PEPSI BOTTLING GROUP INC, S-1, 1999-01-08

PEPSI BOTTLING GROUP INC
S-1, 1999-01-08

Previous: CENTRAL BANCORP INC /MA/, 8-K12G3, 1999-01-08

Next: DECRANE HOLDINGS CO, S-1, 1999-01-08

<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 8, 1999

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

THE PEPSI BOTTLING GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 2086 13-4038356
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>

ONE PEPSI WAY
SOMERS, NY 10589
(914) 767-6000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------

PAMELA C. MCGUIRE

SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
THE PEPSI BOTTLING GROUP, INC.
ONE PEPSI WAY
SOMERS, NY 10589
(914) 767-7982
------------------------

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C> <C>
WINTHROP B. CONRAD, JR. LAWRENCE F. DICKIE MATTHEW J. MALLOW
DAVIS POLK & WARDWELL PEPSICO, INC. SKADDEN, ARPS, SLATE, MEAGHER
450 LEXINGTON AVENUE 700 ANDERSON HILL ROAD & FLOM LLP
NEW YORK, NEW YORK 10017 PURCHASE, NEW YORK 10577 919 THIRD AVENUE
(212) 450-4000 (914) 253-2950 NEW YORK, NEW YORK 10022-3897
(212) 735-3000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common stock, par value $.01 per share............................................ $1,000,000,000 $278,000
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 8, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting offers to buy these securities
in any state where the offer or sale is not permitted.
<PAGE>
PROSPECTUS [LOGO]

SHARES
THE PEPSI BOTTLING GROUP, INC.
COMMON STOCK

------------------

This is The Pepsi Bottling Group, Inc.'s initial public offering of common
stock.

We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for the common stock. After pricing of the
offering, we expect that the common stock will trade on the New York Stock
Exchange under the symbol "PBG."

INVESTING IN THE COMMON STOCK INVOLVES RISKS WHICH ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 11 OF THIS PROSPECTUS.

---------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ---------
<S> <C> <C>
Public Offering Price.......................................... $ $
Underwriting Discount.......................................... $ $
Proceeds, before expenses, to The Pepsi Bottling Group, Inc.... $ $
</TABLE>

The underwriters may also purchase up to an additional shares of
common stock at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Merrill Lynch & Co. is acting as book-running lead manager for the offering.
Merrill Lynch & Co. and Morgan Stanley & Co. Incorporated are acting as joint
lead managers. The shares of common stock will be ready for delivery in New
York, New York on or about , 1999.

------------------------

JOINT LEAD MANAGERS

MERRILL LYNCH & CO. MORGAN STANLEY DEAN WITTER
---------------

The date of this prospectus is , 1999.
<PAGE>
[PHOTOGRAPHS OF PBG'S OPERATIONS AND PRODUCTS TO BE INCLUDED HERE]

[MAP OF PBG TERRITORIES TO BE INCLUDED HERE]

2
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Summary....................................................................................... 5
Risk Factors.................................................................................. 11
Transaction Rationale and Separation of PBG from PepsiCo...................................... 18
Use of Proceeds............................................................................... 20
Dividend Policy............................................................................... 20
Capitalization................................................................................ 21
Selected Combined Historical and Pro Forma Financial Data..................................... 22
Management's Discussion and Analysis of Results of Operations and Financial Condition......... 24
Business...................................................................................... 34
Management.................................................................................... 49
Relationship with PepsiCo and Certain Transactions............................................ 56
Principal Stockholder......................................................................... 61
Description of Capital Stock.................................................................. 62
Shares Eligible for Future Sale............................................................... 66
Certain United States Federal Tax Considerations for Non-U.S. Holders of Common Stock......... 68
Underwriting.................................................................................. 70
Legal Matters................................................................................. 73
Experts....................................................................................... 73
Additional Information........................................................................ 73
Index to Financial Statements................................................................. F-1
</TABLE>

------------------------

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about The Pepsi Bottling Group, Inc., including,
among other things:

- our anticipated growth strategies,

- competition in the beverage industry,

- our continuing relationship with PepsiCo, Inc.,

- anticipated trends in the beverage industry,

- social, political and economic situations in foreign countries where we
have operations, and

- our ability to continue to control costs.

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

------------------------

You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.

3
<PAGE>
CERTAIN TERMS AND INDUSTRY DATA

As used in this prospectus, the term "equivalent case" refers to 192 ounces
of finished beverage product (24 eight ounce servings) and, when applied to
syrup, the amount of syrup required to produce 192 ounces of finished beverage
product. The term "raw case" refers to the actual physical number of cases. The
volume contained in each physical case of product may differ because our
products come in different package sizes.

References to "North America" in this prospectus include the United States
and Canada, but exclude Mexico.

Our fiscal year ends on the last Saturday in December and generally consists
of 52 weeks, though certain of our fiscal years will consist of 53 weeks. This
last occurred in 1994 and will next occur in 2000. All references to our fiscal
years 1993 through 1997 are to the fiscal years ended December 25, 1993,
December 31, 1994, December 30, 1995, December 28, 1996 and December 27, 1997,
respectively. Each of the first three quarters of our fiscal years consists of
12 weeks and the fourth quarter consists of 16 or 17 weeks. References to
thirty-six weeks in 1997 and 1998 refer to the thirty-six weeks ended September
6, 1997 and September 5, 1998, respectively.

The term "Pepsi-Cola beverages" includes not only beverages bearing the
PEPSI-COLA or PEPSI trademarks, but also other brands licensed to us by PepsiCo
and PepsiCo's joint ventures, such as MOUNTAIN DEW, AQUAFINA, LIPTON BRISK and
STARBUCKS FRAPPUCCINO.

References to the term "Pepsi Beverage Agreements" refer to the Master
Bottling Agreement we have with PepsiCo for cola products in the United States
as well as the agreements we have with PepsiCo relating to non-cola products and
fountain syrup in the United States and similar agreements relating to
Pepsi-Cola beverages in Canada, Spain, Greece and Russia.

4
<PAGE>
SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and may not contain all of the information you
should consider before investing in our common stock. You should read the entire
prospectus carefully. In this prospectus, "PBG," "we," "us" and "our" refer to
The Pepsi Bottling Group, Inc. and where appropriate, to our principal operating
subsidiary, Bottling Group, LLC, which we refer to as "Bottling LLC." "PepsiCo"
refers to PepsiCo, Inc. and its consolidated subsidiaries.

THE PEPSI BOTTLING GROUP, INC.

The Pepsi Bottling Group, Inc. is the world's largest manufacturer, seller
and distributor of carbonated and non-carbonated Pepsi-Cola beverages,
accounting for 54% of the Pepsi-Cola beverages sold in North America and 32%
worldwide. We have the exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages in all or a portion of 39 states, the District of Columbia,
eight Canadian provinces, Spain, Greece and Russia. Approximately 93% of our
volume is sold in North America.

The brands we sell are some of the best recognized trademarks in the world
and include PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW, LIPTON BRISK, LIPTON'S ICED
TEA, 7UP (outside the U.S.), PEPSI MAX, PEPSI ONE, SLICE, MUG, AQUAFINA,
STARBUCKS FRAPPUCCINO and MIRINDA, which we bottle under licenses from PepsiCo
or PepsiCo joint ventures. In some of our territories, we also have the right to
manufacture, sell and distribute soft drink products of other companies,
including DR PEPPER and 7UP (in the U.S.). During the period from 1992 through
1997, the volume of Pepsi-Cola beverages sold in our U.S. territories grew at a
compound annual rate of approximately 4%.

In the U.S. in 1997, the Pepsi-Cola beverages we sell had a 31% share of the
carbonated soft drink market as compared to the brands of The Coca-Cola Company
("Coca-Cola"), which had a 44% share. However, excluding fountain sales, where
the consumer typically does not have a choice due to exclusive agreements, the
market share difference narrowed significantly, with Pepsi-Cola beverages having
25% and Coca-Cola brands having 28%, according to our estimates. In convenience
and gas stores, where retail pricing, packaging and presentation are generally
similar among brands, and therefore consumers are free to choose based on brand
preference and taste, Pepsi-Cola beverages had the leading share, with 40%, as
compared to 36% for Coca-Cola brands.

Our products are delivered through an extensive direct-to-store distribution
system. Our North American distribution system utilizes approximately 7,000
trucks and covers over 7,400 routes. Working seven days a week, our sales force
sells and delivers over 100 million eight ounce servings per day. Our products
are produced in 72 manufacturing facilities worldwide.

Our management team has substantial experience in the soft drink bottling
business and a proven operating record with respect to manufacturing operations,
sales, distribution and financial management. For example, Craig Weatherup, our
Chairman and Chief Executive Officer, has over 24 years of experience in the
beverage industry and our 11 field operations managers have an average of nearly
15 years of experience in the beverage business.

With our strong portfolio of global brands, broad range of products,
extensive distribution system, scale in operations, experienced management team
and close relationship with PepsiCo, we expect to continue to be a leader in the
liquid refreshment beverage industry.

THE LIQUID REFRESHMENT BEVERAGE INDUSTRY

We believe we are well positioned to capitalize on trends in the liquid
refreshment beverage industry. Liquid refreshment beverage annual retail sales
in 1997 were more than $72 billion in North America, and included carbonated
soft drink products, as well as non-carbonated beverages sold in

5
<PAGE>
bottles and cans, such as waters, shelf-stable juices and juice drinks, sports
drinks and tea and coffee drinks. This industry does not include alcoholic or
dairy beverages or waters, coffees or teas that are not packaged and
ready-to-drink. In this industry, the owners of beverage brands either
manufacture and sell products themselves or appoint bottlers to sell, distribute
and, in some cases, manufacture these products pursuant to licenses.

We believe that the following are the significant trends in the industry:

- GROWTH IN BEVERAGE SALES. Liquid refreshment beverage sales have grown in
recent years and this growth is expected to continue. From 1992 to 1997,
average annual equivalent case sales of liquid refreshment beverages in
the U.S. increased 4%.

- CHANGES IN LIFESTYLE. The emergence of an "on-the-go" lifestyle in
developed countries has resulted in increased dining out and demand for
ready-to-drink beverages instead of drinks prepared at home. In addition,
consumers are demanding packages that are easy to carry, close and reuse
and that are available at convenient locations. To meet these needs,
bottlers are focusing on expanding the availability of cold beverages sold
for immediate consumption and are also developing innovations in packaging
and new products.

- CONSOLIDATION OF BOTTLERS. The bottling industry has experienced
significant consolidation in recent years. The reasons for this
consolidation are the need to generate economies of scale and cost savings
and the need to better sell to and service large regional and national
accounts, such as supermarkets, restaurants and mass merchandisers, which
have themselves been consolidating. Consolidation has also been driven by
the estate planning needs of family-owned independent bottlers and
competitive pressures to invest in manufacturing, distribution and
information systems. We believe that these factors will result in
continued consolidation of the bottling industry.

- INCREASE IN INTERNATIONAL OPPORTUNITIES. Given the relatively low per
capita consumption levels of carbonated soft drinks outside North America,
there are significant growth opportunities. As a result, bottlers in
international markets are increasingly focused on opportunities to grow
through expansion of their distribution channels and product and packaging
innovation.

STRATEGY

Our strategy is intended to capitalize on the key trends in the beverage
industry as well as our strengths, which include our broad portfolio of global
brands supported by PepsiCo's marketing programs, an extensive range of
products, an effective distribution system, scale in operations and purchasing
and an experienced management team.

We have designed our strategy to enable us to achieve our goals of growing
our cash flow, earning a return on our investments in excess of our cost of
capital and increasing our market share. The key elements of our strategy
include:

- INCREASE COLD DRINK AVAILABILITY. We intend to continue to invest
significantly in placements of vending machines and coolers to increase
cold drink availability in the marketplace. The market for cold drinks
sold from vending machines and coolers for immediate consumption is one of
the fastest growing and most profitable segments within the liquid
refreshment beverage industry in North America, with gross margins that
are significantly higher than those from sales of products for consumption
at home.

- PURSUE NORTH AMERICAN ACQUISITIONS. We expect to play a key role in the
consolidation of PepsiCo's North American bottling system. We intend to
pursue acquisitions of independent PepsiCo bottlers in North America,
particularly in territories contiguous to our own, and expect that PepsiCo
will help us identify and acquire these bottlers. These acquisitions will
enable us to

6
<PAGE>
provide better service to our large retail customers as well as to reduce
costs through economies of scale.

- INCREASE PRODUCTIVITY. We are undertaking a number of initiatives to
reduce costs by improving productivity and operating efficiencies. Over
the last two years, in North America, our manufacturing line efficiency
increased 13%, resulting in lower annual operating costs and in capital
investment savings. We expect to complete the first phase of these
initiatives by the end of 1999. We are also planning for a second phase to
further improve our product supply chain management, from buying raw
materials to stocking retailers' shelves.

- EXPAND BUSINESS WITH OUR KEY RETAIL CUSTOMERS. We intend to grow our
business with key retail customers by improving our retail presence
through increased promotional frequency and in-store product inventory--on
the shelf, on display and in the cooler--while remaining price
competitive.

- CAPITALIZE ON DISTRIBUTION AND BRAND STRENGTHS. We intend to use our
distribution system to increase penetration of established brands such as
MOUNTAIN DEW and new brands such as PEPSI ONE and AQUAFINA. In addition,
we intend to capitalize on the strength of our brand portfolio to gain new
points of distribution.

- GROW OUR INTERNATIONAL BUSINESS. Internationally, low per capita
consumption levels present opportunities for volume growth. We will
implement distribution and marketing initiatives tailored to each of our
international markets in order to take advantage of these opportunities.
We intend to improve our results in Russia, where infrastructure
investments and the recent economic crisis have resulted in losses, and to
improve our operating and financial performance in Spain and Greece. We
also plan to evaluate international acquisition opportunities as they
become available.

RATIONALE FOR THE TRANSACTION

We were organized in November 1998 to effect the separation of most of
PepsiCo's company-owned bottling business from its brand ownership. As an
independent entity, we believe we will benefit from a sharper definition of our
role and be able to execute our business strategy more effectively on a local
market level. The most significant advantages of the separation include:

- FOCUS ON SALES AND SERVICE IN OUR TERRITORIES. We will be free to focus
more closely on sales and service in our territories. Prior to separation,
we assisted PepsiCo in managing its relationships with independent PepsiCo
bottlers, including the coordination of regional and national marketing
initiatives. This responsibility has now been assumed by PepsiCo.

- SHIFT IN PERFORMANCE MEASURES. We will be able to shift our performance
emphasis to growth in operating cash flow. We believe this shift in
emphasis is appropriate given our higher levels of indebtedness and
significant non-cash depreciation and amortization charges resulting from
our capital investments and acquisitions. We intend to generate sufficient
cash flow to fund an aggressive investment program in vending machines,
coolers and other revenue generating assets.

- TARGETED INCENTIVES FOR MANAGEMENT AND EMPLOYEES. Our performance will now
be measurable and rewardable based upon the results we achieve. Our equity
securities will provide a basis for management and employee incentives
that are directly related to our performance.

- CAPITAL STRUCTURE AND FINANCIAL POLICIES APPROPRIATE FOR A BOTTLING
COMPANY. As a separate entity, we will have a capital structure and
financial policies that are more appropriate for a bottling company,
allowing us to make better capital allocation and investment decisions. In
addition, our equity securities will provide an additional form of
consideration for possible future acquisitions and financings.

7
<PAGE>
After the offering, our business interests will continue to be aligned with
those of PepsiCo, which shares our objective of increasing availability and
consumption of Pepsi-Cola beverages. We plan to work closely with PepsiCo and
expect to benefit from this relationship in a number of ways including:

- MARKETING SUPPORT AND FUNDING. We will have the benefit of PepsiCo's
worldwide marketing expertise and advertising programs and we expect that
PepsiCo will continue to provide us with significant marketing support and
funding. This support covers a variety of initiatives, including consumer
marketing programs, trade incentives, capital equipment investment and
shared media expense.

- SHARED SERVICES. Pursuant to a shared services agreement, we will have the
benefit of PepsiCo's scale and efficiencies in certain areas such as the
procurement of raw materials, transaction processing such as accounts
payable and credit and collection, certain tax and treasury services and
information technology maintenance and systems development.

- CREDIT ENHANCEMENT. We expect to benefit from lower interest rates
resulting from PepsiCo's guarantee of $ of debt of our principal
operating subsidiary, Bottling LLC.

- ACQUISITIONS. We expect that PepsiCo will help us identify and acquire
other independent PepsiCo bottlers principally in North America.

8
<PAGE>
THE OFFERING

Unless otherwise specifically stated, the information throughout this
prospectus does not take into account the possible issuance of additional shares
of common stock to the underwriters pursuant to their rights to purchase
additional shares to cover over-allotments.

<TABLE>
<S> <C>
Common stock offered......................... shares

Capital stock to be outstanding after the
offering:

Common stock............................... shares

Class B common stock....................... shares
---------------------------------------------

Total.................................... shares

Over-allotment option........................ shares of common stock

Use of proceeds.............................. We estimate that the net proceeds from the
offering will be approximately $ . We
intend to use these net proceeds to repay
indebtedness.

Dividend policy.............................. We intend to declare and pay quarterly cash
dividends of $ per share, subject to our
financial results and action by our Board of
Directors. The first dividend is expected to
be payable in the quarter of 1999.

Voting rights:

Common stock............................... One vote per share

Class B common stock....................... 250 votes per share

Other common stock provisions................ Apart from the different voting rights, the
holders of common stock and Class B common
stock generally have identical rights. See
"Description of Capital Stock."

Risk factors................................. See "Risk Factors" and the other information
included in this prospectus for a discussion
of factors you should carefully consider
before deciding to invest in shares of the
common stock.

Proposed NYSE symbol......................... "PBG"
</TABLE>

Our principal executive offices are located at One Pepsi Way, Somers, New
York 10589 and our telephone number is (914) 767-6000.

9
<PAGE>
SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary combined financial information of PBG should be read
in conjunction with, and is qualified in its entirety by, reference to
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," the audited Combined Financial Statements, the unaudited Condensed
Combined Financial Statements, the unaudited Pro Forma Condensed Combined
Financial Statements and the related notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA
1993 1994(1) 1995 1996 1997 1997(2)
--------- ----------- --------- --------- --------- -------------

<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AND PER CASE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 5,457 $ 5,950 $ 6,393 $ 6,603 $ 6,592 $
Cost of sales........................................ 3,031 3,432 3,771 3,844 3,832
--------- ----------- --------- --------- --------- -------------
Gross profit......................................... 2,426 2,518 2,622 2,759 2,760
Selling, delivery and administrative expenses........ 2,111 2,243 2,273 2,396 2,423
--------- ----------- --------- --------- --------- -------------
Operating income..................................... 315 275 349 363 337
Interest expense, net................................ 193 212 219 206 203
--------- ----------- --------- --------- --------- -------------
Income before income taxes........................... 122 63 130 157 134
Income tax expense................................... 81 45 79 96 63
Minority interest.................................... -- -- -- -- --
--------- ----------- --------- --------- --------- -------------
Net income........................................... $ 41 $ 18 $ 51 $ 61 $ 71 $
--------- ----------- --------- --------- --------- -------------
--------- ----------- --------- --------- --------- -------------
Pro forma earnings per share(3)......................
Pro forma weighted average shares outstanding(3).....

OTHER FINANCIAL DATA:
EBITDA(4)............................................ $ 659 $ 767 $ 788 $ 776
Cash provided by operations.......................... 496 443 463 560
Cash used for investments............................ (310) (355) (376) (564)
Cash provided by (used for) financing................ (172) (78) (78) 51
Capital expenditures................................. (432) (358) (418) (472)

OTHER OPERATING DATA:
Net sales per case................................... $ 6.87 $ 6.57 $ 6.60 $ 6.39
Costs of sales per case.............................. 3.96 3.88 3.84 3.71
EBITDA per case...................................... 0.76 0.79 0.79 0.75

BALANCE SHEET DATA (AT PERIOD END):
Total assets......................................... $ 6,860 $ 6,847 $ 7,082 $ 7,052 $ 7,188
Long-term debt:
Allocation of PepsiCo long-term debt............... 3,000 3,000 3,000 3,000 3,000
Due to third parties............................... 97 135 131 127 96
--------- ----------- --------- --------- ---------
Total long-term debt............................. 3,097 3,135 3,131 3,127 3,096
Advances from PepsiCo................................ 1,713 1,565 1,551 1,462 1,703

<CAPTION>
THIRTY-SIX WEEK PERIOD
-----------------------------------
<S> <C> <C> <C>
PRO FORMA
1997 1998 1998(2)
--------- --------- -------------

<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 4,677 $ 4,988 $
Cost of sales........................................ 2,708 2,936
--------- --------- -------------
Gross profit......................................... 1,969 2,052
Selling, delivery and administrative expenses........ 1,621 1,760
--------- --------- -------------
Operating income..................................... 348 292
Interest expense, net................................ 140 146
--------- --------- -------------
Income before income taxes........................... 208 146
Income tax expense................................... 97 76
Minority interest.................................... -- --
--------- --------- -------------
Net income........................................... $ 111 $ 70 $
--------- --------- -------------
--------- --------- -------------
Pro forma earnings per share(3)......................
Pro forma weighted average shares outstanding(3).....
OTHER FINANCIAL DATA:
EBITDA(4)............................................ $ 647 $ 612
Cash provided by operations.......................... 252 275
Cash used for investments............................ (341) (623)
Cash provided by (used for) financing................ 104 318
Capital expenditures................................. (325) (356)
OTHER OPERATING DATA:
Net sales per case................................... $ 6.38 $ 6.37
Costs of sales per case.............................. 3.69 3.75
EBITDA per case...................................... 0.88 0.78
BALANCE SHEET DATA (AT PERIOD END):
Total assets......................................... $ 7,689 $
Long-term debt:
Allocation of PepsiCo long-term debt............... 3,000
Due to third parties............................... 99
--------- -------------
Total long-term debt............................. 3,099
Advances from PepsiCo................................ 2,046
</TABLE>

- ----------------------------------
(1) Fiscal year 1994 consisted of 53 weeks. The fifty-third week increased 1994
net sales by $68 million and income before income taxes by approximately $3
million (net income by $2 million).

Fiscal year 1994 net income reflects the cumulative effect of accounting
changes arising from Statement of Financial Accounting Standards 112 ("SFAS
112"), "Employers Accounting for Postemployment Benefits," and changing to a
preferable method for calculating the market-related value of pension plan
assets used in determining the return-on-asset component of annual pension
expense and the cumulative net unrecognized gain or loss subject to
amortization. The adoption of SFAS 112 reduced income before income taxes by
$28 million (net income by $17 million) while the pension change increased
income before income taxes by $9 million (net income by $6 million).

(2) The pro forma combined statement of operations data gives effect to the
offering and to the following as if such transactions had actually occurred
on the first day of our 1997 fiscal year: (i) the 1998 acquisitions of
Pepsi-Cola Allied Beverages, Inc., Gray Beverage, Inc. and Pepsi
International Bottlers, LLC, (ii) incremental recurring corporate
administrative expenses, (iii) interest expense on $ of debt expected to be
outstanding after giving effect to the offering at an estimated interest
rate of % and (iv) PepsiCo's % minority interest in Bottling LLC. The
pro forma combined balance sheet data gives effect to the offering and to
debt of $ expected to be outstanding after the offering and the October
1998 acquisition of Pepsi-Cola Allied Beverages, Inc., as if such
transactions had actually occurred on September 5, 1998.

(3) Pro forma earnings per share is based upon an assumed million shares of
capital stock to be outstanding after the offering.

(4) EBITDA is computed as net income plus the sum of interest, income tax,
depreciation and amortization expense and minority interest. We have
included information concerning EBITDA because it is used by certain
investors as a measure of our operating performance. EBITDA is not required
under generally accepted accounting principles ("GAAP") and should not be
considered an alternative to net income or any other measure of performance
required by GAAP, and should be read in conjunction with the Combined
Statements of Cash Flows contained in the Combined Financial Statements
included elsewhere in this prospectus. EBITDA should also not be used as a
measure of liquidity or cash flows under GAAP.

10
<PAGE>
RISK FACTORS

Investing in our common stock will provide you with an equity ownership
interest in PBG. As a stockholder of PBG, you may be subject to risks inherent
in our business. The performance of your shares will reflect the performance of
our business relative to, among other things, competition, industry conditions
and general economic and market conditions. The value of your investment may
increase or decrease and could result in a loss. You should carefully consider
the following factors as well as other information contained in this prospectus
before deciding to invest in shares of our common stock.

This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.

RISKS FROM COMPETITION IN THE LIQUID REFRESHMENT BEVERAGE INDUSTRY

The liquid refreshment beverage industry is highly competitive. Carbonated
soft drink products compete not only with each other, but also with
non-carbonated beverages sold in bottles and cans such as waters, shelf-stable
juices and juice drinks, sports drinks and ready-to-drink tea and coffee drinks.
In addition, liquid refreshment beverages compete with other beverages,
including milk, beer and non-packaged beverages such as tap water. Our
competitors in the liquid refreshment beverage industry include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. The industry competes
primarily on the basis of advertising to create brand awareness, price and price
promotions, retail space management, customer service, consumer points of
access, new products, packaging innovation and distribution methods.

Our most significant competitors in most markets we serve are Coca-Cola
Enterprises Inc. ("CCE") and other Coca-Cola bottlers. Competition in our
markets could cause us to reduce pricing, increase capital and other
expenditures or lose market share, which could have a material adverse effect on
our business and financial results.

DEPENDENCE UPON PEPSICO

In early 1999, we entered into the Pepsi Beverage Agreements with PepsiCo
for cola, non-cola and fountain beverage products. The Pepsi Beverage Agreements
provide that we must purchase all of our concentrate for such beverages at
prices and on other terms which are set by PepsiCo in its sole discretion. There
can be no assurance that prices under the Pepsi Beverage Agreements will not
increase materially or that we will be able to pass on any increased costs to
our customers. PepsiCo has traditionally provided marketing support and funding
to its bottling operations. However, while PepsiCo has indicated to us that they
intend to continue to provide this support, PepsiCo is not obligated under the
Pepsi Beverage Agreements to do so and any such support provided to us will be
at PepsiCo's discretion. Any concentrate price increases or decreases in
marketing support and funding levels could materially affect our financial
results.

In addition, PepsiCo is a 50% owner of the joint ventures that license
LIPTON BRISK, LIPTON'S ICED TEA and STARBUCKS FRAPPUCCINO to us. Under our
bottling agreements with these joint ventures, the joint ventures have the same
rights with respect to concentrate pricing as those enjoyed by PepsiCo under the
Pepsi Beverage Agreements. Similarly, the joint ventures are not obligated to
continue to provide marketing support and funding to us under their bottling
agreements with us.

The Pepsi Beverage Agreements also require us to submit our annual
marketing, advertising, management and financial plans each year to PepsiCo for
its review and approval. If we fail to do so, or if we fail to carry out these
plans in all material respects, PepsiCo has the right to terminate the

11
<PAGE>
Pepsi Beverage Agreements. If the Pepsi Beverage Agreements are terminated for
this or for any other reason, it would have a material adverse effect on our
business and financial results.

Following the offering, we will continue to obtain certain administrative
and other services from PepsiCo, including the procurement of raw materials,
transaction processing such as accounts payable and credit and collection,
certain tax and treasury services and information technology maintenance and
systems development. PepsiCo will provide these services to us pursuant to a
shared services agreement. If the shared services agreement is terminated, we
will have to obtain such services on our own. We cannot assure you that we will
be able to replace these services in a timely manner or on terms, including
cost, that are as favorable as those we received from PepsiCo. We also sublease
our headquarters from PepsiCo. The agreements with PepsiCo were negotiated in
the context of our separation from PepsiCo and, therefore, are not the result of
arms-length negotiations between independent parties. For more information about
these arrangements, see "Relationship with PepsiCo and Certain Transactions."

RISKS OF CONTINUING OWNERSHIP INTEREST BY PEPSICO

For more information about our relationship with PepsiCo, see "Relationship
with PepsiCo and Certain Transactions" and "Description of Capital Stock."

CONFLICTS OF INTEREST BETWEEN US AND PEPSICO

The nature of the relationship between PBG and PepsiCo and our respective
businesses may give rise to conflicts of interest between us. Such conflicts
could arise with respect to dealings between us and PepsiCo, such as with
respect to the nature, quality and pricing of services or products provided to
us by PepsiCo or by us to PepsiCo, potential acquisitions of bottling
territories and/or assets from PepsiCo or other independent PepsiCo bottlers,
the divestment of certain of our bottling operations, the payment of dividends
by us or balancing the objectives of increasing sales volume of Pepsi-Cola
beverages and maintaining or increasing our profitability. We also have
obligations to other brand owners which may compete with our obligations to
PepsiCo.

In addition, of our directors are also directors or officers of
PepsiCo, a situation which may give rise to certain conflicts of interest. Our
certificate of incorporation provides that PepsiCo has no duty to refrain from
engaging in the same or similar activities as we do. Our certificate also
provides that PepsiCo need not communicate to us, may pursue or acquire for
itself, or may direct to another person, a corporate opportunity, without
liability to us or our stockholders.

SOCIAL, POLITICAL AND ECONOMIC RISKS AFFECTING OUR FOREIGN OPERATIONS AND
EFFECTS OF FOREIGN CURRENCY FLUCTUATIONS

In the past two years, approximately 16% of our net sales came from Canada,
Spain, Greece and Russia. Social, economic and political conditions in these
international markets may adversely affect our results of operations, cash flows
and financial condition. The overall risks to our international businesses
include changes in foreign governmental policies, and other political or
economic developments. Such developments may lead to new product pricing, tax or
other policies and monetary fluctuations which may adversely impact our
business. In addition, our results of operations and the value of our foreign
assets are affected by fluctuations in foreign currency exchange rates.

12
<PAGE>
Our operations in Russia have resulted in significant losses, in large part
due to significant investment to fund start-up manufacturing and distribution
costs. Recent economic turmoil in Russia has had a further adverse effect on our
results of operations, cash flows and financial condition during our fourth
fiscal quarter. Net sales in Russia are denominated in rubles, which in August
1998 experienced significant devaluation against the U.S. dollar, whereas a
substantial portion of the expenses of our Russian bottling operations are
denominated in U.S. dollars. In addition, the current Russian economic crisis
has caused a significant drop in demand, resulting in lower net sales and
increased operating losses.

For the foreseeable future, we anticipate that our Russian operations will
incur losses and require significant amounts of cash to fund operations. In
addition, we are evaluating the extent of impairment of our long-lived assets in
Russia, which will be recorded in the fourth quarter of fiscal 1998. For more
information about our Russian operations, see "Management's Discussion and
Analysis of Results of Operations and Financial Condition."

Recent events in Russia also may subject our operations to increased risks
of political instability, higher taxes, cancellation of contracts and currency
shortages and controls.

SEASONALITY OF OUR BUSINESS

Our business is seasonal, with our peak season being the warm summer months
beginning with Memorial Day and ending with Labor Day. More than 90% of our
operating income is typically earned during the second and third quarters and we
typically report a net loss in the first and fourth quarters. Over 75% of cash
flow from operations is typically generated in the third and fourth quarters.
Bad weather conditions during our peak selling season could adversely affect
operating income and cash flow and could therefore have a disproportionate
impact on our results for the full year.

RISKS FROM INDEBTEDNESS; INTEREST RATE FLUCTUATIONS

We have incurred substantial indebtedness. On a pro forma basis, after
giving effect to the offering and the application of the net proceeds, at
, 1998 we would have had $ of indebtedness outstanding ($ if
the underwriters' over-allotment option is exercised in full). Our historical
financial statements reflect an allocation of PepsiCo's interest expense based
upon the indebtedness expected to be outstanding after giving effect to the
application of proceeds from the offering. Our interest rate for this debt would
have been higher during the periods covered by these financial statements had we
been a stand-alone company. We may incur additional indebtedness in the future
to finance acquisitions, capital expenditures, working capital and for other
purposes.

Our level of indebtedness could have important consequences to our
stockholders such as:

- limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
pay interest;

- limiting our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service requirements
or other purposes; and

- limiting our ability to react to changing market conditions, changes in
our industry and economic downturns.

In addition, because a portion of our indebtedness is expected to bear
interest at variable rates, increases in interest rates could have a material
impact on our results of operations. Although we expect to enter into certain
interest rate hedging transactions, we may not be able to mitigate completely
the effect of significant adverse interest rate fluctuations.

13
<PAGE>
DEPENDENCE UPON CERTAIN RAW MATERIALS

Our principal raw materials are soft drink concentrates, sweeteners, glass
and plastic bottles, cans, closures, syrup containers, other packaging materials
and carbon dioxide. Artificial sweeteners are included in the concentrates we
purchase for diet soft drinks. We depend primarily on PepsiCo for our
concentrates. The Pepsi Beverage Agreements allow PepsiCo to adjust from time to
time the prices of concentrates sold to us. If we are not able to pass through
to consumers any increase in the price of concentrates purchased from PepsiCo,
our business and operating results could be adversely affected. We also purchase
concentrates from other brand owners at prices and with marketing support levels
determined by them.

We generally purchase our raw materials, other than concentrates, from
multiple suppliers. The Pepsi Beverage Agreements provide that, with respect to
the soft drink products of PepsiCo, all authorized containers, closures, cases,
cartons and other packages and labels may be purchased only from manufacturers
approved by PepsiCo. Expenditures for packaging and concentrates each constitute
approximately 45% of our total raw material costs.

None of the materials or supplies used by us is presently in short supply,
although the supply or cost of specific materials could be adversely affected by
price changes, strikes, weather conditions, governmental controls or other
factors. Any sustained interruption in the supply of these raw materials or any
significant increase in their price could have a material adverse effect on our
business and financial results.

RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY

We intend to grow in part through the acquisition of bottling assets and
territories from PepsiCo's independent bottlers. This strategy will entail
reviewing and potentially reorganizing acquired business operations, corporate
infrastructure and systems and financial controls. Our growth strategy may be
inhibited because of unforeseen expenses, difficulties, complications and delays
encountered in connection with the expansion of our operations through
acquisitions. Under the Pepsi Beverage Agreements, we have agreed not to acquire
PepsiCo's other independent bottlers in certain limited areas of the United
States without the prior written consent of PepsiCo. Any acquisition by us is
subject to the approval of PepsiCo which may not be withheld if we have
successfully negotiated such acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the Pepsi Beverage Agreements. We
cannot provide assurance that we will be able to acquire or manage profitably
additional businesses or to integrate successfully any acquired businesses into
our business without substantial costs, delays or other operational or financial
difficulties. In addition, we may be required to incur additional debt or issue
equity to pay for future acquisitions. For more information about our
acquisition strategy, see "Business--Strategy."

SUBSTANTIAL CAPITAL REQUIREMENTS

We will require substantial capital expenditures to implement our business
strategy and we may incur additional indebtedness or obtain other financing in
order to meet these capital expenditure requirements. In the past, our capital
needs, including those for working capital, have been satisfied by PepsiCo as
part of its overall capital plan. Following our separation from PepsiCo, PepsiCo
will no longer be required to provide financing for our operations. It may not
be possible to obtain financing with interest rates or on terms that are as
favorable as those historically enjoyed by PepsiCo. If we are unable to obtain
financing in the amounts desired or on acceptable terms, we may have to reduce
our planned capital expenditures which could have a material adverse effect on
our growth prospects and the market price of our common stock.

14
<PAGE>
RISK FROM ABSENCE OF HISTORY AS A STAND-ALONE COMPANY

We have never operated as a stand-alone company. Prior to November 1998, we
were fully integrated with PepsiCo and we depended upon PepsiCo for various
services and for the financing of our activities. In anticipation of our
establishment as a stand-alone entity, in late 1998, we made significant
organizational and strategic changes which are intended to promote future
growth. However, there can be no assurance that such changes will have the
intended effect or that we will be successful in implementing our strategy as a
stand-alone entity.

LIMITED RELEVANCE OF OUR HISTORICAL FINANCIAL INFORMATION

The historical financial information we have included in this prospectus may
not reflect what our results of operations, financial position and cash flows
would have been had we been a separate, stand-alone entity during the periods
presented or what our results of operations, financial position and cash flows
will be in the future. This is because PepsiCo did not account for us as, and we
were not operated as, a single stand-alone business for the periods presented.

For more information about the carve-out of our financial statements from
the financial statements of PepsiCo, see "Management's Discussion and Analysis
of Results of Operations and Financial Condition."

DEPENDENCE ON KEY PERSONNEL

Our success depends largely on the efforts and abilities of certain key
management employees. Key management employees are not parties to employment
agreements with us. The loss of the services of such key personnel could have a
material adverse effect on our business and financial results. In addition, the
implementation of our strategic plan will depend on our ongoing ability to
attract and retain additional qualified employees. Because of competition for
qualified personnel, we may not be successful in attracting and retaining the
personnel we require. See "Business--Employees" and "Management" for more
information about our key personnel.

YEAR 2000 RISK

Many existing computer programs were designed and developed without
considering the upcoming change in the century, which could lead to the failure
of computer applications or create erroneous results by or at the Year 2000. The
Year 2000 issue is a broad business issue, whose impact extends beyond
traditional computer hardware and software to possible failure of automated
plant systems and instrumentation, as well as to third parties with whom we do
business.

We have implemented a Year 2000 program and we believe we have allocated
adequate resources for this purpose. Our most significant exposure arises from
our dependence on high volume transaction processing systems, particularly for
production scheduling, inventory cost accounting, purchasing, customer billing
and collection, and payroll. We anticipate that any corrective actions to these
applications will be completed by the end of the second quarter in 1999. There
can, however, be no assurance that this will be the case. The ability of third
parties with whom we do business to address adequately their Year 2000 issues is
outside our control. Our failure or the failure of such third parties to address
adequately their respective Year 2000 issues may have a material adverse effect
on our business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000" for a detailed discussion of the status of our Year 2000
program.

PRODUCT LIABILITY; PRODUCT RECALLS

We may be liable if the consumption of any of our products causes injury,
illness or death. We also may be required to recall certain of our products that
become contaminated or are damaged or

15
<PAGE>
mislabeled. We are not currently aware of any material product liability claim
against us or product recall that may be required. However, a significant
product liability judgment against us or a widespread product recall could have
a material adverse effect on our business, financial condition and results of
operations.

IMPACT OF GOVERNMENTAL REGULATION

Our operations and properties are subject to regulation by various federal,
state and local government entities and agencies as well as foreign government
entities. As a producer of food products, we are subject to production,
packaging, quality, labeling and distribution standards in each of the countries
where we have operations, including, in the United States, those of the federal
Food, Drug and Cosmetic Act. The operations of our production and distribution
facilities are subject to various federal, state and local environmental laws
and workplace regulations both in North America and abroad. These laws and
regulations include, in the United States, the Occupational Safety and Health
Act, the Unfair Labor Standards Act, the Clean Air Act, the Clean Water Act and
laws relating to the maintenance of fuel storage tanks. We believe that our
current legal and environmental compliance programs adequately address such
concerns and that we are in substantial compliance with applicable laws and
regulations. However, compliance with, or any violation of, current and future
laws or regulations could require material expenditures by us or otherwise have
a material adverse effect on our business, financial condition and results of
operations.

HOLDING COMPANY STRUCTURE; NO ASSURANCE OF DIVIDENDS

We are primarily a holding company with limited direct operations and
limited assets other than our % interest in Bottling LLC. We will be dependent
on distributions from Bottling LLC to meet our obligations (including the
payment of principal and interest on our indebtedness), and to pay dividends to
our stockholders.

The determination of the amount of distributions, if any, to be paid to us
by Bottling LLC will depend upon the terms of Bottling LLC's indebtedness, as
well as Bottling LLC's financial condition, results of operations, cash flow and
future business prospects. We will receive % of any distribution made by
Bottling LLC based on our % ownership interest and PepsiCo will receive the
remaining % of any such distribution.

At September 5, 1998, on a pro forma basis after giving effect to the
offering, Bottling LLC would have had $ of indebtedness and aggregate
liabilities of $ . Any right of ours to participate in the assets of Bottling
LLC upon any liquidation or reorganization of Bottling LLC will be subject to
the prior claims of Bottling LLC's creditors (including trade creditors and
holders of indebtedness) except to the extent that we are a creditor of Bottling
LLC.

ABSENCE OF PRIOR MARKET FOR OUR SHARES; POSSIBLE VOLATILITY OF SHARE PRICE

Prior to this offering, there has been no public market for our common
stock. We intend to list the common stock on the New York Stock Exchange. We do
not know how the common stock will trade in the future. The initial public
offering price will be determined through negotiations between the underwriters
and us. You may not be able to resell your shares at or above the initial public
offering price due to a number of factors, including:

- actual or anticipated fluctuations in our operating results;

- changes in expectations as to our future financial performance or changes
in financial estimates of securities analysts; and

- the operating and stock price performance of other comparable companies.

16
<PAGE>
In addition, the stock market in general has experienced extreme volatility
that often has been unrelated to the operating performance of particular
companies. These broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance.

You should read the "Underwriting" section for a more complete discussion of
the factors to be considered in determining the initial public offering price.

LIMITATIONS ON CHANGE IN CONTROL

Following the offering, PepsiCo will own % of our outstanding common stock
( % if the underwriters' over-allotment option is exercised in full) and 100%
of our outstanding Class B common stock, together representing % of the voting
power of all classes of our voting stock. PepsiCo will also own % of the
equity of Bottling LLC, our principal operating subsidiary, giving PepsiCo
economic ownership of % of our combined operations ( % if the underwriters'
over-allotment option is exercised in full). In addition, PepsiCo will have the
right to terminate the Pepsi Beverage Agreements upon the occurrence of certain
events, including any disposition of any voting securities of any bottler
subsidiary without the consent of PepsiCo, the assignment or transfer of the
Pepsi Beverage Agreements or the acquisition of any contract, option, conversion
privilege or other right to acquire, directly or indirectly, beneficial
ownership of more than 15% of any class or series of our voting securities by a
person or affiliated group, without the consent of PepsiCo. This concentration
of ownership and ability to terminate the Pepsi Beverage Agreements may have the
effect of delaying or preventing a change in control.

In addition, our certificate of incorporation and bylaws contain several
provisions which may be deemed to have anti-takeover effects and may discourage,
delay or prevent a takeover attempt that a stockholder might consider in its
best interest. These provisions include the requirement that: (1) the number of
directors shall be no more than 15; and (2) with respect to annual stockholders'
meetings, stockholders must comply with the timing and procedural requirements
of the federal proxy rules in order for a stockholder proposal to be included in
our proxy statement. See "Description of Capital Stock" for a more complete
discussion of our certificate of incorporation and bylaws.

Our Board of Directors has the authority to authorize the issuance of
preferred stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of PBG, and may adversely
affect the voting and other rights of the holders of our capital stock.

SHARES ELIGIBLE FOR FUTURE SALE

After the offering, we will have outstanding shares of capital
stock ( shares if the underwriters exercise in full their option to
purchase additional shares of common stock in the offering). Of these shares,
the shares sold in the offering will be freely transferable without restriction
or further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares purchased by our "affiliates" as
defined in Rule 144 under the Securities Act. The remaining shares of capital
stock outstanding will be owned by PepsiCo and will be "restricted securities"
as defined in Rule 144. The common stock may be sold in the future without
registration under the Securities Act to the extent permitted by Rule 144 or an
exemption under the Securities Act. In addition, we, our officers and directors
and PepsiCo have agreed, for a period of 180 days from the date of this
prospectus, not to sell shares. Accordingly, on , 1999, shares of
our common stock will be available for immediate resale (subject to certain
volume and other restrictions imposed by the securities laws).

We have entered into a registration rights agreement with PepsiCo which
enables PepsiCo to require us to register shares of our common stock owned by
PepsiCo and to include those shares in registrations of common stock made by us
in the future. Sales of a substantial number of shares of common stock into the
public market after this offering, or the perception that such sales could
occur, could materially and adversely affect our stock price or could impair our
ability to obtain capital through an offering of equity securities.

17
<PAGE>
TRANSACTION RATIONALE AND SEPARATION OF PBG FROM PEPSICO

After the offering, our business interests will continue to be aligned with
those of PepsiCo, which shares our objective of increasing availability and
consumption of Pepsi-Cola beverages. We plan to work closely with PepsiCo and
expect to benefit from this relationship in a number of ways including:

- CREDIT ENHANCEMENT. We expect to benefit from lower interest rates
resulting from PepsiCo's guarantee of $ of debt of our principal
operating subsidiary, Bottling LLC.

- ACQUISITIONS. We expect that PepsiCo will help us identify and acquire
other independent PepsiCo bottlers principally in North America.

18
<PAGE>
elected by PepsiCo to the Board, are officers of PepsiCo, are former
officers of PepsiCo and are now officers of PBG and the remainder are
independent.

Bottling LLC is a limited liability company which was formed in January 1999
and % of its equity is owned by us. Bottling LLC owns substantially all of the
property, plant and equipment used in our operations. PepsiCo is the guarantor
of $ aggregate principal amount of Bottling LLC's indebtedness. Use of a
limited liability company rather than a corporation is advantageous to us and
PepsiCo. It allows PepsiCo, which holds a minority interest in Bottling LLC, to
take into account its allocable share of Bottling LLC's income without
imposition of a second level of tax. The limited liability company structure
also provides an attractive acquisition platform since prospective sellers of
bottling operations may prefer to receive a minority limited liability company
interest for those operations, rather than a minority interest in a corporation.

19
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by us from the sale of our common stock in
the offering, after deducting estimated expenses of $ and underwriting
discounts and commissions, are estimated to be approximately $
(approximately $ if the underwriters exercise their over-allotment option
in full), at an assumed initial public offering price of $ per share, the
midpoint of the range set forth on the cover page of this prospectus.

In connection with the organization of our company and Bottling LLC, PepsiCo
contributed bottling assets and businesses to us and these assets and businesses
are held by Bottling LLC. In connection with these contributions, Bottling LLC
assumed $ of indebtedness incurred by PepsiCo through a sale of notes, which
indebtedness is unconditionally guaranteed by PepsiCo and is expected to remain
outstanding after the offering.

Prior to this offering, we borrowed $ from banks and incurred $ through a
sale of notes. All of the net proceeds of this offering will be used to repay a
portion of such indebtedness. The $ loan bears interest at a rate of % and
matures on . The notes bear interest at a rate of % and mature on
. All of the proceeds of the bank indebtedness and the sale of notes were
used to repay our outstanding payables and indebtedness to PepsiCo.

DIVIDEND POLICY

Our Board of Directors expects to declare and pay quarterly cash dividends
of $ per share, commencing with a dividend payable in the quarter of
1999. The declaration of dividends by us and the amount thereof will, however,
be determined by our Board of Directors and will depend upon our results of
operations, financial condition, cash requirements, future prospects and other
factors deemed relevant by our Board.

We are a newly formed corporation and as such have never declared or paid
any cash dividends on our capital stock.

20
<PAGE>
CAPITALIZATION

The following table sets forth our actual combined capitalization as of
September 5, 1998 as adjusted to (1) reflect $ of short-term financing and
$ of long-term debt that is expected to be incurred or assumed prior to the
offering and the repayment of $ of indebtedness and payables to PepsiCo with
the proceeds from those borrowings, and (2) as further adjusted to reflect the
offering and the application of the estimated net proceeds as described under
"Use of Proceeds". The table should be read in conjunction with the Combined
Financial Statements, the unaudited Condensed Combined Financial Statements, the
unaudited Pro Forma Condensed Combined Financial Statements and the related
notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 5, 1998
-----------------------------------
<S> <C> <C> <C>
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
--------- ----------- -----------

<CAPTION>
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term borrowings.......................................................... $ 91 $ (1) $
--------- ----------- -----------
Long-term debt:
Allocation of PepsiCo long-term debt......................................... 3,000 -- --
Due to third parties......................................................... 99 99 99
PBG debt(2).................................................................. --
Bottling LLC debt(3)......................................................... --
--------- ----------- -----------
Total long-term debt....................................................... 3,099
--------- ----------- -----------
Stockholder's equity:
Preferred stock, par value $.01 per share; 20 million shares authorized; no
shares issued or outstanding as adjusted and as further adjusted........... -- -- --
Common stock, par value $.01 per share; 300 million shares
authorized; million shares issued and
outstanding as adjusted; and million shares issued and outstanding as
further adjusted(4)........................................................ -- -- --
Class B common stock, par value $.01 per share; 75,000 shares authorized;
shares issued and outstanding as adjusted; and shares issued and
outstanding as futher adjusted............................................. -- -- --
Additional paid-in capital................................................... -- --
Advances from PepsiCo........................................................ 2,046
Accumulated other comprehensive loss......................................... (231)
--------- ----------- -----------
Total stockholder's equity............................................... 1,815
--------- ----------- -----------
Total capitalization..................................................... $ 5,005 $ $
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

- ------------------------

(1) We will obtain $ short-term financing prior to the offering. This
financing will be used to repay outstanding payables and indebtedness to
PepsiCo. We anticipate that such financing will be repaid out of the
proceeds of this offering.

(2) We will obtain $ through a sale of notes prior to the offering. This
indebtedness is expected to remain outstanding after the offering. The
proceeds of this debt will be used to repay outstanding payables and
indebtedness to PepsiCo.

(3) Bottling LLC will assume $ of indebtedness incurred by PepsiCo through a
sale of notes by PepsiCo prior to the offering. The indebtedness is
unconditionally guaranteed by PepsiCo and is expected to remain outstanding
after the offering.

(4) Excludes shares of common stock issuable upon the exercise of employee
stock options granted to PBG employees.

21
<PAGE>
SELECTED COMBINED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following selected combined financial information of PBG should be read
in conjunction with, and is qualified in its entirety by, reference to
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," the audited Combined Financial Statements, the unaudited Condensed
Combined Financial Statements, the unaudited Pro Forma Condensed Combined
Financial Statements and the related notes thereto included elsewhere in this
prospectus.

The financial information for the fiscal years 1995, 1996 and 1997 has been
derived from, and is qualified in its entirety by reference to, our audited
Combined Financial Statements appearing elsewhere in this prospectus. The
unaudited condensed combined financial information as of September 5, 1998, and
for the thirty-six week periods ended September 6, 1997 and September 5, 1998
has been derived from our unaudited Condensed Combined Financial Statements
appearing elsewhere in this prospectus, which have been prepared on a basis
consistent with that of the Combined Financial Statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation. Results of operations for the
thirty-six week period ended September 5, 1998 are not necessarily indicative of
results to be expected for the full fiscal year.

Corporate overhead related to PepsiCo's corporate administrative functions
has been allocated to us based on a specific identification of PepsiCo's
administrative costs relating to the bottling operations and, to the extent that
such identification was not practicable, based upon the percentage of our sales
to PepsiCo consolidated net sales. These allocated costs have been included in
selling, delivery and administrative expenses in the Combined Statements of
Operations. As a separate public company, we will incur certain incremental
recurring corporate administrative expenses.

Interest expense included in the Combined Financial Statements reflects an
allocation of PepsiCo's interest costs based upon debt expected to be
outstanding after the offering and application of the proceeds therefrom.
Interest rates reflect PepsiCo's weighted average borrowing rate. Our interest
rate for this debt would have been higher during the periods presented.

The capital structure that existed when we operated as part of PepsiCo is
not relevant because it does not reflect our expected future capital structure
as a separate, independent company. Accordingly, per share data for earnings and
cash dividends declared has not been presented except for pro forma earnings per
share for the fiscal year ended December 27, 1997 and the thirty-six week period
ended September 5, 1998, which was based on million shares.

The summary pro forma data set forth below is derived from the unaudited Pro
Forma Condensed Combined Financial Statements included elsewhere in this
prospectus. The unaudited Pro Forma Condensed Combined Financial Statements give
effect to the acquisitions of Pepsi-Cola Allied Beverages, Inc., Gray Beverage,
Inc. and Pepsi International Bottlers, LLC consummated in 1998, incremental
recurring corporate administrative expenses as a result of being a separate
public company, as well as the offering and related transactions. These
transactions have been recorded as if they had actually occurred on the first
day of our 1997 fiscal year with respect to pro forma statement of operations
data and on September 5, 1998 with respect to pro forma balance sheet data. The
pro forma data does not necessarily represent what our financial position or
results of operations would have been had such transactions been completed on
such dates nor does it give effect to any events other than those discussed in
the notes to the unaudited Pro Forma Condensed Combined Financial Statements.
The pro forma data also does not necessarily project our financial position or
results of operations as of any future date or for any future period.

22
<PAGE>
<TABLE>
<CAPTION>
THIRTY-SIX
WEEK
FISCAL YEAR PERIOD
-------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA
1993 1994(1) 1995 1996 1997 1997(2) 1997
--------- ----------- --------- --------- --------- ----------- ---------

<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AND PER CASE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $ 5,457 $ 5,950 $ 6,393 $ 6,603 $ 6,592 $ $ 4,677
Cost of sales................................ 3,031 3,432 3,771 3,844 3,832 2,708
--------- ----------- --------- --------- --------- ----------- ---------
Gross profit................................. 2,426 2,518 2,622 2,759 2,760 1,969
Selling, delivery and administrative
expenses................................... 2,111 2,243 2,273 2,396 2,423 1,621
--------- ----------- --------- --------- --------- ----------- ---------
Operating income............................. 315 275 349 363 337 348
Interest expense, net........................ 193 212 219 206 203 140
--------- ----------- --------- --------- --------- ----------- ---------
Income before income taxes................... 122 63 130 157 134 208
Income tax expense........................... 81 45 79 96 63 97
Minority interest............................ -- -- -- -- -- --
--------- ----------- --------- --------- --------- ----------- ---------
Net income................................... $ 41 $ 18 $ 51 $ 61 $ 71 $ $ 111
--------- ----------- --------- --------- --------- ----------- ---------
--------- ----------- --------- --------- --------- ----------- ---------
Pro forma earnings per share(3)..............
Pro forma weighted average shares
outstanding(3).............................

OTHER FINANCIAL DATA:
EBITDA(4).................................... $ 659 $ 767 $ 788 $ 776 $ 647
Cash provided by operations.................. 496 443 463 560 252
Cash used for investments.................... (310) (355) (376) (564) (341)
Cash provided by (used for) financing........ (172) (78) (78) 51 104
Capital expenditures......................... (432) (358) (418) (472) (325)

OTHER OPERATING DATA:
Net sales per case........................... $ 6.87 $ 6.57 $ 6.60 $ 6.39 $ 6.38
Costs of sales per case...................... 3.96 3.88 3.84 3.71 3.69
EBITDA per case.............................. 0.76 0.79 0.79 0.75 0.88

BALANCE SHEET DATA (AT PERIOD END):
Total assets................................. $ 6,860 $ 6,847 $ 7,082 $ 7,052 $ 7,188
Long-term debt:
Allocation of PepsiCo long-term debt....... 3,000 3,000 3,000 3,000 3,000
Due to third parties....................... 97 135 131 127 96
--------- ----------- --------- --------- ---------
Total long-term debt..................... 3,097 3,135 3,131 3,127 3,096
Advances from PepsiCo........................ 1,713 1,565 1,551 1,462 1,703

<S> <C> <C>
PRO FORMA
1998 1998(2)
--------- -----------

<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $ 4,988 $
Cost of sales................................ 2,936
--------- -----------
Gross profit................................. 2,052
Selling, delivery and administrative
expenses................................... 1,760
--------- -----------
Operating income............................. 292
Interest expense, net........................ 146
--------- -----------
Income before income taxes................... 146
Income tax expense........................... 76
Minority interest............................ --
--------- -----------
Net income................................... $ 70 $
--------- -----------
--------- -----------
Pro forma earnings per share(3)..............
Pro forma weighted average shares
outstanding(3).............................
OTHER FINANCIAL DATA:
EBITDA(4).................................... $ 612
Cash provided by operations.................. 275
Cash used for investments.................... (623)
Cash provided by (used for) financing........ 318
Capital expenditures......................... (356)
OTHER OPERATING DATA:
Net sales per case........................... $ 6.37
Costs of sales per case...................... 3.75
EBITDA per case.............................. 0.78
BALANCE SHEET DATA (AT PERIOD END):
Total assets................................. $ 7,689 $
Long-term debt:
Allocation of PepsiCo long-term debt....... 3,000
Due to third parties....................... 99
---------
Total long-term debt..................... 3,099
Advances from PepsiCo........................ 2,046
</TABLE>

- ------------------------------

(1) Fiscal year 1994 consisted of 53 weeks. The fifty-third week increased 1994
net sales by $68 million and income before income taxes by approximately $3
million (net income by $2 million).

(2) The pro forma combined statement of operations data gives effect to the
offering and to the following as if such transactions had actually occurred
on the first day of our 1997 fiscal year: (i) the 1998 acquisitions of
Pepsi-Cola Allied Beverages, Inc., Gray Beverage, Inc. and Pepsi
International Bottlers, LLC, (ii) incremental recurring corporate
administrative expenses, (iii) interest expense on $ of debt expected to
be outstanding after giving effect to the offering at an estimated interest
rate of % and (iv) PepsiCo's % minority interest in Bottling LLC. The
pro forma combined balance sheet data gives effect to the offering and to
debt of $ expected to be outstanding after the offering and the October
1998 acquisition of Pepsi-Cola Allied Beverages, Inc., as if such
transactions had actually occurred on September 5, 1998.

(3) Pro forma earnings per share is based upon an assumed million shares of
capital stock to be outstanding after the offering.

23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

GENERAL

We are the world's largest manufacturer, seller and distributor of
carbonated and non-carbonated Pepsi-Cola beverages, accounting for 54% of the
Pepsi-Cola beverages sold in North America and 32% worldwide. We have the
exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in all
or a portion of 39 states, the District of Columbia, eight Canadian provinces,
Spain, Greece and Russia. Approximately 93% of our volume is sold in North
America and approximately 88% of our net sales are derived from the sale of
Pepsi-Cola beverages.

COMPETITION. The liquid refreshment beverage business is highly
competitive. Carbonated soft drink products compete not only with each other,
but also with non-carbonated beverages sold in bottles and cans such as waters,
shelf-stable juices and juice drinks, sports drinks and ready-to-drink tea and
coffee drinks. In addition, liquid refreshment beverages compete with other
beverages, including milk, beer and non-packaged beverages such as tap water.
Our competitors in the liquid refreshment beverage industry include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. The industry competes
primarily on the basis of advertising to create brand awareness, price and price
promotions, retail space management, customer service, consumer points of
access, new products, packaging innovations and distribution methods.

PEPSICO'S OWNERSHIP INTEREST. Following the offering, PepsiCo will own %
of our outstanding common stock ( % if the underwriters' over-allotment option
is exercised in full) and 100% of our outstanding Class B common stock, together
representing % of the voting power of all classes of our voting stock. PepsiCo
will also own % of the equity of Bottling LLC, our principal operating
subsidiary, giving PepsiCo economic ownership of % of our combined operations
( % if the underwriters' over-allotment option is exercised in full).

FINANCIAL STATEMENTS. Our Combined Financial Statements and the notes
thereto, which are included elsewhere in this prospectus, reflect the results of
operations, financial condition and cash flows of the business transferred to us
from PepsiCo. Our Combined Financial Statements have been carved-out from the
financial statements of PepsiCo using the historical results of operations and
assets and liabilities of such business. Certain costs have been reflected in
the Combined Financial Statements which are not necessarily indicative of the
costs that we would have incurred had we operated as an independent, stand-alone
entity for all periods presented. Such costs include (i) allocated PepsiCo
corporate overhead, (ii) an allocation of PepsiCo interest expense and (iii)
income taxes.

- Corporate overhead related to PepsiCo's corporate administrative functions
has been allocated to us based on a specific identification of PepsiCo's
administrative costs relating to the bottling operations and, to the
extent that such identification was not practicable, based upon the
percentage of our sales to PepsiCo consolidated net sales. These allocated
costs of $39 million, $42 million and $42 million for 1995, 1996 and 1997,
respectively, have been included in selling, delivery and administrative
expenses in the Combined Statements of Operations. We believe that such
allocation methodology is reasonable. As a separate public company, we
will incur certain incremental recurring corporate administrative
expenses. See the Pro Forma Condensed Combined Financial Statements for
information regarding the effect of additional corporate overhead on a pro
forma basis.

- Interest expense included in the Combined Financial Statements reflects an
allocation of PepsiCo's interest costs based upon debt expected to be
outstanding after the offering and application of the proceeds therefrom.
Interest rates reflect PepsiCo's weighted average

24
<PAGE>
borrowing rate. Our interest rate for this debt would have been higher
during the periods presented.

- Income tax expense has been reflected in the Combined Financial Statements
as if we had actually filed a separate income tax return. In the Combined
Financial Statements, our effective tax rate is higher than the 35% U.S.
federal statutory rate. This is primarily due to state and local income
taxes, the amortization of goodwill which is not deductible for U.S.
income tax purposes, and, until 1997, an accrual for a disputed claim with
the Internal Revenue Service regarding the deductibility of the
amortization of acquired franchise rights. In the future, our effective
tax rate will depend on our structure and tax strategies as a separate,
independent company.

Cost of sales is comprised of raw materials, which include concentrates,
sweeteners, carbon dioxide and other ingredients; packaging, which is primarily
cans and plastic bottles; and other direct costs, including labor and
manufacturing overhead. Expenditures for concentrate and packaging constitute
our largest individual raw material costs, each representing approximately 45%
of our total raw material costs. We depend primarily on PepsiCo for our
concentrates and we purchase our other raw materials from multiple suppliers. We
are subject to market fluctuations in commodity pricing. PepsiCo has announced,
effective February 1999, an increase in the price of its concentrates. We expect
that the aggregate price to us of concentrates will increase by approximately 5%
in 1999, although PepsiCo has advised us that it expects that the cost of these
price increases will be offset in substantial part by anticipated increases in
marketing support and funding.

Selling, delivery and administrative expenses include labor and benefit
costs, depreciation of facilities and equipment and advertising and marketing
expenses. These expenses also include significant non-cash charges for
amortization of franchise rights, goodwill and other intangible assets.

Our fiscal year ends on the last Saturday in December and generally consists
of 52 weeks, though certain of our fiscal years will consist of 53 weeks. This
last occurred in 1994 and will next occur in 2000. Fiscal years 1995, 1996 and
1997 consisted of 52 weeks. Each of the first three quarters of each fiscal year
consists of 12 weeks and the fourth quarter consists of 16 or 17 weeks.

SEASONALITY. Our business is seasonal, with our peak season being the warm
summer months beginning with Memorial Day and ending with Labor Day. More than
90% of our operating income is typically earned in the second and third quarters
and we typically report a net loss in the first and fourth quarters. Over 75% of
cash flow from operations is typically generated in the third and fourth
quarters. Bad weather conditions during our peak selling season could adversely
affect operating income and cash flow and could therefore have a
disproportionate impact on our results for the full year.

ACQUISITIONS. In addition to growth derived from our existing territories,
we intend to pursue additional acquisitions of independent PepsiCo bottlers. In
1998, we made several acquisitions which increased our ownership of the PepsiCo
system in the U.S. from approximately 51% to 52% and in Canada from
approximately 65% to 79%. In 1998, we acquired the remaining interest in our
Russian joint venture. The unaudited Pro Forma Combined Statements of Operations
reflect these transactions as though they had been made on the first day of
fiscal 1997.

INTERNATIONAL MARKETS. Operating results in our international markets vary
considerably based on economic and industry development. In Spain and Greece,
which contribute approximately 7% of net sales and 8% of volume and provide
positive cash flow, there is low inflation, economic stability and a carbonated
soft drink industry that has been in existence for some time.

In recent years, we have invested in Russia to build infrastructure and to
fund start-up manufacturing and distribution costs. Approximately 1% of our net
sales in fiscal 1997 and 2% in the

25
<PAGE>
thirty-six weeks ended September 5, 1998 were attributable to our operations in
Russia. During such periods, operating losses amounted to $50 million and $57
million, respectively, and cash requirements for investing activities and to
fund operations were $71 million and $168 million, respectively. A substantial
portion of such cash requirements was attributable to our purchase of a 25%
interest in a Russian bottler in 1997, and our purchase of the remaining
interest in such bottler in 1998.

The recent economic turmoil in Russia has had a further adverse effect on
our results of operations, cash flows and financial condition during our fourth
fiscal quarter. Net sales in Russia are denominated in rubles, which in August
1998 experienced significant devaluation against the U.S. dollar, whereas a
substantial portion of the expenses of our Russian bottling operations are
denominated in U.S. dollars. In addition, the current Russian economic crisis
has caused a significant drop in demand resulting in lower net sales and
increased operating losses. We have taken actions to reduce our fixed cost
structure in response to these economic events. We are evaluating the extent of
impairment of our long-lived assets in Russia, which will be recorded in the
fourth quarter of fiscal 1998.

For the foreseeable future, we anticipate that our Russian operations will
incur losses and require significant amounts of cash to fund operations.
However, capital requirements will be minimal because our existing
infrastructure is adequate for current operations. We plan to review our Russian
operations on a regular basis and to consider changes in our distribution
systems and other operations as circumstances dictate.

USE OF EBITDA

As a separate entity, we will have a capital structure and financial
policies that are more appropriate for a bottling company, allowing us to make
better capital allocation and investment decisions. As an independent entity, we
will be able to shift our performance emphasis to growth in EBITDA. We believe
this shift in emphasis is appropriate given our higher levels of indebtedness
and significant non-cash depreciation and amortization charges resulting from
our capital investments and acquisitions. EBITDA should be considered in
addition to, not as a substitute for, operating income, net income, cash flows
and other measures of financial performance reported in accordance with
generally accepted accounting principles. Management's discretionary use of
funds depicted by EBITDA may be limited by working capital, debt service, tax
payment and capital expenditure requirements, and by restrictions related to
legal requirements, commitments and uncertainties.

RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations,
financial condition and cash flows should be read in conjunction with the
Combined Financial Statements and the accompanying notes appearing elsewhere in
this prospectus.

The table below sets forth, for the periods indicated, Combined Statements
of Operations data as a percentage of net sales.

<TABLE>
<CAPTION>
FISCAL YEAR THIRTY-SIX WEEKS
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Net sales...................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................................. 59.0 58.2 58.1 57.9 58.9
--------- --------- --------- --------- ---------
Gross profit................................................... 41.0 41.8 41.9 42.1 41.1
Selling, delivery and administrative expenses.................. 35.6 36.3 36.8 34.7 35.3
--------- --------- --------- --------- ---------
Operating income............................................... 5.4 5.5 5.1 7.4 5.8

EBITDA......................................................... 12.0 11.9 11.8 13.8 12.3
</TABLE>

26
<PAGE>
THIRTY-SIX WEEKS ENDED SEPTEMBER 5, 1998 COMPARED TO THIRTY-SIX WEEKS ENDED
SEPTEMBER 6, 1997

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS
--------------------------------
AMOUNTS IN MILLIONS 1997 1998 $ CHANGE % CHANGE
- ----------------------------------------------------------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.................................................. $ 4,677 $ 4,988 $ 311 6.6%
Operating income........................................... 348 292 (56) (16.1)
EBITDA..................................................... 647 612 (35) (5.4)
</TABLE>

Worldwide raw case volume grew 7% with North America increasing 6% and
international increasing 20%. Excluding the impact of acquisitions, volume
increased 5% and 7% in our North American and international markets,
respectively. Strong increases in Pepsi-Cola beverages, led by MOUNTAIN DEW, and
expanded U.S. distribution of AQUAFINA bottled water, coupled with growth in
LIPTON BRISK and MUG drove the growth in volume.

Worldwide net sales growth of 6.6% was fueled by strong volume gains,
acquisitions of bottlers in Russia and North America and favorable pricing.
Volume gains contributed five percentage points of net sales growth. Unfavorable
foreign currency fluctuations, primarily in Spain and Canada, reduced net sales
growth by one percentage point, while bottler acquisitions contributed two
percentage points to net sales growth. Pricing improvements were primarily a
result of favorable mix shifts.

For the first thirty-six weeks of 1998, our operating income declined $56
million or 16.1% as compared to the same period in 1997. Strong worldwide volume
growth in all markets and improved pricing/product mix were more than offset by
higher raw material costs, increases in selling and delivery expenses associated
with significant investments in cold drink equipment (primarily vending machines
and coolers) and higher losses in Russia.

- Cost of sales as a percentage of net sales increased from 57.9% in 1997 to
58.9% in 1998, because of higher concentrate and sweetener costs which
were partially offset by lower plastic bottle costs.

- Selling, delivery and administrative expenses increased $139 million or
8.6% in 1998. These expenses grew faster than volume largely because we
continued our program of heavy investment in vending machines and coolers,
consistent with our long-term strategy to increase our presence in the
cold drink channel of the industry in North America. Year-to-date spending
on vending machines and coolers at customer locations in North America is
approximately 8% higher than the comparable period in 1997, driving
increases in the costs associated with placing, depreciating and servicing
these assets. Information system costs incurred to remediate Year 2000
issues also contributed to selling, delivery and administrative cost
growth. See "--Year 2000" below.

- In early 1998, we acquired the remaining 80% interest in our Russian joint
venture. We had higher operating losses in Russia for the first thirty-six
weeks of 1998 compared to the same period in 1997 because in 1998 we
reflected 100% of the losses incurred by our Russian joint venture in our
financial results.

EBITDA for the first thirty-six weeks of 1998 declined $35 million or 5.4%
as compared to the same period in 1997. This decline in EBITDA was lower than
the decline in operating income due primarily to a significant increase in
depreciation expense resulting from our investments in cold drink equipment
which reduced our operating income.

INTEREST EXPENSE, NET

Weighted average interest expense increased $6 million or 4.3% for the first
thirty-six weeks in 1998 over the comparable period in 1997, reflecting an
increase in PepsiCo's average borrowing rate.

27
<PAGE>
INCOME TAX EXPENSE

Our effective tax rate for the first thirty-six weeks of 1998 was 52.1%
compared to 46.6% for the comparable period in 1997. The change was due
primarily to reduced income from our operations, which when coupled with the
same level of non-deductible items produced a higher effective tax rate.

FISCAL 1997 COMPARED TO FISCAL 1996

<TABLE>
<CAPTION>
AMOUNTS IN MILLIONS 1996 1997 $ CHANGE % CHANGE
- ------------------------------------------------------------------------ --------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales............................................................... $ 6,603 $ 6,592 $ (11) (0.2)%
Operating income........................................................ 363 337 (26) (7.2)
EBITDA.................................................................. 788 776 (12) (1.5)
</TABLE>

Worldwide raw case volume grew 3% reflecting 4% growth in our North American
markets driven by strong performance from MOUNTAIN DEW, LIPTON BRISK and MUG
offset by an 8% decline in our international markets. Our international volume,
excluding our St. Petersburg, Russia operations, which we sold in 1997, was 4%
lower than in the prior year.

Worldwide net sales in 1997 declined by 0.2% compared to 1996. Volume gains
contributed four percentage points of net sales growth. Pricing declines
resulting from the competitive pricing environment in North America offset
volume growth by approximately two percentage points. In addition, the combined
effect of unfavorable foreign currency fluctuations, primarily in Spain, and the
sale of our St. Petersburg, Russia operations also reduced net sales growth by
two percentage points.

Operating income in 1997 declined $26 million or 7.2% as compared to 1996.
Results were impacted by significant competitive pricing pressures in our North
American markets and lower international volumes. These items more than offset
the positive North American volume growth and lower raw material costs in the
majority of our markets.

- Cost of sales as a percentage of net sales improved from 58.2% in 1996 to
58.1% in 1997. Significant declines in aluminum, plastic bottles and
sweetener costs in 1997 were greater than the effect of the decline in
pricing on net sales.

- Selling, delivery and administrative expenses increased $27 million or
1.1% in 1997, somewhat slower than volume growth. Beginning in 1997, we
began a multi-year investment in vending machines and coolers to increase
our North American presence in the cold drink channel. However, financial
support received from PepsiCo for this initiative more than offset the
incremental costs for placement and servicing of this equipment.

EBITDA in 1997 declined $12 million or 1.5% as compared to 1996. This
decline was lower than the decline in operating income due to increases in
depreciation expense associated with our cold drink investment strategy.

INTEREST EXPENSE, NET

In 1997, net interest expense decreased $3 million or 1.5% due primarily to
external debt reductions in our international markets.

INCOME TAX EXPENSE

Our effective tax rate in 1997 was 47.0% compared to 61.1% in 1996. The
change was due primarily to no longer accruing for a disputed claim with the
Internal Revenue Service regarding deductibility of the amortization of acquired
franchise rights because we made substantial progress towards a satisfactory
resolution of the dispute. The other significant factor contributing to the
change was the increased tax benefit from our international operations.

28
<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995

<TABLE>
<CAPTION>
AMOUNTS IN MILLIONS 1995 1996 $ CHANGE % CHANGE
- ------------------------------------------------------------------------ --------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales............................................................... $ 6,393 $ 6,603 $ 210 3.3%
Operating income........................................................ 349 363 14 4.0
EBITDA.................................................................. 767 788 21 2.7
</TABLE>

Worldwide raw case volume grew 3% due to growth in North America. The volume
growth in North America was attributable to growth in brand PEPSI, MOUNTAIN DEW
and MUG. International volume growth was flat with volume gains in Russia offset
by declines in Spain and Greece.

Worldwide net sales grew 3.3% primarily attributable to North American
volume gains and modest price increases. Improved pricing was a result of higher
prices across most packages in the first half of the year, partially offset by
lower can pricing in the second half of the year in our North American markets.
Additionally, our Spain and Greece markets had higher pricing on most package
sizes in 1996.

Operating income grew by $14 million or 4.0% in 1996 as compared to 1995.
Volume growth, lower raw material costs and improved pricing in our U.S. and
Canadian markets were partially offset by higher selling, delivery and
administrative expenses across all of our markets.

- Cost of sales as a percentage of net sales improved from 59.0% in 1995 to
58.2% in 1996 due to lower plastic bottle and sweetener costs.

- Selling, delivery and administrative expenses increased $123 million or
5.4% in 1996, which was more than volume growth. The increase was the
result of higher expenses incurred to support key information technology
initiatives including new selling tools and systems to support the
centralization of our North American credit and collection functions and
expenses incurred to increase operating efficiencies in Spain.

EBITDA in 1996 increased $21 million or 2.7% as compared to 1995. This
increase was higher than the increase in operating income due to higher
depreciation expense in 1996.

INTEREST EXPENSE, NET

Net interest expense decreased $13 million or 5.9% in 1996 primarily
reflecting a decrease in PepsiCo's average borrowing rate.

INCOME TAX EXPENSE

In 1996, our effective tax rate of 61.1% was slightly higher than our
effective tax rate of 60.8% in 1995. There was no significant change in the
various factors that impacted these rates.

LIQUIDITY AND CAPITAL RESOURCES

FINANCING

Our capital investments and acquisitions have been financed by cash flow
from operations and advances from PepsiCo. Under PepsiCo's centralized cash
management system, PepsiCo deposited sufficient cash in our bank accounts to
meet our daily obligations, and withdrew excess funds from those accounts. These
transactions are included in advances from PepsiCo in the Combined Balance
Sheets and Combined Statements of Cash Flows.

We are currently in the process of negotiating a bank credit facility which
we anticipate will provide $ of revolving credit capacity. We expect these
arrangements to be finalized prior to the offering.

29
<PAGE>
The debt levels prior to the offering are not necessarily indicative of our
debt levels as a separate, independent entity.

Based upon current and anticipated levels of operations, we believe that our
cash on hand and cash flow from operations, combined with borrowings available
under the proposed bank facility, will be sufficient to enable us to meet our
current and anticipated cash operating requirements, capital expenditures and
working capital needs for the foreseeable future. However, actual capital
requirements may change, particularly as a result of any acquisition which we
may make. Our ability to meet current and anticipated operating requirements
will depend upon our future performance, which, in turn, will be subject to
general economic and competitive conditions and to financial, business and other
factors, some of which may be beyond our control.

CAPITAL EXPENDITURES

We have incurred and will require capital for (i) ongoing infrastructure,
including investment in developing markets and (ii) acquisitions.

- Our business requires substantial infrastructure investments to maintain
our existing level of operations and to fund investments targeted at
growing our business. Capital infrastructure expenditures totaled $358
million, $418 million and $472 million during 1995, 1996 and 1997,
respectively, and $325 million and $356 million for the first thirty-six
weeks of 1997 and 1998, respectively. We believe that capital
infrastructure spending will continue to be significant, driven by our
increased investment in the cold drink channel. We anticipate investing
approximately $ billion in infrastructure over the next three years.

- We intend to pursue acquisitions of independent PepsiCo bottlers in North
America, particularly in territories contiguous to our own, and expect
that PepsiCo will help us identify these bottlers. These acquisitions will
enable us to provide better service to our large retail customers as well
as to reduce costs through economies of scale. We also plan to evaluate
international acquisition opportunities as they become available.

CASH FLOWS

THIRTY-SIX WEEKS ENDED SEPTEMBER 5, 1998 COMPARED TO THIRTY-SIX WEEKS ENDED
SEPTEMBER 6, 1997

Net cash provided by operations for the thirty-six weeks ended September 5,
1998 was $275 million compared with $252 million for the comparable period in
1997 due to the favorable effect of a three year insurance prepayment to a
PepsiCo affiliate in 1997.

Net cash used for investments was $623 million in the thirty-six weeks ended
September 5, 1998, as compared to $341 million for the comparable period in
1997. In 1998, $269 million was utilized for the acquisition of bottlers in the
U.S., Canada and Russia. In addition, we continued to make investments in cold
drink equipment in North America.

The net cash used for investments in 1998 was financed through normal
operating activities, advances from PepsiCo and proceeds from short and
long-term borrowings. The total net cash provided by financing activities for
the thirty-six weeks ended September 5, 1998 was $318 million.

FISCAL 1997 COMPARED TO FISCAL 1996

Net cash provided by operations in 1997 increased to $560 million from $463
million in 1996. This improvement was driven by a focus on working capital
management, partially offset by prepayment of insurance to an affiliate of
PepsiCo.

Net cash used for investments was $564 million in 1997, as compared to $376
million in 1996. In 1997, we began an initiative to significantly increase the
amount of cold drink equipment in North

30
<PAGE>
America. Also contributing to this increase were additional investments made in
the Russian joint venture and increased payments for non-current and other
assets.

In 1997, we received $149 million in advances from PepsiCo. This financing
was primarily used to repay short and long-term borrowings and make capital
investments. Our remaining capital needs were funded by normal operating
activities.

FISCAL 1996 COMPARED TO FISCAL 1995

Net cash provided by operations in 1996 increased to $463 million from $443
million in 1995 in line with earnings growth.

Net cash used for investments was $376 million in 1996, as compared to $355
million in 1995. This increase represents higher capital expenditures partially
offset by cash provided from the sale of bottling operations.

The net cash used for investments in 1996 was financed through normal
operating activities. With the additional cash generated through operating
activities we paid down our advances from PepsiCo. The net cash used in
financing activities was $78 million in 1996.

MARKET RISKS

We are exposed to various market risks including (i) commodity prices, (ii)
interest rates on our debt and (iii) foreign exchange rates.

COMMODITY PRICES

We are subject to market risks with respect to commodities because our
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate.

INTEREST RATES

Historically, we have had no material interest rate risk associated with
debt used to finance our operations due to limited third party borrowings.
Subsequent to the offering, we intend to manage our interest rate exposure using
both financial derivative instruments and a mix of fixed and floating interest
rate debt.

FOREIGN EXCHANGE

Operating in international markets involves exposure to movements in
currency exchange rates. Currency exchange rate movements typically also affect
economic growth, inflation, interest rates, government actions and other
factors. These changes can cause us to adjust our financing and operating
strategies. The discussion below of changes in currency exchange rates does not
incorporate these other economic factors. For example, the sensitivity analysis
presented in the foreign exchange discussion below does not take into account
the possibility that rates can move in opposite directions and that gains from
one category may or may not be offset by losses from another category.

Operations outside the U.S. constitute approximately 16% of our net sales.
As currency exchange rates change, translation of the statements of operations
of our international businesses into U.S. dollars affects year-over-year
comparability. We have not hedged translation risks because cash flows from
international operations have generally been reinvested locally, nor
historically have we entered into hedges to minimize the volatility of reported
earnings. We estimate that a 10% change in foreign exchange rates would affect
reported operating income by less than $5 million.

31
<PAGE>
Foreign exchange gains and losses reflect transaction and translation gains
and losses arising from the re-measurement into U.S. dollars of the net monetary
assets of businesses in highly inflationary countries. Russia is considered a
highly inflationary economy for accounting purposes and all foreign exchange
gains and losses are included in the Combined Statements of Operations.

On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between their existing currencies ("legacy
currencies") and one common currency, the Euro. The Euro trades on currency
exchanges and may be used in business transactions. Conversion to the Euro
eliminated currency exchange rate risk between member countries. Beginning in
January 2002, new Euro-denominated bills and coins will be issued, and legacy
currencies will be withdrawn from circulation.

Spain is one of the member countries that instituted the Euro and we have
established plans to address the issues raised by the Euro currency conversion.
These issues include, among others, the need to adapt computer and financial
systems, business processes and equipment such as vending machines, to
accommodate Euro-denominated transactions and the impact of one common currency
on cross-border pricing. Since financial systems and processes currently
accommodate multiple currencies, we do not expect the system and equipment
conversion costs to be material. Due to numerous uncertainties, we cannot
reasonably estimate the long-term effects one common currency may have on
pricing, costs and the resulting impact, if any, on financial condition or
results of operations.

YEAR 2000

We have established teams to identify and correct Year 2000 issues.
Information technology systems with non-compliant code are expected to be
modified or replaced with systems that are Year 2000 compliant. Similar actions
are being taken with respect to systems embedded in manufacturing and other
facilities. The teams are also charged with investigating the Year 2000
readiness of suppliers, customers and other third parties and with developing
contingency plans where necessary.

Key information technology systems have been inventoried and assessed for
compliance, and detailed plans are in place for required system modifications or
replacements. Remediation and testing activities are well underway with
approximately 83% of the systems already compliant. This percentage is expected
to increase to 95% and 99% by the end of the first and second quarters of 1999,
respectively. Inventories and assessments of systems embedded in manufacturing
and other facilities are in progress and expected to be complete by year-end;
remediation began in the fourth quarter of 1998 with a mid-year 1999 target
completion date. Independent consultants are monitoring progress against
remediation programs and performing tests at certain key locations. In addition,
the progress of the programs is also monitored by senior management and the
boards of directors of PepsiCo and PBG.

Our most significant exposure arises from our dependence on high volume
transaction processing systems, particularly for production scheduling,
inventory cost accounting, purchasing, customer billing and collection, and
payroll. We anticipate that any corrective actions to these applications will be
completed by the end of the second quarter in 1999.

We have identified critical suppliers, customers and other third parties and
have begun to survey their Year 2000 remediation programs. Risk assessments and
contingency plans, where necessary, will be finalized in the second quarter of
1999.

Incremental costs directly related to Year 2000 issues are estimated to be
$49 million, of which $20 million was spent in the first thirty-six weeks of
1998, and $8 million of which was spent in 1997. Approximately one-half of the
total estimated spending represents costs to modify existing systems. This
estimate assumes that we will not incur any costs on behalf of our suppliers,
customers or other third parties. These costs will not necessarily increase our
normal level of spending on information technology due to the deferral of other
projects to enable us to focus on Year 2000 remediation.

32
<PAGE>
Contingency plans for Year 2000 related interruptions are being developed
and will include, but not be limited to, the development of emergency backup and
recovery procedures, remediation of existing systems parallel with installation
of new systems, replacement of electronic applications with manual processes,
identification of alternate suppliers and an increase in raw material and
finished goods inventory levels. All plans are expected to be completed by the
end of the second quarter in 1999.

Our most likely potential risk is a temporary inability of suppliers to
provide supplies or raw materials or of customers to pay on a timely basis.

Our Year 2000 efforts are ongoing and our overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While we anticipate no major interruption to our business
activities, that will depend, in part, on the ability of third parties to be
Year 2000 compliant. Although we have implemented the actions described above to
address third party issues, we have no direct ability to ensure compliance
action by such parties. Accordingly, while we believe our actions in this regard
should have the effect of lessening Year 2000 risks, we are unable to eliminate
such risks or to estimate the ultimate effect of Year 2000 risks on our
operating results.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. We are currently assessing
the effects of adopting SFAS 133, and have not yet made a determination of the
impact on our financial position or results of operations. SFAS 133 will be
effective for our first quarter of year 2000.

33
<PAGE>
BUSINESS

The brands we sell are some of the best recognized trademarks in the world
and include PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW, LIPTON BRISK, LIPTON'S ICED
TEA, 7UP (outside the U.S.), PEPSI MAX, PEPSI ONE, SLICE, MUG, AQUAFINA,
STARBUCKS FRAPPUCCINO and MIRINDA, which we bottle under licenses from PepsiCo
or PepsiCo joint ventures. In some of our territories, we also have the right to
manufacture, sell and distribute soft drink products of other companies,
including DR PEPPER and 7UP (in the U.S.). During the period from 1992 through
1997, the volume of Pepsi-Cola beverages sold in our U.S. territories, measured
in equivalent cases, grew at a compound annual rate of approximately 4%.

THE LIQUID REFRESHMENT BEVERAGE INDUSTRY

OVERVIEW

We believe we are well positioned to capitalize on industry trends in the
liquid refreshment beverage industry. Liquid refreshment beverage annual retail
sales in 1997 were more than $72 billion in North America, and included
carbonated soft drink products, as well as non-carbonated beverages sold in
bottles and cans, such as waters, shelf-stable juices and juice drinks, sports
drinks and tea and coffee drinks. This industry does not include alcoholic or
dairy beverages or waters, coffees or teas that are not packaged and
ready-to-drink.

34
<PAGE>
The following chart sets forth the category mix by volume for the U.S.:

1997 CATEGORY MIX BY VOLUME--U.S. LIQUID REFRESHMENT BEVERAGE INDUSTRY

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
SPORTS DRINKS 3%
<S> <C>
Ready-to-drink Tea and Coffee 3%
Bottled Water 16%
Shelf-stable Juices and Juice
Drinks 8%
Carbonated Soft Drinks 70%
</TABLE>

Source: Beverage World

The owners of beverage brands either manufacture and sell products
themselves or appoint bottlers to sell, distribute and, in some cases,
manufacture these products pursuant to licenses. Brand owners, such as PepsiCo,
generally own both the beverage trademarks and the secret formulas for the
concentrates, which they also manufacture and sell to their licensed bottlers.
Brand owners also develop new products and packaging for use by their bottlers.
Brand owners develop national marketing, promotion and advertising programs to
support their brands and brand image, and lead and coordinate selling efforts
with respect to national fountain, supermarket and mass merchandising accounts.
They also provide local marketing support to their bottlers.

Bottlers, such as PBG, are generally responsible for manufacturing, selling
and distributing their products under the brand names they license from brand
owners in their exclusive territories. For carbonated soft drink products, the
bottler combines soft drink concentrate with sweeteners and carbonated water and
packages this mixture in bottles or cans. Bottlers may also have licenses to
manufacture syrup for sale to fountain accounts. Under these licenses, bottlers
combine soft drink concentrate with sweeteners to manufacture syrup for delivery
to fountain customers. For non-carbonated beverages, the bottler either
manufactures and packages such products or purchases such products in finished
form and sells them through its distribution system.

The primary distribution channels for the retail sale of products in the
beverage industry are supermarkets, mass merchandisers, vending machines,
convenience and gas stores, fountain (such as restaurants or cafeterias) and
other (for example, small groceries, drug stores and educational institutions).
Channel mix refers to the relative size of the various distribution channels
through which beverage products are sold. The largest channel in North America
is supermarkets but the fastest growing channels have been mass merchandisers,
fountain and convenience and gas stores.

35
<PAGE>
The following chart sets forth the carbonated soft drink channel mix by
volume in the U.S.:

1997 U.S. CARBONATED SOFT DRINK CHANNEL MIX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
VENDING 11%
<S> <C>
Mass Merchandisers 8%
Supermarkets and Other Retail 44%
Fountain 25%
Convenience and Gas Stores 12%
</TABLE>

Source: Beverage Marketing Corporation

Depending upon the size of the bottler and the particular market, a bottler
delivers products through these channels using either a direct-to-store delivery
system or a warehouse system. In a direct-to-store delivery system, a bottler
delivers its product to a store, stocks the store's shelves and orders
additional product when needed by the store. In a warehouse system, the bottler
delivers beverages to a warehouse, and then the retailer or a third party
delivers the product to a store. In its exclusive territories, each bottler is
responsible for selling products and providing timely service to its existing
customers and identifying and obtaining new customers. Bottlers are also
responsible for local advertising and marketing, as well as the execution in
their territories of national and regional selling programs instituted by brand
owners. The bottling business is capital intensive. Manufacturing operations
require specialized high-speed equipment, and distribution requires extensive
placement of cold drink, vending and fountain equipment as well as investment in
trucks and warehouse facilities.

The soft drink bottling industry in North America consists of three bottling
networks: (1) the PepsiCo system, which includes PBG, Whitman Corporation and
other independent PepsiCo bottlers, (2) the Coca-Cola system, which includes CCE
and Coca-Cola Bottling Co. Consolidated, as well as other independent Coca-Cola
bottlers and (3) the smaller independent bottlers of brands not associated with
either PepsiCo or Coca-Cola.

36
<PAGE>
INDUSTRY TRENDS

We believe that the following are the significant trends in the industry:

- GROWTH IN BEVERAGE SALES

Liquid refreshment beverage sales have grown in recent years and this
growth is expected to continue. From 1992 to 1997, average annual
equivalent case sales of liquid refreshment beverages in the U.S.
increased 4%. Carbonated soft drink sales increased 3% and non-carbonated
soft drink sales increased 13% per annum over the same period.

- CHANGES IN LIFESTYLE

The emergence of an "on-the-go" lifestyle in developed countries has
resulted in increased dining out and demand for ready-to-drink beverages
instead of drinks prepared at home. In addition, consumers are demanding
packages that are easy to carry, close and reuse and that are available
at convenient locations. Consumers are also increasingly shifting to
bottled or canned soft drinks, waters and teas from hot coffee, milk and
tap water. As a result, convenience, packaging and product innovation
have become important factors in consumers' purchasing decisions. To
capitalize on this trend, bottlers and brand owners are (1) making
products easier to purchase and more readily available for consumption by
expanding points of access, especially for cold single-serve products,
(2) creating innovative packaging and (3) developing new products.

The market for cold drinks sold for immediate consumption is one of
the fastest growing segments in the liquid refreshment beverage industry
in North America. Since a key to making a sale is having products close
at hand, pursuing sales opportunities requires the placement of equipment
that keeps products cold (vending machines, visi-coolers and fountain
dispensers) in a location where the consumer is likely to purchase a
drink. As a result, bottlers, especially PBG and CCE, are investing
significant capital to increase the number of cold drink vending machines
and coolers in the marketplace. Locations include restaurants,
convenience and gas stores, schools and businesses and supermarkets and
video stores. Since 1995, the number of vending machines in the U.S.
marketplace has increased more than 35%.

Innovations in packaging have also addressed consumers' desire for
convenience. Over the last 30 years, a variety of new sizes, shapes and
configurations of packaging has been introduced. For instance, use of the
20 ounce plastic bottle has become increasingly popular because of its
larger size and resealable cap, which allows for better portability in a
single-serve package.

In the past five years, the number of new product introductions in
the liquid refreshment beverage industry has increased to satisfy
consumers' desire for a wider choice of flavors and products. New
products have included bottled teas, waters, juices, new age drinks and
sports drinks, as well as new carbonated soft drinks. From 1992 to 1997,
the volume of non-carbonated beverages in the U.S. has grown more than
80%, from approximately 700 million equivalent cases to 1.3 billion
equivalent cases.

- CONSOLIDATION OF BOTTLERS

The bottling industry has experienced significant consolidation in
recent years. The reasons for this consolidation are the need to generate
economies of scale and cost savings and the need to better sell to and
service large regional and national accounts, such as supermarkets,
restaurants and mass merchandisers, which have themselves been
consolidating. Consolidation has also been driven by the estate planning
needs of family-owned independent bottlers and competitive pressures to
invest in manufacturing, distribution and information systems. We believe
that these factors will result in continued consolidation of the bottling
industry.

37
<PAGE>
- INCREASE IN INTERNATIONAL OPPORTUNITIES

Per capita carbonated soft drink beverage consumption varies
considerably around the world. In 1997, U.S. per capita consumption was
859 eight ounce servings. International per capita consumption is
dramatically lower than in North America. However, in many international
markets consumption is growing rapidly. The following chart sets forth
per capita consumption of carbonated soft drinks in selected countries:

CARBONATED SOFT DRINK CONSUMPTION PER CAPITA IN 1997

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COUNTRIES IN WHICH WE OPERATE
<S> <C>
U.S. 859
Mexico 495
Canada 460
UK 336
Greece 281
Spain 227
Poland 141
Russia 65
China 17
8 OZ. SERVINGS PER YEAR
</TABLE>

Generally, in international markets the variety of soft drink
products is not as broad and the distribution channels are less developed
than in North America. In many markets outside North America, soft drinks
are established products but many opportunities for volume growth remain
through basic improvements in distribution infrastructure, packaging
innovation, the introduction of cold drink equipment and, in developed
countries, modern large store merchandising and promotional techniques.

Given the relatively low per capita consumption levels of carbonated
soft drinks outside North America, bottlers in international markets are
increasingly focused on opportunities to grow through expansion of their
distribution channels and product and packaging innovation. We believe
that the greatest potential for volume growth lies in several
less-developed markets, including Eastern Europe, Russia, China and
India. In these markets, bottlers are attempting to take advantage of
increases in consumers' disposable income, shifts in consumers' tastes to
soft drinks and, in certain countries, the development of the local
economy and its retail trade and infrastructure. Significant investments
are being made in these markets by PepsiCo and others to develop basic
infrastructure and build brand awareness.

STRATEGY

38
<PAGE>
We have designed our strategy to enable us to achieve our goals of growing
EBITDA, earning a return on our investments in excess of our cost of capital and
increasing our market share. The key elements of our strategy include:

- INCREASE COLD DRINK AVAILABILITY

We intend to continue to invest significantly in placements of
vending machines and coolers to increase cold drink availability in the
marketplace. The market for cold drinks sold from vending machines and
coolers for immediate consumption is one of the fastest growing and most
profitable segments within the liquid refreshment beverage industry in
North America because of the emergence of an on-the-go lifestyle and the
consumer's desire for convenience. This market is particularly attractive
for us because the gross margins for product sold through cold drink
equipment are significantly higher than those from sales of products for
consumption at home. In the U.S., beverages sold cold constituted
approximately 30% of our volume and 35% of our net sales in fiscal 1997.
Since the key to making the sale is having our products close at hand,
pursuing this sales opportunity requires the placement of equipment that
keeps our product cold (vending machines, visi-coolers and fountain
dispensers) in a location where consumers live, work or play. Because
consumers frequently desire to take the product with them, we have
installed vending machines that can dispense the larger single-serve 20
ounce plastic bottles, which can be resealed and can be easily carried.
In 1997, we began to increase significantly our placement of cold drink
equipment, doubling the spending for new pieces of equipment placed in
the market as compared to the prior year. In addition, we added almost
300 employees in positions designed to service the equipment in the
market. In 1998, we placed approximately 250,000 new pieces of equipment
into the market. We expect to continue this rapid pace of investment over
the next several years.

- PURSUE NORTH AMERICAN ACQUISITIONS

We expect to play a key role in the consolidation of PepsiCo's North
American bottling system. We intend to pursue acquisitions of independent
PepsiCo bottlers in North America, particularly in territories contiguous
to our own, and expect that PepsiCo will help us identify and acquire
these bottlers. In North America, we own 54% of the PepsiCo bottling
system in terms of 1998 equivalent case sales, and more than 100 bottlers
own the remaining 46%. Under the Pepsi Beverage Agreements, we may
acquire independent PepsiCo bottlers in a significant portion of the
remaining 46% of North America, subject to PepsiCo's approval. These
acquisitions will enable us to provide better service to our large retail
customers as well as to reduce costs through economies of scale.

- INCREASE PRODUCTIVITY

We are undertaking a number of initiatives to reduce costs by
improving productivity and operating efficiencies. Over the last two
years, in North America, we have been engaged in a manufacturing and
warehousing productivity program designed to maximize the capacity and
efficiency of our production and warehousing labor and assets. As a
result of this program, our manufacturing line efficiency increased 13%,
resulting in lower annual operating costs and in capital investment
savings. We expect to complete the first phase of this program by the end
of 1999, and have already begun planning for a second phase, which we
believe will generate additional labor and asset productivity gains by
further improving our product supply chain management, from buying raw
materials to stocking retailers' shelves.

- EXPAND BUSINESS WITH OUR KEY RETAIL CUSTOMERS

In addition to adding points of access for cold drinks, we intend to
grow our business with key retail customers. Our principal method will be
to improve our retail presence through

39
<PAGE>
increased promotional frequency and in-store product inventory--on the
shelf, on display and in the cooler--while remaining price competitive.
In 1998, we reorganized our field sales teams to provide dedicated focus
on large retail customers, small retail customers and on-premise or cold
drink accounts. We believe this step will enable us to provide
significantly better customer service and will stimulate growth.

We believe our "category management" selling technique and "Power of
One" approach to marketing provide us with a competitive advantage in
retail chains. Our category management selling approach involves
recommending to our retailers merchandising strategies and retail space
allocation policies for a portfolio of beverage categories, as opposed to
a specific brand. These policies maximize the strength and profitability
of the entire beverage category for the retailer, and not just a
particular brand. Given the strength of the products we distribute in
channels where the consumer is free to choose any brand, we believe the
category management approach aligns our objectives with those of the
retailer and constitutes a competitive advantage.

In the last two years, we have expanded our joint selling and
promotional efforts with PepsiCo's snack division, Frito-Lay, a concept
we call "Power of One." This includes take home promotional and display
programs in supermarkets as well as single serve promotions in
convenience and gas stores (such as combo pricing for a snack and
beverage). The synergies of soft drinks and salty snacks and Frito-Lay's
strength in the salty snack category make this combination a competitive
advantage.

- CAPITALIZE ON DISTRIBUTION AND BRAND STRENGTHS

We intend to take advantage of opportunities to increase our
penetration in our exclusive territories and capitalize on the strength
of PepsiCo's brand portfolio, which are some of the world's best
recognized trademarks. For instance, MOUNTAIN DEW has been the fastest
growing major soft drink brand in the U.S. over the last ten years and is
now the fourth largest carbonated soft drink brand (after Coca-Cola,
PEPSI-COLA and Diet Coke) in terms of equivalent cases sold in the U.S.
It is larger than Sprite and more than twice the size of 7UP.
Nevertheless, there remain many markets and distribution channels where
MOUNTAIN DEW is under-represented. In addition, we intend to build upon
the initial success of PEPSI ONE, our new one calorie cola which was
introduced across the United States in October 1998. Although AQUAFINA
only reached national distribution in 1998, it is already the number two
bottled water in convenience and gas stores and number six in
supermarkets. AQUAFINA presents significant opportunities for sales
expansion because the bottled water segment is highly fragmented and
growing rapidly. Our non-carbonated soft drink portfolio, in addition to
AQUAFINA, includes the number one ready-to-drink packaged tea (LIPTON)
and the only national ready-to-drink coffee beverage (STARBUCKS
FRAPPUCCINO). Taken together, our broad product portfolio provides an
advantage in selling to many customers.

In the U.S. in 1997, the Pepsi-Cola beverages we sell had a 31% share
of the carbonated soft drink market as compared to the brands of
Coca-Cola, which had a 44% share. However, excluding fountain sales,
where the consumer typically does not have a choice due to exclusive
agreements, the market share difference narrowed significantly, with
Pepsi-Cola beverages having 25% and Coca-Cola brands having 28%,
according to our estimates. In convenience and gas stores, where retail
pricing, packaging and presentation are generally similar among brands,
and therefore consumers are free to choose based on brand preference and
taste, Pepsi-Cola beverages had the leading share, with 40%, as compared
to 36% for Coca-Cola brands.

40
<PAGE>
- GROW OUR INTERNATIONAL BUSINESS

Internationally, low per capita consumption levels present
opportunities for volume growth. We will implement distribution and
marketing initiatives tailored to each of our international markets in
order to take advantage of these opportunities. We intend to improve our
operating and financial performance in Spain and Greece. Spain and Greece
currently have per capita consumption of carbonated soft drinks of about
230 and 280 eight ounce servings per year, respectively, less than
one-third the U.S. per capita consumption. With low inflation, economic
stability and a well-established carbonated soft drink industry, Spain
and Greece offer many opportunities with respect to channel development
and product and package innovation. Since a significant and growing
portion of the volume is sold through supermarkets and hypermarkets,
there is opportunity to grow sales with modern merchandising and
promotional programs focused on specific target audiences.

We intend to improve our results in Russia, where infrastructure
investments and the recent economic crisis have resulted in losses. In
Russia, which is the world's seventh most populous nation, per capita
consumption of carbonated soft drinks is only about 65 eight ounce
servings per year, less than 10% of the U.S. per capita consumption. For
per capita consumption growth to occur in Russia, our products need to be
affordable for a large part of the population. Accordingly, we have taken
steps to streamline our Russian operations and control costs in order to
lower prices. Although the current economic and social situation in
Russia presents significant challenges, we believe we have the expertise
to take advantage of the longer-term opportunities Russia presents. We
also plan to evaluate international acquisition opportunities as they
become available. See "Risk Factors--Social, Political and Economic Risks
Affecting Our Foreign Operations and Effects of Foreign Currency
Fluctuations" for a discussion of the current economic situation in
Russia.

PRODUCTS AND PACKAGING

Our portfolio of beverage products includes some of the best recognized
trademarks in the world. While the majority of our volume is derived from brands
licensed from PepsiCo and PepsiCo joint ventures, we also sell and distribute
brands licensed from others. Our principal beverage brands are set forth below:

<TABLE>
<CAPTION>
NORTH AMERICA SPAIN GREECE RUSSIA
- ---------------------------------------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
BRANDS LICENSED
BRANDS LICENSED FROM PEPSICO BRANDS LICENSED
FROM PEPSICO JOINT VENTURES FROM OTHERS BRANDS LICENSED FROM PEPSICO
- -------------------- -------------------- -------------------- ----------------------------------------------------------------
PEPSI-COLA LIPTON BRISK 7UP(2) PEPSI-COLA PEPSI-COLA PEPSI-COLA
DIET PEPSI LIPTON'S ICED TEA DIET 7UP(2) PEPSI-COLA LIGHT PEPSI-COLA LIGHT 7UP
MOUNTAIN DEW STARBUCKS DR PEPPER PEPSI MAX PEPSI MAX 7UP LIGHT
DIET MOUNTAIN DEW FRAPPUCCINO(2) HAWAIIAN 7UP 7UP MIRINDA (flavors)
CAFFEINE FREE PEPSI PUNCH(2) 7UP LIGHT 7UP LIGHT KAS (flavors and
CAFFEINE FREE DIET SCHWEPPES KAS (juices, flavors IVI (waters and mixers)
PEPSI OCEAN and mixers) flavors)
7UP(1) SPRAY RADICAL FRUIT
7UP LIGHT(1)
PEPSI ONE(2)
PEPSI MAX (3)
WILD CHERRY PEPSI(2)
SLICE(2)
MUG
AQUAFINA
ALL SPORT
</TABLE>

- ------------------------

(1) The 7UP brand is owned by PepsiCo in Canada and by Cadbury Schweppes in the
U.S.

(2) U.S. only

(3) Canada only

41
<PAGE>
Pepsi-Cola beverages have an approximately 29% share of the United States
liquid refreshment beverage market and an approximately 31% share of the United
States carbonated soft drink market. International market share measurements are
less precise and change rapidly, particularly in developing markets. However,
Pepsi-Cola beverages sold by us occupy a leading position in their category in
each of our international markets. Pepsi-Cola consistently wins taste tests
versus its primary competitor and has the leading market share in convenience
and gas stores. Our three largest brands in terms of volume are PEPSI-COLA, DIET
PEPSI and MOUNTAIN DEW, which together account for 78% of our volume in the U.S.
as shown in the chart below:

1997 PBG U.S. BRAND MIX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
DIET PEPSI PEPSI OTHER MOUNTAIN DEW
<S> <C> <C> <C>
17% 44% 22% 17%
</TABLE>

Our beverages are available in different package types, including two liter,
one liter and 20 ounce bottles, and multi-packs of 6, 12, and 24 cans. Syrup is
also sold in larger packages for fountain use. In our international markets,
more than 75% of our equivalent case volume is sold in cans or in non-returnable
plastic bottles. Cans are the dominant package in the U.S., however, use of the
resealable 20 ounce bottle has grown rapidly in the convenience and gas store
channel where it is now 24% of raw cases sold in bottles and cans.

TERRITORIES

We have the exclusive right to manufacture, sell and distribute Pepsi-Cola
beverages in all or a portion of 39 states, the District of Columbia, eight
Canadian provinces, Spain, Greece and Russia. Our sales of Pepsi-Cola beverages
account for 54% of the Pepsi-Cola beverages sold in North America and 32%
worldwide.

42
<PAGE>
[MAP TO BE INSERTED SHOWING PBG'S TERRITORIES IN THE U.S.]

In the U.S., where we bottle about 54% of total Pepsi-Cola beverages sold,
our strongest regions include the northern New England states, the Mid-Atlantic
states, Michigan and certain South Western states, as well as parts of northern
and central California. We sold approximately 80% of the volume of equivalent
cases of all Pepsi-Cola beverages sold in Canada. Our strongest regions in
Canada are Quebec and the Maritime Provinces, where we have a market share of
approximately 40%.

We focus on local market execution because there can be substantial
differences with respect to share position, trade structure, channel mix and
package mix not only between our international and North American markets but
also within the North American market itself. For example, our share of the
combined supermarket, drug store and mass merchandise channels of carbonated
soft drink beverages ranges from a low of 13% in Houston to 50% in Pittsburgh.
In most markets, our share ranges from 25% to 35%.

43
<PAGE>
SALES, MARKETING AND DISTRIBUTION

Our sales and marketing approach varies by region and channel to respond to
the unique local competitive environment. For us, the fastest growing channels
are mass merchandisers, convenience and gas stores and vending. Developing a
sales and marketing plan that manages channel mix and package mix is critical to
our success. The following chart shows the relative importance of our U.S.
distribution channels by volume:

PBG U.S. 1997 RAW CASE VOLUME CHANNEL MIX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
SUPERMARKETS AND OTHER RETAIL 49%
<S> <C>
Fountain 20%
Convenience and Gas Stores 12%
Vending 12%
Mass Merchandisers 7%
</TABLE>

In North America, the channels with larger stores can accommodate a number
of beverage suppliers and, therefore, marketing efforts tend to focus on
increasing the amount of shelf space and the number of displays in any given
outlet. In locations where our products are purchased for immediate consumption,
marketing efforts are aimed not only at securing the account but also on
providing equipment that facilitates the sale of cold product, such as vending
machines, visi-coolers and fountain equipment.

An important aspect of our sales and marketing strategy involves working
closely with PepsiCo to ensure that the mix of new products and packages it is
developing meets the needs of customers in our particular markets. Product
introductions such as PEPSI ONE, a one calorie cola launched in the fourth
quarter of 1998, and AQUAFINA, PepsiCo's water brand, which achieved national
distribution in 1998, further strengthen our portfolio of products. Package mix
is an important consideration in the development of our marketing plans.
Although some packages are more expensive to produce, in certain channels those
packages may have a higher and more stable selling price. For example, packaged
product that is sold cold for immediate consumption generally has better margins
than product sold to take home.

On a local level, we market our products with a number of specific programs
and promotions, including sweepstakes, product tie-ins, associations with
entertainment or athletic events, and joint marketing programs with local
retailers. In addition, we have programs with local schools, universities and
businesses through which we support certain programs or pay sponsorship fees in
exchange for vending and fountain rights. We also implement local advertising
campaigns on a cooperative basis with PepsiCo and work with PepsiCo on local
media plans and signage promotions.

In North America, we distribute directly to a majority of customers in our
licensed territories through a direct-to-store distribution system. Our
approximately 10,000 member sales force is key to our selling efforts because
its members interact continually with our customers to promote and sell our
products. The members of our sales force deliver products on company-owned
trucks directly to our

44
<PAGE>
retail customers. They then arrange the product on the shelves, build any
displays previously agreed upon with the retailer and take the next delivery
order. To ensure they have selling incentive, a large part of our route
salesmen's compensation is made up of commissions based on revenues. Although
route salesmen are responsible for selling to their customers, in certain
markets and channels we use a pre-sell system, where we call accounts in advance
to determine how much product to deliver and whether we will provide any
additional displays. We are in the process of expanding this system because it
is efficient and cost effective for many accounts. In our efforts to obtain new
accounts we use 700 retail sales representatives who are responsible for calling
on prospective new accounts, developing relationships, selling accounts and
interacting with such accounts on an ongoing basis.

In North America, this direct-to-store system is used for all packaged goods
and some fountain accounts. We deliver fountain syrup to local customers in
large containers rather than in packaged form. We have the exclusive right to
sell and deliver fountain syrup to local customers in our territories. We have
400 managers who are responsible for calling on prospective fountain accounts,
developing relationships, selling accounts and interacting with accounts on an
ongoing basis. We also serve as PepsiCo's exclusive delivery agent in our
territories for PepsiCo national fountain account customers that request
direct-to-store delivery. We are also the exclusive equipment service agent for
all of PepsiCo's national account customers in our territories.

We believe our distribution system is highly effective. For example, we
introduced PEPSI ONE in October 1998 and within four weeks achieved more than
80% distribution in the convenience and gas store, mass merchandise and
supermarket channels in our exclusive territories in the United States.

In international markets, we use both direct-to-store distribution system
and third party distributors. In the early stages of market development, it is
more common to use third party distributors. As the market grows and reaches
critical mass, there is generally a move toward direct-to-store distribution
systems.

In the less developed international markets, small format retail outlets
play a larger role. However, with the emergence of larger, more sophisticated
retailers in Spain and Greece, the marketing focus is increasingly similar to
that of North America.

RAW MATERIALS AND MANUFACTURING

Expenditures for concentrate and packaging constitute our largest individual
raw material costs, each representing approximately 45% of our total raw
material costs.

We buy various soft drink concentrates from PepsiCo and other soft drink
companies whose products we bottle, and mix them in our plants with other
ingredients, including carbon dioxide and sweeteners. Artificial sweeteners are
included in the concentrates we purchase for diet soft drinks. The product is
then bottled in a variety of containers ranging from 12 ounce cans to two-liter
plastic bottles to various glass packages, depending on market requirements.

In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials and carbon
dioxide. We generally purchase our raw materials, other than concentrates, from
multiple suppliers. The Pepsi Beverage Agreements provide that, with respect to
the soft drink products of PepsiCo, all authorized containers, closures, cases,
cartons and other packages and labels may be purchased only from manufacturers
approved by PepsiCo.

We manufacture soft drink products using state-of-the-art processes that
produce high quality finished products. The first step of the manufacturing
process is to combine concentrate with sweeteners and other ingredients. Cans or
bottles are then conveyed to a filling area, where syrups from the mixing tanks
are combined with purified water. The liquid is then carbonated and filled at
speeds frequently in excess of 1,200 cans per minute. Sealed cans and bottles
are imprinted with date codes that permit us to monitor and replace inventory to
provide fresh products.

45
<PAGE>
INFORMATION TECHNOLOGY

Information technology systems are critical to our ability to manage our
business. Every day, on average, in the U.S., more than 7,000 trucks are
dispatched to make deliveries to our customers. Our information technology
systems enable us to coordinate this activity, from production scheduling and
raw material ordering to truck routing and loading and customer delivery and
invoicing.

We depend upon standardized systems that can be maintained centrally but are
available for decision making by our front line employees. We believe this is
the most effective strategy to make the most of our significant investment in
information technology. We also believe that several recent initiatives have
significantly contributed to our ability to service customers, reduce costs and
improve efficiency.

- HANDHELD SALES COMPUTERS. Handheld computers are used by all of our route
salesmen in North America and have been upgraded to provide customer
sales trends, pricing and promotional information.

- CUSTOMER SERVICE CENTER. Customer support activities in the U.S. such as
telephone selling, billing and collection have been centralized in one
location to best utilize investments in technology, people and process.

- CUSTOMER EQUIPMENT TRACKING SYSTEM. With the significant investment in
cold drink equipment, our customer equipment tracking system enables us
to track equipment and coordinate service needs in the U.S., minimizing
lost sales and equipment down-time.

See "Risk Factors--Year 2000 Risk" for a discussion of how the Year 2000
problem will affect our information technology systems.

COMPETITION

The liquid refreshment beverage business is highly competitive. Carbonated
soft drink products compete not only with each other, but also with
non-carbonated beverages sold in bottles and cans such as waters, shelf-stable
juices and juice drinks, sports drinks and ready-to-drink tea and coffee drinks.
In addition, liquid refreshment beverages compete with other beverages,
including milk, beer and non-packaged beverages such as tap water. Our
competitors in the liquid refreshment beverage industry include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. We estimate that in 1997 the
carbonated soft drink products of PepsiCo represented 31% of total carbonated
soft drink sales in the United States. We estimate that in each U.S. territory
in which we operate, between 65% and 85% of soft drink sales from supermarkets,
drug stores and mass merchandisers are accounted for by us and our major
competitor--CCE or the local Coca-Cola bottler. The industry competes primarily
on the basis of advertising to create brand awareness, price and price
promotions, retail space management, customer service, consumer points of
access, new products, packaging innovations and distribution methods. We believe
that brand recognition is a primary factor affecting our competitive position.

EMPLOYEES

As of December 1998, we employed approximately 36,900 full-time workers, of
whom approximately 33,000 were employed in North America and approximately
11,500 of whom were union members. We consider relations with our employees to
be good and have not experienced significant interruptions of operations due to
labor disagreements.

We have 159 contracts with our union employees worldwide, which expire at
various times over the next five years. There are contracts covering
approximately 1,000 employees that are up for renewal in 1999.

46
<PAGE>
PROPERTIES

We operate 72 soft drink production facilities, eight of which are solely
production facilities and 64 of which are combination production/distribution
facilities. We also operate 296 distribution facilities. We believe that our
bottling, canning and syrup filling lines and our distribution facilities are
sufficient to meet present needs.

We also own or lease and operate more than 16,500 vehicles, including
delivery trucks, delivery and transport tractors and trailers and other trucks
and vans used in the sale and distribution of our soft drink products. We also
own or lease approximately 1.3 million soft drink dispensing and vending
machines.

In addition, we sublease our headquarters in Somers, New York from PepsiCo.

We believe that our properties are in good operating condition and are
adequate to serve our current operational needs.

LEGAL PROCEEDINGS

From time to time we are a party to various litigation matters incidental to
the conduct of our business. There is no pending or threatened legal proceeding
to which we are a party that, in the opinion of management, is likely to have a
material adverse effect on our future financial results.

GOVERNMENTAL REGULATION

Our operations and properties are subject to regulation by various federal,
state and local governmental entities and agencies as well as foreign government
entities. As a producer of food products, we are subject to production,
packaging, quality, labeling and distribution standards in each of the countries
where we have operations, including, in the United States, those of the federal
Food, Drug and Cosmetic Act. The operations of our production and distribution
facilities are subject to various federal, state and local environmental laws
and workplace regulations both in North America and abroad. These laws and
regulations include, in the United States, the Occupational Safety and Health
Act, the Unfair Labor Standards Act, the Clean Air Act, the Clean Water Act and
laws relating to the maintenance of fuel storage tanks. We believe that our
current legal and environmental compliance programs adequately address such
concerns and that we are in substantial compliance with applicable laws and
regulations. We do not anticipate making any material expenditures in connection
with environmental remediation and compliance. However, compliance with, or any
violation of, current and future laws or regulations could require material
expenditures by us or otherwise have a material adverse effect on our business,
financial condition and results of operations.

BOTTLE AND CAN LEGISLATION

In all but a few of our United States and Canadian markets, we offer our
bottle and can beverage products in non-returnable containers. Legislation has
been enacted in certain states and Canadian provinces where we operate that
generally prohibits the sale of certain beverages unless a deposit is charged
for the container. These include Connecticut, Delaware, Maine, Massachusetts,
Michigan, New York, Oregon and California and British Columbia, Alberta,
Saskatchewan, Manitoba, New Brunswick, Nova Scotia and Quebec.

Maine, Massachusetts and Michigan have statutes that require us to pay all
or a portion of unclaimed container deposits to the state and California imposes
a levy on beverage containers to fund a waste recovery system.

In addition to the Canadian deposit legislation described above, Ontario,
Canada currently has a regulation requiring that 30% of all soft drinks sold in
Ontario be bottled in refillable containers. This regulation is currently being
reviewed by the Ministry of the Environment.

The European Commission has issued a packaging and packing waste directive
which is in the process of being incorporated into the national legislation of
the member states. This will result in

47
<PAGE>
targets being set for the recovery and recycling of household, commercial and
industrial packaging waste and impose substantial responsibilities upon bottlers
and retailers for implementation.

We are not aware of similar material legislation being proposed or enacted
in any other areas served by us. We are unable to predict, however, whether such
legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.

SOFT DRINK EXCISE TAX LEGISLATION

Specific soft drink excise taxes have been in place in certain states for
several years. The states in which we operate that currently impose such a tax
are West Virginia, Arkansas, North Carolina, South Carolina, Tennessee and, with
respect to fountain syrup only, Washington. Although soft drink excise tax
legislation is currently in place in North Carolina and South Carolina, new
legislation has been enacted that phases out such taxes by the end of the year
2000 in North Carolina and 2002 in South Carolina.

Value-added taxes on soft drinks vary in our territories located in Canada,
Spain, Greece and Russia, but are consistent with the value-added tax rate for
other consumer products.

We are not aware of any material soft drink taxes that have been enacted in
any other market served by us. We are unable to predict, however, whether such
legislation will be enacted or what impact its enactment would have on our
business, financial condition or results of operations.

TRADE REGULATION

As a manufacturer, seller and distributor of bottled and canned soft drink
products of PepsiCo and other soft drink manufacturers in exclusive territories
in the United States and internationally, we are subject to antitrust laws.
Under the Soft Drink Interbrand Competition Act, soft drink bottlers operating
in the United States, such as us, may have an exclusive right to manufacture,
distribute and sell a soft drink product in a geographic territory if the soft
drink product is in substantial and effective competition with other products of
the same class in the same market or markets. We believe that there is such
substantial and effective competition in each of the exclusive geographic
territories in which we operate.

Our operations in Spain and Greece are subject to the antitrust laws of the
European Union, Spain and Greece. As a result of antitrust laws in the European
Union, the beverage agreements applicable in Spain, unlike the Pepsi Beverage
Agreements relating to our U.S. operations, do not prohibit the transshipment of
Pepsi-Cola beverages into our exclusive territories in response to unsolicited
orders. Our operations in Russia are subject to the trade practices laws of
Russia.

CALIFORNIA LEGISLATION

A California law requires that any person who exposes another to a
carcinogen or a reproductive toxin must provide a warning to that effect.
Because the law does not define quantitative thresholds below which a warning is
not required, virtually all manufacturers of food products are confronted with
the possibility of having to provide warnings due to the presence of trace
amounts of defined substances. Regulations implementing the law exempt
manufacturers from providing the required warning if it can be demonstrated that
the defined substances occur naturally in the product or are present in
municipal water used to manufacture the product. We have assessed the impact of
the law and its implementing regulations on our beverage products and have
concluded that none of our products currently require a warning under the law.
We cannot predict whether or to what extent food industry efforts to minimize
the law's impact on food products will succeed. We also cannot predict what
impact, either in terms of direct costs or diminished sales, imposition of the
law may have.

48
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding our executive
officers, senior management and Directors, as of January 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Craig E. Weatherup................................... 53 Chairman of the Board, Chief Executive Officer and
Director
Craig D. Jung........................................ 45 Chief Operating Officer
John T. Cahill....................................... 41 Executive Vice President, Chief Financial Officer and
Director
Pamela C. McGuire.................................... 51 Senior Vice President, General Counsel and Secretary
Margaret D. Moore.................................... 51 Senior Vice President and Treasurer
Peter A. Bridgman.................................... 46 Senior Vice President and Controller

SENIOR MANAGEMENT:
Donald W. Blair...................................... 40 Senior Vice President, Finance
Kevin L. Cox......................................... 35 Senior Vice President and Chief Personnel Officer
Gary K. Wandschneider................................ 46 Senior Vice President, Operations
</TABLE>

DIRECTORS

Our certificate of incorporation provides that the number of Directors may
be altered from time to time by a resolution adopted by our Board of Directors.
However, the number of Directors may not be less than two nor more than fifteen.

The following individuals have agreed to serve as Directors of PBG. They
will hold office until the first annual meeting of our stockholders after the
offering, which is expected to be held in 2000.

CRAIG E. WEATHERUP, 53, is the Chairman of our Board and our Chief Executive
Officer, and has served as a Director of PepsiCo since 1996. Prior to becoming
our Chairman and Chief Executive Officer, he served as Chairman and Chief
Executive Officer of the Pepsi-Cola Company since July 1996. He was appointed
President of the Pepsi-Cola Company in 1988, President and Chief Executive
Officer of Pepsi-Cola North America in 1991, and served as PepsiCo's President
in 1996. Mr. Weatherup is also a director of Federated Department Stores, Inc.
and Starbucks Corporation.

JOHN T. CAHILL, 41, is our Executive Vice President and Chief Financial
Officer. He held the same position at the Pepsi-Cola Company from March until
November 1998. Prior to that, Mr. Cahill was Senior Vice President and Treasurer
of PepsiCo, having been appointed to that position in April 1997. Mr. Cahill
joined PepsiCo in 1989, became Senior Vice President, Finance and Chief
Financial Officer for KFC Corporation (a former subsidiary of PepsiCo) in 1993,
and in 1996 he became Senior Vice President and Chief Financial Officer of
Pepsi-Cola North America.

We intend to elect additional Directors who are officers of PepsiCo and
Directors who are independent of PepsiCo and us prior to the consummation of
the offering.

BOARD COMPENSATION AND BENEFITS

Employee Directors will not receive additional compensation for serving on
our Board of Directors. Non-employee Directors will receive an annual grant of
$75,000 worth of our common stock,

49
<PAGE>
and will receive no cash compensation. Directors may convert their annual stock
grant into options to purchase our common stock at a ratio of options for
each share of common stock. Options will be granted at fair market value at the
grant date and be exercisable for ten years. Directors may also defer payment of
their stock grant. The deferral will be in our common stock equivalents.
Non-employee Directors will also receive a one-time $25,000 grant of our common
stock at the initial public offering price, which shares may not be sold until a
Director retires or resigns from our Board of Directors. Directors will not
receive retirement, health or insurance benefits.

COMMITTEES OF THE BOARD

Our Board has established an Audit Committee, an Executive Development and
Compensation Committee (the "Compensation Committee"), a Nominating Committee
and an Affiliated Transactions Committee. The members will all be non-employee
Directors.

AUDIT COMMITTEE. The Audit Committee will: (i) recommend to the Board the
selection, retention or termination of our independent auditors; (ii) approve
the level of non-audit services provided by the independent auditors; (iii)
review the scope and results of the work of our internal auditors; (iv) review
the scope and approve the estimated cost of the annual audit; (v) review the
annual financial statements and the results of the audit with management and the
independent auditors; (vi) review with management and the independent auditors
the adequacy of our system of internal accounting controls; (vii) review with
management and the independent auditors the significant recommendations made by
the auditors with respect to changes in accounting procedures and internal
accounting controls; and (viii) report to the Board on the results of its review
and make such recommendations as it may deem appropriate.

COMPENSATION COMMITTEE. The Compensation Committee will: (i) administer our
Long-Term Incentive Plan, Executive Incentive Compensation Plan and related
plans; (ii) approve, or refer to the Board of Directors for approval, changes in
such plans and the compensation programs to which they relate; and (iii) review
and approve the compensation of our senior executives.

NOMINATING COMMITTEE. The Nominating Committee will: (i) identify
candidates for future Board membership; (ii) develop criteria for selection of
candidates for election as Directors; (iii) propose to the Board a slate of
Directors for election by the stockholders at each annual meeting; and (iv)
propose to the Board candidates to fill Board vacancies as they occur.

AFFILIATED TRANSACTIONS COMMITTEE. The Affiliated Transactions Committee
will review and approve any transaction between us and PepsiCo, or any entity in
which PepsiCo directly or indirectly has a 20% or greater ownership interest,
where such transaction is other than in the ordinary course of business and has
a value of more than $10 million. No member of this Committee will be an
employee of PBG or PepsiCo.

EXECUTIVE OFFICERS

In addition to Messrs. Weatherup and Cahill, the following persons are
executive officers of PBG:

CRAIG D. JUNG, 45, is our Chief Operating Officer. After joining PepsiCo
more than 12 years ago, Mr. Jung worked in a variety of domestic and
international operating assignments at Frito-Lay. He was named a Vice President
of Sales at Frito-Lay in 1992, and became President of Hostess Frito-Lay in
Canada in 1994. He joined Pepsi-Cola International as the Business Unit General
Manager for South America in 1996, and was named President of the Pepsi-Cola
Bottling Co. in 1997.

PAMELA C. MCGUIRE, 51, is our Senior Vice President, General Counsel and
Secretary. Ms. McGuire has had more than twenty years' experience in the
beverage business, serving as Vice

50
<PAGE>
President and Division Counsel of Pepsi-Cola since 1989, and, in March 1998, she
was named Vice President and Associate General Counsel of the Pepsi-Cola
Company.

MARGARET D. MOORE, 51, is our Senior Vice President and Treasurer. In
addition to serving in PepsiCo's Treasury, Planning and Human Resources
Departments from 1973 to 1986, Ms. Moore has been PepsiCo's Vice President,
Investor Relations, since 1987. Ms. Moore is also a director of Michael Foods,
Inc.

PETER A. BRIDGMAN, 46, is our Senior Vice President and Controller. Mr.
Bridgman had been Vice President and Controller of the Pepsi-Cola Company since
1992, and had previously been Controller and Finance Director at Pepsi-Cola
International.

SENIOR MANAGEMENT

DONALD W. BLAIR, 40, is our Senior Vice President of Finance. Mr. Blair was
Pepsi-Cola International's Vice President of Finance from 1993 until 1996, when
he joined Pizza Hut, Inc., a former subsidiary of PepsiCo, as Vice President,
Planning. In 1997, he became Chief Financial Officer of the Pepsi-Cola Bottling
Company.

KEVIN L. COX, 35, is our Senior Vice President and Chief Personnel Officer.
Mr. Cox has served as Director, Organizational Capability and Sales Development
in the Pepsi-Cola Company from 1994 to 1995, and as Vice President,
Organizational Capability from 1996 to 1997. Prior to assuming his present
position, he was Senior Vice President, Human Resources, Pepsi-Cola Bottling Co.

GARY K. WANDSCHNEIDER, 46, is our Senior Vice President, Operations, a
position he held with the Pepsi-Cola Company since 1997. He also served as Vice
President, Manufacturing and Logistics from 1995 to 1997, and, in 1994, as a
General Manager of two of Pepsi-Cola's business units.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

All of our capital stock is currently owned by PepsiCo and therefore none of
our executive officers or Directors own any of our capital stock. Certain
officers, including the executive officers named in the Summary Compensation
Table below, will be granted options to purchase shares of our common stock. No
Director or executive officer will own in excess of 1% of our common stock.

EXECUTIVE COMPENSATION

Prior to the offering, all compensation paid to our executive officers was
paid by PepsiCo, Inc., and was attributable, at least in part, to services
provided to PepsiCo's bottling business.

The following table sets forth information concerning the compensation paid
to our Chief Executive Officer and our four other most highly compensated
executive officers (our "named executive officers") during our fiscal year ended
December 26, 1998.

51
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1998
LONG-TERM
1998 ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- -----------
<S> <C> <C> <C> <C>
AWARDS
-----------

<CAPTION>
PEPSICO
SECURITIES
OTHER ANNUAL UNDERLYING
SALARY BONUS COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION ($) ($) ($) (#)
- ------------------------------------------------- ------ ------ ------------------- -----------
<S> <C> <C> <C> <C>
Craig E. Weatherup
Chairman and Chief Executive Officer........... (2) 156,486

Craig D. Jung
Chief Operating Officer........................ 53,625

John T. Cahill
Executive Vice President and Chief Financial
Officer........................................ 51,490

Margaret D. Moore
Senior Vice President and Treasurer............ 31,428

Pamela C. McGuire
Senior Vice President, General Counsel and
Secretary...................................... 17,066

<S> <C> <C>
PAYOUTS
-------------------

LONG-TERM
INCENTIVE ALL OTHER
PLAN PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($)(1)
- ------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Craig E. Weatherup
Chairman and Chief Executive Officer........... 0 (3)
Craig D. Jung
Chief Operating Officer........................ 0
John T. Cahill
Executive Vice President and Chief Financial
Officer........................................ 0
Margaret D. Moore
Senior Vice President and Treasurer............ 0
Pamela C. McGuire
Senior Vice President, General Counsel and
Secretary...................................... 0
</TABLE>

- ------------------------

(1) We pay a portion of the annual cost of life insurance policies on the lives
of certain of our key employees. These amounts are included here. If a
covered employee dies while employed by us, we are reimbursed for our
payments from the proceeds of the policy.

(2) This amount includes from the use of corporate transportation in 1998.

(3) Of this amount, $ is for life insurance (see note (1)) and $ is
preferential earnings on income deferred by Mr. Weatherup since 1986. In
order to earn a preferential return, Mr. Weatherup elected a risk feature
under which, if he terminated his employment, he would forfeit all his
deferred income.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning grants of stock
options made to the named executive officers during the Company's fiscal year
ended December 26, 1998. All grants relate to PepsiCo capital stock.

52
<PAGE>
PEPSICO OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
------------------------------------------------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE 5%($)(2) 10%($)(2)
- -------------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
Craig E. Weatherup.................... 156,486 0.968 $ 36.50 1/31/08 3,592,082 9,103,041
Craig D. Jung......................... 53,625 0.332 $ 36.50 1/31/08 1,230,943 3,179,452
John T. Cahill........................ 51,490 0.319 $ 36.50 1/31/08 1,181,935 2,995,256
Margaret D. Moore..................... 31,428 0.194 $ 36.50 1/31/08 721,419 1,828,217
Pamela C. McGuire..................... 17,066 0.101 $ 36.50 1/31/08 391,744 992,757
</TABLE>

- ------------------------

(1) These options become exercisable on February 1, 2001.

(2) The 5% and 10% rates of appreciation were set by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, of
PepsiCo's capital stock. If PepsiCo's capital stock does not increase in
value, then the option grants described in the table will be valueless.

PEPSICO OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

The following table sets forth information concerning option exercises with
respect to PepsiCo capital stock by the named executive officers during our
fiscal year ended December 26, 1998.

AGGREGATED PEPSICO OPTION EXERCISES IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END MONEY OPTIONS AT FY-END (1)
ACQUIRED ON VALUE ------------------------- ----------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ------------ ------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig E. Weatherup..... 565,057 $18,521,040 1,236,237 1,830,688 $ 31,842,378 $ 35,810,676
Craig D. Jung.......... 0 0 114,958 162,311 2,666,813 1,403,184
John T. Cahill......... 0 0 209,523 153,858 5,242,681 1,416,124
Margaret D. Moore...... 26,751 770,488 131,119 87,730 3,085,501 864,181
Pamela C. McGuire...... 26,917 770,657 125,799 58,364 3,219,509 610,244
</TABLE>

- ------------------------

(1) The closing price of PepsiCo capital stock on December 24, 1998, the last
trading day prior to PepsiCo's fiscal year end, was $40.4375 per share.

53
<PAGE>
LONG-TERM INCENTIVE PLAN

PEPSICO LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
-----------------------------------
<S> <C> <C> <C> <C> <C>
NUMBER OF DATE OF
PERFORMANCE MATURATION OR
NAME UNITS PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------------------- --------------- --------------- ----------- ---------- ----------
Craig E. Weatherup......................... n/a 2/1/01
Craig D. Jung.............................. n/a 2/1/01
John T. Cahill............................. n/a 2/1/01
Margaret D. Moore.......................... n/a 2/1/01
Pamela C. McGuire.......................... n/a 2/1/01
</TABLE>

PENSION PLANS

Many of our salaried employees have been participants in PepsiCo's Salaried
Employees Retirement Plan. At or prior to the consummation of the offering, we
intend to adopt a PBG Salaried Employees Retirement Plan and a PBG Pension
Equalization Plan on terms substantially similar to the comparable PepsiCo
plans.

Under the PBG plan, when an executive retires at the normal retirement age
(65), the approximate annual benefits payable after January 1, 1999 for the
following pay classifications and years of service are:

<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------
REMUNERATION 20 25 30 35 40
- ------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 250,000
$ 500,000
$ 750,000
$ 1,000,000
$ 1,250,000
$ 1,500,000
$ 1,750,000
$ 2,000,000
$ 2,250,000
$ 2,500,000
</TABLE>

The pay covered by the pension plans noted below is based on the salary and
bonus shown in the Summary Compensation Table on page for each of the named
executive officers. The years of credited service as of January 1, 1999 for the
named executive officers are as follows:

years for Mr. Weatherup; years for Mr. Jung;
years for Mr. Cahill; years for Ms. Moore; and
years for Ms. McGuire.

NEW STOCK-BASED AND INCENTIVE PLANS

PBG LONG-TERM INCENTIVE PLAN

GENERALLY. The PBG Long-Term Incentive Plan (the "PBG LTIP") has been
approved by our Board of Directors and by PepsiCo as our sole stockholder. The
PBG LTIP provides for the grant of various types of long-term incentive awards
to key employees. These awards may include non-qualified options to purchase
shares of our common stock, performance units, incentive stock options, stock
appreciation rights and restricted stock grants. The term of the PBG LTIP is ten
years.

54
<PAGE>
ADMINISTRATION. The PBG LTIP vests broad powers in the Compensation
Committee of our Board of Directors to administer and interpret the PBG LTIP.
The Compensation Committee's powers include authority to select persons to be
granted awards, to determine terms and conditions of awards, including but not
limited to the type, size and term of awards, to determine the time when awards
will be granted and any conditions for receiving awards, to establish objectives
and conditions for earning awards, to determine whether such conditions have
been met and whether payment of an award will be made at the end of an award
period, or at the time of exercise, or deferred, and to determine whether
payment of an award should be reduced or eliminated. The PBG LTIP grants powers
to the Compensation Committee to amend and terminate the PBG LTIP.

ELIGIBILITY. Key employees of PBG and its divisions, subsidiaries and
affiliates have or will be granted awards under the PBG LTIP. The Compensation
Committee may also grant awards to employees of a joint venture or other
business in which we have a substantial investment, and may make awards to
non-executive employees who are in a position to contribute to our success.

GRANTS AS OF THE OFFERING
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE ON
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR ($/SH)(2) DATE
- --------------------------------------- ----------------- ------------------- ------------------- ---------------------

<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR
OPTION TERM
------------------------------
<S> <C> <C>
NAME 5%(3) 10%(3)
- --------------------------------------- ------ -------
</TABLE>

- ------------------------

(1) These options will be granted as of the offering date and consist of
non-qualified stock options. These options become exercisable on and
expire on .

(2) Based upon an assumed initial public offering price of $ per share, the
midpoint of the range set forth on the cover page of this prospectus.

(3) The 5% and 10% rates of appreciation were set by the Securities and Exchange
Commission and are not intended to forecast future appreciation, if any, of
our common stock. If our common stock does not increase in value, then the
option grants described in the table will be valueless.

PBG EXECUTIVE INCENTIVE COMPENSATION PLAN

GENERALLY. PBG's Executive Incentive Compensation Plan (the "PBG Incentive
Plan") has been approved by our Board of Directors and by PepsiCo as our sole
stockholder. The PBG Incentive Plan provides for executives of PBG and its
divisions and subsidiaries to be granted cash incentive awards. The term of the
PBG Incentive Plan is expected to be ten years.

ADMINISTRATION. The PBG Incentive Plan vests broad powers in the
Compensation Committee to administer and interpret the PBG Incentive Plan. The
Compensation Committee's powers include authority to select the persons to be
granted awards, to determine the time when awards will be granted, to determine
and certify whether objectives and conditions for earning awards have been met,
to determine whether payment of an award will be made at the end of an award
period or deferred, and to determine whether an award or payment of an award
should be reduced or eliminated. The PBG Incentive Plan vests broad powers in
the Compensation Committee to amend and terminate the PBG Incentive Plan.

55
<PAGE>
RELATIONSHIP WITH PEPSICO AND CERTAIN TRANSACTIONS

In 1998 and prior years, there have been significant transactions between us
and PepsiCo involving purchases of concentrate from PepsiCo, the provision of
marketing and other support by PepsiCo, as well as the provision to us of
administrative and other services by PepsiCo. See Note 15 to the notes to
Combined Financial Statements. For purposes of governing certain on-going
relationships between us and PepsiCo, we will enter into (or continue in effect)
various agreements and relationships, including those described below. The
agreements described below were negotiated in the context of our separation from
PepsiCo and therefore are not the result of arm's-length negotiations between
independent parties. There can be no assurance, therefore, that such agreements,
or the transactions provided for therein, or any amendments thereof will be on
terms at least as favorable to us as could have been obtained from unaffiliated
third parties.

Certain agreements summarized below are included as exhibits to the
registration statement of which this prospectus is a part, and the following
summaries are qualified in their entirety by reference to such exhibits which
are herein incorporated by reference.

RELATIONSHIP WITH PEPSICO AFTER THE OFFERING.

STOCK OWNERSHIP AND PARTICIPATION IN MANAGEMENT. Following the offering,
PepsiCo will own % of our outstanding common stock ( % if the underwriters'
over-allotment option is exercised in full) and 100% of our outstanding Class B
common stock, together representing % of the voting power of all classes of
our voting stock. PepsiCo will also own % of the equity of Bottling LLC,
giving PepsiCo economic ownership of % of our combined operations ( % if the
underwriters' over-allotment option is exercised in full). We have been advised
that PepsiCo has no present intention of disposing of any of the shares of our
capital stock that it will own after the offering. As a % stockholder, PepsiCo
will be able to significantly influence the outcome of all matters requiring
stockholder action. Of the persons elected to our Board, are
executive officers of PepsiCo, are former officers of PepsiCo and the
remainder are independent.

CORPORATE OPPORTUNITIES. Our certificate of incorporation provides that
PepsiCo has no duty to refrain from engaging in the same or similar activities
as we do. Our certificate also provides that PepsiCo need not communicate to us,
may pursue or acquire for itself, or may direct to another person, a corporate
opportunity, without liability to us or our stockholders.

BOTTLING AGREEMENTS. We have recently entered into a number of bottling
agreements with PepsiCo. These bottling agreements consist of: (i) the Master
Bottling Agreement for beverages bearing the "PEPSI-COLA" and "PEPSI" trademark,
including DIET PEPSI and PEPSI ONE (the "Cola Beverages") in the United States,
(ii) bottling and distribution agreements for non-cola products in the United
States (the "Non-Cola Bottling Agreements"), (iii) a Master Fountain Syrup
Agreement for fountain syrup in the United States (the "Master Syrup
Agreement"), and (iv) agreements similar to the Master Bottling Agreement and
the Non-Cola Bottling Agreements for each of Canada, Spain, Greece and Russia,
as well as a fountain syrup agreement similar to the Master Syrup Agreement for
Canada (the "Country Specific Bottling Agreements").

The Master Bottling Agreement, the Master Syrup Agreement, the Non-Cola
Bottling Agreements and the Country Specific Bottling Agreements are sometimes
referred to herein as the "Pepsi Beverage Agreements."

Set forth below is a description of the Pepsi Beverage Agreements and other
bottling agreements to which we are a party.

THE MASTER BOTTLING AGREEMENT. The Master Bottling Agreement under which we
manufacture, package, sell and distribute the Cola Beverages was entered into in
, 1999. The Master Bottling Agreement gives us the exclusive right
to distribute the Cola Beverages for sale in specified territories in authorized
containers of the nature currently used by us. The Master Bottling Agreement

56
<PAGE>
provides that we will purchase our entire requirements of concentrates for the
Cola Beverages from PepsiCo at prices, and on terms and conditions, as
determined from time to time by PepsiCo. The prices at which we purchase
concentrate under the Master Bottling Agreement and the level of advertising and
marketing support provided by PepsiCo may vary materially from the levels
provided historically. PepsiCo may determine from time to time what types of
containers to authorize for use by us. PepsiCo has no rights under the Master
Bottling Agreement with respect to the prices at which we sell our products.

Under the Master Bottling Agreement we are obligated to: (i) maintain such
plant and equipment, staff, and distribution and vending facilities as are
capable of manufacturing, packaging and distributing the Cola Beverages in
sufficient quantities to fully meet the demand for these beverages in our
territories; (ii) undertake adequate quality control measures prescribed by
PepsiCo; (iii) push vigorously the sale of the Cola Beverages in our
territories; (iv) increase and fully meet the demand for the Cola Beverages in
our territories; (v) use all approved means and spend such funds on advertising
and other forms of marketing beverages as may be reasonably required to meet the
objective, and (vi) maintain such financial capacity as may be reasonably
necessary to assure performance under the Master Bottling Agreement by us.

The Master Bottling Agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan (including the introduction of any new beverage product or
any change in the geographic area in which existing beverage products are
distributed), management plan and advertising plan with respect to the Cola
Beverages for the year. In addition we must also present a financial plan
showing that we have the financial capacity to perform our duties and
obligations under the Master Bottling Agreement, as well as projected sales,
marketing and advertising plans and related capital expenditures for the two
years following such year. PepsiCo has the right to approve such plans, which
approval shall not be unreasonably withheld.

If we carry out our plan in all material respects, we will be deemed to have
satisfied our obligations to push vigorously the sale of the Cola Beverages and
to increase and fully meet the demand for the Cola Beverages in our territories
and to maintain the financial capacity required under the Master Bottling
Agreement. Failure to present a plan or carry out approved plans in all material
respects would constitute an event of default that, if not cured within 120 days
of notice of the failure, would give PepsiCo the right to terminate the Master
Bottling Agreement.

If we present a plan that PepsiCo does not approve, such failure shall
constitute a primary consideration for determining whether we have satisfied our
obligations to maintain our financial capacity and to push vigorously the sale
of the Cola Beverages and to increase and fully meet the demand for the Cola
Beverages in our territories.

If we fail to carry out a plan in all material respects in any segment of
our territory, whether defined geographically or by type of market or outlet,
and if such failure is not cured within six months of notice of the failure,
PepsiCo may reduce the territory covered by the Master Bottling Agreement by
eliminating the territory, market or outlet with respect to which such failure
has occurred.

PepsiCo has no obligation to participate with us in advertising and
marketing spending, but it may contribute to such expenditures and undertake
independent advertising and marketing activities, as well as cooperative
advertising and sales promotion programs that would require our cooperation and
support. Although PepsiCo has advised us that it intends to continue to provide
cooperative advertising funds, it is not obligated to do so under the Master
Bottling Agreement.

The Master Bottling Agreement provides that PepsiCo may in its sole
discretion reformulate any of the Cola Beverages or discontinue any of the Cola
Beverages, subject to certain limitations, so long as all Cola Beverages are not
discontinued. PepsiCo may also introduce new beverages under the PEPSI-COLA
trademarks or any modification thereof. In such event, we will be obligated to
manufacture, package, distribute and sell such new beverages with the same
obligations as then exist

57
<PAGE>
with respect to other Cola Beverages. We are prohibited from producing or
handling cola products (other than those of PepsiCo) or other products or
packages that imitate, infringe or cause confusion with the products, trade
dress, containers or trademarks of PepsiCo. The Master Bottling Agreement also
imposes requirements with respect to the use of PepsiCo's trademarks, authorized
containers, packaging and labeling.

If we acquire control, directly or indirectly, of any bottler of Cola
Beverages, we must cause the acquired bottler to amend its bottling appointments
for the Cola Beverages to conform to the terms of the Master Bottling Agreement.

We have agreed not to acquire or attempt to acquire the right to manufacture
and sell the Cola Beverages outside a geographic area specified by the Master
Bottling Agreement without PepsiCo's prior written consent. Any acquisition
within the geographic area specified in the Master Bottling Agreement would be
subject to PepsiCo's approval, and PepsiCo has agreed not to withhold its
approval if the acquisition has been successfully negotiated and, in PepsiCo's
reasonable judgment, we have satisfactorily performed our obligations under the
Master Bottling Agreement. The geographic area in which we have agreed not to
pursue acquisitions currently represents approximately 32% of PepsiCo's U.S.
bottling system in terms of volume.

The Master Bottling Agreement is perpetual, subject to termination by
PepsiCo in the event of our default. Events of default include: (1) our
insolvency, bankruptcy, dissolution, receivership or the like, (2) any
disposition of any voting securities of one of our bottling subsidiaries or
substantially all of our bottling assets without the consent of PepsiCo, (3) our
entry into any business other than the business of manufacturing, selling or
distributing non-alcoholic beverages or any business which is directly related
and incidental to such beverage business, and (4) any material breach under the
contract that remains uncured for 120 days after notice by PepsiCo. In addition,
an event of default will occur upon the acquisition of any contract, option,
conversion privilege, or other right to acquire, directly or indirectly,
beneficial ownership of more than 15% of any class or series of our voting
securities by a person or affiliated group, without the consent of PepsiCo. If
the Master Bottling Agreement is terminated, PepsiCo also has the right to
terminate the remaining Pepsi Beverage Agreements.

We are prohibited from assigning, transferring or pledging the Master
Bottling Agreement, or any interest therein, whether voluntarily, or by
operation of law (including by merger or liquidation), without the prior consent
of PepsiCo.

The Master Bottling Agreement was entered into by us in the context of our
separation from PepsiCo and, therefore, the provisions of the Master Bottling
Agreement were not the result of arms-length negotiations. Consequently, such
agreement contains provisions that are less favorable to us than the exclusive
bottling appointments for the Cola Beverages currently in effect for independent
bottlers in the United States.

NON-COLA BOTTLING AGREEMENTS. The beverage products covered by the Non-Cola
Bottling Agreements are beverages licensed to us by PepsiCo, consisting of
MOUNTAIN DEW, DIET MOUNTAIN DEW, SLICE, MUG root beer and cream soda and ALL
SPORT. The Non-Cola Bottling Agreements contain provisions that are similar to
those contained in the Master Bottling Agreement with respect to pricing,
transshipping, authorized containers, planning, quality control, transfer
restrictions, term, and related matters. Our Non-Cola Bottling Agreements will
each terminate if PepsiCo terminates our Master Bottling Agreement. The
exclusivity provisions contained in the Non-Cola Bottling Agreements would
prevent us from manufacturing, selling or distributing beverage products which
imitate, infringe upon, or cause confusion with, the beverage products covered
by the Non-Cola Bottling Agreements. In addition, PepsiCo may elect to
discontinue the manufacture, sale or distribution of a non-cola beverage and
terminate the applicable Non-Cola Bottling Agreement upon six months notice to
us.

We also have a distribution agreement with PepsiCo pursuant to which we have
the exclusive right to distribute AQUAFINA in our territories. We have the right
to manufacture AQUAFINA in certain locations depending on the availability of
appropriate equipment. The distribution agreement contains

58
<PAGE>
provisions generally similar in effect to those in the Master Bottling Agreement
as to use of trademarks, trade names, approved containers and labels and causes
for termination. However, the distribution agreement does not preclude us from
distributing other bottled waters. The distribution agreement is for a limited
term. Upon expiration of this term, PepsiCo may issue a perpetual license
depending on whether we meet specific volume, distribution and marketing
objectives described in the distribution license.

THE MASTER SYRUP AGREEMENT. The Master Syrup Agreement grants us the
exclusive right to manufacture, sell and distribute fountain syrup to local
customers in our territories. The Master Syrup Agreement also grants us the
right to act as a manufacturing and delivery agent for national accounts within
our territories that specifically request direct-to-store delivery. In addition,
we are granted a right of first refusal to act as the manufacturer for fountain
syrup to be delivered to national accounts that elect delivery through
independent distributors. Under the Master Syrup Agreement, we will have the
exclusive right to service fountain equipment for all of the national account
customers within our territories. The Master Syrup Agreement provides that the
determination of whether an account is local or national is in the sole
discretion of PepsiCo.

The Master Syrup Agreement contains provisions that are similar to those
contained in the Master Bottling Agreement with respect to pricing,
transshipping (with respect to local customers and national customers electing
direct-to-store delivery only), planning, quality control, transfer restrictions
and related matters but is substantially different with regard to term. The
Master Syrup Agreement has an initial term of five years and is automatically
renewable for additional five year periods unless PepsiCo terminates it for
cause. PepsiCo has the right to terminate the Master Syrup Agreement without
cause at the conclusion of the initial five year period or at any time during a
renewal term upon twenty four months notice. In the event PepsiCo terminates the
Master Syrup Agreement without cause, PepsiCo is required to pay us the fair
market value of all of our rights under such agreement.

In addition, our Master Syrup Agreement will terminate if PepsiCo terminates
our Master Bottling Agreement.

OTHER BOTTLING AGREEMENTS IN THE UNITED STATES. The bottling agreements
between us and other licensors of beverage products (including Cadbury Schweppes
plc (for DR PEPPER, 7UP, SCHWEPPES and CANADA DRY) the Pepsi/Lipton Tea
Partnership (for LIPTON BRISK and LIPTON'S ICED TEA) and the North American
Coffee Partnership (for STARBUCKS FRAPPUCCINO)) contain provisions generally
similar in effect to those in the Master Bottling Agreement as to use of
trademarks, trade names, approved containers and labels, sales of imitations,
and causes for termination. Some of these beverage agreements have limited terms
of appointment and, in most instances, prohibit us from dealing in similar
beverage products.

THE COUNTRY SPECIFIC BOTTLING AGREEMENTS. The Country Specific Bottling
Agreements contain provisions similar to those contained in the Master Bottling
Agreement and the Non-Cola Bottling Agreements and, in Canada, the Master Syrup
Agreement with respect to authorized containers, planning, quality control,
transfer restrictions, causes for termination and related matters. These
bottling agreements may differ from the Master Bottling Agreement with respect
to term and contain certain provisions that have been modified in accordance
with the laws and regulations of the applicable country. For example, the
bottling agreements in Spain do not contain a proscription on the sale and
shipment of Pepsi-Cola beverages into our territory in response to unsolicited
orders.

OTHER AGREEMENTS

We have entered into, or will enter into, certain agreements with PepsiCo
described below, governing the relationships between us and PepsiCo after the
offering, and providing for the allocation of tax and certain other liabilities
and obligations relating to periods prior to and after the offering. Copies of
the forms of such agreements are filed as exhibits to the registration statement
of which this prospectus is a part. We currently estimate that the fees that we
will pay PepsiCo during fiscal 1999

59
<PAGE>
under the agreements described below will be approximately $ in the
aggregate. In addition, we anticipate that we will pay approximately $7 million
in 1999 to PepsiCo for the sublease of our headquarters in Somers, New York.

SHARED SERVICES AGREEMENT. We have entered into a Shared Services Agreement
with PepsiCo (the "Shared Services Agreement") providing for various services to
be provided by PepsiCo to us after the offering, and the fees and payment terms
for each such service. The Shared Services Agreement provides that we will have
the benefit of PepsiCo's scale and efficiencies in certain areas such as the
procurement of raw materials, transaction processing such as accounts payable
and credit and collection, certain tax and treasury services and information
technology maintenance and systems development. In addition, we will continue to
provide certain employee benefits services to PepsiCo.

TAX SEPARATION AGREEMENT. We have entered into a Tax Separation Agreement
with PepsiCo (the "Tax Separation Agreement"), on our own behalf and on behalf
of our respective consolidated tax groups, that reflects each party's rights and
obligations with respect to payments and refunds of taxes that are attributable
to periods beginning prior to and including the offering date and taxes
resulting from transactions effected in connection with the offering. The Tax
Separation Agreement also expresses each party's intention with respect to
certain of our tax attributes after the offering. The Tax Separation Agreement
provides for payments between the two companies for certain tax adjustments made
after the offering that cover pre-offering tax liabilities. Other provisions
cover the handling of audits, settlements, stock options, elections, accounting
methods and return filing in cases where both companies have an interest in the
results of these activities.

EMPLOYEE PROGRAMS AGREEMENT. We have entered into an Employee Programs
Agreement with PepsiCo (the "Employee Programs Agreement"), which allocates
assets, liabilities and responsibilities between the two parties with respect to
certain employee compensation and benefit plans and programs and certain other
related matters.

SEPARATION AGREEMENT. We have entered into a Separation Agreement with
PepsiCo (the "Separation Agreement") which provides for, among other things,
certain books, records and personnel which we and PepsiCo will make available to
each other from and after the offering. The Separation Agreement also provides
for the assumption by us of liabilities relating to our bottling businesses and
indemnification of PepsiCo with respect to such liabilities (other than the
$ of debt of Bottling LLC that has been unconditionally guaranteed by
PepsiCo).

Pursuant to the Separation Agreement, we have agreed to use our best efforts
to release, terminate or replace, prior to the offering, all letters of credit,
guarantees (other than the guarantee of the $ of debt assumed by Bottling
LLC, the "LLC Debt Guarantee") and contingent liabilities relating to our
bottling businesses for which PepsiCo is liable. Nevertheless, after the
offering, PepsiCo may remain liable for certain of such letters of credit,
guarantees and contingent liabilities which were not terminated or replaced and
from which PepsiCo was not released prior to the offering. Under the Separation
Agreement, from and after the offering we will pay a fee to PepsiCo with respect
to any such letters of credit, guarantees (other than the LLC Debt Guarantee)
and contingent liabilities, until such time as they are released, terminated or
replaced by a qualified letter of credit. We will be required to indemnify
PepsiCo with respect to such letters of credit, guarantees (other than the LLC
Debt Guarantee) and contingent liabilities.

REGISTRATION RIGHTS AGREEMENT. We have entered into a registration rights
agreement with PepsiCo which enables PepsiCo to require us to register shares of
our common stock owned by PepsiCo and to include such shares in any registration
of common stock made by us in the future. We have agreed pursuant to the terms
of the registration rights agreement to cooperate fully in connection with any
such registration and with any offering made pursuant thereto and to pay all
costs and expenses, other than underwriting discounts and commissions, related
to shares to be sold by PepsiCo in connection with any such registration.

60
<PAGE>
PRINCIPAL STOCKHOLDER

Prior to this offering, PepsiCo owned 100% of our capital stock. Following
the offering, PepsiCo will own % of our outstanding common stock ( % if the
underwriters' over-allotment option is exercised in full) and 100% of our
outstanding Class B common stock, together representing % of the voting power
of all classes of our voting stock. PepsiCo will also own % of the equity of
Bottling LLC, our principal operating subsidiary, giving PepsiCo economic
ownership of % of our combined operations ( % if the underwriters'
over-allotment option is exercised in full).

The following table sets forth, as of , 199 , the beneficial
ownership of PepsiCo's Capital Stock by each of our executive officers named in
the Summary Compensation Table, each of our directors and all of our directors
and executive officers as a group:

OWNERSHIP OF PEPSICO CAPITAL STOCK BY PBG EXECUTIVE OFFICERS AND DIRECTORS

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PEPSICO CAPITAL STOCK
NAME AND ADDRESS OF BENEFICIALLY
BENEFICIAL OWNER (1) OWNED(2)(3) PERCENT
- ------------------------------------------------------ ---------------------- -----------
<S> <C> <C>

</TABLE>

- ------------------------

(1) The number and percentage of shares beneficially owned are based on
shares of PepsiCo capital stock outstanding as of ,
199 . Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. Shares of PepsiCo
capital stock subject to options that are currently exercisable or
exercisable within 60 days of , 199 are deemed to be outstanding
and beneficially owned by the person holding such options for the purpose of
computing the number of shares beneficially owned and the percentage
ownership of such person, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table, and subject to applicable
community property laws, such persons have sole voting and investment power
with respect to all shares of the PepsiCo capital stock shown as
beneficially owned by them.

(2) Certain directors or executive officers share voting and investment power
over shares of PepsiCo capital stock with their spouses or
children. The shares shown include shares of PepsiCo capital stock
which certain directors and executive officers have a right to acquire
within 60 days.

(3) The shares shown do not include shares held by children or
spouses of directors or executive officers, or by trusts for the benefit of
directors or executive officers, as to which beneficial ownership is
disclaimed. The shares shown also include the following number of PepsiCo
capital stock equivalents, which are held in PepsiCo's deferred income
program:
; and all directors
and executive officers as a group, shares.

Directors and executive officers as a group own less than 1% of outstanding
capital stock.

61
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following summary of certain provisions of our capital stock describes
all material provisions of our certificate of incorporation and bylaws. This
summary, however, does not purport to be complete and is subject to, and
qualified in its entirety by, the certificate of incorporation and bylaws,
copies of which have been filed as exhibits to the registration statement of
which this prospectus is a part and by the provisions of applicable law.

CAPITAL STOCK

Our certificate of incorporation provides for two classes of capital stock,
common stock and Class B common stock (collectively referred to as "capital
stock"), which are substantially identical, except with respect to voting
rights. Our capital stock has no preemptive rights with respect to new stock we
issue and no redemption or sinking fund provisions. All the shares of our
capital stock to be issued upon completion of this offering will be fully paid
and non-assessable.

VOTING AND CONVERSION RIGHTS. Holders of common stock and Class B common
stock generally have identical voting rights and vote together as a single
class, except that holders of common stock are entitled to one vote per share
and holders of Class B common stock are entitled to 250 votes per share. In
addition, holders of common stock may not vote on an alteration or change in the
powers or rights of the Class B common stock that does not adversely affect the
rights of the common stock. Any amendment to our certificate of incorporation
which would alter or change the powers, preferences or rights of the common
stock or the Class B common stock must be approved by a majority of the votes
cast by holders of shares affected by the proposed amendment, voting as a class,
in addition to approval by a majority of the votes cast by holders of capital
stock.

Other than as set forth above, all matters to be voted on by stockholders
must be approved by a majority of the votes cast by holders of the outstanding
shares of common stock and Class B common stock, subject to any voting rights
granted in the future to holders of outstanding preferred stock. Holders of
capital stock may not cumulate their votes for the election of directors.

Each share of Class B common stock held by PepsiCo is, at PepsiCo's option,
convertible into one share of common stock. Any shares of Class B common stock
transferred by PepsiCo to any person other than a PepsiCo affiliate or
subsidiary will automatically convert into shares of common stock upon such
transfer.

DIVIDENDS AND DISTRIBUTIONS. Subject to the rights of the holders of
preferred stock, holders of common stock and holders of Class B common stock
shall share equally on a per share basis in any dividends or distributions
declared by our Board of Directors. In the case of dividends or distributions
payable in capital stock, only shares of common stock shall be paid or
distributed with respect to common stock and only shares of Class B common stock
shall be paid or distributed with respect to Class B common stock. The number of
shares of common stock and Class B common stock distributed on each share shall
be equal in number. The shares of common stock and Class B common stock may not
be reclassified, subdivided or combined unless such reclassification,
subdivision or combination occurs simultaneously and in the same proportion for
each class.

In the event of any dissolution, liquidation or winding up of our affairs,
after payment of amounts due to holders of preferred stock, our remaining assets
and funds shall be distributed pro rata to the holders of capital stock, and the
holders of common stock and Class B common stock shall be entitled to the same
amount per share.

MERGER. If we reorganize or consolidate or merge with another corporation,
and shares of common stock or Class B common stock are converted into shares of
stock and/or securities or property of another entity, the holders of common
stock and Class B common stock will be entitled to

62
<PAGE>
receive the same per share consideration, unless unequal consideration is
approved by a majority of the votes cast by holders of each class of capital
stock.

PREFERRED STOCK

Our Board of Directors has the authority, subject to limitations prescribed
by the Delaware General Corporation Law (the "DGCL") to authorize the issuance
of preferred stock. The preferred stock may be divided into two or more series,
with such preferences, limitations and relative rights as the Board may
determine. However, no holder of preferred stock shall be authorized or entitled
to receive, if we involuntarily liquidate, an amount in excess of $100 per share
of preferred stock. The issuance of preferred stock may have the effect of
delaying, deferring or preventing a change in control of PBG, and may adversely
affect the voting and other rights of the holders of our common stock. We have
no current plan to issue any preferred stock.

CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS

CHANGE IN CONTROL. Pursuant to the terms of our certificate of
incorporation, we have "opted-out" of Delaware's anti-takeover law. In general,
Section 203 of the DGCL prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date the person became an interested
stockholder, unless (with certain exceptions) the "business combination" or the
transaction in which the person became an interested stockholder is approved in
a prescribed manner. Generally, a "business combination" includes a merger,
asset or stock sale, or other transaction resulting in a financial benefit to
the interested stockholder. An "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years prior to
the determination of interested stockholder status, did own) 15% or more of a
corporation's voting stock, other than "interested stockholders" prior to the
time our common stock is listed on the NYSE. The existence of this provision
would be expected to have an anti-takeover effect with respect to transactions
not approved in advance by our Board of Directors, including discouraging
takeover attempts that might result in a premium over the market price for the
shares of our common stock held by stockholders.

SPECIAL MEETINGS. The bylaws provide that special meetings of stockholders
may be called at any time by our Chairman of the Board or the Board, and must be
called by our Secretary upon the written request of stockholders holding of
record at least 25% of the voting power of our capital stock issued and
outstanding and entitled to vote at such meeting. Following the offering,
PepsiCo will own capital stock representing % of the voting power of the
capital stock (without giving effect to the underwriters' exercise of their
over-allotment option). As a result, PepsiCo will be able to call a special
meeting of stockholders to consider various corporate actions.

STOCKHOLDER PROPOSALS. Our bylaws provide that for business proposed by a
stockholder (other than director nominations) to be a proper subject for action
at an annual meeting of stockholders, the stockholder must timely request that
the proposal be included in our proxy statement for the meeting and such request
must satisfy all of the provisions of Rule 14a-8 under the Securities Exchange
Act of 1934, as amended. This provision may limit the ability of stockholders to
bring business before an annual stockholders' meeting.

CORPORATE OPPORTUNITIES. Our certificate of incorporation provides that
PepsiCo shall have no duty to refrain from engaging in the same or similar
activities as we do and, except as set out below, neither PepsiCo nor any of its
officers, directors, or employees shall be liable to us or our stockholders by
reason of any such activities. In the event that PepsiCo acquires knowledge of a
potential transaction or matter which may be a corporate opportunity for both
PepsiCo and us, PepsiCo shall have no duty to communicate or offer such
corporate opportunity to us and shall not be liable to us or our stockholders
for breach of any fiduciary duty to us by reason of the fact that PepsiCo
pursues or acquires such

63
<PAGE>
corporate opportunity for itself, directs such corporate opportunity to another
person, or does not communicate information regarding such corporate opportunity
to us. PepsiCo currently owns interests in other domestic and international
bottling companies and may offer opportunities to them which may be of interest
to us.

Where corporate opportunities are offered to persons who are directors or
officers of both us and PepsiCo, our certificate of incorporation provides that
such director or officer shall have fully satisfied his or her fiduciary duty to
us and to our stockholders and will have no liability to us or our stockholders
if such person acts in a manner consistent with the following policy:

(i) a corporate opportunity offered to any person who is an officer of
PBG and also a director of PepsiCo shall belong to us; (ii) a corporate
opportunity offered to any person who is one of our directors but is not one
of our officers, and who is also a director or officer of PepsiCo, shall
belong to us if such opportunity is expressly offered to such person in
writing solely in his or her capacity as one of our directors, and otherwise
shall belong to PepsiCo; and (iii) a corporate opportunity offered to any
person who is an officer of both us and PepsiCo shall belong to us.

LIABILITY AND INDEMNIFICATION OF DIRECTORS. A provision of our certificate
of incorporation provides that, to the full extent from time to time permitted
by law, no director shall be personally liable in any action for monetary
damages for breach of any duty as a director, whether such action is brought by
us or in our right or otherwise. Neither the amendment or repeal of this
provision, nor the adoption of any provision of our certificate of incorporation
which is inconsistent with this provision, shall eliminate or reduce the
protection afforded by this provision with respect to any matter which occurred,
or any cause of action, suit or claim which, but for this provision would have
accrued or arisen, prior to such amendment, repeal or adoption.

While our certificate of incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, they do not
eliminate such duty. Accordingly, our certificate of incorporation will have no
effect on the availability of equitable remedies such as an injunction or
recission based on a director's breach of his or her duty of care.

Our certificate of incorporation also provides that we shall, to the fullest
extent from time to time permitted by law, indemnify our directors and officers
against all liabilities and expenses in any suit or proceeding, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
our behalf, including all appeals therefrom, arising out of their status as such
or their activities in any of the foregoing capacities. We shall likewise and to
the same extent indemnify any person who, at our request, is or was serving as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise, or
as a trustee or administrator under any employee benefit plan. The right to be
indemnified shall include, without limitation, the right of a director or
officer to be paid expenses in advance of the final disposition of any
proceeding upon receipt of an undertaking to repay such amount unless it shall
ultimately be determined that he or she is entitled to be indemnified. A person
entitled to indemnification shall also be paid reasonable costs, expenses and
attorneys' fees (including expenses) in connection with the enforcement of
rights to the indemnification granted. The foregoing rights of indemnification
shall not be exclusive of any other rights to which those seeking
indemnification may be entitled. Our Board of Directors may take such action as
it deems necessary or desirable to carry out the foregoing indemnification
provisions, including adopting procedures for determining and enforcing the
rights guaranteed thereby and purchasing insurance policies, and our Board of
Directors is expressly empowered to adopt, approve and amend from time to time
such bylaws, resolutions or contracts implementing such provisions or such
further indemnification arrangement as may be permitted by law. Neither the
amendment or repeal of the foregoing indemnification provisions, nor the
adoption of any provision of our certificate of incorporation inconsistent with
the foregoing indemnification provisions, shall eliminate or reduce any rights
to indemnification afforded by the foregoing indemnification

64
<PAGE>
provisions to any person with respect to their status or any activities in their
official capacities prior to such amendment, repeal or adoption.

THE PEPSI BEVERAGE AGREEMENTS

An event of default will occur under the Pepsi Beverage Agreements upon the
acquisition of any contract, option, conversion privilege, or other right to
acquire, directly or indirectly, beneficial ownership of more than 15% of any
class or series of our voting securities by a person or affiliated group,
without the consent of PepsiCo.

LISTING

We intend to list the common stock on the New York Stock Exchange under the
symbol "PBG."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is .

65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. We cannot predict the effect, if any, that sales of shares of our common
stock to the public or the availability of shares for sale to the public will
have on the market price of our common stock prevailing from time to time.
Nevertheless, sales of a significant number of shares of our common stock in the
public market, or the perception that such sales may occur, could adversely
affect the prevailing market price of our common stock.

Upon consummation of this offering, we will have shares of common
stock outstanding ( shares if the underwriters' over-allotment is
exercised in full). Of the shares outstanding after the offering, the
shares of common stock sold in the offering will be freely tradeable without
restriction under the Securities Act, except for any such shares which may be
acquired by one of our "affiliates," which shares will be subject to the volume
limitations of Rule 144 under the Securities Act ("Rule 144"). As defined in
Rule 144, an "affiliate" of an issuer is a person who, directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with, such issuer. The remaining shares of common stock
will be owned by PepsiCo and will be "restricted securities" (as that phrase is
defined in Rule 144) and may not be resold in the absence of registration under
the Securities Act or pursuant to an exemption from such registration, including
the exemption provided by Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, if a period of at least
one year has elapsed between the later of the date on which the restricted
securities were acquired from us and the date on which they were acquired from
one of our affiliates, then the holder of such restricted securities (including
an affiliate) is entitled to sell a number of shares within any three-month
period that does not exceed the greater of (i) 1% of the then outstanding shares
of the common stock or (ii) the average weekly reported volume of trading of the
common stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements pertaining to the manner of
such sales, notices of such sales and the availability of current public
information concerning us. Affiliates may sell shares not constituting
restricted securities in accordance with the foregoing volume limitations and
other requirements but without regard to the one-year period. Under Rule 144(k),
if a period of at least two years has elapsed between the later of the date on
which restricted securities were acquired from us and the date on which they
were acquired from an affiliate, a holder of such restricted securities who is
not an affiliate at the time of the sale and has not been an affiliate for at
least three months prior to the sale would be entitled to sell such restricted
securities immediately without regard to the volume limitations and other
conditions described above. The foregoing description of Rule 144 is not
intended to be a complete description thereof.

In connection with the offering, we are offering options to purchase
approximately shares of our outstanding common stock. Immediately after
this offering, we intend to file a registration statement on Form S-8 covering
all options granted under the PBG LTIP. Shares of our common stock registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, unless such
shares are subject to vesting restriction with us or the lock-up agreements
described below. See "Management--Stock Plans."

We have entered into a registration rights agreement with PepsiCo which
enables PepsiCo to require us to register shares of our common stock owned by
PepsiCo and to include such shares in any registration of our common stock made
by us in the future. We do not currently have any other registration rights
outstanding. See "Relationship with PepsiCo and Certain Transactions."

Notwithstanding the foregoing, in connection with this offering, we, our
directors and officers and PepsiCo have agreed, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith

66
<PAGE>
Incorporated on behalf of the underwriters, during the period ending 180 days
after the date of this prospectus, not to directly or indirectly:

- offer, pledge, sell contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for our common stock
(whether such shares or any such securities are then owned by such person
or are thereafter acquired directly from us); or

- enter into any swap or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock.

The above 180-day restriction does not apply, however, to the following:

- the sale to the underwriters of the shares of common stock under the
underwriting agreement (as described below);

- the issuance of options to purchase our common stock pursuant to the PBG
LTIP;

- the issuance by us of shares of our common stock upon the exercise of an
option or warrant or the conversion of any security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing; or

- transactions by any person other than us, PepsiCo and our directors or
executive officers relating to shares of our common stock or other
securities acquired in open market transactions after completion of the
offering of the shares of our common stock. See "Underwriting."

67
<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock by
a beneficial owner that is a "Non-U.S. Holder." A "Non-U.S. Holder" is a person
or entity that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a foreign estate or
trust.

This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to change, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances and does not address any tax consequences arising under the laws
of any state, local or foreign jurisdiction. Prospective holders are advised to
consult their tax advisors with respect to the particular tax consequences to
them of owning and disposing of our common stock, including the consequences
under the laws of any state, local or foreign jurisdiction.

DIVIDENDS

Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of our common stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
For purposes of determining whether tax is to be withheld at a 30% rate or at a
reduced rate as specified by an income tax treaty, we ordinarily will presume
that dividends paid on or before December 31, 1999 to an address in a foreign
country are paid to a resident of such country, absent knowledge that such
presumption is not warranted.

Under the United States Treasury Regulations applicable to dividends paid
after December 31, 1999 (the "Final Regulations"), to obtain a reduced rate of
withholding under a treaty, a Non-U.S. Holder generally will be required to
provide an Internal Revenue Service Form W-8 certifying such Non-U.S. Holder's
entitlement to benefits under a treaty. The Final Regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.

There will be no withholding tax on dividends paid to a Non-U.S. Holder that
are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States if a Form 4224 (or, after December 31, 1999, a
Form W-8) stating that the dividends are so connected is filed with us. Instead,
the effectively connected dividends will be subject to regular U.S. income tax
in the same manner as if the Non-U.S. Holder were a U.S. resident. A non-U.S.
corporation receiving effectively connected dividends may also be subject to an
additional "branch profits tax" which is imposed, under certain circumstances,
at a rate of 30% (or such lower rate as may be specified by an applicable
treaty) of the non-U.S. corporation's effectively connected earnings and
profits, subject to certain adjustments.

Generally, we must report to the U.S. Internal Revenue Service the amount of
dividends paid, the name and address of the recipient, and the amount, if any,
of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence.

Dividends paid to a Non-U.S. Holder at an address within the United States
may be subject to backup withholding imposed at a rate of 31% if the Non-U.S.
Holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and certain other information to us.

68
<PAGE>
Under current United States federal income tax law, backup withholding
generally will not apply to dividends paid on or before December 31, 1999 to a
Non-U.S. Holder at an address outside the United States (unless the payer has
knowledge that the payee is a U.S. person). Under the Final Regulations,
however, a Non-U.S. Holder will be subject to backup withholding unless
applicable certification requirements are met.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of our common stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States, (ii) in the case of certain Non-U.S. Holders who
are non-resident alien individuals and hold our common stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) we are or have been a "U.S. real property holding
corporation" within the meaning of Section 897(c)(2) of the Code at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. We are not, and do not anticipate becoming, a U.S. real
property holding corporation.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING ON DISPOSITION OF
COMMON STOCK

Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of our common stock effected by or through a U.S. office of a broker
unless the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements will apply to
a payment of disposition proceeds where the transaction is effected outside the
United States by or through an office outside the United States of a broker that
is either (i) a U.S. person, (ii) a foreign person which derives 50% or more of
its gross income for certain periods from the conduct of a trade or business in
the United States, (iii) a "controlled foreign corporation" for U.S. federal
income tax purposes, and (iv) effective after December 31, 1999, a foreign
partnership (A) at least 50% of the capital or profits interest in which is
owned by U.S. persons, or (B) that is engaged in a U.S. trade or business, and
the broker fails to maintain documentary evidence that the holder is a Non-U.S.
Holder and that certain conditions are met, or that the holder otherwise is
entitled to an exemption. Effective after December 31, 1999, backup withholding
will apply to such payment if the broker has actual knowledge that the holder is
a U.S. person.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.

FEDERAL ESTATE TAX

An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in our common stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.

69
<PAGE>
UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and
Morgan Stanley & Co. Incorporated are acting as representatives (the "U.S.
Representatives") of each of the Underwriters named below (the "U.S.
Underwriters"). Subject to the terms and conditions set forth in a U.S. purchase
agreement (the "U.S. Purchase Agreement") between us and the U.S. Underwriters,
and concurrently with the sale of shares of our common stock to the
International Managers (as defined below), we have agreed to sell to the U.S.
Underwriters, and each of the U.S. Underwriters severally and not jointly has
agreed to purchase from us, the number of shares of common stock set forth
opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................................
Morgan Stanley & Co. Incorporated.................................................
-----------
Total...................................................................
-----------
-----------
</TABLE>

We have also entered into an international purchase agreement (the
"International Purchase Agreement") with certain underwriters outside the United
States and Canada (the "International Managers" and, together with the U.S.
Underwriters, the "Underwriters") for whom Merrill Lynch International and
Morgan Stanley & Co. International Limited are acting as lead managers (the
"Lead Managers"). Subject to the terms and conditions set forth in the
International Purchase Agreement, and concurrently with the sale of
shares of our common stock to the U.S. Underwriters pursuant to the
U.S. Purchase Agreement, we have agreed to sell to the International Managers,
and the International Managers severally have agreed to purchase from us, an
aggregate of shares of our common stock. The initial public offering
price per share and the total underwriting discount per share of common stock
are identical under the U.S. Purchase Agreement and the International Purchase
Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement, the
several U.S. Underwriters and the several International Managers, respectively,
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the shares of common stock being sold pursuant to each such agreement if
any of the shares of common stock being sold pursuant to such agreement are
purchased. Under certain circumstances, under the U.S. Purchase Agreement and
the International Purchase Agreement, the commitments of non-defaulting
Underwriters may be increased. The closings with respect to the sale of shares
of common stock to be purchased by the U.S. Underwriters and the International
Managers are conditioned upon one another.

The U.S. Representatives have advised us that the U.S. Underwriters propose
initially to offer the shares of our common stock to the public at the initial
public offering price set forth on the cover page of this prospectus, and to
certain dealers at such price less a concession not in excess of $ per
share of common stock. The U.S. Underwriters may allow, and such dealers may
reallow, a discount not in excess of $ per share of common stock to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

We have granted an option to the U.S. Underwriters, exercisable for 30 days
after the date of this prospectus, to purchase up to an aggregate of
additional shares of our common stock at the initial public offering price set
forth on the cover page of this prospectus, less the underwriting discount. The
U.S. Underwriters may exercise this option solely to cover over-allotments, if
any, made on the sale of our common stock offered hereby. To the extent that the
U.S. Underwriters exercise this option, each U.S. Underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares of our
common stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. We also have granted an option to the International
Managers,

70
<PAGE>
exercisable for 30 days after the date of this prospectus, to purchase up to an
aggregate of additional shares of our common stock to cover
over-allotments, if any, on terms similar to those granted to the U.S.
Underwriters.

The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the U.S. Underwriters and the
International Managers and the proceeds before expenses to us. This information
is presented assuming either no exercise or full exercise by the U.S.
Underwriters and the International Managers of their over-allotment options.

<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- --------- ---------
<S> <C> <C> <C>
Public Offering Price...................................... $ $ $
Underwriting Discount...................................... $ $ $
Proceeds, before expenses, to PBG.......................... $ $ $
</TABLE>

The expenses of the offering (exclusive of the underwriting discount) are
estimated at $ and are payable by us and PepsiCo. The Underwriters have
agreed to reimburse PepsiCo for certain expenses payable by it.

The shares of common stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part.

At our request, the Underwriters have reserved for sale, at the initial
public offering price, up to of the shares offered hereby to be sold to
certain of our directors and officers. The number of shares of our common stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not orally
confirmed for purchase within one day of the pricing of the offering will be
offered by the Underwriters to the general public on the same terms as the other
shares offered hereby.

We and our executive officers and directors and PepsiCo have agreed, subject
to certain exceptions, not to directly or indirectly (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, lend or
otherwise dispose of or transfer any shares of our common stock or securities
convertible into or exchangeable or exercisable for or repayable with our common
stock, whether now owned or thereafter acquired by the person executing the
agreement or with respect to which the person executing the agreement thereafter
acquires the power of disposition, or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement that transfers, in whole or in part, the economic consequence of
ownership of our common stock whether any such swap or transaction is to be
settled by delivery of our common stock or other securities, in cash or
otherwise, without the prior written consent of Merrill Lynch on behalf of the
Underwriters for a period of 180 days after the date of this prospectus. See
"Shares Eligible for Future Sale."

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares of
our common stock to each other for purposes of resale at the initial public
offering price, less an amount not greater than the selling concession. Under
the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer
to whom they sell shares of our common stock will not offer to sell or sell
shares of our common stock to persons who are non-U.S. or non-Canadian persons
or to persons they believe intend to resell to persons who are non-U.S. or
non-Canadian persons, and the International Managers and any dealer to whom they
sell shares of our common stock will not offer to sell or sell shares of our
common stock to U.S. persons or to Canadian

71
<PAGE>
persons or to persons they believe intend to resell to U.S. or Canadian persons,
except in the case of transactions pursuant to the Intersyndicate Agreement.

Prior to the offering, there has been no public market for our common stock.
The initial public offering price will be determined through negotiations
between us and the U.S. Representatives and the Lead Managers. The factors to be
considered in determining the initial public offering price, in addition to
prevailing market conditions, the valuation multiples of publicly traded
companies that the U.S. Representatives and the Lead Managers believe to be
comparable to us, certain of our financial information, the history of, and the
prospects for, PBG and the industry in which we compete, and an assessment of
our management, its past and present operations, the prospects for, and timing
of, future revenues of PBG, the present state of our development, and the above
factors in relation to market values and various valuation measures of other
companies engaged in activities similar to ours. There can be no assurance that
an active trading market will develop for our common stock or that our common
stock will trade in the public market subsequent to the offerings at or above
the initial public offering price.

We expect our common stock to be approved for listing on the New York Stock
Exchange, subject to notice of issuance, under the symbol "PBG." In order to
meet the requirements for listing of our common stock on that exchange, the U.S.
Underwriters and the International Managers have undertaken to sell lots of 100
or more shares to a minimum of 2,000 beneficial owners.

The Underwriters do not expect sales of our common stock to any accounts
over which they exercise discretionary authority to exceed 5% of the number of
shares being offered hereby.

We and PepsiCo have agreed to indemnify the U.S. Underwriters and the
International Managers against certain liabilities, including certain
liabilities under the Securities Act, or to contribute to payments the U.S.
Underwriters and International Managers may be required to make in respect
thereof.

Until the distribution of our common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase our common stock. As an
exception to these rules, the U.S. Representatives are permitted to engage in
certain transactions that stabilize the price of our common stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of our common stock.

If the Underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more shares of our common stock
than are set forth on the cover page of this prospectus, the U.S.
Representatives and the Lead Managers, respectively, may reduce that short
position by purchasing our common stock in the open market. The U.S.
Representatives and the Lead Managers, respectively, may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.

The U.S. Representatives and the Lead Managers, respectively, may also
impose a penalty bid on certain Underwriters and selling group members. This
means that if the U.S. Representatives or the Lead Managers purchase shares of
our common stock in the open market to reduce the Underwriters' short position
or to stabilize the price of our common stock, they may reclaim the amount of
the selling concession from the Underwriters and selling group members who sold
those shares as part of the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of our common stock to the extent that it
discourages resales of our common stock.

Neither we nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our common stock. In addition, neither
we nor any of the Underwriters makes any representation that the U.S.
Representatives or the Lead Managers will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

72
<PAGE>
LEGAL MATTERS

Certain legal matters with respect to the validity of the issuance of the
shares of our common stock offered hereby will be passed upon for us by Pamela
C. McGuire, Senior Vice President, General Counsel and Secretary of PBG, and
Davis Polk & Wardwell, New York, New York. Certain legal matters relating to our
common stock offered hereby will be passed upon for the underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York.

EXPERTS

Our combined financial statements and schedules as of December 27, 1997 and
December 28, 1996, and for each of the three years in the period ended December
27, 1997 included in this prospectus have been audited by KPMG LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission (the
"Commission"), a registration statement on Form S-1 under the Securities Act,
and the rules and regulations promulgated thereunder, with respect to the common
stock offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement and the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other
document that is filed as an exhibit to the registration statement are not
necessarily complete and each such statement is qualified in all respects by
reference to the full text of such contract or document. For further information
with respect to us and our common stock, reference is hereby made to the
registration statement and the exhibits and schedules thereto, which may be
inspected and copied at the principal office of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies of all or any part thereof may
be obtained at prescribed rates from the Commission's Public Reference Section
at such addresses. The public may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. Also, the
Commission maintains a world Wide Web Site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Upon
approval of our common stock for listing on the New York Stock Exchange, such
reports, proxy and information statements and other information can be inspected
also at the offices of the New York Stock Exchange at 20 Broad Street, New York,
New York 10005.

Upon completion of this offering, we will become subject to the
informational requirements of the Securities and Exchange Act of 1934, as
amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information will be available for inspection and copying at
the regional offices, public reference facilities and Web site of the Commission
referred to above.

73
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE REFERENCE
-----------------
<S> <C>
COMBINED FINANCIAL STATEMENTS

Report of Independent Auditors.................................................................... F-2

Combined Statements of Operations--
Fiscal years ended December 30, 1995,
December 28, 1996 and December 27, 1997......................................................... F-3

Combined Statements of Cash Flows--
Fiscal years ended December 30, 1995,
December 28, 1996 and December 27, 1997......................................................... F-4

Combined Balance Sheets--
December 28, 1996 and December 27, 1997......................................................... F-5

Combined Statements of Stockholder's Equity and Accumulated
Other Comprehensive Loss--
Fiscal years ended December 30, 1995,
December 28, 1996 and December 27, 1997......................................................... F-6

Notes to Combined Financial Statements............................................................ F-7

CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)

Condensed Combined Statements of Operations--
Thirty-six weeks ended September 6, 1997
and September 5, 1998........................................................................... F-20

Condensed Combined Statements of Cash Flows--
Thirty-six weeks ended September 6, 1997
and September 5, 1998........................................................................... F-21

Condensed Combined Balance Sheets--
December 27, 1997 and September 5, 1998......................................................... F-22

Notes to unaudited Condensed Combined Financial Statements........................................ F-23

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)..................................... P-1

Pro Forma Condensed Combined Statement of Operations--
Fiscal year ended December 27, 1997............................................................. P-2

Pro Forma Condensed Combined Statement of Operations--
Thirty-six weeks ended September 5, 1998........................................................ P-3

Pro Forma Condensed Combined Balance Sheet--
September 5, 1998............................................................................... P-4

Notes to unaudited Pro Forma Condensed Combined Financial Statements.............................. P-5
</TABLE>

F-1
<PAGE>
When PBG's capitalization is finalized as set forth in Note 1, we will be in
a position to render the following report.

/s/ KPMG LLP

THE PEPSI BOTTLING GROUP, INC.
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholder
The Pepsi Bottling Group, Inc.

We have audited the accompanying combined balance sheets of The Pepsi
Bottling Group, Inc. as of December 28, 1996 and December 27, 1997 and the
related combined statements of operations, cash flows and stockholder's equity
and accumulated other comprehensive loss for each of the fiscal years in the
three-year period ended December 27, 1997. These combined financial statements
are the responsibility of management of The Pepsi Bottling Group, Inc. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of The Pepsi Bottling
Group, Inc. as of December 28, 1996 and December 27, 1997, and the results of
its operations and its cash flows for each of the fiscal years in the three-year
period ended December 27, 1997, in conformity with generally accepted accounting
principles.

New York, New York
January , 1999

F-2
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

COMBINED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA)

FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996
AND DECEMBER 27, 1997

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
NET SALES............................................................................ $ 6,393 $ 6,603 $ 6,592
Cost of sales........................................................................ 3,771 3,844 3,832
--------- --------- ---------
GROSS PROFIT......................................................................... 2,622 2,759 2,760
Selling, delivery and administrative expenses........................................ 2,273 2,396 2,423
--------- --------- ---------
OPERATING INCOME..................................................................... 349 363 337
Interest expense, net................................................................ 219 206 203
--------- --------- ---------
INCOME BEFORE INCOME TAXES........................................................... 130 157 134
Income tax expense................................................................... 79 96 63
--------- --------- ---------
NET INCOME........................................................................... $ 51 $ 61 $ 71
--------- --------- ---------
--------- --------- ---------
UNAUDITED PRO FORMA EARNINGS PER SHARE............................................... $

UNAUDITED PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING..............................
</TABLE>

See accompanying notes to Combined Financial Statements.

F-3
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

COMBINED STATEMENTS OF CASH FLOWS

(IN MILLIONS)

FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996
AND DECEMBER 27, 1997

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS--OPERATIONS
Net income.......................................................................... $ 51 $ 61 $ 71
Adjustments to reconcile net income to net cash provided by operations:
Depreciation...................................................................... 289 296 316
Amortization...................................................................... 129 129 123
Deferred income taxes............................................................. 20 8 17
Other noncash charges and credits, net............................................ (11) 1 12
Changes in operating working capital, excluding effects of acquisitions and
dispositions:
Trade accounts receivable..................................................... (101) (87) 26
Inventories................................................................... (35) 21 --
Prepaid expenses, deferred income taxes and other current assets.............. (14) 35 (54)
Accounts payable and other current liabilities................................ 74 (5) 56
Trade accounts payable to PepsiCo............................................. (3) (9) 7
Income taxes payable.......................................................... 44 13 (14)
--------- --------- ---------
Net change in operating working capital......................................... (35) (32) 21
--------- --------- ---------
NET CASH PROVIDED BY OPERATIONS..................................................... 443 463 560
--------- --------- ---------
CASH FLOWS--INVESTMENTS
Capital expenditures................................................................ (358) (418) (472)
Acquisitions of bottlers and investments in affiliates.............................. (33) (26) (49)
Sales of bottling operations and property, plant and equipment...................... 18 55 23
Other, net.......................................................................... 18 13 (66)
--------- --------- ---------
NET CASH USED FOR INVESTMENTS....................................................... (355) (376) (564)
--------- --------- ---------
CASH FLOWS--FINANCING
Short-term borrowings--three months or less......................................... 15 54 (90)
Proceeds from third party debt...................................................... 1 4 3
Payments of third party debt........................................................ (5) (7) (11)
Increase (decrease) in advances from PepsiCo........................................ (89) (129) 149
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING........................................... (78) (78) 51
--------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS........................ -- -- (1)
--------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................... 10 9 46
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR........................................ 21 31 40
--------- --------- ---------
CASH AND CASH EQUIVALENTS--END OF YEAR.............................................. $ 31 $ 40 $ 86
--------- --------- ---------
--------- --------- ---------

SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH INVESTING AND FINANCING ACTIVITIES:
PepsiCo capital stock issued in conjunction with acquisitions of bottlers....... $ -- $ -- $ 14
Liabilities incurred and/or assumed in conjunction with acquisitions of
bottlers...................................................................... $ 12 $ 2 $ 3
</TABLE>

See accompanying notes to Combined Financial Statements.

F-4
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

COMBINED BALANCE SHEETS

(IN MILLIONS)

DECEMBER 28, 1996 AND DECEMBER 27, 1997

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents...................................................................... $ 40 $ 86
Trade accounts receivable, less allowance of $65 and $45, in 1996 and 1997, respectively....... 846 808
Inventories.................................................................................... 262 257
Prepaid expenses, deferred income taxes and other current assets............................... 130 185
--------- ---------
TOTAL CURRENT ASSETS......................................................................... 1,278 1,336

Property, plant and equipment, net............................................................. 1,818 1,918
Intangible assets, net......................................................................... 3,820 3,679
Other assets................................................................................... 136 255
--------- ---------
TOTAL ASSETS............................................................................... $ 7,052 $ 7,188
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities................................................. $ 750 $ 811
Trade accounts payable to PepsiCo.............................................................. 19 23
Income taxes payable........................................................................... 269 273
Short-term borrowings.......................................................................... 116 40
--------- ---------
TOTAL CURRENT LIABILITIES.................................................................... 1,154 1,147

Allocation of PepsiCo long-term debt........................................................... 3,000 3,000
Long-term debt due to third parties............................................................ 127 96
Other liabilities.............................................................................. 335 350
Deferred income taxes.......................................................................... 1,076 1,076

STOCKHOLDER'S EQUITY
Advances from PepsiCo.......................................................................... 1,462 1,703
Accumulated other comprehensive loss........................................................... (102) (184)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY................................................................... 1,360 1,519
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY................................................. $ 7,052 $ 7,188
--------- ---------
--------- ---------
</TABLE>

See accompanying notes to Combined Financial Statements.

F-5
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
AND ACCUMULATED OTHER COMPREHENSIVE LOSS

(IN MILLIONS)
FISCAL YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996

AND DECEMBER 27, 1997

<TABLE>
<CAPTION>
ACCUMULATED
OTHER
ADVANCES COMPREHENSIVE COMPREHENSIVE
TOTAL FROM PEPSICO INCOME/(LOSS) LOSS
--------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>

BALANCE AT DECEMBER 31, 1994............................. $ 1,453 $ 1,565 $ (112)
Comprehensive income:
Net income........................................... 51 51 $ 51
Currency translation adjustment...................... 46 46 46
-----
Total comprehensive income............................. $ 97
-----
-----
Change in advances from PepsiCo........................ (65) (65)
--------- ------ -----

BALANCE AT DECEMBER 30, 1995............................. 1,485 1,551 (66)
Comprehensive income:
Net income........................................... 61 61 $ 61
Currency translation adjustment...................... (36) (36) (36)
-----
Total comprehensive income............................. $ 25
-----
-----
Change in advances from PepsiCo........................ (150) (150)
--------- ------ -----

BALANCE AT DECEMBER 28, 1996............................. 1,360 1,462 (102)
Comprehensive loss:
Net income........................................... 71 71 $ 71
Currency translation adjustment...................... (82) (82) (82)
-----
Total comprehensive loss............................... $ (11)
-----
-----
Change in advances from PepsiCo........................ 170 170
--------- ------ -----

BALANCE AT DECEMBER 27, 1997............................. $ 1,519 $ 1,703 $ (184)
--------- ------ -----
--------- ------ -----
</TABLE>

See accompanying notes to Combined Financial Statements.

F-6
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA)

NOTE 1--BASIS OF PRESENTATION

The Pepsi Bottling Group, Inc. ("PBG") is a wholly-owned subsidiary of
PepsiCo, Inc. ("PepsiCo") and consists of bottling operations located in the
United States, Canada, Spain, Greece and Russia. These bottling operations
manufacture, sell and distribute Pepsi-Cola beverages including PEPSI-COLA, DIET
PEPSI, MOUNTAIN DEW and other brands of carbonated soft drinks and other
ready-to-drink beverages. Approximately 88% of PBG's 1997 net sales were derived
from the sale of Pepsi-Cola beverages.

PBG expects to obtain debt funding and use substantially all of the proceeds
to settle certain amounts due to PepsiCo prior to the offering. In addition, PBG
and PepsiCo will enter into agreements providing for the separation of the
companies and governing various relationships between PBG and PepsiCo, including
a Separation Agreement, Tax Separation Agreement, Employee Programs Agreement,
Registration Rights Agreement and Shared Services Agreement.

In connection with the offering, PBG expects to enter into a Master Bottling
Agreement, Non-Cola Bottling Agreements, Master Syrup Agreement and Country
Specific Bottling Agreements ("Pepsi Beverage Agreements") which will govern the
preparation, bottling and distribution of beverages in PBG's territories. The
Pepsi Beverage Agreements permit PBG to use the concentrates purchased from
PepsiCo to bottle and distribute a variety of beverages under certain authorized
brand names, and to utilize, under certain conditions, trademarks of PepsiCo to
promote such products.

The accompanying Combined Financial Statements are presented on a carve-out
basis and include the historical results of operations and assets and
liabilities directly related to PBG and have been prepared from PepsiCo's
historical accounting records.

PBG was allocated $39 million, $42 million and $42 million of overhead costs
related to PepsiCo's corporate administrative functions in 1995, 1996 and 1997,
respectively. The allocation was based on a specific identification of PepsiCo's
administrative costs attributable to PBG and, to the extent that such
identification was not practicable, on the basis of PBG's sales as a percentage
of PepsiCo's sales. The allocated costs are included in selling, delivery and
administrative expenses in the Combined Statements of Operations. Management
believes that such allocation methodology is reasonable. Subsequent to the
offering, PBG will be required to manage these functions and will be responsible
for the expenses associated with the operations of a public company.

PBG's operations have been financed through its operating cash flows and
advances from PepsiCo. PBG's interest expense includes an allocation of
PepsiCo's interest expense based on PepsiCo's weighted average interest rate
applied to a debt level of $3 billion as of the offering date. In 1995, PBG was
allocated $198 million of interest expense reflecting PepsiCo's average interest
rate of 6.6%. In 1996 and 1997, PBG was allocated $186 million of interest
expense reflecting PepsiCo's average interest rate of 6.2%.

Income tax was calculated as if PBG had filed separate income tax returns.
PBG's future effective tax rate will depend largely on its structure and tax
strategies as a separate, independent company.

F-7
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

Allocations of corporate overhead and interest costs have been deemed to
have been paid by PBG to PepsiCo, in cash, in the period in which the cost was
incurred.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The preparation of the Combined Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of net sales and expenses during the
reporting period. Actual results could differ from those estimates.

BASIS OF COMBINATION The accounts of all wholly-owned subsidiaries of PBG
are included in the accompanying combined financial statements. Intercompany
accounts and transactions have been eliminated in combination.

FISCAL YEAR PBG's fiscal year ends on the last Saturday in December and, as
a result, a fifty-third week is added every five or six years. Fiscal years
1995, 1996 and 1997 consisted of 52 weeks.

ADVERTISING AND MARKETING COSTS PBG is involved in a variety of programs to
promote its products. Advertising and marketing costs included in selling,
delivery and administrative expenses in the Combined Statements of Operations
are charged ratably in relation to sales over the year in which incurred.
Advertising and marketing costs were $192 million, $213 million and $210 million
in 1995, 1996 and 1997, respectively.

BOTTLER INCENTIVES PepsiCo and other brand owners, at their sole
discretion, provide PBG with various forms of marketing support. This marketing
support is intended to cover a variety of programs and initiatives, including
direct marketplace support, capital equipment funding and shared media and
advertising support. Based on the objective of the programs and initiatives,
marketing support is recorded as an adjustment to net sales or a reduction of
selling, delivery and administrative expenses. There are no conditions or other
requirements which could result in a repayment of marketing support received.

STOCK-BASED EMPLOYEE COMPENSATION PBG measures stock-based compensation
cost in accordance with Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees," and its related interpretations.
Accordingly, compensation cost for PepsiCo stock option grants to PBG employees
is measured as the excess of the quoted market price of PepsiCo's capital stock
at the grant date over the amount the employee must pay for the stock. PepsiCo's
policy is to grant stock options at fair value at the date of grant.

CASH EQUIVALENTS Cash equivalents represent funds temporarily invested with
original maturities not exceeding three months.

INVENTORIES Inventories are valued at the lower of cost (computed on the
first-in, first-out method) or net realizable value.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment ("PP&E") is
stated at cost. Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows: 20 to 33 years for buildings
and improvements and 3 to 10 years for machinery and equipment.

F-8
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

INTANGIBLE ASSETS Intangible assets, which are primarily franchise rights
and goodwill, are amortized on a straight-line basis over a period of no more
than 40 years.

RECOVERABILITY OF LONG-LIVED ASSETS PBG reviews all long-lived assets,
including intangible assets, annually or when facts and circumstances indicate
that the carrying value of the asset may not be recoverable.

An impaired asset is written down to its estimated fair value based on the
best information available. Estimated fair value is generally based on either
appraised value or measured by discounting estimated future cash flows.
Considerable management judgment is necessary to estimate discounted future cash
flows. Accordingly, actual results could vary significantly from such estimates.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT PBG uses futures contracts and
options on futures to hedge against the risk of adverse movements in the price
of certain commodities. In order to qualify for deferral hedge accounting of
unrealized gains and losses, such instruments must be designated and effective
as a hedge of an anticipatory transaction. Management reviews the correlation
and effectiveness of these financial instruments on a periodic basis. Financial
instruments that do not meet the criteria for hedge accounting treatment are
marked-to-market with the resulting unrealized gain or loss recorded as gain or
loss in cost of sales.

Realized gains and losses that result from the early termination of
financial instruments used for hedging purposes are deferred and are included in
cost of sales when the anticipated transaction actually occurs.

Premiums paid for the purchase of options on futures are recorded as a
prepaid expense in the Combined Balance Sheet and are amortized as an adjustment
to cost of sales over the duration of the option contract.

Foreign exchange gains and losses reflect transaction and translation gains
and losses arising from the re-measurement into U.S. dollars of the net monetary
assets of businesses in highly inflationary countries. Russia is considered a
highly inflationary economy for accounting purposes and all foreign exchange
gains and losses are included in the Combined Statements of Operations.

NEW ACCOUNTING STANDARDS In June 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standard 130, "Reporting
Comprehensive Income" ("SFAS 130") which establishes standards for the reporting
and display of net income and other gains and losses affecting stockholder's
equity that are excluded from net income. The only components of other
comprehensive loss are net income and the foreign currency translation component
of stockholder's equity. These financial statements reflect the adoption of SFAS
130. Other items of comprehensive income or loss are reported in the Combined
Statements of Stockholder's Equity and Accumulated Other Comprehensive Loss.

In June 1997, the FASB issued Statement of Financial Accounting Standard
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"), which establishes standards for reporting information about
operating segments and related disclosures about products and services,
geographic areas and major customers. SFAS 131 requires that the definition of
operating segments align with the measurements used internally to assess
performance. These financial statements reflect the adoption of SFAS 131.

F-9
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

In June 1998, the FASB issued Statement of Financial Accounting Standard
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. PBG is currently assessing the effects of adopting
SFAS 133, and has not yet made a determination of the impact on its financial
position or results of operations. SFAS 133 will be effective for PBG's first
quarter of fiscal year 2000.

EARNINGS PER SHARE PBG's historical capital structure is not indicative of
its prospective capital structure and, accordingly, historical earnings per
share information has not been presented in the Combined Financial Statements.
Unaudited pro forma earnings per share has been presented on the basis of the
number of shares of capital stock of PBG deemed to be outstanding as of the date
of the offering.

NOTE 3--INVENTORIES

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Raw materials and supplies............................................... $ 106 $ 104
Finished goods........................................................... 156 153
--------- ---------
$ 262 $ 257
--------- ---------
--------- ---------
</TABLE>

NOTE 4--PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Land..................................................................... $ 140 $ 141
Buildings and improvements............................................... 644 699
Machinery and equipment.................................................. 2,779 2,979
Other.................................................................... 106 102
--------- ---------
3,669 3,921
Accumulated depreciation................................................. (1,851) (2,003)
--------- ---------
$ 1,818 $ 1,918
--------- ---------
--------- ---------
</TABLE>

NOTE 5--INTANGIBLE ASSETS, NET

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Franchise rights and other identifiable intangibles...................... $ 3,188 $ 3,175
Goodwill................................................................. 1,590 1,580
--------- ---------
4,778 4,755
Accumulated amortization................................................. (958) (1,076)
--------- ---------
$ 3,820 $ 3,679
--------- ---------
--------- ---------
</TABLE>

Identifiable intangible assets principally arise from the allocation of the
purchase price of businesses acquired and consist primarily of territorial
franchise rights. Amounts assigned to such

F-10
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

identifiable intangibles were based on independent appraisals or internal
estimates. Goodwill represents the residual purchase price after allocation to
all identifiable net assets.

NOTE 6--ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Accounts payable......................................................... $ 257 $ 313
Accrued compensation and benefits........................................ 145 141
Trade incentives......................................................... 116 148
Other current liabilities................................................ 232 209
--------- ---------
$ 750 $ 811
--------- ---------
--------- ---------
</TABLE>

NOTE 7--SHORT-TERM BORROWINGS AND LONG-TERM DEBT

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Short-term borrowings
Current maturities of long-term debt................................... $ 6 $ 29
Other short-term borrowings............................................ 110 11
--------- ---------
$ 116 $ 40
--------- ---------
--------- ---------
Long-term debt due to third parties
Debt obligations, due 1998 to 2012 with interest rates of
6% to 18%............................................................ $ 101 $ 95
Capital lease obligations.............................................. 32 30
--------- ---------
133 125
Less current maturities of long-term debt.............................. 6 29
--------- ---------
$ 127 $ 96
--------- ---------
--------- ---------
Allocation of PepsiCo long-term debt..................................... $ 3,000 $ 3,000
</TABLE>

NOTE 8--LEASES

PBG has noncancelable commitments under both capital and long-term operating
leases. Capital and operating lease commitments expire at various dates through
2019. Most leases require payment of related executory costs, which include
property taxes, maintenance and insurance.

F-11
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

Future minimum commitments under noncancelable leases are set forth below:

<TABLE>
<CAPTION>
COMMITMENTS
------------------------
<S> <C> <C>
CAPITAL OPERATING
----------- -----------
1998..................................................................... $ 29 $ 37
1999..................................................................... 1 39
2000..................................................................... 1 35
2001..................................................................... -- 32
2002..................................................................... -- 32
Later years.............................................................. 4 121
--- -----
$ 35 $ 296
--- -----
--- -----
</TABLE>

At December 27, 1997, the present value of minimum payments under capital
leases was $30 million after deducting $5 million representing imputed interest.

Rental expense was $39 million, $42 million, and $35 million for 1995, 1996
and 1997, respectively.

NOTE 9--FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

COMMODITY PRICES PBG uses futures contracts and options on futures in the
normal course of business to hedge anticipated purchases of certain raw
materials used in PBG's manufacturing operations.

Deferred gains and losses at year end 1996 and 1997, as well as gains and
losses recognized as part of cost of sales in 1995, 1996, and 1997 were not
significant. At December 28, 1996, commodity contracts involving notional
amounts of $65 million were outstanding. These notional amounts do not represent
amounts exchanged by the parties and thus are not a measure of PBG's exposure;
rather, they are used as the basis to calculate the amounts due under the
agreements. There were no outstanding commodity contracts at December 27, 1997.

INTEREST RATE RISK Prior to the offering, PBG had minimal external interest
rate risk to manage. Subsequent to this offering, however, PBG intends to manage
any significant interest rate exposure by using financial derivative instruments
as part of a program to manage the overall cost of borrowing.

FOREIGN EXCHANGE RISK As currency exchange rates change, translation of the
statements of operations of our international business into U.S. dollars affects
year-over-year comparability. PBG has not historically hedged translation risks
because cash flows from international operations have generally been reinvested
locally, nor historically have we entered into hedges to minimize the volatility
of reported earnings.

FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of PBG's financial
instruments approximates fair value due to the short maturity of PBG's financial
instruments and since interest rates approximate fair value for long-term debt.
PBG does not use any financial instruments for trading or speculative purposes.

NOTE 10--PENSION PLANS

U.S. employees of PBG participate in PepsiCo sponsored noncontributory
defined benefit pension plans which cover substantially all full-time salaried
employees, as well as certain hourly employees.

F-12
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

Benefits generally are based on years of service and compensation or stated
amounts for each year of service. All plans are funded and contributions are
made in amounts not less than minimum statutory funding requirements nor more
than the maximum amount that can be deducted for U.S. income tax purposes.

It is intended that PBG will assume the existing defined benefit pension
plan obligations for PBG's U.S. employees as of the offering date and trust
assets from the funded plans will be transferred based upon actuarial
determinations in accordance with regulatory requirements.

Net U.S. pension expense allocated to PBG was $4 million, $11 million and
$16 million in 1995, 1996 and 1997, respectively. Net pension expense for the
defined benefit pension plans for PBG's foreign operations was not significant.
PBG will assume the foreign defined benefit pension plan obligations as of the
offering date and any related assets will be transferred.

NOTE 11--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

PepsiCo has historically provided postretirement health care benefits to
eligible retired employees and their dependents, principally in the U.S.
Salaried retirees who have 10 years of service and attain age 55 are eligible to
participate in the postretirement benefit plans. The plans are not funded and
since 1995 have included retiree cost sharing. Postretirement benefit expense
relating to PBG employees reflected in the accompanying financial statements was
$12 million, $16 million and $13 million in 1995, 1996 and 1997, respectively.
Postretirement benefit liability relating to PBG employees reflected in the
accompanying financial statements was $195 million and $199 million in 1996 and
1997, respectively.

NOTE 12--EMPLOYEE STOCK OPTION PLANS

The amounts presented below represent options granted under PepsiCo employee
stock option plans. The pro forma amounts below are not necessarily
representative of the effects of stock-based awards on future pro forma net
income because the plans eventually adopted by PBG may differ from PepsiCo stock
option plans and accordingly (1) future grants of employee stock options by PBG
management may not be comparable to awards made to employees while PBG was a
part of PepsiCo, and (2) the assumptions used to compute the fair value of any
stock option awards will be specific to PBG and therefore, may not be comparable
to the PepsiCo assumptions used.

PBG employees were granted stock options under PepsiCo's three long-term
incentive plans: the SharePower Stock Option Plan ("SharePower"); the Long-Term
Incentive Plan ("LTIP"); and the Stock Option Incentive Plan ("SOIP").

- Prior to 1997, SharePower options were granted annually to essentially all
full-time employees and become exercisable ratably over 5 years from the
grant date and must be exercised within 10 years from the grant date.
There were no SharePower options granted in 1997. All SharePower options
granted in 1998 become exercisable in 3 years from the grant date and must
be exercised within 10 years from the grant date.

- Most LTIP options were granted every other year to senior management
employees. Most of these options become exercisable after 4 years and must
be exercised within 10 years from the grant date. In addition, the LTIP
allows for grants of performance share units ("PSUs"). The maximum value
of a PSU is fixed at the value of a share of PepsiCo stock at the grant
date and vests 4 years from the grant date. Payment of PSUs are made in
cash and/or stock and the

F-13
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

payment amount is determined based on the attainment of prescribed
performance goals. Amounts expensed for PSUs for PBG employees in 1995,
1996 and 1997 were not significant.

- SOIP options are granted to middle-management employees and, prior to
1997, were granted annually. SOIP options are exercisable after one year
and must be exercised within 10 years after their grant date.

Stock option activity:

<TABLE>
<CAPTION>
1995 1996 1997
------------------------------ ------------------------------ ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
(OPTIONS IN MILLIONS) OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE
----------- ----------------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 23.2 $ 15.57 24.1 $ 16.76 26.4 $ 19.87
Granted........................... 3.6 22.93 5.2 32.43 0.2 33.97
Exercised......................... (1.5) 13.54 (2.1) 14.97 (3.2) 14.97
Forfeited......................... (1.2) 16.82 (0.8) 20.76 (0.6) 23.24
PepsiCo modification (a)........ -- -- -- -- 1.7 --
Outstanding at end of year.......... 24.1 16.76 26.4 19.87 24.5 19.13
--- ------ --- ------ --- ------
--- ------ --- ------ --- ------
Exercisable at end of year.......... 10.6 13.53 13.3 15.04 14.7 15.90
--- ------ --- ------ --- ------
--- ------ --- ------ --- ------
Weighted average fair value of
options granted during the year... $ 5.62 $ 9.32 $ 9.64
------ ------ ------
------ ------ ------
</TABLE>

Stock options outstanding at December 27, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE ------------------------------
RANGE OF REMAINING CONTRACTUAL WEIGHTED AVERAGE WEIGHTED AVERAGE
EXERCISE PRICE OPTIONS LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- ---------------------------------- ----------- ------------------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$ 4.25 to $ 8.17 1.6 1.35yrs 7.38 1.6 7.38
$ 8.20 to $16.37 9.6 4.70 13.99 8.1 13.95
$16.87 to $37.72 13.3 7.43 24.21 5.0 21.70
--- ---
24.5 5.95 19.13 14.7 15.90
--- ---
</TABLE>

- ------------------------

(a) In 1997, PepsiCo spun off its restaurant businesses to its shareholders. In
connection with this spin-off, the number of options for PepsiCo capital
stock were increased and their exercise prices were decreased to preserve
the economic value of those options that existed just prior to the spin-off
for the holders of PepsiCo stock options.

PBG adopted the disclosure provisions of Statement of Financial Accounting
Standard 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), but
continues to measure stock-based compensation cost in accordance with APB
Opinion 25 and its related interpretations. If PBG had measured compensation
cost for the PepsiCo stock options granted to its employees in 1995, 1996 and

F-14
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

1997 under the fair value based method prescribed by SFAS 123, net income would
have been changed to the pro forma amounts set forth below:

<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net Income
Reported........................................................... $ 51 $ 61 $ 71
Pro forma.......................................................... $ 49 $ 55 $ 56
</TABLE>

The fair value of PepsiCo stock options granted to PBG employees used to
compute pro forma net income disclosures were estimated on the date of grant
using the Black-Scholes option-pricing model based on the following weighted
average assumptions used by PepsiCo:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Risk free interest rate........................................ 6.2% 6.0% 5.8%
Expected life.................................................. 5 years 6 years 3 years
Expected volatility............................................ 20% 20% 20%
Expected dividend yield........................................ 1.75% 1.5% 1.32%
</TABLE>

NOTE 13--INCOME TAXES

The details of the provision for income taxes are set forth below:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C> <C>
Current: Federal.................................................. $ 54 $ 71 $ 36
Foreign.................................................. 2 6 3
State.................................................... 3 11 7
--------- --------- ---------
59 88 46
--------- --------- ---------
Deferred: Federal.................................................. 6 7 17
Foreign.................................................. 8 -- (2)
State.................................................... 6 1 2
--------- --------- ---------
20 8 17
--------- --------- ---------
$ 79 $ 96 $ 63
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Income before income taxes:
U.S................................................................. $ 124 $ 232 $ 196
Foreign............................................................. 6 (75) (62)
--------- --------- ---------
$ 130 $ 157 $ 134
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-15
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

A reconciliation of income taxes calculated at the U.S. federal tax
statutory rate to PBG's provision for income taxes is set forth below:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Income taxes computed at the U.S. federal statutory rate................ 35.0% 35.0% 35.0%
State income tax, net of federal tax benefit............................ 4.3 4.6 4.3
Effect of differences in foreign tax rates.............................. (2.4) (0.1) (8.1)
U.S. goodwill and other nondeductible expenses.......................... 13.0 10.4 12.7
U.S. franchise rights................................................... 9.7 9.4 --
Other, net.............................................................. 1.2 1.8 3.1
--- --- ---
Total effective income tax rate......................................... 60.8% 61.1% 47.0%
--- --- ---
--- --- ---
</TABLE>

The details of the 1996 and 1997 deferred tax liabilities (assets) are set forth
below:

<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Intangible assets and property, plant and equipment...................... $ 1,193 $ 1,201
Other.................................................................... 49 35
--------- ---------
Gross deferred tax liabilities........................................... 1,242 1,236
--------- ---------
--------- ---------
Net operating loss carryforwards......................................... (77) (76)
Employee benefit obligations............................................. (85) (85)
Bad debts................................................................ (20) (20)
Various liabilities and other............................................ (172) (152)
--------- ---------
Gross deferred tax assets................................................ (354) (333)
Deferred tax asset valuation allowance................................... 84 80
--------- ---------
Net deferred tax assets.................................................. (270) (253)
--------- ---------
Net deferred tax liability............................................... $ 972 $ 983
--------- ---------
--------- ---------
Included in:
Prepaid expenses, deferred income taxes and other current assets......... $ (104) $ (93)
Deferred income taxes.................................................... 1,076 1,076
--------- ---------
$ 972 $ 983
--------- ---------
--------- ---------
</TABLE>

Valuation allowances, which reduce deferred tax assets to an amount that
will more likely than not be realized, have increased by $18 million and $47
million in 1995 and 1996, respectively, and decreased by $4 million in 1997.

Net operating loss carryforwards totaling $227 million at December 27, 1997,
are available to reduce future taxes of certain foreign subsidiaries, primarily
related to Spain. Of these carryforwards, $4 million expire in 1998 and $223
million expire at various times between 1999 and 2004. A full valuation
allowance has been established for these net operating loss carryforwards.

F-16
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

NOTE 14--GEOGRAPHIC DATA

PBG operates in one industry--carbonated soft drinks and other
ready-to-drink beverages. PBG does business in 39 states and the District of
Columbia in the U.S. Outside the U.S., PBG does business in eight Canadian
provinces, Spain, Greece and Russia.
<TABLE>
<CAPTION>
NET SALES
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
U.S.............................................................. $ 5,288 $ 5,476 $ 5,584
Other countries.................................................. 1,105 1,127 1,008
--------- --------- ---------
$ 6,393 $ 6,603 $ 6,592
--------- --------- ---------
--------- --------- ---------

LONG-LIVED ASSETS
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
U.S.............................................................. $ 4,804 $ 4,792 $ 4,918
Other countries.................................................. 1,029 982 934
--------- --------- ---------
$ 5,833 $ 5,774 $ 5,852
--------- --------- ---------
--------- --------- ---------
</TABLE>

Included in other assets on the Combined Balance Sheets are $24 million, $32
million and $64 million of investments in joint ventures at December 30, 1995,
December 28, 1996, and December 27, 1997, respectively. PBG's equity income or
loss in such joint ventures was $11 million equity income in 1995 and $1 million
and $12 million equity loss in 1996 and 1997, respectively.

NOTE 15--TRANSACTIONS WITH PEPSICO

PBG purchases concentrate from PepsiCo to be used in the production of
carbonated soft drinks and other non-alcoholic beverages. PBG also produces or
distributes other products and purchases finished goods and concentrate through
various arrangements with PepsiCo or PepsiCo joint ventures. Such purchases are
reflected in cost of sales.

PepsiCo and PBG share a business objective of increasing availability and
consumption of Pepsi-Cola beverages. Accordingly, PepsiCo provides PBG with
various forms of marketing support to promote Pepsi-Cola beverages. This support
covers a variety of initiatives, including marketplace support, marketing
programs, capital equipment investment and shared media expense. PepsiCo and PBG
each record their share of the cost of marketing programs in their financial
statements. Based on the objective of the programs and initiatives, marketing
support is recorded as an adjustment to net sales or a reduction of selling,
delivery and administrative expense. There are no conditions or requirements
which could result in the repayment of any support payments received by PBG.

PBG manufactures and distributes fountain products and provides fountain
equipment service to PepsiCo customers in certain territories in accordance with
the Pepsi Beverage Agreements. PBG pays a royalty fee to PepsiCo for the
AQUAFINA trademark.

PepsiCo provides certain administrative support to PBG, including
procurement of raw materials, transaction processing such as accounts payable
and credit and collection, certain tax and treasury services and information
technology maintenance and systems development. PBG also subleases its
headquarters building from PepsiCo. These services are more fully described in
the Shared Services Agreement between the two companies.

F-17
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

The Combined Statements of Operations include the following income (expense)
amounts as a result of transactions with PepsiCo:

<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net sales..................................................... $ 189 $ 220 $ 216
Cost of sales................................................. (1,015) (1,067) (1,188)
Selling, delivery and administrative expenses................. 171 176 215
</TABLE>

NOTE 16--CONTINGENCIES

PBG is subject to various claims and contingencies related to lawsuits,
taxes, environmental and other matters arising out of the normal course of
business. Management believes that the ultimate liability, if any, in excess of
amounts already recognized arising from such claims or contingencies is not
likely to have a material adverse effect on PBG's annual results of operations
or financial condition.

NOTE 17--SUBSEQUENT EVENTS (UNAUDITED)

During 1998, PBG acquired independent PepsiCo bottlers in the U.S. and
Canada and the remaining interest in its bottling joint venture in Russia for an
aggregate cash purchase price of $543 million. These acquisitions will be
accounted for by the purchase method. The purchase prices have been
preliminarily allocated to the estimated fair value of the assets acquired and
liabilities assumed. Franchise rights, goodwill and other intangibles recorded
in connection with these acquisitions was $450 million and will be amortized
over no more than 40 years.

In recent years, PBG has invested in Russia to build infrastructure and to
fund start-up manufacturing and distribution costs. Approximately 1% of PBG's
net sales in fiscal 1997 and 2% in the thirty-six weeks ended September 5, 1998
were attributable to PBG's operations in Russia; during such periods, operating
losses amounted to $50 million and $57 million, respectively, and cash
requirements for investing activities and to fund operations were $71 million
and $168 million, respectively. A substantial portion of such cash requirements
was attributable to PBG's purchase of a 25% interest in a Russian bottler in
1997, and PBG's purchase of the remaining interest in such bottler in 1998.

The recent economic turmoil in Russia has had a further adverse effect on
PBG's results of operations, cash flows and financial condition during its
fourth fiscal quarter. Net sales in Russia are denominated in rubles, which in
August 1998 experienced significant devaluation against the U.S. dollar, whereas
a substantial portion of the expenses of PBG's Russian bottling operations are
denominated in U.S. dollars. In addition, the current Russian economic crisis
has caused a significant drop in demand resulting in lower net sales and
increased operating losses. PBG has taken actions to reduce its fixed cost
structure in response to these economic events. PBG is evaluating the extent of
impairment of its long-lived assets in Russia, which will be recorded in the
fourth quarter of 1998.

F-18
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (TABULAR DOLLARS IN MILLIONS, EXCEPT PER
SHARE DATA) (CONTINUED)

NOTE 18--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL YEAR ENDED
1996 QUARTER QUARTER QUARTER QUARTER DECEMBER 28, 1996
- ----------------------------------- ----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 1,280 $ 1,656 $ 1,803 $ 1,864 $ 6,603
Gross profit....................... 547 695 748 769 2,759
Operating income (loss)............ 57 153 182 (29) 363
Net income (loss).................. (8) 52 80 (63) 61
</TABLE>

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL YEAR ENDED
1997 QUARTER QUARTER QUARTER QUARTER DECEMBER 27, 1997
- ----------------------------------- ----------- ----------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 1,306 $ 1,585 $ 1,786 $ 1,915 $ 6,592
Gross profit....................... 561 673 735 791 2,760
Operating income (loss)............ 50 140 159 (12) 337
Net income (loss).................. -- 55 56 (40) 71
</TABLE>

F-19
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA, UNAUDITED)

THIRTY-SIX WEEKS ENDED SEPTEMBER 6, 1997 AND SEPTEMBER 5, 1998

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
----------------------------
<S> <C> <C>
SEPTEMBER 6, SEPTEMBER 5,
1997 1998
------------- -------------
NET SALES............................................................................. $ 4,677 $ 4,988
Cost of sales......................................................................... 2,708 2,936
------ ------
GROSS PROFIT.......................................................................... 1,969 2,052
Selling, delivery and administrative expenses......................................... 1,621 1,760
------ ------
OPERATING INCOME...................................................................... 348 292
Interest expense, net................................................................. 140 146
------ ------
INCOME BEFORE INCOME TAXES............................................................ 208 146
Income tax expense.................................................................... 97 76
------ ------
NET INCOME............................................................................ $ 111 $ 70
------ ------
------ ------
PRO FORMA EARNINGS PER SHARE..........................................................
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING.........................................
</TABLE>

See accompanying notes to unaudited Condensed Combined Financial Statements.

F-20
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

CONDENSED COMBINED STATEMENTS OF CASH FLOWS

(IN MILLIONS, UNAUDITED)

THIRTY-SIX WEEKS ENDED SEPTEMBER 6, 1997 AND SEPTEMBER 5, 1998

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
CASH FLOWS--OPERATIONS
Net income....................................................................................... $ 111 $ 70
Adjustments to reconcile net income to net cash provided by operations:
Depreciation................................................................................... 213 238
Amortization................................................................................... 86 82
Deferred income taxes.......................................................................... 15 37
Other noncash charges and credits, net......................................................... 6 47
Changes in operating working capital, excluding effects of acquisitions and dispositions:
Trade accounts receivable.................................................................. (147) (211)
Inventories................................................................................ (50) (48)
Prepaid expenses, deferred income taxes and other current assets........................... (39) (2)
Accounts payable and other current liabilities............................................. 23 32
Trade accounts payable to PepsiCo.......................................................... 34 35
Income taxes payable....................................................................... -- (5)
--------- ---------
Net change in operating working capital........................................................ (179) (199)
--------- ---------
NET CASH PROVIDED BY OPERATIONS.................................................................. 252 275
--------- ---------
CASH FLOWS--INVESTMENTS
Capital expenditures............................................................................. (325) (356)
Acquisitions of bottlers and investments in affiliates........................................... (36) (269)
Sales of bottling operations and property, plant and equipment................................... 20 20
Other, net....................................................................................... -- (18)
--------- ---------
NET CASH USED FOR INVESTMENTS.................................................................... (341) (623)
--------- ---------
CASH FLOWS--FINANCING
Short-term borrowings--three months or less...................................................... (14) 40
Proceeds from third party debt................................................................... -- 47
Payments of third party debt..................................................................... (11) (33)
Increase in advances from PepsiCo................................................................ 129 264
--------- ---------
NET CASH PROVIDED BY FINANCING................................................................... 104 318
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS..................................... (1) (1)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................. 14 (31)
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR..................................................... 40 86
--------- ---------
CASH AND CASH EQUIVALENTS--END OF PERIOD......................................................... $ 54 $ 55
--------- ---------
--------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
NON-CASH INVESTING AND FINANCING ACTIVITIES:
PepsiCo capital stock issued in conjunction with acquisitions of bottlers.................... $ 14 $ --
Liabilities incurred and/or assumed in conjunction with acquisitions of bottlers............. $ 3 $ 71
</TABLE>

See accompanying notes to unaudited Condensed Combined Financial Statements.

F-21
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

CONDENSED COMBINED BALANCE SHEETS

(IN MILLIONS)

DECEMBER 27, 1997 AND SEPTEMBER 5, 1998

<TABLE>
<CAPTION>
SEPTEMBER 5,
1998
(UNAUDITED)
DECEMBER 27, --------------------------
1997 HISTORICAL PRO FORMA
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................................ $ 86 $ 55
Trade accounts receivable, less allowance of $45 and $50, in 1997 and
1998, respectively..................................................... 808 1,048
Inventories.............................................................. 257 321
Prepaid expenses, deferred income taxes and other current assets......... 185 192
------ ------
TOTAL CURRENT ASSETS................................................... 1,336 1,616

Property, plant and equipment, net....................................... 1,918 2,143
Intangible assets, net................................................... 3,679 3,751
Other assets............................................................. 255 179
------ ------
TOTAL ASSETS......................................................... $ 7,188 $ 7,689
------ ------
------ ------

LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES
Accounts payable and other current liabilities........................... $ 811 $ 877
Trade accounts payable to PepsiCo........................................ 23 45
Income taxes payable..................................................... 273 274
Short-term borrowings.................................................... 40 91
------ ------
TOTAL CURRENT LIABILITIES.............................................. 1,147 1,287

Allocation of PepsiCo long-term debt..................................... 3,000 3,000
Long-term debt due to third parties...................................... 96 99
Other liabilities........................................................ 350 346
Deferred income taxes.................................................... 1,076 1,142

STOCKHOLDER'S EQUITY
Advances from PepsiCo.................................................... 1,703 2,046
Accumulated other comprehensive loss..................................... (184) (231)
------ ------
TOTAL STOCKHOLDER'S EQUITY............................................. 1,519 1,815
------ ------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY........................... $ 7,188 $ 7,689
------ ------
------ ------
</TABLE>

See accompanying notes to unaudited Condensed Combined Financial Statements.

F-22
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS

(TABULAR DOLLARS IN MILLIONS)

NOTE 1--BASIS OF PRESENTATION

The Condensed Combined Balance Sheet at September 5, 1998 and the Condensed
Combined Statements of Operations and Cash Flows for the thirty-six weeks
ended September 6, 1997 and September 5, 1998 have not been audited, but
have been prepared in conformity with the accounting principles applied in
the PBG audited Combined Financial Statements for the fiscal year ended
December 27, 1997. In the opinion of management, this information includes
all material adjustments necessary for a fair presentation. The results for
the thirty-six weeks are not necessarily indicative of the results expected
for the fiscal year.

NOTE 2--INVENTORIES

<TABLE>
<CAPTION>
SEPTEMBER 5, 1998
-----------------
<S> <C>
Raw materials and supplies............................................... $ 117
Finished goods........................................................... 204
------
$ 321
------
------
</TABLE>

NOTE 3--REPAYMENT OF AMOUNTS OWED TO PEPSICO

The unaudited pro forma stockholder's equity or deficit gives effect to a
$ repayment of certain amounts to PepsiCo.

NOTE 4--ACQUISITIONS

As explained in Note 17 of the Combined Financial Statements, PBG made
certain acquisitions in the thirty-six week period ended September 5, 1998
and in the fourth quarter of 1998 for an aggregate cash purchase price of
$269 million and $274 million, respectively. The aggregate purchase price
less the fair value of the net assets acquired, including the resulting tax
effect, resulted in goodwill of approximately $158 million and $292 million
in the thirty-six week period ended September 5, 1998 and the fourth quarter
of 1998, respectively. The following table presents the unaudited pro forma
combined results of PBG and the aforementioned acquisitions as if they had
occurred at the beginning of fiscal year 1997. The pro forma information
does not necessarily represent what the actual combined results would have
been for these periods and is not intended to be indicative of future
results.

<TABLE>
<CAPTION>
THIRTY-SIX WEEKS
FISCAL ENDED SEPTEMBER 5,
1997 1998
--------- -------------------
<S> <C> <C>
Net sales....................................................... $ 6,984 $ 5,188
Net income...................................................... 75 82
</TABLE>

NOTE 5--SUBSEQUENT EVENTS

Also as described in Note 17 to the Combined Financial Statements, PBG has
taken actions to reduce its fixed cost structure in response to recent
economic events in Russia. PBG is evaluating the extent of impairment of its
long-lived assets in Russia, which will be recorded in the fourth quarter of
1998.

NOTE 6--OTHER COMPREHENSIVE INCOME

The total other comprehensive income was $23 million for thirty-six weeks
ended September 5, 1998.

F-23
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited Pro Forma Condensed Combined Balance Sheet as of September 5,
1998 and the unaudited Condensed Combined Statements of Operations for the year
ended December 27, 1997 and the thirty-six weeks ended September 5, 1998 have
been prepared from the Condensed Combined Financial Statements and the unaudited
Condensed Combined Financial Statements presented elsewhere in this prospectus.

In 1998, PBG acquired certain bottlers for aggregate cash consideration of
$543 million. In connection with the formation of PBG and Bottling LLC, Bottling
LLC assumed $ of indebtedness incurred by PepsiCo through a sale of notes,
which is unconditionally guaranteed by PepsiCo and is expected to remain
outstanding after the offering. Also, prior to the offering, PBG incurred
$ of indebtedness through a sale of notes and borrowed an additional
$ from banks. All of the net proceeds of the offering will be used to repay
the $ of short-term bank borrowings. Accordingly, PBG is expected to have
$ of long-term indebtedness outstanding after the offering and the
application of the net proceeds of the offering.

PBG and its primary operating subsidiary, Bottling LLC were formed in
January 1999. In connection with the formation of PBG and Bottling LLC, PepsiCo
contributed bottling assets and businesses to PBG which will be held by Bottling
LLC. As a result of the contribution of the assets, PBG will own % of Bottling
LLC and PepsiCo will directly own the remaining %. Accordingly, the unaudited
Pro Forma Condensed Combined Statements of Operations reflect PepsiCo's %
share of the combined net income of PBG as minority interest.

The accompanying unaudited Pro Forma Condensed Combined Financial Statements
of PBG as of September 5, 1998, and for the fiscal year ended December 27, 1997
and the thirty-six weeks ended September 5, 1998, give effect to the
acquisitions of certain bottlers, the indebtedness described above, and, with
respect to the Pro Forma Condensed Combined Balance Sheet, gives effect to the
offering and the application of the estimated net proceeds therefrom and related
transactions as described in the Notes. For purposes of the Pro Forma Condensed
Combined Statements of Operations, such transactions are assumed to have
occurred on the first day of fiscal 1997. For purposes of the Pro Forma
Condensed Combined Balance Sheet, the transactions are assumed to have occurred
on September 5, 1998.

Management believes that the assumptions used provide a reasonable basis for
presenting the significant effects directly attributable to the acquisitions of
certain bottlers, the indebtedness incurred, the offering and the application of
the net proceeds therefrom. The Pro Forma Condensed Combined Financial
Statements do not necessarily reflect what PBG's results of operations or
financial position would have been had such transactions been completed as of
the dates indicated nor does it give effect to any events other than those
discussed in the notes to the unaudited Pro Forma Condensed Combined Financial
Statements or to project the results of operations or financial position of PBG
for any future period or date. These should be read in conjunction with the Pro
Forma Condensed Combined Financial Statements, the unaudited Condensed Combined
Financial Statements, Use of Proceeds, and Management's Discussion and Analysis
of Results of Operations and Financial Condition, included elsewhere in this
prospectus.

P-1
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA, UNAUDITED)

FISCAL YEAR ENDED DECEMBER 27, 1997

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
<S> <C> <C> <C> <C>
ACQUISITIONS AND PRO FORMA
ACTUAL OTHER(A) FINANCING AS ADJUSTED
--------- ----------------- ----------- -----------
NET SALES..................................................... $ 6,592 $ 392 $ -- $
Cost of sales................................................. 3,832 244 --
--------- ----- ----- -----------
GROSS PROFIT.................................................. 2,760 148 --
Selling, delivery and administrative expenses................. 2,423 151(b) --
--------- ----- ----- -----------
OPERATING INCOME (LOSS)....................................... 337 (3) --
Interest expense, net......................................... 203 1 (c)
--------- ----- ----- -----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST.............. 134 (4)
Income tax expense (benefit).................................. 63 (2)(d) (d)
--------- ----- ----- -----------
NET INCOME BEFORE MINORITY INTEREST........................... 71 (2)
Minority interest............................................. -- -- (e) $
--------- ----- ----- -----------
NET INCOME (LOSS)............................................. $ 71 $ (2) $ $
--------- ----- ----- -----------
--------- ----- ----- -----------
PRO FORMA NET INCOME PER SHARE................................ $
--------- -----------
--------- -----------
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING.................
</TABLE>

See accompanying notes to unaudited Pro Forma Condensed Combined Financial
Statements.

P-2
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(IN MILLIONS, EXCEPT PER SHARE DATA, UNAUDITED)

THIRTY-SIX WEEKS ENDED SEPTEMBER 5, 1998

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
<S> <C> <C> <C> <C>
ACQUISITIONS AND PRO FORMA
ACTUAL OTHER(A) FINANCING AS ADJUSTED
--------- ----------------- ----------- -----------
NET SALES..................................................... $ 4,988 $ 200 $ -- $
Cost of sales................................................. 2,936 109 --
--------- ----- ----- -----------
GROSS PROFIT.................................................. 2,052 91 --
Selling, delivery and administrative expenses................. 1,760 73(b) --
--------- ----- ----- -----------
OPERATING INCOME.............................................. 292 18 --
Interest expense, net......................................... 146 -- (c)
--------- ----- ----- -----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST.............. 146 18
Income tax expense............................................ 76 9(d) (d)
--------- ----- ----- -----------
NET INCOME BEFORE MINORITY INTEREST........................... 70 9
Minority interest............................................. -- -- (e)
--------- ----- ----- -----------
NET INCOME (LOSS)............................................. $ 70 $ 9 $ $
--------- ----- ----- -----------
--------- ----- ----- -----------
PRO FORMA NET INCOME PER SHARE................................ $ $
--------- -----------
--------- -----------
PRO FORMA WEIGHTED AVERAGE SHARES OUTSTANDING.................
</TABLE>

See accompanying notes to unaudited Pro Forma Condensed Combined Financial
Statements.

P-3
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET

(IN MILLIONS, UNAUDITED)

SEPTEMBER 5, 1998

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS PRO FORMA
------------------------------ PRO FORMA OFFERING AS FURTHER
ACTUAL ACQUISITION(A) FINANCING AS ADJUSTED (D) ADJUSTED
--------- ----------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................. $ 55 $ 33 $ $ $ $
Trade accounts receivable.................. 1,048 26
Other current assets....................... 513 9
--------- ----- ----------- ----------- ----------- ------
TOTAL CURRENT ASSETS....................... 1,616 68
Property, plant and equipment, net......... 2,143 40
Intangible assets, net..................... 3,751 259
Other assets............................... 179 (28)
--------- ----- ----------- ----------- ----------- ------
TOTAL ASSETS............................... $ 7,689 $ 339 $ $ $ $
--------- ----- ----------- ----------- ----------- ------
--------- ----- ----------- ----------- ----------- ------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and other current
liabilities.............................. $ 877 $ 11 $ $ $ $
Short-term borrowings...................... 91 -- (b)
Other...................................... 319 9
--------- ----- ----------- ----------- ----------- ------
TOTAL CURRENT LIABILITIES.................. 1,287 20
Allocation of PepsiCo long-term debt....... 3,000 -- (c)
Long-term debt due to third parties........ 99 -- (c)
Other liabilities.......................... 346 --
Deferred income taxes...................... 1,142 66
STOCKHOLDER'S EQUITY
Additional paid in capital................. -- --
Advances from PepsiCo...................... 2,046 253 (b)
Accumulated other comprehensive income
loss..................................... (231) -- (e)
--------- ----- ----------- ----------- ----------- ------
TOTAL STOCKHOLDER'S EQUITY................. 1,815 253
--------- ----- ----------- ----------- ----------- ------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY................................... $ 7,689 $ 339 $ $ $ $
--------- ----- ----------- ----------- ----------- ------
--------- ----- ----------- ----------- ----------- ------
</TABLE>

See accompanying notes to unaudited Pro Forma Condensed Combined Financial
Statements.

P-4
<PAGE>
THE PEPSI BOTTLING GROUP, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(1) PRO FORMA ADJUSTMENTS FOR THE CONDENSED COMBINED STATEMENTS OF OPERATIONS

(a) Reflects the impact of certain acquisitions of bottlers, for aggregate
cash consideration of $543 million. The acquisitions have been accounted
for using the purchase method. The aggregate purchase price less the fair
value of the net assets acquired, including the resulting deferred tax
effect, results in goodwill of approximately $450 million, which is being
amortized over a period of no more than 40 years. PBG owned approximately
20% of two of these bottlers which were accounted for under the equity
method prior to the acquisition of the remaining interest in 1998.

(b) Reflects incremental corporate overhead costs that PBG is expected to
incur on a stand-alone basis of $12 million for fiscal 1997 and $8
million for the thirty-six weeks ended September 5, 1998.

(c) Reflects interest of $ and $ in fiscal 1997 and the
first thirty-six weeks of 1998, respectively resulting from the net
effect of eliminating the PepsiCo interest expense allocation and
recording interest expense based on $ ($ incurred by
PBG and Bottling LLC, respectively) of external debt using an interest
rate of %. A change in the interest rate of 1/8% would result in
movement of interest expense of $ annually and $ for
the thirty-six weeks ended September 5, 1998.

(d) Reflects the estimated tax impact of the pro forma adjustments using an
effective tax rate of 47.0% for fiscal 1997 and 52.2% for the first
thirty-six weeks of 1998.

(e) In connection with the formation of PBG and Bottling LLC and the
contribution of assets and bottling operations from PepsiCo and the
assumption of indebtedness from PepsiCo, Bottling LLC will be a % owned
subsidiary of PBG with PepsiCo owning the remaining %. Accordingly, the
pro forma statements of operations reflect PepsiCo's % minority
interest in the net income of Bottling LLC.

(2) PRO FORMA ADJUSTMENTS FOR THE CONDENSED COMBINED BALANCE SHEET

(a) Reflects the net assets acquired including resulting goodwill of $336
million from an October 1998 bottler acquisition for cash consideration
of $273 million and the elimination of our 20% investment.

(b) Reflects the $ , % loan PBG will incur prior to the offering
and the use of the proceeds to repay certain payables and indebtedness to
PepsiCo.

(c) Records the estimated $ of combined external debt PBG expects
to incur prior to the offering to repay certain payables and indebtedness
to PepsiCo. This debt will be made up of the following:

- $ , % to be incurred by Bottling LLC, PBG's principal
operating subsidiary.

- $ , % to be incurred by PBG.

(d) Records the estimated net proceeds from issuance of shares of PBG
capital stock from this offering and the repayment of PBG's $
short-term bank loan.

P-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Through and including , 1999 (the 25(th) day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

THE PEPSI BOTTLING GROUP, INC.

COMMON STOCK

------------------

PROSPECTUS

------------------

MERRILL LYNCH & CO.

MORGAN STANLEY DEAN WITTER

, 1999

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
Registration fee...................................................................................... $ 278,000
NASD Filing fee....................................................................................... 30,500
New York Stock Exchange listing fee................................................................... *
Transfer agent's fees................................................................................. *
Printing and engraving expenses....................................................................... *
Legal fees and expenses............................................................................... *
Accounting fees and expenses.......................................................................... *
Blue Sky fees and expenses............................................................................ *
Miscellaneous......................................................................................... *
-----------
Total........................................................................................... $ *
-----------
-----------
</TABLE>

- ------------------------

* To be filed by amendment

Each of the amounts set forth above, other than the Registration fee and the
NASD filing fee, is an estimate.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent to the Registrant. The
Delaware General Corporation Law provides that Section 145 is not exclusive of
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Article Eighth of the Registrant's certificate of incorporation provides for
indemnification by the Registrant of its directors, officers and employees to
the fullest extent permitted by the Delaware General Corporation Law.

Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. The Registrant's Certificate of Incorporation
provides for such limitation of liability.

The Registrant maintains standard policies of insurance under which coverage
is provided (a) to its directors and officers against loss rising from claims
made by reason of breach of duty or other wrongful act, and (b) to the
Registrant with respect to payments which may be made by the Registrant to such
officers and directors pursuant to the above indemnification provision or
otherwise as a matter of law.

II-1
<PAGE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (CONTINUED)
The proposed forms of Underwriting Agreement filed as Exhibit 1 to this
Registration Statement provide for indemnification of directors and officers of
the Registrant by the underwriters against certain liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since January 1, 1996, the Registrant has sold the following securities
without registration under the Securities Act of 1933:

None

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement*
3.1 Certificate of incorporation
3.2 Bylaws
4 Form of common stock certificate*
5 Opinion of Davis Polk & Wardwell*
10.1 Form of Master Bottling Agreement*
10.2 Form of Separation Agreement*
10.3 Form of Shared Services Agreement*
10.4 Form of Tax Separation Agreement*
10.5 Form of Employee Programs Agreement*
10.6 Form of Registration Rights Agreement*
21 Subsidiaries of the Registrant*
23.1 Consent of KPMG LLP
23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5)*
24 Power of Attorney (included on signature page)
27 Financial Data Schedule
</TABLE>

- ------------------------

* To be filed by amendment.

(b) The following financial statement schedule is filed as part of this
Registration Statement:

Schedule II--Valuation and Qualifying Accounts

ITEM 17. UNDERTAKINGS

The undersigned hereby undertakes:

(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy

II-2
<PAGE>
ITEM 17. UNDERTAKINGS (CONTINUED)
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Purchase, New York, on the 8th day of
January, 1999.

<TABLE>
<S> <C> <C>
THE PEPSI BOTTLING GROUP, INC.

By: /s/ JOHN T. CAHILL
----------------------------------------
John T. Cahill
Executive Vice President and Chief
Financial Officer
</TABLE>

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lawrence F. Dickie and Pamela C. McGuire, and
each of them, his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any and
all additional registration statements pursuant to Rule 462(b) relating to this
Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and things
requisite and necessary to be done as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and ratifying and confirming all that said attorneys-in-fact
and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ CRAIG E. WEATHERUP
- ------------------------------ Principal Executive January 8, 1999
Craig E. Weatherup Officer and Director

/s/ JOHN T. CAHILL
- ------------------------------ Principal Financial January 8, 1999
John T. Cahill Officer and Director

/s/ PETER A. BRIDGMAN
- ------------------------------ Controller and Principal January 8, 1999
Peter A. Bridgman Accounting Officer
</TABLE>

II-4
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE PEPSI BOTTLING GROUP, INC.
(IN MILLIONS)

<TABLE>
<CAPTION>
ADDITIONS
BALANCE ----------------------------------------
AT CHARGED TO BALANCE
BEGINNING COSTS AND CHARGED TO AT END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------- --------------- ----------------- --------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED:

DECEMBER 30, 1995
Allowance for losses on trade
accounts receivable......... $ 64 $ 16 $ 5 (a) $ 20 (b) $ 65

DECEMBER 28, 1996
Allowance for losses on trade
accounts receivable......... $ 65 $ 8 $ 4 (a) $ 12 (b) $ 65

DECEMBER 27, 1997
Allowance for losses on trade
accounts receivable......... $ 65 $ 6 $ 2 (a) $ 28 (b) $ 45
</TABLE>

- ------------------------

(a) Represents recoveries of amounts previously written off.

(b) Charge off of uncollectible accounts.
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION SEQUENTIALLY NUMBERED PAGE
- ----------- ---------------------------------------------------------------------------- ---------------------------------
<C> <S> <C>

1 Form of Underwriting Agreement*.............................................

3.1 Certificate of incorporation................................................

3.2 Bylaws......................................................................

4 Form of common stock certificate*...........................................

5 Opinion of Davis Polk & Wardwell*...........................................

10.1 Form of Master Bottling Agreement*..........................................

10.2 Form of Separation Agreement*...............................................

10.3 Form of Shared Services Agreement*..........................................

10.4 Form of Tax Separation Agreement*...........................................

10.5 Form of Employee Programs Agreement*........................................

10.6 Form of Registration Rights Agreement*......................................

21 Subsidiaries of the Registrant*.............................................

23.1 Consent of KPMG LLP.........................................................

23.2 Consent of Davis Polk & Wardwell (included in Exhibit 5)*...................

24 Power of Attorney (included on signature page)..............................

27 Financial Data Schedule.....................................................
</TABLE>

- ------------------------

* To be filed by amendment.

<PAGE>

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION

THE PEPSI BOTTLING GROUP, INC.

[COMPOSITE]

FIRST: The name of the corporation is The Pepsi Bottling Group, Inc.,
hereinafter referred to as the "Corporation."

SECOND:

(a) The Corporation shall have authority to issue 320,075,000 shares,
with a par value of $.01 per share, of which (i) 300,000,000 shares shall be
Common Stock, and 75,000 shares shall be Class B Common Stock (the Common Stock
and the Class B Common Stock being collectively referred to herein as the
"Capital Stock", and (ii) 20,000,000 shares shall be shares of Preferred Stock
(the "Preferred Stock").

(b) Preferred Stock. The Board of Directors is authorized to provide
for the issuance of all or any shares of the Preferred Stock in one or more
classes or series, and to fix for each such class or series the voting powers
(if any) and such distinctive designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors providing for the
issuance of such class or series and as may be permitted by the Delaware General
Corporation Law ("DGCL"); provided, however, that no holder of any Preferred
Stock shall be authorized or entitled to receive upon involuntary liquidation of
the Corporation an amount in excess of $100 per share of Preferred Stock.

(1) Except as otherwise set forth below in this Article
SECOND, the relative powers, preferences and participating, optional or other
special rights, and the qualification, limitations or restrictions of the Common
Stock and Class B Common Stock shall be identical in all respects.

<PAGE>

(2) Subject to the rights of the holders of Preferred Stock,
and subject to any other provisions of this Certificate of Incorporation,
holders of Common Stock and Class B Common Stock shall be entitled to receive
such dividends and other distributions in cash, stock of any corporation or
property of the Corporation as may be declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally available
therefor and shall share equally on a per share basis in all such dividends and
other distributions. In the case of dividends or other distributions payable in
Capital Stock, including distributions pursuant to stock splits or divisions of
Capital Stock of the Corporation, only shares of Common Stock shall be paid or
distributed with respect to Common Stock and only shares of Class B Common Stock
shall be paid or distributed with respect to Class B Common Stock. The number of
shares of Common Stock and Class B Common Stock so distributed on each share
shall be equal in number. Neither the shares of Common Stock nor the shares of
Class B Common Stock may be reclassified, subdivided or combined unless such
reclassification, subdivision or combination occurs simultaneously and in the
same proportion for each class.

(3) At every meeting of the stockholders of the Corporation
every holder of Common Stock shall be entitled to one vote in person or by proxy
for each share of Common Stock standing in his or her name on the transfer books
of the Corporation, and every holder of Class B Common Stock shall be entitled
to 250 votes in person or by proxy for each share of Class B Common Stock
standing in his or her name on the transfer books of the Corporation in
connection with the election of directors and all other matters submitted to a
vote of stockholders. Except as may be otherwise required by law or by this
Certificate of Incorporation, the holders of Common Stock and Class B Common
Stock shall vote together as a single class and their votes shall be counted and
totaled together, subject to any voting rights which may be granted to holders
of Preferred Stock, on all matters submitted to a vote of stockholders of the
Corporation. Notwithstanding any other provision of this Certificate of
Incorporation to the contrary, holders of Common Stock shall not be eligible to
vote on any alteration or change in the powers, preferences, or special rights
of the Class B Common Stock that would not adversely affect the rights of the
Common Stock; provided that, for the foregoing purposes, any provisions for the
voluntary, mandatory or other conversion or exchange of the Class B Common Stock
into or for Common Stock on a one for one basis shall be deemed not to adversely
affect the rights of the Common Stock. Except as otherwise provided by law, and
subject to any rights of the holders of Preferred Stock, the provisions of this
Certificate of Incorporation shall not be modified, revised, altered or amended,
repealed or rescinded in whole or in part, without the approval of a majority of
the votes cast by the holders of the Common Stock and the Class B Common Stock,
voting together as a single class; provided, however, that

2
<PAGE>

with respect to any proposed amendment of this Certificate of Incorporation
which would alter or change the powers, preferences or special rights of the
shares of Common Stock or Class B Common Stock so as to affect them adversely,
the approval of a majority of the votes cast by the holders of the shares
affected by the proposed amendment, voting separately as a class, shall be
obtained in addition to the approval of a majority of the votes entitled to be
cast by the holders of the Common Stock and the Class B Common Stock voting
together as a single class as hereinbefore provided.

(4) Each share of Class B Common Stock held by PepsiCo, Inc.
and its subsidiaries, affiliates and divisions (collectively "PepsiCo") shall,
at PepsiCo's option, be convertible into one share of Common Stock. Any share of
Class B Common Stock transferred by PepsiCo to any person or entity other than a
PepsiCo affiliate or subsidiary will automatically be converted into shares of
Common Stock upon such transfer.

(5) In the event of any dissolution, liquidation or winding up
of the affairs of the Corporation, whether voluntary or involuntary, after
payment in full of the amounts required to be paid to the holders of Preferred
Stock, the remaining assets and funds of the Corporation shall be distributed
pro rata to the holders of Capital Stock, and the holders of Common Stock and
the holders of Class B Common Stock will be entitled to receive the same amount
per share in respect thereof.

(6) Except as shall otherwise be approved by a majority of the
votes cast by the holders of each class of Capital Stock voting separately as a
class, in case of any reorganization or any consolidation of the Corporation
with one or more other corporations or a merger of the Corporation with another
corporation in which shares of Common Stock or Class B Common Stock are
converted into (or entitled to receive with respect thereto) shares of stock
and/or other securities or property (including cash), each holder of a share of
Common Stock shall be entitled to receive with respect to such shares the same
kind and amount of shares of stock and other securities and property (including
cash) receivable upon such reorganization, consolidation or merger by a holder
of a share of Class B Common Stock, and each holder of a share of Class B Common
Stock shall be entitled to receive with respect to such share the same kind and
amount of shares of stock and other securities and property (including cash)
receivable upon such reorganization, consolidation or merger by a holder of a
share of Common Stock.

THIRD: The address of the registered office of the Corporation in the
State of Delaware is 1013 Center Road, Wilmington, New Castle County,

3
<PAGE>

Delaware 19805 and the name of its initial registered agent at such address is
Corporation Service Company.

FOURTH: No holder of any shares of the Corporation, whether now or
hereinafter authorized, shall have any preemptive right to subscribe for or to
purchase any shares or other securities of the Corporation, nor have any right
to cumulate his votes for the election of directors. Except as otherwise
provided in the Certificate of Incorporation, at all meetings of the
stockholders of the Corporation, a quorum being present, all matters shall be
decided by a majority of the votes cast.

FIFTH: The Corporation shall have the authority to carry on any
business, whether manufacturing or otherwise, and to have and exercise all the
powers conferred upon corporations formed under the Delaware General Corporation
Law (the "DGCL").

SIXTH: The following provisions are intended for the management of the
business and the regulation of the affairs of the Corporation, and it is
expressly provided that the same are intended to be in furtherance and not in
limitation of the powers conferred by statute:

(a) The Board of Directors shall have the exclusive power and authority
to direct management of the business and affairs of the Corporation and shall
exercise all corporate powers, and possess all authority, necessary or
appropriate to carry out the intent of this provision, and which are customarily
exercised by the board of directors of a public company. In furtherance of the
foregoing, but without limitation, the Board of Directors shall have the
exclusive power and authority to: (a) elect all executive officers of the
Corporation as the Board may deem necessary or desirable from time to time; (b)
fix the compensation of such officers; and (c) fix the compensation of
directors.

(b) The number of directors constituting the Board of Directors shall
not be less than two nor more than fifteen, as may be fixed from time to time by
resolution duly adopted by the Board of Directors. The only qualifications for
directors of the Corporation shall be those set forth in this Certificate of
Incorporation. Directors need not be residents of the State of Delaware.

(c) A vacancy occurring on the Board of Directors, including, without
limitation, a vacancy resulting from an increase in the number of directors, may
only be filled by a majority of the remaining directors or by the sole remaining
director in office. In the event of the death, resignation, retirement, removal
or disqualification of a director during his elected term of office, his
successor shall serve until the next stockholders' meeting at which directors
are elected.

4
<PAGE>

(d) The Board of Directors may adopt, amend or repeal the Corporation's
Bylaws, in whole or in part, but any Bylaws made by the Board of Directors may
be altered, amended or repealed by the stockholders entitled to vote.

(e) The Corporation may in its Bylaws confer upon directors powers
additional to the foregoing and the powers and authorities conferred upon them
by statute.

(f) The Board of Directors may create and make appointments to one or
more committees of the Board, comprised exclusively of directors, who will serve
at the pleasure of the Board and who may have and exercise such powers of the
Board in directing the management of the business and affairs of the Corporation
as the Board may delegate, in its sole discretion, consistent with the
provisions of the DGCL and this Certificate of Incorporation. The Board of
Directors may not delegate its authority over the expenditure of funds of the
Corporation except to a committee of the Board and except to one or more
executive officers of the Corporation elected by the Board.

SEVENTH:

(a) PepsiCo, Inc. shall have no duty to refrain from engaging in the
same or similar activities or lines of business as the Corporation, and except
as provided in paragraph (b) below, neither PepsiCo nor any officer, director,
or employee thereof shall be liable to the Corporation or its stockholders for
breach of any fiduciary duty by reason of any such activities of PepsiCo or of
such person. In the event that PepsiCo acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both PepsiCo and
the Corporation, PepsiCo shall have no duty to communicate or offer such
corporate opportunity to the Corporation and shall not be liable to the
Corporation or its stockholders for breach of any fiduciary duty as a
stockholder of the Corporation by reason of the fact that PepsiCo pursues or
acquires such corporate opportunity for itself, directs such corporate
opportunity to another person, or does not communicate information regarding
such corporate opportunity to the Corporation.

(b) In the event that a director or officer of the Corporation, who is
also a director or officer of PepsiCo, acquires knowledge of a potential
transaction or matter which may be a corporate opportunity for both the
Corporation and PepsiCo, such director or officer shall have fully satisfied and
fulfilled his or her fiduciary duty to the Corporation and its stockholders with
respect to such corporate opportunity, and shall not be liable to the
Corporation or its

5
<PAGE>

stockholders for breach of any fiduciary duty by reason of the fact that PepsiCo
pursues or acquires such corporate opportunity for itself or directs such
corporate opportunity to another person or does not communicate information
regarding such corporate opportunity to the Corporation, if such director or
officer acts consistent with the following:

(i) a corporate opportunity offered to any person who is an
officer of the Corporation, and who is also a director of PepsiCo,
shall belong to the Corporation; (ii) a corporate opportunity offered
to any person who is a director of the Corporation, and who is also a
director or officer of PepsiCo shall belong to the Corporation if such
opportunity is expressly offered to such person solely in his or her
capacity as a director of the Corporation, and otherwise shall belong
to PepsiCo; and (iii) a corporate opportunity offered to any person who
is an officer of both the Corporation and PepsiCo shall belong to the
Corporation.

EIGHTH:

(a) The Corporation shall, to the fullest extent from time to time
permitted by law, indemnify its directors, officers, employees and agents
against all liabilities and expenses in any suit or proceedings, whether civil,
criminal, administrative or investigative, and whether or not brought by or on
behalf of the Corporation, including all appeals therefrom, arising out of their
status as such or their activities in any of the foregoing capacities. The
Corporation shall likewise and to the same extent indemnify any person who, at
the request of the Corporation, is or was serving as a director, officer,
partner, trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under any employee benefit plan.

(b) The right to be indemnified hereunder shall include, without
limitation, the right of a director or officer to be paid expenses in advance of
the final disposition of any proceedings, upon receipt of an undertaking to
repay such amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified hereunder.

(c) A person entitled to indemnification hereunder shall also be paid
reasonable costs, expenses and attorneys' fees in connection with the
enforcement of rights to the indemnification granted hereunder.

(d) The foregoing rights of indemnification shall not be exclusive of
any other rights to which those seeking indemnification may be entitled.

6
<PAGE>

(e) The Board of Directors may take such action as it deems necessary
or desirable to carry out these indemnification provisions, including without
limitation adopting procedures for determining and enforcing the rights
guaranteed hereunder, and purchasing insurance policies; and the Board of
Directors is expressly empowered to adopt, approve and amend from time to
time such bylaws, resolutions or contracts implementing such provisions or
such further indemnification arrangement as may be permitted by law.

(f) Neither the amendment or repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation inconsistent
with this Article, shall eliminate or reduce any right to indemnification
afforded by this Article to any person with respect to their status or any
activities in their official capacities prior to such amendment, repeal or
adoption.

NINTH: To the full extent from time to time permitted by law, no person
who is serving or who has served as a director of the Corporation shall be
personally liable in any action for monetary damages for breach of any duty as a
director, whether such action is brought by or in the right of the Corporation
or otherwise. Neither the amendment or repeal of this Article, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article, shall eliminate or reduce the protection afforded by this Article with
respect to any matter which occurred prior to such amendment, repeal or
adoption.

TENTH: The provisions of Section 203 of the DGCL shall not be
applicable to the Corporation.

ELEVENTH: Except as may be otherwise determined by the Board of
Directors, the stockholders of the Corporation shall have access as a matter of
right only to the books and records of the Corporation as may be required to be
made available to qualified stockholders by the DGCL.

TWELFTH: To the extent that there ever may be inconsistency between
this Certificate of Incorporation and the Bylaws of the Corporation as may be
adopted or amended from time to time, the Certificate of Incorporation shall
control.

7
<PAGE>

THIRTEENTH: The name and address of the incorporator is:

James F. Burnett Potter Anderson & Corroon, LLP
1313 North Market Street
P. O. Box 951
Wilmington, Delaware 19899

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 6th
day of January, 1999.

/s/ James F. Burnett
--------------------------
James F. Burnett
Sole Incorporator

<PAGE>

EXHIBIT 3.2
BYLAWS

THE PEPSI BOTTLING GROUP, INC.

ARTICLE 1 - OFFICES

SECTION 1. OFFICES. The principal office of The Pepsi Bottling Group, Inc.
(the "Corporation") in the State of Delaware shall be in the City of Wilmington.
The Corporation may have offices at such other places, either within or without
the State of Delaware, as the Board of Directors may from time to time determine
or as may be appropriate to the Corporation's business.

ARTICLE 2 - MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETING. Meetings of stockholders shall be held at such
places, either within or without the State of Delaware, as shall be designated
in the notice of the meeting.

SECTION 2. ANNUAL MEETING. The annual meeting of stockholders shall be held
on such date and at such time as the Board of Directors shall determine each
year in advance thereof, for the purpose of electing directors of the
Corporation and the transaction of such business as may be a proper subject for
action at the meeting.

SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation may be called at any time by the Chairman of the Board or the Board,
and shall be called by the Secretary upon the written request of stockholders
holding of record in the aggregate at least twenty-five percent (25%) of the
voting power of the issued and outstanding shares of Capital Stock of the
Corporation entitled to vote at such meeting. Such special meeting shall be held
at such time and at such place within or without the State of Delaware as may be
fixed by the Chairman of the Board, in the case of meetings called by the
Chairman of the Board, or by resolution of the Board, in the case of meetings
called by the Board, and any meeting called at the request of stockholders
pursuant hereto shall be held at the principal office of the Corporation within
seventy-five (75) days from the receipt by the Secretary of such request. Any
request for a special meeting of stockholders shall state the purpose or
purposes of the proposed meeting, and such purpose or purposes shall be set
forth in the notice of meeting, and the business transacted at any such special
meeting shall be limited to such purpose or purposes.

SECTION 4. NOTICE OF MEETINGS. At least 10 and no more than 60 days prior
to any annual or special meeting of stockholders, the Corporation shall notify
stockholders

<PAGE>

of the date, time and place of the meeting. Unless otherwise required by the
Certificate of Incorporation or by statute, the Corporation shall be required to
give notice only to stockholders entitled to vote at the meeting. If an annual
or special stockholders' meeting is adjourned to a different date, time or
place, notice thereof need not be given if the new date, time or place is
announced at the meeting before adjournment. If a new record date for the
adjourned meeting is fixed pursuant to Article 7, Section 5 hereof, notice of
the adjourned meeting shall be given to persons who are stockholders as of the
new record date. If mailed, notice shall be deemed to be effective when
deposited in the United States mail with postage thereon prepaid, correctly
addressed to the stockholder's address shown in the Corporation's current record
of stockholders.

SECTION 5. QUORUM, PRESIDING OFFICER. Except as otherwise prescribed by
statute, the Certificate of Incorporation or these Bylaws, at any meeting of the
stockholders of the Corporation, the presence in person or by proxy of the
holders of record of outstanding shares of Capital Stock entitled to cast a
majority of all the votes which could be cast at such meeting by the holders of
all the outstanding shares of Capital Stock of the Corporation entitled to vote
thereat shall constitute a quorum for the transaction of business. In the
absence of a quorum at such meeting or any adjournment thereof, the holders of
record of such shares, entitled to cast a majority of all votes which could be
cast at such meeting, so present in person or by proxy and entitled to vote
thereat, may adjourn the meeting from time to time until a quorum shall be
present. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. Meetings of stockholders shall be presided over by the
Chairman of the Board, or, if the Chairman is not present, by another officer or
director who shall be designated to serve in such event by the Board. The
Secretary of the Corporation, or an Assistant Secretary designated by the
officer presiding at the meeting, shall act as Secretary of the meeting.

SECTION 6. VOTING. Except as otherwise prescribed by statute, the
Certificate of Incorporation or these Bylaws, at any meeting of the stockholders
of the Corporation, each stockholder shall be entitled to one vote in person or
by proxy for each share of Capital Stock of the Corporation registered in the
name of such stockholder on the books of the Corporation on the date fixed
pursuant to these Bylaws as the record date for the determination of
stockholders entitled to vote at such meeting. No proxy shall be voted after
eleven (11) months from its date unless said proxy provides for a longer period.
Shares of its Capital Stock belonging to the Corporation shall not be voted
either directly or indirectly. The vote for the election of directors, other
matters expressly prescribed by statute, and, upon the direction of the
presiding officer of the meeting, the vote on any other question before the
meeting, shall be by ballot.

SECTION 7. NOTICE OF STOCKHOLDER PROPOSAL. For business proposed by a
stockholder to be a proper subject for action at an annual meeting of
stockholders, in addition to any requirement of law, the stockholder must timely
request (by certified mail - return receipt requested) that the proposal be
included in the Corporation's proxy statement for the meeting, and such request
must satisfy all of the provisions of Rule 14a-8 under the Securities Exchange
Act of 1934, as amended.

2
<PAGE>

SECTION 8. POSTPONEMENT OF STOCKHOLDERS MEETING. A scheduled annual or
special meeting of stockholders may be postponed by the Board of Directors by
public notice given at or prior to the time of the meeting.

ARTICLE 3 - BOARD OF DIRECTORS

SECTION 1. GENERAL POWERS. Except as otherwise expressly provided in the
Certificate of Incorporation or by statute, the Board of Directors shall have
the exclusive power and authority to direct management of the business and
affairs of the Corporation and shall exercise all corporate powers, and possess
all authority, necessary or appropriate to carry out the intent of this
provision, and which are customarily exercised by the board of directors of a
public company.

SECTION 2. NUMBER, TERM AND QUALIFICATION. The number, term and
qualifications of directors of the Corporation shall be as provided in the
Certificate of Incorporation.

SECTION 3. VACANCIES. Vacancies occurring in the Board of Directors shall
be filled only as provided in the Certificate of Incorporation.

SECTION 4. COMPENSATION. Compensation for the services of directors as such
shall be determined exclusively by the Board of Directors as provided in the
Certificate of Incorporation.

ARTICLE 4 - MEETINGS OF DIRECTORS

SECTION 1. ANNUAL AND REGULAR MEETINGS. All annual and regular meetings of
the Board of Directors shall be held at such places and times as determined by
the Board of Directors in their discretion.

SECTION 2. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at such places and times as determined by the Board of Directors
in their discretion.

SECTION 3. NOTICE OF MEETINGS. Unless the Board of Directors by resolution
determines otherwise, all meetings of the Board of Directors may be held without
notice of the date, time, place or purpose of the meeting. The Secretary shall
give such notice of any meetings called by the Board by such means of
communication as may be specified by the Board.

SECTION 4. QUORUM. A majority of directors in office shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.

3
<PAGE>

SECTION 5. MANNER OF ACTING. A majority of directors who are present at a
meeting at which a quorum is present will constitute the required vote to effect
any action taken by the Board of Directors.

SECTION 6. ACTION WITHOUT MEETING. Action required or permitted to be taken
at a meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action must be evidenced by one
or more written consents signed by each director before or after such action,
describing the action taken, and included in the minutes or filed with the
corporate records. Action taken without a meeting is effective when the last
director signs the consent, unless the consent specifies a different effective
date.

SECTION 7. MEETING BY COMMUNICATIONS DEVICE. Directors may participate in
any meeting of the Board of Directors by, or conduct the meeting through the use
of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in a
meeting by this means is deemed to be present in person at the meeting.

ARTICLE 5 - COMMITTEES

SECTION 1. ELECTION AND POWERS. The Board of Directors may appoint such
committees with such members who shall have such powers and authority as may be
determined by the Board. To the extent specified by the Board of Directors or in
the Certificate of Incorporation, each committee shall have and may exercise the
powers of the Board in the management of the business and affairs of the
Corporation, except that no committee shall have authority to do the following:

(a) Authorize distributions.

(b) Approve or propose to stockholders action required to be approved by
stockholders.

(d) Amend the Certificate of Incorporation.

(e) Adopt, amend or repeal the Bylaws.

(f) Approve a plan of merger not requiring stockholder approval.

(g) Authorize or approve the reacquisition of shares, except according to
a formula or method prescribed by the Board of Directors.

(h) Authorize or approve the issuance, sale or contract for sale of
shares, except that the Board of Directors may authorize a committee
(or a senior

4
<PAGE>

executive officer of the Corporation) to do so within limits
specifically prescribed by the Board of Directors.

SECTION 2. REMOVAL; VACANCIES. Unless the Board of Directors by resolution
determines otherwise, any member of a committee may be removed at any time
exclusively by the Board of Directors, with or without cause, and vacancies in
the membership of a committee as a result of death, resignation,
disqualification or removal shall be filled by vote of a majority of the whole
Board of Directors.

SECTION 3. MEETINGS. The provisions of Article 4 governing meetings of the
Board of Directors, action without meeting, notice, waiver of notice and quorum
and voting requirements shall apply to each committee of the Board and its
members to the extent not otherwise prescribed by the Board in the resolution
authorizing the establishment of the committee.

SECTION 4. MINUTES. Each committee shall keep minutes of its proceedings
and shall report thereon to the Board of Directors at or before the next meeting
of the Board.

ARTICLE 6 - OFFICERS

SECTION 1. PRINCIPAL OFFICERS. The principal officers of the Corporation
shall be a Chairman of the Board of Directors, who shall be chosen from among
the directors, a Chief Executive Officer, a Chief Operating Officer, a Chief
Financial Officer, one or more Vice Presidents, a Secretary, a Treasurer, and a
Controller. One person may hold any two offices.

SECTION 2. ELECTION, TERM OF OFFICE, QUALIFICATION. The principal officers
of the Corporation shall be elected annually by the Board and each shall hold
office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall resign. Any officer may be
removed at any time by the Board with or without cause.

SECTION 3. GENERAL POWERS OF OFFICERS. Except as may be otherwise provided
in these Bylaws or the Delaware General Corporation Law, the Chairman, the Chief
Executive Officer, the Chief Operating Officer, any Vice President, the
Controller, the Treasurer, the Secretary, or any one of them, may (i) execute
and deliver in the name of the Corporation, in the name of any division of the
Corporation, or in both names, any agreement, contract, deed, instrument, power
of attorney or other document pertaining to the business affairs of the
Corporation or any division of the Corporation, and (ii) delegate to any
employee or agent the power to execute and deliver any such agreement, contract,
deed, instrument, power of attorney or other document.

SECTION 4. CHAIRMAN. The Chairman shall preside at the meetings of the
Board, and may call meetings of the Board and of any committee thereof whenever
he deems it necessary, and he shall call to order and preside at all meetings of
the stockholders of the Corporation. In addition, he shall have such other
powers and duties as the Board

5
<PAGE>

shall designate from time to time. The Chairman of the Board of Directors shall
have power to sign all certificates of stock, bonds, deeds and contracts of the
Corporation.

SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall have supervision of its policies, business, and affairs, and
such other powers and duties as are commonly incident to the office of the chief
executive officer.

SECTION 6. CHIEF OPERATING OFFICER. The Chief Operating Officer shall have
such powers and perform such duties as the Board or the Chief Executive Officer
may from time to time prescribe or as may be prescribed by these Bylaws.

SECTION 7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have
such powers and perform such duties as the Board or the Chief Executive Officer
may from time to time prescribe or as may be prescribed by these Bylaws. The
Chief Financial Officer shall present to the Board such balance sheets, income
statements, budgets and other financial statements and reports as the Board or
the Chief Executive Officer may require and shall perform such other duties as
may be prescribed or assigned pursuant to these Bylaws and all other acts
incident to the position of Chief Financial Officer.

SECTION 8. VICE PRESIDENTS. Each Vice President shall have such powers and
perform such duties as the Board or the Chief Executive Officer may from time to
time prescribe. The Board may elect or designate one or more of the Vice
Presidents as Executive Vice Presidents, Senior Vice Presidents, or with such
other title as the Board may deem appropriate.

SECTION 9. THE TREASURER. The Treasurer shall keep, deposit, invest and
disburse the funds and securities of the Corporation, shall keep full and
accurate accounts of the receipts and disbursements of the Corporation, shall
maintain insurance coverage on the Corporation's assets, and, in general, shall
perform all the duties incident to the office of Treasurer and such other duties
as may from time to time be assigned to him by the Chief Executive Officer or
the Board.

SECTION 10. THE SECRETARY. The Secretary shall act as secretary of, and
keep the minutes of, all meetings of the Board and of the stockholders, shall be
custodian of the seal of the Corporation, and shall affix and attest the seal to
all documents the execution of which on behalf of the Corporation under its seal
shall have been specifically or generally authorized by the Board, and, in
general, shall perform all the duties incident to the office of Secretary and
such other duties as may from time to time be assigned by the Chairman, the
Chief Executive Officer or the Board.

SECTION 11. THE CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation, shall have charge of its accounting department and
shall keep or cause to be kept complete and accurate records of the assets,
liabilities, business and transactions of the Corporation.

6
<PAGE>

SECTION 12. ADDITIONAL OFFICERS. The Board may elect or appoint such
additional officers as it may deem necessary or advisable, and may delegate the
power to appoint such additional officers to any committee or principal officer.
Such additional officers shall have such powers and duties and shall hold office
for such terms as may be determined by the Board or such committee or officer.

SECTION 13. SALARIES. The salaries of the officers of the Corporation shall
be fixed from time to time in the manner prescribed by the Board.

SECTION 14. VOTING UPON SECURITIES. Unless otherwise ordered by the Board
of Directors, the Chairman, the Chief Executive Officer, the Chief Operating
Officer, or any Vice President shall have full power and authority on behalf of
the Corporation to attend, act and vote at meetings of the stockholders of any
entity in which this Corporation may hold securities, and at such meetings shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities and which, as the owner, the Corporation might have possessed
and exercised if present. The Board of Directors may by resolution from time to
time confer such power and authority upon any person or persons.

SECTION 15. CONTINUING DETERMINATION BY BOARD. All powers and duties of the
officers shall be subject to a continuing determination by the Board of
Directors.

ARTICLE 7 - CAPITAL STOCK

SECTION 1. CERTIFICATES. Unless the Board determines otherwise, shares of
the Capital Stock of the Corporation shall be represented by certificates. The
name and address of the persons to whom shares of Capital Stock of the
Corporation are issued, with the number of shares and date of issue, shall be
entered on the stock transfer records of the Corporation. Certificates for
shares of the Capital Stock of the Corporation shall be in such form not
inconsistent with the Certificate of Incorporation as shall be approved by the
Board of Directors. Each certificate shall be signed (either manually or by
facsimile) by (a) the Chairman, or any Vice President, and by the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer or (b) any two
officers designated by the Board of Directors. Each certificate may be sealed
with the seal of the Corporation or a facsimile thereof.

SECTION 2. TRANSFER OF SHARES. Transfers of shares shall be made on the
stock transfer records of the Corporation, and transfers shall be made only upon
surrender of the certificate for the shares sought to be transferred by the
holder of record or by a duly authorized agent, transferee or legal
representative. All certificates surrendered for transfer or reissue shall be
canceled before new certificates for the shares shall be issued.

SECTION 3. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint
one or more transfer agents and one or more registrars or transfers and may
require all stock certificates to be signed or countersigned by the transfer
agent and registered by the registrar.

7
<PAGE>

SECTION 4. REGULATIONS. The Board of Directors may make such rules
and regulations as it deems expedient concerning the issue, transfer and
registration of shares of Capital or Preferred Stock of the Corporation.

SECTION 5. FIXING RECORD DATE. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other purpose, the Board of Directors shall fix in advance
a date as the record date for the determination of stockholders. The record date
shall not be more than 60 days before the meeting or action requiring a
determination of stockholders. A determination of stockholders entitled to
notice of or to vote at a stockholders' meeting shall be effective for any
adjournment of the meeting unless the Board of Directors fixes a new record
date, which it shall do if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting. If no record date is fixed for
the determination of stockholders, the record date shall be the day the notice
of the meeting is mailed or the day the action requiring a determination of
stockholders is taken.

SECTION 6. LOST CERTIFICATES. In case of loss, theft, mutilation or
destruction of any certificate evidencing shares of the Capital or Preferred
Stock of the Corporation, another may be issued in its place upon proof of such
loss, theft, mutilation or destruction and upon the giving of indemnity or other
undertaking of the Corporation in such form and in such sum as the Board may
direct.

ARTICLE 8 - GENERAL PROVISIONS

SECTION 1. DIVIDENDS AND OTHER DISTRIBUTIONS. The Board of Directors may
from time to time declare and the Corporation may pay dividends or make other
distributions with respect to its outstanding shares in the manner and upon the
terms and conditions provided by law.

SECTION 2. SEAL. The seal of the Corporation shall be any form approved
from time to time by the Board of Directors.

SECTION 3. WAIVER OF NOTICE. Whenever notice is required to be given to a
stockholder, director or other person under the provisions of these Bylaws, the
Certificate of Incorporation or applicable statute, a waiver in writing signed
by the person or persons entitled to the notice, whether before or after the
date and time stated in the notice, and delivered to the Corporation, shall be
equivalent to giving the notice.

SECTION 4. DEPOSITORIES. The Chairman, the Chief Executive Officer, the
Chief Financial Officer, and the Treasurer are each authorized to designate
depositories for the funds of the Corporation deposited in its name or that of a
division of the Corporation, or both, and the signatories with respect thereto
in each case, and from time to time, to change such depositories and
signatories, with the same force and

8
<PAGE>

effect as if each such depository and the signatories with respect thereto and
changes therein had been specifically designated or authorized by the Board; and
each depository designated by the Chairman, the Chief Executive Officer, the
Chief Financial Officer, or the Treasurer shall be entitled to rely upon the
certificate of the Secretary or any Assistant Secretary of the Corporation
setting forth the fact of such designation and of the appointment of the
officers of the Corporation or of other persons who are to be signatories with
respect to the withdrawal of funds deposited with such depository, or from time
to time the fact of any change in any depository or in the signatories with
respect thereto.

SECTION 5. SIGNATORIES. Unless otherwise designated by the Board or by the
Chairman, the Chief Executive Officer, the Chief Financial Officer or the
Treasurer, all notes, drafts, checks, acceptances and orders for the payment of
money shall be (a) signed by the Treasurer or any Assistant Treasurer and (b)
countersigned by the Controller or any Assistant Controller, or either signed or
countersigned by the Chairman, the Chief Executive Officer, any Executive Vice
President, any Senior Vice President or any Vice President in lieu of either the
officers designated in (a) or the officers designated in (b) of this Section.

SECTION 6. PROXIES. Unless otherwise provided by a resolution of the Board,
the Chief Executive Officer, or any Vice President or Secretary or Assistant
Secretary designated by the Board may from time to time appoint an attorney or
attorneys or agent or agents of the Corporation to cast, in the name and on
behalf of the Corporation, the votes which the Corporation may be entitled to
cast as the holder of stock or other securities in any other corporation, at
meetings of the holders of the stock or other securities of such other
corporation, or to consent in writing, in the name of the Corporation as such
holder, to any action by such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as such officer may deem necessary or proper.

SECTION 7. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by the Board of Directors.

SECTION 8. AMENDMENTS. These Bylaws may be amended or repealed by the Board
of Directors, including any Bylaw adopted, amended, or repealed by the
stockholders generally. These Bylaws may be amended or repealed by the
stockholders even though the Bylaws may also be amended or repealed by the Board
of Directors.

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

The Board of Directors and Stockholder
The Pepsi Bottling Group, Inc.:

The audits referred to in our report dated January 8, 1999, included the
related financial statement schedule as of December 27, 1997, and for each of
the fiscal years in the three-year period ended December 27, 1997, included in
the registration statement. This financial statement schedule is the
responsibility of The Pepsi Bottling Group, Inc.'s management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic combined financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG LLP

New York, New York
January 8, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from The Pepsi
Bottling Group, Inc. combined financial statements for the 52 week period ended
December 27, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001076405
<NAME> The Pepsi Bottling Group, Inc.
<MULTIPLIER> 1,000,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 86
<SECURITIES> 0
<RECEIVABLES> 853
<ALLOWANCES> 45
<INVENTORY> 257
<CURRENT-ASSETS> 1,336
<PP&E> 3,924
<DEPRECIATION> 2,003
<TOTAL-ASSETS> 7,188
<CURRENT-LIABILITIES> 1,147
<BONDS> 96
0
0
<COMMON> 0
<OTHER-SE> 1,519
<TOTAL-LIABILITY-AND-EQUITY> 7,188
<SALES> 6,592
<TOTAL-REVENUES> 6,592
<CGS> 3,832
<TOTAL-COSTS> 3,832
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> 134
<INCOME-TAX> 63
<INCOME-CONTINUING> 71
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>