<PAGE>



                                       FORM 10-Q


                         SECURITIES AND EXCHANGE COMMISSION 
                                WASHINGTON, D.C. 20549


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

For the quarterly period ended January 4, 1997

                            Commission File Number 0-26602



                               THE GRAND UNION COMPANY
                (Exact name of registrant as specified in its charter)

                Delaware                              22 - 1518276
                --------                              ------------
    (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)



   201 Willowbrook Boulevard, Wayne,
               New Jersey                              07470 - 0966
   ---------------------------------                   ------------
(Address of principal executive offices)                (Zip Code)


                                     201-890-6000
                                     ------------
            (Registrant's telephone number, including area code)


     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 whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                            Yes  X  .   No     . 
                                ---        --- 

     As of February 18, 1997, there were issued and outstanding 10,000,000
shares of the  Registrant's common stock.

                                       1

<PAGE>

                               THE GRAND UNION COMPANY 

                                        INDEX

PART I - FINANCIAL INFORMATION (Unaudited)

Item 1.  Financial Statements.


<TABLE>
<CAPTION>
                                                                                                              Page No.
<S>                                                                                                             <C>
Consolidated Statement of Operations - 12 weeks ended January 4, 1997 and January 6, 1996                        3

Consolidated Statement of Operations - 40 weeks ended January 4, 1997, 29 weeks ended January 6, 1996
(Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company)                                       4

Consolidated Balance Sheet - January 4, 1997 and March 30, 1996                                                  5

Consolidated Statement of Cash Flows - 40 weeks ended January 4, 1997, 29 weeks ended January 6, 1996 
(Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company)                                       6

Notes to Consolidated Financial Statements                                                                       7

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
Operations.                                                                                                      9

PART II - OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders.                                                   12

Item 6.  Exhibits.                                                                                              13


</TABLE>

All items which are not applicable or to which the answer is negative have been
omitted from this report.


                                       2

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                               THE GRAND UNION COMPANY
                         CONSOLIDATED STATEMENT OF OPERATIONS
                        (in thousands, except per share data)
                                     (unaudited)


                                                 12 Weeks Ended
                                            -------------------------
                                            January 4,     January 6,
                                               1997           1996
                                            ----------     ----------

Sales                                       $  537,151     $  543,617

Cost of sales                                 (372,816)      (376,754)
                                            -----------     ----------
Gross profit                                   164,335        166,863

Operating and administrative expenses         (138,373)      (136,035)

Depreciation and amortization                  (16,257)       (16,547)

Amortization of excess reorganization value    (23,678)       (24,578)

Unusual item                                         -        (15,000)

Interest expense, net                          (24,391)       (23,537)
                                            -----------     ----------

Loss before income tax benefit                 (38,364)       (48,834)

Income tax benefit                               6,687          7,840
                                            -----------     ----------

Net loss                                       (31,677)       (40,994)

Accrued dividends on preferred stock              (788)             -
                                            -----------     ----------

Net loss applicable to common stock         $  (32,465)    $  (40,994)
                                            -----------     ----------
                                            -----------     ----------

Net loss per common share                     $  (3.25)    $    (4.10)
                                            -----------     ----------
                                            -----------     ----------



       See accompanying notes to consolidated financial statements (unaudited).

                                       3



<PAGE>

                               THE GRAND UNION COMPANY
                         CONSOLIDATED STATEMENT OF OPERATIONS
                        (in thousands, except per share data)
                                     (unaudited)

<TABLE>
<CAPTION>

                                                                                             Predecessor
                                                                   Successor Company           Company
                                                               ---------------------------    -----------
                                                               40 Weeks       29 Weeks        11 Weeks
                                                                Ended           Ended          Ended
                                                               January 4,     January 6,      June 17,
                                                                 1997            1996           1995
                                                               -----------    ----------      ---------
<S>                                                            <C>            <C>             <C>

Sales                                                          $ 1,797,386    $1,299,991      $ 487,882

Cost of sales                                                   (1,248,994)     (897,411)      (344,041)
                                                                ----------    ----------      ---------          
 
Gross profit                                                       548,392       402,580        143,841

Operating and administrative expenses                             (451,060)     (321,459)      (117,544)

Depreciation and amortization                                      (61,402)      (40,504)       (17,215)

Amortization of excess reorganization value                        (78,928)      (59,405)          --

Unusual items                                                         --         (19,500)       (18,627)

Interest expense, net (contractual interest of $43,360        
  for the 11 weeks ended June 17, 1995)                            (81,252)      (55,516)       (19,791)
                                                               -----------    ----------      ---------
Loss before income tax benefit and extraordinary gain 
  on debt discharge                                               (124,250)      (93,804)       (29,336)

Income tax benefit                                                  18,108        13,212           -- 
                                                               -----------    ----------      ---------
Loss before extraordinary gain on debt discharge                  (106,142)      (80,592)       (29,336)

Extraordinary gain on debt discharge                                  --            --          854,785
                                                               -----------    ----------      ---------

Net (loss) income                                                 (106,142)      (80,592)       825,449

Accrued dividends on preferred stock                                (1,031)         --             --
                                                               -----------    ----------      ---------

Net (loss) income applicable to common stock                     $(107,173)     $(80,592)      $825,449
                                                               -----------    ----------      ---------
                                                               -----------    ----------      ---------

Net loss per common share                                        $  (10.72)     $  (8.06)
                                                               -----------    ----------
                                                               -----------    ----------
</TABLE>

   See accompanying notes to consolidated financial statements (unaudited).

                                       4


<PAGE>


                            THE GRAND UNION COMPANY
                           CONSOLIDATED BALANCE SHEET
                      (dollars in thousands, except par value)
                                     (unaudited)

<TABLE>
<CAPTION>

                                                                                  January 4,       March 30,
                                                                                     1997             1996
                                                                                  ----------       ---------
<S>                                                                               <C>              <C>
    ASSETS
    Current assets:
     Cash and temporary investments                                               $   36,091      $   39,425
     Receivables                                                                      33,189          20,948
     Inventories                                                                     139,104         133,506
     Other current assets                                                             13,988          13,709
                                                                                  ----------       ---------
      Total current assets                                                           222,372         207,588
    Property, net                                                                    456,643         473,726
    Excess reorganization value, net                                                 358,744         437,672
    Deferred tax asset                                                                72,024          53,916
    Other assets                                                                      12,692          12,304
                                                                                  ----------       ---------
                                                                                  $1,122,475      $1,185,206
                                                                                  ----------      ----------
                                                                                  ----------      ----------
    LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
    Current liabilities:
    Current maturities of long-term debt                                           $      212      $    1,813
    Current portion of obligations under capital leases                                 7,747           7,080
    Accounts payable and accrued liabilities                                          178,598         170,010
                                                                                   ----------       ---------
    Total current liabilities                                                         186,557         178,903
                                                                                   ----------       ---------
    Long-term debt                                                                    740,485         738,067
                                                                                   ----------       ---------
    Obligations under capital leases                                                  135,771         128,114
                                                                                   ----------       ---------
    Other noncurrent liabilities                                                       93,660          95,978
                                                                                   ----------       ---------
    Redeemable Class A  preferred  stock, $1.00 par value, 3,500,000 shares  
     authorized, 819,700 shares issued and outstanding, liquidation preference 
     $41,031                                                                           41,031               -
                                                                                   ----------       ---------
   Stockholders' (deficit) equity:
    Common stock, $.01 and $1.00 par value at January 4, 1997 and March 30, 1996,
     respectively, 60,000,000 shares authorized, 10,000,000 shares issued and
     outstanding                                                                         100           10,000
    Preferred stock, $1.00 par value, 10,000,000 shares authorized less amount 
     authorized as Class A preferred stock, no shares issued and outstanding               -                -
    Capital in excess of par value                                                   140,869          144,000
    Accumulated deficit                                                             (215,998)        (109,856)
                                                                                   ----------       ---------
     Total stockholders' (deficit) equity                                            (75,029)          44,144
                                                                                   ----------       ---------
                                                                                $  1,122,475     $  1,185,206
                                                                                   ----------       ---------
                                                                                   ----------       ---------
</TABLE>

       See accompanying notes to consolidated financial statements (unaudited).

                                       5


<PAGE>
                               THE GRAND UNION COMPANY
                         CONSOLIDATED STATEMENT OF CASH FLOWS
                                    (in thousands)
                                     (unaudited)
                                           
<TABLE>
<CAPTION>
                                                                                                        Predecessor
                                                                             Successor Company            Company
                                                                          -------------------------     -----------
                                                                           40 Weeks       29 Weeks       11 Weeks
                                                                            Ended          Ended           Ended
                                                                          January 4,     January 6,       June 17,
                                                                             1997           1996           1995
                                                                          ----------     ----------      ---------
<S>                                                                       <C>            <C>            <C>
OPERATING ACTIVITIES:
 Net (loss) income                                                        $(106,142)      $(80,592)      $825,449
 Adjustments to reconcile net (loss) income to net cash provided by       
    (used for) operating activities before reorganization items paid:
    Depreciation and amortization                                            61,402         40,504         17,215
    Amortization of excess reorganization value                              78,928         59,405            -
    Deferred taxes                                                          (18,108)       (12,787)           -
    LIFO charge                                                               1,000          1,000            300
    Noncash interest                                                           (145)        14,595          1,126
    Extraordinary gain on debt discharge                                        -              -         (854,785)
 Net changes in assets and liabilities:     
   Receivables                                                              (12,241)       (10,865)         1,769
   Inventories                                                               (6,598)        10,489         12,646
   Accounts payable and accrued liabilities                                  10,357        (17,720)       (34,928)
   Other current assets                                                        (279)        (1,102)         2,776
   Other                                                                     (4,399)        (3,176)         4,493
                                                                          ----------     ----------      ---------
 Net cash provided by (used for) operating  
   activities before reorganization items paid                                3,775           (249)       (23,939)
     Reorganization items paid                                               (4,492)       (19,609)        (4,913)
                                                                          ----------     ----------      ---------
 Net cash used for operating activities                                        (717)       (19,858)       (28,852)
                                                                          ----------     ----------      ---------
INVESTMENT ACTIVITIES:
  Capital expenditures                                                      (31,430)       (27,304)        (3,301)
  Disposals of property                                                       7,942            -            5,452
                                                                          ----------     ----------      ---------
 Net cash (used for) provided by investment activities                      (23,488)       (27,304)         2,151
                                                                          ----------     ----------      ---------
FINANCING ACTIVITIES:
  Net proceeds from sale of preferred stock                                  28,000            -              -
  Obligations under capital leases discharged                                (8,434)        (4,155)        (1,707)
  Retirement of long-term debt                                               (7,695)          (585)          (239)
  Net proceeds from long-term debt                                            9,000         18,089            -
  Proceeds from New Bank agreement                                              -              -          104,144
  Payment of Old Bank debt                                                      -              -          (93,144)
  Loan placement fees                                                           -              -           (3,125)
                                                                          ----------     ----------      ---------
  Net cash provided by financing activities                                  20,871         13,349          5,929
                                                                          ----------     ----------      ---------
  Decrease in cash and temporary investments                                 (3,334)       (33,813)       (20,772)
  Cash and temporary investments at beginning of period                      39,425         68,651         89,423
                                                                          ----------     ----------      ---------
  Cash and temporary investments at end of period                          $ 36,091       $ 34,838       $ 68,651
                                                                          ----------     ----------      ---------
                                                                          ----------     ----------      ---------
Supplemental disclosure of cash flow information:
  Interest payments                                                        $ 62,705       $ 15,169        $ 9,515
  Capital lease obligations incurred                                         16,758          1,168         20,072
  Accrued dividends on preferred stock                                        1,031            -              -
  Decrease in common stock par value                                          9,900            -              -
</TABLE>

       See accompanying notes to consolidated financial statements (unaudited).

                                         6
<PAGE>

                                   THE GRAND UNION COMPANY
                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                        (unaudited)

NOTE 1 - Basis of Accounting

     The accompanying interim consolidated financial statements of The Grand 
Union Company (the "Company") include the accounts of the Company and its 
subsidiaries, all of which are wholly-owned.  These consolidated financial 
statements as of and for the periods subsequent to June 17, 1995 were 
prepared in accordance with the principles of fresh-start reporting contained 
within the American Institute of Certified Public Accountants Statement of 
Position 90-7, "Financial Reporting By Entities In Reorganization Under The 
Bankruptcy Code" ("Fresh-Start Reporting").  Therefore, in connection with 
the implementation of Fresh-Start Reporting, a new entity was deemed created 
for financial reporting purposes and, where applicable, the consolidated 
financial statements for the "Successor Company" have been separately 
identified from those of the "Predecessor Company".   In the opinion of 
management, the consolidated financial statements include all adjustments, 
which, except for fresh-start adjustments, consist only of normal recurring 
adjustments necessary for a fair presentation of operating results for the 
interim periods.

     These consolidated financial statements should be read in conjunction 
with the consolidated financial statements and related notes contained in the 
Company's Annual Report on Form 10-K for the 52 weeks ended March 30, 1996. 
Operating results for the periods presented are not necessarily indicative of 
the results for the full fiscal year.

NOTE 2 - Issuance of Preferred Stock

     On July 30, 1996, the Company entered into an agreement (the "Stock 
Purchase Agreement") to sell $100 million of 8.5% convertible preferred 
stock, $1.00 par value per share, (the "Class A Preferred Stock") to an 
investment group composed of Trefoil Capital Investors II, L. P., a Delaware 
limited partnership, and GE Investment Private Placement Partners II, A 
Limited Partnership, a Delaware limited partnership (collectively, the 
"Purchasers").

     On September 17, 1996, the Company sold 800,000 shares of Class A 
Preferred Stock to the Purchasers for aggregate proceeds of $40,000,000 (the 
"Principal Closing").  Under the terms of the Stock Purchase Agreement, the 
Company will sell to the Purchasers an additional 400,000 shares of Class A 
Preferred Stock at a purchase price of $50 per share (the "Stated Value") on 
each of February 25, 1997, August 25, 1997 and February 25, 1998.  Any or all 
of the additional purchases may be accelerated by the Purchasers at their 
option.  Each of the additional purchases is subject to the satisfaction or 
waiver of certain closing conditions as specified in the Stock Purchase 
Agreement.

     Dividends are cumulative and payable quarterly at 8.5% of the Stated 
Value per annum.  Dividends are payable, at the option of the Company, in 
additional shares of Class A Preferred Stock or common stock through the 
third anniversary of the Principal Closing.  From the third anniversary 
through the fifth anniversary of the Principal Closing, dividends are payable 
in cash, unless the terms of the Company's bank credit agreement or 12% 
senior note indenture prohibit cash dividends, in which case dividends may be 
paid in Class A Preferred Stock or common stock.  After the fifth anniversary 
of the Principal Closing, dividends are payable in cash.  To the extent that 
any dividends on the Class A Preferred Stock are paid in shares of common 
stock, the Company is required to pay a premium in additional shares of 
common stock equal to 33 1/3% of the number of shares of common stock that 
would otherwise be paid as the dividend.  On December 31, 1996 and September 
30, 1996, the Company paid dividends on the Class A Preferred Stock through 
the issuance of 17,056 and 2,644 shares, respectively, of Class A Preferred 
Stock.  The aggregate Stated Value of the dividends at December 31, 1996 and 
September 30, 1996 was $852,800 and $132,200, respectively.

     Each share of Class A Preferred Stock is convertible at the option of 
the holder, at any time, into 6.8966 shares of common stock.  At January 4, 
1997, the 819,700 outstanding shares of Class A Preferred Stock were 
convertible into an aggregate 5,653,143 shares of common stock.     

     The Company is required to redeem the Class A Preferred Stock no later 
than June 1, 2005. Additionally, the Class A Preferred Stock may be redeemed 
at the Company's option at $50 per share plus all accrued and unpaid 
dividends if the volume-weighted average price of the Company's common stock 
over a 60-day period exceeds $13.05 per share after September 17, 1998,
or $14.50 per share after September 17, 1999.  After September 17, 2001, the 
Company's right to redeem is not contingent on the  

                                       7
<PAGE>

price of the common stock and the redemption price is approximately $51.60 
per share plus all accrued and unpaid dividends, declining ratably to $50 per 
share plus all accrued and unpaid dividends after September 17, 2004.

     The Stock Purchase Agreement and the Certificate of Designation of 
Preferred Stock, setting forth the powers, preferences, rights, 
qualifications, limitations and restrictions of such class of preferred stock 
(the "Certificate of Designation"), also contain provisions with respect to 
the rights of the Purchasers to elect a specified number of directors, the 
number of disinterested directors, voting rights and pre-emptive rights with 
respect to any sale by the Company of shares of common stock or securities 
convertible into, or exchangeable for, common stock.  The liquidation 
preference of the Class A Preferred Stock is equal to its Stated Value plus 
any accrued and unpaid dividends.

     The Class A Preferred Stock has been classified as Redeemable Class A 
Preferred Stock in the accompanying Consolidated Balance Sheet.  The 
dividends on the Class A Preferred Stock and the accrued and unpaid dividends 
through January 4, 1997 have been accounted for by a charge against Capital 
in Excess of Par Value and a corresponding increase in the value of the Class 
A Preferred Stock.

     The Company has recorded, as a charge to Capital in Excess of Par Value, 
costs directly related to the sale of the Class A Preferred Stock totaling 
$12,000,000.  The costs include transaction fees paid to Shamrock Capital 
Advisors, Inc. and GE Investment Management Corporation of $2,000,000 each, 
fees paid to Donaldson, Lufkin and Jenrette, the Company's financial advisor 
and a related party, of approximately $5,200,000 and legal and other 
professional fees and expenses of $2,800,000.

NOTE 3 - Net Loss Per Share

     The Company's outstanding warrants to purchase common stock and options 
to purchase common stock under the Company's 1995 Non-Employee Director's 
Stock Option Plan and 1995 Equity Incentive Plan are considered common stock 
equivalents.  The inclusion of these common stock equivalents in the 
Company's primary earnings per share calculation would have been 
anti-dilutive for the periods presented.  Accordingly, only the weighted 
average number of common shares outstanding, totaling 10,000,000, were 
included in the calculation.

     The Company's Class A Preferred Stock is not deemed to be a common stock 
equivalent.  A fully diluted earnings per share calculation is not presented 
because inclusion of the Class A Preferred Stock in the calculation would 
have been anti-dilutive for the periods presented.    

     Earnings (loss) per common share data is not meaningful for periods 
prior to June 17, 1995 due to the significant change in the capital structure 
of the Company.

NOTE 4  - Annual Meeting of Stockholders

     On November 7, 1996, the Company held its annual meeting of stockholders 
and the shareholders approved the 1995 Non-Employee Directors' Stock Option 
Plan and the 1995 Equity Incentive Plan. Additionally, approval was given to 
an increase in the number of authorized shares of common stock to 60,000,000 
and a decrease in the par value to $.01.  Also approved were two amendments 
to the Company's certificate of incorporation, a fair price amendment and an 
amendment to permit stockholder action by written consents. 

                                       8
<PAGE>

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

General: 

     As discussed in Note 1, as of June 17, 1995, in accordance with the 
American Institute of Certified Public Accountants Statement of Position 
90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy 
Code", the Company applied Fresh-Start Reporting.  In connection with the 
adoption of Fresh-Start Reporting, a new entity was deemed created for 
financial reporting purposes.  For purposes of the discussion of Results of 
Operations for the 40 weeks ended January 6, 1996, the results of the 
Predecessor Company and Successor Company have been combined.

Results of Operations

     The following table sets forth certain statement of operations data 
reflecting the combination discussed above (all dollars in millions):

<TABLE>
<CAPTION>
                                                  12 Weeks Ended         40 Weeks Ended
                                               ---------------------   ----------------------
                                               January 4, January 6,   January 4,  January 6,
                                                 1997       1996         1997        1996
                                               ---------  ---------    ----------  ----------
<S>                                            <C>        <C>          <C>         <C>
Sales                                          $ 537.2     $ 543.6      $1,797.4    $1,787.9
Gross profit                                     164.3       166.9         548.4       546.4
Operating and administrative expenses           (138.4)     (136.0)       (451.1)     (439.0)
Depreciation and amortization                    (16.3)      (16.5)        (61.4)      (57.7)
Amortization of excess reorganization value      (23.7)      (24.6)        (78.9)      (59.4)
Unusual items                                       --       (15.0)           --       (38.1)
Interest expense, net                            (24.4)      (23.5)        (81.3)      (75.3)
Income tax benefit                                 6.7         7.8          18.1        13.2
Extraordinary gain on debt discharge                --          --            --       854.8
Net (loss) income                                (31.7)      (41.0)       (106.1)      744.9

LIFO provision                                    (0.3)       (0.3)         (1.0)       (1.0)

Sales percentage (decrease) increase              (1.2%)      (3.5%)         0.5%       (4.3%)
Same store sales percentage (decrease) increase   (0.8)       (1.3)          0.8        (1.2)
Gross profit as a percentage of sales             30.6        30.7          30.5        30.6
Operating and administrative
  expenses as a percentage of sales               25.8        25.0          25.1        24.6
</TABLE>

     Sales for the 12 (the "third quarter") weeks ended January 4, 1997 
decreased $6.5 million, or 1.2%, as compared to the 12 weeks ended January 6, 
1996.  Same store sales (sales of stores which were operated during the 
comparable periods of both fiscal years) decreased 0.8% during the third 
quarter as compared to the prior year's third quarter.  Same store sales 
decreases for the third quarter were largely attributable to a shorter than 
normal holiday season this year coupled with no snow this year versus the 
sales benefit of four snow storms last year.  Sales for the 40 weeks ended 
January 4, 1997 increased $9.5 million, or 0.5%, as compared to the 40 weeks 
ended January 6, 1996.  Same store sales increased 0.8% during the year to 
date as compared to last year's 40 week period.  Same store sales increases 
for the year to date resulted primarily from the continued maturation of the 
Company's marketing and customer service programs and the effect of the 
Company's capital expenditure program offset by those factors affecting the 
third quarter comparison.

          Gross profit, as a percentage of sales, decreased 0.1% for both the 
third quarter and year to date compared to the prior year's comparable 
periods. Factors negatively affecting third quarter gross profit, compared to 
the prior year, include the "More Lower Prices" marketing program implemented 
at the beginning of the fiscal year in the majority of the Company's 
metropolitan New York area stores and higher levels of promotional spending 
partially offset by the positive benefits from outsourcing warehousing and 
distribution.  In addition to the factors affecting the third quarter 
comparison, the year to date comparison reflects

                                       9
<PAGE>

the positive benefit of the restoration of vendor promotional 
allowances and other vendor support to normal levels compared to bankruptcy - 
impacted levels experienced in last year's first quarter.

     Operating and administrative expenses, as a percentage of sales, 
increased 0.8% to 25.8% and 0.5% to 25.1% for the third quarter and year to 
date, respectively.  The increase in operating expenses, as a percentage of 
sales, in both the third quarter and year to date periods primarily resulted 
from increased store advertising and promotional activity and store labor 
levels to properly launch and support the key elements of the Company's 
strategic plan. In addition, gains on sales of stores in the first half of 
this year were lower than the comparable period of the prior year.

     Depreciation and amortization decreased $0.2 million to $16.3 million 
for the third quarter and increased $3.7 million to $61.4 million for the 
year to date.  The year to date increase is principally from increases in 
capital spending and capitalized leases.

     Interest expense increased $0.9 million to $24.4 million and $6.0 
million to $81.3 million for the third quarter and year to date periods, 
respectively, compared with the same periods of the prior year.  The third 
quarter increase is principally a result of higher levels of capitalized 
leases in the current year.  The year to date increase was impacted by the 
finalization of debt levels upon emergence from bankruptcy.

     The Company recorded federal and state income tax benefits of $6.7 and 
$18.1 million during the third quarter and year to date periods, 
respectively, compared to $7.8 million and  $13.2 million for the same 
periods last year.

     The Company frequently utilizes a financial measure, EBITDA, in 
discussing its operating results to normalize comparisons with companies of  
varying capital structures.  The Company arbitrarily defines EBITDA as 
earnings before accrued preferred stock dividends, extraordinary gains or 
losses, income tax benefits, interest expense, unusual items, depreciation 
and amortization and LIFO provision.  The Company believes that EBITDA 
comparisons are useful for investors but are not a substitute for operating 
data required by generally accepted accounting principles.  EBITDA, as 
defined by the Company, totaled $26.3 million, 4.9% of sales, and $98.3 
million, 5.5% of sales, for the third quarter and year to date, respectively, 
compared to $31.1 million, 5.7% of sales, and $108.4 million, 6.1% of sales, 
for the same periods last year.  The decreases are a result of the sales, 
gross profit and operating expense variances discussed previously.  During 
Fiscal 1996 and Fiscal 1997, the Company has reduced costs through the 
outsourcing of distribution, store voluntary resignation incentive programs 
and reorganization of the Company's organizational structure.  These savings 
have been reinvested in price repositioning and customer service programs 
which adversely affect gross margin and operating expenses in periods in 
which they are made.

Liquidity and Capital Resources

     On July 30, 1996, the Company entered into an agreement (the "Stock 
Purchase Agreement") to sell $100 million of 8.5% convertible preferred 
stock, $1.00 par value per share (the "Class A Preferred Stock") to an 
investment group composed of Trefoil Capital Investors II, L. P., a Delaware 
limited partnership, and GE Investment Private Placement Partners II, A 
Limited Partnership, a Delaware limited partnership (collectively, the 
"Purchasers").

     On September 17, 1996, the Company sold 800,000 shares of Class A 
Preferred Stock to the Purchasers for an aggregate price of $40 million.  The 
Company incurred $12 million of costs directly related to the sale of Class A 
Preferred Stock, including one-time fees totaling approximately $9.2 million.

     Under the terms of the Stock Purchase Agreement, the Company will sell 
to the Purchasers an additional 400,000 shares of Class A Preferred Stock at 
a purchase price of $50 per share (the "Stated Value") on each of February 
25, 1997, August 25, 1997 and February 25, 1998.  Any or all of the purchases 
referred to in the preceding sentence may be accelerated by the Purchasers, 
with or without the approval of the Company.

     The Company is and will continue to be highly leveraged.  Interest 
payments totaled approximately $63 million for the 40 weeks ended January 4, 
1997 and will be approximately $110 million for the full year.  Capital 
expenditures, including capitalized leases other than real estate leases, 
totaled approximately $34 million for the 40 weeks ended January 4, 1997 and 
are expected to total between $55 and $60 million for the full year.  Fiscal 
1997 capital expenditures will principally be dedicated to remodels, new and 
replacement stores, store systems and maintenance capital.  Through January 
4, 1997, the Company had opened one new 

                                       10
<PAGE>

and two replacement stores.  By the end of April, the Company expects to have 
completed ten M.A.S.T.E.R.S. ("Maximize All Space, Totally Expand the Right 
Stuff") renovations since the beginning of the second half of the fiscal 
year.  There are no significant scheduled debt principal repayments prior to 
June 2000.  The Company plans to finance its working capital, interest 
expense and capital expenditure requirements from proceeds received from the 
sale of Class A Preferred Stock, operations, its Amended and Restated Credit 
Agreement (the "New Bank Facility") and, to a limited extent, equipment 
leases or purchase money mortgages.  The Company's ability to fund the 
payment of interest and other obligations when due is primarily dependent on 
cash generated from its operations, net of cash capital expenditures.  The 
Company's ability to complete its expanded capital expenditure program is 
dependent on its operating performance.

     Resources used to finance significant expenditures are as follows (in 
millions):

<TABLE>
<CAPTION>
                                                                       40 Weeks Ended
                                                                  -----------------------
                                                                  January 4,   January 6,
                                                                     1997         1996
                                                                  ---------    ----------
<S>                                                               <C>          <C>
Resources used for:     
  Capital expenditures                                              $ 31.4      $ 30.6
  Debt and capital lease repayments                                   16.1        99.8
  Loan placement fees                                                   --         3.1
                                                                    ------      ------
                                                                    $ 47.5      $133.5
                                                                    ------      ------
                                                                    ------      ------
Financed by:
  Net proceeds from  sale of Class A Preferred Stock                $ 28.0      $   --
  Net proceeds from long-term debt                                     9.0          --
  Property disposals                                                   7.9         5.5
  Operating activities, including cash and temporary investments       2.6         5.8
  Proceeds from New Bank Facility                                       --       122.2
                                                                    ------      ------
                                                                    $ 47.5      $133.5
                                                                    ------      ------
                                                                    ------      ------
</TABLE>

     During the 40 weeks ended January 4, 1997, funds for capital 
expenditures and debt and capital lease repayments were obtained from net 
proceeds from the sale of Class A Preferred Stock, borrowings under the 
Company's bank agreement, property disposals and operating activities.  
During the 40 weeks ended January 6, 1996, funds for debt and capital lease 
repayments and capital expenditures and loan placement fees were principally 
obtained from cash provided by the New Bank Facility.

     As of January 4, 1997, the Company had $36.0 million of borrowings and 
approximately $44.4 million of letters of credit outstanding under its $100 
million revolving credit facility.

     The Company and its bank lenders amended the term loan and revolving 
credit agreements effective at the end of the third quarter.  The amendment 
reduces the minimum levels of EBITDA required for both the third quarter and 
the fiscal year and correspondingly reduces the EBITDA to cash interest 
coverage requirement over the same time frame.  The Company's ability to meet 
its future debt covenants is dependent on the results of future operations.  
The Company is currently in compliance with these amended debt agreements.

     Accounts receivable increased $12.2 million since the end of the prior 
fiscal year primarily due to increased landlord construction receivables in 
support of the Company's capital program.

     Certain statements by the Company may be considered "forward-looking 
statements" within the meaning of federal securities law.  Such 
forward-looking statements are subject to risks, uncertainties and other 
factors which could cause actual results to differ materially from future 
results expressed or implied by such forward-looking statements.  Potential 
risks and uncertainties include, but are not limited to, the competitive 
environment in which the Company operates, the Company's ability to complete 
its capital expenditures on a timely basis, the success of operating 
initiatives, regional weather conditions and the general economic conditions 
in the geographic areas in which the Company operates.

                                       11
<PAGE>

PART II - OTHER INFORMATION

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

     The Company's first regular annual meeting of stockholders since 
emergence from bankruptcy was held on November 7, 1996.  

     (a)  Votes cast in favor of and withheld from voting with respect to the 
election of each nominee for director were as follows:
    
     Director                       Votes For  Votes Withheld
     --------                       ---------  --------------
     Roger E. Stangeland           13,824,047     42,207
     Joseph J. McCaig              13,824,401     41,853
     James J. Costello             13,823,947     42,307
     Daniel E. Josephs             13,824,047     42,207
     William G. Kagler             13,824,047     42,207
     Clifford A. Miller            13,824,047     42,207
     Geoffrey T. Moore             13,824,401     41,853
     J. Richard Stonesifer         13,824,301     41,953
     David Y. Ying                 13,824,401     41,853

     (b)  The 1995 Non-Employee Directors' Stock Option Plan and the issuance 
of up to one hundred thousand (100,000) shares of Common Stock pursuant to 
that plan was approved, with 11,865,827 votes in favor, 158,285 votes 
against, 36,403 in abstention and 1,805,739 broker non-votes.

     (c)  The 1995 Equity Incentive Plan and the issuance of up to nine 
hundred thousand (900,000) shares of Common Stock pursuant to that plan was 
approved, with 10,703,529 votes in favor, 1,296,111 votes against, 38,595 
votes in abstention and 1,828,019 broker non-votes.

     (d)  The amendment of the Company's Certificate of Incorporation to 
increase the number of shares of authorized Common Stock to sixty million 
(60,000,000) and to reduce the par value to $.01 per share was approved, with 
13,582,864 votes in favor, 126,858 votes against, 46,493 votes in abstention 
and 110,039 broker non-votes.  Common shares were voted 8,065,584 in favor, 
126,858 against, 46,493 in abstention and 110,039 broker non-votes.

     (e)  The amendment of the Company's Certificate of Incorporation to 
provide holders of the Company's Common Stock with price protection in 
connection with certain business combination transactions (the "Fair Price" 
amendment) was approved, with 11,629,493 votes in favor, 384,065 votes 
against, 35,051 votes in abstention and 1,817,645 broker non-votes. Common 
shares were voted 6,112,213 in favor, 384,065 against, 35,051 in abstention 
and 1,817,645 broker non-votes.

     (f)  The amendment of the Company's Certificate of Incorporation to 
permit stockholder action by written consent was approved, with 11,896,093 
votes in favor,  101,789 votes against, 40,348 votes in abstention and 
1,828,024 broker non-votes.  Common shares were voted 6,378,813 in favor, 
101,789 against, 40,348 in abstention and 1,828,024 broker non-votes.

     (g)  The appointment of Price Waterhouse LLP as independent accountants 
of the Company for the fiscal year ending March 29, 1997 was ratified, with 
13,792,665 votes in favor, 47,480 votes against and 26,109 votes in 
abstention.


                                       12
<PAGE>
Item 6.  Exhibits

     Exhibit Number
     --------------
          10.1          Fourth Amendment to the Amended and Restated Credit
                        Agreement dated January 13, 1997.

          27.1          Financial Data Schedule.

                                       13
<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 thereunto duly authorized.

                                       THE GRAND UNION COMPANY
                                       -----------------------
                                              (Registrant)

Date: February 18, 1997                /s/ Joseph J. McCaig
                                       --------------------
                                           Joseph J. McCaig
                                           Director, President, 
                                           and Chief Executive Officer

Date: February 18, 1997                /s/ John M. Needham
                                       -------------------
                                           John M. Needham
                                           Vice President and Controller
                                           (Chief Accounting Officer)

                                       14