FORM 10-Q
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)
 X QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
---
ACT OF 1934 For the quarterly period ended June 12, 1999 (12 and 24 Weeks Ended)

                                       OR

      TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
EXCHANGE ACT OF 1934 For the transition period from       to

Commission file number  1-14893




                         THE PEPSI BOTTLING GROUP, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                             13-4038356
            --------                                             ----------
(State or other jurisdiction of                                    (I.R.S.
Employer incorporate or organization)                        Identification No.)

     One Pepsi Way, Somers, New York                                10589
     -------------------------------                                -----
(Address of principal executive offices)                         (Zip Code)

                                  914-767-6000
                                  ------------
              (Registrant's telephone number, including area code)

                                       N/A
                                       ---
              (Former name, former address and former fiscal year,
                         if changed since last report.)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

YES   X    NO
    -----     -----

Number of shares of Capital Stock outstanding as of July 9, 1999:
155,005,704






                         THE PEPSI BOTTLING GROUP, INC.

                                      INDEX

                                                                        Page No.
                                                                        --------


Part I       Financial Information

    Item 1.  Financial Statements

             Condensed Consolidated Statements of Operations-
                12 and 24 weeks ended June 13, 1998 and June 12, 1999      2

             Condensed Consolidated Statements of Cash Flows -
                24 weeks ended June 13, 1998 and June 12, 1999             3

             Condensed Consolidated Balance Sheets -
                December 26, 1998 and June 12, 1999                        4

             Notes to Condensed Consolidated Financial Statements          5-9

    Item 2.  Management's Discussion and Analysis of Results of
                Operations and Financial Condition                         10-16

    Item 3.  Quantitative and Qualitative Disclosures About
                Market Risk                                                17

             Independent Accountants' Review Report                        18

Part II      Other Information and Signatures

    Item 6.  Exhibits and Reports on Form 8-K                              19




                                       -1-




                         PART I - FINANCIAL INFORMATION
     Item 1.
                         THE PEPSI BOTTLING GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      in millions except per share amounts
                                   (unaudited)

<TABLE>
<CAPTION>
                                                           12 Weeks Ended               24 Weeks Ended
                                                           --------------               --------------
                                                      June 13,        June 12,     June 13,        June 12,
                                                        1998            1999         1998            1999
                                                        ----            ----         ----            ----

<S>                                                     <C>           <C>            <C>           <C>
Net Revenues .....................................     $ 1,686       $ 1,831        $ 3,026       $ 3,283
Cost of sales ....................................         990         1,046          1,767         1,881
                                                       -------       -------        -------       -------

Gross Profit .....................................         696           785          1,259         1,402
Selling, delivery and administrative expenses ....         592           648          1,116         1,223
Non-cash compensation charge .....................           -            45              -            45
                                                       -------       -------        -------       -------

Operating Income .................................         104            92            143           134
Interest expense, net ............................          53            51            105            97
Foreign currency (gain) loss .....................           2            (1)             2             -
Minority interest ................................           -             7              -             7
                                                       -------       -------        -------       -------
Income before income taxes .......................          49            35             36            30
Income tax expense ...............................          26            15             19            13
                                                       -------       -------        -------       -------
Net Income .......................................     $    23       $    20        $    17       $    17
                                                       =======       =======        =======       =======

Basic and Diluted Earnings Per Share .............     $  0.41       $  0.14        $  0.30       $  0.18
Weighted Average Basic and Diluted
   Shares Outstanding ............................          55           142             55            98

Pro Forma Basic and Diluted Earnings Per
   Share (see note 8):
   As reported....................................     $  0.15       $  0.13        $  0.11       $  0.11
   Excluding non-cash compensation charge.........     $  0.15       $  0.32        $  0.11       $  0.30
   Basic and diluted shares outstanding ..........         155           155            155           155

</TABLE>

          See accompanying notes to Condensed Consolidated Financial Statements.




                                       -2-




                         THE PEPSI BOTTLING GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   in millions
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                              24 Weeks Ended
                                                                                              --------------
                                                                                          June 13,      June 12,
                                                                                            1998          1999
                                                                                            ----          ----
Cash Flows - Operations
<S>                                                                                        <C>            <C>
       Net income....................................................................    $   17         $   17
       Adjustments to reconcile net income to net cash provided by operations:
            Depreciation.............................................................       152            164
            Amortization.............................................................        54             59
            Deferred income taxes....................................................        24             (2)
            Non-cash compensation charge.............................................         -             29
            Other non-cash charges and credits, net..................................        33             35
            Changes in operating working capital, excluding effects of
              acquisitions and dispositions;
               Trade accounts receivable.............................................      (120)          (182)
               Inventories...........................................................       (76)           (44)
               Prepaid expenses, deferred income taxes and other current assets......        (4)           (20)
               Accounts payable and other current liabilities........................       (18)            93
                                                                                         -------        -------
            Net change in operating working capital .................................      (218)          (153)
                                                                                         -------        -------
Net Cash Provided by Operations......................................................        62            149
                                                                                         -------        -------

    Cash Flows - Investments
       Capital expenditures..........................................................      (217)          (232)
       Acquisitions of bottlers and investments in affiliates........................      (256)          (165)
       Sale of property, plant and equipment.........................................        14              9
       Other, net....................................................................       (33)            34
                                                                                         -------        -------

    Net Cash Used by Investments.....................................................      (492)          (354)
                                                                                         -------        -------

    Cash Flows - Financing
       Short-term borrowings - three months or less..................................        48            (66)
       Proceeds from third party debt................................................        38          3,260
       Replacement of PepsiCo allocated debt.........................................         -         (3,300)
       Payments of third party debt..................................................        (5)           (41)
       Net IPO proceeds..............................................................         -          2,208
       Increase (decrease) in advances from PepsiCo..................................       367         (1,834)
                                                                                        --------       --------
    Net Cash Provided by Financing...................................................       448            227
                                                                                        --------       --------
    Effect of Exchange Rate Changes on Cash and Cash Equivalents.....................         -             (1)
                                                                                        --------       --------
    Net Increase in Cash and Cash Equivalents........................................        18             21
    Cash and Cash Equivalents - Beginning of Period..................................        86             36
                                                                                        --------       --------

    Cash and Cash Equivalents - End of Period........................................   $   104        $    57
                                                                                        ========       ========
          See accompanying notes to Condensed Consolidated Financial Statements.

</TABLE>




                                       -3-




                         THE PEPSI BOTTLING GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        in millions, except share amounts

<TABLE>
<CAPTION>
                                                                                  (Unaudited)
                                                                        December    June 12,
                                                                        26, 1998      1999
                                                                        --------      ----
ASSETS
Current Assets
<S>                                                                        <C>      <C>
  Cash and cash equivalents ......................................     $    36      $    57
  Trade accounts receivable, less allowance of $46 and $52
        at December 26, 1998 and  June 12, 1999, respectively ....         808          984
  Inventories ....................................................         296          341
  Prepaid expenses, deferred income taxes and other current assets         178          202
                                                                       -------      -------
           Total Current Assets ..................................       1,318        1,584

Property, plant and equipment, net ...............................       2,055        2,147
Intangible assets, net ...........................................       3,806        3,879
Other assets .....................................................         143          120
                                                                       -------      -------
          Total Assets ...........................................     $ 7,322      $ 7,730
                                                                       =======      =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
 Accounts payable and other current liabilities ..................     $   913      $ 1,009
 Short-term borrowings ...........................................         112           43
                                                                       -------      -------
     Total Current Liabilities ...................................       1,025        1,052

Allocation of PepsiCo long-term debt .............................       3,300            -
Long-term debt due to third parties ..............................          61        3,279
Other liabilities ................................................         367          348
Deferred income taxes ............................................       1,202        1,168
Minority interest ................................................           -          267
Advances from PepsiCo ............................................       1,605            -
                                                                       -------      -------
          Total Liabilities ......................................       7,560        6,114

Shareholders' Equity
   Common stock, par value $.01 per share:
      Authorized 300,000,000 shares, issued 155,005,704 shares....           -            2
   Additional paid in capital ....................................                    1,786
   Retained Earnings..............................................           -           43
   Accumulated other comprehensive loss ..........................        (238)        (215)
                                                                       -------      -------
          Total Shareholders' Equity .............................        (238)       1,616
                                                                       -------      -------
              Total Liabilities and Shareholders' Equity .........     $ 7,322      $ 7,730
                                                                       =======      =======
          See accompanying notes to Condensed Consolidated Financial Statements.
</TABLE>




                                       -4-




                         THE PEPSI BOTTLING GROUP, INC.
               tabular dollars in millions, except per share data
                                   (unaudited)

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Basis of Presentation
     The Pepsi Bottling Group, Inc. consists of bottling  operations  located in
the United States, Canada, Spain, Greece and Russia. Prior to its formation, PBG
was an  operating  unit of PepsiCo,  Inc.  PBG was  incorporated  in Delaware in
January  1999 and,  prior to its  initial  public  offering,  PepsiCo  owned all
55,000,000 shares of outstanding common stock.

     On March 31, 1999,  100,000,000 shares of PBG common stock were offered for
sale at $23 per share in an initial public offering generating $2,208 million in
net proceeds,  which were used to fund  acquisitions  and repay  obligations  to
PepsiCo.  Subsequent to the offering,  PepsiCo owns 55,005,679  shares of common
stock consisting of 54,917,329 shares of common stock and 88,350 shares of Class
B common stock.  PepsiCo's ownership  represents 35.4% of the outstanding common
stock and 100% of the  outstanding  Class B common stock  together  representing
43.5% of the voting power of all classes of PBG's voting  stock.  Subsequent  to
the offering, PepsiCo also owns 7.1% of the equity of Bottling Group, LLC, PBG's
principal  operating  subsidiary,  giving PepsiCo economic ownership of 40.0% of
PBG's combined operations.

     The  accompanying   Condensed  Consolidated  Financial  Statements  include
information,  which has been presented on a carve-out basis for the period prior
to PBG's initial  public  offering.  This  information  includes the  historical
results of operations and assets and liabilities directly related to PBG and has
been prepared from PepsiCo's historical  accounting records.  Certain estimates,
assumptions and allocations  were made in determining  such financial  statement
information.  Therefore,  these Condensed  Consolidated Financial Statements may
not necessarily be indicative of the results of operations,  financial  position
or cash  flows  that would have  existed  had PBG been a  separate,  independent
company from the first day of all periods presented.

     The accompanying Condensed Consolidated Balance Sheet at June 12, 1999, the
Condensed  Consolidated  Statements of Operations  for the 12 and 24 weeks ended
June 13, 1998 and June 12, 1999 and the  Condensed  Consolidated  Statements  of
Cash Flows for the 24 weeks  ended June 13, 1998 and June 12, 1999 have not been
audited, but have been prepared in conformity with generally accepted accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Article 10 of Regulation  S-X. These Condensed  Consolidated  Financial
Statements  should be read in conjunction  with the audited  combined  financial
statements  for  the  year  ended  December  26,  1998  as  presented  in  PBG's
Registration  Statement on Form S-1,  which was declared  effective on March 30,
1999.  In the opinion of  management,  this  interim  information  includes  all
material adjustments,  which are of a normal and recurring nature, necessary for
a fair presentation of PBG's financial position,  results of operations and cash
flows.




                                       -5-




Note 2 - Seasonality of the Business
     The results for the periods presented are not necessarily indicative of the
results that may be expected for the full year because of business  seasonality.
The seasonality of our operating  results arises from higher sales in the second
and third quarters  versus the first and fourth  quarters of the year,  combined
with the impact of fixed costs, such as depreciation, amortization and interest,
which are not significantly impacted by business seasonality.

Note 3 - Acquisitions
     During 1998 and 1999, PBG acquired the exclusive right to manufacture, sell
and distribute  Pepsi-Cola  beverages from several independent PepsiCo franchise
bottlers.  These acquisitions were accounted for by the purchase method.  During
1999,  the following  acquisitions  occurred for an aggregate  purchase price of
$165  million in cash and debt:

     -    Jeff  Bottling  Company,  Inc.  in New York in January.
     -    Pepsi-Cola General Bottlers of Princeton,  Inc. and Pepsi-Cola General
          Bottlers of  Virginia,  Inc.  with  territories  in Virginia  and West
          Virginia in March.
     -    St.   Petersburg,   Russia  territory  in  March.
     -    Leader Beverage Corporation in Connecticut in April.

     During 1998,  the  following  acquisitions  occurred for an aggregate  cash
purchase  price of $546  million:

     -    The  remaining  75% interest in our Russian  bottling  joint  venture,
          Pepsi International Bottlers, LLC in February.
     -    Gray Beverages,  Inc. in Canada in May.
     -    Pepsi-Cola  Allied  Bottlers,  Inc.  in New  York and  Connecticut  in
          November.

     The  following  table  presents  the 12 and 24 weeks  ended  June 13,  1998
unaudited pro forma consolidated  results of PBG and the 1998 acquisitions noted
above  as if they had  occurred  at the  beginning  of  fiscal  year  1998.  The
performance results of the 1999 acquisitions have been excluded, as their impact
on the financial statements was not significant.  The pro forma information does
not necessarily  represent what the actual consolidated  results would have been
for the  periods  presented  and is not  intended  to be  indicative  of  future
results.

                                                                June 13, 1998
                                                                -------------
                                                           12 weeks     24 weeks
                                                             ended        ended
                                                             -----        -----

Net revenues...............................................  $1,753      $3,149
                                                             ======      ======

Net income.................................................  $   28      $   20
                                                             ======      ======

Pro forma earnings per share (see note 8)..................  $ 0.18      $ 0.13
                                                             ======      ======




                                       -6-




Note 4 - Inventories
                                                          December      June 12,
                                                          26, 1998        1999
                                                          --------        ----

Raw materials and supplies ............................... $   120      $   126
Finished goods ...........................................     176          215
                                                           -------      -------
                                                           $   296      $   341
                                                           =======      =======

Note 5 - Property, Plant and Equipment, net
                                                          December      June 12,
                                                          26, 1998        1999
                                                          --------        ----

Land ..................................................... $   151      $   147
Buildings and improvements ...............................     813          834
Production and distribution equipment ....................   1,989        2,032
Marketing equipment ......................................   1,368        1,495
Other ....................................................      95           89
                                                           -------      -------
                                                             4,416        4,597
Accumulated depreciation .................................  (2,361)      (2,450)
                                                           -------      -------
                                                           $ 2,055      $ 2,147
                                                           =======      =======

Note 6 - Long-term Debt and Interest Expense
                                                         December       June 12,
                                                         26, 1998         1999
                                                         --------         ----

5 5/8% notes due 2009 .................................. $     -        $ 1,300
5 3/8% notes due 2004 ..................................       -          1,000
7% notes due 2029 ......................................       -          1,000
Other ..................................................     109             22
                                                         -------        -------
                                                             109          3,322
Less: unamortized discount .............................       -             40
         current maturities of long-term debt ..........      48              3
                                                         -------        -------
                                                         $    61        $ 3,279
                                                         =======        =======
Allocation of PepsiCo long-term debt ................... $ 3,300        $     -

     The $1.3  billion  of 5 5/8%  senior  notes and the $1.0  billion of 5 3/8%
senior  notes were issued on February  9, 1999 by  Bottling  Group,  LLC and are
guaranteed by PepsiCo.  PBG issued the 7% senior notes,  which are guaranteed by
Bottling Group, LLC, on March 8, 1999. During the second quarter PBG executed an
interest rate swap effectively  converting 3% of its fixed rate debt to floating
rate debt.

     1999 interest  expense was determined  using $3.3 billion of allocated debt
and PepsiCo's  weighted  average interest rate of 5.75% until the above PBG debt
was issued.  Once issued,  the actual PBG interest  rates were used to determine
interest expense for the remainder of the period. Allocated interest expense for
1998 was calculated using $3.3 billion of allocated debt and PepsiCo's  weighted
average interest rate of 6.4%.




                                       -7-




     In April, PBG entered into a $500 million  commercial paper program that is
supported by a credit facility. The credit facility consists of two $250 million
components,  one of which is one year in duration and the other of which is five
years in duration.

Note 7 - Comprehensive Income (Loss)

                                            12 Weeks Ended     24 Weeks Ended
                                            --------------     --------------
                                         June 13,   June 12,  June 13,  June 12,
                                           1998      1999       1998      1999
                                           ----      ----       ----      ----
Net income................................  $23      $ 20      $ 17      $ 17
Currency translation adjustment...........  (20)       (7)      (21)        4
Minimum pension liability adjustment......    -        19         -        19
                                           -----     -----     -----     ----
Comprehensive Income (Loss)...............  $ 3      $ 32      $ (4)     $ 40
                                           =====     =====     =====     ====

Note 8 - Earnings per Share
     PBG's historical  capital  structure is not  representative  of its current
structure due to PBG's initial public offering that became effective on April 6,
1999.  Immediately  preceding the offering,  PBG had 55 million shares of common
stock outstanding. In connection with the offering, 100 million shares were sold
to the public generating $2,208 million of net proceeds, which were used to fund
acquisitions  and  repay  obligations  to  PepsiCo.  The pro  forma  information
contained in the Condensed Consolidated  Statements of Operations and Footnote 3
has been  adjusted to reflect the 155 million  shares of common stock as if this
stock had been outstanding for all of the periods presented.

     In  addition,  in  connection  with the  offering  PBG  issued  a  one-time
founder's  grant of options to all  non-management  employees  to  purchase  100
shares of PBG common stock. PBG also issued options during the second quarter to
all management  employees as part of its long-term  incentive  plan. At June 12,
1999,  approximately 12 million options were  outstanding,  all of which have an
exercise price of $23 per share. These options did not have a dilutive effect on
earnings per share for the periods presented.

Note 9 - Minority Interest
     PBG and  PepsiCo  contributed  bottling  businesses  and assets used in the
bottling  businesses to Bottling Group,  LLC in connection with the formation of
Bottling Group,  LLC. As a result of the  contribution  of the assets,  PBG owns
92.9% of Bottling Group,  LLC and PepsiCo owns the remaining 7.1%.  Accordingly,
the Condensed  Consolidated  Financial  Statements  reflect  PepsiCo's  share of
consolidated  net income of Bottling  Group,  LLC as minority  interest on PBG's
Condensed   Consolidated   Statements  of  Operations  and  PepsiCo's  share  of
consolidated  net assets of Bottling  Group,  LLC as minority  interest on PBG's
Condensed Consolidated Balance Sheet.




                                       -8-




Note 10 - Supplemental Cash Flow Information
                                                             24 Weeks Ended
                                                             --------------
                                                          June 13,    June 12,
                                                           1998         1999
Liabilities incurred and/or assumed in connection with     ----         ----
   acquisitions of bottlers.............................   $ 39         $ 48
Interest paid to third parties..........................   $ 10         $  2

     Amounts paid to third parties for income taxes were not  significant in the
periods presented.

Note 11 - Non-cash Compensation Charge
     In connection  with the  consummation  of the offering,  substantially  all
non-vested  PepsiCo stock options held by PBG employees vested. As a result, PBG
incurred a $45 million non-cash  compensation  charge in the second quarter ($29
million after tax or $.19 per share based on pro forma  weighted  average shares
outstanding),  equal to the  difference  between the market price of the PepsiCo
capital stock and the exercise price of these options at the vesting date.

Note 12 - New Accounting Standards
     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting Standard 133,  "Accounting for Derivative  Instruments and
Hedging  Activities."  This  statement  establishes   accounting  and  reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts which are  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.

     In July 1999, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standard 137 delaying the  implementation of SFAS 133 for
one year.  SFAS 133 will now be effective for PBG's first quarter of fiscal year
2001.




                                       -9-




Item 2.

MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF RESULTS OF  OPERATIONS  AND  FINANCIAL
CONDITION

The Business
     PBG  is  the  world's  largest  manufacturer,  seller  and  distributor  of
Pepsi-Cola  beverages,  accounting  for  55% of the  Pepsi-Cola  beverages  sold
annually  in the  United  States  and  Canada  and 32%  worldwide.  We have  the
exclusive right to manufacture,  sell and distribute Pepsi-Cola beverages in all
or a portion of 41 states, the District of Columbia,  eight Canadian  provinces,
Spain, Greece and Russia.  Approximately 92% of our annual volume is sold in the
United States and Canada.

General
     Management's  discussion and analysis  should be read in  conjunction  with
PBG's Condensed  Consolidated  Financial  Statements and accompanying  footnotes
along with the cautionary statements at the end of this section.

     In line with our strategy to be a key  consolidator  of PepsiCo's  bottling
system,  1999 results are impacted by the 1998  acquisitions  of Gray Beverages,
Inc. in Canada, Pepsi-Cola Allied Bottlers, Inc. in New York and Connecticut and
Pepsi International  Bottlers,  LLC in Russia. In addition, in 1999 PBG acquired
Jeff  Bottling  Company,  Inc.  in New  York,  Pepsi-Cola  General  Bottlers  of
Princeton,  Inc.  and  Pepsi-Cola  General  Bottlers of  Virginia,  Inc.,  whose
territories are in Virginia and West Virginia,  the territory in St. Petersburg,
Russia and Leader Beverages in Fairfield, Connecticut.

     Management believes that constant territory  performance results are better
indicators of operating  trends and  performance,  particularly  in light of our
stated intention of acquiring  additional  bottling  territories and of industry
practice.  Constant  territory  operating results are achieved by adjusting 1999
results to exclude 1999  acquisitions and 1998 results to include the results of
1998  acquisitions as if they had occurred on the first day of fiscal year 1998.
The results for the 12 and 24 week periods ended June 13, 1998 and June 12, 1999
are presented below both on an as reported and constant territory basis.

     EBITDA, which is computed as operating income plus the sum of depreciation,
amortization,  and any unusual non-cash charges,  is a key indicator  management
and the industry use to evaluate our operating performance.  It is not, however,
required under GAAP and should not be considered an alternative to  measurements
required by GAAP such as net income or cash  flows.  1999  EBITDA  excludes  the
impact of the non-cash compensation charge discussed below.




                                      -10-




Results of Operations

Overview
     On a  constant  territory  basis,  EBITDA  grew 12% in the  quarter  and 9%
year-to-date,  ahead of our  expectations  for the first half of the year.  This
growth  can be  attributed  to our  ability  to  execute  market  by market in a
disciplined and focused fashion with tools and processes  adapted to each of our
individual  markets.  In  the  second  quarter  we  have  executed  against  our
objectives  and  increased  cold  drink  equipment  and  delivered  an  improved
price/volume trade-off. We believe that we are well positioned to deliver 10-12%
EBITDA growth for full year 1999.

EBITDA
                              12 weeks ended                 24 weeks ended
                              June 12, 1999                  June 12, 1999
                               ------------                   -------------
                                       Constant                        Constant
                         Reported     Territory          Reported      Territory
                          Change        Change            Change        Change
                          ------        ------            ------        ------
  Growth...............     20%           12%               15%            9%

     On a reported basis, EBITDA was $252 million and $402 million in the second
quarter and year-to-date,  respectively.  This represents a 20% and 15% increase
for the quarter and  year-to-date,  respectively,  over the comparable period in
1998. On a constant territory basis, the second quarter and year-to-date  growth
in EBITDA  reflect a stronger  pricing  environment  and volume  growth in North
America, favorable raw material costs and reduced operating losses in Russia.

Volume
     Our  worldwide  physical  case  volume  grew  7%  in  the  quarter  and  8%
year-to-date  on a reported basis and 2% in the quarter and 3% year-to-date on a
constant territory basis. In North America,  which includes the U.S. and Canada,
constant  territory volume increased more than 3% in the quarter and improved 4%
year-to-date  driven by strong  growth in the cold drink channel and more modest
advances in the take home business. Outside North America our constant territory
volumes  declined more than 10% for the quarter and  year-to-date  driven by the
economic  conditions in Russia,  which began to deteriorate last August with the
devaluation of the ruble.

Net Revenues
     On a reported  basis,  net revenues were $1,831  million and $3,283 million
for the quarter and  year-to-date,  respectively,  a 9% increase  over the prior
year for both time periods.  On a constant  territory basis net revenues grew 4%
for the quarter  and  year-to-date.  This  increase  was driven by strong  North
America  volume  growth and an  approximate  2% and 1%  increase  in revenue per
physical case for the quarter and year-to-date,  respectively, driven largely by
higher  pricing and  changes in channel  and  package mix in our North  American
business.




                                      -11-




Cost of Sales
     Cost of sales as a percentage  of net revenues  improved by 1.6  percentage
points in the  quarter  to 57.1% and  slightly  more than one  percentage  point
year-to-date to 57.3% on a reported basis. This improvement was driven by higher
net price per case and lower packaging  costs,  partially offset by the February
increase in North America concentrate prices.

Selling, Delivery and Administrative Expenses
     Selling,  delivery  and  administrative  expenses  as a  percentage  of net
revenues grew by two tenths of a percentage  point to 35.4% and four tenths of a
percentage point to 37.3% for the quarter and year-to-date,  respectively,  on a
reported basis.  This primarily  reflects  increased  selling and delivery costs
resulting  from an increase in our North  American sales force and our continued
program of heavy investment in vending machines and coolers, consistent with our
long-term  strategy  to expand our  presence  in the cold  drink  segment of the
industry in North America.  These  increases  were  partially  offset by reduced
operating  costs in  Russia  as our cost  structure  benefited  from our  fourth
quarter 1998  restructuring  actions,  as well as relatively flat year over year
general and  administrative  costs. In addition,  the 1999 year-to-date  expense
also  includes a $6 million  one-time cash cost for shell  deposits  incurred to
eliminate PBG's previous practice of collecting  deposits on plastic shells used
to carry our products to market.

Non-cash Compensation Charge
     In connection  with the  consummation  of the offering,  substantially  all
non-vested  PepsiCo stock options held by PBG employees vested. As a result, PBG
incurred a $45 million non-cash  compensation  charge in the second quarter ($29
million after tax or $.19 per share based on pro forma  weighted  average shares
outstanding),  equal to the  difference  between the market price of the PepsiCo
capital stock and the exercise price of these options at the vesting date.

Interest Expense, net
     Net interest expense  decreased by $2 million to $51 million in the quarter
and decreased by $8 million to $97 million  year-to-date  due to lower  weighted
average  interest rates on our $3.3 billion of debt, which went from 6.4% in the
prior year to 5.9% in the current  year,  coupled  with  reduced  external  debt
outside North America.

Provision for Income Taxes
     PBG's full year anticipated  effective tax rate for 1999 is 38% compared to
53.5% in 1998. The $45 million  non-cash  compensation  charge  described  above
contributed an additional 5 points to the second quarter effective tax rate. The
decrease of 15.5 points in the full year ongoing effective tax rate is primarily
due to favorable tax treatment of foreign  operations  and the reduced impact of
fixed nondeductible permanent expenses on higher pretax income in 1999.




                                      -12-




Minority Interest
     PBG and  PepsiCo  contributed  bottling  businesses  and assets used in the
bottling  businesses to Bottling Group,  LLC in connection with the formation of
Bottling Group,  LLC. As a result of the  contribution  of the assets,  PBG owns
92.9% of Bottling Group,  LLC and PepsiCo owns the remaining 7.1%.  Accordingly,
the Condensed  Consolidated  Financial  Statements  reflect  PepsiCo's  share of
consolidated  net income of Bottling  Group,  LLC as minority  interest on PBG's
Condensed Consolidated  Statements of Operations for the period from the initial
public offering on April 6, 1999 through the end of the quarter.

Liquidity and Capital Resources

Cash Flows
     Net cash  provided by operating  activities  increased  $87 million to $149
million  reflecting  strong growth in EBITDA and favorable  working capital cash
flows resulting from the timing of cash payments for interest and taxes.

     Net cash used by  investments  decreased  from $492  million  during the 24
weeks  ended June 13, 1998 to $354  million  over the same period in 1999 mainly
related to the timing of acquisitions, which were $91 million lower in the first
two quarters of 1999. However, capital expenditures increased by $15 million, or
7%, driven by a 25% increase in North  America as we continue to invest  heavily
in cold drink  equipment,  partially offset by a reduction in spending in Russia
where our existing infrastructure is adequate for current operations.

     Net cash  provided by  financing  decreased by $221 million to $227 million
for the first two quarters of 1999 mainly due to the net pay down of $66 million
of  short-term  borrowings  in 1999 versus 1998  proceeds of $48  million.  Also
contributing to the change are 1998 borrowings in Russia related to the purchase
of Pepsi International Bottlers LLC, which was paid down in the first quarter of
1999. Net IPO proceeds of $2.2 billion were used to fund  acquisitions and repay
obligations to PepsiCo.

Euro
     On  January  1,  1999,  eleven  member  countries  of  the  European  Union
established  fixed conversion  rates between existing  currencies and one common
currency,  the Euro. Beginning in January 2002, new  Euro-denominated  bills and
coins  will  be  issued,   and  existing   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 the financial  condition or
results of operations.




                                      -13-



Year 2000
     Many  computerized  systems  and  microprocessors  that are  embedded  in a
variety of products used by PBG have the potential for  operational  problems if
they lack the  ability  to  handle  the  transition  to the Year  2000.  We have
established  teams to identify and correct Year 2000 issues. We have engaged IBM
to help set the testing  strategy and complete some of the offsite  remediation.
Information  technology  systems  with  non-compliant  code are  expected  to be
modified or replaced with systems that are Year 2000 compliant.  Similar actions
were  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 largely complete with 97%
of the systems already compliant. This percentage is expected to increase to 99%
in the third quarter.  The remaining work includes the completion of Y2K testing
and rollout for one system.  A contingency  plan has been  developed and will be
tested for this one application. Inventories and assessments of systems embedded
in manufacturing and other facilities were completed in June 1999;  remediations
began in the fourth quarter of 1998 with a third quarter 1999 target  completion
date.  A full scale Year 2000 test was  performed at one  representative  plant.
Results from that test  concluded  that minimal  disruptions  could be expected.
Independent   consultants  are  monitoring  progress  against  remediation.   In
addition,  senior  management and the board of directors are also monitoring the
progress of the remediation programs.

     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. All corrective actions have been taken on these applications.

     We have  contacted  and assessed the 51 suppliers  that are critical to our
production  processes.  These suppliers have been selected either because of our
dependence on them or because of concerns  regarding their remediation plans. We
believe that these suppliers will not present any material risks to our business
and will be able to continue  to supply us through  the year 2000.  We have also
contacted   significant   customers  and  PepsiCo  joint  venture  partners  who
manufacture  certain  Lipton  and  Starbucks  products  that we  sell,  and have
completed  a survey of their  Year 2000  efforts.  We will  continue  to monitor
remediation until it is complete.




                                      -14-




     Costs directly related to Year 2000 issues are estimated to be $56 million,
of  which $5  million  was  spent  in the  second  quarter  of 1999 ($8  million
year-to-date),  $26  million  and  $7  million  in  full  year  1998  and  1997,
respectively.  We have  redeployed  approximately  160 employees to support this
work,  as  well as  engaged  over  100  independent  contractors.  Approximately
one-half of the total  estimated  spending  represents  costs to modify existing
systems, which includes the inventory, assessment,  remediation, and testing and
rollout phases.  The remaining dollars  represent  spending for the development,
testing and rollout of new systems to replace older, non-compliant applications.
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.

     Contingency  plans for Year 2000 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
alternative  suppliers  and an  increase  in raw  material  and  finished  goods
inventory  levels.  Contingency  plans for national  customers and suppliers are
being  maintained  centrally  and are  expected to be complete by the end of the
third quarter.  Additional  contingency plans are being developed and maintained
for local  requirements  and will continue to be enhanced through the end of the
year.

     In light of the  foregoing,  we do not  currently  anticipate  that we will
experience a significant disruption to our business as a result of the Year 2000
issue. Our most likely  potential risk is a temporary  inability of suppliers to
provide  supplies of raw  materials or customers  to pay on a timely  basis.  We
typically  experience  below average sales in January due to the  seasonality of
our business.  In addition, we are not dependent on any single supplier location
or PBG location for a critical  commodity  or product.  Consequently  we believe
that in a worst case scenario any supply  disruption can be minimized by drawing
down  inventories  or  increasing  production  at  unaffected  plants  with some
increase in distribution  costs. We are testing  electronic  billing and payment
systems during 1999 as part of our overall Year 2000 strategy and will work with
customers that experience disruptions that might impact payment to us.

     While we do not  expect  any  major  disruptions,  we will be  prepared  to
respond to unanticipated external or internal disruptions.  We will establish an
Event Management Center, which will monitor the status of our business,  support
customers through access to the Center, and provide event management guidance if
necessary.  Existing processes for each area will be leveraged.  The Center will
be fully  functional  in December and  January.  Additionally,  field  resources
necessary to activate  contingency plans are being identified and work schedules
are being developed.




                                      -15-




     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,  there is still uncertainty about the broader scope of the Year 2000
issue as it may affect us and third parties,  including suppliers and customers.
For example,  lack of  readiness by  electrical  and water  utilities  and other
providers of general infrastructure, such as rail transportation, could, in some
geographic areas, pose significant impediments to our ability to carry on normal
operations in the area  affected.  Accordingly,  while we believe our actions in
this regard should have the effect of lessening  Year 2000 risks,  we are unable
to  estimate  such  risks or to  estimate  the  ultimate  Year 2000 risks on our
operations.

Cautionary Statements
     Except for the historical  information  and discussions  contained  herein,
statements   contained  in  this  Form  10-Q  may  constitute  `forward  looking
statements' as defined by the Private Securities  Litigation Reform Act of 1995.
These `forward looking statements' are based on currently available competitive,
financial and economic data and our operating plans.  These statements involve a
number of risks, uncertainties and other factors that could cause actual results
to be  materially  different.  Among the  events  and  uncertainties  that could
adversely affect future periods are  lower-than-expected  net pricing  resulting
from marketplace competition,  material changes from expectations in the cost of
raw materials and  ingredients,  an inability to achieve the expected timing for
returns  on  cold  drink  equipment  and  related  infrastructure  expenditures,
material changes in expected levels of marketing  support payments from PepsiCo,
Inc.,  an  inability  to meet  projections  for  performance  in newly  acquired
territories,  unexpected  costs and  business  risks  associated  with Year 2000
compliance by PBG, its customers and/or  suppliers,  unexpected costs associated
with  conversion to the common European  currency and unfavorable  interest rate
and currency  fluctuations.  We caution that in addition to the above cautionary
statements,  all forward-looking  statements  contained herein should be read in
conjunction  with the detailed  cautionary  statements  found on pages eleven to
eighteen  of PBG's  Registration  Statement  on Form  S-1,  which  was  declared
effective on March 30, 1999.




                                      -16-




Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We have no material  changes to the disclosures  made on this matter in our
Registration  Statement on Form S-1,  which was declared  effective on March 30,
1999.




                                      -17-




                     Independent Accountants' Review Report

The Board of Directors
The Pepsi Bottling Group, Inc.

We have reviewed the accompanying  condensed  consolidated  balance sheet of The
Pepsi  Bottling  Group,  Inc.  as of June  12,  1999 and the  related  condensed
consolidated statements of operations for the twelve and twenty-four weeks ended
June 13, 1998 and June 12, 1999 and the  condensed  consolidated  statements  of
cash flows for the  twenty-four  weeks  ended June 13,  1998 and June 12,  1999.
These condensed  consolidated financial statements are the responsibility of The
Pepsi Bottling Group, Inc.'s management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information  consists  principally of applying  analytical  review procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the combined  balance sheet of The Pepsi Bottling Group,  Inc. as of
December 26, 1998, and the related combined statements of operations, cash flows
and  accumulated  other  comprehensive  loss for the fifty-two  week period then
ended not presented herein;  and in our report dated March 8, 1999, we expressed
an unqualified opinion on those combined financial  statements.  In our opinion,
the information set forth in the  accompanying  condensed  consolidated  balance
sheet as of December 26, 1998, is fairly presented, in all material respects, in
relation  to the  condensed  consolidated  balance  sheet from which it has been
derived.

                                                                        KPMG LLP



New York, New York
July 7, 1999




                                      -18-




                   PART II - OTHER INFORMATION AND SIGNATAURES


Item 6.           Exhibits and Reports on Form 8-K
                  (a)  Exhibits

                        See Index to Exhibits on page 21.




                                      -19-




         Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned.








                                                  THE PEPSI BOTTLING GROUP, INC.
                                                  ------------------------------
                                                                    (Registrant)






Date: July 26, 1999                                            Peter A. Bridgman
-------------------                                            -----------------
                                                       Senior Vice President and
                                                                      Controller






Date: July 26, 1999                                               John T. Cahill
-------------------                                               --------------
                                                    Executive Vice President and
                                                         Chief Financial Officer




                                      -20-




                               INDEX TO EXHIBITS
                                   ITEM 6 (a)



EXHIBITS

Exhibit 11              Computation of Basic and Diluted Earnings Per Share


Exhibit 27.1            Financial Data Schedule 12 weeks ended June 12, 1999


Exhibit 27.2            Financial Data Schedule 12 weeks ended June 13, 1998




                                      -21-