                        25,300         25,300
                                                  ------------   ------------
         Total                                     152,208,088    123,196,885
         Less current installments                  (9,073,983)    (7,573,215)
                                                  ------------   ------------

         Total long-term liabilities              $143,134,105   $115,623,670
                                                  ============   ============

  Total maturities of long-term liabilities in each of the next five fiscal
  years are as follows:

           Year                                      Amount   
           ----                                   ------------
           1997                                   $  9,073,983
           1998                                     50,911,311
           1999                                      6,755,475
           2000                                      7,087,769
           2001                                      9,458,923

  The terms of certain financing agreements contain, among other provisions,
  requirements for maintaining certain financial ratios.  Also, a minimum
  amount of equity must be maintained, subordinated debt restrictions on the
  sale of assets, and allowable contingent indebtedness.  The Company was not
  in compliance with the fixed charge coverage covenant as of September 27,
  1996.  The Company will be working with its senior creditors to establish a
  plan to return to compliance with this ratio and will request the necessary
  waivers for noncompliance with this particular covenant.









                                                                     20
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


8.    Income taxes
      ------------

  The provision for income taxes for the three years consists of the
  following:
                                        1996           1995          1994   
                                     ----------     ----------    ----------
    Current payable:            
     Federal                         $  146,016     $  542,585    $  439,200
     State                               47,640         50,156        86,252
    Deferred:
     Federal                            (95,036)       113,948       506,977
     State                              (24,391)        67,780       (32,088)
                                     ----------     ----------    ----------

         Total                       $   74,229     $  774,469    $1,000,341
                                     ==========     ==========    ==========

    The effective income tax rate for the three years ended September 27,
    1996 does not correspond with the Federal tax rate.  The reconciliation
    of this rate to the effective income tax rate is as follows:

                                         1996          1995          1994   
                                     ----------     ----------    ----------

    Statutory income tax rate (34%)  $   82,934     $  732,181    $  871,668
    State income taxes, net of
     Federal income tax benefit          31,443         33,103        56,926
    Tax exempt interest                 (97,712)      (133,622)     (158,673)
   Refunds as a result of carrybacks       --          (64,954)         --
    Prior year under accrual               --             --         179,235
    Other                                57,564        207,761        51,185
                                     ----------     ----------    ----------

         Income tax expense          $   74,229     $  774,469    $1,000,341
                                     ==========     ==========    ==========

        Effective income tax rate          30.4%          36.0%         39.0%
                                           ====           ====          ====

  The significant components of the deferred income taxes - current asset and
  non-current liability as of the balance sheet date are as follows:

                                          1996           1995   
                                       ----------     ----------
  Deferred income taxes - 
   current asset:
    Insurance reserves                 $  785,964     $1,041,485    
    Inventories                           839,507        746,442    
    Unearned insurance premiums           571,239        508,089    
    Allowance for doubtful accounts       294,566        420,530    
    Other                                (173,504)      (179,223)   
                                       ----------     ----------

      Total                            $2,317,772     $2,537,323    
                                       ==========     ==========





                                                                      21
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------
                                                                    

8.    Income taxes (continued)
      -----------------------
                                          1996           1995   
                                       ----------     ----------
   Deferred income taxes - 
    non-current liability:
     Accumulated depreciation          $5,017,128     $5,070,833 
     Deferred income                     (634,029)      (345,898)
     Allowance for doubtful notes        (401,818)      (233,679)
     Deferred compensation               (174,550)      (174,550)
     Alternative minimum tax 
      (AMT) credit                       (446,739)      (611,439)
     Other                                (47,725)       (54,020)
                                       ----------     ----------

       Total                           $3,312,267     $3,651,247    
                                       ==========     ==========

   Net amount by tax paying component:
    Federal                            $  597,823     $  692,860
    State                                 396,672        421,064
                                       ----------     ----------

       Total                           $  994,495     $1,113,924
                                       ==========     ==========

   The significant components of deferred income tax expense for the three
   years are as follows:
                                          1996         1995          1994   
                                       ----------   ----------    ----------
   Decrease (increase) in deferred 
    income taxes - asset               $  219,551   $  274,590    $   11,915
   (Decrease) increase in 
    deferred income taxes - 
    liability after applying 
    AMT credit                           (338,980)     (92,862)      462,974
                                       ----------   ----------    ----------

       Total                           $ (119,429)  $  181,728    $  474,889
                                       ==========   ==========    ==========

   The Company has net operating loss carryovers of approximately $5,000,000
   to apply against future years' State income taxes, expiring in years 2007
   through 2011.  These operating loss carryovers are the result of the
   insurance company subsidiary being required to file a separate calendar
   year State tax return and not giving the parent the benefit of this offset
   on its State tax return.  The Company also has unused State energy tax
   credits of approximately $45,000, expiring in 1998.














                                                                    22
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------

9. Members' patronage dividends
   ----------------------------

   The Company's income from sales to members, before income taxes and
   patronage dividends, is available, at the discretion of the Board of
   Directors, to be returned to the members in the form of patronage
   dividends.  As of year end, the Board of Directors voted to distribute the
   following in patronage dividends:
                                         1996          1995         1994   
                                     -----------   -----------  -----------
    Payable in cash and shown as
     a current liability             $ 3,200,110   $ 6,646,867  $ 6,865,736
    Distributable in the form
     of common stock                     799,890     1,703,133    1,864,432
                                     -----------   -----------  -----------

         Total                       $ 4,000,000   $ 8,350,000  $ 8,730,168
                                     ===========   ===========  ===========

10. Reinsurance
    -----------

    Reinsurance amounts reflected in the financial statements are as follows:
                                         1996          1995   
                                     -----------   -----------
    For the balance sheet:
     Reinsurance recoverable for 
      ceded losses                   $ 6,496,713   $ 5,081,542
     Prepaid reinsurance premiums      2,831,215     2,050,101
                                     -----------   -----------

         Total                       $ 9,327,928   $ 7,131,643
                                     ===========   ===========

                                         1996          1995         1994   
                                     -----------   -----------  -----------
    For the income statement:
     Premiums written:
      Gross                          $28,987,953   $27,808,928  $23,992,639
      Assumed                            567,243       698,280      860,953
      Ceded                           (8,184,619)   (7,364,002)  (6,652,410)
                                     -----------   -----------  -----------

         Net premiums written        $21,370,577   $21,143,206  $18,201,182
                                     ===========   ===========  ===========

    Percentage of amount assumed
       to net                               2.65%         3.30%        4.73%
                                            ====          ====         ====

    Premiums earned:
     Gross                           $26,515,356   $26,719,189  $23,736,321
     Assumed                             598,048       718,692      829,978
     Ceded                            (7,403,505)   (6,708,155)  (6,505,887)
                                     -----------   -----------  -----------

         Net premiums earned         $19,709,899   $20,729,726  $18,060,412
                                     ===========   ===========  ===========

    Percentage of amount assumed
     to net                                 3.03%         3.47%        4.60%
                                            ====          ====         ====

                                                                            23
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


10. Reinsurance (continued):
    -----------------------

    Reinsurance contracts do not relieve the Company from its obligation to
    policyholders.  Failure of reinsurers to honor their obligations could
    result in losses to the Company.  The Company evaluates the financial
    condition of its reinsurers and monitors concentrations of credit risk
    arising from similar geographic regions, activities, or economic
    characteristics of the reinsurers to minimize its exposure to significant
    losses from reinsurer insolvencies.

                                         1996          1995         1994   
                                     -----------   -----------  -----------
     Expenses:
      Losses and loss adjustment
       expenses                      $18,051,136   $21,000,749  $15,079,858
      Reinsurance recoveries          (4,616,616)   (5,511,850)  (3,389,844)
                                     -----------   -----------  -----------

         Net losses and loss
          adjustment expenses        $13,434,520   $15,488,899  $11,690,014
                                     ===========   ===========  ===========

11. Segment reporting
    -----------------

    The Company has two operating segments which are located primarily in the
    Pacific Northwest.  The distribution segment includes all operations
    relating to wholesale grocery and related product sales, retail grocery
    sales, service department revenues, and financing income and fees.  The
    insurance segment includes all operations relating to insurance
    underwriting, commissions, and reinsurance primarily to provide workers'
    compensation and property-casualty coverage.

    A summary of information about the Company's operations by segment before
    intersegment eliminations for the three years is as follows:
                                                
                                  1996            1995            1994     
                             --------------  --------------  --------------

    Net sales and operations:
     Distribution            $1,283,119,244  $  996,966,961  $  936,266,067
     Insurance                   20,095,633      22,794,952      18,788,523
      Less intersegment 
       insurance sales and 
       expenses                  (1,708,211)     (1,513,457)       (834,240)
                             --------------  --------------  --------------

         Total               $1,301,506,666  $1,018,248,456  $  954,220,350
                             ==============  ==============  ==============

    Income before allowances,
     dividends, income taxes 
     and accounting change:
      Distribution           $   13,351,190  $   18,889,425  $   19,791,157
      Insurance                   2,480,300       3,127,833       2,952,047
                             --------------  --------------  --------------

         Total               $   15,831,490  $   22,017,258  $   22,743,204
                             ==============  ==============  ==============


                                                                            24
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


11. Segment reporting (continued)
    -----------------------------

                                  1996            1995            1994     
                             --------------  --------------  --------------
    Total assets:
     Distribution            $  314,180,675  $  260,365,677  $  243,267,148
     Insurance                   69,963,279      63,698,155      64,923,598
                             --------------  --------------  --------------

         Total               $  384,143,954  $  324,063,832  $  308,190,746
                             ==============  ==============  ==============

    Depreciation expense:
     Distribution            $    6,442,124  $    5,770,681  $    5,408,896
     Insurance                      187,124         181,895         200,883
                             --------------  --------------  --------------

         Total               $    6,629,248  $    5,952,576  $    5,609,779
                             ==============  ==============  ==============

    Capital expenditures:
     Distribution            $   16,151,402  $   10,096,516  $    5,161,425
     Insurance                       79,735         275,224          93,157
                             --------------  --------------  --------------

         Total               $   16,231,137  $   10,371,740  $    5,254,582
                             ==============  ==============  ==============

    For net sales and operations during the three years ended September 27,
    1996, wholesale grocery sales (primarily to members) accounted for
    approximately 95% of the distribution total.  Premium revenue (primarily
    from members) accounted for approximately 95% of the insurance total.
    
12.    Retirement plans
       ----------------

   The Company has a Company-sponsored pension plan that covers substantially
   all of its salaried employees.  The Company also has separate Company-
   sponsored 401(k) plans for salaried and union employees.  The Company has
   made annual contributions to the plans equal to the amount annually
   accrued for pension expense.  The Company's funding policy is to satisfy
   the funding requirements of the Employees' Retirement Income Security Act.

   The Company also participates in several multi-employer pension plans for
   the benefit of its employees who are union members.  The data available
   from administrators of the multi-employer plans is not sufficient to
   determine the accumulated benefit obligation, nor the net assets
   attributable to the multi-employer plans in which the Company's union
   employees participate.

   The financial statements include pension expense for the Company-sponsored
   pension plan as determined using Statement of Financial Accounting
   Standards (SFAS) No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS.  The effect
   of SFAS No. 87 was an increase of pension expense in the amount of
   $191,893 for 1996, and a decrease of $362,794 for 1995 and $546,894 for
   1994.  The Company's unrecognized net asset resulting from the initial
   application of SFAS No. 87 of $3,027,024 is being amortized over eighteen
   years with a remaining balance of $1,547,153 as of September 27, 1996.



                                                                      25
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------
12.    Retirement plans (continued)
       ----------------------------

   In determining the actuarial present value of the projected benefit
   obligation, a discount rate of 8% and a future maximum compensation
   increase rate of 4% were used.  The expected long-term rate of return on
   assets was 8%.

   Pension costs for all plans for the three years consist of the following: 
                                         1996          1995          1994   
                                     -----------   -----------   -----------
   Company-sponsored:
    Service costs of benefits 
     earned                          $   952,126   $   945,413   $   918,423
    Interest cost on the projected 
     benefit obligation                1,667,852     1,557,954     1,448,447
    Expected return on plan assets    (1,932,053)   (1,713,673)   (1,688,595)
    Net amortization of unrecognized 
     net asset                          (168,168)     (168,168)     (168,168)
    Unrecognized net gain                (37,901)         --          (4,414)
    Unrecognized prior service 
     cost                                 61,478        61,478        73,760
                                     -----------   -----------   -----------

       Net salaried pension cost         543,334       683,004       579,453

   Multi-employer plan costs           3,326,359     2,590,269     2,395,300
   Matching costs of 401(k) plans        290,518       384,282       391,605
                                     -----------   -----------   -----------

       Total pension expense         $ 4,160,211   $ 3,657,555   $ 3,366,358
                                     ===========   ===========   ===========

   The following table sets forth the Company-sponsored plan's funded status
   as of year end:
                                         1996          1995          1994   
                                     -----------   -----------   -----------
   Actuarial present value of 
    benefit obligations:
     Vested                          $14,458,251   $14,997,208   $13,337,570
     Non-vested                          985,366       927,101       823,015
                                     -----------   -----------   -----------
     Accumulated benefit 
       obligation                     15,443,617    15,924,309    14,160,585
     Effect of projected future
      compensation levels              5,837,535     4,767,286     4,881,117
                                     -----------   -----------   -----------
     Projected benefit obligation     21,281,152    20,691,595    19,041,702
   Plan assets at fair value, 
    primarily listed stocks, fixed 
    income, and bond and equity 
    funds                             27,252,210    24,482,376    22,030,725
                                     -----------   -----------   -----------
   Excess of plan assets over 
    projected benefit obligation       5,971,058     3,790,781     2,989,023
   Unrecognized prior service cost       655,515       716,993       778,471
   Unrecognized net gain              (4,802,538)   (2,745,049)   (1,422,307)
   Unrecognized net asset, net of
    amortization                      (1,561,167)   (1,729,335)   (1,897,503)
                                     -----------   -----------   -----------

      Prepaid pension cost           $   262,868   $    33,390   $   447,684
                                     ===========   ===========   ===========

                                                                  26
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


12.    Retirement plans (continued)
       ----------------------------

   In addition to providing pension benefits, the Company provides certain
   medical benefits for certain salaried retirees, spouse and eligible
   dependents.  Employees who were hired prior to January 1, 1989, the last
   eligibility date, and have met the Company's minimum service requirements,
   become eligible for these benefits.  The medical benefits available are
   non-contributory in nature, and it is the Company's practice to fund these
   benefits as incurred.

   Postretirement benefit costs for 1996 were $491,993, which is comprised of
   $52,361 for service costs, $270,543 for interest cost and $169,089 for the
   amortization of the transition obligation.  The Company's unrecognized
   transition obligation resulting from the initial application of SFAS
   No.106 of $3,668,682 is being amortized over twenty years and has a
   remaining balance of $3,499,593 as of September 27, 1996.  The assumed
   health care cost trend used to measure the expected cost of benefits was
   10% in year one, decreasing 1% per year to a minimum rate of 4%.  Prior to
   adopting SFAS No. 106, postretirement benefits were expensed as claims
   were paid, and amounted to approximately $349,000 and $356,000 for 1995
   and 1994, respectively.

13.    Leases
       ------

   The Company is obligated under one hundred and twenty-seven significant
   leases in 1996.  Fifty-one of these leases are for twenty to twenty-five
   years with renewal options and involve supermarket properties which are
   subleased to members.  Six of these leases are subleased to affiliated
   companies.  The remaining leases represent property and equipment used by
   the Company.  The leases expire at various dates, the last expiring in
   2022.  Rental expense for the three years consists of the following:

                                      1996            1995           1994   
                                  -----------     -----------    -----------
         Minimum rentals          $19,463,073     $15,252,948    $13,690,702
         Less sublease income      (6,873,099)     (6,549,338)    (5,971,461)
                                  -----------     -----------    -----------

         Net rental expense       $12,589,974     $ 8,703,610    $ 7,719,241
                                  ===========     ===========    ===========

    The following is a schedule by years showing future minimum rental
    payments required under operating leases that have initial or remaining
    non-cancelable lease terms in excess of one year as of September 27,
    1996:
           Fiscal                   Minimum        Minimum           Net
            year                  payments (A)   receipts (B)      minimum  
         ---------                ------------   ------------   ------------
         1996-1997                $ 21,279,652   $  7,904,468   $ 13,375,184
         1997-1998                  20,060,119      8,923,638     11,136,481
         1998-1999                  18,556,581      8,859,209      9,697,372
         1999-2000                  17,548,978      8,664,809      8,884,169
         2000-2001                  16,884,746      8,502,442      8,382,304
         Later years               143,943,281     94,120,970     49,822,311
                                  ------------   ------------   ------------

            Total                 $238,273,357   $136,975,536   $101,297,821
                                  ============   ============   ============


                                                                            27
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


13. Leases (continued)
    ------------------
                                    Minimum        Minimum           Net
                                  payments (A)   receipts (B)      minimum  
                                  -----------    -----------    -----------
    Summary:
     Building leases              $229,625,277   $136,122,368   $ 93,502,909 
     Equipment leases                8,648,080        853,168      7,794,912 
                                  ------------   ------------   ------------

         Total                    $238,273,357   $136,975,536   $101,297,821
                                  ============   ============   ============

    (A)  Minimum payments are those required by the Company over the terms of
         the significant leases.

    (B)  Minimum receipts are those to be received by the Company from
         sublease agreements.

    The Company has sale-leaseback transactions for four cash and carry
    outlets.  The sales resulted in deferred gains of approximately
    $1,200,000 which are being amortized over the leaseback period of fifteen
    years.  The total remaining lease commitments are approximately
    $3,940,000 over fourteen years with an annual rental of approximately
    $310,000.

14. Supplemental cash flow information
    ----------------------------------

                                      1996            1995            1994   
                                  -----------     -----------     -----------
   Supplemental disclosures:
    Cash paid during the 
     year for:
      Interest                    $14,546,216     $11,753,143     $ 8,898,144
      Income taxes - net 
        of refunds                    278,730         341,836         336,810

   Supplemental schedule of
    noncash investing and
    financing activities:
     Patronage dividends payable
      in common stock                 799,890       1,703,103       1,864,432
     Exchange of member loan 
      for equity interest in 
      affiliate                     3,250,000            --              --
       
15.    Affiliated companies
       --------------------

   The Company owns interests in three separate affiliates which are
   accounted for on the equity method.  All of these affiliates are in the
   grocery distribution business.  One affiliate is a vendor that provides
   private label brand merchandise.  The other affiliates operate retail
   grocery stores and are also members of the Company.






                                                                            28
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------

15.    Affiliated companies (continued)
       --------------------------------

   An approximate summary of accounts aggregate transactions with these
   affiliates is as follows:
                                      1996            1995        
                                  ------------    -----------
       For the balance sheet:
        Equity interest           $ 12,477,000    $ 8,392,000     
        Accounts receivable          3,800,000      4,820,000     
        Notes receivable             2,853,000      6,440,000     
        Accounts payable            (5,259,000)    (4,930,000)    
        Undistributed earnings       1,975,000      1,416,000     

                                      1996            1995           1994   
                                  ------------    -----------    -----------
       For the income statement:
        Increase in equity 
         investments              $  3,517,000    $   607,000    $ 6,094,000
        Sales                     (129,855,000)   (91,447,000)   (22,945,000)
        Purchases                  111,348,000     97,541,000     89,179,000
        Volume incentive rebate     (2,931,000)    (1,707,000)    (1,561,000)
        Refunds, rebates and
          allowances                 2,570,000      3,013,000        701,000
        Equity interest
         income (loss)                 568,000        (47,000)      (192,000) 

        Dividends received               --              --             --

   These affiliates and the Company's percentage of ownership are as follows:

       Western Family Holding Company                            22%
       C & K Market, Inc.                                        22%
       R.A.F. Limited Liability Company                          94%
       North State Grocery, Inc.                                 26%
       West Linn Foods Marketplace, L.L.C.                       20%
       Willamette Foods Marketplace, L.L.C.                      49%

   All of these affiliates are privately held companies for which no ready
   market values are available.  In management's opinion, the equity interest
   as stated is equal to or less than the fair value of their interest in
   these affiliates.
   
16.    Concentrations of credit risk
       -----------------------------

   Financial instruments that potentially subject the company to significant
   concentrations of credit risk consist principally of cash and cash
   equivalents, investments, store financing loans and trade accounts
   receivable.

   The Company holds its cash and cash equivalents in several banks located
   in the Pacific Northwest and a zero balance bank account located in the
   Midwest.  Each bank is covered by FDIC insurance; balances in excess of
   coverage are not insured.







                                                                            29
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 ---------------------------------------------


16.    Concentrations of credit risk (continued)
       -----------------------------------------

   As a cooperative, the majority of the Company's accounts receivable
   represent sales to its members who are located throughout the Pacific
   Northwest.  These accounts are not generally secured by collateral but
   each member has stock holdings in the Company as well as patronage rebates
   which the Company could apply against account balances.

   The Company makes store financing loans to members from time to time
   mainly to finance the acquisition of grocery store properties and
   equipment.  These loans are represented by notes receivable which are
   secured by collateral consisting of personal property, securities and
   guarantees.  See Note 18.a. for sale of notes subject to limited recourse
   provisions.

   The insurance subsidiaries have investments primarily in federal
   securities and state municipal bonds which are backed by the full faith
   and credit of the respective governmental agency.  See Note 2 for
   investment details.

17.    Fair value of financial instruments
       -----------------------------------

   The following disclosure of the estimated fair value of financial
   instruments is made in accordance with the requirements of SFAS No. 107,
   DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.  The estimated fair
   value amounts have been determined by the Company using available market
   information and appropriate valuation methodologies.

   The following methods and assumptions were used by the Company in
   estimating its fair value disclosures for financial instruments:

   CASH AND CASH EQUIVALENTS, INVESTMENTS MAINTAINED FOR INSURANCE RESERVES
   AND LONG-TERM NOTES RECEIVABLES INCLUDING THE CURRENT PORTION:  The
   carrying amounts reported in the balance sheet for cash and cash
   equivalents and long-term receivables approximate their fair value.

   INVESTMENT IN AND ACCOUNTS WITH AFFILIATED COMPANIES:  It is not
   practicable to estimate the fair value of an investment representing the
   common stock of a non-public company because this stock is not traded;
   that investment is carried at its original cost plus equity in earnings to
   date in the consolidated balance sheet.

   NOTES PAYABLE - BANK AND LONG-TERM LIABILITIES, INCLUDING CURRENT
   MATURITIES:  The carrying amounts of commercial paper and other variable-
   rate debt instruments approximate their fair value.  The fair values of
   fixed-rate long-term debt are estimated using discounted cash flow
   analyses based on the Company's incremental borrowing rates for similar
   types of borrowing arrangements.  The assumed incremental borrowing rates
   used to determine the fair value of fixed-rate long-term debt were 7.50%
   to 8.30% and 7.50% to 8.00% for 1996 and 1995, respectively.  










                                                                            30
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


17.    Fair value of financial instruments (continued)
       -----------------------------------------------

   INSURANCE RESERVES SUPPORTED BY INVESTMENTS:  The fair value of insurance
   accruals, which represent contractual obligations to pay cash in the
   future, is estimated based on a discounted cash flow analysis using the
   Company's incremental borrowing rate as the discount rate.

   The carrying amounts and fair values of the Company's financial
   instruments at the balance sheet date are as follows:
<TABLE>
<CAPTION>

                                       1996                     1995        
                            -------------------------------------------------------
                              Carrying      Fair       Carrying      Fair
                              amounts      values       amounts     values
                            ----------- -----------  ----------- -----------
   <S>                      <C>         <C>          <C>         <C>
   Cash and cash equivalents$16,509,866 $16,509,866  $13,045,456 $13,045,456
   Investments maintained for
    insurance reserves       46,828,893  46,966,058   40,809,762  41,610,228
   Long-term notes receivable,
    including the current 
    portion                  28,660,237  28,165,237   26,602,381  26,302,381
   Investment in and accounts
    with affiliated companie 12,477,107  12,477,107    8,392,281   8,392,281
   Notes payable - bank      61,173,867  61,173,867   48,515,543  48,515,543
   Insurance reserves supported
    by investments           29,561,657  29,561,657   29,958,678  29,958,678
   Long-term liabilities, 
    including current maturities      152,208,088153,560,695123,196,885124,416,290

</TABLE>

18. Commitments and contingencies
    -----------------------------
                                                
    a.   The Company has entered into various agreements under which it sells
         certain of its notes receivable from members subject to limited
         recourse provisions.  These notes are secured by collateral which
         usually consists of personal property, securities and guarantees. 
         The Company in turn receives a monthly service fee. In 1996, 1995
         and 1994, the Company sold notes totaling approximately $10,549,000,
         $20,800,000 and $8,600,000, respectively.  The balances of
         transferred notes that were outstanding and subject to recourse
         provisions were approximately $27,426,000, $28,537,000 and
         $13,652,000 at September 27, 1996, September 29, 1995 and September
         30, 1994, respectively.

    b.   In connection with its loan activities to members, the Company has
         approved loan applications totaling approximately $16,528,900 for
         which funds have been committed, but not disbursed, as of September
         27, 1996.

    c.   The Company is guarantor of a covenant and a loan by members as of
         September 27, 1996 totaling approximately $2,137,000 with annual
         payments of approximately $291,000.








                                                                      31
<PAGE>
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                 --------------------------------------------


18. Commitments and contingencies (continued)
    -----------------------------------------

    d.   The Company is in labor negotiations with several of its unions,
         whose contract expired in April, 1996.  If the Company is unable to
         reach a negotiated settlement, it is likely that a strike would
         occur which would depress volumes and cause plant efficiencies to
         suffer.

    e.   The Company is a party to various litigation and claims arising in
         the ordinary course of business.  While the ultimate effect of such
         actions cannot be predicted with certainty, the Company expects that
         the outcome of these matters will not result in a material adverse
         effect on the Company's consolidated financial position or results
         of operations.
    














































                                                                      32
<PAGE>











Board of Directors
United Grocers, Inc.


           INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION
           --------------------------------------------------------


We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in United Grocers, Inc.'s annual
report to stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated December 12, 1996.  Our audits were made for
the purpose of forming an opinion on those financial statements taken as a
whole.  The pro forma consolidated schedules of income for the years ended
September 27, 1996 and September 29, 1995 are presented for purposes of
additional analysis and are not a required part of the basic financial
statements.  Such information has not been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
accordingly, we express no opinion on it.




                                                /s/ DeLap, White & Raish


Portland, Oregon
December 12, 1996





























                                                                      33
<PAGE>
                             UNITED GROCERS, INC.
                             --------------------
                  PRO FORMA CONSOLIDATED SCHEDULES OF INCOME
             YEARS ENDED SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
             -----------------------------------------------------


                                                 1996             1995   
                                            --------------     --------------
Net sales and operations                    $1,352,302,776     $1,326,522,799
                                            --------------     --------------

Cost and expenses:
 Cost of sales                               1,172,830,590      1,149,986,553
 Operating expenses                            130,089,635        126,054,112
 Selling and administrative expenses            15,997,692         11,705,432
 Depreciation                                    6,631,292          6,392,862
 Interest:                                                     
 
 Interest expense                               14,825,357         14,175,652
  Interest income                               (4,162,561)        (4,494,053)
                                            --------------     --------------
    Interest expense, net                       10,662,796          9,681,599
                                            --------------     --------------

         Total costs and expenses            1,336,212,005      1,303,820,558
                                            --------------     --------------

Income before members' allowances and 
 patronage dividends, and income taxes          16,090,771         22,702,241

Members' allowances                            (11,604,949)       (11,513,784)

Members' patronage dividends                    (4,000,000)        (8,350,000)
                                            --------------     --------------

Income before income taxes                         485,822          2,838,457

Provision for income taxes                        (185,052)        (1,021,063)
                                            --------------     --------------

         Net income                         $      300,770     $    1,817,394
                                            ==============     ==============



This pro forma presentation attempts to show United Grocers, Inc. and Market
combined and operating as one business unit using historical financial
statements as if the transaction had been consummated at the beginning of the
year that ended September 29, 1995.  (See Note 1.d. of the notes to
consolidated financial statements for more details of this transaction.)











The accompanying independent auditor's report on supplemental information
should be read as part of this schedule.





                                                                   34
<PAGE>











Board of Directors
United Grocers, Inc.



         INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULES
         -------------------------------------------------------------



We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in United Grocers, Inc.'s annual
report to stockholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated December 12, 1996.  Our audits were made for
the purpose of forming an opinion on those financial statements taken as a
whole.  Schedules I, II and V listed in the index under Section 210.12-04 are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.  These
schedules have been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                            /s/ DeLap, White & Raish


Portland, Oregon
December 12, 1996
    




























                                                                   35
<PAGE>
                                                                    SCHEDULE I
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                   SEPTEMBER 27, 1996 AND SEPTEMBER 29, 1995
                   ----------------------------------------
BALANCE SHEETS:
--------------
                                    ASSETS
                                    ------
                                                  1996            1995    
                                              ------------   -------------
Current assets:
 Cash and cash equivalents                    $  6,538,664   $  1,215,643
 Accounts receivable - net of allowance         60,052,031     55,014,559
 Inventories                                    99,762,081     73,880,989
 Other current assets                            3,791,262      2,875,918
 Deferred income taxes                             683,022        884,350
                                              ------------   ------------
  Total current assets                         170,827,060    133,871,459
                                              ------------   ------------

Non-current assets:
 Investments in affiliated companies
  and intercompany accounts                     75,357,036     74,593,758
 Other non-current assets                       22,796,883     15,410,908
                                              ------------   ------------
  Total non-current assets                      98,153,919     90,004,666
                                              ------------   ------------

Property, plant and equipment - (net 
 of accumulated depreciation)                   63,667,719     55,669,749
                                              ------------   ------------

  Total                                       $332,648,698   $279,545,874
                                              ============   ============

                        LIABILITIES AND MEMBERS' EQUITY
                        -------------------------------

Current liabilities:
 Notes payable - bank                         $ 61,173,867   $ 48,515,543
 Accounts payable                               61,126,166     49,765,896
 Other expenses and taxes                        9,130,914      4,678,846
 Members' patronage payable                      3,200,110      6,646,867
 Current installments on long-term
  liabilities                                    9,073,983      7,573,215
                                              ------------   ------------
  Total current liabilities                    143,705,040    117,180,367
                                              
Long-term liabilities                          143,134,105    115,623,670
Deferred income taxes                            3,550,044      3,696,317
Deferred income                                  1,000,026        886,917   
                                              ------------   ------------
  Total liabilities                            291,389,215    237,387,271
                                              ------------   ------------
Members' equity:
 Common stock                                    3,192,255      3,278,315
 Additional paid-in capital                     24,224,262     23,956,797
 Retained earnings                              13,842,966     14,923,491
                                              ------------   ------------
  Total members' equity                         41,259,483     42,158,603
                                              ------------   ------------
                                              
  Total                                       $332,648,698   $279,545,874
                                              ============   ============

The independent auditor's report on financial statement schedules should be
read with this supplemental schedule along with the notes to the consolidated
financial statements.
                                                                 36
<PAGE>
                                                                  SCHEDULE I
                     UNITED GROCERS, INC. AND SUBSIDIARIES
                     -------------------------------------
           CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
             YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, 
                            AND SEPTEMBER 30, 1994
                            ----------------------
<TABLE>
<CAPTION>
STATEMENTS OF INCOME:
--------------------
                                           1996            1995           1994    
                                      --------------   ------------   ------------
<S>                                   <C>              <C>            <C>
Net sales and operations              $1,226,617,871   $937,134,185   $898,754,635
                                      --------------   ------------   ------------
Costs and expenses:
 Cost of sales                         1,072,100,764    812,077,258    782,437,215
 Operating expenses                      103,928,225     76,575,960     71,084,769
 Selling and administrative expenses      14,989,440     10,872,432      9,533,741
 Depreciation                              5,636,998      4,878,412      4,444,310
 Interest expense, net of interest
  income                                  13,981,587     11,450,122      8,343,701
                                      --------------   ------------   ------------
      Total costs and expenses         1,210,637,014    915,854,184    875,843,736
                                      --------------   ------------   ------------

Income before members' allowances and
 patronage dividends, income taxes and
 income (loss) of subsidiaries            15,980,857     21,280,001     22,910,899
Members' allowances                      (11,744,604)   (11,513,784)   (11,449,305)
Members' patronage dividends              (4,000,000)    (8,350,000)    (8,730,168)
                                      --------------   ------------    -----------

Income before income taxes and
 income (loss) of subsidiaries               236,253      1,416,217      2,731,426
Provision for income taxes                   (76,092)      (457,895)      (876,343)
Income (loss) of subsidiaries                 (7,849)       420,683       (291,693)
                                      --------------   ------------   ------------
      Net income                      $      152,312   $  1,379,005   $  1,563,390
                                      ==============   ============   ============
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF MEMBERS' EQUITY:
----------------------------- 
                                           Additional
                              Common        paid-in        Retained
                              stock*        capital        earnings       Total   
                           -----------    -----------    -----------   -----------
<S>                        <C>            <C>            <C>           <C>
Balance, October 1, 1993   $ 3,285,755    $21,006,563    $14,820,084   $39,112,402
Stock:
 Issued                        148,090      1,515,656           --       1,663,746
 Repurchased                  (334,440)    (1,757,412)    (1,687,261)   (3,779,113) 
Patronage dividends            156,675      1,707,757           --       1,864,432
Net income                        --             --        1,563,390     1,563,390
                           -----------    -----------    -----------   -----------
Balance, Sept 30, 1994       3,256,080     22,472,564     14,696,213    40,424,857

Stock:
 Issued                        115,780      1,260,324           --       1,376,104
 Repurchased                  (230,585)    (1,342,184)    (1,151,727)   (2,724,496)
Patronage dividends            137,040      1,566,093           --       1,703,133
Net income                        --             --        1,379,005     1,379,005
                           -----------    -----------    -----------   -----------
Balance, Sept 29, 1995       3,278,315     23,956,797     14,923,491    42,158,603   

<PAGE>
Stock:                                                   
 Issued                         93,620      1,059,512           --       1,153,132
 Repurchased                  (244,680)    (1,526,937)    (1,232,837)   (3,004,454)
Patronage dividends             65,000        734,890           --         799,890
Net income                        --             --          152,312       152,312
                           -----------    -----------    -----------   -----------

Balance, Sept 27, 1996     $ 3,192,255    $24,224,262    $13,842,966   $41,259,483 
                           ===========    ===========    ===========   ===========


*See consolidated statements of members' equity for common stock share information.









The independent auditor's report on financial statement schedules should be read with
this supplemental schedule along with the notes to the consolidated financial
statements.
</TABLE>














































                                                                        37
<PAGE>
<TABLE>
<CAPTION>
                                                                                
SCHEDULE I
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
               CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
      YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
      --------------------------------------------------------------------------
                                           
STATEMENTS OF CASH FLOWS:
------------------------
                                          1996            1995           1994   
                                      -----------     -----------    -----------
<S>                                   <C>             <C>            <C>
Cash flows from operating activities:
  Net income                          $   152,312     $ 1,379,005    $ 1,563,390
  Adjustments to reconcile net 
   income to net cash provided by 
   (used in) operating activities:
    Depreciation                        5,636,998       4,878,412      4,444,310
    Provision for doubtful accounts       828,086         622,000        722,000
    Patronage dividends payable
     in common stock                      799,890       1,703,133      1,864,432
    Loss (gain) on sale of assets         545,650         213,478         22,593
   (Income) loss of subsidiaries            7,849        (420,683)       291,693
    Equity in loss (earnings) of 
    affiliated companies                 (567,701)         46,989        191,760
    Deferred income taxes                  55,055         296,932        719,262
    (Increase) decrease in non-cash
    current assets:
      Accounts receivable               6,426,757     (11,183,991)   (16,408,543)
      Inventories                      (5,085,569)     (3,504,412)    (1,560,061)
    Other current assets                 (374,779)       (283,055)      (592,812)
    Increase (decrease) in non-cash
   current liabilities:
    Accounts payable                   (1,999,775)     (3,936,161)     6,050,699
    Other expenses and taxes            2,951,925       1,217,329        134,923 
    Members' patronage payable         (3,446,757)       (218,869)      (349,191)
    (Increase) decrease in other 
    non-current assets                 (5,902,398)     (2,811,565)    (1,529,897)
                                      -----------     -----------    -----------
      Net cash provided by (used in)
       operating activities                27,543     (12,001,458)    (4,435,442)
                                      -----------     -----------    -----------
                                      
Cash flows from investing activities:
 (Increase) decrease in investment 
  in affiliated companies                (203,426)      1,199,609    (13,363,124)
 Sale of property, plant
  and equipment                         6,621,492         824,916         46,238
 Purchase of property, plant
  and equipment                       (15,403,431)     (8,039,599)    (3,923,351)
 Purchase of business combination     (23,251,791)           --             --   
                                      -----------     -----------    -----------
  Net cash used in investing
   activities                         (32,237,156)     (6,015,074)   (17,240,237)
                                      -----------     -----------    -----------
                                      


The independent auditor's report on financial statement schedules should be read with
this supplemental schedule along with the notes to the consolidated financial
statements.





                                                                           38
<PAGE>
                                                                                
SCHEDULE I
                         UNITED GROCERS, INC. AND SUBSIDIARIES
                         -------------------------------------
               CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
      YEARS ENDED SEPTEMBER 27, 1996, SEPTEMBER 29, 1995, AND SEPTEMBER 30, 1994
      ---------------------------------------------------------------------------
                                           
STATEMENTS OF CASH FLOWS (CONTINUED):
------------------------------------



                                            1996            1995             1994   
                                       --------------   -----------     ------------
Cash flows from financing activities:
 Sale of common stock                  $    1,153,132   $  1,376,104    $  1,663,746
 Repurchase of common stock                (3,004,454)    (2,724,496)     (3,779,113)
 Proceeds of long-term liabilities:
 Revolving bank lines of credit         1,043,200,000    689,100,000     807,500,000
 Mortgages and notes                       30,310,851     25,640,393      12,104,717
 Redeemable notes and certificates         18,056,500     19,529,600      22,395,400
 Repayment of long-term liabilities:
  Revolving bank lines of credit       (1,030,541,677)  (671,605,124)   (801,209,733)
  Mortgages and notes                      (6,923,218)   (23,842,696)     (2,157,310)
  Redeemable notes and certificates       (14,718,500)   (19,492,749)    (22,618,900)
                                       --------------   ------------    ------------
      Net cash provided by 
       financing activities                37,532,634     17,981,032      13,898,807
                                       --------------   ------------    ------------
      
Net increase (decrease) in cash
 and cash equivalents                       5,323,021        (35,500)     (7,776,872)
Cash and cash equivalents: 
 Beginning of year                          1,215,643      1,251,143       9,028,015
                                       --------------   ------------    ------------

      End of year                      $    6,538,664   $  1,215,643    $  1,251,143
                                       ==============   ============    ============

Supplemental disclosures:
 Cash paid during the year for:
  Interest                             $   14,546,216   $ 11,753,143    $  8,898,144
                                       ==============   ============    ============
  Income taxes - net of refunds        $      278,730   $    341,836    $    336,810
                                       ==============   ============    ============

 Dividends paid to registrant by
  UGIC, Ltd.                           $      723,829   $      --       $      --  
                                       ==============   ============    ============

Supplemental schedule of noncash
 investing and financing activities:
  Patronage dividends payable in
  common stock                         $      799,890   $  1,703,133    $  1,864,432
                                       ==============   ============    ============


</TABLE>





The independent auditor's report on financial statement schedules should be
read with this supplemental schedule along with the notes to the consolidated
financial statements.


                                                                         39
<PAGE>
<TABLE>
<CAPTION>

                                          UNITED GROCERS, INC. AND SUBSIDIARIES                       SCHEDULE II        
                                          -------------------------------------
                                            VALUATION AND QUALIFYING ACCOUNTS
                                      FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                                      --------------------------------------------
 Column A                        Column B        Column C - Additions        Column D      Column E 
-----------                    ------------  -----------------------------------------    ----------
                                                 (1)            (2)
                               Balance at     Charged to     Business      Deductions-    Balance at
                               beginning      costs and     combination    net writeoffs     end of
Description                      of period     expenses       accounts     and payments     period 
-----------                    ------------  --------------------------    ------------  ----------
<S>                            <C>           <C>            <C>            <C>            <C>
1996:
Reserves deducted in
 balance sheet from asset
 to which it applies - 
 Allowance for doubtful
 accounts for:
  Accounts receivable          $ 1,176,767   $ 1,001,041    $   587,540    $ 1,624,624    $ 1,140,724
  Notes receivable                 508,229     1,062,000        317,716        778,301      1,109,644
                               -----------   --------------------------   ------------    -----------
        Total                  $ 1,684,996   $ 2,063,041    $   905,256    $ 2,402,925    $ 2,250,368
                               ===========   ===========    ===========    ===========    ===========
Reserves which support 
 the balance sheet caption:
  Insurance reserves for
   losses and expenses:
    Workers' compensation      $16,181,057   $ 7,232,693    $      --      $ 8,486,847    $14,926,903
     Property and casualty      13,777,621     5,853,398           --        4,996,265     14,634,754
                               -----------   -----------    -----------    -----------    -----------
        Total                  $29,958,678   $13,086,091    $      --      $13,483,112    $29,561,657
                               ===========   ===========    ===========    ===========    ===========
1995:
Reserves deducted in
 balance sheet from asset
 to which it applies - 
 Allowance for doubtful
 accounts for:
  Accounts receivable          $ 1,270,987   $   794,189    $      --      $   888,409    $ 1,176,767
  Notes receivable                 334,774     1,100,000           --          926,545        508,229
                               -----------   -----------    --------------------------    -----------
        Total                  $ 1,605,761   $ 1,894,189    $      --      $ 1,814,954    $ 1,684,996
                               ===========   ===========    ============   ===========    ===========
Reserves which support 
 the balance sheet caption:
  Insurance reserves for
   losses and expenses:
    Workers' compensation      $15,205,999   $ 9,837,535    $       --     $ 8,862,477    $16,181,057
     Property and casualty      16,832,409     5,652,133            --       8,706,921     13,777,621
                               -----------   -----------    ------------   -----------    -----------
        Total                  $32,038,408   $15,489,668    $       --     $17,569,398    $29,958,678
                               ===========   ===========    ==========================    ===========


The independent auditor's report on financial statement schedules should be read with this supplemental schedule.
                                                                                                                   40    
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                      SCHEDULE II          
                           UNITED GROCERS, INC. AND SUBSIDIARIES
                           -------------------------------------
                       VALUATION AND QUALIFYING ACCOUNTS (CONTINUED)
                       FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                       ============================================

 Column A                       Column B      Column C       Column D       Column E 
----------                     ----------    ----------     -------------  ----------
                                              Additions     
                                Balance at    charged to    Deductions-    Balance at
                                beginning     costs and     net writeoffs    end of
Description                     of period      expenses      and payments    period  
-----------                    -----------   -----------    -------------  ----------
<S>                            <C>           <C>            <C>            <C>
1994:

Reserves deducted in balance 
 sheet from asset to which it 
 applies - 
 Allowance for doubtful 
  accounts for:
   Accounts receivable         $ 1,283,681   $ 1,092,589    $ 1,105,283    $ 1,270,987
   Notes receivable                376,108       900,000        941,334        334,774
                               -----------   -----------    -----------    -----------
     Total                     $ 1,659,789   $ 1,992,589    $ 2,046,617    $ 1,605,761
                               ===========   ===========    ===========    ===========
Reserves which support the
 balance sheet caption:
  Insurance reserves for
   losses and expenses:
    Workers' compensation      $15,230,686   $ 6,355,601    $ 6,380,288    $15,205,999
    Property and casualty       17,284,711     5,635,565      6,087,867     16,832,409
                               -----------   -----------    -----------    -----------
     Total                     $32,515,397   $11,991,166    $12,468,155    $32,038,408
                               ===========   ===========    ===========    ===========











As to columns omitted, the answer is "none".

















The independent auditor's report on financial statement schedules should be read with
this supplemental schedule.
                                                                           41
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                     SCHEDULE V 
                                         UNITED GROCERS, INC. AND SUBSIDIARIES
                                         SUPPLEMENTARY INFORMATION CONCERNING 
                                        PROPERTY-CASUALTY INSURANCE OPERATIONS
                                     FOR THE THREE YEARS ENDED SEPTEMBER 27, 1996
                                     --------------------------------------------

 Column A                             Column B         Column C          Column E         Column F         
-----------                          ----------       ------------     -----------      -----------
                                                      Reserves for
                                      Deferred        unpaid claims
                                       policy         and claims
                                     acquisition       adjustment        Unearned         Earned  
Affiliation with Registrant             costs           expenses         premiums        premiums         
---------------------------          -----------      -------------    -----------      -----------
<S>                                  <C>              <C>              <C>              <C>               
Consolidated property - 
 casualty entities:
  1996                               $   519,338      $29,561,657      $10,347,514      $19,781,425
  1995                                   471,064       29,958,678        8,735,486       21,581,735
  1994                                   432,192       32,038,408        8,518,168       18,192,765

<CAPTION>
                     Column G                 Column H                   Column I         Column J         Column K 
                    ----------       -----------------------------     ------------     ------------      ----------
                                                                       Amortization
                                                                       of deferred      Paid claims
                       Net                 Claims and claim              policy          and claim          
                    investment            adjustment expenses          acquisition       adjustment         Premiums
                      income               incurred related to            costs           expenses          written   
                    ----------       ------------------------------    ------------     ------------      -----------
                                          (1)             (2)

                                     Current year     Prior years
                                     ------------     -----------
<S>                 <C>              <C>              <C>              <C>              <C>               <C>
Consolidated property -
 casualty entities:
  1996              $ 3,219,591      $10,882,025      $ 2,504,066      $ 1,789,755      $13,386,090       $21,370,577
  1995                2,981,013       14,609,091          880,577        1,765,422       15,489,668        21,143,200
  1994                2,666,023       12,251,155         (558,021)       1,479,422       11,991,166        18,201,182


As to columns omitted, the answer is "none".




The independent auditor's report on financial statement schedules should be read with this supplemental schedule.

                                                                                                           42
</TABLE>
 <PAGE>
Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

    None
                                 PART III

Item 10.  Directors and Executive Officers of the Registrant

    A. Identification of Directors:

      Name                  Age    Principal Occupation
      ----                  ---    --------------------
      Directors whose terms began in 1994 and expire in 1997:

  Raymond Nidiffer          67     President, C & K Markets, Inc.
  David D. Neal             46     President, SMN Company
  Peter J. O'Neal           52     President, Quality Food Investments, Inc.

      Directors whose terms began in 1995 and expire in 1998:

  Dick Leonard              57     President, L & L Market, Inc.
  Dean Ryan                 38     President, Topps Industries, Inc.
  Gordon Smith              51     President, Market Place Foods, Inc. 

      Directors whose terms began in 1996 and expire in 1999:

   Robert A. Lamb           56     Partner, Lamb Lasko Partnership      
   Ron Mansacola            60     President, Al Mansacola Grocery Market, 
                                     Inc.
   H. Larry Montgomery      52     President, Larry's Market, Inc.         

      Nominees for Director (three to be elected in 1997 for terms expiring in
2000):

  Kenneth W. Findley        57     Vice President, Bales Thriftway, Inc.
  Dennis Blasingame         48     Owner, Da Boys #2
  Craig Danielson           48     President, Dan, Inc. Oregon
  Gaylon Baese              59     President, Howards on Scholls, Inc.
  James Glassel             56     President, Fatewell, Inc.
  James Wiley               38     President, Wiley & Sons, Inc.

  

    B. Identification of Executive Officers:

       Name               Age     Offices Held                Officer Since
       ----               ---     ------------                -------------
       Alan C. Jones      54     President, Secretary, Treas.    1981
       John W. White      43     Vice President                  1988
       George P. Fleming  56     Assistant Secretary             1980


    C. Identification of Certain Significant Employees:

       None.

    D.  Family Relationships

       None.

    E.  Business Experience

       All executive officers have been employed by United in various
management and executive capacities for more than the past five years.

       All directors and nominees have been principally engaged in the retail
grocery business for more than the past five years with the firms shown
opposite their names.  Except as described in Item 13 below, none of such
firms is a parent, subsidiary or other affiliate of United.

       No director or nominee is a director in another company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to the requirements of Section 15(d) of such Act or any
company registered as an investment company under the Investment Company Act
of 1940.

    F.  Involvement in Certain Legal Proceedings

        None

Item 11.  Executive Compensation

    A.  Remuneration

       The following table shows the compensation, during each of the years in
the three year period ended September 27, 1996, earned by each of the
Company's executive officers whose total annual salary and bonus for fiscal
1996 exceeded $100,000. The Company does not provide long term compensation to
its executive officers other than retirement benefits, as discussed below.

<TABLE>
<CAPTION>

Name of               
Individual                  Annual Compensation                 All
and                                                           Other
Principal                                                   Compen-
Position              Year      Salary       Bonus          sation <F1>
----------            ----      ------       -----          -----------
<S>                   <C>      <C>          <C>             <C>
Alan C. Jones         1996     $268,676     $ 60,000        $37,228
President,            1995      251,713       28,781         34,048
Chief Executive       1994      252,398       54,000         54,111
Officer
       

John W. White         1996      119,078       45,000          2,700
Vice President,       1995      112,195       38,000          2,767
Chief Financial       1994      108,959       35,000          4,823
Officer
<FN>
<F1> Amounts shown for fiscal 1996 and 1995 include the dollar amount of
insurance premiums paid by the Company with respect to term life insurance for
the benefit of Mr. Jones, in the amount of $30,000 for 1996 and $27,000 for
1995.  Such amounts also include matching contributions by the Company under
the United Grocers Special 401(k) Savings Plan as follows:  Mr. Jones, $7,228
and $7,048; Mr. White, $2,700 and $2,767.  The Company provides Mr. Jones with
a company car and a social membership at a local golf club.  
</TABLE>

B. Employment Agreement

    Mr. Jones has an employment agreement with the Company pursuant to which
he is entitled to an annual base salary (subject to cost of living adjustment)
plus bonuses subject to performance targets set at the discretion of the board
of directors.  The agreement further provides for Mr. Jones to receive certain
payments if the agreement is terminated without "cause" (as defined) or in the
event of a change in control of United.
 
    In the event Mr. Jones is terminated without cause during the term of the
agreement, he will be entitled to receive payments for the remaining term of
the agreement equal to 50% of his then-current base salary plus the annual
premium for his life insurance policy.  Further, Mr. Jones would be entitled
to be covered under the Company's medical and dental plans for the remaining
term of the agreement.  As of September 27, 1996, the employment agreement had
a remaining term of 12 months.

    In the event of a change of control of United (as defined), Mr. Jones will
have the right to terminate the employment agreement and receive a severance
payment equal to three times an amount which is 150% of his then-current base
salary. 
 

C.  Retirement Plan

       The Company's retirement plan is an actuarially funded defined benefit
plan. The following table shows the estimated annual benefits payable upon
retirement (assuming normal retirement at age 65) for employees at specified
annual salary levels (based upon the highest average of five consecutive
years) with various years of service.

<TABLE>
<CAPTION>

Annual                                  Pension Plan Table
Remuneration                           Years of Service <F1>            
------------                           ---------------------
            10      15         20        25        30         35
<S>        <C>      <C>        <C>       <C>       <C>        <C>
 $50,000   $ 7,733  $11,600    $15,467   $19,333    $23,200   $27,067
 $75,000   $12,358  $18,537    $24,717   $30,896    $37,075   $43,254
$100,000   $16,983  $25,475    $33,967   $42,458    $50,950   $59,422
$125,000   $21,608  $32,412    $43,217   $54,021    $64,825   $75,629
$150,000   $26,233  $39,350    $52,467   $65,583    $78,700   $91,817
 
<F1> Under the present terms of the Company's retirement plan, the maximum
salary level and number of years of service considered for the purposes of
determining benefits are $150,000 and 35 years, respectively. 
</TABLE>



The number of years of service under the plan for the officers listed in
the table on the preceding page is as follows:

                                                    Years of
                         Person                     Service 
                         ------                     --------
                         Alan C. Jones               32
                         John W. White                9

       The amount of compensation used in calculation of pension benefits for
Mr. Jones and Mr. White is the dollar amount shown under "salary" and "bonus,"
subject to plan limitations, in the table for Item 11, Section A. above.

     Amounts payable under the plan are not subject to deduction for social
security or other offset amounts.

       D.   Remuneration of directors

Directors, except the Chairman of the Board, received $10, plus expenses, for
each board meeting attended.  The Chairman received $25, plus expenses, for
each board meeting attended and for each additional day spent on the conduct
of United's business.


<PAGE>
Item 12.  Security Ownership of Certain Beneficial Owners and Management

       A.   Security Ownership of Certain Beneficial Owners

       The following table sets forth information as of December 22, 1996,
regarding each person known to United to be the beneficial owner of more than
5 percent of United's Common Stock.


Title of Class    Name and address    Amount and nature of   Percent of
                of beneficial owner   beneficial ownership      class
--------------  -------------------   --------------------   ----------

United Grocers,  Raymond L. Nidiffer      55,482 shares<F1>  8.9% of class 
Inc., Common     P. O. Box 730
Stock            Brookings, OR  97415


[FN]
<F1>   Includes 1,409 shares issuable as patronage dividendsithin 60 days. 
Mr. Nidiffer has sole voting and investment power with respect to the shares
indicated in the table.


       B.   Security Ownership of Management.

            As of December 22, 1996, the directors and nominees forelection as
directors of United owned the indicated amounts of United's Common Stock,
United's only class of voting security.

                                Amount of
                                Beneficial         Stock to           Percent
          Beneficial Owner      Ownership <F1><F2> be issued <F9>     of class
          ----------------      ------------------ --------------     --------
          Directors:                        

          Ray Nidiffer          54,073 shares        1,409 shares      8.9<F7>
          Dave Neal              4,000 shares          -0- shares       .6<F3>
          Peter J. O'Neal        4,174 shares           51 shares       .7     
   
          Deano Ryan             4,263 shares          -0- shares       .7<F3>
          Gordon Smith           4,996 shares           27 shares       .8<F8>
          Dick Leonard           4,133 shares          -0- shares       .7
          Robert A. Lamb        13,472 shares           15 shares      2.2<F4>
          Ron Mancasola          6,376 shares           73 shares      1.0<F3>
          H. Larry Montgomery    2,862 shares           20 shares       .5<F3>

          Directors and 
            officers as
            a group            98,349 shares        1,595 shares      16.1

          Nominees:

          Kenneth W. Findley    11,499 shares            0 shares      1.9<F6>
          Gaylon G. Baese        4,216 shares            0 shares       .7<F3>
          Craig T. Danielson    19,999 shares          268 shares      3.6<F5>
          Dennis Blasingame      1,699 shares           19 shares       .3<F3>
          James Glassel          1,073 shares           31 shares       .2<F3>
          James E. Wiley           200 shares           47 shares         <F3>
[FN]
<F1>      According to the bylaws, each stockholder of record is
          entitled to one vote and one vote only, irrespective of
          number of shares owned.  All of the above-named individuals
          have only one vote, except for Messrs. Smith, Danielson,
          Lamb and Findley, who may be deemed to have more than one
          vote because they have interests in various entities that own
          shares.

<PAGE>
<F2>      Except as indicated below, all of the above-named individuals
          have sole voting and investment power with respect to the
          shares indicated in the table.

<F3>      These shares are owned jointly by the person named and his
          spouse or by a corporation whose stock is owned jointly by
          the person named and his spouse.

<F4>      These shares are owned by a corporation and a partnership in which
          Mr. Lamb has an equity or voting interest.

<F5>      These shares are owned by two corporations in which Mr.
          Danielson has an equity interest.

<F6>      These shares are owned by a corporation in which Mr. Findley has a
          voting interest.

<F7>      These shares are owned by a corporation in which Mr. Nidiffer
          has a controlling interest.

<F8>      These shares are owned by two corporations in which Mr. Smith
          has an equity interest.

<F9>      These shares are issuable as patronage dividends within 60 days
          and are included in the total shown under "Amount of
          Beneficial Ownership."

  C.   Changes in Control.     None

Item 13.  Certain Relationships and Related Transactions.

  A.   Transactions with Management and Others

       All directors and nominees (or their firms), as members of United,
purchase groceries and related products from United in the ordinary course of
business at prices available to members generally.

       In the ordinary course of business, United enters into prime leases and
subleases property to qualified members.  United presently is a party to
subleases with entities affiliated with Ray Nidiffer, Craig Danielson, Ron
Mancasola, Gaylon Baese and Robert Lamb, directors or nominees for director of
United.  At September 27, 1996, monthly payments due pursuant to the subleases
were as follows:

       Danielson                        $91,049
       Nidiffer                         $51,660
       Mancasola                        $16,054
       Baese                            $20,078
       Lamb                             $47,841

       United guarantees members' indebtedness under certain conditions and
loans money to members through its financing department.  The Company has
guaranteed certain loan obligations of C&K Market, Inc., a corporation owned
and controlled by Ray Nidiffer, a director.

       During 1996, the company acquired one store in satisfaction of
indebtedness from a corporation in which David Neal, a director, had an
ownership interest.

  B.   Certain Business Relationships

       During fiscal year 1996, C&K Market, Inc., a corporation controlled by
Ray Nidiffer, a director, purchased groceries and other products in the
ordinary course of business from United in the amount of $89,279,472.  United
owns a 22% equity interest in C&K Market, Inc.

<PAGE>
  C.   Indebtedness of Management         

The following directors, officers, nominees or related persons or entities
were indebted to United during the fiscal year ended September 27, 1996, or
thereafter and prior to the date of this report:

<TABLE>
<CAPTION>
                               Largest 
                               aggregate
                            amount of debt
                              outstanding                            # of
                                during           Balance at         Notes
                              year ended        November 30,       & Rate of 
Name of Debtor               September 27,          1996           Interest
                                 1996
--------------              ---------------     ------------       ---------
<S>                          <C>                <C>             <C>

Quality Food Investments,
  Inc.                            75,000                -0-     
Peter J O'Neal - Director

SMN Company                   14,948,277          1,567,065        1 @ 10.00%
David Neal -  Director        

C & K Market, Inc.             6,901,839          1,653,480        3 @ 10.00%
Ray Nidiffer -  Director

Wiley & Sons, Inc.                27,304                -0-
James e. wiley - Nominee

Robert Lamb/Gale Lasko, 
  Partnership
Robert Lamb, Director            233,101                -0-

Howard's on Scholls, Inc.      1,319,484                -0-
Gaylon Baese - Nominee

</TABLE>

All of the above loans were for purchase of inventory and equipment
and are secured by inventory and equipment.  Variable rate loans bear
interest at prime plus 1.75 percent to 2.25 percent.
<PAGE>
                                  PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

    (a)   Documents filed as part of the report

    1. The following financial statements are filed as part of this report:

    Independent Auditor's Report on Financial Statements
    Consolidated Balance Sheets
    Consolidated Statements of Income
    Consolidated Statements of Members' Equity
    Consolidated Statements of Cash Flows
    Notes to Consolidated Financial Statements
    Independent Auditor's Report on Supplemental Information
    Supplemental Information
    Independent Auditor's Report on Financial Statement Schedules

    2. The following financial statement schedules are filed as part of this
report:

Schedule I -      Condensed financial information of registrant

Schedule II -     Valuation and qualifying accounts

Schedule V -      Supplementary information concerning property - casualty
                  insurance operations

    3. Exhibits.  The exhibits listed on the accompanying index to exhibits
are filed as part of this report.

    (b)   Reports on Form 8-K

          None.

                                SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                            UNITED GROCERS, INC.
                                                  (Registrant)



Dated:    December 24, 1996                 By:  /s/ Alan C. Jones          
        
                                                Alan C. Jones
                                                President
<PAGE>
   Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


   Name                       Title                                 Date
   ----                       -----                                 ----

/s/ Alan C. Jones       President, Secretary and                  12-24-96
Alan C. Jones               Treasurer (Principal
                            executive officer)


/s/ John W. White       Vice President                            12-24-96
John W. White               (Principal financial officer
                             and principal accounting officer)


/s/ Robert A. Lamb*          Director                             12-24-96
Robert A. Lamb   

/s/Peter J. O'Neal*
Peter J. O'Neal              Director                             12-24-96


/s/ David D. Neal*           Director                             12-24-96
David D. Neal     


/s/ Harry R. (Dick) Leonard* Director                             12-24-96
Harry R. (Dick) Leonard 



                             Director                             12-24-96
Deano Ryan


/s/ Gordon Smith*            Director                             12-24-96
Gordon Smith

/s/ Ron L. Mancasola*        Director                             12-24-96
Ron L. Mancasola

/s/ H. Larry Montgomery*     Director                             12-24-96
H. Larry Montgomery


/s/Raymond L. Nidiffer*      Director                             12-24-96
Raymond L. Nidiffer  



*  By /s/ John W. White
          John W. White
          Attorney-in-fact
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.

   No annual report covering the company's last fiscal year has been sent
to security holders.  An annual report will be furnished to security
holders subsequent to the filing of the annual report on Form 10-K and
copies of the annual report shall be sent to the Commission when sent to
security holders.

   Enclosed with this report is a copy of proxy soliciting material, including
the form of proxy, sent to United's shareholders for the January 11, 1997
annual meeting.

   The enclosed proxy soliciting material and, when provided, the annual
report for the last fiscal year are, or will be, furnished to the Commission
for its information and shall not be deemed filed with the Commission or
otherwise subject to the liabilities of Section 18 of the Securities Exchange
Act of 1934, except to the extent that the company specifically incorporates
them in its annual report on this form by reference.
<PAGE>
<TABLE>
<CAPTION>
                                                 APPENDIX 1


Analysis of Loss Reserve Development
  ($ in thousands)
                                                                                                           (9 Mos) (9 Mos)
     Year Ended     12/84   12/85   12/86   12/87   12/88   12/89   12/90   12/91   12/92   12/93   12/94   9/94    9/95
     ----------     -----   -----   -----   -----   -----   -----   -----   -----   -----   -----   -----   ----    ----
<S>                <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net Liability for 
Unpaid Claims and  
Claim Adjustment 
Expenses            4,169   6,498   8,985   11,251  13,123  15,951  17,610  22,357  25,252  27,784  28,351  27,639  29,353

Paid (Cumulative) 
as of:
One Year Later      1,808   2,558   4,568   4,534   4,580   6,219   5,311   5,620   7,466   8,708
Two Years Later     2,798   4,414   6,788   6,903   7,383   8,238   8,057  10,016  12,815
Three Years Later   3,666   4,844   8,233   8,399   8,084   9,390  10,349  12,063
Four Years Later    3,748   5,302   9,074   8,881   8,427  10,113  11,100
Five Years Later    3,782   5,424   9,296   8,972   8,644  10,336
Six Years Later     3,876   5,413   9,287   9,118   8,669
Seven Years Later   3,897   5,257   9,387   9,120
Eight Years Later   3,872   5,250   9,351
Nine Years Later    3,865   5,240
Ten Years Later     3,838

Reserves Reesti-
  mated
Year Ended          12/84   12/85   12/86   12/87   12/88   12/89   12/90   12/91   12/92   12/93
One Year Later      4,632   6,765  10,902  12,419  14,410  17,226  17,696  19,574  22,726  24,623
Two Years Later     4,577   6,898  11,188  12,875  13,927  14,673  15,024  18,058  22,203
Three Years Later   4,792   6,350  11,951  12,817  11,386  12,807  14,315  17,692
Four Years Later    4,457   6,831  11,903  11,026  10,337  12,298  14,826
Five Years Later    4,573   6,801  10,643  10,353  10,096  12,777
Six Years Later     4,603   6,140  10,142  10,215  10,576
Seven Years Later   4,284   5,720  10,132  10,645
Eight Years Later   4,128   5,533  10,486
Nine Years Later    3,999   5,733
Ten Years Later     4,050

Cumulative 
Redundancy
or (Deficiency)       119     765  (1,501)    606   2,547   3,174   2,784   4,665   3,049   3,161

</TABLE>
<PAGE>
                                  APPENDIX 2

<TABLE>
<CAPTION>
Reconciliation of claim reserves:
       ($ in thousands)

                                 @ 9 mos   @ 9 mos
                                   1995      1994     1994     1993     1992
                                 =======   =======   ======   ======   ======
<S>                              <C>       <C>       <C>      <C>      <C>
a   Net liabilities, beginning    28,351    27,784   27,784   25,252   22,357
      of year

b   Incurred claims & claim
      adjustment expense

i   Provision for current
      accident year claims        12,928    11,837   17,864   18,426   16,933

ii  Increase/(decrease) in
      prior year claims              120    (1,425)  (3,162)  (1,778)  (2,156)

    Total incurred claims and
      claim adjustment expense    13,048    10,412   14,702   16,648   14,777

c   Payments

i   Provision for current          3,852     2,136    5,426    5,903    5,634
      accident year claims

ii  Attributable to prior
      year claims                  8,037     6,894    8,708    8,212    6,122

    Total Payments                11,888     9,030   14,134   14,115   11,756

d   Other                           None      None     None     None     None

e   Net liabilities, end of year  29,603    27,639   28,351   27,784   25,252

/TABLE
<PAGE>
                              EXHIBIT INDEX

2.A         Copy of agreement for sale and purchase of business assets dated
            December 7, 1994, between Commissary Cash & Carry, Inc., and the
            registrant (incorporated by reference to Exhibit 10.1 to the
            registrant's quarterly report on Form 10-Q for the period ended
            March 31, 1995).

2.B         Copy of agreement for sale and purchase of business assets dated
            December 22, 1994, between Rich and Rhine, Inc., and the
            registrant (incorporated by reference to Exhibit 10.2 to the
            registrant's quarterly report on Form 10-Q for the period ended
            March 31, 1995).

2.C         Copy of asset purchase agreement dated as of November 10, 1995,
            between Bay Area Foods, Inc., and the registrant (incorporated by
            reference to Exhibit 2 to the registrant's current report on Form
            8-K dated December 13, 1995).

3.A         Copy of the registrant's restated articles of incorporation, as
            amended (incorporated by reference to Exhibit 4-E to the
            registrant's registration statement on Form S-2, No. 33-26631).

3.B         Copy of the registrant's bylaws, as amended (incorporated by
            reference to Exhibit 4-F to the registrant's registration
            statement on Form S-2, No. 33-26631).

4.A         Copy of indenture dated as of February 1, 1978, between the
            registrant and United States National Bank of Oregon, as trustee,
            relating to the registrant's Capital Investment Notes
            (incorporated by reference to Exhibit 4-I to the registrant's
            registration statement on Form S-1, No. 2-60488).

4.B1        Copy of supplemental indenture dated as of December 15, 1984,
            between the registrant and United States National Bank of Oregon,
            as trustee, relating to the registrant's Series D 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-F to the registrant's registration statement on Form
            S-2, No. 33-95213).

4.B2        Copy of supplemental indenture dated as of December 15, 1986,
            between the registrant and United States National Bank of Oregon,
            as trustee, relating to the registrant's Series E 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-G to the registrant's registration statement on Form
            S-2, No. 33-11212).

4.B3        Copy of supplemental indenture dated as of January 27, 1989,
            between the registrant and United States National Bank of Oregon,
            as trustee, relating to the registrant's Series F 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-G to the registrant's Form 10-K for the fiscal year
            ended September 30, 1989).

4.B4        Copy of supplemental indenture dated as of January 22, 1991,
            between the registrant and United States National Bank of Oregon,
            as trustee, relating to the registrant's Series G 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-D to the registrant's registration statement on Form
            S-2, No. 33-38617).

4.B5        Copy of supplemental indenture dated as of July 6, 1992, between
            the registrant and United States National Bank of Oregon, as
            trustee, relating to the registrant's Series H 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-C to the registrant's registration statement on Form
            S-2, No. 33-49450).

4.B6        Copy of supplemental indenture dated as of January 9, 1995,
            between the registrant and First Bank National Association, as
            trustee, relating to the registrant's Series J 5% Subordinated
            Redeemable Capital Investment Notes (incorporated by reference to
            Exhibit 4-C to the registrant's registration statement on Form
            S-2, No. 33-57199).

4.C         Copy of amended and restated credit agreement of May 31, 1995,
            among the registrant, United States National Bank of Oregon, and
            Seattle-First National Bank. (incorporated by reference to Exhibit
            4-C to the registrant's Form 10-K for the fiscal year ended
            September 29, 1995).

4.D         Copy of note agreement dated as of September 20, 1991, and senior
            notes dated September 24, 1991 among the registrant and various
            purchasers (incorporated by reference to Exhibit 4-I to the
            registrant's Form 10-K for the fiscal year ended September 27,
            1991).

4.E         Copy of Promissory Note, Assignment of Rents and Leases, Deed of
            Trust, Financing Agreement and Security Agreement, and
            Environmental Indemnity Agreement dated as of September 30, 1993,
            between the registrant and United of Omaha Life Insurance Company,
            relating to the registrant's construction of a new office building
            (incorporated by reference to Exhibit 4.E to the registrant's Form
            10-K for the fiscal year ended October 1, 1993).

4.F1        Copy of Loan Purchase and Servicing Agreement dated as of  May 13,
            1994, among United Resources, Inc., as Seller and Servicer, the
            registrant, as Guarantor, and National Consumer Cooperative Bank,
            as Buyer, relating to the selling of loans originated by the
            registrant's subsidiary, United Resources, Inc., (incorporated by
            reference to Exhibit 4.F1 to the registrant's Form 10-K for the
            fiscal year ended September 30, 1994). 

4.F2        Copy of First Amendment to Loan Purchase and Servicing Agreement
            of May 13, 1994, dated as of July 15, 1994, among United
            Resources, Inc., the registrant, and National Consumer Cooperative
            Bank (incorporated by reference to Exhibit 4.F2 to the
            registrant's Form 10-K for the fiscal year ended September 30,
            1994).

4.F3        Copy of Second Amendment to Loan Purchase and Servicing Agreement
            of May 13, 1994, dated as of September 28, 1995, among United
            Resources, Inc., the registrant, and National Consumer Cooperative
            Bank.(incorporated by reference to Exhibit 4.F3 to the
            registrant's Form 10-K for the fiscal year ended September 29,
            1995). 

4.F4        Copy of Loan Purchase and Servicing Agreement (Holdback Program)
            dated as of September 28, 1995, between United Resources, Inc., as
            Seller and Servicer, and National Consumer Cooperative Bank, as
            Buyer, and related guaranty agreement between the registrant and
            National Consumer Cooperation Bank.(incorporated by reference to
            Exhibit 4.F4 to the registrant's Form 10-K for the fiscal year
            ended September 29, 1995). 

4.G         Copy of Note Agreement dated October 10, 1994, between the
            registrant and Phoenix Home Life Mutual Insurance Company
            (incorporated by reference to Exhibit 4.G to the registrant's Form
            10-K for the fiscal year ended September 30, 1994).

Pursuant to Item 601 (b)(4)(iii) of Regulation S-K, the registrant is not
filing certain instruments with respect to its long-term debt because the
amount authorized under any such instrument does not exceed 10 percent of the
total consolidated assets of the registrant at September 27, 1996.  The
registrant agrees to furnish a copy of any such instrument to the Securities
and Exchange Commission upon request.

10.A1*      Copy of United Grocers, Inc., pension plan and trust agreement
            dated as of October 1, 1985 (incorporated by reference to Exhibit
            10-A to the registrant's registration statement on Form S-2, No.
            33-11212).

10.A2*      Copy of first amendment to United Grocers, Inc., pension  plan and
            trust agreement dated as of October 1, 1987  (incorporated by
            reference to Exhibit 10-B to post  effective amendment No. 1 to
            the registrant's registration statement on Form S-2, No.
            33-11212).

10.A3*      Copy of policy summary and related documents pertaining to a life
            insurance policy for Alan C. Jones, President of the registrant,
            purchased pursuant to the registrant's supplemental executive
            retirement plan (incorporated by reference to Exhibit 10-E to the
            registrant's Form 10-K for the fiscal year ended September 28,
            1990).

10.A4*      Copy of registrant's executive deferred compensation plan
            (incorporated by reference to Exhibit 10-U to the registrant's
            Form 10-K for the fiscal year ended September 27, 1991).

10.B*       Copy of executive compensation agreement dated March 1, 1991
            (incorporated by reference to Exhibit 10-T to the registrant's
            Form 10-K for the fiscal year ended September 27, 1991).

10.C*       Copy of binder of insurance with respect to indemnification of
            officers and directors (incorporated by reference to Exhibit 10.C
            to the registrant's Form 10-K for the fiscal year ended October 1,
            1993).

10.D1       Typical forms executed in connection with loans to members,
            including directors: 

10.D1a      Installment note (Stevens-Ness form 217), with optional interest
            rate riders (incorporated by reference to Exhibit 10-D1a to the
            registrant's Form 10-K for the fiscal year ended October 2, 1992).

10.D1b      Promissory note (Stevens-Ness form 216), with optional interest
            rate riders (incorporated by reference to Exhibit 10-D1b to the
            registrant's Form 10-K for the fiscal year ended October 2, 1992).

10.D1c      Installment note.(incorporated by reference to Exhibit 10-D1c to
            the registrant's Form 10-K for the fiscal year ended September 29,
            1995).

10.D1d      Renewal note for fixed rate loan.(incorporated by reference to
            Exhibit 10-D1d to the registrant's Form 10-K for the fiscal year
            ended September 29, 1995).

10.D1e      Subsequent note (three forms) (incorporated by reference to
            Exhibit 10-D1c to the registrant's Form 10-K for the fiscal year
            ended October 2, 1992).

10.D1f      Loan agreement (two forms) (incorporated by reference to Exhibit
            10-D1d to the registrant's Form 10-K for the fiscal year ended
            October 2, 1992).

10.D1g      Loan agreement for subsequent notes (incorporated by reference to
            Exhibit 10-D1e to the registrant's Form 10-K for the fiscal year
            ended October 2, 1992).

10.D1h      Amendment to loan and security agreements, including optional
            clauses (incorporated by reference to Exhibit 10-D1f to the
            registrant's Form 10-K for the fiscal year ended October 2, 1992).

10.D1i      Amendment to installment note and security agreements.
            (incorporated by reference to Exhibit 10-D1i to the registrant's
            Form 10-K for the fiscal year ended September 29, 1995).

10.D1j      Security agreement (Stevens-Ness form 1201) (incorporated by
            reference to Exhibit 10-D1g to the registrant's Form 10-K for the
            fiscal year ended October 2, 1992).

10.D1k      Purchase money security agreement (Stevens-Ness form 1202)
            (incorporated by reference to Exhibit 10-D1h to the registrant's
            Form 10-K for the fiscal year ended October 2, 1992).

10.D1l      Security agreement for equipment (Stevens-Ness form 1203) 
            (incorporated by reference to Exhibit 10-D1i to the registrant's
            Form 10-K for the fiscal year ended October 2, 1992).

10.D1m      Inventory loan and security agreement (Stevens-Ness form 1206)
            (incorporated by reference to Exhibit 10-D1j to the registrant's
            Form 10-K for the fiscal year ended October 2, 1992).

10.D1n      Security agreement (equipment and inventory) (incorporated by
            reference to Exhibit 10-D1k to the registrant's Form 10-K for the
            fiscal year ended October 2, 1992).

10.D1o      Security agreement for subsequent notes (incorporated by reference
            to Exhibit 10-D1l to the registrant's Form 10-K for the fiscal
            year ended October 2, 1992).

Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the forms listed above in lieu of filing each copy executed in
connection with loans to directors.  A schedule showing the principal amount
and interest rate of each director loan at November 30, 1996, appears in Item
13.C of this Form 10-K.  The registrant agrees to furnish a copy of any
omitted loan document to the Securities and Exchange Commission upon request.

10.D2       Typical form of residual stock redemption note executed in
            connection with redemption of common stock from members
            (incorporated by reference to Exhibit 10-D2 to the registrant's
            Form 10-K for the fiscal year ended October 2, 1992).

Pursuant to Instruction 2 to Item 601 of Regulation S-K, the registrant has
filed the form listed above in lieu of filing each copy executed in
transactions with directors.  The registrant agrees to furnish a copy of any
omitted document to the Securities and Exchange Commission upon request.

10.E1       Copy of sublease agreement for Aloha store dated January 3, 1994,
            between the registrant and CTD, L.L.C., a limited liability
            company controlled by Craig T. Danielson, a director of the
            registrant (incorporated by reference to Exhibit 10.E to the
            registrant's Form 10-Q for the quarterly period ended April 1,
            1994).

10.E2       Copy of sublease agreement for Tigard store dated January 3, 1994,
            between the registrant and CTD, L.L.C., a limited liability
            company controlled by Craig T. Danielson, a director of the
            registrant (incorporated by reference to Exhibit 10.D to the
            registrant's Form 10-Q for the quarterly period ended April 1,
            1994).

10.E3       Copy of sublease agreement for Sandy store dated May 4, 1994,
            between the registrant and Dan Inc Oregon, a corporation
            controlled by Craig T. Danielson, a director of the registrant
            (incorporated by reference to Exhibit 10.G3 to the registrant's
            Form 10-K for the fiscal year ended September 30, 1994).

10.E4       Copy of Asset Purchase and Sale Agreement dated May 4, 1994, for
            Sandy store between the registrant and Dan Inc Oregon, a
            corporation controlled by Craig T. Danielson, a director of the
            registrant (incorporated by reference to Exhibit 10.G4 to the
            registrant's Form 10-K for the fiscal year ended September 30,
            1994). 

10.E5       Copy of Asset Purchase and Sale Agreement dated January 3, 1994,
            for Aloha and Tigard stores between the registrant and CTD,
            L.L.C., a limited liability company controlled by Craig T.
            Danielson, a director of the registrant (incorporated by reference
            to Exhibit 10.C to the registrant's Form 10-Q for the quarterly
            period ended April 1, 1994).

10.F1       Copy of sublease agreement for Troutdale store dated December 15,
            1993, between the registrant and a partnership in which Robert A.
            Lamb, a nominee for director of the registrant, is a partner
            (incorporated by reference to Exhibit 10-F1 to the registrant's
            Form 10-K for the fiscal year ended September 29, 1995).

10.F2       Copy of sublease agreement for Wilsonville store dated June 25,
            1991, between the registrant and a partnership in which Robert A.
            Lamb, a nominee for director of the registrant, is a partner
            (incorporated by reference to Exhibit 10-F2 to the registrant's
            Form 10-K for the fiscal year ended September 29, 1995).

10.G        Copy of sublease agreement for Magalia store dated March 15, 1994,
            between the registrant and Al Mancasola Grocery Markets, Inc., a
            corporation controlled by Ronald L. Mancasola, a nominee for
            director of the registrant (incorporated by reference to
            Exhibit 10-G to the registrant's Form 10-K for the fiscal year
            ended September 29, 1995).

10.H1       Copy of sublease agreement for Silverton store effective as of
            December 14, 1994, between the registrant and a partnership in
            which David D. Neal, a director of the registrant, is a partner
            (incorporated by reference to Exhibit 10-H1 to the registrant's
            Form 10-K for the fiscal year ended September 29, 1995).

10.H2       Copy of assignment of real property sale contract dated
            February 20, 1985, by David D. Neal to the registrant
            (incorporated by reference to Exhibit 10-H2 to the registrant's
            Form 10-K for the fiscal year ended September 29, 1995).

10.I1       Copy of sublease agreement for Coos Bay store dated February 28,
            1991, between the registrant and Raymond Nidiffer, a director of
            the registrant (incorporated by reference to Exhibit 10-I19 to the
            registrant's Form 10-K for the fiscal year ended September 27,
            1991).

10.I2       Copy of sublease agreement for Arcata store dated August 11, 1977,
            between the registrant and Raymond L. Nidiffer, a director of the
            registrant (incorporated by reference to Exhibit 10-Q2 of the
            registrant's registration statement on Form S-2, No. 33-26631).

10.I3       Copy of sublease agreement for Gold Beach store dated July 6,
            1979, between the registrant and Raymond L. Nidiffer, a director
            of the registrant (incorporated by reference to Exhibit 10-Q3 of
            the registrant's registration statement on Form S-2, No. 33-
            26631).

10.I4       Copy of assignment of lease and related documents for Mt. Shasta
            store between the registrant and C & K Market, Inc., an affiliate
            of Raymond L. Nidiffer, a director of the registrant (incorporated
            by reference to Exhibit 10-Q4 of the registrant's registration
            statement on Form S-2, No. 33-26631).

10.I5       Copy of sublease agreement for Rogue River store dated June 25,
            1976, between the registrant and Raymond L. Nidiffer, a director
            of the registrant (incorporated by reference to Exhibit 10-Q5 of
            the registrant's registration statement on Form S-2, No. 33-
            26631).

10.I6       Copy of lease agreement for Coos Bay store dated February 28,
            1991, between the registrant and Raymond L. Nidiffer, a director
            of the registrant (incorporated by reference to Exhibit 10-I20 to
            the registrant's Form 10-K for the fiscal year ended September 27,
            1991).

10.I7       Copy of loan guaranties dated June 12, 1980 and September 30, 1988
            given by registrant for the benefit of C & K Market, Inc., an
            affiliate of Raymond L. Nidiffer, a director of the registrant
            (incorporated by reference to Exhibit 10-I12 to the registrant's
            Form 10-K for the fiscal year ended September 30, 1989).

10.I8       Copy of stock purchase agreement dated as of June 20, 1994,
            between the registrant and C&K Market, Inc., an affiliate of
            Raymond L. Nidiffer, a director of the registrant (incorporated by
            reference to Exhibit 10.F8 to the registrant's Form 10-K for the
            fiscal year ended September 30, 1994).

12          Statement of Computation of Ratio of Adjusted Income to Fixed
            Charges.

22          Subsidiaries of the registrant.

24          Power of Attorney of certain directors of the registrant.

27          Financial Data Schedule.

* Denotes management contract or compensatory plan or arrangement.
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