SECURITIES AND EXCHANGE COMMISSION
                                
                     WASHINGTON, D.C. 20549
                                
                            FORM 10-Q
                                
                                
                                
        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934
                                
                                
 For Quarter Ended September 30, 1998 Commission File Number 33-68958
                  --------------------                       ---------

             Specialty Foods Acquisition Corporation
            ------------------------------------------
     (Exact name of registrant as specified in its charter)
                                
                                
          State of Delaware                 75-2488183
         -----------------------------------------------
       (State or other jurisdiction       (I.R.S. Employer
     of incorporation or organization)     Identification No.)
                                
                                
       520 Lake Cook Road, Suite 550, Deerfield, IL 60015
--------------------------------------------------------------
  (Address of principal executive offices)        (Zip Code)

                                
Registrant's telephone number, including area code (847) 405-5300
                                                   --------------
                                
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
and (2) has been subject to such filing requirements for the past 90 days.
                                
                       Yes      X       No
                             ------        --------
                                
                                
                                
The number of shares outstanding of the Registrant's common stock
as of  October 13, 1998 was 62,768,000 shares of common stock.
                                

<PAGE>     1

            SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES


                                   INDEX
                                   -----



PART I - FINANCIAL INFORMATION                        Page No.
                                                      ---------
     ITEM 1. FINANCIAL STATEMENTS

     Condensed Consolidated Balance Sheets
        as of September 30, 1998 and December 31, 1997        3

     Condensed Consolidated Statements of Operations for
        the three- and nine-month periods
        ended September 30, 1998 and 1997                     4

     Condensed Consolidated Statements of Cash Flows for
        the nine-month periods ended
        September 30, 1998 and 1997                           5

     Notes to Financial Statements                          6-7

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS    8-11

PART II - OTHER INFORMATION                                  11

SIGNATURE                                                    12







This Report on Form 10-Q contains forward-looking statements
within the meaning of the federal securities laws which reflect
the Company's expectations and are based on currently available
information.  Actual results, performance, achievements or other
information may vary materially from such statements and are
subject to future known and unknown risks, uncertainties and
events, including, among other factors, weather, economic and
market conditions, cost and availability of raw materials,
competitive activities and other business conditions.

<PAGE>          2

                    PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL INFORMATION

<TABLE>

            SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES

                       Condensed Consolidated Balance Sheets

                                  ($ In thousands)

<CAPTION>
                                            September 30,      December 31,
                                                1998               1997
                                              --------           --------
             Assets                         (unaudited) 
<S>                                           <C>                <C>
                          
Current assets:                                     
  Cash and cash equivalents                 $  104,353         $  235,034
  Accounts receivable, net                      20,914             19,163
  Inventories                                   45,109             35,577
  Other current assets                           9,319              7,400
                                              --------           --------      
          Total current assets                 179,695            297,174
                                                    
Property, plant, and equipment, net            239,486            187,874
Intangible assets, net                          20,983             19,434
Other noncurrent assets                         33,503             28,334
                                              --------           --------
                                                    
          Total assets                      $  473,667         $  532,816
                                              ========           ========

Liabilities and Stockholders' Equity                
                                                    
Current liabilities:                                
  Current maturities of long-term debt       $   3,831         $   2,847
  Accounts payable                              45,521            51,983
  Accrued expenses                              70,778            85,344
                                              --------         ---------
                                                    
          Total current liabilities            120,130           140,174
                                                    
Long-term debt                               1,167,021         1,134,882
Other noncurrent liabilities                    29,303            30,645
                                             ---------         ---------
                                                    
          Total liabilities                  1,316,454         1,305,701
                                                    
Redeemable preferred stock                      19,500            19,500
                                                    
Stockholders' equity                          (862,287)         (792,385)
                                             ---------         ---------       
     Total liabilities and 
            stockholders' equity            $  473,667        $  532,816
                                             =========         =========

</TABLE>

See accompanying notes to condensed consolidated financial statements.

<PAGE>    3
<TABLE>

            SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES

                  Condensed Consolidated Statements of Operations

                                   (Unaudited)
                       ($ In thousands, except share data)

<CAPTION>
                             Three months ended September 30,   Nine months ended September 30,
                             ------------------------------------------------------------------
                                      1998         1997          1998         1997
                                      ----         ----          ----         ---- 
<S>                               <C>          <C>           <C>          <C>

Net sales                        $  229,670   $  237,982    $  675,671   $  679,131
Cost of sales                       120,554      130,448       359,071      375,626
                                 ----------   ----------    ----------   ----------
           Gross profit             109,116      107,534       316,600      303,505
                                 ----------   ----------    ----------   ----------
                                                                    
Operating expenses:                                                
 Selling, distribution,                                            
   general and administrative        92,309       94,795       285,335      276,116
 Amortization of intangibles            356          346         1,070        1,036
                                  ---------    ---------     ---------    ---------
    Total operating expenses         92,665       95,141       286,405      277,152
                                  ---------    ---------     ---------    ---------
                                                                   
       Operating profit              16,451       12,393        30,195       26,353
                                                                    
Other expenses:                                                    
 Interest expense, net               33,918       34,187        97,896      101,041
 Other expense, net                     857          893         2,475        3,966
                                  ---------    ---------      --------    ---------
   Loss before income taxes         (18,324)     (22,687)      (70,176)     (78,654)
                                                                    
Provision (benefit) for                                            
     income taxes                      (307)         368          (277)         766
                                  ---------    ---------     ---------    ---------
 Loss from continuing operations    (18,017)     (23,055)      (69,899)     (79,420)
 
                                                                    
Discontinued operations:                                           
 Net income                               -        4,297             -       12,585
 Gain (loss) on disposal, net             -           31             -       (5,337)
                                  ---------    ---------     ---------    ---------
                                                                    
                                          -        4,328             -        7,248
                                  ---------    ---------     ---------    ---------
                                                                    
           Net loss              $  (18,017)  $  (18,727)   $  (69,899)  $  (72,172)
                                  =========    =========     =========    =========
                                                                    
                                                                    
                                                                    
Earnings (loss) per share:                                         
 From continuing operations      $     (.29)  $     (.37)   $    (1.11)  $    (1.25)
 From discontinued operations             -          .07             -          .11
                                  ---------    ---------     ---------    ---------  
           Net loss              $     (.29)        (.30)        (1.11)       (1.14)
                                  =========    =========     =========    =========
 Weighted average shares                                       
       outstanding                   62,768       62,921        62,768       63,110
                                  =========    =========     =========    =========

</TABLE>

See accompanying notes to condensed consolidated financial
statements.

<PAGE>    4

<TABLE>
              SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES

                    Condensed Consolidated Statements of Cash Flows

                                       (Unaudited)
                                    ($ In thousands)

<CAPTION>
                                         Nine months ended September 30,
                                       ----------------------------------
                                                  1998           1997
                                                 -----          -----
<S>                                           <C>          <C>

Cash flows from operating activities:              
 Loss from continuing operations           $   (69,899)   $   (79,420)
 Adjustments to reconcile to net cash
   from continuing operating activities
     Depreciation and amortization              21,344         17,851
     Debt issuance cost amortization             7,211          4,590
     Accretion of interest                      35,906         31,889
     Changes in operating assets and                   
      liabilities, net of effects from
      businesses acquired or sold              (34,927)       (56,514)
                                            ----------     ----------
      Net cash used by continuing        
          operating activities                 (40,365)       (81,604)
      Net cash provided by                        
          discontinued operations                    -         11,568
                                            ----------     ----------
                                                   
         Net cash used by operations           (40,365)       (70,036)
                                                   
Cash flows from investing activities:              
 Proceeds from divestitures of businesses            -         55,785
 Capital expenditures                          (72,465)       (28,868)
 Other                                          (3,963)           (21)
                                            ----------     ----------
          Net cash provided (used) by              
            investing activities               (76,428)        26,896
                                                   
Cash flows from financing activities:              
 Decrease in revolving credit                        -        (22,900)
 Issuance of preferred stock and warrants            -         19,500
 Refinancing costs                             (11,862)             -
 Payments on long-term debt                     (2,026)        (2,604)
 Other                                               -          1,177
                                            ----------     ----------
          Net cash used by                         
            financing activities               (13,888)        (4,827)
                                                   
Decrease in cash and cash equivalents         (130,681)       (47,967)
Cash - beginning of period                     235,034         49,147
                                            ----------     ----------
Cash - end of period                      $    104,353    $     1,180
                                            ==========     ==========

</TABLE>

See accompanying notes to condensed consolidated financial
statements.

   
<PAGE>    5


      SPECIALTY FOODS ACQUISITION CORPORATION AND SUBSIDIARIES

     Notes to Condensed Consolidated Financial Statements   

               ($ In thousands, except per share data)

   NOTE 1 - Interim Financial Information
   
       In the opinion of management, the accompanying unaudited
       interim condensed financial information of Specialty
       Foods Acquisition Corporation (SFAC) and its subsidiaries
       (collectively, the Company) contains all adjustments,
       consisting only of those of a recurring nature, necessary
       to present fairly the Company's financial position and
       results of operations.  All significant intercompany
       accounts, transactions and profits have been eliminated.
   
       These financial statements are for interim periods and do
       not include all information normally provided in annual
       financial statements and should be read in conjunction
       with the financial statements of the Company for the year
       ended December 31, 1997 included in the annual report
       filed on Form 10-K.  The results of operations for
       interim periods are not necessarily indicative of the
       results that may be expected for the full year.
   
       Certain amounts in the 1997 financial statements have
       been reclassified to conform to the manner in which the
       1998 financial statements have been presented.
   
   
   NOTE 2 - Inventories
   
       The components of inventories are as follows:
   
<TABLE>
          
                                     September 30,   December 31,
                                          1998          1997
                                          ----          ----
        <S>                               <C>         <C>               
        Raw materials and packaging    $  16,747     $  14,026
        Work in progress                   1,919         1,857
        Finished goods                    24,232        17,340
        Other                              2,211         2,354
                                        --------      --------
                                       $  45,109     $  35,577
                                        ========      ========
                                              
</TABLE>


       Inventories are stated at the lower of cost or market.
       Cost is determined principally by the first-in first-out
       ("FIFO") method.

   
<PAGE>   6   
   
   
   NOTE 3 - Discontinued Operations
   
       Discontinued operations relate to the divestiture of
       certain operating companies during 1997.
       These divestitures have been reported as discontinued
       operations in the accompanying financial statements in
       accordance with Accounting Principles Board Opinion No.
       30.  Operating results for these businesses, including
       revenues of $170 million and $578 million for the
       quarter ended and the nine month period ended September
       30, 1997, respectively, have been classified as
       discontinued operations in the Consolidated Statement of
       Operations.  No interest expense has been allocated to
       discontinued operations.
   
   
   NOTE 4  -  Subsequent Events
   
       In a press release dated October 14, 1998, the Company
       announced that it had signed definitive agreements to
       acquire two bakery companies, which would represent, in
       the aggregate, an investment of over $100 million.
       Consummation of certain of these transactions is subject
       to customary closing conditions, including the obtaining
       of all required approvals from governmental regulatory
       agencies and, in the case of one acquisition,
       review by its subsidiary Specialty Foods
       Corporation  (SFC) of completed disclosure schedules.
   
       Also on that date, the Company and its subsidiary SFC
       announced exchange offers for their publicly held debt.
       The offers are to exchange existing debt of SFC and SFAC
       for new debt securities of two new intermediate holding
       companies.  Upon consummation, the exchanges will result
       in the postponement of the cash pay interest dates and
       the extension of the maturity date of SFAC's 13% Senior
       Secured Discount Debentures.  In addition, SFC is seeking
       the consent of its term loan and revolving credit lenders
       to amend existing agreements to conform to the new
       holding company structure.  Upon consummation of the
       exchange offers, the Company will write-off approximately
       $19.1 million of deferred debt issuance costs.  The
       exchange offers are subject to certain conditions
       described in the exchange offers.
   
   
<PAGE>      7   

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS



Seasonality

The Company's businesses are moderately seasonal with lower
sales, operating profit, and cash flows generally occurring in
the first quarter of the year.  This seasonality is due primarily
to higher bread and cookie sales in the summer months, as well as
the winter holiday season.

Results of Operations

         COMPARISON OF THIRD QUARTER 1998 TO THIRD QUARTER 1997

Consolidated net sales from continuing operations decreased 3% to
$229.7 million in 1998 compared to $238.0 million in 1997.  Net
sales of the Bakery Operations decreased $1.1 million (1%) to
$185.8 million in 1998 due to pricing, product and customer mix
at Mother's.  Net sales of the Meat Operations
decreased $7.2 million (14%) to $43.9 million due to lower sales
volume and market driven price decreases on its formula priced
products reflecting a decrease in beef and pork commodity prices.

The Company's gross profit margin percentage increased to 47.5%
in 1998 from 45.1% in 1997 primarily due to production
efficiencies, a favorable sales mix shift at Mother's and lower
flour costs.

Selling, distribution, and general and administrative expenses
decreased $2.5 million (2.6%) in 1998 to $92.3 million.  This
decrease is principally related to lower promotional and
distribution costs in the Bakery Operations.

Interest expense, net in 1998 decreased $0.3 million to $33.9
million from $34.2 million in 1997.  The decrease is primarily
due to the paydown of the Revolver and interest earned on cash
equivalents, offset by a higher interest rate on the senior
secured debt.

Other expense, net of $0.9 million in 1998 was consistent with
1997 and consists principally of discount expense on the
Company's Accounts Receivable Facility.

As a result of the above factors, net loss from continuing
operations decreased to $18.0 million in 1998 compared to $23.1
million in 1997.

The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.


              NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO
                   NINE MONTHS ENDED SEPTEMBER 30, 1997

Consolidated net sales from continuing operations decreased 1% to
$675.7 million in 1998 compared to $679.1 million in 1997. Net
sales of the Bakery Operations increased $14.0 million (3%) to
$543.0 million in 1998.  The increase was primarily due to volume
increases at Metz.  Net sales of the Meat Operations decreased
$17.4 million (12%) to $132.7 million due to lower sales volume
and market

<PAGE>    8

driven price decreases on its formula priced products
reflecting a decrease in beef and pork commodity prices.

The Company's gross profit margin percentage increased to 46.8%
in 1998 from 44.6% in 1997 primarily due to increased volume,
production efficiencies, a favorable sales mix shift at Mother's
and lower flour costs.

Selling, distribution, and general and administrative expenses
increased $9.2 million (3%) in 1998 to $285.3 million. This
increase is principally related to costs associated with
contractual wage and fringe benefit increases, higher advertising
and promotion costs, and higher distribution expense at Metz due
to new business volume.

Interest expense, net in 1998 decreased $3.1 million to $97.9
million from $101.0 million in 1997.  The decrease is primarily
due to the paydown of the Revolver and interest earned on cash
equivalents, offset by a higher interest rate on the senior
secured debt.

Other expense, net decreased to $2.5 million in 1998 compared to
$4.0 million in 1997 and consists principally of discount expense
on the Company's Accounts Receivable Facility.

As a result of the above factors, net loss from continuing
operations decreased to $69.9 million in 1998 compared to $79.4
million in 1997.

The Company reports minimal state income tax and no federal
income tax due to its net operating loss position for tax
purposes.

Because of the highly leveraged status of the Company, earnings
before interest, taxes, depreciation, and amortization ("EBITDA")
is an important performance measure used by the Company and its
stakeholders.  The Company believes that EBITDA provides
additional information for determining its ability to meet future
debt service requirements.  However, EBITDA is not indicative of
operating income or cash flow from operations as determined under
generally accepted accounting principles.  The Company's EBITDA
from continuing operations for the three and nine-month periods
ended September 30, 1998 and 1997 is calculated as follows:


                               Three Months Ended          Nine Months Ended  
                                  September 30,              September 30,     
                                 1998      1997             1998       1997
                           ------------------------------------------------
                                               (In Millions)        
                                                         
Operating Profit               $  16.5    $  12.4           $  30.2   $  26.4
Depreciation and amortization      7.6        6.1              21.4      17.9
                                ------    -------           -------    ------
                                                         
EBITDA                         $  24.1    $  18.5           $  51.6   $  44.3
                                ======    =======           =======    =======
                                
<PAGE>    9



Liquidity and Capital Resources

Net cash used in operating activities totaled $40.4 million in
1998.  The $34.9 million use of cash for changes in operating
assets and liabilities included increased inventories of $9.5
million for seasonal inventory build, a reduction in accrued
expenses of  $14.6 million which is impacted by the timing of
interest payments, and $6.5 million for reductions in accounts
payable as the Company took advantage of certain cash discount
opportunities.  In 1997, cash used by operating activities of
$70.0 million was principally driven by increased working capital
requirements, including higher levels of receivables and
inventories and reductions in accounts payable and accrued
expenses.

Net cash used by investing activities totaled $76.4 million in
1998.  The activity in 1998 was primarily attributable to the
Company purchasing $35.0 million of fleet and production
equipment previously leased and planned capital expenditures.  In
1997, net cash provided by investing activities of $26.9 million
was primarily attributable to the net proceeds from the sale of
divested businesses, offset by capital expenditures.

Net cash used in financing activities amounted to $13.9 million
in 1998 principally due to refinancing costs and scheduled
payments on long-term debt.  In 1997, net cash used by financing
activities of $4.8 million was primarily attributable to a
decrease in revolving credit borrowings, partially offset by the
issuance of preferred stock.

Based upon the above, the net decrease in cash in 1998 and 1997
was $130.7 million and $48.0 million, respectively.

As of September 30, 1998, Specialty Foods Corporation (SFC) had a
cash balance of $104 million and has no borrowings under its $125
million Revolving Credit Facility.  Outstanding letters of credit
of $9 million as of  September 30, 1998 reduce available funds
under the facility.  Management believes that these funds along
with operating cash flows should be adequate to fund the
Company's short-term obligations and its 360-day asset sale
reinvestment obligations stemming from the December 5, 1997 sale
of Stella Foods, Inc.  However, there can be no assurance that
available funds will be adequate to meet such needs.
Additionally, SFAC's ability to meet its cash debt service
obligations is dependent upon cash dividends from SFC.
Currently, due to covenant restrictions, SFC is unable to make
such dividends.  By the year 2000, the Company's ability to meet
its cash debt service requirements will be dependent upon either
refinancing a significant portion of its indebtedness or
additional asset sales.
   
In a press release dated October 14, 1998, the Company and its
subsidiary SFC announced exchange offers for their publicly held
debt.  The offers are to exchange existing debt of SFC and SFAC
for new debt  securities of two new intermediate holding
companies. Upon consummation, the exchanges will result in the
postponement of the cash pay interest dates and the extension of the
maturity date of SFAC's 13% Senior Secured Discount Debentures.
In addition, SFC is seeking the consent of its term loan and
revolving credit lenders to amend existing agreements to conform
to the new holding company structure. The exchange offers are
subject to certain conditions described in the exchange offers.

<PAGE>     10

Forward-Looking Statements

Certain statements in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" constitute
"forward-looking statements" within the meaning of the federal
securities laws which reflect the Company's expectations and are
based on currently available information.  Actual results,
performance, achievements or other information may vary
materially from such statements and are subject to future known
and unknown risks, uncertainties and events, including, among
other factors, weather, economic and market conditions, cost and
availability of raw materials, competitive activities or other
business conditions.


PART II - OTHER INFORMATION

Item 4:  Submission of Matters to a Vote of Security Holders

None.


Item 6:  Exhibits and Reports on Form 8-K

(a)  See Exhibit Index filed herewith.

(b)  The Company did not file a report on Form 8-K during the
     third quarter of 1998.



<PAGE>    11

                         SIGNATURE
                        -----------


Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.


           SPECIALTY FOODS ACQUISITION CORPORATION
           ----------------------------------------
                          (Registrant)
                          -----------


                                   By:


Date:  October 22, 1998            /s/ Robert L. Fishbune
                                   ---------------------- 
                                   Robert L. Fishbune
                                   Vice President and
                                     Chief Financial Officer



                           EXHIBIT INDEX


Exhibit
Number             Description of Document
-----               ----------------------
27*                 Financial Data Schedule


__________

*Filed Herewith.