UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q
        (mark one)
        [x]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
                         SECURITIES EXCHANGE ACT OF 1934
                 For the thirteen weeks ended December 27, 1998

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


                             Commission File Number:
                             SF Holdings Group, Inc.
             (Exact name of registrant as specified in its charter)

          Delaware                                       13-3990796
          --------                                       ----------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                         Identification
                                                       Number)
                               115 Stevens Avenue
                            Valhalla, New York 10595
                                 (914) 749-3274
   (Address and telephone number of registrant's principal executive offices)


         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 the number of shares  outstanding of each of the  registrant's
classes of common stock, as of the latest practicable date.
         Common Stock, $.001 par value, as of February 1, 1999:
                                                    Class A:   5,625,838 Shares
                                                    Class B:     564,586 Shares
                                                    Class C:     399,000 Shares


<PAGE>




                             SF HOLDINGS GROUP, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                                TABLE OF CONTENTS


Part I - Financial Information

<TABLE>
<CAPTION>


Item 1. Financial Statements (unaudited):                                                      Page
<S>                                                                                          <C> 
        Consolidated Condensed Balance Sheets as of December 27, 1998
           and July 26, 1998 (audited)                                                          3

        Consolidated Statements of Operations and Comprehensive Income (Loss)
            for the thirteen weeks ended December 27, 1998 and January 25, 1998                 4

        Consolidated Statements of Cash Flows for the thirteen weeks ended
            December 27, 1998 and January 25, 1998                                              5

        Notes to Consolidated Financial Statements                                              6


Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                                           8


Part II - Other Information


Item 6.  Exhibits and Reports on Form 8-K                                                      14

Signatures                                                                                     16

</TABLE>


                                       2

<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


                             SF HOLDINGS GROUP, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                     December 27,        July 26, 
                                                                                         1998             1998
                                                                                     -------------    -------------
                                                                                     (unaudited)
<S>                                                                                       <C>             <C>     
ASSETS
Current assets:
    Cash and cash equivalents                                                             $ 3,638         $ 20,703
    Cash in escrow                                                                          7,349            6,819
    Accounts receivable, less allowance for doubtful
      accounts of $2,596 and $3,569, respectively                                         112,039          120,112
    Due from affiliates                                                                     5,469            1,313
    Inventories                                                                           153,766          168,493
    Deferred income taxes                                                                  17,268           17,322
    Other current assets                                                                   21,929           20,026
                                                                                     -------------    -------------
         Total current assets                                                             321,458          354,788
Property, plant and equipment, net                                                        414,305          430,150
Goodwill, net                                                                              99,683           94,865
Deferred income taxes                                                                      37,979           32,572
Other assets, net                                                                          30,301           31,436
                                                                                     -------------    -------------
TOTAL ASSETS                                                                             $903,726         $943,811
                                                                                     =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
   Accounts payable                                                                      $ 62,899         $ 78,013
   Accrued expenses                                                                       104,351          117,426
   Current maturities of long-term debt                                                     3,972            3,825
                                                                                     -------------    -------------
      Total current liabilities                                                           171,222          199,264
Long-term debt                                                                            621,884          619,143
Other liabilities                                                                          62,705           61,865
Deferred income taxes                                                                       5,382            4,771
                                                                                     -------------    -------------
      Total liabilities                                                                   861,193          885,043
Exchangeable preferred stock                                                               32,601           30,680
Minority interest in subsidiary                                                             1,743            3,020
Redeemable common stock                                                                     2,166            2,139
Stockholders' equity                                                                        6,023           22,929
                                                                                     =============    =============
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                               $903,726         $943,811
                                                                                     =============    =============


                 See notes to consolidated financial statements.


                                       3

<PAGE>


                             SF HOLDINGS GROUP, INC.
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                   (unaudited)
                                 (in thousands)

                                                                              Thirteen Weeks Ended
                                                                    --------------------------------------
                                                                        December 27,       January 25,
                                                                            1998               1998
                                                                        -------------       --------------
Net sales                                                                  $ 272,803             $ 66,016
Cost of goods sold                                                           246,351               53,492
                                                                        -------------       --------------
     Gross profit                                                             26,452               12,524

Selling, general and administrative expenses                                  24,500                8,776
Other (income) expense, net                                                      239                 (309)
                                                                        -------------       --------------
     Income from operations                                                    1,713                4,057
Interest expense (net of interest income
 of $307 and $141)                                                            16,477                3,067
                                                                        -------------       --------------
     Income (loss) before income taxes and minority interest                 (14,764)                 990
Income taxes (benefit) provision                                              (5,590)                 417
Minority interest in subsidiary's loss                                          (729)                   -
                                                                        -------------       --------------
     Net income (loss)                                                        (8,445)                 573
Payment-in-kind dividends on exchangeable preferred stock                      1,157                    -
                                                                        =============       ==============
     Net income (loss) applicable to common stock                           $ (9,602)               $ 573
                                                                        =============       ==============

Statements of comprehensive income (loss):
     Net income (loss)                                                      $ (8,445)               $ 573
     Other comprehensive income, net of income tax:
       Minimum pension liability adjustment                                    1,343                    -
       Foreign translation adjustment                                           (263)                   -
                                                                        -------------       --------------
     Total comprehensive income (loss)                                      $ (7,365)               $ 573
                                                                        =============       ==============



                 See notes to consolidated financial statements.


                                       4

<PAGE>


                             SF HOLDINGS GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (in thousands)


                                                                             Thirteen Weeks Ended
                                                                  --------------------------------------
                                                                      December 27,       January 25,
                                                                          1998               1998
                                                                       -------------       -------------
Operating activities:                                                                       
 Net income (loss)                                                         $ (8,445)              $ 573
Adjustments  to  reconcile  net  income  (loss)  to net cash  
     used in  operating activities:
   Depreciation and amortization                                             13,982               1,475
   Interest capitalized on debt                                               2,664                   -
   Provision for doubtful accounts                                               19                  37
   Deferred income taxes                                                     (5,909)               (251)
   Gain on building and equipment dispositions                                 (112)               (308)
   Minority interest in subsidiary's loss                                      (729)                  -
   Changes in assets and liabilities:
      Accounts receivable                                                     4,361               5,851
      Due from affiliates                                                    (4,537)             (1,035)
      Inventories                                                            16,522               3,910
      Other current assets                                                     (287)                 37
      Accounts payable and accrued expenses                                  (5,396)                499
      Other                                                                   1,802                (108)
                                                                       -------------       -------------
    Net cash provided by operating activities                                13,935              10,680
                                                                       -------------       -------------

Investing activities:
 Capital expenditures                                                       (15,624)             (2,387)
 Proceeds from building and equipment dispositions                            3,131                 219
 Payments for business acquisitions                                               -              (6,712)
                                                                       -------------       -------------
   Net cash used in investing activities                                    (12,493)             (8,880)
                                                                       -------------       -------------

Financing activities:
 Net decrease in revolving credit borrowings                                 (5,168)             (2,020)
 Repayments of long-term debt                                                  (381)               (159)
 Redemption of Fonda's common stock                                               -              (1,436)
 Debt issuance costs                                                              -                   -
 Decrease in escrow cash                                                     (1,885)                  -
                                                                       -------------       -------------
   Net cash used in financing activities                                     (7,434)             (3,615)
                                                                       -------------       -------------
Net decrease in cash                                                         (5,992)             (1,815)
Cash and cash equivalents, beginning of period                                9,630               2,339
                                                                       -------------       -------------
Cash and cash equivalents, end of period                                    $ 3,638               $ 524
                                                                       =============       =============

Supplemental cash flow information: 
Cash paid during the period for:
   Interest                                                                 $ 2,994               $ 204
   Income taxes, net of refunds                                             $ 2,255               $ 169
</TABLE>


                 See notes to consolidated financial statements.


                                       5


<PAGE>
                             SF HOLDINGS GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       BASIS OF PRESENTATION

         SF Holdings  Group,  Inc. ("SF  Holdings"),  is a holding  company that
conducts its  operations  through its  subsidiaries,  Sweetheart  Holdings  Inc.
("Sweetheart")   and  The  Fonda  Group,  Inc.  ("Fonda")   (collectively,   the
"Company"),  and therefore has no  significant  cash flows  independent  of such
subsidiaries. The instruments governing the indebtedness of Sweetheart and Fonda
contain  numerous  restrictive  covenants  that restrict  Sweetheart and Fonda's
ability to pay dividends or make other  distributions  to SF Holdings or to each
other.  The Company  believes that the combined  operations of its  subsidiaries
makes  the  Company  one  of the  three  largest  converters  and  marketers  of
disposable food service and food packaging products in North America.

         The  information   included  in  the  foregoing  interim   consolidated
financial  statements  of the  Company  are  unaudited  but,  in the  opinion of
management,  include  all  adjustments  (consisting  only  of  normal  recurring
adjustments  and  accruals)  which the Company  considers  necessary  for a fair
presentation  of the operating  results for these  periods.  Results for interim
periods are not  necessarily  indicative  of results for the entire year.  These
condensed financial  statements should be read in conjunction with the Company's
financial  statements and notes thereto  included in the Company's annual report
on Form 10-K for the fiscal year ended July 26, 1998 and its  transition  report
on Form 10-Q for the nine week period ended September 27, 1998.

         On October 22,  1998,  the Board of  Directors of SF Holdings and Fonda
approved  a change in their  respective  fiscal  year ends from a  fifty-two  or
fifty-three week period which ends on the last Sunday in July to the same number
of weekly  periods  which end on the last  Sunday in  September.  The  nine-week
transition  period  ending  September  27,  1998 was not part of the fiscal year
ended  July 26,  1998 and will not be part of  Fiscal  1999,  which  will end on
September 26, 1999.

         The following  summarized,  pro forma results of operations  assume the
Company's acquisitions in Fiscal 1998 occurred as of the beginning of the period
(in thousands).

                                                      Thirteen Weeks
                                                          Ended
                                                     January 25, 1998
                                                  -----------------------
          Net sales                                   $ 265,166
          Net loss                                    $  (8,632)

2.  CASH IN ESCROW

         Cash  received by  Sweetheart  as  proceeds  from the sale of assets is
restricted  to  qualified  capital  expenditures  under  Sweetheart's  indenture
agreement, and is held in escrow until utilized.

3.  INVENTORIES

         Inventories consist of the following (in thousands):

                                                 December 27,       July 26,
                                                     1998             1998
                                                 -------------    -------------
     Raw materials and supplies                      $ 46,826         $ 43,998
     Work-in-process                                    7,732            9,456
     Finished goods                                    99,208          115,039
                                                 =============    =============
                                                    $ 153,766        $ 168,493
                                                 =============    =============


                                       6

<PAGE>

4.  RELATED PARTY TRANSACTIONS

         In December  1998,  Fonda  entered  into an Exclusive  Manufacture  and
Supply  Agreement  (the  "Manufacture  and  Supply   Agreement")  with  Creative
Expressions Group ("CEG"), an affiliate.  Pursuant to such agreement, Fonda will
manufacture  and  supply  all of CEG's  requirements  for,  among  other  items,
disposable  paper  plates,  cups,  napkins  and  tablecovers.  Fonda  sells such
manufactured products to CEG in accordance with a formula based on cost.

         Also in December 1998,  Fonda purchased  certain  manufacturing  assets
from CEG for $4.9 million and in a separate transaction, purchased certain paper
plate manufacturing assets from Sweetheart Holdings Inc., an affiliate, for $2.4
million.  An  independent  appraisal  was  obtained,  for each  transaction,  to
determine the fairness of the respective  purchase prices.  The Company believes
the  terms on which  such  assets  were  purchased  and/or  sold are at least as
favorable as those it could have obtained from unrelated  third parties and were
negotiated  on an arm's  length  basis.  The  purchase  of assets by Fonda  from
Sweetheart was eliminated in consolidation.


5.  CONTINGENCIES

         On January 11, 1999, the United States Supreme Court denied plaintiff's
petition for Writ of  Certiorari in the matter of Aldridge v.  Lily-Tulip,  Inc.
Salary Retirement Plan Benefits  Committee and Fort Howard Cup Corporation.  The
court has decided that the Lily-Tulip,  Inc. Salary Retirement Plan (the "Plan")
was lawfully terminated.  Sweetheart is in the process of determining the timing
and amount of total payouts for which the Plan is liable.  The initial  estimate
of the  total  termination  liability  exceeds  assets  set aside in the Plan by
approximately $17 million, which has been fully reserved.  Sweetheart expects to
fund such  payments  within  the next  nine  months.  See Item 2 -  Management's
Discussion  and  Analysis  of  Financial  Condition  and  Results of  Operations
-Liquidity and Capital Resources.

         A patent  infringement  action  seeking  injunctive  relief and damages
relating to  Sweetheart's  production and sale of certain paper plates  entitled
Fort James Corp. v. Sweetheart Cup Company Inc., was filed in the U.S.  District
Court for the Eastern  District of Wisconsin  on November  21, 1997.  Sweetheart
filed an  answer  to the  complaint  denying  liability  and  asserting  various
defenses and counterclaims.  Discovery  proceedings are in process.  The Company
does not believe  that the  ultimate  liability,  if any,  would have a material
adverse effect on Sweetheart's financial position or results of operations.


                                       7

<PAGE>

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

         The  following  discussion  for the  Company  contains  forward-looking
statements which involve risks and  uncertainties.  The Company's actual results
or future  events  could  differ  materially  from  those  anticipated  in these
forward-looking  statements as a result of certain factors,  including,  but not
limited to, raw material costs, labor market conditions,  the highly competitive
nature  of  the  industry,   general  economic  and  business  conditions,   and
developments with respect to contingencies.

         As a result of the  change in the  fiscal  year from the  fifty-two  or
fifty-three week period which ends on the last Sunday in July to the same number
of weekly  periods  which end on the last  Sunday in  September,  the  quarterly
comparisons  are between the thirteen  weeks ended  December 27, 1998 (the "1999
First Fiscal  Quarter") and the thirteen weeks ended January 25, 1998 (the "1998
Second Fiscal Quarter").

General

         SF Holdings Group, Inc. ("SF Holdings")  conducts all of its operations
through  its  principal   operating   subsidiaries,   Sweetheart  Holdings  Inc.
("Sweetheart") and The Fonda Group, Inc. ("Fonda") (collectively, the "Company")
and therefore has no significant cash flows independent of such subsidiaries.

         The investment in Sweetheart was  consummated on March 12, 1998 and was
accounted for as a purchase. As a result, the financial information with respect
to the 1998 Second Fiscal Quarter contained herein does not reflect Sweetheart's
results  of  operations.   Accordingly,   such  financial   information  is  not
necessarily  indicative  of the  results  of  operations  that  would  have been
achieved had the investment in Sweetheart been consummated by the Company at the
beginning  of such  period  or which may be  achieved  in the  future.  For more
information regarding  Sweetheart's results of operations,  reference is made to
Sweetheart's  annual report on Form 10-K for the fiscal year ended September 27,
1998 and its  quarterly  report on Form 10-Q for the thirteen week period ending
December 27, 1998.

         Sweetheart and Fonda are converters and marketers of disposable  paper,
plastic and foam food service and food packaging  products.  The prices for each
subsidiary's raw materials fluctuate. When raw material prices decrease, selling
prices have historically  decreased.  The actual impact on each company from raw
materials  price changes is affected by a number of factors  including the level
of inventories at the time of a price change,  the specific timing and frequency
of price  changes,  and the lead and lag time  that  generally  accompanies  the
implementation  of both raw materials and subsequent  selling price changes.  In
the event that raw materials  prices  decrease over a period of several  months,
each company may suffer margin erosion on the sale of such inventory.

         Each of Fonda and Sweetheart's  business is seasonal with a majority of
its net cash flows from operations  realized in the second and third quarters of
the calendar year.  Sales for such periods reflect the high seasonal  demands of
the summer months when outdoor and away-from-home  consumption increases. In the
event that Fonda's and/or Sweetheart's cash flow from operations is insufficient
to  provide  working  capital  necessary  to fund  their  respective  production
requirements, Fonda and/or Sweetheart will need to borrow under their respective
credit  facilities  or seek  other  sources of  capital.  Although  the  Company
believes that funds  available under such credit  facilities  together with cash
generated  from  operations,  will be  adequate  to provide  for each  company's
respective  cash  requirements,  there can be no  assurance  that  such  capital
resources will be sufficient in the future.

Recent Developments
         In  connection   with  the  License   Agreement,   Fonda  and  Creative
Expressions Group ("CEG"), an affiliate,  entered into an Exclusive  Manufacture
and Supply Agreement in December 1998 (the "Manufacture and Supply  Agreement").
Pursuant to the Manufacture  and Supply  Agreement,  Fonda will  manufacture and
supply all of CEG's  requirements  for,  among  other  items,  disposable  paper
plates, cups, napkins and tablecovers. Fonda sells such manufactured products to
CEG in accordance  with a formula  based on cost, as defined in such  agreement.
The Company  believes  that such  agreement  will enable  Fonda to increase  the
utilization of its manufacturing  capacity.  Pursuant to the License  Agreement,
CEG has the right, among other things, to distribute certain products previously

                                       8

<PAGE>


distributed by Fonda and in exchange therefor, Fonda receives a royalty of 5% of
CEG's cash flow as  determined in  accordance  with a formula  specified in such
agreement.

        Results of Operations

<TABLE>
<CAPTION>
                                                                           Thirteen Weeks Ended
                                                            -------------------------------------------------------
                                                                  December 27,                 January 25,
                                                                     1998                          1998
                                                            -------------------------     -------------------------
                                                              Amount      % of Net Sales    Amount     % of Net Sales
                                                            ------------ ----------------------------  ----------------
                                                                              (Dollars in millions)
<S>                                                             <C>            <C>            <C>            <C>    
Net sales                                                       $ 272.8        100.0 %        $ 66.0         100.0 %
Cost of goods sold                                                246.4         90.3            53.5          81.0
                                                            ------------ ------------     -----------  ------------
   Gross profit                                                    26.5          9.7            12.5          19.0
Selling, general and
   administrative expenses                                         24.5          9.0             8.8          13.3
Other (income) expense, net                                         0.2          0.1            (0.3)         (0.5)
                                                            ------------ ------------     -----------  ------------
   Income from operations                                           1.7          0.6             4.1           6.1
Interest expense, net                                              16.5          6.0             3.1           4.6
                                                            ------------ ------------     -----------  ------------
   Income (loss) before taxes                                     (14.8)        (5.4)            1.0           1.5
Income tax (benefit) provision                                     (5.6)        (2.0)            0.4           0.6
Minority interest in subsidiary's loss                             (0.7)        (0.3)              -             -
                                                            ------------ ------------     -----------  ------------
   Net income (loss)                                             $ (8.4)        (3.1)%         $ 0.6           0.9 %
                                                            ============ ============     ===========  ============
</TABLE>


Thirteen Weeks Ended December 27, 1998 Compared to January 25, 1998
         Net  sales  were  $272.8  million  in the  1999  First  Fiscal  Quarter
(including  $203.8 million as a result of the  consolidation  of Sweetheart) and
$66.0 million in the 1998 Second Fiscal Quarter.  The 1998 Second Fiscal Quarter
included  $4.2  million  of net  sales  of  tissue  mill  products  relating  to
operations  that were sold in March  1998.  Sales  volume in Fonda's  converting
operations  increased  32.3% in the consumer  market and  decreased  1.6% in the
institutional  market.  Average  selling  prices  decreased 9.5% in the consumer
market and increased 8.8% in the institutional  market.  The increased volume in
the consumer  market was primarily due to the effects of  seasonality  resulting
from  comparing  the 1999 First  Fiscal  Quarter  (which  includes the four week
period in October 1998) with the 1998 Second Fiscal Quarter (which  includes the
four week period in January 1998). Sales in Fonda's  converting  operations were
$6.3 million higher in the four weeks of October 1998 compared to the four weeks
of  January  1998.  The  reduction  in  selling  prices in the  consumer  market
primarily  results  from lower  pricing of certain  products  sold to CEG.  This
reduction in selling prices reflects cost savings from the License  Agreement as
well as savings  that Fonda  expects  to  realize  in future  periods  upon full
implementation  of the Manufacture and Supply  Agreement.  In the  institutional
market,  the  increase  in selling  prices  and  reduction  in sales  volume was
primarily  due to a change in sales mix,  whereby Fonda  emphasized  the sale of
value added converted tissue products rather than commodity products.

         Gross  profit  was  $26.5  million  in the 1999  First  Fiscal  Quarter
(including  $14.3 million as a result of the  consolidation  of Sweetheart)  and
$12.5 million in the 1998 Second Fiscal  Quarter.  As a percentage of net sales,
gross profit  decreased  from 19.0% in the 1998 Second Fiscal Quarter to 9.7% in
the 1999 First Fiscal Quarter  primarily due to lower margins at Sweetheart.  In
addition,  Fonda's gross margins in the 1999 First Fiscal Quarter were adversely
affected by reduced selling prices of consumer  products,  described  above, and
are  expected  to  improve in future  periods  upon full  implementation  of the
Manufacture and Supply Agreement,  however,  there can be no assurance that such
will occur.

         Selling,  general and administrative expenses were $24.5 million in the
1999  First  Fiscal  Quarter  (including  $15.9  million  as  a  result  of  the
consolidation of Sweetheart) and $8.8 million in the 1998 Second Fiscal Quarter.
As a  percentage  of net sales,  selling,  general and  administrative  expenses
decreased from 13.3% in the 1998 Second Fiscal Quarter to 9.0% in the 1999 First
Fiscal  Quarter.  The decrease as a percentage of net sales was


                                       9

<PAGE>

primarily due to the effects of  consolidating  Sweetheart,  for which  selling,
general and  administrative  costs as a percentage of net sales are historically
lower than at Fonda due to  economies  of scale.  In  addition,  the  percentage
reduction was also impacted at Fonda by the reduction in selling,  marketing and
distribution  costs due to the License  Agreement,  as well as the closure of an
administrative  office.  Such  decreases  were  partially  offset by the sale of
Fonda's tissue mill  operation,  for which selling,  general and  administrative
costs were low relative to net sales.

         Income  from  operations  was $1.7  million  in the 1999  First  Fiscal
Quarter  (including  an  operating  loss  of $1.8  million  as a  result  of the
consolidation  of Sweetheart) and $4.1 million in the 1998 Second Fiscal Quarter
due to the reasons  discussed above and other income realized in the 1998 Second
Fiscal Quarter from the sale of equipment by Fonda.

         Interest expense,  net of interest income was $16.5 million in the 1999
First Fiscal Quarter  (including $13.7 million as a result of the  consolidation
of Sweetheart and financing  thereof) and $3.1 million in the 1998 Second Fiscal
Quarter.

         The  effective  tax rate was 37.9% in the 1999  First  Fiscal  Quarter,
which  reflects  certain  non-deductible  costs  relating to the  investment  in
Sweetheart and the related financing, and 42% in the 1998 Second Fiscal Quarter.
As a result of the above and the addback of minority  interest  representing 10%
of Sweetheart's historical loss, the net loss was $8.4 million in the 1999 First
Fiscal  Quarter  compared to net income of $.6 million in the 1998 Second Fiscal
Quarter.

Liquidity and Capital Resources
         Historically,  the Company's subsidiaries have relied on cash flow from
operations  and  borrowings  to  finance  their   respective   working   capital
requirements, capital expenditures and acquisitions. In addition, Sweetheart has
been funding a majority of its capital expenditures from the sale of assets.

         Net cash provided operating activities in 1999 First Fiscal Quarter was
$13.9  million  (including  $12.4  million  relating  to  the  consolidation  of
Sweetheart)  compared  to $10.7  million  in the  1998  Second  Fiscal  Quarter.
Excluding  the  effects  of  consolidating  Sweetheart,  the  reduction  in cash
provided by  operations  is primarily  due to the seasonal  reduction in working
capital in January 1998,  which was included in the 1998 Second Fiscal  Quarter,
and a buildup in amounts due from affiliates  resulting from the  implementation
of the License Agreement. 

         Capital  expenditures  were $15.6  million,  including  $5.5 million at
Sweetheart  for new  production  equipment and $4.9 million at Fonda to purchase
converting equipment. See Note 3 of Notes to Financial Statements. The remainder
of capital expenditures was primarily for routine capital improvements.

         None of SF  Holdings,  Fonda or  Sweetheart  anticipates  any  material
capital  expenditures  in the next twelve months other than those funded through
asset sales and available cash from the respective subsidiaries.  SF Holdings is
a holding  company and does not  anticipate  any material  cash needs until 2003
when  interest on the  Discount  Notes (as defined  below) and  dividends on the
Exchangeable Preferred (as defined below) become payable in cash.

         On  March  12,  1998,  the  Company  issued  $144.0  million  aggregate
principal  amount at maturity of 12 3/4% Senior Secured  Discount Notes due 2008
(the "Discount  Notes").  Until March 15, 2003, accrued interest on the Discount
Notes will not be paid but will accrete  semi-annually,  thereby  increasing the
value of the Discount  Notes.  Also on March 12, 1998,  the Company issued $30.0
million  of 13 3/4%  Exchangeable  Preferred  Stock due 2009 (the  "Exchangeable
Preferred").  Until March 15, 2003  cumulative  dividends may be paid quarterly,
either  in  cash  or by  the  issuance  of  additional  shares  of  Exchangeable
Preferred,  at the Company's  option.  Thereafter,  dividends will be payable in
cash. The Exchangeable Preferred is exchangeable at the Company's option into 13
3/4% subordinated notes due March 15, 2009. As of December 1, 1998, dividends on
the Exchangeable  Preferred have been paid by the issuance of additional  shares
of Exchangeable Preferred.

         The $120  million  principal  amount of the Fonda  Notes is  payable on
February 28, 2007 and interest is payable  semi-annually in arrears.  Fonda may,
at its  election,  redeem the Fonda  Notes at any time after  March 1, 2002 at a
redemption  price  equal  to a  percentage  (104.75%  after  March  1,  2002 and
declining in annual steps to 100% after March 1, 2005) of the  principal  amount
thereof plus accrued interest.  The Fonda Notes provide that upon the


                                       10

<PAGE>

occurrence of a Change of Control (as defined therein), the holders thereof will
have the option to require the  redemption  of the Fonda  Notes at a  redemption
price equal to 101% of the principal amount thereof plus accrued interest.

         Fonda's  revolving  credit  facility,  which matures on March 31, 2000,
provides up to $50 million  borrowing  capacity,  is  collateralized by eligible
accounts  receivable  and  inventories,  certain  general  intangibles  and  the
proceeds on the sale of accounts receivable and inventory. At December 27, 1998,
there was no  outstanding  balance and $35.5  million  was the  maximum  advance
available based upon eligible collateral.  At December 27, 1998, borrowings were
available at a bank's prime rate plus .25% or at LIBOR plus 2.25%.

         Sweetheart's  revolving  credit  facility,  as  amended,  provides  for
borrowings  in an amount of up to $135.0  million,  subject  to  borrowing  base
limitations  (the  "Sweetheart  U.S.  Credit  Facility").  Borrowings  under the
Sweetheart  U.S. Credit Facility mature on September 30, 2000 and as of December
27, 1998,  $11.9  million is available.  Borrowings  under the  Sweetheart  U.S.
Credit  Facility bear interest,  at  Sweetheart's  election,  at a rate equal to
LIBOR plus 2.25%,  or a bank's base rate plus 1.00%.  The Sweetheart U.S. Credit
Facility is secured by accounts receivable,  inventory, equipment,  intellectual
property,  general  intangibles  and  the  proceeds  on the  sale  of any of the
foregoing.  On June 15, 1998, a Canadian subsidiary of Sweetheart refinanced its
then  existing term loan and  revolving  credit  facility and entered into a new
term loan and revolving credit facility agreement which provides for a term loan
facility of up to Cdn $10.0 million and a revolving credit facility of up to Cdn
$10.0 million (the "Sweetheart  Canadian Credit Facility and with the Sweetheart
U.S. Credit Facility, the "Sweetheart Credit Facilities").  Term loan borrowings
under the Sweetheart  Canadian Credit Facility are payable quarterly through May
2001 and  revolving  credit  borrowings  and term loan  borrowings  have a final
maturity  date of June 15,  2001.  As of December  27,  1998,  Cdn $1.7  million
(approximately  $1.1 million) was available under such facility.  The Sweetheart
Canadian  Credit  Facility is secured by all of the existing and after  acquired
real and  personal,  tangible  assets of such  Canadian  subsidiary  and the net
proceeds on the sale of any of the  foregoing.  Borrowings  under the Sweetheart
Canadian  Credit Facility bear interest at an index rate plus 2.25% with respect
to the revolving credit borrowings, and an index rate plus 2.50% with respect to
the term loan borrowings.

         The  Sweetheart  Notes  include:  (i) $190.0  million of 9 5/8%  Senior
Secured Notes due September 1, 2000 (the  "Sweetheart  Secured  Notes") and (ii)
$110.0 million of 10 1/2% Senior  Subordinated  Notes due September 1, 2003 (the
"Sweetheart  Subordinated Notes").  Sweetheart may, at its election,  redeem the
Sweetheart Secured Notes at any time at a redemption price equal to a percentage
(currently  101.604%  and  declining  to 100%  after  August  31,  1999)  of the
principal  amount,  plus accrued  interest.  The  Sweetheart  Secured  Notes are
secured  by  mortgages  on the real  property  owned by  Sweetheart.  Payment of
principal and interest on the  Sweetheart  Subordinated  Notes is subordinate to
Senior  Indebtedness  (as defined  therein),  which includes the Sweetheart U.S.
Credit  Facility  and the  Sweetheart  Secured  Notes.  Sweetheart  may,  at its
election,  redeem the Sweetheart  Subordinated Notes at any time at a redemption
price equal to a percentage (103.938% and declining in annual increments to 100%
after August 31, 2001) of the  principal  amount,  plus  accrued  interest.  The
Sweetheart  Notes  provide that upon the  occurrence  of a Change of Control (as
defined  therein) the holders will have the option to require the  redemption of
the  Sweetheart  Notes at a  redemption  price  equal  to 101% of the  principal
amount, plus accrued interest.

         Pursuant to the terms of the instruments  governing the indebtedness of
SF  Holdings,  Fonda  and  Sweetheart,   each  company  is  subject  to  certain
affirmative and negative covenants  customarily  contained in agreements of this
type,  including,  without  limitation,  covenants  that  restrict,  subject  to
specified  exceptions  (i)  mergers,  consolidations,  asset sales or changes in
capital structure, (ii) creation or acquisition of subsidiaries,  (iii) purchase
or  redemption  of capital  stock or  declaration  or payment  of  dividends  or
distributions on such capital stock, (iv) incurrence of additional indebtedness,
(v) investment activities,  (vi) granting or incurrence of liens to secure other
indebtedness,  (vii)  prepayment or  modification  of the terms of  subordinated
indebtedness and (viii) engaging in transactions  with affiliates.  In addition,
such debt  instruments  restrict each  subsidiary's  ability to pay dividends or
make other  distributions  to SF Holdings or each other.  The credit  facilities
also require that each subsidiary satisfy certain financial covenants.


         Fonda has reinvested  amounts in excess of $10 million from the sale of
its tissue mill,  within the required  time period,  as specified in  accordance
with the asset sale covenant under the indenture governing Fonda's Notes.


                                       11

<PAGE>

         During  the 1999  First  Fiscal  Quarter,  the  Company  did not  incur
material costs for compliance with environmental law and regulations.

         In January  1999,  the  Company  was  notified  that the United  States
Supreme  Court had denied  plaintiffs'  petition for Writ of  Certiorari  in the
matter of Aldridge v. Lily-Tulip, Inc. Salary Retirement Plan Benefits Committee
and Fort  Howard Cup  Corporation.  The court has  decided  that the  Lily-Tulip
Salary Retirement Plan (the "Plan") was lawfully  terminated.  The Company is in
the process of determining  the timing and amount of total payouts for which the
Plan is liable. The initial estimate of the total termination  liability exceeds
assets set aside in the Plan by approximately $17 million, which amount has been
fully reserved by the Company.  The Company expects to fund such payments within
the next nine  months.  The  Company's  operating  plan  contemplates  that cash
generated  by  operations  and  amounts  available  under the  Company's  credit
facilities will be sufficient to make the required  payments under the Plan when
due.  However,  there can be no  assurance  that the  Company  will  achieve its
operating  plan and have the necessary cash to make these  payments.  Failure by
the Company to make such  payments  will have a material  adverse  effect on the
Company and its financial condition.

         The  Company  believes  that  cash  generated  by each of  Fonda's  and
Sweetheart's  operations,  combined with amounts  available under its respective
credit facilities as well as funds generated by asset sales by Sweetheart should
be  sufficient  to fund each of  Fonda's  and  Sweetheart's  respective  capital
expenditures  needs,  debt  service  requirements  and  working  capital  needs,
including  Sweetheart's   termination   liabilities  under  the  Plan,  for  the
foreseeable future.

Year 2000
         Many of  Sweetheart's  and  Fonda's  computer  systems may be unable to
process dates beyond  December 31, 1999. This could result in system failures or
miscalculations  which  could have a material  adverse  effect on the  Company's
business,  financial condition or results of operations.  Each of Sweetheart and
Fonda has  implemented a Year 2000 compliance  program  intended to identify the
programs  and  infrastructures  that could be  effected  by Year 2000 issues and
resolve the problems that were identified on a timely basis.

         Fonda has completed the  assessment  phase,  in which it has identified
potential  Year  2000  issues,  including  those  with  respect  to  information
technology  systems,  technology embedded within equipment Fonda uses as well as
equipment that interfaces  with vendors and other third parties.  Fonda has also
completed  the upgrade of its hardware and  software  systems  which run most of
Fonda's data processing and financial  reporting  software  applications and has
consolidated  certain  of its  in-house  developed  computer  systems  into  the
upgraded systems. In addition,  Fonda is working with vendors to ensure that its
telephone systems and other embedded  technologies are Year 2000 compliant.  The
telephone  system is expected to be Year 2000 compliant by May 1999. EDI trading
partners have been contacted, and other key business partners are in the process
of being contacted,  to ensure that key business  transactions will be Year 2000
compliant.  Furthermore,  in the  event  Fonda is  unable  to meet  certain  key
operational  dates,  the Company believes its systems that are already Year 2000
compliant,  as well as  temporary  solutions  to systems  that are  currently in
place, and manual  procedures would allow Fonda to ship product to customers and
engage in other critical business functions.

         Sweetheart  has  completed  the  assessment  phase,  in  which  it  has
identified  potential  Year 2000 issues with respect to  information  technology
systems,  as well as equipment that  interfaces  with vendors and third parties,
and  developed a  compliance  project for its  hardware,  operating  systems and
application  systems.  Sweetheart  has also completed the hardware and operating
systems  conversion.  With  respect  to the  application  phase,  Sweetheart  is
compliant  in  its  planning,   order   management  and   warehousing   systems.
Manufacturing  systems are in final  testing and are expected to be compliant by
April 1999.  Financial,  corporate and in-house  developed systems are scheduled
for compliance by July 1999.  Sweetheart  has completed its internal  assessment
phase for technology  embedded within  equipment and is awaiting  responses from
certain vendors.  Sweetheart believes a significant portion of its manufacturing
equipment is not affected by Year 2000 issues due to its operations  use, or was
compliant when purchased.  Sweetheart has or is in the process of contacting key
vendors and business partners,  to ensure that key business transactions will be
Year 2000  compliant.  Furthermore,  in the event  Sweetheart  is unable to meet
certain key operational  dates,  Sweetheart  believes its already compliant Year
2000 systems for planning,  order management and warehouse management,  together
with manual  systems,  would allow  Sweetheart to ship products to customers and
engage in other critical business functions.


                                       12

<PAGE>

         As of February 1, 1999, Sweetheart and Fonda estimate the total cost of
their   respective   Year  2000  program  at  $2.7  million  and  $3.2  million,
respectively.  Sweetheart  has spent  $2.0  million  as of  December  27,  1998,
including $.8 million in the thirteen weeks ended  December 27, 1998.  Fonda has
spent $2.2 million as of December 27, 1998,  including  $1.0 million in the 1999
First Fiscal  Quarter.  Expenditures  have been,  and are expected to be, funded
from cash  flows  from the  respective  company's  operations,  available  cash,
borrowings  under  each  company's  respective  credit  facility,  or by  lease.
However,  there can be no assurance  that  Sweetheart or Fonda will identify all
Year 2000 issues in their  computer  systems in advance of their  occurrence  or
that they will be able to successfully  remedy all problems that are discovered.
Failure by Sweetheart or Fonda and/or their significant vendors and customers to
complete Year 2000 compliance  programs in a timely manner could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  In addition, the revenue stream and financial stability of existing
customers  may be  adversely  impacted by Year 2000  problems  which could cause
fluctuations in the Company's revenues and operating profitability.

Net Operating Loss Carryforwards
         As of September 27, 1998,  Sweetheart had approximately $202 million of
net operating loss carryforwards  ("NOLs") which expire at various dates through
2018.  Although  the Company  expects  that  sufficient  taxable  income will be
generated in the future to realize these NOLs,  there can be no assurance future
taxable income will be generated to utilize such NOLs.

                                       13

<PAGE>


PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits:

         Exhibits 2.1 through 10.8 are  incorporated  herein by reference to the
         exhibit with the  corresponding  number filed as part of the  Company's
         Registration  Statement on Form S-4, as amended  (File No.  333-50683).
         Exhibits 10.9 through 10.18 are incorporated herein by reference to the
         exhibit with the  corresponding  number filed as part of the  Company's
         Registration Statement on Form S-4, as amended (File No. 333-51563).

     Exhibit #                                       Description of Exhibit
     ---------                                       ----------------------

          2.1       Investment  Agreement,  dated as of December 29, 1997, among
                    the  Stockholders of Sweetheart  Holdings Inc.  ("Sweetheart
                    Holdings"),  Creative Expressions Group, Inc. ("CEG") and SF
                    Holdings Group, Inc. ("SF Holdings").

          3.1       Restated Certificate of Incorporation of the Company.

          3.2       By-laws of the Company.

          4.1       Indenture,  dated as of March 12, 1998,  between SF Holdings
                    and The Bank of New York.  

          4.2       Form  of 12  3/4%  Series  A and  Series  B  Senior  Secured
                    Discount Notes,  dated as of March 12, 1998 (incorporated by
                    reference to Exhibit 4.1).

          4.3       Registration  Rights Agreement,  dated as of March 12, 1998,
                    among SF Holdings,  Bear, Stearns & Co. Inc. and SBC Warburg
                    Dillon Read Inc. (the "Initial Purchasers").

          4.4       Registration  Rights Agreement,  dated as of March 20, 1998,
                    between the Company, American Industrial Partners Management
                    Company, Inc. ("AIPM") and Bear, Stearns & Co. Inc.

          4.5       Form of Certificate of Exchangeable Preferred Stock.

          4.6       Form of  Indenture  between  the Company and The Bank of New
                    York governing the 13 3/4% Subordinated  Notes due March 15,
                    2009.

          4.7       Paragraph A of Article Fourth of the Restated Certificate of
                    Incorporation  of the Company  (incorporated by reference to
                    Exhibit 3.1).

          10.1      Stockholders' Rights Agreement,  dated as of March 12, 1998,
                    among SF  Holdings  and the  persons  listed on  Schedule  I
                    thereto.

          10.2      Stockholders'  Agreement,  dated as of March 12, 1998, among
                    Sweetheart   Holdings,   SF   Holdings   and  the   Original
                    Stockholders.

          10.3      Stockholders Agreement, dated as of March 12, 1998, among SF
                    Holdings and the Initial Purchasers.

          10.4      Pledge  Agreement,  dated as of March 12,  1998,  between SF
                    Holdings  and  the  Bank  of  New  York.  

          10.5      Tax Sharing Agreement,  dated as of March 12, 1998, among SF
                    Holdings and The Fonda Group, Inc ("Fonda").

          10.6      Second Restated Management  Services Agreement,  dated as of
                    March 12, 1998,  among Sweetheart  Holdings,  Sweetheart Cup
                    Company  Inc.   ("Sweetheart   Cup"),   American  Industrial
                    Partners Management Company, Inc. ("AIPM") and SF Holdings.

          10.7      Amendment  No.  1 to  Second  Restated  Management  Services
                    Agreement,  dated as of March  12,  1998,  among  Sweetheart
                    Holdings, Sweetheart Cup, AIPM and SF Holdings.

          10.8      Assignment and Assumption  Agreement,  dated as of March 12,
                    1998,  between  SF  Holdings  and Fonda.  

          10.9      Stockholders Agreement,  dated as of March 20, 1998, between
                    the Company and Bear, Stearns & Co. Inc.

          10.10     Executive  Retention Pay  Agreement,  dated as of October 1,
                    1997, between Sweetheart Holdings and Daniel M. Carson.

          10.11     Executive  Retention Pay  Agreement,  dated as of October 1,
                    1997, between Sweetheart Holdings and William H. Haas.

          10.12     Executive  Retention Pay  Agreement,  dated as of October 1,
                    1997, between Sweetheart Holdings and James R. Mullen.

                                       14

<PAGE>


          10.13     Special Incentive Agreement between Sweetheart Holdings Inc.
                    and its subsidiary,  Sweetheart Cup Company Inc. and William
                    H. Haas dated November 18, 1996.

          10.14     Special Incentive Agreement between Sweetheart Holdings Inc.
                    and its  subsidiary,  Sweetheart Cup Company Inc. and Daniel
                    M. Carson dated November 18, 1996.

          10.15     Special Incentive Agreement between Sweetheart Holdings Inc.
                    and its subsidiary, Sweetheart Cup Company Inc. and James R.
                    Mullen dated November 18, 1996.

          10.16     Employee  Relocation  Agreement between Sweetheart  Holdings
                    Inc.  and its  subsidiary,  Sweetheart  Cup Company Inc. and
                    James R. Mullen dated December 19, 1997.

          10.17     Employee  Relocation  Agreement between Sweetheart  Holdings
                    Inc.  and its  subsidiary,  Sweetheart  Cup Company Inc. and
                    Daniel M. Carson dated December 19, 1997.

          10.18     Employee  Relocation  Agreement between Sweetheart  Holdings
                    Inc.  and its  subsidiary,  Sweetheart  Cup Company Inc. and
                    William H. Haas dated December 19, 1997.

          16.1      Letter regarding change in certifying accountant.

          27.1      * Financial Data Schedule.


      ----------------
      *  filed herein.

(b)  A report on Form 8-K was filed on  October  30,  1998  under item 8 for the
     change in the Company's fiscal year-end from the last Sunday in July to the
     last Sunday in September.

                                       15

<PAGE>


                                   SIGNATURES

         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, thereto duly authorized.

Date: February 10, 1999

                                     SF HOLDINGS GROUP, INC.



                                     By:  /s/ HANS H. HEINSEN
                                         ---------------------   
                                                  Hans H. Heinsen
                                     Senior Vice President, Chief Financial
                                     Officer and Treasurer (Principal Financial
                                     And Accounting Officer)



                                       16