SECURITIES AND EXCHANGE COMMISSION
                     Washington, DC  20549
                                
                                
                            FORM 10-K
                                

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

For the Fiscal Year Ended December 31, 1996 Commission File Number 33-68956



                  SPECIALTY FOODS CORPORATION
     (Exact name of registrant as specified in its charter)

           Delaware                        75-2488181
 (State or other jurisdiction           (I.R.S. Employer
              of                       Identification No.)
incorporation or organization)
    9399 West Higgins Road                      
           Suite 800                       60018-4940
         Rosemont, IL                      (Zip Code)
     (Address of principal
      executive offices)
        (847) 685-1000
    (Registrant's telephone
 number, including area code)


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


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

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

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

State the aggregate market value of voting stock held by non-
affiliates of the Registrant. No market presently exists for the
Registrant's Common Stock.

Number of shares of common stock outstanding as of March 20,
1997: 100 shares.

Documents incorporated by reference:  None.

TABLE OF CONTENTS

PART I

Item 1.        Business
Item 2.        Properties
Item 3.        Legal Proceedings
Item 4.        Submission of Matters to a Vote of Security Holders

PART II

Item 5.        Market for the Registrant's Common Equity and
               Related Stockholder Matters
Item 6.        Selected Financial Data
Item 7.        Management's Discussion and Analysis of Financial
               Condition and Results
               of Operations
Item 8.        Financial Statements and Supplementary Data
Item 9.        Changes In and Disagreements With Accountants on
               Accounting and Financial Disclosure

PART III

Item 10.  Directors and Executive Officers of the Registrant
Item 11.  Executive Compensation
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management
Item 13.  Certain Relationships and Related Transactions

PART IV

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

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

PART I


ITEM 1.  BUSINESS

This Annual Report or Form 10-K contains certain forward-looking 
statements within the meaning of the federal securities laws
which reflect the Company's expectations and are based upon
currently available information.  Actual results, performance,
achievements or other information may vary materially from such
statements and are subject to future known and unknown risks and 
uncertainties and events including those in the forepart and 
elsewhere herein.

Specialty Foods Corporation serves as the holding company for a
number of companies engaged primarily in the production and
distribution of breads, cookies, specialty Italian cheeses, and
pre-cooked meat products.  All of the capital stock of SFC is
owned by Specialty Foods Acquisition Corporation (SFAC).  SFAC
SFC and their subsidiaries are referred to in this report on Form
10-K as the Company or the Successor.  SFAC and SFC were formed
in June 1993 to acquire (the Acquisition) the North American food
businesses (the Acquired Companies or the Predecessor Company) of
Beledia N.V., a subsidiary of Artal Group S.A.  The Company
operates in two primary product groupings: Bakery Operations and
Cheese and Meat Operations.

BAKERY OPERATIONS

Metz Baking Company (Metz) is a leading broad-line wholesale
baking company serving the Midwestern United States.  Metz's
product line includes breads, buns, rolls and sweet goods. These
products are marketed by Metz under the Taystee, Holsum, Old
Home, Master, Country Hearth, Egekvist and D'Italiano brand names
and numerous private labels.  Such trademarks are either owned by
Metz or subject to long-term licensing arrangements.  Metz also
is marketing bread and bun products under the Pillsbury and
Healthy Choice trademarks in test markets in certain of its
service areas.  Metz expects these licenses to continue on a long-
term basis once such test-marketing is completed.  Metz
distributes its products through a company-owned direct store
delivery (DSD) system to customers in 16 states. Management
believes that the stability of Metz's revenue base is
significantly enhanced by the breadth of its product line, the
balance between its branded and private label sales, and the
scope and diversity of the geographic area it serves.

The Company also owns and operates Mother's Cake & Cookie Co.
(Mother's).  Mother's is a producer and distributor of branded
cookie products and fruit cobblers sold primarily through retail
grocers in the Western United States.  Mother's products are
marketed under the Mother's, Mrs. Wheatley's, Bakery Wagon and
Marie Lu brand names. Mother's sells its cookie products
primarily to retail grocers through a DSD system that is
primarily company-owned.

The Company also owns and operates Andre-Boudin Bakeries, Inc.
(Boudin), a chain of 40 bakery cafes and kiosks located in the
San Francisco Bay area, Southern California, Dallas and the
greater Chicago area.  In addition, Boudin operates catalog, mail-
order and catering businesses.

CHEESE AND MEAT OPERATIONS

Stella Foods, Inc. (Stella) is one of the largest producers of
specialty cheeses in the United States. Stella's product line
consists of specialty Italian cheeses (parmesan, romano, ricotta,
string cheese and retail pack mozzarella), other European-style
specialty cheeses (feta, blue cheese and Lorraine brand cheese)
and basic Italian cheeses (bulk pack mozzarella and provolone).
These products are sold through retail grocers, to foodservice
accounts and to commercial food processors primarily under the
Stella, Frigo, Gardenia, Dragone and Lorraine trademarks. Stella
has established substantial positions in a number of higher-
margin specialty cheese categories, and has a balanced
involvement in all three of the industry's primary distribution
channels: retail, foodservice and manufacturers of prepared
foods.

Stella also manages H&M Food Systems Company, Inc. (H&M), a
producer of custom formulated, pre-cooked meat products. H&M's
products are sold primarily to national restaurant chains and
prepared-food producers.

DIVESTITURES

In 1996, the Company announced and implemented a plan to sell
certain of its non-core businesses.  Set forth below is a
description of those non-core businesses for which the Company
has finalized its decision to sell or that have been sold to the
date of this report.

In December, 1996, the Company sold Bloch & Guggenheimer, Inc.
(B&G) and Burns & Ricker, Inc. (B&R) by means of a stock
transaction.  Under the Company's ownership, B&G manufactured,
marketed and distributed pickles, peppers and spices primarily
through retail grocers in the greater New York metropolitan area,
and B&R manufactured, marketed and distributed baked premium
snack products through brokers and distributors to grocery
stores.

In February, 1997, the Company sold substantially all of the
assets of Gai's Seattle French Baking Company and related
operating companies (collectively Gai's).  Under the Company's
ownership, Gai's was a wholesale restaurant and institutional
bakery company servicing western Washington State and northern
Oregon.

In the fourth quarter of 1996, the Company finalized its decision
to dispose of San Francisco French Bread Company (SFFB), a
subsidiary of the Company managed by Metz.  SFFB is a leading
wholesale producer of genuine sourdough French bread in the
United States with operations based primarily in Northern
California.

Total gross proceeds for these divestitures are estimated to be
approximately $140 million, with net proceeds of approximately
$110 million after the repurchase of receivables and
other transaction costs. These divestitures have been reported as
discontinued operations in the accompanying financial statements.

In August, 1996, the Company completed the sales of substantially
all of the assets of Venice Bakery Ltd. (VBL) and The Bagel
Place, Inc. (TBP).  Under the Company's ownership, VBL was a
wholesale bakery company servicing British Columbia, and TBP
manufactured, marketed and distributed bagels and other bakery
products in California.


FINANCING STRUCTURE

SFC's financing structure at December 31, 1996 consisted of the
following:  a $125 million Revolving Credit Facility at the
operating subsidiary level (Revolving Credit Facility); $175
million Term Loan Facility at the SFC level (Term Loan Facility);
$225 million of 10 1/4% Senior Notes due 2001 (10 1/4% Senior
Notes); $150 million of 11 1/8% Senior Notes due 2002 (11 1/4%
Senior Notes); and $200 million of 11 1/4% Senior Subordinated
Notes due 2003 (Senior Subordinated Notes).  In addition, SFC is
a party to an accounts receivable securitization facility
pursuant to which the accounts receivable of the Company's
operating subsidiaries are transferred to a master trust
(Accounts Receivable Facility).  At December 31, 1996, the
maximum amount of accounts receivable that could be sold to the
Accounts Receivable Facility was $115 million.

RAW MATERIALS

The Company is a major purchaser of milk, flour, sugar, meat,
other agricultural products, vegetable oils, and plastic and
paper for packaging materials. Although the Company has some long-
term contracts, the bulk of such raw materials are purchased on
the open market or pursuant to short-term agreements. The prices
paid for food product raw materials generally reflect external
forces, among which weather conditions and commodity market
activities are most significant. Although the prices of the
principal raw materials used by the Company can be expected to
fluctuate as a result of government actions and/or market forces
(which would directly affect the cost of products and value of
inventories), such materials are generally in adequate supply and
available from numerous sources. Occasionally, and where
possible, the Company makes advance purchases of commodities
significant to its business in order to lock in what is perceived
to be favorable pricing and to protect itself from basic market
price fluctuations.  The Company seeks to pass through increases
in the costs of commodity ingredients to its customers where
possible.  The Company's ability to do so is dependent primarily
upon competitive conditions and pricing methodologies employed in
the various markets in which the Company conducts its business.

In 1996, the Company's Cheese Operations were adversely affected
by historically high milk prices.  The Company believes that milk
prices are likely to moderate in 1997 from such historically high
levels.  However, there can be no assurance that price increases will
not occur and that the Company's financial performance will not be
adversely affected by milk prices in the future.

TRADEMARKS, PATENTS AND LICENSES

The Company owns or licenses a number of trademarks and
tradenames which management believes provide significant value to
several of the Company's businesses because of their recognition
by customers and consumers.  The Company owns or licenses a
number of patents, but such patents and licenses are not
considered material to the conduct of the Company's businesses,
and the Company does not believe that any of its businesses are
substantially dependent on patent protection.

SEASONALITY, WORKING CAPITAL

The Company's businesses are moderately seasonal with higher
sales, operating profit and cash flows generally occurring in the
third and fourth quarters of the year.  This seasonality is due
primarily to higher bread sales in the summer months and higher
cheese sales in the fall and winter months.  The cheese business
tends to build inventory of its hard-style cheeses for aging in
the spring and summer when milk prices tend to be lower.

CUSTOMERS, SALES AND BACKLOG

No one customer accounts for more than 10% of the Company's net
sales.  In general, the backlog of orders is not deemed to be
significant or material for an understanding of the Company's
businesses.

COMPETITION

The Company's products compete in highly competitive lines of
business.  In particular, the Company's Bakery Operations face
intense competition as a result of continued overcapacity in the
industry and the increased presence of in-store bakeries.
Competitors include national and international companies and
numerous regional and local companies.  Some of the competitors
have greater financial and other resources than the Company,
while others have lower fixed costs and greater operating
flexibility. The Company does not encounter material foreign
competition. Competition is based primarily on price, quality,
service and freshness.

ENVIRONMENTAL MATTERS

In June, 1993, Stella became aware that some of the whey by-
product at its Ogdensburg plant which was disposed of by means of
land spreading may have affected the ground water serving certain
homes located in the vicinity of the land spread location.
Stella voluntarily undertook to provide water to approximately 50
homes and began environmental studies, working in conjunction
with the New York State Department of Environmental Conservation
(DEC) and the New York State Department of Health, to determine
whether Stella was responsible for the alleged problems, and, if
so, to identify appropriate corrective actions.  In early 1995,
DEC and Stella agreed that only approximately 15 homes were
potentially affected by the whey spreading.  In April, 1995,
Stella was named as the defendant in a lawsuit brought in New
York State Supreme Court by approximately 75 residents of about
30 homes in the vicinity of the land spread location seeking
recovery of damages allegedly caused by Stella's whey disposal.
The Company does not believe that the damages to be
recovered from Stella as a result of the Ogdensburg lawsuit, if
any, would have a material adverse effect on the financial
condition or results of operations of the Company, however, there
can be no assurance that the Ogdensburg lawsuit will not have such a 
material adverse effect.

In addition, the past and present business operations of the
Company and the past and present ownership and operation of real
property by the Company are subject to extensive and changing
federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the
environment, the handling and disposition of wastes (including
solid and hazardous wastes) or otherwise relating to protection
of the environment.  Compliance with federal, state, local and
foreign environmental laws and regulations is not expected to
have a material impact on the Company's capital expenditures,
earnings or competitive position.  No assurance can be given,
however, that additional environmental issues relating to
presently known matters or identified sites or to other matters
or sites will not require additional, currently unanticipated
investigation, assessment or expenditures.


REGULATION

     PUBLIC HEALTH

The Company is subject to the Federal Food, Drug and Cosmetic Act
and regulations administered by the Food and Drug Administration
(FDA), or, with respect to meat products, the United States
Department of Agriculture (USDA).  These comprehensive regulatory
schemes govern, among other things, the manufacture, composition,
ingredient labeling, packaging and safety of food. For example,
the FDA regulates manufacturing practices for food through its
current "good manufacturing practices" regulations, specifies the
"recipes," called standards of identity, for certain foods,
including many of the kinds of products marketed by the Company's
subsidiaries, and prescribes the format and content of certain
information required to appear on the labels of food products.

The Company has revised the labeling of its products to comply
with regulations promulgated by the FDA pursuant to the Nutrition
Labeling and Education Act of 1990.  The Company also has revised
the labeling of its meat products to comply with similar
regulations adopted by the USDA.  These regulations require
nutritional labeling on all foods that are a meaningful source of
nutrition, including many of the Company's products, and place
limitations on the use of certain terms while requiring the use
of other terms.

The operations and the products of the Company's businesses also
are subject to state and local regulation through such measures
as licensing of plants, enforcement by state health agencies of
various state standards and inspection of the facilities.

The Company also is subject to regulation by certain other
governmental agencies, including the United States Department of
Agriculture and certain state and local regulatory agencies.

     DAIRY SUPPORT

The Company purchases substantial quantities of bulk milk. The
prices paid for bulk milk in the United States are controlled in
most areas by Federal Milk Marketing Orders or state regulatory
agencies. Such orders and agencies establish base minimum prices
that processors must pay for bulk milk according to the class of
intended use. In most areas, the prices paid for bulk milk by
processors are higher than these minimums due to premiums charged
by suppliers and shippers. These regulations and other factors
have resulted in significant fluctuations in bulk milk prices in
the past. There can be no assurance that price swings will not
occur and that the Company's financial performance will not be
adversely affected by price fluctuations in the future.

     FEDERAL TRADE COMMISSION

The Company is subject to certain regulations by the Federal
Trade Commission (FTC).  Advertising of the Company's businesses
is subject to regulation by the FTC pursuant to the Federal Trade
Commission Act and the regulations promulgated thereunder.

     EMPLOYEE SAFETY REGULATIONS

The Company is subject to certain health and safety regulations
including regulations issued pursuant to the Occupational Safety
and Health Act.  These regulations require the Company to comply
with certain manufacturing, health and safety standards to
protect its employees from accidents.

     EMPLOYEES

At December 31, 1996, the Company employed approximately 14,000
persons. Approximately 64% of the Company's labor force are or
will be covered by collective bargaining agreements upon
completion of current negotiations.

RECENT DEVELOPMENTS

On January 15, 1997, the Company announced the appointment of
Lawrence S. Benjamin, the President and Chief Executive Officer
of Stella since August 1994, as President and Chief Executive
Officer of the Company.  The appointment was made following the
resignation of Paul J. Liska, the Company's former President and
Chief Executive Officer.

In January, 1997, the Accounts Receivable Facility was amended to
increase the maximum allowable amount of accounts receivable that
could be sold to the facility to $124 million.

In February, 1997, the lenders under the Term Loan Facility and
Revolving Credit Facility agreed to amendments of several
provisions of the Term Loan Facility and Revolving Credit
Facility. The amendments, among other things, reduce SFC's
financial covenant levels.  In addition, the amendments allow the
Company to retain for reinvestment in acquisitions and capital
expenditure projects up to $110 million of the proceeds from
business divestitures completed by the Company.  In connection
with the amendments, certain of the stockholders of SFAC have
agreed to contribute to the equity of the Company an amount equal
to $19,500,000 (a description of such agreement appears in Part
III, Item 13, under the heading "Certain Transactions with
Stockholders of SFAC").

In March, 1997, the Company announced that management of the
operations of H&M will be consolidated with the operations of
Stella.

Also, see a description of certain sales of non-core businesses
in the Section under the heading "Divestitures."

ITEM 2.  PROPERTIES

The Company uses various owned and leased plants, warehouses, and
other facilities in its operations. These facilities are located
primarily in the Midwest, and in California, Texas and the
Northeast.  Management believes that the facilities are suitable
and adequate for the conduct of the businesses. The following is
a summary of significant facilities that were operated as of
December 31, 1996.  The summary excludes those facilities deemed
immaterial by management, which are comprised primarily of bakery
thrift stores and depots operated by the Bakery Operations and
retail cafes operated by Boudin.  The summary also excludes those
facilities operated by Gai's (see a description of the sale of
the assets of Gai's in Item 1 under the heading
"Divestitures.")

                                        NUMBER OF FACILITIES
                               ---------------------------------------

                               OWNED           LEASED             TOTAL
                              -------         -------            ------
Bakery Operations                20              49                69
Cheese and Meat Operations       19               4                23
                              -------         -------            ------
                                 39              53                92
                              =======         =======            ======
 
Certain of the foregoing properties are subject to mortgages for
the benefit of the lenders under the Revolving Credit Facility,
including five properties used in the Bakery Operations and two
properties used in the Cheese and Meat Operations.


ITEM 3.  LEGAL PROCEEDINGS

The Company is involved in litigation
matters, including employment and breach of contract, arising out
of the ordinary course of business.  The Company does not believe
that any single matter, if adversely determined, would have a
material adverse effect on the Company's financial condition or
results of operations.  However, if all or a majority of such
matters were adversely decided against the Company, such
judgments could have a material adverse effect on the Company's
financial condition.  The Company does not believe at this time
that there is a reasonable possibility that all or a majority of
such matters will be decided against the Company.  In addition,
the Company is party to other claims and litigation that arise in the
normal course of business.  Management believes that the ultimate outcome
of these claims and litigation will not have a material adverse effect on
the Company's results of operations or financial condition.  However, there
can be no assurance that the outcome of the Company's litigation matters
will not have a material adverse effect on the Company's results of 
operations or finacial condition.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.



PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

There is no public market for the Common Stock of the Registrant,
all of which is held by SFAC.

Certain of the Company's debt agreements contain covenants which
restrict or prohibit (with de minimis exceptions) SFC from paying
dividends or making other distributions to SFAC.  Refer to
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for additional discussion of such
restrictions.

ITEM 6. SELECTED FINANCIAL DATA

The information set forth below for 1992 has been derived from
the combined financial statements of the Predecessor Company.
The results of operations for 1993 include the results of
operations of the Predecessor Company for the period January 1,
1993 to August 16, 1993 and the results of operations of SFC for
the period August 17, 1993 to December 31, 1993.

                                                        
                          1996        1995        1994        1993        1992
                         ------      ------      ------      ------      ------
                                  (In milllions, except per share data)

Net sales              $ 1,661     $ 1,627     $ 1,643      $ 1,691      $ 1,378
                         =====       =====       =====        =====        =====
Income (loss) from                                      
continuing          
operations (1) (2)     $  (435)    $  (222)    $   (31)     $    (6)     $    13
                         =====       =====       =====        =====        =====
Income (loss) from                                      
discontinued        
operations             $   (11)    $   (47)    $    11      $    (3)     $   (2)
                         =====       =====       =====        =====        =====
Total assets           $   616     $ 1,092     $ 1,354      $ 1,395      $   769
                         =====       =====       =====        =====        =====
Long-term debt         $   838     $   836     $   806      $   777      $   315
                         =====       =====       =====        =====        =====

(1)   In  1996,  a goodwill write-down increased  the  loss  from
continuing operations by $356 million.  Additionally, a restructuring charge
further increased the 1996 loss from continuing operations by $28 million.
   
(2)  In  1995,  a  goodwill write-down increased  the  loss  from
continuing operations by $204 million.
   

ITEM  7.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

This Annual Report or Form 10-K contains certain forward-looking 
statements within the meaning of the federal securities laws which
reflect the Company's expectations and are based upon currently
available information.  Actual results, performance, achievements or
other information may vary materially from such statements and are 
subject to future known and unknown risks and uncertainties and events
including those in the forepart and elsewhere herein.

The  following  table sets forth, for the periods indicated,  the
percentage  of  net sales represented by certain items  in  SFC's
statements of operations.

                                                                
                                             1996     1995     1994
                                            -------  -------  -------
                                             
Net sales                                   100.0%   100.0%   100.0%
Cost of sales                                72.8     71.7     72.3
                                            -------  -------  -------
     Gross profit                            27.2     28.3     27.7
                                                        
Operating expenses:                                             
Selling, distribution, general and                     
  administrative                             23.9     22.1     22.4
  Amortization of intangible assets           0.8      1.1      1.1
  Restructuring charges                       1.7        -        -
  Goodwill write-down                        21.4     12.5        -
                                           -------  -------  -------
Total operating expenses                     47.8     35.7     23.5
                                           -------  -------  -------       
    Operating profit (loss)                 (20.6)    (7.4)     4.2
Interest                                      5.7      5.8      5.3
Other, net                                    (.2)     0.3      0.8
                                           -------  -------  -------
    Loss from continuing operations         (26.1)%  (13.5)%  (1.9)%
                                           =======  =======  =======


Shown  below  are the net sales of the Company's operating  units
for  1996, 1995, and 1994, with percentage increases or decreases
based on comparisons to preceding years.

                                               
                             (In millions)                  % Change     
                             -------------                  --------
                           
                        1996     1995     1994     1996 vs. 1995   1995 vs. 1996
                      ------   ------   ------     -------------   -------------
Bakery Operations    $   701  $   695  $   662            1%               5%
Cheese and Meat          
Operations               960      932      981            3               (5)  
                      ------   ------   ------         ------           ------  
                     $ 1,661  $ 1,627  $ 1,643            2%              (1)%
                      ======   ======   ======         ======           ======


RESULTS OF OPERATIONS
 
     1996 COMPARED TO 1995

Consolidated net sales from continuing operations increased 2% to
$1.661 billion in 1996 compared to $1.627 billion in 1995.
Excluding the impact of acquisitions and divestitures, net sales
increased by $65 million (4%) during the same period.  Net sales
of the Bakery Operations increased $6 million (1%) to $701
million in 1996.  The increase was due primarily to price
increases taken to recover increased ingredient costs.  Net sales
of the Cheese and Meat Operations increased $28 million (3%) to
$960 million.  Net sales at Stella increased $28 million (4%)
primarily due to price increases reflecting a significant
increase in the cost of milk in 1996, partially offset by a
decline in volume which resulted from a fire at its Lena,
Wisconsin manufacturing plant in January, 1996.

SFC's gross profit margin decreased to 27.2% in 1996 from 28.3%
in 1995 primarily due to the increased cost of milk at Stella,
increased rental expense from sale leaseback activity, higher
costs associated with sourcing parmesan cheese, and an
unfavorable mix shift at Mother's.

Selling, distribution, and general and administrative expenses
increased $37 million (10%) in 1996 to $397 million.  Selling
expense increased due to costs associated with new product
introductions and expanded distribution of products at both
Stella and Mother's.  Distribution expenses increased primarily
due to contractual wage and fringe benefit increases for route
sales representatives at Metz and Mother's. General and
administrative expense increases are attributed to staff upgrades
at the Company's core businesses, Stella and Metz, wage and
fringe increases, and severance expenses associated with payments
to former senior executives of the Company.

Operating results in 1996 also reflect a writedown of goodwill
for $356 million and costs associated with a restructuring
program totaling $28 million.  Both of these charges are more
fully described in notes 4 and 5, respectively, to the
accompanying consolidated financial statements.

Interest expense for 1996 was consistent with 1995.

Other (income) expense, net was $3 million of income in 1996
compared to $6 million of expense in 1995.  The net other income
in 1996 results primarily from the Company's insurance recovery,
partially offset by a loss incurred in connection with the
disposition of VBL, the Company's Canadian bakery operations, and
a loss on the sale and leaseback of certain equipment.  The
breakdown of other (income) expense is more fully described in
Note 22 to the accompanying consolidated financial statements.

As a result of the above factors, net loss from continuing
operations increased to $435 million in 1996 compared to $222
million in 1995.

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

The extraordinary loss of $18 million in 1995 resulted from the
write off of deferred financing costs associated with certain
borrowings that were repaid by SFC in the first and third
quarters of 1995.

In the fourth quarter of 1996, the Company finalized its decision
to dispose of B&G/B&R, Gai's, and SFFB.  These divestitures are
reported as discontinued operations in accordance with Accounting
Principles Board Opinion No. 30 and are more fully described in
note 3 to the accompanying consolidated financial statements.

Because of the highly leveraged status of SFC, earnings before
interest, taxes, depreciation, and amortization ("EBITDA") is an
important performance measure used by SFC and its stakeholders.
SFC believes that EBITDA provides additional information for
determining its ability to meet future debt service requirements.
However, EBITDA is not a defined term under generally accepted
accounting principles ("GAAP") and is not indicative of operating
or cash flow from operations as determined under GAAP.  SFC's
EBITDA from continuing operations in 1996 and 1995 is calculated
as follows:
                                              (In thousands)
  
                                           1996           1995
                                        ---------      --------- 
Operating loss                         $ (342,194)    $ (120,680)
Goodwill write-down                       355,664        203,824
Property write-downs included in               
  restructuring charges                    23,300              -
Amortization                               12,886         17,903
Depreciation                               36,380         36,876
Business interruption claim (included               
  in other income)                          5,286              -
                                        ---------      ---------
                                       $   91,322     $  137,923
                                        =========      =========
                                                    
     1995 COMPARED TO 1994

Consolidated net sales of continuing operations decreased 1% to
$1.627 billion, compared to $1.643 billion in 1994.  Excluding
the impact of acquisitions and divestitures, net sales increased
$5 million in the period, or less than 1%.  Net sales of the
Bakery Operations increased $33 million (5%) to $695 million.
This increase was due primarily to the acquisition in May, 1995
of two bakeries and the related routes, the expansion of cookie
distribution in non-grocery channels, and price increases.  Net
sales of the Cheese and Meat Operations, consisting of Stella,
H&M and Gordon's Wholesale, Inc. (a wholesale distributor sold in
May, 1994), decreased $49 million (5%) to $932 million.  Net
sales at Stella increased $2 million, while declining $11 million
(6%) at H&M, and declining $40 million (100%) at Gordon's due to
its divestment in May, 1994.  Stella's increase was primarily due
to a favorable mix shift to higher price hard-style cheeses.  The
decline at H&M was due to near-record low beef and pork commodity
prices and the loss of significant volume from its largest
customer at that time.

SFC's gross profit margin increased to 28.3% in 1995 from 27.7%
in 1994 primarily due to the divestiture of the low-margin
Gordon's business and the impact of the continuing productivity
improvements resulting from cost reduction programs initiated in
1994, partially offset by the lower gross margins experienced by
SFC's Bakery Operations due to higher flour costs in the last
half of 1995.

Selling, distribution, and general and administrative expenses
decreased $8 million (2%) in 1995 to $360 million.  Selling
expense increased compared to 1994 primarily due to wage and
fringe benefit increases. Distribution expense was consistent
with 1994 levels as contractual wage and fringe benefit increases
for route sales representatives was offset by the impact of the
divestiture of Gordon's, and lower levels of workers'
compensation expense in the Bakery Operations.  General and
administrative expense decreases are attributable to a reduction
in the workforce due to plant closures and a lower level of
workers' compensation and fringe benefit expense.

Operating results in 1995 also reflect a writedown of goodwill
for $204 million.  This charge is more fully described in note 4
to the accompanying consolidated financial statements.

Interest expense for 1995 increased 9% to $95 million from $87
million in 1994.  The increase was due to higher interest rates
and additional outstanding borrowings during 1995.

Other (income) expense, net was $6 million of expense in 1995
compared to $13 million of expense in 1994.  The net other
expense for both years includes approximately $5 million for the
discount on receivables sold and additionally in 1994 relates to
the write-off of $6 million of deferred financing costs as a
result of the refinancing of the Accounts Receivable Facility in
1994.

As a result of the above factors, net loss from continuing
operations increased to $222 million in 1995 from $31 million in
1994.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities totaled $35 million in
1996.  The increase in net cash used in operating activities in
1996 was primarily attributable to the Company's lower operating
results and increased working capital usage.  Working capital
requirements have increased in 1996 primarily as a result of the
timing of cash outlays and collection of insurance proceeds
related to the fire at Stella's Lena, Wisconsin facility, cash
expenditures associated with acquisition liabilities, and lower
accounts payable levels resulting from the Company's effort to
normalize relations with suppliers.  In 1995, cash provided by
operating activities of $33 million was principally driven by the
Company's aggressive working capital management and the benefit
from the sale of work-in-process cheese inventory.  In 1994, cash
provided by operating activities of $25 million was principally
driven by the Company's aggressive working capital management.

Net cash provided by investing activities totaled $59 million in
1996.  The activity in 1996 was primarily attributable to the net
proceeds from the sale of B&G/B&R and sale leaseback
transactions, offset by increased capital expenditures, which
have been reduced by proceeds from the insurance claim related to
the fine at Stella's Lena, Wisconsin facility.  In 1995
and 1994, cash used in investing activities of $36 million and
$31 million, respectively, resulted from capital expenditures and
acquisitions.

Net cash used in financing activities amounted to $4 million in
1996 as a slight increase in revolving credit borrowings was
offset by normal payments on long-term debt.  In 1995, cash
provided by financing activities of $18 million reflects the
impact of the issuance of $150 million of 11 1/8% Senior Notes,
the establishment of $175 million Term Loan Facility, and
borrowings under the new Revolving Credit Facility, offset by the
subsequent repayment of the Company's original term loan facility
and original revolving credit facility.  In 1994, cash provided
by financing activities of $5 million reflected the additional
long-term debt borrowings.

Based upon the above, the net increase (decrease) in cash in
1996, 1995 and 1994 was $20 million, $15 million, and ($0.2)
million, respectively.

In February, 1997, the lenders for the Term Loan Facility and
Revolving Credit Facility agreed to amend several provisions of
the agreements pertaining to these facilities which is described
in note 13 to the accompanying consolidated financial statements.

As of December 31, 1996, the Company has a cash balance of $38
million.  Additionally, the Company has borrowed $78 million
under its $125 million Revolving Credit Facility.  Outstanding
letters of credit of $25 million as of December 31, 1996 also
reduce available funds under the facility.  Management believes
that these funds along with operating cash flows, proceeds from
the Gai's and SFFB divestitures and the insurance claim relating
to the fire at Stella's Lena, Wisconsin facility should be
adequate to fund the Company's short term obligations, although
there can be no assurances that cash flow will be adequate to
meet such obligations.  Longer term, the Company will also consider
refinancing and additional asset sales to address future
liquidity and capital structure issues.  In any case, the Company
expects that by the year 2000 it will be required to refinance a
significant portion of its indebtedness.  Currently, the Company
has no specific refinancing plans.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Information on page F-1.


ITEM  9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None.



                            PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The number of persons presently serving on the Board of Directors
of the Company is eleven.  Set forth below are the names, ages,
other positions and offices held and a brief account of the
business experience for each director. All members of the Board
of Directors serve until a successor is elected.

NAME                 AGE      OTHER POSITIONS
----                 ---      ---------------
                                
Robert B. Haas        49      Chairman of the Board of SFAC and
                              SFC since their organization and
                              Chairman of the Board of Haas Wheat
                              Advisory Partners Incorporated (Haas
                              Wheat) since 1992; Chairman of the
                              Board of Haas Wheat & Partners
                              Incorporated, a private investment
                              firm, since January, 1995; Chairman
                              of the Board of Haas & Partners
                              Incorporated, a private investment
                              firm, since 1989. Mr. Haas also is
                              Chairman of the Board of Playtex
                              Products, Inc. and a Director of
                              Sybron International Corporation.

Thomas J. Baldwin     38      Director of SFAC and SFC since May,
                              1996; Chief Executive Officer of
                              Christmas Corner, Inc. since January,
                              1995 and President of RB Ventures
                              since July, 1994. Mr. Baldwin was
                              also Managing Director of Invus Group
                              Ltd. from 1990 until February, 1995.

Lawrence S. Benjamin  41      Director of SFAC and SFC since
                              February, 1997; President and Chief
                              Executive Officer of SFAC and SFC
                              since January, 1997; and President
                              and Chief Executive Officer of Stella
                              since August, 1994.  Mr. Benjamin
                              held various positions from 1986
                              through August, 1994 with operating
                              units of Kraft General Foods, Inc.,
                              including President of All American
                              Gourmet Company, Vice President of
                              Kraft Frozen Products Group and Vice
                              President and General Manager of the
                              Specialty Ingredients Unit of Kraft.
   
J. Taylor Crandall    43      Director of SFAC and SFC since
                              August, 1993; Vice President and
                              Chief Financial Officer of Keystone,
                              Inc. (Keystone) since October, 1986
                              and President, Director and sole
                              stockholder of Acadia MGP, Inc.
                              (managing general partner of Acadia
                              FW Partners, L.P., the sole general
                              partner of Acadia Partners, L.P.
                              (Acadia)) since March, 1992.
                              Mr. Crandall also is a Director of
                              Bell & Howell Holdings Company.


Charles J. Delaney    37      Director of SFAC and SFC since
                              August, 1993 and President of UBS
                              Capital L.L.C. (UBS Capital) since
                              January, 1993; First Vice President
                              in charge of Leveraged Finance Group
                              of Corporate Banking Division of
                              Union Bank of Switzerland since May,
                              1989.  Mr. Delaney also is a Director
                              of Peoples Telephone Company, Inc.

Daniel L. Doctoroff   38      Director of SFAC and SFC since
                              August, 1993 and Managing Director of
                              Oak Hill Partners, Inc. (Acadia's
                              investment advisor) and its
                              predecessor since August, 1987; and
                              Vice President and Director of Acadia
                              MGP, Inc. since March, 1992; and Vice
                              President of Keystone since March,
                              1992.  Mr. Doctoroff also is a
                              Director of Bell & Howell Holdings
                              Company, Kemper Corporation and
                              Capstar Hotel Company.

Jerry M. Meyer        57      Director of SFAC and SFC since
                              June, 1996 and Chairman of the Board,
                              President and Chief Executive Officer
                              of Pinnacle Brands, Inc. since 1991.
                              Mr. Meyer also is a Director of
                              Century Capital Financial, Inc. and
                              City National Bank in Kilgore and
                              Longview, Texas.

Andrew J. Nathanson   39      Director of SFAC and SFC since
                              August, 1993 and Managing Director of
                              Donaldson, Lufkin & Jenrette
                              Securities Corporation since January,
                              1991.  Mr. Nathanson also is a
                              Director of Coram Healthcare, Inc.
 
David G. Offensend    43      Director of SFAC and SFC since
                              August, 1993 and Founder of Evercore
                              Partners, LLC since October, 1995.
                              Mr. Offensend was also Managing Director
                              of Oak Hill Partners, Inc. and its
                              predecessor from April, 1990 to
                              September, 1995; Executive Vice
                              President of PTJ, Inc. (the general
                              partner of Penobscot - MG Partners) 
                              from April, 1990 to September, 1995;
                              Vice President and Director of Acadia 
                              MGP, Inc. from March, 1992 to September,
                              1995; and Vice President of Keystone from 
                              March,1992 to September, 1995.  Mr.
                              Offensend also is a Director of Ivex
                              Packaging Corporation.

Anthony P. Scotto     50      Director of SFAC and SFC since
                              August, 1993 and Managing Director of
                              Oak Hill Partners, Inc. and its
                              predecessor since March, 1988.
                              Mr. Scotto also is a Director of Ivex
                              Packaging Corporation and Holophane
                              Corporation.

Douglas D. Wheat      46      Director of SFAC and SFC since
                              August, 1993 and President of Haas
                              Wheat since November, 1992; President
                              of Haas Wheat & Partners,
                              Incorporated, a private investment
                              firm, since January, 1995. Mr. Wheat
                              was Co-Chairman of Grauer & Wheat,
                              Inc., a private investment firm, from
                              April, 1989 to October, 1992.  Mr.
                              Wheat also is a Director of Playtex
                              Products, Inc.
                                     
EXECUTIVE OFFICERS                
                                 
Set forth below are the names, ages, positions held and a brief
account of the business experience for each executive officer of
the Company and certain executive officers of the Company's
subsidiaries who may be deemed executive officers of the Company.
No family relationship exists among the identified executive
officers. Executive officers of the Company are elected by and
serve at the discretion of the Board of Directors of the Company.
                                   
                                   
NAME                  AGE     POSITION
----                  ---     --------  

Lawrence S. Benjamin  41      See Directors.

John E. Kelly         44      Vice President, Secretary and
                              General Counsel of SFAC and SFC since
                              January, 1994. Mr. Kelly was Vice
                              President and Associate General
                              Counsel of Kraft General Foods, Inc.
                              from December, 1990 until January,
                              1994, and Vice President and
                              Corporate Counsel of Kraft General
                              Foods, Inc. from December, 1988 until
                              December, 1990.
                      
Robert L. Fishbune    41      Vice President and Chief Financial
                              Officer of SFAC and SFC since May,
                              1996.  Mr. Fishbune was a Partner at
                              Coopers & Lybrand L.L.P. from 1988
                              until May, 1996.

John R. Reisenberg    52      Vice President of Human Resources 
                              SFAC and SFC since November, 1993.
                              Mr. Reisenberg held
                              various positions with Kraft General
                              Foods from 1969 through 1993,
                              including Group Vice President and
                              General Manager - Foodservice and
                              Trademark Licensing from 1987 to 1993
                              and Group Vice President and Director
                              - Human Resources from 1981 to 1987.

Henry J. Metz         46      Chief Executive Officer of Metz
                              since August, 1993 and President of
                              Metz since February, 1983.  Mr. Metz
                              was Chief Operating Officer of Metz
                              from 1988 until August, 1993.
 
Richard G. Scalise    42      President and Chief Executive
                              Officer of H&M since August, 1994.
                              Mr. Scalise held various positions
                              from 1985 through August, 1994 with
                              Armour Swift-Eckrich, Inc. including
                              Vice President and General Manager of
                              Deli Foodservice.

Stephen J. Liguori    40      President and Chief Executive
                              Officer of Mother's since February,
                              1996.  Mr. Liguori held various
                              positions with Frito Lay, Inc.
                              including Vice President and General
                              Manager of the Dallas marketing area
                              from January, 1994 until February,
                              1996, and Vice President of Brand
                              Marketing from January, 1991 until
                              December, 1993.
                      
David G. Barrows      39      President and Chief Executive
                              Officer of Boudin since August, 1995.
                              Mr. Barrows was the Vice President of
                              Marketing for Sizzler International
                              Inc. from August, 1992 until July,
                              1995.  Mr. Barrows also held various
                              marketing positions with Taco Bell
                              Corp. (including Manager of Strategic
                              Marketing and Director of National
                              Program Development) from 1989 until
                              August, 1992
                           

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows compensation in 1996 of Mr. Benjamin,
the President and Chief Executive Officer of SFAC and SFC (CEO),
who served as President and Chief Executive Officer of Stella
during the Company's 1996 fiscal year, each of the four most
highly compensated executive officers (including the CEO) of the
Company (including its operating subsidiaries) who were serving
as executive officers at December 31, 1996, and Mr. Liska, the
former President and Chief Executive Officer of SFAC and SFC who
served during the Company's 1996 fiscal year, and who resigned
from his position effective as of January 15, 1997.

<TABLE>
<CAPTION>
                                                                                    Long Term
                                                      Annual Compensation          Compensation
                                              ---------------------------------  -------------------
                                                                                      Awards
                                                                                 -----------------------
                                                                                 Restricted   Securities
                                                                 Other Annual      Stock      Underlying     All Other
     Name and                   Year    Salary     Bonus         Compensation     Awards     Options/SARs   Compensation
Principal Position              (1)     ($)(1)   ($)(1)(2)            ($)         ($) (4)       (#) (5)       ($) (6)
------------------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>       <C>             <C>             <C>        <C>            <C>
Lawrence S. Benjamin            1996    320,000    72,000               -  (7)         -        50,000        1,000
President and Chief             1995    283,000   257,000         157,000  (7)         -        50,000      197,000
Executive Officer of            1994    106,000        -           20,000  (7)         -       100,000       18,000
SFAC and SFC (3)                                                       
                                                                   
John E. Kelly                   1996    400,000   162,000         118,000  (8)         -             -        1,000
Vice President and              1995    326,000    29,000          94,000  (8)         -        40,000(12)    1,000
General Counsel of              1994    300,000   170,000          98,000  (8)         -       230,000(12)    1,000
SFAC and SFC (14)                                                    
                                                                       
Robert L. Fishbune              1996    191,000    81,000          88,000  (9)         -       100,000       54,000
Vice President and              1995          -         -               -              -             -            -
Chief Financial                 1994          -         -               -              -             -            -
Officer of SFAC and SFC (15)                                                    
                                                                       
Henry J. Metz                   1996    320,000   240,000          93,000 (10)         -        50,000       72,000
President                       1995    287,000    15,000               - (10)         -        75,000        1,000
and Chief Executive             1994    251,000   144,000               - (10)         -        60,000            -
Officer of Metz                                                     
                                                                       
Paul J. Liska                   1996    560,000   227,000         180,000 (11)         -             -        2,000
former President and            1995    386,000    48,000         119,000 (11)         -        50,000(13)    1,000
Chief Executive                 1994    280,000   115,000         100,000 (11)         -       300,000(13)    3,000
of SFAC and SFC (16)                                                   

</TABLE>

(1) The table shows compensation received by the
named executive officers of the Company during 1994, 1995 and
1996.

(2) Includes annual bonus awards for services
rendered in 1994, 1995 and 1996 that were paid under SFC's
incentive bonus plan. The bonus plan provides certain key
employees of the Company with annual cash awards based upon
the financial performance of the Company.  This plan is
administered by the Compensation Committee of the Board of
Directors.  Awards for Messrs. Kelly and Liska in 1994 and
1995 were based upon SFC's achievement of certain
predetermined consolidated EBITDA (defined as income from
operations plus depreciation of property, plant and equipment
and amortization of intangible assets) objectives.  Awards for
Messrs. Kelly, Fishbune and Liska in 1996 were based upon the
sale of certain of the Company's businesses.  Awards for
Messrs. Benjamin and Metz were based upon the achievement by
Stella and Metz, respectively, of certain EBITDA objectives.
Under the provisions of the plan, executive officers have
target incentive compensation of 50% to 75% of the year's base
salary.

(3) Mr. Benjamin served as President and Chief Executive Officer
of Stella during the Company's 1996 fiscal year.  Mr. Benjamin was
appointed President and Chief Executive Officer of SFAC and SFC
as of January 15, 1997.

(4) In 1994, SFAC sold shares of restricted stock
to each of the following named executive officers in the
amounts set forth opposite their respective names:  Mr.
Benjamin, 4,298 shares; Mr. Kelly, 89,390 shares; Mr. Metz,
957,750 shares and. Mr. Liska, 76,620 shares.  In 1995, SFAC
sold shares of restricted stock to each of the following named
executive officers in the amounts set forth opposite their
respective names:  Mr. Benjamin, 14,578 shares; and Mr. Liska,
18,222 shares.  All such shares of restricted stock were sold
at a price of $.726703211 per share.  In 1996, no shares of
restricted stock were sold to any of the named executive
employees.  Due to the fact that the Common Stock is not
publicly traded, it is not possible to calculate a precise
value for the restricted stock.  These securities vest in four
equal portions over an 18 month period that commenced on the
respective date of purchase by each executive.  SFAC has no
present intention to pay dividends on such shares.  On each of
August 18, 1994, November 17, 1994, January 20, 1995, February
22, 1995, June 13, 1995, July 28, 1995, September 21, 1995,
October 15, 1995, February 21, 1996, and May 15, 1996, the
Board of Directors of SFAC determined that a per share price
of $.726703211 is not greater than the fair market value of
the Common Stock.  On August 14, 1996, the Board of Directors
of SFAC determined that a per share price of $.726703211 is
equal to the fair market value of the Common Stock.
Accordingly, the dollar value of the restricted stock awards
made to each of the named executive officers equals the
consideration paid by the named executive officers.  As of
December 31, 1996, the aggregate number of shares of
restricted stock and the value therefor, net of consideration
paid, for such shares held by executive officers named in the
Summary Compensation Table was as follows:  Mr. Benjamin,
18,876 shares, $0; Mr. Kelly, 89,390 shares, $0; Mr. Fishbune,
0 shares, $0; Mr. Metz, 957,750 shares, $0; Mr. Liska, 94,842
shares, $0.

(5)In 1994, options were granted under the
Specialty Foods Acquisition Corporation 1994 Stock Option Plan
(SFAC Stock Option Plan) and the Specialty Foods Acquisition
Corporation 1994 Performance Stock Option Plan for Certain
Employees (Stock LTIP) in the following amounts:  Mr.
Benjamin, options for 100,000 shares under the SFAC Stock
Option Plan and no options under the Stock LTIP; Mr. Kelly,
options for 150,000 shares under the SFAC Stock Option Plan
and 80,000 shares under the Stock LTIP; Mr. Metz, options for
60,000 shares under the SFAC Stock Option Plan and no options
under the Stock LTIP; and Mr. Liska, options for 200,000
shares under the SFAC Stock Option Plan and 100,000 shares
under the Stock LTIP.  In 1995, options were granted under the
SFAC Stock Option Plan and the Stock LTIP in the following
amounts: Mr. Benjamin, options for 50,000 shares under the
Stock Option Plan and no options under the Stock LTIP; Mr.
Kelly, options for 40,000 shares under the Stock Option Plan
and no options under the Stock LTIP; Mr. Metz, options for
75,000 shares under the Stock Option Plan and no options under
the Stock LTIP; and Mr. Liska, options for 50,000 shares under
the Stock Option Plan and no options under the Stock LTIP.  In
1996, options were granted under the SFAC Stock Option Plan in
the following amounts:  Mr. Benjamin, options for 50,000
shares; Mr. Kelly, no options; Mr. Fishbune, options for
100,000 shares; Mr. Metz, options for 50,000 shares; and Mr.
Liska, no options.  No options were granted under the Stock
LTIP to any of the named executives in 1996.  See "Item 11
Executive Compensation - Stock Option and Long Term
Performance Related Incentive Plans" for a description of the
terms and conditions of the SFAC Stock Option Plan and Stock
LTIP.

(6) The amounts set forth for 1994 include
payments of life insurance premiums on behalf of Messrs.
Benjamin, Kelly, and Liska and reimbursement of $17,000 of
moving and relocation expenses to Mr. Benjamin.  The amounts
set forth for 1995 include life insurance premiums on behalf
of Messrs. Benjamin, Kelly, Metz, and Liska and reimbursement
of $196,000 of moving and relocation expenses to Mr. Benjamin.
The amounts set forth for 1996 include life insurance premiums
on behalf of Messrs. Benjamin, Kelly, Fishbune, Metz, and
Liska, reimbursement of $53,000 of moving and relocation
expenses to Mr. Fishbune, and reimbursement of $71,000 of
moving and relocation expenses to Mr. Metz.

(7) The amounts set forth for Mr. Benjamin in
1994 reflect $15,000 of tax reimbursement payments made to Mr.
Benjamin in 1994 in connection with moving and relocation
expenses.  The amounts set forth for Mr. Benjamin in 1995
reflect $144,000 of tax reimbursement payment made to Mr.
Benjamin in 1995 in connection with moving and relocation
expenses.  No amounts are set forth for Mr. Benjamin in 1996
because the dollar amount of perquisites and other personal
benefits received by Mr. Benjamin in 1996 falls below the
reporting threshold established by the SEC.  Currently,
disclosure is required only when the aggregate value of
perquisites and other personal benefits exceeds the lesser of
$50,000 or ten percent of total salary and bonus.

(8) The amounts set forth for Mr. Kelly in 1994
reflect $43,000 of contributions paid on Mr. Kelly's behalf by
SFC to a retirement account maintained by Mr. Kelly (the terms
and conditions of which are more fully described in this
section under the subheading "Executive Retirement Accounts
Maintained by Certain HQ Employees") and $37,000 of tax
reimbursement payments made to Mr. Kelly in 1994.  The amount
set forth for Mr. Kelly in 1995 reflect $45,000 of
contributions paid on Mr. Kelly's behalf to a retirement
account maintained by Mr. Kelly and $35,000 of tax
reimbursement payment made to Mr. Kelly in 1995.  The amounts
set forth for Mr. Kelly in 1996 reflect $55,000 of
contributions paid on Mr. Kelly's behalf to a retirement
account maintained by Mr. Kelly and $43,000 of tax
reimbursement payment made to Mr. Kelly in 1996.

(9) The amounts set forth for Mr. Fishbune in
1996 reflect $29,000 of contributions paid on Mr. Fishbune's
behalf by SFC to a retirement account maintained by Mr.
Fishbune (the terms and conditions of which are more fully
described in this section under the subheading "Executive
Retirement Accounts Maintained by Certain HQ Employees"),
$23,000 of tax reimbursement payments made to Mr. Fishbune in
1996, and $20,000 of tax reimbursement payment made to Mr.
Fishbune in 1996 in connection with moving and relocation
expenses.

(10) No amounts are set forth for Mr. Metz in 1994
or 1995 because the dollar amount of perquisites and other
personal benefits received by Mr. Metz in such years falls
below the reporting threshold established by the SEC.
Currently, disclosure is required only when the aggregate
value of the perquisites and other personal benefits exceeds
the lesser of $50,000 or ten percent of total salary and bonus
for any such year.  The amounts set forth for Mr. Metz  in
1996 reflect $54,000 of tax reimbursement payments in 1996 in
connection with moving and relocation expenses, and $39,000
for personal use of Metz's airplane.

(11) The amounts set forth for Mr. Liska in 1994
reflect $44,000 of contributions paid on Mr. Liska's behalf by
SFC to a retirement account maintained by Mr. Liska (the terms
and conditions of which are more fully described in this
section under the subheading "Executive Retirement Accounts
Maintained by Certain HQ Employees") and $38,000 of tax
reimbursement payments made to Mr. Liska in 1994.  The amount
set forth for Mr. Liska in 1995 reflect $59,000 of
contributions paid on Mr. Liska's behalf to a retirement
account maintained by Mr. Liska and $47,000 of tax
reimbursement payment made to Mr. Liska in 1995.  The amounts
set forth for Mr. Liska in 1996 reflect $86,000 of
contributions paid on Mr. Liska's behalf to a retirement
account maintained by Mr. Liska and $67,000 of tax
reimbursement payment made to Mr. Liska in 1996.

(12) In 1994, Mr. Kelly was granted options for
the purchase of 150,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreement between SFAC and Mr.
Kelly dated as of February 1, 1994.  In 1995, Mr. Kelly was
granted options for the purchase of 40,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Kelly dated as of February 1, 1995.  Upon
Mr. Kelly's resignation from the Company, SFAC and Mr. Kelly
shall enter into an Amended and Restated Non-Qualified Stock
Option Agreement, which, among other things, will reduce the
number of shares subject to the option to 132,500 (the terms
and conditions of which are more completely described in this
section under the heading "Agreements with Mr. Kelly").

(13) In 1994, Mr. Liska was granted options for
the purchase of 200,000 shares of common stock of SFAC granted
pursuant to a Stock Option Agreements between SFAC and Mr.
Liska dated as of February 1, 1994.  In 1995, Mr. Liska was
granted options for the purchase of 50,000 shares of common
stock of SFAC granted pursuant to a Stock Option Agreement
between SFAC and Mr. Liska dated as of February 1, 1995.  SFAC
and Mr. Liska entered into an Amended and Restated Non-
Qualified Stock Option Agreement dated as of January 15, 1997,
which, among other things, reduced the number of shares
subject to the option to 162,500 (the terms and conditions of
which are more completely described in this section under the
heading "Agreements with Mr. Liska").

(14)  Mr. Kelly shall receive certain post-
termination compensation upon his resignation pursuant to a
Termination Agreement with SFAC and SFC, dated as of February
20, 1997, which agreement is more completely described in this
subsection under the heading "Agreements with Mr. Kelly."

15) Mr. Fishbune joined the Company in May 1996,
and, therefore, did not receive any compensation from the
Company in 1994 or 1995.



(16) Mr. Liska resigned from his position with
SFAC and SFC effective as of January 15, 1997 and shall
receive certain post-termination compensation pursuant to a
Termination Agreement with SFAC and SFC, dated as of January
14, 1997, which agreement is more completely described in this
subsection under the heading "Agreements with Mr. Liska."

OPTIONS/SARS GRANT TABLE
<TABLE>
<CAPTION>

                        Option/SAR Grants in Last Fiscal Year
-------------------------------------------------------------------------------------------------------------
                               Individual Grants                                 Potential Realizable Value
                                                                                  Assumed Annual Rates of
                                                                                  Stock Price Appreciation
                                                                                    for Option Term (2)
-------------------------------------------------------------------------------------------------------------
                      Number of
                     Securities       % of Total                            
                     Underlying      Options/SARs     Exercise 
                    Options/SARs      Granted to       or Base
                      Granted        Employees in       Price     Expiration
   Name                (#) (1)        Fiscal Year      ($/Sh)       Date          5%($)        10%($)
------------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>           <C>           <C>           <C>          <C>
Lawrence S. Benjamin                            
President and Chief
Executive Officer of
SFAC and SFC            50,000           4.90%        0.726703211    2/1/06        22,851       57,910
                                                                        
John E. Kelly                                                        
Vice President and
General Counsel of
SFAC and SFC                 -              -                  -         -              -            -
                                                                        
Robert L. Fishbune                                                      
Vice President and                                                      
Chief Financial                                                         
Officer of
SFAC and SFC           100,000           9.80%        0.726703211    2/1/06        45,704       115,822
                                                                     
Henry J. Metz                                                       
President                                                       
and Chief Executive
Officer of Metz         50,000           4.90%        0.726703211    2/1/06        22,851       57,910
                                                                        
Paul J. Liska                                                           
former President and
Chief Executive Officer
of SFAC and SFC              -              -                   -        -              -            -

</TABLE>

(1) Options to purchase common stock of SFAC
granted pursuant to the SFAC Stock Option Plan.  See "Section
11 Executive Compensation - Stock Option and Long Term
Performance Related Incentive Plans" for the terms and
conditions of the SFAC Stock Option Plan.

(2) All options were granted at an exercise price
of $.726703211 per share of Common Stock. Due to the fact that
the Common Stock is not publicly traded, it is not currently
possible to calculate a precise value for unexercised options.
On each of August 18, 1994, November 17, 1994, January 20,
1995, February 22, 1995, June 13, 1995, July 28, 1995,
September 21, 1995, October 15, 1995, February 21, 1996 and
May 15, 1996, the Board of Directors of SFAC determined that a
per share price of $.726703211 is not below the fair market
value of the Common Stock.  On August 14, 1996, the Board of
Directors of SFAC determined that a per share price of
$.726703211 is equal to the fair market value of the Common
Stock.


AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR AND YEAR-END 
OPTION/SAR VALUES

<TABLE>
<CAPTION>

                                                            Number of         
                                                            Securities             Value of
                                                            Underlying            Unexercised
                                                            Unexercised          In-the-Money
                                                          Options/SARs at        Options/SARs at
                                                        Fiscal Year-End (#)    Fiscal Year-End ($)
                      Shares Acquired                       Exercisable/          Exercisable/    
Name                  on Exercise (#)  Value Realized($)  Unexercisable(1)      Unexercisable
--------------------------------------------------------------------------------------------------
<S>                    <C>                <C>            <C>                      <C>
Lawrence S. Benjamin            0                 0         75,000/125,000              (2)
President and Chief
Executive Officer of
SFAC and SFC

John E. Kelly                   0                 0         85,000/190,000 (3)          (2)
Vice President and
General Counsel of
SFAC and SFC

Robert L. Fishbune              0                 0         25,000/75,000               (2)
Vice President and
Chief Financial Officer of
SFAC and SFC

Henry J. Metz                   0                 0         76,250/108,750              (2)
President and
Chief Executive Officer
of Metz

Paul J. Liska                   0                 0         112,500/250,000 (4)         (2)
former President and Chief
Executive Officer of
SFAC and SFC

</TABLE>

(1) Options to purchase Common Stock.

(2) All options were granted at an exercise price
of  $.726703211 per share of Common Stock. Due to the fact that
the  Common  Stock is not publicly traded, it is not  currently
possible  to calculate a precise value for unexercised options.
On  each  of  August 18, 1994, November 17, 1994,  January  20,
1995,  February  22,  1995,  June  13,  1995,  July  28,  1995,
September  21, 1995, October 15, 1995, February  21,  1996  and
May 15, 1996, the Board of Directors of SFAC determined that  a
per  share  price of $.726703211 is not below the  fair  market
value  of  the Common Stock.  On August 14, 1996, the Board  of
Directors  of  SFAC  determined  that  a  per  share  price  of
$.726703211  is equal to the fair market value  of  the  Common
Stock.

(3) In  1994, Mr. Kelly was granted options  for
the  purchase of 150,000 shares of common stock of SFAC granted
pursuant  to  a  Stock Option Agreement between  SFAC  and  Mr.
Kelly  dated  as of February 1, 1994.  In 1995, Mr.  Kelly  was
granted  options  for the purchase of 40,000 shares  of  common
stock  of  SFAC  granted pursuant to a Stock  Option  Agreement
between SFAC and Mr. Kelly dated as of February 1, 1995.   Upon
Mr.  Kelly's resignation from the Company, SFAC and  Mr.  Kelly
shall  enter  into an Amended and Restated Non-Qualified  Stock
Option  Agreement, which, among other things, will  reduce  the
number  of  shares subject to the option to 132,500 (the  terms
and  conditions of which are more completely described in  this
section under the heading "Agreements with Mr. Kelly").

(4) In  1994, Mr. Liska was granted options  for
the  purchase of 200,000 shares of common stock of SFAC granted
pursuant  to  a Stock Option Agreements between  SFAC  and  Mr.
Liska  dated  as of February 1, 1994.  In 1995, Mr.  Liska  was
granted  options  for the purchase of 50,000 shares  of  common
stock  of  SFAC  granted pursuant to a Stock  Option  Agreement
between SFAC and Mr. Liska dated as of February 1, 1995.   SFAC
and  Mr.  Liska  entered  into an  Amended  and  Restated  Non-
Qualified Stock Option Agreement dated as of January 15,  1997,
which,  among  other  things,  reduced  the  number  of  shares
subject  to the option to 162,500 (the terms and conditions  of
which  are more completely described in this section under  the
heading "Agreements with Mr. Liska").


LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                         Estimated Future Payouts
                                                                              Under Nonstock
                                                  Perfomance or             Price-Based Plans
                               Number of           Other Period      -------------------------------
                             Shares, Units or    Until Maturation    Threshold    Target     Maximum
Name                        Other Rights (#)(1)     or Payout         ($) (2)     ($)(3)        ($)
----------------------------------------------------------------------------------------------------
<S>                           <C>                     <C>              <C>         <C>        <C>
Lawrence S. Benjamin             0 units                (3)                0          -        (6)
President and Chief
Executive Officer of
SFAC and SFC
                                                                
John E. Kelly                    0 units                (2)                0          -        (4)
Vice President and
General Counsel of
SFAC and SFC
                                                                
Robert L. Fishbune               0 units                (3)                0          -        (5)
Vice President and
Chief Financial                                                 
Officer of
SFAC and SFC                                                    
                                                             
Henry J. Metz                    0 units                (3)                0          -        (5)
President and
Chief Executive Officer
of Metz                                                         
                                                                
Paul J. Liska                    0 units                (2)               0           -        (4)
former President
and Chief Executive
Officer of SFAC and SFC

</TABLE>

(1) This column contains the number of
performance units granted to each of the named executive
officers in 1996 under the terms of the Specialty Foods
Corporation Long Term Incentive Compensation Plan (the Cash
LTIP) or the Long Term Incentive Compensation Plans of the
Company's operating units (the Subsidiary LTIPs).  With
respect to those executive officers that are HQ employees,
each performance unit represents the right to receive 0.1% of
the ultimate cash award under the Cash LTIP.  The payment of
awards under the Cash LTIP is conditional on the achievement
by SFAC of specified consolidated EBITDA targets in fiscal
1998, or earlier in the event of a change in control.  Award
payments under each Subsidiary LTIP will accrue to employees
of the relevant subsidiary in fiscal 1998 based upon such
subsidiary's attainment of EBITDA in excess of the specified
EBITDA targets for such year.  The maximum amount payable
under the Cash LTIP (of which Mr. Fishbune is a participant)
is $15 million.  The maximum amount payable under the Metz
Subsidiary LTIP (of which Mr. Metz is a participant) is $20
million.  The maximum amount payable under the Stella
Subsidiary LTIP (of which Mr. Benjamin is a participant) is
$12 million.  See "Section 11 Executive Compensation - Stock
Option and Long Term Performance Related Incentive Plans" for
the terms and conditions of the Cash LTIP and Subsidiary
LTIPs.

(2) Under the Cash LTIP, payment is conditional
upon the achievement by SFAC of specified consolidated EBITDA
targets in fiscal 1998, or earlier in the event of a change of
control.  The awards, if and to the extent earned, will be
paid over a three-year period commencing in 1999, with no
interest accruing on the award amounts during such period.

(3) Under the Subsidiary LTIPs, payment is
conditional on the achievement by the relevant subsidiary in
fiscal 1998 of EBITDA in excess of the specified EBITDA
targets for such year.  The awards, if and to the extent
earned, will be paid over a three-year period commencing in
1999, with no interest accruing on the award amounts during
such period.

(4) Under the Cash LTIP, an aggregate award of $1 million will be
made available to all participants for each
percentage point by which the consolidated EBITDA of SFAC for
fiscal 1998 exceeds the consolidated EBITDA target for SFAC in
fiscal 1998, up to a maximum aggregate award of $15 million
based upon the attainment of fiscal 1998 consolidated EBITDA
that exceeds the fiscal 1998 consolidated EBITDA target by
15%.

(5) Under the Metz Subsidiary LTIP, an aggregate
award of $1,333,333 will be made available to all participants
for each percentage point by which EBITDA of Metz for fiscal
1998 exceeds the EBITDA target for Metz in fiscal 1998, up to
a maximum aggregate award of $20 million based upon the
attainment of fiscal 1998 EBITDA that exceeds the fiscal 1998
EBITDA target by 15%.

(6) Under the Stella Subsidiary LTIP, an aggregate
award of $800,000 will be made available to all
participants for each percentage point by which EBITDA of
Stella for fiscal 1998 exceeds the EBITDA target for Stella in
fiscal 1998, up to a maximum aggregate award of $12 million
based upon the attainment of fiscal 1998 EBITDA that exceeds
the fiscal 1998 EBITDA target by 15%.

METZ-MOTHER'S CAKE & COOKIE COMPANY CONSOLIDATED PENSION PLAN FOR
  NON-UNION EMPLOYEES

The following table indicates the estimated annual benefits
payable upon retirement to Mr. Metz for the specified
compensation and years of service classifications under the Metz-
Mother's Cake & Cookie Company Consolidated Pension Plan for Non-
Union Employees (Pension Plan), as of December 31, 1996, assuming
that Mr. Metz remain in service with Metz until their retirement.
Mr. Metz is the only named executive officer participating in the
Pension Plan.

PENSION PLAN TABLE FOR THE PENSION PLAN

   Remuneration                                 Years of Service
   ------------                ---------------------------------------------

                                  15        20        25        30        35
                                ------    ------    ------    ------    ------
   125,000                      20,657    28,463    36,269    44,075    44,075

   150,000                      25,794    35,507    45,220    54,933    54,933
  
   175,000                      30,935    42,554    54,173    65,792    65,792

   200,000                      36,075    49,600    63,125    76,650    76,650
            
   225,000                      39,422    54,189    68,956    83,723    83,723
 
   250,000                      40,027    55,018    70,009    85,000    85,000
          
   300,000                      40,027    55,018    70,009    85,000    85,000
 
   400,000                      40,027    55,018    70,009    85,000    85,000
             
   450,000                      40,027    55,018    70,009    85,000    85,000
 
   500,000                      40,027    55,018    70,009    85,000    85,000
             

"Compensation" under the Pension Plan generally refers to total
annual cash compensation (up to $150,000 for 1994 and 1995, as
limited by the Code section 401(a) (17)), including pre-tax
salary deferrals, but excluding certain specified items such as
compensation received under the Metz Baking Company Executive
Incentive Compensation Plan, the Metz Baking Company Deferred
Compensation Plan or the Metz Baking Company Plant Managers Bonus
Incentive Plan.

Although the amount reported as annual compensation for Mr. Metz
in the Summary Compensation table is $560,000, Mr. Metz's covered
compensation under the Metz Plan in 1995 was $150,000 (as limited
by Code section 401(a)(171).  As of December 31, 1996, Mr. Metz
had approximately 25 years of credited service under the Pension
Plan.  Benefits are computed on a straight life annuity basis and
are not subject to deduction for Social Security or other offset
amounts.


CERTAIN EMPLOYMENT ARRANGEMENTS

EMPLOYMENT AGREEMENT WITH MR. BENJAMIN

SFAC and SFC entered into an Amended and Restated Executive
Employment Agreement with Mr. Benjamin effective January 1, 1997,
replacing that certain Executive Employment Agreement dated as of
August 15, 1994 among Mr. Benjamin, SFAC and Stella Holdings,
Inc., as amended.  The Employment Agreement for Mr. Benjamin
provides for the initial term of employment to end December 31,
1999, which term will automatically be renewed for additional one-
year extension periods unless the renewal is canceled by SFAC or
SFC or Mr. Benjamin upon six months' prior notice.  The
Employment Agreement provides for an initial base salary of
$560,000 and an annual target bonus of 75% of base salary upon
attainment by the Company of specified EBITDA targets.

Pursuant to the Employment Agreement, Mr. Benjamin has been or
will be granted options pursuant to the SFAC Stock Option Plan to
purchase an aggregate amount of 500,000 of Common Stock, and, to
date, such options have been granted in blocks of options to
purchase 100,000 shares, 50,000 shares, and 50,000 shares.  These
options will vest (and therefore become and remain exercisable)
and will be exercisable at a price of $0.726703211 per share on
the dates set forth below:  100,000 shares, vested by February 1,
1998, exercisable until February 1, 2004; 50,000 shares, vested
by February 1, 1999, exercisable until February 1, 2005; and
50,000 shares, vested by February 1, 1999, exercisable until
February 1, 2006.

In the event of termination of Mr. Benjamin's employment for any
reason, SFAC and SFC will have the right to repurchase all shares
of Common Stock and vested options held by Mr. Benjamin at the
time of termination.  Options not vested will lapse upon
termination (except that upon Mr. Benjamin's death, disability,
termination without cause or voluntary termination with good
reason, options that would have vested within six months of the
date of termination are treated as vested).  In the event of Mr.
Benjamin's death, disability, termination without cause or
voluntary termination for good reason, Mr. Benjamin will have the
right to put his shares of Common Stock to SFAC.  In addition,
upon termination in such circumstances, SFAC and SFC will make
certain post-termination salary and bonus payments to such
executive (or his estate).

Mr. Benjamin's Employment Agreement also provides that Mr.
Benjamin may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options and/or his
termination in connection with a change of control of SFAC.
These payments are limited in some circumstances to the tax
savings actually realized by SFAC and in other circumstances by
various dollar amounts.

Mr. Benjamin has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.

EMPLOYMENT AGREEMENT WITH MR. FISHBUNE

SFAC and SFC entered into an Executive Employment Agreement with
Mr. Fishbune effective May 13, 1996.  The Employment Agreement
for Mr. Fishbune provides for the initial term of employment to
end December 31, 1998, which term will automatically be renewed
for up to a one-year extension period unless the renewal is
canceled by SFAC or SFC or Mr. Fishbune upon six months' prior
notice. The Employment Agreement provides for an initial base
salary of $300,000 and an annual target bonus of 50% of base
salary upon attainment by the Company of specified EBITDA
targets.

Pursuant to the Employment Agreement, Mr. Fishbune has been
granted options pursuant to the SFAC Stock Option Plan to
purchase 100,000 shares of Common Stock.  These options will vest
(and therefore become and remain exercisable) over time so that
all such options will be vested by February 1, 1999.  These
options, once vested, will be exercisable until February 1, 2006
at a price of $0.726703211 per share.

Mr. Fishbune's Employment Agreement also provides that Mr.
Fishbune may be entitled to receive, under certain circumstances,
payments to offset (at least in part) certain tax consequences to
him as a result of his exercise of stock options and/or his
termination in connection with a change of control of SFAC or
SFC.  These payments are limited in some circumstances to the tax
savings actually realized by SFAC or SFC and in other
circumstances by various dollar amounts.

Mr. Fishbune has agreed to be bound by certain confidentiality,
non-competition and non-solicitation restrictions set forth in
his Employment Agreement.

AGREEMENTS WITH MR. KELLY

SFAC, SFC and Mr. Kelly entered into a Termination Agreement (the
Kelly Termination Agreement), dated as of February 20, 1997,
which, among other things, provides for the termination of the
Executive Employment Agreement, dated as of January 1, 1994 among
SFAC, SFC and Mr. Kelly, as amended, as of a date mutually
agreeable by the parties (the Resignation Date).  As of the
filing date of this report, the Resignation Date had not yet
occurred or been determined.  The Kelly Termination Agreement
provides for the cancellation upon the Resignation Date of the
Non-Qualified Stock Option Agreement dated as of February 1, 1995
and the Performance Stock Option Agreement dated February 1,
1994, each between SFAC and Mr. Kelly.  The Kelly Termination
Agreement also provides upon the Resignation Date for SFAC and
Mr. Kelly to amend and restate the Non-Qualified Stock Option
Agreement dated as of February 1, 1994 to, among other things,
reduce the number of shares subject to an option to purchase
Common Stock of SFAC from 190,000 to 132,500 shares.  Pursuant to
the Kelly Termination Agreement, Mr. Kelly shall receive (a)
$30,260.42 every one-half month for a minimum of four months, and
a maximum of twelve months, depending on future employment, (b) a
$100,000 bonus upon the sale of Gai's, and (c) a $147,916.68
bonus upon the sale of SFFB provided the sale occurs on or before
the forty-fifth (45th) day after the Resignation Date.  The Kelly
Termination Agreement also provides for the cancellation of that
certain Limited Recourse Secured Promissory Note dated as of June
15, 1995 in the principal amount of $290,681.28, and, in
connection with such cancellation, for Mr. Kelly to deliver to
SFAC (x) Subordinated Debentures with a then-current accreted
value of $151,711.96, and (y) 191,233 shares of Common Stock with
a value of $138,969.32, based upon founder's cost of $.726703211
per share.

AGREEMENTS WITH MR. LISKA

SFAC, SFC and Mr. Liska entered into a Termination Agreement (the
Liska Termination Agreement), dated as of January 14, 1997,
which, among other things, terminated the Executive Employment
Agreement, dated as of January 1, 1996, among SFAC, SFC and Mr.
Liska.  The Liska Termination Agreement provides for the
cancellation of the Non-Qualified Stock Option Agreements dated
as of February 1, 1994 and February 1, 1995 and the Performance
Stock Option Agreement dated as of February 1, 1994, each between
SFAC and Mr. Liska.  The Liska Termination Agreement also
provided for SFAC and Mr. Liska to amend and restate the Stock
Option Agreement dated as of November 17, 1994 between SFAC and
Mr. Liska to, among other things, reduce the number of shares
subject to an option to purchase Common Stock of SFAC from
250,000 to 162,500.  Pursuant to

the Liska Termination Agreement, Mr. Liska shall receive
$40,833.33 every one-half month for six months commencing on
January 15, 1997.  The Liska Termination Agreement also provides
for the cancellation of that certain Limited Recourse Secured
Promissory Note dated as of June 15, 1995 in the principal amount
of $290,681.28, and, in connection with such cancellation, for
Mr. Liska to deliver to SFAC (x) Subordinated Debentures with a
then current accreted value of $172,034.04, and (y) 163,268
shares of Common Stock with a value of $118,647.24, based upon
founder's cost of $.726703211 per share.

EXECUTIVE  RETIREMENT ACCOUNTS MAINTAINED BY CERTAIN  HEADQUARTER
(HQ) EMPLOYEES

Certain HQ employees, including Messrs. Kelly, Fishbune and Liska
have established retirement accounts into which they contribute
up to 15% of base pay (on an after-tax basis) to annuity or money
market funds. The Company provides certain contributions to each
employee's retirement account and reimbursement for the tax
impact incurred by participating employees on all contributions
made in connection with the plan.


STOCK OPTION AND LONG TERM PERFORMANCE RELATED INCENTIVE PLANS

SPECIALTY FOODS ACQUISITION CORPORATION 1994 STOCK OPTION PLAN

Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation 1994 Stock Option Plan, which was amended
and restated in February, 1995 (the SFAC Stock Option Plan). An
aggregate of 5,852,917 shares, representing approximately 8.04%
of the fully-diluted common equity of SFAC, may be subject to
options granted under the SFAC Stock Option Plan. Options may be
granted to key employees (including officers and directors) and
consultants of SFAC and its operating subsidiaries. Options
granted under the SFAC Stock Option Plan may either be
nonqualified stock options (NQSOs) or incentive stock options
(ISOs).

Generally, options for employees of the operating subsidiaries
will become eligible for grant in five installments during fiscal
years 1994-1998. The last four tranches will be granted only if
and to the extent 1994-1997 EBITDA targets are attained. The
Compensation Committee (the Committee) of the Board of Directors
of SFAC (the SFAC Board), which has been appointed by the SFAC
Board to administer the SFAC Stock Option Plan, has discretion to
establish and adjust targets and award levels.

The option term will generally be 10 years. The exercise price
per share of ISOs will equal or exceed the fair market value of
the Common Stock on the date of grant. The exercise price per
share of NQSOs may be below such fair market value.

SPECIALTY  FOODS  ACQUISITION  CORPORATION  LONG  TERM  INCENTIVE
COMPENSATION PLAN

Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation Long Term Incentive Compensation Plan,
which was amended and restated in February, 1995 (the Cash LTIP).
The payment of awards under the Cash LTIP is conditional on the
achievement by SFAC of consolidated EBITDA in fiscal year 1998 in
excess of a specified consolidated EBITDA target for such year.
The Committee (which has been appointed by the SFAC Board to
administer the Cash LTIP) may, in its discretion, grant
performance units under the Cash LTIP to HQ Employees. The total
number of performance units potentially available for grants
during the five-fiscal year period ending on December 31, 1998
(the performance cycle) is 1,000. Each performance unit
represents the right to receive 0.1% of the ultimate cash award
pool. The maximum award pool under the Cash LTIP is $15 million.
In all circumstances, up and to the extent earned, awards will be
paid over a three-year period commencing in 1999, with no
interest accruing on the award amounts during such period.
Performance units may be allocated to participants by the
Committee during or following any fiscal year in the performance
cycle.

The SFAC Board or the Committee may, in their discretion, adjust
awards, the award pool and EBITDA targets to reflect certain
corporate transactions.

SPECIALTY  FOODS  ACQUISITION CORPORATION 1994 PERFORMANCE  STOCK
OPTION PLAN FOR CERTAIN EMPLOYEES

Effective January 1, 1994, SFAC adopted the Specialty Foods
Acquisition Corporation 1994 Performance Stock Option Plan for
Certain Employees, which was amended and restated in February,
1995 (the Stock LTIP). An aggregate of 354,722 shares may be
subject to options granted to key HQ Employees under the Stock
LTIP (representing approximately 0.49% of the fully diluted
common equity of SFAC). These options may be granted at any time
through the end of the fiscal year 1998. These options will vest
on December 31, 1998 if SFC meets certain specified EBITDA
performance targets for the fiscal year ending December 31, 1998.
If SFC fails to meet such specified EBITDA performance targets,
these options will vest January 1, 2003.

Only NQSOs may be granted under the Stock LTIP. The option term
will generally be 10 years. The option exercise price will be
determined by the Committee (which has been appointed by the SFAC
Board to administer the Stock LTIP) and may be less than the fair
market value of the Common Stock on the date of grant.

SUBSIDIARY LONG TERM INCENTIVE COMPENSATION PLANS

Effective January 1, 1994, SFC adopted Long Term Incentive
Compensation Plans for each of its operating units, which were
amended and restated in February, 1995 (collectively, the
Subsidiary LTIPs). The compensation committee of the Board of
Directors of SFC (which has been appointed by the SFC Board of
Directors to administer the Subsidiary LTIPs) may, in its
discretion, grant performance units under each Subsidiary LTIP to
employees of the business group covered thereby for the
achievement by that business group of EBITDA in fiscal year 1998
in excess of the specified EBITDA target for such business group
in such fiscal year. The total number of performance units
potentially available for grants under each Subsidiary LTIP
during the five year period ending December 31, 1998 is 1,000.
Each performance unit will represent the right to receive 0.1% of
the ultimate award pool.

The maximum award pools under the Subsidiary LTIPs range from $5
million to $20 million, depending on the size of the business
group. The maximum aggregate amount payable under all Subsidiary
LTIPs is $49 million. In all circumstances, the awards, if and to
the extent earned, will be paid over a three-year period
commencing 1999, with no interest accruing on the award amounts
during such period. The portion that will actually be awarded
depends upon the amount by which the actual EBITDA achieved in
fiscal year 1998 exceeds targeted 1998 EBITDA.

The Board of Directors of SFC and its compensation committee have
discretion to adjust awards, the award pools and EBITDA targets
to reflect certain corporate transactions.

COMPENSATION OF DIRECTORS

Employees of SFAC, SFC or their subsidiaries do not receive any
additional compensation for services as a director or on
committees of the board of directors of SFAC, SFC or any of their
subsidiaries. Directors of SFAC, SFC or their subsidiaries are
reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at Board of Directors and committee
meetings and are covered by director's liability insurance.  Each
of Messrs. Baldwin and Meyer also receive directors fees of
$20,000 annually.

COMPENSATION  COMMITTEE INTERLOCKS AND INSIDER  PARTICIPATION  IN
COMPENSATION DECISIONS

J. Taylor Crandall, Robert B. Haas and Anthony P. Scotto are all
of the members of the compensation committee of the Board of
Directors of each of SFAC and SFC (Compensation Committee).
Messrs. Crandall, Haas and Scotto own a beneficial interest in or
is (or was during a portion of the Company's 1996 fiscal year) an
executive officer of one or more of the entities that received
fees from the Company in connection with the Acquisition and/or
have entered into financial advisory arrangements with SFC as
described below.

Mr. Haas is a controlling shareholder and Chairman of the Board
of Haas Wheat. Haas Wheat is a party to a financial advisory
agreement with SFC pursuant to which Haas Wheat has agreed to
provide certain financial advisory and other consulting services
to SFC for a five-year period in consideration for an annual fee
of $700,000. Haas Wheat and Acadia have a contractual agreement
under which Haas Wheat remits a portion of its annual fee to
Acadia.

J. Taylor Crandall is Vice President and Chief Financial Officer
of Keystone and is President, Director and Sole Stockholder of
Acadia MGP, Inc., the managing general partner of Acadia FW
Partners, L.P., the sole general partner of Acadia.  Mr. Scotto
is a Managing Director of Oak Hill Partners, Inc. and its
predecessor.  Each of Penobscot and Keystone have entered into
five-year financial advisory agreements with SFC, pursuant to
which they are paid annual fees, $200,000 per year in the case of
Penobscot and $100,000 per year in the case of Keystone.


ITEM  12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND
MANAGEMENT

All of the capital stock of SFC is beneficially owned by SFAC.
The following table sets forth, as of March 20, 1997, certain
information regarding the beneficial ownership of voting
securities of SFAC by (i) each person known by the Company to be
the beneficial owner of more than 5% of the Common Stock of SFAC
(Common Stock), which is SFAC's only outstanding class of voting
securities, (ii) each of the directors and named executive
officers of SFC, and (iii) all executive officers and directors
of SFC.


                                                              Percentage of   
                                                               Outstanding
  Name and Address                      Number of Shares     Shares of Common
of Beneficial Owner                     of Common Stock         Stock (a)
--------------------------------------------------------------------------------
                
Acadia Partners, L.P. (b)                                                   
201 Main Street                                                       
Fort Worth, Texas  76102                   23,596,345             37.38%      
                                                                        
Artal Luxembourg S.A.(c)                                              
39 Boulevard Royal                                                     
Luxembourg 2449                             5,959,327              9.44%     
                                                                              
Keystone, Inc. (d)                                                  
201 Main Street                                                       
Fort Worth, Texas  76102                    5,891,500              9.33%       
                                                                       
UBS Capital LLC (e)                                                       
299 Park Avenue                                                       
New York, New York  10171                   5,366,913              8.50%
                                                                      
Robert B. Haas (f)                                                     
300 Crescent Court, Suite 1700                                     
Dallas, Texas  75201                        5,111,051              8.10%    
          
DLJ Merchant Banking
Partners, L.P. (g)
277 Park Avenue                                                       
New York, New York 10172                    3,815,712              6.04%    
                                                                       
Thomas J. Baldwin                              --                   --   
                                                                       
J. Taylor Crandall (b)                         --                   --   
                                                                       
Charles J. Delaney                             --                   --   
                                                                       
Daniel L. Doctoroff (b)                        --                   --   
                                                                       
Jerry M. Meyer                                 --                   --   
                                                                       
Andrew J. Nathanson (g)                        --                   --   
                                                                       
David G. Offensend (b)                         --                   --   
                                                                    
Anthony P. Scotto (b)                          --                   --   
                                                                       
Douglas D. Wheat (h)                        2,396,776              3.80%    
                                                                   
Lawrence S. Benjamin (i)                      218,876                *         
                                         
Paul J. Liska (j)                             494,074                *
                                                                      
John E. Kelly (j)                             430,657                *
                                                                               
Henry J. Metz (i)                           1,159,000              1.84% 
                                                                        
All directors and executive 
  officers as a group (b)(g)(i)             9,782,455             15.50% 
                                                 
_______________                                                  

* Less than 1%.

(a) This column reflects percentages of the aggregate number of
    outstanding shares of Common Stock on March 20, 1997. The
    holdings of all of the stockholders listed in this table may
    be diluted by the exercise of options which, under employment
    arrangements and stock option plans approved by SFAC and SFC,
    may be granted to certain employees. The SFAC Stock Option
    Plan makes available to certain operating company employees
    and HQ Employees options to purchase 5,852,917 shares of
    Common Stock, representing approximately 8.04% of SFAC's
    fully diluted common equity. See "Item 11-Executive
    Compensation-Stock Option and Long Term Performance Related
    Incentive Plans." The Stock LTIP makes available to certain
    HQ Employees options to purchase a maximum of 354,722 shares
    of Common Stock, representing approximately 0.49% of SFAC's
    fully diluted common equity. See "Item 11-Executive
    Compensation-Stock Option and Long Term Performance Related
    Incentive Plans."

(b) Acadia's shares of Common Stock include shares owned by FWHY-
    Coinvestments VII Partners, L.P. (FWHY), SFC Partners, L.P.
    (SFCP) and SFC Partners II, L.P. (SFCII), parties related to
    Acadia. The general partner of Acadia is Acadia FW Partners,
    L.P. (Acadia FW), the managing general partner of which is
    Acadia MGP, Inc. (Acadia MGP), a corporation controlled by J.
    Taylor Crandall.  In addition, Mr. Crandall controls Group
    31, Inc., the general partner of each of FWHY, SFCP and
    SFCII.  Therefore, Acadia FW and Acadia MGP may be deemed to
    beneficially own the shares of Common Stock held by Acadia,
    and Mr. Crandall may be deemed to beneficially own the shares
    of Common Stock held by Acadia, SFCP, SFCII and FWHY. Messrs.
    Doctoroff, Offensend and Scotto are limited partners of SFCII
    and disclaim beneficial ownership of the shares of Common
    Stock held by SFCII. The address of Acadia FW, Acadia MGP,
    FWHY, SFCP, SFCII and Mr. Crandall is 201 Main Street, Fort
    Worth, Texas 76102.

(c) Artal Luxembourg S.A. is a wholly-owned subsidiary of
    Lorraine Investments Luxembourg S.A.("Lorraine Luxembourg"),
    a Luxembourg company. The issued and outstanding capital
    stock of Lorraine Luxembourg is in the form of bearer shares.
    The address of Lorraine Luxembourg is 39, Boulevard Royal, L-
    2449 Luxembourg.  All decisions with respect to Lorraine
    Luxembourg and its subsidiaries are made by the Board of
    Directors of Lorraine Luxembourg. The members of the Board of
    Directors of Lorraine Luxembourg are as follows:  Eric
    Wittouck, Guy Ullens and Roger Morley.

(d) Keystone is controlled by Robert M. Bass. As such, Mr. Bass
    may be deemed to beneficially own the shares of Common Stock
    held by Keystone.  The address of Mr. Bass and Keystone is
    201 Main Street, Fort Worth, Texas 76102.
 
(e) UBS Capital is a wholly-owned merchant banking subsidiary
    of Union Bank of Switzerland. The shares of capital stock of
    Union Bank of Switzerland are publicly held.

(f) Mr. Haas' shares of Common Stock include 101,011 shares
    owned by HWP Specialty Subsidiary Partners, 25,253 shares
    owned by HWP Specialty Subsidiary Partners II, and 1,000,000
    shares owned by the Haas Family Long-Term Trust.  The shares
    owned by HWP Specialty Subsidiary Partners and HWP Specialty
    Subsidiary Partners II also are beneficially owned by Mr.
    Douglas Wheat.

(g) DLJ Merchant Banking Partners, L.P's shares consist of
    shares of Common Stock held by the following entities
    (collectively, the DLJ Entities): DLJ Merchant Banking
    Partners, L.P. (DLJMBP), DLJ International Partners, C.V.
    (DLJIP), DLJ Offshore Partners, C.V. (DLJOP), DLJ Merchant
    Banking Funding, Inc. (DLJMBF), DLJ First ESC L.L.C.
    (DLJFESC), an "employee securities corporation" (as defined
    in the Investment Company Act of 1940) formed to hold
    securities under employee compensation plans, and Donaldson,
    Lufkin & Jenrette Securities Corporate (DLJSC, together with
    DLJMBP, DLJIP, DLJOP, DLJMBF, DLJFESC and DLJSC, the "DLJ
    Entities").  The address of each DLJMBP, DLJMBF, DLJFESC and
    DLJSC is 277 Park Avenue, New York, New York 10172. The
    address of each of DLJIP and DLJOP is John B. Gorsiraweg 6,
    Willemstad, Curacao, Netherlands Antilles. Mr. Nathanson is a
    Managing Director of Donaldson, Lufkin & Jenrette Securities
    Corporation. As such, Mr. Nathanson may be deemed to
    beneficially own the shares of Common Stock held by the DLJ
    Entities. Mr. Nathanson disclaims beneficial ownership of the
    shares of Common Stock held by the DLJ Entities.  The
    aggregate number of shares of Common Stock held by all
    directors and officers includes all shares of Common Stock
    held by the DLJ Entities, even though Mr. Nathanson disclaims
    beneficial ownership of such shares.

(h) Mr. Wheat's shares of Common Stock include 101,011 shares
    owned by HWP Specialty Subsidiary Partners and 25,253 shares
    owned by HWP Specialty Subsidiary Partners II, which also are
    beneficially owned by Mr. Robert B. Haas.
 
(i) All shares of Common Stock purchased by members of
    management are subject to an 18-month vesting schedule. In
    each case, 25% of the shares vest upon the executive
    officer's effective date of employment by the Company, 25%
    vest on the 6-month anniversary of such date, 25% vest on the
    1-year anniversary of such date and the remaining 25% vest on
    the 18-month anniversary of such date. Shares of Common Stock
    not yet vested are, upon termination of the executive officer
    for any reason, subject to repurchase at cost.

(j) All shares of Mr. Liska and Mr. Kelly are fully vested and
    are not subject to repurchase by the Company.
 


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCKHOLDERS' AGREEMENT

Simultaneously with the closing of the Acquisition, Haas Wheat,
Acadia, Keystone, UBS Capital, Artal Belgium S.A. and DLJMBP (in
some cases acting through affiliates) (collectively, with certain
of their affiliates, the Principal Stockholders) acquired all of
the Common Stock not acquired by the purchasers of the Debenture
Units, at a price of $0.726703211 per share. On August 16, 1993,
the Principal Stockholders entered into a stockholders' agreement
governing the relationships among such stockholders (the
Stockholders' Agreement). Subsequent transferees of the Common
Stock that are affiliates of the Principal Stockholders or
members of management have also agreed to be bound by the
Stockholders' Agreement. The Stockholders' Agreement imposes on
the parties thereto certain restrictions and conditions on the
transfer of Common Stock, subject to certain exceptions. The
Stockholders' Agreement provides the parties with the right to
participate in certain sales of Common Stock by other parties.
The parties to the Stockholders' Agreement were granted certain
preemptive rights with respect to issuance of Common Stock by
SFAC and the right, in certain circumstances, to have their
Common Stock registered for public sale under the Securities Act
of 1933. The Stockholders' Agreement also sets forth provisions
relating to corporate governance of SFAC. Pursuant to the
Stockholders' Agreement, Acadia has nominated three Directors,
Keystone has nominated two Directors, Haas Wheat has nominated
two Directors, and UBS Capital, Artal Belgium S.A. and DLJMBP
have each nominated one Director. Under certain conditions Acadia
and Keystone can increase the number of Directors they can
nominate.

CERTAIN TRANSACTIONS WITH STOCKHOLDERS OF SFAC

Certain of the Principal Stockholders and their affiliates were
paid financial advisory fees by the Company in 1996 pursuant to
financial advisory agreements with the Company (Financial
Advisory Agreements).

Haas Wheat, Penobscot and Keystone each entered into Financial
Advisory Agreements with SFC.  SFC paid Haas Wheat an annual fee
of $700,000 (a portion of which Haas Wheat is obligated by
agreement to remit to Acadia), Penobscot an annual fee of
$200,000 and Keystone an annual fee of $100,000. See "Item 11-
Executive Compensation-Compensation Committee Interlocks and
Insider Participation in Compensation Decisions."

In November, 1996, SF Leasing L.L.C. (of which Acadia and
Keystone each owns a 45% interest and Haas Wheat owns a 10%
interest) purchased from Metz and Stella all of the equipment at
three manufacturing facilities for the aggregate amount of
$18,380,000 (which price was based on the appraised value of such
equipment), and leased such equipment back to Metz and Stella in
a transaction that was deemed by the parties to be equivalent to
an arms length transaction.  The Board of Directors of the
Company determined that the foregoing transaction was on terms no
less favorable to the Company, Metz and Stella than could
otherwise have been obtained by the Company, Metz or Stella in a
transaction with an unaffiliated third party.

In 1996, SFC and Stella sold an insurance receivable generated in
connection with the fire at Stella's Lena, Wisconsin facility to
Acadia, Keystone and Haas Wheat in the aggregate face amount and
for the aggregate purchase price set forth opposite their
respective names:  Acadia, face amount of $8,775,000, purchase
price of $8,643,375; Keystone, face amount of $8,775,000,
purchase price of $8,643,375; and Haas Wheat, face amount of
$1,950,000, purchase price of $1,920,750.  The Board

of Directors of the Company determined that the foregoing
transactions were on terms no less favorable to SFC and Stella
that would otherwise have been obtained by SFC or Stella in a
transaction with an unaffiliated third party.

In March, 1997, Acadia, Keystone, Haas Wheat, SFAC, SFC and The
Chase Manhattan Bank entered into an Equity Investment Agreement
whereby Acadia, Keystone and Haas Wheat agreed (and each of such
other Principal Stockholders which exercises its preemptive
rights pursuant to the Principal Stockholders Agreement shall
have the right) to purchase equity of SFAC in the aggregate
amount of $19,500,000.  The Equity Investment Agreement provides
that the equity investment may be fully satisfied by the
contribution to the equity of SFAC of each such party's
respective interest in the insurance receivable arising from the
fire at Stella's Lena, Wisconsin facility, which receivable was
purchased from SFC and Stella.  In exchange for the Equity
Investment, SFAC shall issue to the investing shareholders common
or preferred stock of SFAC in an amount to be determined by the
Board of Directors of SFAC and the investing shareholder.

TAX SHARING AGREEMENT

SFAC and SFC have entered into a tax sharing agreement pursuant
to which SFC agreed to pay to SFAC its pro rata share of SFAC's
consolidated income tax liability.

TRANSACTIONS WITH MANAGEMENT

SFAC and SFC entered into the Liska Termination Agreement with
Mr. Liska, the former President and Chief Executive Officer of
SFAC and SFC, providing for certain severance payments to Mr.
Liska.  SFAC also entered into an Amended and Restated Non-
Qualified Stock Option Agreement which, among other things,
reduced the number of options to purchase shares of Common Stock
of SFAC.  See "Item 11 - Executive Compensation - Agreements with
Mr. Liska".  SFAC and SFC entered into the Kelly Termination
Agreement with Mr. Kelly providing for certain severance payments
to Mr. Kelly upon his resignation from the Company.  The Kelly
Termination Agreement provides for SFAC and Mr. Kelly to enter
into an Amended and Restated Non-Qualified Stock Option Agreement
which will, among other things, reduce the number of options to
purchase shares of Common Stock of SFAC.  See "Item 11 -
Executive Compensation - Agreements with Mr. Kelly".  In
addition, SFAC and SFC have entered into employment agreements
with Mr. Benjamin (President and Chief Executive Officer of SFC,
SFAC and Stella) and Mr. Fishbune (Vice President and Chief
Financial Officer of SFAC and SFC).  See "Item 12-Security
Ownership of Certain Beneficial Owners and Management."

In April, 1996, SFAC sold shares of SFAC common stock to Mr.
Liguori at a price of $0.726703211 per share (Purchased Shares).
The Purchased Shares sold to Mr. Liguori had been previously
repurchased by SFAC from time to time from former employees of
the Company.  In connection with this transaction, Mr. Liguori
bought 134,402 shares.  Mr. Liguori paid for his Purchased Shares
by delivering to SFAC a limited recourse promissory note secured
by all of the SFAC's securities held by such executive officer,
including his Purchased Shares.  Such note will be due on the
first to occur of June 15, 2002 and 60 days after the date on
which such executive officer's employment with the Company
terminates. The Purchase Shares will vest as follows:  20% on the
date of purchase and 20% on each of the first four anniversaries
of the date of purchase.  Upon certain events of termination,
SFAC and SFC may repurchase Mr. Liguori's unvested Purchase
Shares at the cost of purchase and any of Mr. Liguori's vested
Purchase Shares at the fair market value thereof at such time.



                            PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K

(a)(1) - (2)  Financial Statements and Schedule.

See Index to Financial Information on page F-1.

(3)  Exhibits.

        EXHIBIT
        NUMBER    DESCRIPTION OF DOCUMENT

                       3.1  Certificate of Incorporation of SFC.
                  (Incorporated by reference to Exhibit 3.1 to
                  Amendment No. 2 to SFC's Registration
                  Statement on Form S-4, dated November 10, 1993
                  (SFC's 1993 Form S-4) (Registration No. 33-
                  68956).)
 
                       3.2  Amended and Restated By-Laws of SFC.
                  (Incorporated by reference to Exhibit 3.2 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       4.1  Indenture, dated as of August 16,
                  1993, between SFAC and United States Trust
                  Company of New York, as Trustee (Trustee)
                  governing the 13% Senior Secured Discount
                  Debentures due 2005.  (Incorporated by
                  reference to Exhibit 4.1 to SFAC's
                  Registration Statement on Form S-4, dated
                  November 10, 1993 (SFAC's Form S-4)
                  (Registration No. 33-68958).)

                       4.2  Amendment No. 1 to the Indenture
                  governing the 13% Senior Secured Discount
                  Debentures, dated as of October 28, 1994,
                  between SFAC and the Trustee (Incorporated by
                  reference to Exhibit 10.49 to SFAC's Report on
                  Form 10-Q for the quarter ended September 30,
                  1994).

                       4.3  Registration Rights Agreement, dated
                  as of August 16, 1993, among SFAC, SFC and the
                  purchasers, named therein.  (Incorporated by
                  reference to Exhibit 4.3 to SFC's 1993 Form S-
                  4 (Registration No. 33-68956).)

                       4.4  Indenture, dated as of August 16,
                  1993, between SFC and the Trustee governing
                  the 10 1/4% Senior Notes due 2001.
                  (Incorporated by reference to Exhibit 4.1 to
                  SFC's 1993 Form S-4 (Registration No. 33-
                  68956).)

                       4.5  Amendment No. 1 to the Indenture
                  governing the 10 1/4% Senior Notes, due 2001
                  dated as of October 28, 1994, between SFC and
                  the Trustee.  (Incorporated by reference to
                  Exhibit 10.37 to SFC's Report on Form  10-Q
                  for the quarter ended September 30, 1994).

                       4.6  Indenture, dated as of August 16,
                  1993, between SFC and the Trustee governing
                  the 11 1/4% Senior Subordinated Notes due
                  2003. (Incorporated by reference to Exhibit
                  4.2 to SFAC's 1993 Form S-4 (Registration No.
                  33-68956).)

                       4.7  Amendment No. 1 to the Indenture
                  governing the 11 1/4% Senior Subordinated
                  Notes due 2003, dated as of October 28, 1994,
                  between SFC and the Trustee.  (Incorporated by
                  reference to Exhibit 10.38 to SFC's Report on
                  Form 10-Q for the quarter ended September 30,
                  1994.)

                       4.8  Indenture, dated as of July 17,
                  1995, between SFC and the Trustee governing
                  the 11 1/8% Senior Notes due 2002.
                  (Incorporated by reference to Exhibit 4.6
                  SFC's Report on Form 10-Q for the quarter
                  ended June 30, 1995.)

                       4.9  Registration Rights Agreement, dated
                  as of July 17, 1995, among SFC and the initial
                  purchasers of the 11 1/8% Senior Notes due
                  2002 issued by SFC.  (Incorporated by
                  reference to Exhibit 4.7 to SFC's Report on
                  Form 10-Q for the quarter ended June 30,
                  1995.)

                       10.1 Stock Purchase Agreement, dated as
                  of August 9, 1993, among the sellers party
                  thereto and SFC.  (Incorporated by reference
                  to Exhibit 10.1 to SFC's 1993 Form S-4
                  (Registration No. 33-68956).)

                       10.2 Amendment No. 1, dated as of August
                  16, 1993, to the Stock Purchase Agreement
                  among the sellers party thereto and SFC.
                  (Incorporated by reference to Exhibit 10.2 to
                  SFC's 1993 Form S-4 (Registration No. 33-
                  68956).)

                       10.3 Security Escrow Agreement, dated as
                  of August 16, 1993, by and among the sellers
                  party thereto and SFC.  (Incorporated by
                  reference to Exhibit 10.3 to SFC's 1993 Form S-
                  4 (Registration No. 33-68956).)

                       10.4 Settlement Agreement, dated as of
                  March 31, 1995, between SFC and Beledia N.V.
                  (Incorporated by reference to Exhibit 10.4 to
                  SFC's Registration Statement on Form S-4
                  dated July 21, 1995 (SFC's 1995 Form S-4).)

                       10.5 Financial Advisory Agreement, dated
                  as of August 16, 1993, among SFAC, SFC and
                  Penobscot.  (Incorporated by reference to
                  Exhibit 10.5 to SFC's 1993 Form S-4
                  (Registration No. 33-68756).)

                       10.6 Financial Advisory Agreement, dated as of
                  August 16, 1993, among SFAC, SFC and Keystone
                  (Incorporated by reference to Exhibit 10.6 to
                  the SFC's 1993 Form S-4 (Registration No. 33-
                  68956).)

                       10.7 Financial Advisory Agreement, dated as of
                  August 16, 1993, among SFAC, SFC and Haas
                  Wheat.  (Incorporated by reference to Exhibit
                  10.7 to SFC's 1993 Form S-4 (Registration No.
                  33-68956).)

                       10.8 Financial Advisory Agreement, dated
                  as of August 16, 1993, among SFAC, SFC and UBS
                  Capital.  (Incorporated by reference to
                  Exhibit 10.8 to SFC's 1993 Form S-4
                  (Registration No. 33-68956).)

                       10.9 Financing Commitment Fee Agreement,
                  dated as of August 16, 1993, among SFAC, SFC
                  and Acadia.  (Incorporated by reference to
                  Exhibit 10.9 to SFC's 1993 Form S-4
                  (Registration No. 33-68956).)

                       10.10     Financing Commitment Fee
                  Agreement, dated as of August 16, 1993, among
                  SFAC, SFC and Keystone.  (Incorporated by
                  reference to Exhibit 10.10 to SFC's 1993 Form
                  S-4 (Registration No. 33-68956).)

                       10.11     Financing Commitment Fee
                  Agreement, dated as of August 16, 1993, among
                  SFAC, SFC and UBS Capital.  (Incorporated by
                  reference to Exhibit 10.11 to SFAC's 1993 Form
                  S-4 (Registration No. 33-68956).)

                       10.12     Tax Sharing Agreement, dated as
                  of August 16, 1993, among SFAC, SFC and
                  certain subsidiaries of SFC.  (Incorporated by
                  reference to Exhibit 10.12 to SFC's 1993 Form
                  S-4 (Registration No. 33-68958).)

                       10.13     Tax Sharing Agreement, dated as
                  of August 16, 1993, between SFAC and SFC.
                  (Incorporated by reference to Exhibit 10.13 to
                  SFC's 1993 Form S-4 (Registration No. 33-
                  68956).)

                       10.14     Corporate Services Agreement,
                  dated as of June 30, 1994, between SFAC and
                  SFC.  (Incorporated by reference to Exhibit
                  10.14 to SFC's Report on Form 10-K for the
                  year ended December 31, 1994.)

                       10.15     Term Loan Agreement, dated as
                  of July 17, 1995, among the SFC, certain
                  lenders and Chemical Bank, as Administrative
                  Agent. (Incorporated by reference to Exhibit
                  10.16 to SFC's 1995 Form S-4 (SFC's 1995 Form
                  S-4) (Registration No. 33-68956).)

                       10.16     Amendment to Term Loan
                  Agreement, dated as of February 28, 1996,
                  among SFC, certain of its subsidiaries,
                  certain lenders and Chemical Bank, as
                  Administrative Agent.  (Incorporated by
                  reference to Exhibit 10.16 to SFC's Report on
                  Form 10-K for the year ended December 30,
                  1995.)

                       10.17     Second Amendment and Waiver to Term
                  Loan Agreement, dated as of August 2, 1996,
                  among SFC, certain of its subsidiaries,
                  certain lenders and The Chase Manhattan Bank
                  (Chase), successor to Chemical Bank, as
                  Administrative Agent.  (Incorporated by
                  reference to Exhibit 10.53 to SFC's report on
                  Form 10-Q for the quarter ended June 29,
                  1996.)

                       10.18     Third Amendment to Term Loan
                  Agreement, dated as of October 24, 1996, among
                  SFC, certain of its subsidiaries, certain
                  lenders and Chase, as Administrative Agent.
                  (Incorporated by reference to Exhibit 10.57 to
                  SFC's report on Form 10-Q for the quarter
                  ended September 28, 1996.)

                       10.19*    Fourth Amendment to Term Loan
                  Agreement, dated as of February 25, 1996,
                  among SFC, certain of its subsidiaries,
                  certain lenders and Chase, as Administrative
                  Agent.

                       10.20     Revolving Credit Agreement,
                  dated as of August 16, 1993, as amended and
                  restated July 17, 1995, by and among certain
                  subsidiaries SFC, certain lenders and Chemical
                  Bank, as Administrative Agent. (Incorporated
                  by reference to Exhibit 10.23 to SFC's 1995
                  Form S-4 (Registration No. 33-68956).)

                       10.21     Borrower Guarantee, dated as of
                  August 16, 1993, by SFC in favor of Chemical
                  Bank, as Administrative Agent for the lenders
                  under the Revolving Credit Agreement.
                  (Incorporated by reference to Exhibit 10.16 to
                  SFC's 1993 Form S-4 (Registration No. 33-
                  68956).)

                       10.22     Pooling Agreement, dated as of
                  November 16, 1994, by and among Specialty
                  Foods Finance Corporation (SFFC), SFC, as
                  Master Servicer, and Chemical Bank, as Trustee
                  (the Pooling Agreement). (Incorporated by
                  reference to Exhibit 10.22 to SFC's Report on
                  Form 10-K for the year ended December 31,
                  1994.)

                       10.23     Series 1994-1 Supplement to the
                  Pooling Agreement, dated as of November 16,
                  1994, by and among SFFC, SFC, as Master
                  Servicer, and Chemical Bank, as Trustee.
                  (Incorporated by reference to Exhibit 10.23 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       10.24     Series 1996-1 Supplement to the
                  Pooling Agreement, dated as of August 1, 1996,
                  by and among SFFC, SFC, as Master Servicer,
                  and Chase, as Trustee.  (Incorporated by
                  reference to Exhibit 10.56 to SFC's Report on
                  Form 10-Q for the quarter ended September 28,
                  1996.)

                       10.25*    Amendment No. 1 Series to 1996-1
                  Supplement, dated as of November 29, 1996, by
                  and among SFFC, SFC, as Master Servicer, and
                  Chase, as initial VFC Certificateholders, and
                  Chase, as Trustee.

                       10.26*    Amendment No. 2 to Series 1996-1
                  Supplement, dated as of December 13, 1996, by
                  and among SFFC, SFC, as Master Servicer, and
                  Chase, as initial VFC Certificateholders, and
                  Chase, as Trustee.

                       10.27*    Series 1997-1 Supplement to the
                  Pooling Agreement, dated as of January 31,
                  1997, by and among SFFC, SFC, as Master
                  Servicer, and Chase, as Trustee.

                       10.28     Amended and Restated Receivables
                  Sales Agreement, dated as of November 16,
                  1994, by and among SFFC, SFC, as Master
                  Servicer, and certain subsidiaries to SFC.
                  (Incorporated by reference to Exhibit 10.24 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       10.29     Servicing Agreement, dated as of
                  November 16, 1994, by and among SFFC, SFC, as
                  Master Servicer, and certain subsidiaries of
                  SFC. (Incorporated by reference to Exhibit
                  10.25 to SFC's Report on Form 10-K for the
                  year ended December 31, 1994.)

                       10.30*    Amendment No. 1 to SFC Master Trust
                  Pooling and Servicing Agreements, dated as of
                  December 16, 1996, by and among SFFC, SFC, as
                  Master Servicer, and Chase, as Trustee.

                       10.31*    Amendment No. 2 to SFC Master Trust
                  Pooling Agreement, dated as of December 27,
                  1996, by and among SFFC, SFC, as Master
                  Servicer, and Chase, as Trustee.

                       10.32*    Amendment No. 3 to SFC Master Trust
                  Pooling Agreement, dated as of February 24,
                  1997, by and among SFFC, SFC, as Master
                  Servicer, and Chase, as Trustee.

                       10.33*    Amendment No. 1 to Amended and
                  Restated Receivables Sale Agreement, dated as
                  of December 16, 1996, by and among SFFC, SFC,
                  as Master Servicer, and certain subsidiaries
                  of SFC.

                       10.34*    Amendment No. 2 to Amended and
                  Restated Receivables Sale Agreement, dated as
                  of December 27, 1996, by and among SFFC, SFC,
                  as Master Servicer, and certain subsidiaries
                  of SFC.

                       10.35*    Amendment No. 3 to Amended and
                  Restated Receivables Sale Agreement, dated as
                  of February 24, 1997, by and among SFFC, SFC,
                  as Master Servicer, and certain subsidiaries
                  of SFC.

                       10.36     Amended and  Restated SFAC 1994
                  Stock Option Plan.  (Incorporated by reference
                  to Exhibit 10.26 to SFC's Report on Form 10-K
                  for the year ended December 31, 1994.)

                       10.37     Amended and Restated SFAC 1994
                  Performance Stock Option Plan for Certain
                  Employees. (Incorporated by reference to
                  Exhibit 10.27 to SFC's Report on Form 10-K for
                  the year ended December 31, 1994.)

                       10.38     Amended and Restated SFAC Long-
                  Term Incentive Compensation Plan for Certain
                  Employees.  (Incorporated by reference to
                  Exhibit 10.28 to SFC's Report on Form 10-K for
                  the year ended December 31, 1994.)

                       10.39     Form of Amended and Restated
                  Subsidiary Long-Term Incentive Compensation
                  Plan (with appendices showing differing
                  material terms of each separate plan).
                  (Incorporated by reference to Exhibit 10.29
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       10.40     Letter Agreement, dated as of
                  November 26, 1993, between SFC and Chemical
                  Bank, confirming adherence to International
                  Swap Dealers Association, Inc. 1991 ISDA
                  Definitions and Master Agreement in connection
                  with Rate Collar Transaction between the
                  parties. (Incorporated by reference to Exhibit
                  10.25 to SFC's Report on Form 10-K for the
                  year ended December 31, 1993).

                       10.41     Employment Agreement, effective
                  as of August 15, 1994, among SFAC, Stella and
                  Lawrence S. Benjamin.  (Incorporated by
                  reference to Exhibit 10.33 to SFC's Report on
                  Form 10-K for the year ended December 31,
                  1994.)

                       10.42     Form of HQ Employee Employment
                  Agreement entered into with the following
                  Executive Officers:  Paul J. Liska, John E.
                  Kelly, Robert E. Baker, and John R. Reisenberg
                  (with schedule showing differing material
                  terms for each such HQ Employee that is a
                  party to an employment agreement).
                  (Incorporated by reference to Exhibit 10.29 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1993).

                       10.43     Amendment No. 1, effective as
                  of November 17, 1994, to the Employment
                  Agreement among SFC, SFAC and Paul J. Liska.
                  (Incorporated by reference to Exhibit 10.35 to
                  SFC's Report on Form  10-K for the year ended
                  December 31, 1994.)

                       10.44     Form of Executive Securities
                  Purchase Agreement among certain named
                  executive officers, respectively, and the
                  Principal Stockholders, SFAC and SFC (with
                  schedule showing differing material terms for
                  each such officer's agreement).  (Incorporated
                  by reference to Exhibit 10.30 SFC's Report on
                  Form 10-K for the year ended December 31,
                  1993.)

                       10.45     June 1995 Amendment to
                  Executive Employment Agreement, dated as of
                  June 15, 1995, among Paul J. Liska, SFC and
                  SFAC.  (Incorporated by reference to Exhibit
                  10.40 to SFC's 1995 Form S-4 (Registration No.
                  33-94836).)

                       10.46     Stock Purchase Agreement, dated as
                  of June 15, 1995, between Paul J. Liska and
                  SFAC.  (Incorporated by reference to Exhibit
                  10.41 to SFC's 1995 Form S-4 (Registration No.
                  33-94836).)

                       10.47     Amended and Restated Executive
                  Employment Agreement, dated as of May 30,
                  1996, among Paul J. Liska, SFC and SFAC.
                  (Incorporated by reference to Exhibit 10.54 to
                  SFC's Form 10-Q for the quarter ended June 29,
                  1996.)


                       10.48     June 1995 Amendment to Executive
                  Employment Agreement, dated as of June 15,
                  1995, among John E. Kelly, SFC and SFAC
                  (Incorporated by reference to Exhibit 10.42 to
                  SFC's 1995 Form S-4 (Registration No. 33-
                  94836).)

                       10.49     Stock Purchase Agreement, dated as
                  of June 15, 1995, between John E. Kelly and
                  SFAC (Incorporated by reference to Exhibit
                  10.43 to SFC's 1995 Form S-4 (Registration No.
                  33-94836).)

                       10.50     June, 1995 Amendment to Executive
                  Employment Agreement, dated as of June 15,
                  1995, among Robert E. Baker, SFC and SFAC
                  (Incorporated by reference to exhibit 10.44 to
                  SFC's 1995 Form S-4 (Registration No. 33-
                  94836).)

                       10.51     Stock Purchase Agreement, dated as
                  June 15, 1995, between Robert E. Baker and
                  SFAC (Incorporated by reference to Exhibit
                  10.45 to SFC's 1995 to SFC's 1995 Form S-4
                  (Registration No. 33-94836).)

                       10.52     Stock Purchase Agreement dated as of
                  June 15, 1995, between Henry J. Metz and SFAC
                  (Incorporated by reference to Exhibit 10.46 to
                  SFC's 1995 Form S-4 (Registration No. 33-
                  94836).)

                        10.53     August 1995 Amendment to Executive
                  Employment Agreement, dated as of August 1,
                  1995, among Lawrence S. Benjamin, Stella and
                  SFAC. (Incorporated by reference to Exhibit
                  10.65 to SFC's Report on Form  10-Q for the
                  quarter ended September 30, 1995.)

                        10.54     August 1995 Amendment to Executive
                  Employment Agreement, dated as of August 1,
                  1995, among Paul Liska and SFAC and SFC.
                  (Incorporated by reference to Exhibit 10.66 to
                  SFAC's Report on Form 10-Q for the quarter
                  ended September 30, 1995.)

                       10.55     Termination Agreement,
                  effective as of January 13, 1995, among SFC,
                  SFAC and Sam K. Reed.  (Incorporated by
                  reference to Exhibit 10.37 to SFC's Report on
                  Form 10-K for the year ended December 31,
                  1994.)

                       10.56     Amended and Restated General
                  Biscuit of America-West Retirement Plan.
                  (Incorporated by reference to Exhibit 10.38 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       10.57     Amended and Restated Metz
                  Baking Company Pension Plan for Non-Union
                  Employees.  (Incorporated by reference to
                  Exhibit 10.39 SFC's Report on Form 10-K for
                  the year ended December 31, 1994.)

                       10.58     Amended and Restated DSD/Bloch
                  & Guggenheimer Defined Benefit Pension Plan.
                  (Incorporated by reference to Exhibit 10.40 to
                  SFC's Report on Form 10-K for the year ended
                  December 31, 1994.)

                       10.59     Securities Purchase Agreement, dated
                  as of August 1, 1995, between Paul J. Liska
                  and SFAC.  (Incorporated by reference to
                  Exhibit 10.45 to SFC's Report on Form 10-K for
                  the year ended December 30, 1995.)

                       10.60     Amendment to Securities Purchase
                  Agreement, dated as of January 2, 1996,
                  between Paul J. Liska and SFAC.  (Incorporated
                  by reference to Exhibit 10.46 to SFC's Report
                  on Form 10-K for the year ended December 30,
                  1995.)

                       10.61     Executive Securities Purchase
                  Agreement, dated as of December 15, 1994,
                  among Lawrence S. Benjamin, SFAC and SFC.
                  (Incorporated by reference to Exhibit 10.47 to
                  SFC's Report on Form 10-K for the year ended
                  December 30, 1995.)

                       10.62     Stock Purchase Agreement, dated as
                  of June 15, 1995, between Lawrence S. Benjamin
                  and SFAC.  (Incorporated by reference to
                  Exhibit 10.48 to SFC's Report on Form 10-K for
                  the year ended December 30, 1995.)

                       10.63     Securities Purchase Agreement, dated
                  as of August 1, 1995, between Lawrence S.
                  Benjamin and SFAC.  (Incorporated by reference
                  to Exhibit 10.49 to SFC's Report on Form 10-K
                  for the year ended December 30, 1995.)

                       10.64     Amendment to Securities Purchase
                  Agreement, dated as of January 2, 1996,
                  between Lawrence S. Benjamin and SFAC.
                  (Incorporated by reference to Exhibit 10.50 to
                  SFC's Report on Form 10-K for the year ended
                  December 30, 1995.)

                       10.65     Termination Agreement, dated as of
                  March 1, 1996, among SFAC, SFC and Thomas
                  Herskovits.  (Incorporated by reference to
                  Exhibit 10.51 to SFC's Report on Form 10-K for
                  the year ended December 30, 1995.)

                       10.66     Amended and Restated Stock Option
                  Agreement, dated as of March 1, 1996, between
                  SFAC and Thomas Herskovits.  (Incorporated by
                  reference to Exhibit 10.52 to SFC's Report on
                  Form 10-K for the year ended December 30,
                  1995.)

                       10.67     Executive Employment Agreement,
                  dated as of May 31, 1996, among SFAC, SFC and
                  Robert L. Fishbune.  (Incorporated by
                  reference to Exhibit 10.55 to SFC's Report on
                  Form 10-Q for the quarter ended June 29,
                  1996.)

                       10.68*    Executive Employment Agreement,
                  dated as of January 1, 1997, among SFAC, SFC
                  and Lawrence S. Benjamin.

                       10.69*    Executive Employment Agreement,
                  dated as of March 1, 1997, among SFAC, SFC and
                  Robert B. Aiken.

                       10.70*    Termination Agreement, dated as of
                  January 14, 1997, among SFAC, SFC and Paul J.
                  Liska.

                       10.71*    Amended and Restated Non-Qualified
                  Stock Option Agreement, dated as of November
                  17, 1994, as Amended and Restated, dated as of
                  January 15, 1997, among SFAC and Paul J.
                  Liska.

                       10.72*    Termination Agreement, dated as of
                  February 20, 1997, among SFAC, SFC and John E.
                  Kelly.

                       10.73*    Purchase Agreement, dated as of
                  August 12, 1996, among SFC, Stella and Acadia,
                  as amended on October 7, 1996.

                       10.74*    First Amendment to Purchase
                  Agreement, dated as of December 27, 1996,
                  among SFC, Stella and Acadia.

                       10.75*    Purchase Agreement, dated as of
                  August 12, 1996, among SFC, Stella and
                  Keystone, as amended on October 7, 1996.

                       10.76*    First Amendment to Purchase
                  Agreement, dated as of December 27, 1996,
                  among SFC, Stella and Keystone.

                       10.77*    Purchase Agreement, dated as of
                  August 12, 1996, among SFC, Stella and Haas
                  Wheat, as amended on October 7, 1996.

                       10.78*    First Amendment to Purchase
                  Agreement, dated as of December 27, 1996,
                  among SFC, Stella and Haas Wheat.

                       10.79*    Master Lease Agreement, dated as of
                  November 14, 1996, among SF Leasing L.L.C.,
                  Stella and Metz.

                       10.80*    Stock Purchase Agreement, dated as
                  of November 26, 1996, between SFC and B
                  Companies Acquisition Corporation.

                       10.81*    Equity Investment Agreement, dated
                  as of March 24, 1997, among SFAC, SFC, Acadia,
                  Keystone, Haas Wheat and Chase.

                       12.1*     Statement re Computation of
                  Ratio and Earnings to Fixed Charges.

                       21.1*     Subsidiaries of SFC.

                       27*       Financial Data Schedule.
-----------------
* Filed herewith.

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

                                   SPECIALTY FOODS CORPORATION



                                   BY: /s/ Lawrence S. Benjamin
                                           LAWRENCE S. BENJAMIN
                                           PRESIDENT AND CHIEF
                                           EXECUTIVE OFFICER
 
                                           MARCH 27, 1997
  

Pursuant to the requirements of the Securities Exchange of Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.

SIGNATURE AND TITLE           CAPACITY                   DATE



/s/ Lawrence S. Benjamin      Principal Executive           March 27, 1997
Lawrence S. Benjamin          Officer and Director
President and Chief
   Executive Officer


/s/ Robert L. Fishbune        Principal Financial and       March 27, 1997
Robert L. Fishbune            Accounting Officer
Vice President and Chief
   Financial Officer

/s/ Robert B. Haas            Chairman of the Board         March 27, 1997
Robert B. Haas                of Directors


/s/ Thomas J. Baldwin         Director                      March 27, 1997
Thomas J. Baldwin

/s/ J. Taylor Crandall        Director                      March 27, 1997
J. Taylor Crandall

/s/ Charles J. Delaney        Director                      March 27, 1997
Charles J. Delaney

/s/ Daniel L. Doctoroff       Director                      March 27, 1997
Daniel L. Doctoroff

/s/ Jerry M. Meyer            Director                      March 27, 1997
Jerry M. Meyer

/s/ Andrew J. Nathanson       Director                      March 27, 1997
Andrew J. Nathanson

/s/ David G. Offensend        Director                      March 27, 1997
David G. Offensend

/s/ Anthony P. Scotto         Director                      March 27, 1997
Anthony P. Scotto

/s/ Douglas D. Wheat          Director                      March 27, 1997
Douglas D. Wheat


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                         
                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Specialty Foods Corporation:

We  have audited the accompanying consolidated balance sheets  of
Specialty  Foods Corporation and Subsidiaries as of December  31,
1996  and  1995  and  the  related  consolidated  statements   of
operations, changes in stockholders' equity, and cash  flows  for
each  of  the  years in the three-year period ended December  31,
1996.    These   consolidated  financial   statements   are   the
responsibility  of the Company's management.  Our  responsibility
is   to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits in accordance with generally  accepted
auditing  standards.  Those standards require that  we  plan  and
perform  the  audit to obtain reasonable assurance about  whether
the  financial statements are free of material misstatement.   An
audit  includes  examining, on a test basis, evidence  supporting
the  amounts  and  disclosures in the financial  statements.   An
audit also includes assessing the accounting principles used  and
significant  estimates made by management, as well as  evaluating
the  overall  financial statement presentation.  We believe  that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above  present  fairly, in all material respects,  the  financial
position  of Specialty Foods Corporation and Subsidiaries  as  of
December  31,  1996 and 1995 and the results of their  operations
and  their  cash  flows for each of the years in  the  three-year
period  ended  December  31, 1996, in conformity  with  generally
accepted accounting principles.

                                   KPMG PEAT MARWICK LLP

Chicago, Illinois
March 21, 1997


SPECIALTY FOODS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands, except share data)


                                                       December 31,
                                         -------------------------------------
                                                 1996              1995
                                             ---------          ---------
          Assets                                            
Current assets:                                     
  Cash                                     $    37,508        $    17,331
  Accounts receivable, net                      33,031             50,086
  Inventories                                  124,976            122,618
  Net assets of discontinued operations         59,154            134,118
  Other current assets                          27,672              8,385
                                             ---------          ---------
          Total current assets                 282,341            332,538
                                                    
Property, plant, and equipment, net            265,207            297,209
Intangible assets, net                          25,142            412,695
Due from Specialty Foods Acquisition    
  Corporation                                   10,999             11,037
Other noncurrent assets                         32,590             38,361
                                             ---------          ---------      
          Total assets                      $  616,279        $ 1,091,840
                                             =========          =========
                                                                     
  Liabilities and Stockholders' Equity                                 
                                                                     
Current liabilities:                                                 
  Current maturities of long-term debt      $    4,049        $     3,591
  Accounts payable                             120,421            128,455
  Accrued expenses                             108,588            111,751
                                             ---------          ---------
          Total current liabilities            233,058            243,797
                                                    
Long-term debt                                 838,059            835,772
Other noncurrent liabilities                    39,205             56,927
                                             ---------          ---------
          Total liabilities                  1,110,322          1,136,496
                                             ---------          ---------    
Stockholders' equity:                               
  Common stock: par value $0.01;                    
    authorized 100 shares;                
    issued 100 shares                               -                  -
  Additional paid-in capital                  275,000            275,000
  Accumulated deficit                        (769,043)          (318,819)
  Cumulative translation adjustment                 -               (837)
                                             --------          ---------
          Total stockholders' equity
            (deficit)                        (494,043)           (44,656)
                                             --------          --------- 
          Total liabilities and  
            stockholders' equity            $ 616,279        $ 1,091,840
                                             ========          =========

See accompanying notes to consolidated financial statements.

SPECIALTY FOODS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)


                                            Years ended December  31,
                                     -----------------------------------
                                        1996         1995         1994
                                        ----         ----         ----    
Net sales                           $1,661,296   $1,626,733   $1,643,239
Cost of sales                        1,209,494    1,165,663    1,187,249
                                     ---------    ---------    ---------
   Gross profit                        451,802      461,070      455,990
                                     ---------    ---------    ---------
Operating expenses:                              
  Selling, distribution, general 
   and administrative                  397,146      360,023      367,961
  Amortization of intangibles           12,886       17,903       17,578
  Restructuring charges                 28,300            -            -
  Goodwill write-down                  355,664      203,824            -
                                     ---------    ---------     --------
                                       793,996      581,750      385,539
                                     ---------    ---------     --------
   Operating profit (loss)            (342,194)    (120,680)      70,451
                                                 
Other:                                           
  Interest expense                      94,833       94,848       87,226
  Other (income) expense, net           (2,859)       5,537       13,068
                                     ---------    ---------     --------
   Loss before income taxes           (434,168)    (221,065)     (29,843)
                                                 
Provision for income taxes               1,201        1,410        1,618
                                     ---------    ---------     --------
   Loss from continuing operations    (435,369)    (222,475)     (31,461)
                                                 
Discontinued operations:                         
  Earnings (loss)                        2,312      (47,468)      10,746
  Loss on disposal                     (13,493)           -            -
                                     ---------    ---------     --------
                                       (11,181)     (47,468)      10,746

  Loss before extroardinary items     (446,550)    (269,943)     (20,715)
                                                 
Extraordinary items                          -      (18,279)           -   
                                     ---------    ---------    ---------
          Net loss                  $ (446,550)  $ (288,222)  $  (20,715)
                                     =========    =========    ========= 

See accompanying notes to consolidated financial statements.

SPECIALTY FOODS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

(In thousands)
<TABLE>
<CAPTION>
   
                                                      Additional                  Cumulative
                                     Common Stock      paid-in     Accumulated   translation
                                   Shares   Amount     capital       deficit      adjustment
                                   ------   ------    ----------   -----------   ----------- 
<S>                                <C>      <C>       <C>          <C>           <C>
Balance at December 31, 1993          100   $   -     $275,000     $ (7,045)     $ (353)
                                                                        
Dividend to parent                      -       -            -       (1,634)          -
Cumulative translation adjustment       -       -            -            -        (506)
Net loss                                -       -            -      (20,715)          -
                                   ------   -----     ----------   -----------   -----------
Balance at December 31, 1994          100       -      275,000      (29,394)       (859)
                                                                        
Dividend to parent                      -       -            -       (1,203)          -
Cumulative translation adjustment       -       -            -            -          22
Net loss                                -       -            -     (288,222)          -
                                   ------   -----     ---------    -----------   -----------
Balance at December 31, 1995          100   $   -      275,000     (318,819)       (837)
                                                                        
Dividend to parent                      -       -            -       (3,674)          -
Cumulative translation adjustment       -       -            -            -         837
Net loss                                -       -            -     (446,550)          -
                                   ------   -----     --------     -----------   -----------
Balance at December 31, 1996          100   $   -      275,000    $(769,043)       $  -
                                   ======   =====     ========     ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

SPECIALTY FOODS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)


                                             Years ended December 31,
                                         ----------------------------------
                                            1996        1995        1994
                                            ----        ----        ----
Cash flows from operating activities:   
   Loss from continuing operations      $(435,369)  $(222,475)   $ (31,461)
   Adjustments to reconcile to net 
    cash from continuing operating                      
    activities
    Depreciation and amortization          49,266      54,779       51,788
    Debt issuance cost amortization         5,472       6,895       10,426
    Write-down of goodwill                355,664     203,824            -
    Restructuring - property write-down    23,300           -            -
    Gain on involuntary conversion        (17,508)          -            -
    Loss on disposal of property, plant,
     and equipment, net                    11,916         536          188
    Changes in assets and 
     liabilities, net:
     Accounts receivable                   14,845      (8,805)     (10,036)
     Inventories                           (3,658)      8,084       (9,453)
     Prepaid expenses and other assets    (19,625)      1,723          507
     Accounts payable                      (6,357)     24,180       20,209
     Accrued expenses and other           (13,127)    (35,331)      (6,712)
                                         ========     =======      =======
Net cash provided (used) by 
 continuing operating activities          (35,181)     33,410       25,456
                                                 
Cash flows from investing activities:
  Proceeds from divestiture of business    69,333          -         5,819
  Capital expenditures                    (67,069)   (34,222)      (29,261)
  Property related insurance proceeds      30,246          -             -
  Proceeds from saleleaseback, net         28,420          -             -
  Acquisition of businesses, net of cash        -     (5,400)      (12,617)
  Other                                    (1,780)     3,264         5,183
                                          -------    --------      -------
Net cash provided (used) by 
 investing activities                      59,150    (36,358)      (30,876)
                                                 
Cash flows from financing activities:
  Increase in revolving credit              5,700     22,600         4,500
  Payments on long-term debt               (2,955)  (374,675)      (15,445)
  Proceeds from long-term debt                  -    380,916        16,479
  Dividends                                (3,674)    (1,203)            -
  Payments of debt issuance costs          (3,738)    (8,646)         (687)
  Other                                       875       (680)          373
                                          -------    -------       -------
Net cash provided (used) by 
 financing activities                      (3,792)    18,312         5,220
                                                 
Increase (decrease) in cash                20,177     15,364          (200)
Cash - beginning of year                   17,331      1,967         2,167
                                          -------    -------       -------
Cash - end of year                      $  37,508  $  17,331       $ 1,967
                                          =======    =======       =======
                                
See accompanying notes to consolidated financial statements.

(1)  COMPANY BACKGROUND

Specialty Foods Acquisition Corporation (SFAC) and its direct,
wholly-owned subsidiary, Specialty Foods Corporation (SFC),
(together with their subsidiaries, the Company) operate a
diversified group of businesses within the food industry segment.
These specialty food businesses are primarily engaged in the
production and distribution of breads, cookies, specialty and
common Italian cheeses, and pre-cooked meat products.  The
operating companies of SFC consist of the following:
   
Bakery Operations
   
  Metz Baking Company (Metz) - Metz is a leading bread-line
  wholesale baking company servicing the Midwestern United States.
  Metz's product line includes breads, buns, rolls, and sweet
  goods.
          
  Mother's Cake & Cookie Co. (Mother's) - Mother's is a
  manufacturer and distributor of branded cookie products.  Mothers
  sells its cookie products primarily to retail grocers in the
  Western United States.

  Andre-Boudin Bakeries, Inc. (Boudin) - Boudin is a chain of
  approximately 40 bakery cafes and kiosks located in California,
  Dallas and the greater Chicago area.

Cheese and Meat Operations

  Stella Foods, Inc. (Stella) - Stella is one of the largest
  producers of specialty cheese in the United States with
  distribution to retail grocers, foodservice accounts, and
  commercial food processors.  Stella's product-line consists of
  specialty Italian cheeses (parmesan, romano, and ricotta), other
  European style specialty cheeses (feta, blue cheese, and
  Lorraine), and other basic Italian cheeses (mozzarella and
  provolone).

  H&M Food Systems Company, Inc. (H&M) - H&M is a producer of
  custom formulated, pre-cooked meat products and sells primarily
  to national restaurant chains and prepared-food producers.

During 1996, the Company made the decision to divest certain
businesses as described in Note 3.  Accordingly, these businesses
are reported as discontinued operations in the consolidated
financial statements.



(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION
   
SFC's financial statements are presented on a consolidated basis.
All significant intercompany accounts and transactions have been
eliminated.  Acquisitions recorded as purchases are included in
the Statement of Operations from the date of acquisition.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and related disclosures at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could
differ from those estimates.

RECLASSIFICATIONS

Certain amounts included in the 1995 and 1994 financial
statements have been reclassified to conform to the manner in
which the 1996 financial statements have been presented.

INVENTORIES

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

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost.  Depreciation
is provided by the straight-line method over the assets'
estimated useful lives or, in the case of leasehold improvements,
over the terms of the leases, if shorter, as follows:

                                                  Years
                                                  -----   
        Buildings and improvements                 7-40
        Machinery and equipment                    3-20
        Office furniture and vehicles              3-10

Expenditures for maintenance, repairs, and minor replacements are
charged to current operations.  Expenditures for major
replacements and betterment are capitalized.

The cost and related accumulated depreciation of property and
equipment retired or sold is eliminated from the property and
equipment accounts at the time of retirement or sale, and the
resulting gain or loss is included in income.
   

INTANGIBLE ASSETS

Intangible assets, which consist primarily of the excess of cost
over fair value of net assets acquired, arose primarily in
connection with the formation of the Company and are amortized on
a straight-line basis over the periods of expected benefit, which
range from two to forty years.  The Company annually evaluates
whether events and circumstances have occurred that indicate that
the remaining estimated useful life of intangible assets may
warrant revision or that the remaining balance of intangible
assets may not be recoverable.  When factors indicate that
intangible assets should be evaluated for possible impairment,
the Company assesses recoverability of intangible assets based on
its expectations concerning operating cash flows after interest
and capital expenditures.  An impairment is recorded if the
discounted value of such cash flows is less than the recorded
value of the intangible assets.  The Company utilizes a discount
rate which reflects its weighted average cost of capital.  Based
on application of this methodology, impairments were recorded in
both 1996 and 1995 (see Note 4).

DEFERRED DEBT ISSUANCE COSTS

Deferred debt issuance costs are being amortized by the straight-
line method over the terms of the related debt agreements and are
classified as other non-current assets.

ADVERTISING COSTS

Advertising costs are expensed as incurred.


(3)  DISCONTINUED OPERATIONS

During the fourth quarter of 1996, the Company finalized its
decision to divest of:

   Bloch & Guggenheimer, Inc. (B&G)/Burns & Ricker, Inc. (B&R)
   - Pickle, pepper, and specialty snack food businesses operated
   under common management.  The sale of the combined business of
   B&R/B&G was completed on December 27, 1996.

   Gai's Seattle French Baking Company (Gai's) - A restaurant
   and institutional bakery operation serving the northwestern
   United States.  The sale of Gai's was completed on February 24,
   1997.

   San Francisco French Bread (SFFB) - A sourdough hearth bread
   operation located in  California.  The sale of SFFB is expected
   to close during the second quarter of 1997.
   
These divestitures have been reported as discontinued operations
in the accompanying financial statements in accordance with
Accounting Principles Board Opinion No. 30.  Operating results
for these businesses, including revenues of $335,000, $321,000,
and $324,000 for the years ended December 31, 1996, 1995, and
1994, respectively, as well as the applicable goodwill writedown
of $49,570 in 1995, have been reclassified to discontinued
operations.  The Consolidated Statement of Operations for 1996
include incurred and estimated losses on disposals.  No interest
expense has been allocated to discontinued operations.

Total gross proceeds for the divestitures are estimated to
approximate $140,000 with net proceeds approximating $110,000,
after the repurchase of receivables and transaction
costs.

Net assets of the discontinued operations as of December 31, 1996
and 1995 consisted of the following:

                                                     December 31,
                                             ---------------------------
                                                   1996       1995
                                                   ----       ----
   Accounts receivable, net of allowance       $   2,753   $   4,900
   Inventories                                     4,130      26,454
   Other current assets                            1,019       2,666
   Plant and equipment, net                       47,935      72,221
   Goodwill, net                                  23,397      59,711
   Accounts payable                               (3,927)    (20,095)
   Accrued expenses and other liabilities        (16,153)    (11,739)
                                                --------     -------
                                               $  59,154   $ 134,118
                                                ========     =======

(4)  GOODWILL WRITE-DOWN

As described under "Intangible Assets" in Note 2, "Summary of
Significant Accounting Policies", the Company annually evaluates
its intangible assets.  Based on the Company's goodwill
assessment, write-downs of goodwill were recorded in the fourth
quarter of 1996 and 1995, which are presented in the accompanying
Consolidated Statements of Operations as follows:
   
                                                1996         1995
                                                ----         ----
   Continuing operations                    $ 355,664    $ 203,824
   Discontinued operations                          -       49,570
                                              -------      -------
                                            $ 355,664    $ 253,394
                                              =======      =======
   
In determining the amounts of the goodwill write-downs, the
Company developed its best estimate of future operating cash
flows, after interest and capital expenditures, over the
remaining useful life of the goodwill.  The Company's estimates
were based on recent historic financial trends and current market
conditions.  The goodwill of each business was evaluated
separately for impairment.  Individual business unit sales growth
projections ranged from two to five percent.  Interest costs were
allocated based on the relative level of investment in each
business.  Each of the

Company's fixed-rate debt obligations were assumed to be
refinanced at existing interest rates.  The Company calculated
the present value of estimated future cash flows using a discount
rate which represents its weighted average cost of capital of
11.8% and 11.4% in 1996 and 1995, respectively.

Since the formation of the Company in 1993, the operating units
have not achieved anticipated annual sales and operating earnings
targets.  During 1995, certain conditions in the Bakery
Operations and Meat Operations prompted management to writedown a
portion of the goodwill related to these operations.  In 1996,
lower than projected cash flows at all operating units has forced
management to reassess its strategy and future plans.

The resulting write-down in 1996 is attributable to several
factors:

  The forecast prepared at the end of 1995 projected
  substantially higher cash flow levels for each of the operating
  units.  The cash flow levels were to be realized through a
  combination of initiatives focused on sales growth and operating
  improvements.  Actual results and cash flow levels declined in
  1996 due to difficult commodity conditions and increased spending
  in other expense categories which did not deliver the projected
  sales growth or operating efficiencies.  As discussed in the
  Company's quarterly reports on Form 10-Q for the second and third
  quarters, these shortfalls also resulted in violations of
  existing financial covenants under the Company's long-term debt
  agreements (which have been amended).  After a thorough
  evaluation of 1996 results and future opportunities, management
  has lowered its future expectations of operating profitability
  and cash flow generating capability of each of its business
  units.

  Due to 1996's cash flow shortfall, the Company has incurred
  additional off-balance sheet debt and financing costs.  Higher
  projected costs related to these financings further reduce future
  cash flow projections.

  Higher levels of working capital and capital expenditures
  are reflected in the forecast prepared as of the end of 1996.
  The increased cash applied to working capital results from an
  initiative to lower the level of accounts payable and reflects
  the cash costs of restructuring.  Increased capital expenditures,
  which have been approved by the Board of Directors and the
  lenders under the Term Loan Agreement and Revolving Credit
  Agreement, are necessary to drive future productivity
  improvements.

  Due to the divestiture of certain businesses in 1996, each
  of the continuing operating units are allocated higher levels of
  interest expense and corporate overhead costs.  The increased
  level of costs have further depressed individual operating unit
  projections.

As of December 31, 1996 there is $19,078 of goodwill remaining on
the Company's Balance Sheet.  Management believes the Company's
remaining goodwill and long-term assets will be recovered over
their useful lives.  However, any further significant declines in
projected cash flows may result in additional write-downs of
other long-lived assets.

(5)     RESTRUCTURING CHARGES

During the fourth quarter of 1996, management authorized and
committed the Company to undertake certain restructuring moves
principally involving the consolidation of several manufacturing
facilities.  The restructuring charge of $28,300 includes $23,300
for the writedown of plant and facilities to net realizable
value.  The remaining portion of the restructuring charge relates
to termination benefits and holding costs that will be incurred
over the next year during the execution of the plan.  The Company
does not expect to incur material incremental costs.  As of
December 31, 1996, no costs have been charged against this
restructuring accrual.


(6)  STELLA FIRE

On January 5, 1996, a Stella cheese manufacturing plant located
in Lena, Wisconsin was substantially destroyed by fire.  The
plant, which was responsible for approximately 20% of Stella's
production, produced mozzarella and ricotta cheeses.  The Company
has rebuilt the plant and resumed production during the fourth
quarter of 1996.

The Company has comprehensive insurance coverage for up to
$100,000 per incident.  The policy includes replacement cost for
property, extra expense and business interruption coverage.

As of December 31, 1996, the Company has recorded an insurance
claim in the amount of $71,481 and has received $35,000 from its
insurance carriers.  In the Company's statement of cash flows for
the year ended December 31, 1996, the insurance proceeds which
relate to destroyed property ($30,246) have been classified with
investing activities, while the remainder of the proceeds have
been classified with operating activities.  Additionally, in the
Statement of Operations for the year ended December 31, 1996, the
portion of the claim representing coverage for the lost operating
profit ($5,286) and the portion representing the excess of
replacement cost over book value of assets destroyed and written
off ($17,508), have been recorded as other income.  The Company
has recently filed its final proof of loss and expects to collect
the net remaining receivable balance in 1997.

Due to the lag time between incurring recoverable expenditures
and receipt of insurance proceeds, the Company sold  an insurance
receivable generated in connection with the fire to Acadia
Partners, L.P. (Acadia), Keystone, Inc. (Keystone), and Haas
Wheat Advisory Partners Incorporated (Haas Wheat) in the
aggregate amount and for the aggregate purchase price set forth
opposite their respective name:  Acadia, face amount of $8,775,
purchase price of $8,643; Keystone, face amount $8,775, purchase
price of $8,643; and Haas Wheat, face amount $1,950, purchase
price of $1,921.  Each of the above parties is a stockholder or
an affiliate of a stockholder of SFAC.  The net proceeds from the
sales have been classified with operating activities in the
Company's Statement of Cash Flows.

(7)  ACQUISITION LIABILITIES

In connection with the formation of the Company, estimated
liabilities were recorded for the expected cash expenditures to
consolidate facilities, streamline operations, and settle
environmental, legal and tax matters.  Cash expenditures
associated with these liabilities were $15,640, $27,651, and
$28,186 for the years ended December 31, 1996, 1995, and 1994.
In December 1996, the Company reduced its estimate of the future
cash expenditures related to these acquisition liabilities and
credited $21,634 against goodwill.  As of December 31, 1996,
there are $30,608 of remaining acquisition liabilities, of which
$19,079 is classified as current.


(8)  EXTRAORDINARY ITEMS

In 1995, two refinancings resulted in the early extinguishment of
debt.  Accordingly, deferred debt issuance costs totaling $18,279
were written off and recorded as extraordinary items.


(9) ACCOUNTS RECEIVABLE

Specialty Foods Finance Corporation (SFFC), a wholly-owned
subsidiary of SFC, was established for the purpose of acquiring
substantially all of the trade accounts receivable generated by
the operating subsidiaries of SFC.  Under the terms of the
Accounts Receivable Facility expiring November 20, 1999, SFFC
sells for cash an undivided interest in eligible accounts
receivable.  On August 1, 1996, the maximum allowable amount of
accounts receivable that could be sold by the Company pursuant to
the Accounts Receivable Facility was increased from $95,000 to
$115,000, and subsequent to year end, to $124,000.  The amount
outstanding at any date varies based upon the level of eligible
receivables.  The discount on receivables sold is included in
other expense and is determined based upon a defined calculation
tied to LIBOR plus 3/8%.  At December 31, 1996 and 1995, the
consolidated accounts receivable balance has been reduced by
$98,000 and $95,000, respectively, due to the receivables sold.
In 1994, deferred costs of $5,506 relating to the previous
Accounts Receivable securitization program were written off and
recorded as other expenses upon such facility's replacement by
the Accounts Receivable Facility.  Trade accounts receivable are
reported net of the allowance for doubtful accounts of $1,955 and
$2,435 1996 and 1995, respectively.

(10) INVENTORIES

The components of inventories are as follows:
                                                 1996       1995
                                                 ----       ---- 
         Raw materials and packaging          $ 21,865   $ 20,539
         Work in progress                       54,676     53,832
         Finished goods                         47,271     48,379
         Other                                   2,627      2,170
                                               -------    -------
                                               126,439    124,920
         Less obsolescence and other                  
           allowances                           (1,463)    (2,302)
                                               -------    -------
                                              $124,976   $122,618
                                               =======    =======

(11) PROPERTY, PLANT, AND EQUIPMENT

The components of property, plant and equipment are as follows:

                                                  1996       1995
                                                  ----       ----     
         Land                                  $ 15,379   $ 18,937
         Buildings and improvements             124,900    108,791
         Machinery and equipment                215,177    219,050
         Office furniture and vehicles           31,086     27,508
         Construction in progress                11,019     11,062
                                                -------    -------
                                                397,561    385,348
         Less accumulated depreciation         (132,354)   (88,139)
                                                -------    -------
                                               $265,207   $297,209
                                                =======    =======

Depreciation expense of continuing operations was $36,380,
$36,876, and $34,259 for the years ended December 31, 1996, 1995,
and 1994, respectively.


(12)  ACCRUED EXPENSES

The components of accrued expenses are as follows:

                                            
                                                1996        1995
                                                ----        ----   
                                                      
Accrued payroll                             $  8,863     $  9,031
Other taxes payable                            5,375        5,199
Workers' compensation                         14,421       15,968
Compensated absences                           9,894       10,638
Accrued interest                              21,898       24,531
Acquisition liabilities                       19,079       25,726
Other                                         29,058       20,658
                                             -------      -------
                                            $108,588     $111,751
                                             =======      =======

(13)  LONG-TERM DEBT

Long-term debt consists of the following:

                                            
                                                      1996         1995
                                                      ----         ----     
    Term Loan Facility                           $  174,250   $  174,750
    Revolving Credit Facility                        78,300       72,600
    10 1/4% Senior Notes due 2001                   225,000      225,000
    11 1/8% Senior Notes due 2002                   150,000      150,000
    11 1/4% Senior Subordinated Notes due 2003      200,000      200,000
    Other                                            14,558       17,013
                                                   --------     --------
                                                    842,108      839,363
    Less current portion                             (4,049)      (3,591)
                                                   --------     --------
                                                 $  838,059   $  835,772
                                                   ========     ========

With respect to the Term Loan Facility, SFC will be required to
make principal payments of $500 annually through 1999 and $86,500
and $86,250 in the years 2000 and 2001, respectively.  The Term
Loan Facility is secured by a pledge of all capital stock of each
of the operating subsidiaries.

At December 31, 1996, SFC has a Revolving Credit Facility
totaling $125,000 with a syndicate of banks. Amounts outstanding
under the facility total $78,300 at December 31, 1996.  In
addition to amounts outstanding under the facility, letters of
credit totaling $25,503 reduce available funds in a like amount
at December 31, 1996.  Proceeds from the facility are used to
finance working capital requirements and are available for other
corporate purposes.  The facility matures in April 2001 and is
secured by substantially all of the personal property and certain
real property of the operating subsidiaries.

Semi-annual interest payments are required through maturity on
the 10 1/4% Senior Notes and the 11 1/4% Senior Subordinated
Notes on each February 15 and each August 15.  Semi-annual
interest payments are required through maturity on the 11 1/8%
Senior Notes on April 1 and October 1.

The 10 1/4% Senior Notes, the 11 1/4% Senior Subordinated Notes,
and the 11 1/8% Senior Notes are unsecured.

Other long-term debt consists primarily of industrial development
bonds and miscellaneous notes payable with interest rates ranging
from 2.75% to 10.5% at December 31, 1996.

The provisions of the Term Loan Facility and the Revolving Credit
Facility contain covenants which require SFC to maintain
specified financial ratios.  SFC also has other limitations
regarding capital expenditures, sales of assets, loans and
investments, encumbrances of assets and assumption of additional
indebtedness.  In addition, the agreements governing the Term
Loan Facility and the Revolving Credit Facility and the
indentures governing the Senior Notes and the Senior Subordinated
Notes contain certain restrictive covenants, including, to the
detriment of the holders of the Senior Debentures and the Senior
Subordinated Debentures, certain covenants that restrict or
prohibit (with de minimis exceptions) SFC's ability to pay
dividends or make other distributions to SFAC.  Specifically, as
a result of the Company's net losses and accumulated deficit,
SFC's ability to make distributions to SFAC under the indentures
of the Senior Notes and the Senior Subordinated Notes has been
impaired and these indentures will require modification before
any such distribution to SFAC can be made.

In February, 1997, the lenders for the Term Loan Facility and
Revolving Credit Facility agreed to amendments of several
provisions of the Term Loan Facility.  The amendments, among
other things, reduce SFC's financial covenant levels.  In
addition, the amendment allows the Company to retain for
investment in acquisitions and capital expenditure projects up to
$110,000 of the proceeds from business divestitures completed by
the Company.  As a result of this amendment, the interest rate on
the Term Loan Facility and Revolving Credit Facility was
increased from LIBOR plus 2 3/4% to LIBOR plus 3%.  In addition,
in connection with the amendment, certain of the shareholders of
SFAC agreed to make an equity contribution, as described in Note
20.

Aggregate maturities of debt are as follows:

          1997                               $  4,049
          1998                                  3,234
          1999                                  3,154
          2000                                 88,441
          2001                                390,247
          Thereafter                          352,983
                                              -------
              Total aggregate maturities     $842,108
                                              =======

Cash paid for interest was $91,412, $87,704, and $74,738 for the
years ended December 31, 1996, 1995, and 1994, respectively.


(14) FINANCIAL INSTRUMENTS

CONCENTRATION OF CREDIT RISK

The Company's exposure to credit loss in the event of nonpayment
of accounts receivable by customers is represented in the amount
of those receivables.  The Company performs ongoing credit
evaluations of its customers' financial condition and generally
requires no collateral from those customers.  As of December 31,
1996, the Company does not believe it has any significant
concentration of credit risk with respect to its trade accounts
receivable.

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

During September, 1995, the Company entered into an interest rate
collar agreement to reduce its exposure to changes in the cost of
its variable rate borrowings.  Under the agreement, which became
effective in October, 1995, and terminates in October, 1998, the
Company would receive payments from the counterparties should the
three-month LIBOR exceed 7% and make payments to the
counterparties should the rate fall below 5.26%.  The payments
would be calculated based upon a notional principal amount of
$270,000.  The net differential of interest to be paid or
received under the agreement is recognized as incurred.  To date,
no amounts have been paid or received under the interest rate
collar agreement.  Off-balance-sheet risk from the interest rate
collar agreement at December 31, 1996 includes the risk
associated with changes in market values and interest rates.  The
counterparties to this contract are major financial institutions.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include long-term debt and
the interest rate collar agreement.  The estimated fair value and
carrying amount of long term debt including current maturities
but excluding related party Senior Subordinated Discount
Debentures at December 31, 1996 are as follows:

                                                          Estimated
                                          Carrying           Fair
                                           Amounts          Values
                                          --------        ---------
        Financial liabilities:
         Long-term debt, including
           current maturities            $ 842,108        $ 866,882
         Interest rate collar agreement  $       -        $     (28)

The fair value of long-term debt and the interest rate collar
agreement have been determined based on quoted market prices and
market interest rates at December 31, 1996.


(15) LEASE COMMITMENTS

The Company leases equipment and facilities under various
noncancelable operating leases.  Future minimum lease payments
under all noncancelable operating leases are as follows:

          1997                           $  24,413
          1998                              21,709
          1999                              19,028
          2000                              16,749
          2001                              11,521
          Thereafter                        26,679
                                           -------
           Total minimum lease payments  $ 120,099
                                           =======
 
Total rental expense for the fiscal years ended 1996, 1995, and
1994 was $24,372, $17,654, and $14,943 respectively.

(16) INCOME TAXES

The provision for income taxes for 1996, 1995, and 1994 relate to
state and Canadian income taxes payable.  Since the Company has
no federal currently payable or deferred income tax expense due
to its net operating loss position, an effective tax rate
reconciliation is not presented.

The components of net deferred taxes are as follows:

                                                 1996         1995
                                                 ----         ---- 
                                               
    Deferred tax assets related to:                         
     Accrued expenses and other liabilities    $ 28,068     $ 37,570
     Net operating losses and credits            75,625       65,219
     Restructuring reserve                        9,905            -
     Other                                         (583)       1,333
                                                -------      -------
           Total deferred tax assets            113,015      104,122

    Valuation allowance                          64,784       54,265
                                                -------      -------
           Total net deferred tax assets         48,231       49,857
                                               
    Deferred tax liabilities related to:
     Depreciation                                44,153       45,259
     Inventories                                  4,078        4,598
                                                -------      -------
           Total deferred tax liabilities        48,231       49,857
                                                -------      -------
           Net deferred tax asset (liabilty)   $      -     $      -
                                                =======      =======

At December 31, 1996, the Company has Federal net operating loss
carryforward of $192,000, including $45,000 of loss carryforwards
from predecessor companies, which are subject to limitations that
may substantially limit future utilization.  Also at December 31,
1996, the Company has $107,000 of state net operating loss
carryforwards and $4,000 of state tax credit carryforwards.  Net
operating loss and credit carryforwards expire in varying amounts
through the year 2011.

Cash paid for income taxes was $2,543, $2,906 and $1,478 for the
years ended December 31, 1996, 1995, and 1994, respectively.


(17)  LITIGATION AND OTHER CONTINGENCIES

        LITIGATION

In the normal course of business activities, the Company is a
party to certain legal proceedings and claims.  Although the
outcome of such matters cannot be determined with certainty, it
is management's opinion that the final outcome will not have a
material adverse effect on the Company's financial position or
results of operations.

          OTHER

Various operating subsidiaries are self-insured or retain a
portion of losses with the respect to workers' compensation
claims.  In connection with such, irrevocable letters of credit
or surety bonds aggregating $34,741 at December 31, 1996 were
provided to state regulatory agencies or insurance companies.


(18) EMPLOYEE BENEFITS

PENSION BENEFITS

Certain of the operating subsidiaries sponsor single-employer,
noncontributory, defined benefit pension plans.  The operating
subsidiaries also participate in numerous multi-employer,
noncontributory, defined benefit pension plans.  Substantially
all the Company's employees are covered by the defined benefit or
multi-employer plans.

Benefits for employees are based on various requirements
including length of service and average compensation.
Contributions are funded to the extent deductible for Federal
income tax purposes.

Pension expense for the single-employer defined benefit pension
plans was as follows:
 
                                             1996       1995       1994
                                             ----       ----       ----
         Service cost of benefits
          earned during the year         $  2,117    $  1,678   $  2,337
         Interest cost on the projected                             
          benefit obligation                3,658       3,558      3,290
         Actual return on plan assets      (6,729)    (10,937)     2,924
         Net amortization and deferral      2,021       6,888     (7,286)
                                           ------      ------     ------
            Net periodic pension cost    $  1,067    $  1,187   $  1,265
                                           ======      ======     ======
   
The following tables set forth the funded status of the plans and
the amounts recognized in the consolidated balance sheets:

                                                       1996      1995
                                                       ----      ----
     Actuarial present value of accumulated 
      benefit obligations, including vested                
      benefits of $45,270 and $46,833 at 
      December 31, 1996 and 1995, respectively       $ 46,140   $ 48,243
                                                       ======     ======
     Plan assets at fair value, primarily 
      listed stocks and corporate and 
      government bonds                                 57,396     53,040
     Less actuarial present value of              
      projected benefit obligations                   (54,218)   (57,094)
                                                       ------     ------
     Excess (deficiency) of plan assets 
      over projected benefit obligations                3,178     (4,054)
     Unrecognized prior service costs                     995        492
     Unrecognized net gain                            (12,435)    (3,724)
     Unrecognized transition asset                       (489)      (597)
                                                       ------     ------
             Accrued pension cost                    $ (8,751)  $ (7,883)
                                                       ======     =======

The significant actuarial assumptions used to determine the
obligations are:

                                           1996      1995      1994
                                           ----      ----      ----      
     Range of weighted average             7.5%      7.5%      7.5%
       discount rates
     Range of increase in future           4.0%      4.0% to   4.0% to
       compensation levels                            5.0%      5.5%
     Range of assumed long-term            9.0%      8.0% to   8.0% to
       rates of return on assets                      9.0%      9.0%


Certain of the operating subsidiaries also participate in various
multi-employer defined benefit pension plans on behalf of
employees pursuant to various collective bargaining agreements.
Contributions to these plans amounted to approximately $14,988,
$13,299, and $13,472 for the years ended December 31, 1996, 1995,
and 1994, respectively.

The Company has various defined contribution plans which
cover non-bargaining-unit employees meeting eligibility
requirements.  Contributions to these plans were approximately
$2,651, $2,530, and $3,221 for the years ended December 31, 1996,
1995, and 1994, respectively.

          POST-RETIREMENT HEALTH CARE BENEFITS

Components of the expense recognized for the years ended
December 31, 1996, 1995, and 1994 for the retiree health care
plan were as follows:

                                             1996         1995         1994
                                             ----         ----         ----
 Service costs                             $  446      $   455      $   425
 Interest cost on projected obligation        661          718          665
 Net amortization and deferral               (832)        (173)          (6)
                                            -----        -----        -----
     Net retiree health care expense       $  275      $ 1,000      $ 1,084
                                            =====        =====        =====

The following table sets forth the amounts recognized in the
balance sheets at December 31, 1996 and 1995:

                                                         1996       1995
                                                         ----       ----
     Actuarial present value of accumulated
        postretirement benefit obligation
           Retirees                                  $  4,113    $  4,772
           Active eligible                              2,015       2,293
           Active ineligible                            3,758       4,272
     Unrecognized net gain                              4,362       2,978
                                                      -------     -------
     Retiree health care liability recognized        $ 14,248    $ 14,315
                                                      =======     =======

The weighted average discount rate assumptions used to determine
the accumulated postretirement benefit obligation for the retiree
health care plan for 1996 and 1995 were 7.57% and 6.68%,
respectively.

The health care trend rate used to determine the pre-age 65
accumulated postretirement benefit obligation was 11% for 1996,
decreasing to 6% by the year 2002 and beyond.  A flat 6% rate per
year is used for the post-age 65 obligation.  Increasing the
assumed health care trend rate by 1% each year would increase the
accumulated postretirement benefit obligation as of December 31,
1996 and 1995 approximately $942 and $1,284, respectively, and
the aggregate of the service and interest cost components of
1996, 1995, and 1994 net retiree healthcare expense approximately
$134, $146, and $120, respectively.


LONG TERM INCENTIVE COMPENSATION PLANS

The Company has adopted long-term incentive compensation plans
for several of its businesses which provide for cash awards upon
the achievement of specified earnings targets in the year ending
December 31, 1998.  Based on performance through 1996, it is
unlikely that any of the businesses will achieve plan earnings
targets.


(19)    RELATED PARTY TRANSACTIONS

CERTAIN TRANSACTIONS WITH STOCKHOLDERS OF AND AFFILIATES OF
STOCKHOLDERS OF SFAC

Certain of SFACOs stockholders and their affiliates previously
entered into financial advisory arrangements (the Financial
Advisory Agreements) with SFACOs subsidiary, SFC.      Haas Wheat
& Partners (Haas Wheat), an affiliate of Acadia Partners, L.P.
(Acadia), and Keystone, Inc. (Keystone) each entered into such
Financial Advisory Agreements.  Under the terms of the Financial
Advisory Agreements, SFC pays Haas Wheat an annual fee of $700 (a
portion of which Haas Wheat is obligated by agreement to remit to
Acadia), the Acadia affiliate an annual fee of $200, and Keystone
an annual fee of $100.

 In March 1997, pursuant to an agreement between Acadia, Haas
Wheat Advisory Partners Incorporated and Keystone (the signing
shareholders) and the Company, the signing shareholders agreed to
contribute their $19,500 insurance receivable to equity of the
Company.  The conversion of the insurance receivable to equity
will occur in the second quarter of 1997.

In November 1996, SF Leasing L.L.C. (of which Acadia and Keystone
each owns a 45% interest and Haas Wheat owns a 10% interest)
purchased from the Company all of the equipment at three
manufacturing facilities for the aggregate amount of $18,380
(which price was based on the appraised value of such equipment),
and leased such equipment back to the Company in a transaction
that was deemed by the parties to be equivalent to an arms length
transaction.

The Board of Directors of the Company determined that the
foregoing transactions were on terms no less favorable to the
Company than could otherwise have been obtained by the Company in
a transaction with an unaffiliated third party.


(20)      ACQUISITIONS AND OTHER DIVESTITURES

In May 1995, the Company completed the acquisition of two Chicago-
area bakeries and, in September 1995, acquired a specialty snack
business.  Total consideration for these acquisitions was $12,400
and they were accounted for by the purchase method.  Pro forma
information has not been presented for the above acquisitions as
the acquisitions are not, individually or collectively,
significant to the Company's results of operations.

On May 18, 1996, the Company sold its baking business in North
Vancouver, British Columbia for cash proceeds of $1,500.  The
assets sold consisted primarily of accounts receivable, equipment
and customer routes.  A loss of $4,500 ($3,800 after taxes),
resulted from the transaction and is recorded in other expense.
The 1996 revenues of this business through the date of sale
approximated $9,000.  In a separate transaction, on August 2,
1996, the Company sold the building and land associated with the
above business for aggregate proceeds of $4,700, which
approximated the financial statement carrying value.


(21)        SALE LEASEBACK TRANSACTIONS

During 1996, the Company entered into several agreements for the
sale and leaseback of production equipment at four bakeries and
two cheese plants for a net sales price of $28,420 (including the
sale and leaseback described in Note 20.)  The leases are
classified as operating leases and, accordingly, the book value
of the equipment was removed from the balance sheet.  Losses of
$3,432 realized on the sale of equipment at three facilities were
recognized immediately and recorded in other expense while net
gains of $4,859 realized on the equipment sales at the other
facilities are being deferred and amortized to income as rent
expense adjustments over the lease term of 4 to 6 1/2 years.


(22) OTHER EXPENSE (INCOME)

Other expense (income) is comprised of the following:

                                             1996      1995       1994
                                             ----      ----       ----
     Loss on disposal of property, 
       plant and equipment                $ 11,916   $   536    $   188
     Discount on receivables sold            4,829     5,037      5,839
     Write-off of deferred costs                 -         -      5,506
     Involuntary conversion of                          
       property, plant, and equipment      
       due to fire (note 6)                (17,508)        -          -
     Business interruption (note 60         (5,286)        -          -
     Other                                   3,190       (36)     1,535
                                            ------    ------     ------ 
                                          $ (2,859)  $ 5,537   $ 13,068
                                            ======    ======     ======