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

(Mark One)

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

For the quarterly period ended September 4, 2004
                               -----------------

                                       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 incorporation 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
                                      ---  ---

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes X No
                                               ---  ---

Number of shares of Common Stock outstanding as of October 1,  2004:
250,083,076

<PAGE>


                         The Pepsi Bottling Group, Inc.
                         ------------------------------
                                      Index

<TABLE>
<CAPTION>

                                                                                                        Page No.
                                                                                                        --------

Part I         Financial Information

    Item 1.    Financial Statements
<S>                                                                                                       <C>
               Condensed Consolidated Statements of Operations -
                   12 and 36 weeks ended September 4, 2004 and September 6, 2003                           2

               Condensed Consolidated Statements of Cash Flows -
                   36 weeks ended September 4, 2004 and September 6, 2003                                  3

               Condensed Consolidated Balance Sheets -
                   September 4, 2004 and December 27, 2003                                                 4

               Notes to Condensed Consolidated Financial Statements                                     5-11

               Report of Independent Registered Public Accounting Firm                                    12

    Item 2.    Management's Financial Review                                                           13-19

    Item 3.    Quantitative and Qualitative Disclosures About Market Risk                                 20

    Item 4.    Controls and Procedures                                                                    20

Part II        Other Information

    Item 2.    Changes in Securities, Use of Proceeds and Issuer Purchases
                   of Equity Securities                                                                   21

    Item 5.    Other Information                                                                       22-23

    Item 6.    Exhibits and Reports on Form 8-K                                                           23
</TABLE>


<PAGE>


                         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           36 Weeks Ended
                                                                                      --------------           --------------
                                                                                  September    September    September   September
                                                                                   4, 2004      6, 2003      4, 2004     6, 2003
                                                                                   -------      -------      -------     -------

<S>                                                                                 <C>          <C>          <C>         <C>
     Net revenues...............................................................    $2,934       $2,810       $7,676      $7,216
     Cost of sales..............................................................     1,522        1,438        3,951       3,655
                                                                                     -----        -----        -----       -----

     Gross profit...............................................................     1,412        1,372        3,725       3,561
     Selling, delivery and administrative expenses..............................     1,055        1,014        2,945       2,812
                                                                                     -----        -----        -----       -----

     Operating income...........................................................       357          358          780         749
     Interest expense, net......................................................        50           56          158         166
     Other non-operating expenses, net..........................................         1            2            3           5
     Minority interest..........................................................        22           21           43          41
                                                                                     -----        -----        -----       -----

     Income before income taxes.................................................       284          279          576         537
     Income tax expense.........................................................        93           96          193         184
                                                                                     -----        -----        -----       -----
     Income before cumulative effect of change in accounting
     principle..................................................................       191          183          383         353
     Cumulative effect of change in accounting principle, net of
     tax and minority interest..................................................         -            -            -           6
                                                                                     -----        -----        -----       -----

     Net income.................................................................    $  191       $  183       $  383      $  347
                                                                                     =====        =====        =====       =====

     Basic earnings per share before  cumulative  effect of change
     in accounting principle....................................................    $ 0.75       $ 0.68       $ 1.49      $ 1.29
     Cumulative effect of change in accounting principle........................         -            -            -       (0.02)
                                                                                     -----        -----        -----       -----
     Basic earnings per share...................................................    $ 0.75       $ 0.68       $ 1.49      $ 1.27
                                                                                     =====        =====        =====       =====

     Weighted-average shares outstanding........................................       254          268          257         273

     Diluted  earnings  per  share  before  cumulative  effect  of
     change in accounting principle.............................................    $ 0.73       $ 0.67       $ 1.44      $ 1.26
     Cumulative effect of change in accounting principle........................         -            -            -       (0.02)
                                                                                     -----        -----        -----       -----
     Diluted earnings per share.................................................    $ 0.73       $ 0.67       $ 1.44      $ 1.24
                                                                                     =====        =====        =====       =====

     Weighted-average shares outstanding........................................       262          274          266         280
</TABLE>


     See accompanying notes to Condensed Consolidated Financial Statements.

                                       -2-

<PAGE>


                         The Pepsi Bottling Group, Inc.
                 Condensed Consolidated Statements of Cash Flows
                             in millions, unaudited
<TABLE>
<CAPTION>

                                                                                              36 Weeks Ended
                                                                                              --------------
                                                                                         September      September
                                                                                          4, 2004        6, 2003
                                                                                         ---------      ---------
    Cash Flows - Operations
<S>                                                                                      <C>              <C>
     Net income.................................................................         $   383          $ 347
     Adjustments to reconcile net income to net cash provided by operations:
       Depreciation.............................................................             394            380
       Amortization.............................................................               9              6
       Deferred income taxes....................................................              38             56
       Cumulative effect of change in accounting principle......................               -              6
       Other non-cash charges and credits, net..................................             208            232
       Changes in operating working capital, excluding effects of acquisitions:
         Accounts receivable, net...............................................            (332)          (324)
         Inventories, net.......................................................             (91)           (52)
         Prepaid expenses and other current assets..............................             (15)           (14)
         Accounts payable and other current liabilities.........................             224             44
                                                                                          ------           ----
       Net change in operating working capital .................................            (214)          (346)
                                                                                          ------           ----
       Pension contributions....................................................             (72)           (15)
       Other, net...............................................................             (36)           (34)
                                                                                          ------           ----

    Net Cash Provided by Operations.............................................             710            632
                                                                                          ------           ----

    Cash Flows - Investments
       Capital expenditures.....................................................            (425)          (428)
       Acquisitions of bottlers.................................................              (8)           (97)
       Sale of property, plant and equipment....................................               8              5
                                                                                          ------           ----

    Net Cash Used for Investments...............................................            (425)          (520)
                                                                                          ------           ----

    Cash Flows - Financing
       Short-term borrowings - three months or less.............................             139             30
       Proceeds from issuance of long-term debt.................................              23            247
       Payments of long-term debt...............................................          (1,010)           (13)
       Dividends paid...........................................................             (18)            (8)
       Proceeds from exercise of stock options..................................              98             28
       Purchases of treasury stock..............................................            (492)          (363)
                                                                                          ------           ----

    Net Cash Used for Financing.................................................          (1,260)           (79)
                                                                                          ------           ----

    Effect of Exchange Rate Changes on Cash and Cash Equivalents................              (3)             1
                                                                                          ------           ----
    Net (Decrease)/Increase in Cash and Cash Equivalents........................            (978)            34
    Cash and Cash Equivalents - Beginning of Period.............................           1,235            222
                                                                                          ------           ----
    Cash and Cash Equivalents - End of Period...................................         $   257          $ 256
                                                                                          ======           ====

    Supplemental Cash Flow Information
    Net third-party interest paid...............................................         $   184          $ 186
                                                                                          ======           ====
    Income taxes paid...........................................................         $    75          $  65
                                                                                          ======           ====
</TABLE>

    See accompanying notes to Condensed Consolidated Financial Statements.

                                      -3-


<PAGE>


                         The Pepsi Bottling Group, Inc.
                      Condensed Consolidated Balance Sheets
                      in millions, except per share amounts
<TABLE>
<CAPTION>

                                                                                        (Unaudited)
                                                                                        September 4,      December 27,
                                                                                           2004              2003
                                                                                          ------            ------
    Assets
    Current Assets
<S>                                                                                      <C>               <C>
       Cash and cash equivalents................................................         $   257           $ 1,235
       Accounts receivable, less allowance of $66 at
         September 4, 2004 and $72 at December 27, 2003.........................           1,295               994
       Inventories..............................................................             464               374
       Prepaid expenses and other current assets................................             261               268
       Investment in debt defeasance trust......................................               -               168
                                                                                          ------            ------
         Total Current Assets...................................................           2,277             3,039

    Property, plant and equipment, net..........................................           3,424             3,423
    Other intangible assets, net................................................           3,543             3,562
    Goodwill....................................................................           1,396             1,386
    Other assets................................................................             121               134
                                                                                          ------            ------
         Total Assets...........................................................         $10,761           $11,544
                                                                                          ======            ======

    Liabilities and Shareholders' Equity
    Current Liabilities
       Accounts payable and other current liabilities...........................         $ 1,431           $ 1,231
       Short-term borrowings....................................................             184                67
       Current maturities of long-term debt.....................................              53             1,180
                                                                                          ------            ------
         Total Current Liabilities..............................................           1,668             2,478

    Long-term debt..............................................................           4,483             4,493
    Other liabilities...........................................................             850               875
    Deferred income taxes.......................................................           1,462             1,421
    Minority interest...........................................................             436               396
                                                                                          ------            ------
         Total Liabilities......................................................           8,899             9,663
                                                                                          ------            ------

    Shareholders' Equity
       Common stock, par value $0.01 per share:
           authorized 900 shares, issued 310 shares.............................               3                 3
       Additional paid-in capital...............................................           1,730             1,743
       Retained earnings........................................................           1,826             1,471
       Accumulated other comprehensive loss.....................................            (406)             (380)
       Deferred compensation....................................................              (4)               (4)
       Treasury stock: 59 shares and 49 shares at September 4, 2004 and December
          27, 2003, respectively................................................          (1,287)             (952)
                                                                                          ------            ------
              Total Shareholders' Equity........................................           1,862             1,881
                                                                                          ------            ------
               Total Liabilities and Shareholders' Equity.......................         $10,761           $11,544
                                                                                          ======            ======
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements.

                                       -4-

<PAGE>


Notes to Condensed Consolidated Financial Statements
Tabular dollars in millions, except per share amounts
--------------------------------------------------------------------------------

Note 1 - Basis of Presentation

     The Pepsi  Bottling  Group,  Inc.  ("PBG" or the  "Company") is the world's
largest manufacturer, seller and distributor of Pepsi-Cola beverages, consisting
of bottling  operations  located in the United States,  Mexico,  Canada,  Spain,
Greece, Russia and Turkey. When used in these Condensed  Consolidated  Financial
Statements, "PBG," "we," "our" and "us" each refers to The Pepsi Bottling Group,
Inc. and,  where  appropriate,  to Bottling  Group,  LLC ("Bottling  LLC"),  our
principal operating subsidiary.

     As of September 4, 2004, PepsiCo Inc.'s ("PepsiCo")  ownership consisted of
42.2% of our outstanding common stock and 100% of our outstanding Class B common
stock,  together  representing  47.4% of the voting  power of all classes of our
voting  stock.  PepsiCo also owns  approximately  6.8% of the equity of Bottling
Group, LLC, our principal operating subsidiary.

     The accompanying Condensed Consolidated Balance Sheet at September 4, 2004,
the  Condensed  Consolidated   Statements  of  Operations  for  the  twelve  and
thirty-six weeks ended September 4, 2004 and September 6, 2003 and the Condensed
Consolidated  Statements of Cash Flows for the thirty-six  weeks ended September
4, 2004 and September 6, 2003 have not been  audited,  but have been prepared in
conformity with accounting principles generally accepted in the United States of
America 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 consolidated financial
statements  for the fiscal  year ended  December  27, 2003 as  presented  in our
Annual  Report  on  Form  10-K.  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.

     Our U.S. and Canadian  operations  report using a fiscal year that consists
of 52 weeks, ending on the last Saturday in December.  Every five or six years a
53rd week is added. Our remaining countries report using a calendar-year  basis.
Accordingly, we recognize our quarterly business results as outlined below:

          Quarter              U.S. & Canada                Mexico & Europe
          -------              -------------                ---------------
       First Quarter             12 weeks                January and February
      Second Quarter             12 weeks                March, April and May
       Third Quarter             12 weeks                June, July and August
      Fourth Quarter             16 weeks                 September, October,
                                                         November and December


Note 2 - Seasonality of Business

     The results for the third  quarter 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 and interest, which are not
significantly impacted by business seasonality.

                                      -5-

<PAGE>


Note 3 - New Accounting Standards

     EITF 02-16

     In  January  2003,  the  Emerging  Issues  Task  Force  ("EITF")  reached a
consensus on Issue No. 02-16,  "Accounting by a Customer  (Including a Reseller)
for Certain  Consideration  Received from a Vendor,"  addressing the recognition
and income statement  classification  of various cash  consideration  given by a
vendor to a customer.  The consensus  requires  that certain cash  consideration
received by a customer  from a vendor is presumed to be a reduction of the price
of the vendor's  products,  and therefore should be characterized as a reduction
of cost of sales when  recognized in the  customer's  income  statement,  unless
certain criteria are met. EITF Issue No. 02-16 became effective beginning in our
fiscal year 2003.  Prior to 2003, we  classified  worldwide  bottler  incentives
received from PepsiCo and other brand owners as  adjustments to net revenues and
selling,  delivery and administrative expenses depending on the objective of the
program.  In accordance with EITF Issue No. 02-16,  we have  classified  certain
bottler  incentives  as a reduction of cost of sales  beginning in 2003.  During
2003,  we  recorded a  transition  adjustment  of $6  million,  net of taxes and
minority interest of $1 million,  for the cumulative effect on prior years. This
adjustment  reflects the amount of bottler  incentives that can be attributed to
our 2003 beginning inventory balances.

     FASB Staff Position FAS 106-2

     During  the  second  quarter,  the  Financial  Accounting  Standards  Board
("FASB")  issued  FASB Staff  Position  FAS 106-2,  "Accounting  and  Disclosure
Requirements  Related  to  the  Medicare  Prescription  Drug,   Improvement  and
Modernization  Act of 2003."  See Note 8 - Pension  and  Postretirement  Benefit
Plans for further details regarding the impact of FASB Staff Position FAS 106-2.

     Share-Based Payments

     The FASB has issued an exposure  draft  proposing to expense the fair value
of  share-based  payments  to  employees  beginning  in 2005.  We are  currently
evaluating the impact of this proposed standard on our financial statements.


Note 4 - Stock-Based Compensation

     We measure  stock-based  compensation  expense  using the  intrinsic  value
method in accordance  with Accounting  Principles  Board ("APB") Opinion No. 25,
"Accounting  for Stock Issued to  Employees,"  and its related  interpretations.
Accordingly,  compensation  expense for stock option  grants to our employees is
measured as the excess of the quoted  market  price of common stock at the grant
date over the amount the employee must pay for the stock. Our policy is to grant
stock  options at fair value on the date of grant.  As allowed by  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 148,  "Accounting for Stock-Based
Compensation - Transition and Disclosure,"  we have elected to continue to apply
the intrinsic-value based method of accounting described above, and have adopted
the  disclosure  requirements  of SFAS  No.  123,  "Accounting  for  Stock-Based
Compensation." If we had measured compensation cost for the stock awards granted
to our employees under the fair-value  based method  prescribed by SFAS No. 123,
net income would have been changed to the pro forma amounts set forth below:

                                      -6-

<PAGE>

<TABLE>
<CAPTION>

                                                                      12 Weeks Ended                36 Weeks Ended
                                                                      --------------                --------------
                                                                 September     September      September      September
                                                                  4, 2004       6, 2003        4, 2004        6, 2003
                                                                  -------       -------        -------        -------
Net income:
<S>                                                                <C>           <C>            <C>            <C>
As reported..................................................      $ 191         $ 183          $ 383          $ 347
Add:  Total stock-based employee compensation included
      in reported net income, net of taxes and
      and minority interest..................................          -             -              1              2
Less: Total stock-based employee compensation
      determined under fair-value based method for all
      awards, net of  taxes and minority interest............        (10)          (12)           (29)           (32)
                                                                    ----          ----           ----           ----

Pro forma....................................................      $ 181         $ 171          $ 355          $ 317
                                                                    ====          ====           ====           ====

Earnings per share:
   Basic - as reported.......................................      $0.75         $0.68          $1.49          $1.27
   Basic - pro forma.........................................       0.71          0.64           1.38           1.16
   Diluted - as reported.....................................      $0.73         $0.67          $1.44          $1.24
   Diluted - pro forma.......................................       0.69          0.63           1.33           1.14
</TABLE>

     Pro forma compensation cost measured for stock options granted to employees
is  amortized  using a  straight-line  basis over the vesting  period,  which is
typically three years.

     The fair value of PBG stock  options  used to compute  pro forma net income
disclosures  was  estimated  on  the  date  of  grant  using  the  Black-Scholes
option-pricing model based on the following weighted-average assumptions:
<TABLE>
<CAPTION>

                                                                       12 Weeks Ended             36 Weeks Ended
                                                                       --------------             --------------
                                                                 September     September      September      September
                                                                  4, 2004       6, 2003        4, 2004        6, 2003
                                                                  -------       -------        -------        -------
<S>                                                                  <C>           <C>            <C>            <C>
Risk-free interest rate......................................        3.9%          2.8%           3.2%           2.9%
Expected life................................................      6 years      6 years        6 years        6 years
Expected volatility..........................................         35%           37%            35%            37%
Expected dividend yield......................................       0.66%         0.21%          0.68%          0.17%


Note 5 - Inventories
                                                                 September     December
                                                                  4, 2004      27, 2003
                                                                  -------      --------
Raw materials and supplies...................................      $ 177        $ 140
Finished goods...............................................        287          234
                                                                    ----         ----
                                                                   $ 464        $ 374
                                                                    ====         ====
</TABLE>

                                      -7-

<PAGE>


Note 6 - Property, plant and equipment, net
<TABLE>
<CAPTION>

                                                                September      December
                                                                 4, 2004       27, 2003
                                                                 -------       --------
<S>                                                              <C>           <C>
Land.........................................................    $   253       $   241
Buildings and improvements...................................      1,221         1,185
Manufacturing and distribution equipment.....................      3,095         3,028
Marketing equipment..........................................      2,187         2,131
Other........................................................        175           176
                                                                  ------        ------
                                                                   6,931         6,761
Accumulated depreciation.....................................     (3,507)       (3,338)
                                                                  ------        ------
                                                                 $ 3,424       $ 3,423
                                                                  ======        ======

Note 7 - Other intangible assets, net and Goodwill
                                                                 September     December
                                                                  4, 2004      27, 2003
                                                                  -------      --------
Intangibles subject to amortization:
     Gross carrying amount:
         Customer relationships and lists ...................    $    45       $    42
         Franchise rights....................................         24            23
         Other identified intangibles........................         28            27
                                                                  ------        ------
                                                                      97            92
                                                                  ------        ------
     Accumulated amortization:
         Customer relationships and lists ...................         (5)           (3)
         Franchise rights....................................        (13)          (10)
         Other identified intangibles........................        (15)          (12)
                                                                  ------        ------
                                                                     (33)          (25)
                                                                  ------        ------
Intangibles subject to amortization, net.....................         64            67
                                                                  ------        ------

Intangibles not subject to amortization:
     Carrying amount:
         Franchise rights....................................      2,900         2,908
         Distribution rights.................................        282           286
         Trademarks..........................................        204           207
         Other identified intangibles........................         93            94
                                                                  ------        ------
     Intangibles not subject to amortization.................      3,479         3,495
                                                                  ------        ------
Total other intangible assets, net...........................    $ 3,543       $ 3,562
                                                                  ======        ======

Goodwill.....................................................    $ 1,396       $ 1,386
                                                                  ======        ======
</TABLE>

     Goodwill  increased  by  approximately  $10 million in 2004 due to purchase
price allocations of $11 million relating to our recent acquisitions,  partially
offset by the impact from foreign currency translation of $1 million.

                                      -8-

<PAGE>


     For intangible  assets subject to amortization,  we calculate  amortization
expense on a straight-line  basis over the period we expect to receive  economic
benefit.  Total  amortization  expense  was $9 million  and $6  million  for the
thirty-six  weeks ended  September 4, 2004 and September 6, 2003,  respectively.
The weighted-average  amortization period for each category of intangible assets
and its estimated aggregate  amortization expense expected to be recognized over
the next five years are as follows:

<TABLE>
<CAPTION>

                                         Weighted-Average   Estimated Aggregate Amortization Expense to be Incurred
                                         ----------------   -------------------------------------------------------
                                           Amortization
                                           ------------
                                              Period
                                              ------
                                                            Balance of                  Fiscal Year Ending
                                                            ----------                  ------------------
                                                               2004         2005        2006        2007         2008
                                                               ----         ----        ----        ----         ----
<S>                                          <C>                <C>          <C>         <C>         <C>          <C>
Customer relationships and lists..........   17-20 years        $1           $3          $3          $3           $3
Franchise rights..........................       5 years        $1           $5          $2          $1           $-
Other identified intangibles..............       6 years        $1           $4          $3          $2           $1
</TABLE>


Note 8 -  Pension and Postretirement Benefit Plans

     Pension Benefits

     Our U.S. employees  participate in noncontributory  defined benefit pension
plans, which cover  substantially all full-time salaried  employees,  as well as
most  hourly  employees.  Benefits  generally  are based on years of service and
compensation,  or stated amounts for each year of service.  All of our qualified
plans are funded and  contributions  are made in amounts  not less than  minimum
statutory funding  requirements and not more than the maximum amount that can be
deducted for U.S.  income tax purposes.  Our net pension expense for the defined
benefit plans for our operations outside the U.S. was not significant and is not
included in the tables presented below.

     Our U.S.  employees are also eligible to  participate in our 401(k) savings
plans,  which  are  voluntary  defined  contribution  plans.  We  make  matching
contributions to the 401(k) savings plans on behalf of participants  eligible to
receive such  contributions.  If a participant  has one or more but less than 10
years of  eligible  service,  our match  will  equal  $0.50 for each  dollar the
participant  elects  to  defer  up  to 4%  of  the  participant's  pay.  If  the
participant has 10 or more years of eligible service, our match will equal $1.00
for each dollar the  participant  elects to defer up to 4% of the  participant's
pay.

                                      -9-

<PAGE>


     Components of our U.S.  pension expense for the twelve and thirty-six weeks
ended September 4, 2004 and September 6, 2003 are as follows:
<TABLE>
<CAPTION>

                                                                   12 Weeks Ended              36 Weeks Ended
                                                                   --------------              --------------
                                                               September    September      September     September
                                                                4, 2004      6, 2003        4, 2004       6, 2003
                                                                -------      -------        -------       -------
<S>                                                               <C>          <C>            <C>           <C>
   Service cost.............................................      $ 10         $  9           $ 30          $ 26
   Interest cost............................................        16           14             48            43
   Expected return on plan assets...........................       (19)         (16)           (57)          (47)
   Amortization of prior service cost.......................         2            2              5             5
   Amortization of net loss.................................         5            3             16             9
                                                                   ---          ---            ---           ---
   Net pension expense for the defined benefit plans........        14           12             42            36
                                                                   ---          ---            ---           ---

   Defined contribution plans expense.......................         4            4             14            13
                                                                   ---          ---            ---           ---

   Total pension expense recognized in the Condensed
   Consolidated Statements of Operations....................      $ 18         $ 16           $ 56          $ 49
                                                                   ===          ===            ===           ===
</TABLE>

     We expect to contribute $100 million to our U.S.  pension plans in 2004. As
of September 4, 2004,  $70 million of  contributions  to our U.S.  pension plans
have been made.

     Postretirement Benefits

     Our  postretirement  plans  provide  medical  and life  insurance  benefits
principally to U.S.  retirees and their  dependents.  Employees are eligible for
benefits if they meet age and service  requirements  and qualify for  retirement
benefits.  The plans are not funded and since 1993 have  included  retiree  cost
sharing.

     Components of our U.S.  postretirement  benefits expense for the twelve and
thirty-six weeks ended September 4, 2004 and September 6, 2003 are as follows:
<TABLE>
<CAPTION>

                                                                   12 Weeks Ended              36 Weeks Ended
                                                                   --------------              --------------
                                                               September    September      September     September
                                                                4, 2004      6, 2003        4, 2004       6, 2003
                                                                -------      -------        -------       -------
<S>                                                               <C>          <C>            <C>           <C>
   Service cost.............................................      $  1         $  1           $  3          $  3
   Interest cost............................................         4            4             13            13
   Amortization of net loss.................................         1            1              3             2
                                                                   ---          ---            ---           ---
   Net postretirement benefits expense recognized in the
   Condensed Consolidated Statements of Operations..........      $  6         $  6           $ 19          $ 18
                                                                   ===          ===            ===           ===
</TABLE>

     On May 19, 2004,  FASB Staff  Position No. FAS 106-2  ("FSP") was issued by
FASB to provide guidance  relating to the prescription  drug subsidy provided by
the  Medicare  Prescription  Drug,  Improvement  and  Modernization  Act of 2003
("Act").  We currently  provide  postretirement  benefits to a group of retirees
(employees  who retired  prior to the  beginning of 1993) with little or no cost
sharing. For these retirees,  the prescription drug benefit provided by us would
be considered to be  actuarially  equivalent to the benefit  provided  under the
Act. Therefore,  we have retroactively applied the FSP to the date of enactment.
As a result:

     o    The obligation (accumulated projected benefit obligation) decreased by
          $11.7 million, and

                                      -10-

<PAGE>


     o    The  net  periodic  postretirement  benefits  cost  decreased  by $0.3
          million  and $0.6  million for the twelve and  thirty-six  weeks ended
          September 4, 2004, respectively.

     We also  provide  postretirement  benefits  to  another  group of  retirees
(employees  who retired  after 1992) with cost sharing.  At present,  due to the
lack of clarifying  regulations  related to the Act, we cannot  determine if the
benefit provided by us would be considered actuarially equivalent to the benefit
provided under the Act.

Note 9 - Geographic Data

     We operate in one industry, carbonated soft drinks and other ready-to-drink
beverages. We conduct business in all or a portion of the United States, Mexico,
Canada, Spain, Russia, Greece and Turkey.
<TABLE>
<CAPTION>

Net Revenues                                                     12 Weeks Ended              36 Weeks Ended
------------                                                     --------------              --------------
                                                            September     September     September      September
                                                             4, 2004       6, 2003       4, 2004        6, 2003
                                                             -------       -------       -------        -------
<S>                                                          <C>           <C>           <C>            <C>
U.S.....................................................     $ 2,002       $ 1,929       $ 5,537        $ 5,222
Mexico..................................................         288           298           722            763
Other countries.........................................         644           583         1,417          1,231
                                                              ------        ------        ------         ------
                                                             $ 2,934       $ 2,810       $ 7,676        $ 7,216
                                                              ======        ======        ======         ======

Long-Lived Assets                                           September     December
                                                             4, 2004      27, 2003
                                                             -------      --------
U.S.....................................................     $ 5,727       $ 5,723
Mexico..................................................       1,410         1,432
Other countries.........................................       1,347         1,350
                                                              ------        ------
                                                             $ 8,484       $ 8,505
                                                              ======        ======
</TABLE>


Note 10 - Comprehensive Income
<TABLE>
<CAPTION>

                                                                 12 Weeks Ended              36 Weeks Ended
                                                                 --------------              --------------
                                                            September     September     September      September
                                                             4, 2004       6, 2003       4, 2004        6, 2003
                                                             -------       -------       -------        -------
<S>                                                            <C>           <C>           <C>           <C>
Net income..............................................       $ 191         $ 183         $ 383         $ 347
Currency translation adjustment.........................          36          (112)          (21)           30
Cash flow hedge adjustment (a) (b)......................          (2)            2            (5)            9
                                                                ----          ----          ----          ----
Comprehensive income....................................       $ 225         $  73         $ 357         $ 386
                                                                ====          ====          ====          ====
</TABLE>


(a)  Net of minority  interest and taxes of $1 million and $1 million for the 12
     weeks ended September 4, 2004 and September 6, 2003, respectively.
(b)  Net of  minority  interest  and taxes of $4 million  and $7 million for the
     thirty-six   weeks  ended   September  4,  2004  and   September  6,  2003,
     respectively.

Note 11 - Contingencies

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

                                      -11-

<PAGE>


             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------

The Board of Directors & Shareholders of
The Pepsi Bottling Group, Inc:

We have reviewed the accompanying  condensed  consolidated  balance sheet of The
Pepsi Bottling Group, Inc. and subsidiaries as of September 4, 2004, the related
condensed  consolidated  statements  of  operations  for  the  twelve  week  and
thirty-six  week  periods  ended  September  4,  2004  and  September  6,  2003,
respectively,  and the related condensed  consolidated  statements of cash flows
for the thirty-six  week periods ended  September 4, 2004 and September 6, 2003.
These condensed  consolidated financial statements are the responsibility of the
Company's management.

We conducted our reviews in accordance  with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  A review of  interim  financial
information  consists  principally of applying analytical  procedures and making
inquiries of persons  responsible  for financial and accounting  matters.  It is
substantially  less in scope  than an audit  conducted  in  accordance  with the
standards of the Public Company Accounting  Oversight Board (United States), 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 reviews, 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 U.S. generally accepted accounting principles.

We have  previously  audited,  in accordance  with standards  established by the
Public Company  Accounting  Oversight Board (United  States),  the  consolidated
balance sheet of The Pepsi Bottling Group,  Inc. and subsidiaries as of December
27, 2003, and the related consolidated statements of operations,  cash flows and
changes in  shareholderss  equity,  for the fiscal year then ended not presented
herein;  and in our report dated January 27, 2004,  we expressed an  unqualified
opinion  on  those  consolidated  financial  statements.  In  our  opinion,  the
information set forth in the accompanying  condensed  consolidated balance sheet
as of December 27, 2003, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.


/s/ KPMG LLP
New York, New York
September 28, 2004



<PAGE>


Item 2.
Management's Financial Review
Tabular dollars in millions, except per share data

OVERVIEW
--------

     The Pepsi  Bottling  Group,  Inc.  ("PBG" or the  "Company") is the world's
largest manufacturer,  seller and distributor of Pepsi-Cola  beverages.  We have
the exclusive right to manufacture,  sell and distribute Pepsi-Cola beverages in
all or a portion of the United States, Mexico, Canada, Spain, Greece, Russia and
Turkey. When used in these Condensed Consolidated  Financial Statements,  "PBG,"
"we," "our" and "us" each refers to The Pepsi  Bottling  Group,  Inc. and, where
appropriate,  to Bottling Group, LLC ("Bottling  LLC"), our principal  operating
subsidiary.

     Management's  Financial  Review  should  be read in  conjunction  with  the
accompanying  unaudited financial  statements and our Annual Report on Form 10-K
for  the  fiscal  year  ended  December  27,  2003,  which  include   additional
information about our accounting  policies,  practices and the transactions that
underlie our financial results.

Financial Performance Summary
-----------------------------
<TABLE>
<CAPTION>

                                                  12 Weeks Ended                         36 Weeks Ended
                                                  --------------                         --------------
                                    Sept.          Sept.            %           Sept.          Sept.           %
                                   4, 2004        6, 2003         Change       4, 2004        6, 2003        Change
                                   -------        -------         ------       -------        -------        ------

<S>                                 <C>            <C>              <C>         <C>            <C>             <C>
Net revenues....................    $2,934         $2,810           4%          $7,676         $7,216          6%

Gross profit....................    $1,412         $1,372           3%          $3,725         $3,561          5%

Operating income................    $  357         $  358           0%          $  780         $  749          4%


Income before cumulative
effect of change in accounting
principle 1.....................    $  191         $  183           4%          $  383           $353          8%

Net income......................    $  191         $  183           4%          $  383           $347         10%

Diluted earnings per share
before cumulative effect of
change in accounting
principle 1, 2..................    $ 0.73         $ 0.67           9%          $ 1.44         $ 1.26         14%

Diluted earnings per share 2....    $ 0.73         $ 0.67           9%          $ 1.44         $ 1.24         16%
</TABLE>

                                      -13-

<PAGE>


1 - Cumulative effect of change in accounting principle for the thirty-six weeks
ended  September  6, 2003,  reflects  the impact of  adoption  of EITF Issue No.
02-16.  See  Note  3 - New  Accounting  Standards  in  the  Notes  to  Condensed
Consolidated Financial Statements for more information.

2 - Percentage  change for diluted  earnings per share and diluted  earnings per
share before cumulative  effect of change in accounting  principle is calculated
by using earnings per share data that is expanded to the fourth decimal place.

     For the third quarter we achieved  diluted  earnings per share of $0.73,  a
nine percent  increase over the similar period in the prior year, which includes
a $0.02  gain from the  settlement  of  certain  international  tax  audits.  We
generated  strong top line results  during the quarter,  growing  worldwide  net
revenues by 4%, driven by  innovation  and  execution in the  marketplace.  This
growth has been  balanced,  reflecting  2% growth in both volume and net revenue
per case. The strong topline growth has been partially  offset by higher cost of
sales as a result  of mix  shifts  into more  expensive  products  and  packages
coupled with increases in raw material costs. However, even with the increase in
cost of sales,  our gross profit is still growing as our worldwide  gross profit
per case increased one percent during the quarter versus the prior year.

     From a cost perspective, selling, delivery and administrative expenses have
increased four percent in the third quarter versus the prior year. Approximately
one half of this increase is due to higher  incentive  compensation  and benefit
costs. As a result of these higher costs,  operating  income for the quarter was
flat versus the prior year.

     We expect our full year  worldwide  operating  income  performance to be in
line with our  year-to-date  trends,  reflecting  growth in both  volume and net
revenue  per case of two to three  percent.  Our cost of goods  sold per case is
expected to grow three to five percent for the full year of 2004.

Volume


                                12 Weeks Ended              36 Weeks Ended
                               Sept. 4, 2004 vs.           Sept. 4, 2004 vs.
                                Sept. 6, 2003               Sept. 6, 2003
                                -------------               -------------
                           World-         Outside        World-          Outside
                            wide   U.S.   the U.S.       wide    U.S.   the U.S.
                           -----   ----   --------       -----  ----    --------
Base volume..............    2  %   1  %    4  %          3  %    3  %     2  %
Acquisitions.............    0  %   0  %    1  %          0  %    0  %     1  %
                            ---    ---     ---           ---     ---      ---
Total volume change          2  %   1  %    5  %          3  %    3  %     3  %
                            ===    ===     ===           ===     ===      ===

     Our reported  worldwide  physical case volume  increased two percent in the
third  quarter and three  percent in the first  thirty-six  weeks of 2004,  when
compared with similar  periods of 2003.  For the quarter,  increases in reported
worldwide volume were driven by growth in the U.S.,  Europe,  Mexico and Canada.
On a year-to-date-basis, worldwide volume growth reflects increases in the U.S.,
Europe and Canada, partially offset by volume declines in Mexico.

     In the U.S.,  our volume  increased by one percent in the third quarter and
three percent on a year-to-date  basis reflecting  growth in both the cold-drink
and take-home channels of our business.  While we did experience softness in our
retail bottle and can cold drink segments,  we have been  experiencing very good
results in our foodservice  business.  Our foodservice  business segment,  which
comprises our on-premise and full service vending accounts,  has generated solid
results,  up four  percent for the  quarter  and six  percent on a  year-to-date
basis. From a brand perspective, Trademark PEPSI's volume was down three percent
for the  quarter,  due to the  lapping  of  PEPSI  VANILLA  in the  prior  year,
partially offset by solid contributions from our diet portfolio and the addition
of PEPSI EDGE. On a year-to-date  basis,  however,  Trademark PEPSI's volume has
grown slightly  versus the prior year. Our  non-carbonated  soft drink portfolio
increased four percent in the

                                      -14-

<PAGE>


quarter and 13% on a year-to-date  basis,  led by the  introduction of TROPICANA
juice drinks and continued growth from AQUAFINA.

     In Europe,  volume grew five percent in the third  quarter and nine percent
on a year-to-date  basis,  driven by strong  performances  in Russia and Turkey,
partially  offset by  declines in Spain.  For the quarter and on a  year-to-date
basis, our volume in Russia and Turkey grew in the double digits.  In Russia, we
had solid growth in our core brands, coupled with contributions from new product
introductions,  including  TROPICANA  JUICE and LIPTON ICED TEAS. In Turkey,  we
continue to improve in the areas of execution and distribution. In Spain, volume
declined  four percent in the quarter and two percent on a  year-to-date  basis,
reflecting weak tourism and cooler weather.

     In Mexico,  volume trends improved during the quarter,  reflecting improved
marketplace  execution,  brand and package  innovation and our focus on consumer
value. Total volume in Mexico,  excluding the impact of acquisitions,  increased
three percent in the quarter with  increases in each of our water and carbonated
soft drink categories.  On a year-to-date  basis,  volume in Mexico declined two
percent  primarily  reflecting  softness in our jug water  business in the first
half of the year.



Net Revenues
<TABLE>
<CAPTION>

                                               12 Weeks Ended            36 Weeks Ended
                                              Sept. 4, 2004 vs.         Sept. 4, 2004 vs.
                                                Sept. 6, 2003             Sept. 6, 2003
                                                -------------             -------------
                                          World-         Outside      World-        Outside
                                           wide    U.S.  the U.S.      wide   U.S.  the U.S.
                                          ------   ----  --------     ------  ----  --------

<S>                                         <C>     <C>     <C>         <C>    <C>    <C>
Volume impact.........................      2  %     1  %   4  %        3  %   3  %    2  %
Net price per case impact (rate/mix)..      2  %     3  %   0  %        3  %   3  %    2  %
Acquisitions..........................      0  %     0  %   1  %        0  %   0  %    1  %
Currency translation..................      0  %     0  %   1  %        0  %   0  %    2  %
                                           -----   -----   -----      -----   -----   -----
     Total Net Revenues change........      4  %     4 %    6  %        6  %   6  %    7  %
                                           =====   =====   =====      ======  =====   =====
</TABLE>



     Net revenues  were $2.9 billion for the third  quarter and $7.7 billion for
the first  thirty-six  weeks in 2004, a four percent and six percent  respective
increase  over similar  periods in 2003.  The  increases in net revenues for the
quarter and on a year-to-date  basis were driven by  improvements  in volume and
growth in net price per case.

     In the U.S.,  net revenues  increased four percent in the third quarter and
six percent  for the first  thirty-six  weeks of 2004,  when  compared  with the
similar  periods of 2003.  The increases in net revenues in the U.S. were driven
by growth in both volume and net price per case.  The three percent  increase in
net price per case in the U.S. for the quarter and on a  year-to-date  basis was
due to a combination of rate increases, primarily in cans, and mix benefits from
higher-priced products.

     Net revenues outside the U.S. grew  approximately  six percent in the third
quarter and seven percent for the first  thirty-six weeks of 2004. The increases
in net  revenues  outside the U.S. for the quarter and on a  year-to-date  basis
were driven by volume and net price per case growth in Europe,  coupled with the
favorable  impact of foreign  exchange  in Europe and  Canada.  This  growth was
partially  offset by net  revenue  declines  in Mexico.  Net  revenues in Mexico
declined  four percent in the quarter and five percent on a  year-to-date  basis
due primarily to the  devaluation of the Mexican peso and volume declines in the
first half of the year.  In local  currency,  our net revenue per case in Mexico
declined one percent in the quarter and increased one percent on a  year-to-date
basis.

                                      -15-

<PAGE>


     In the third quarter,  approximately  68% of our net revenues was generated
in the U.S.,  10% of our net revenues was  generated in Mexico and the remaining
22% was  generated  outside  the  U.S.  and  Mexico.  On a  year-to-date  basis,
approximately 72% of our net revenues was generated in the U.S., nine percent of
our net revenues was  generated in Mexico and the  remaining  19% was  generated
outside the U.S. and Mexico.

     For the full year of 2004,  we expect our worldwide net revenue per case to
grow about two to three  percent,  driven by net  revenue per case growth in the
United States of three percent.

Cost of Sales
<TABLE>
<CAPTION>

                                               12 Weeks Ended            36 Weeks Ended
                                              Sept. 4, 2004 vs.         Sept. 4, 2004 vs.
                                                Sept. 6, 2003            Sept. 6, 2003
                                                -------------            -------------
                                          World-          Outside     World-        Outside
                                           wide     U.S.  the U.S.     wide   U.S.  the U.S.
                                          ------    ----  --------    ------  ----  --------

<S>                                         <C>      <C>    <C>         <C>    <C>     <C>
Volume impact.........................      2  %     1  %   4  %        3  %   3  %    2  %
Costs per case impact.................      3  %     4  %   2  %        4  %   5  %    4  %
Acquisitions..........................      1  %     0  %   1  %        0  %   0  %    1  %
Currency translation..................      0  %     0  %   0  %        1  %   0  %    2  %
                                           ---      ---    ---         ---    ---     ---
     Total Cost of Sales change.......      6  %     5  %   7  %        8  %   8  %    9  %
                                           ===      ===    ===         ===    ===     ===
</TABLE>

     Cost of sales was $1.5  billion in the third  quarter and $4.0 billion for
the first thirty-six  weeks of 2004, a six percent and eight percent  respective
increase over similar  periods in 2003. The growth in cost of sales on a quarter
and  year-to-date  basis  was  driven  primarily  by  volume  and costs per case
increases.

     In the U.S., cost of sales grew five percent in the third quarter and eight
percent  for the  first  thirty-six  weeks of 2004,  due to  volume  growth  and
increases in costs per case.  The  increases in costs per case resulted from the
impact of mix shifts into higher cost  products,  including  our  non-carbonated
products, coupled with higher raw material costs.

     Cost of sales  outside the U.S.  grew  approximately  seven  percent in the
third  quarter of 2004 due to volume  growth and  increases in costs per case in
Europe.  Costs per case  increases  in Europe  were  driven by a mix shift  into
higher priced products and packages, coupled with increases in certain commodity
costs. Cost of sales outside the U.S. on a year-to-date basis grew nine percent,
reflecting increases in costs per case in Europe and Mexico, coupled with volume
growth and the negative impact from foreign currency translation.

     For the full year of 2004, we expect our  worldwide  cost of sales per case
to grow three to five percent.

                                      -16-

<PAGE>


Selling, Delivery and Administrative Expenses
<TABLE>
<CAPTION>

                                             12 Weeks Ended              36 Weeks Ended
                                            Sept. 4, 2004 vs.           Sept. 4, 2004 vs.
                                              Sept. 6, 2003              Sept. 6, 2003
                                              -------------              -------------
                                         World-          Outside      World-        Outside
                                          wide     U.S.  the U.S.      wide   U.S.  the U.S.
                                         ------    ----  --------     ------  ----  --------

<S>                                        <C>     <C>    <C>          <C>    <C>     <C>
Cost impact...........................      4  %    5  %   1  %         4  %   4  %    4  %
Acquisitions..........................      0  %    0  %   1  %         0  %   0  %    1  %
Currency translation..................      0  %    0  %   0  %         1  %   0  %    2  %
                                           -----   -----  -----       -----  -----   -----
     Total SD&A change................      4  %    5  %   2  %         5  %   4  %    7  %
                                           =====   =====  =====        =====  =====   =====
</TABLE>


     Selling,  delivery  and  administrative  expenses  were $1.1 billion in the
third  quarter and $2.9 billion for the first  thirty-six  weeks of 2004, a four
percent and five  percent  respective  increase  over  similar  periods in 2003.
Increases in selling,  delivery and  administrative  costs were driven by higher
costs in the U.S. and Europe.  In the U.S.,  increases  reflect higher incentive
compensation  and benefit costs coupled with  additional  costs  associated with
volume  growth.  Outside the U.S.,  increases  were driven  primarily  by higher
operating costs in Russia and Turkey and the negative impact of foreign currency
throughout Europe and Canada in the first half of the year,  partially offset by
declines in Mexico due to the devaluation of the Mexican peso.

     Selling,  delivery  and  administrative  expenses  for the  full  year  are
expected to grow in line with trends of the third quarter.

Operating Income

     Operating  income  was $357  million in the third  quarter,  which was flat
versus the prior  year.  Operating  income  performance  during the  quarter was
driven by a decline in the U.S. in the mid-single  digits,  partially  offset by
double digit growth in Canada and Europe.  Operating income declines in the U.S.
were due to higher selling,  delivery and administrative expenses as a result of
increases in our incentive compensation and benefit costs. In Canada and Europe,
growth in operating  income was due to strong top line growth,  partially offset
by higher cost of sales.

     On a year-to-date basis,  operating income was $780 million, a four percent
increase  over the prior year.  Growth in  operating  income was driven by a six
percent  increase in the U.S. and double  digit  increases in Canada and Europe.
This growth was  partially  offset by  operating  income  declines in Mexico due
primarily to the decrease in volume in the first half of the year.

     Operating  income for the full year in 2004 is  expected to increase in the
mid-single  digits driven by the continued  strong  topline  growth in the U.S.,
Europe and Canada.

Interest Expense, net

     Interest  expense,  net decreased by $6 million in the third quarter and $8
million for the first  thirty-six  weeks of 2004,  when  compared  with  similar
periods of 2003,  largely due to lower effective  interest rates achieved on our
long-term debt.

     Due to favorable  interest  rates,  we have lowered our full year  interest
expense, net outlook to approximately $235 million.

Income Tax Expense

     Our  effective  tax rate for the  thirty-six  weeks ended 2004 and 2003 was
33.6% and 34.3%, respectively. The decrease in our effective tax rate versus the
prior year is due largely to the

                                      -17-

<PAGE>


settlement  of certain  international  tax audits,  which allowed the Company to
reverse certain previously established  liabilities for tax exposures.  This has
resulted in a $0.02 diluted  earnings per share benefit for the quarter and on a
year-to-date basis.


Liquidity and Financial Condition
---------------------------------
Cash Flows

     Net cash provided by operations  grew by $78 million to $710 million in the
first  thirty-six  weeks  of  2004  due  to  higher  profits,   lower  incentive
compensation payments and working capital improvements in 2004, coupled with the
lapping of payments  related to the  settlement  of our New Jersey wage and hour
litigation in 2003. These upsides were partially offset by the timing of pension
contributions during 2004.

     Net cash used for  investments  decreased  by $95 million to $425  million,
principally reflecting lower acquisition spending.

     Net cash used for financing  increased by $1,181  million to $1,260 million
driven  primarily by the  repayment  of our $1.0 billion note in February  2004,
lower proceeds from long-term borrowings and higher share repurchases, partially
offset by increased stock option exercises and higher short-term borrowings.

     For the full year in 2004,  we  expect  to  achieve  net cash  provided  by
operations  of  more  than  $1.2  billion.   In  addition,   we  expect  capital
expenditures to be between $675 million and $700 million.

Liquidity and Capital Resources

     We  believe  that our  future  cash flows  from  operations  and  borrowing
capacity  will  be  sufficient  to  fund  capital  expenditures,   acquisitions,
dividends  and  working  capital   requirements  for  the  foreseeable   future.
Additionally,  we are  currently in  compliance  with all debt  covenants in our
indenture agreements and credit facilities.

     During the first  quarter we repaid our $1 billion  5.38% senior notes with
the  proceeds  we received  from debt  issued in the prior  year.  Additionally,
during the second  quarter,  we repaid our $160  million  9.75%  senior notes by
liquidating our investments in our debt defeasance trust.

     We have a $500  million  commercial  paper  program  that is supported by a
credit facility,  which is guaranteed by Bottling LLC and expires in April 2009.
At September 4, 2004, we had $86 million outstanding in commercial paper.

     Due to the  nature of our  business,  we  require  insurance  coverage  for
certain  casualty  risks.  Given the rapidly  increasing  costs  associated with
obtaining  third-party insurance coverage for our casualty risks in the U.S., we
moved to a  self-insurance  program in 2002.  In 2004, we are  self-insured  for
workers'  compensation  and automobile  risks for occurrences up to $10 million,
and product and general  liability risks for  occurrences up to $5 million.  For
losses exceeding these self-insurance thresholds, we purchase casualty insurance
from a third-party provider.

     On October 1, 2004, we purchased  the Auburn,  Maine-based  Pepsi  bottling
operation of Seltzer and Rydholm, Inc.

Contractual Obligations

     As of September 4, 2004,  there have been no material  changes  outside the
normal course of business in the contractual obligations disclosed in Exhibit 13
to our Annual  Report on Form 10-K for the fiscal year ended  December 27, 2003,
under the caption  "Contractual  Obligations,"  other than the  repayment of our
long-term debt as discussed above.

                                      -18-

<PAGE>


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:

o changes in our  relationship  with PepsiCo that could have a material  adverse
  effect on our business and financial results;
o restrictions  imposed  by PepsiCo on our raw  material  suppliers  that could
  increase our costs;
o decreased  demand  for our  product  resulting  from  changes  in  consumers'
  preferences;
o an  inability  to  achieve  volume  growth  through   product  and  packaging
  initiatives;
o impact of competitive activities on our business;
o material  changes  from  expectations  in  the  cost  of  raw  materials  and
  ingredients;
o an inability to achieve cost savings;
o an  inability  to  achieve  the  expected  timing  for  returns  on cold drink
  equipment and related infrastructure expenditures;
o material  changes  in  expected  levels of bottler  incentive  payments  from
  PepsiCo;
o changes in product category consumption;
o unfavorable weather conditions in our markets;
o unforeseen economic and political changes;
o possible recalls of our products;
o an  inability  to  meet   projections   for  performance  in  newly  acquired
  territories;
o changes  in laws and  regulations,  including  restrictions  on the sale of
  carbonated  soft  drinks  in  schools,  changes  in  food  and  drug  laws,
  transportation  regulations,  employee safety rules, labor laws, accounting
  standards,  taxation  requirements  (including  unfavorable  outcomes  from
  audits performed by various tax authorities) and environmental laws;
o changes in our debt ratings; and
o material  changes  in  expected  interest  and  currency  exchange  rates and
  unfavorable market performance of our pension plan assets.

                                      -19-

<PAGE>


Item 3.
Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
     The  overall  risks to our  international  businesses  include  changes  in
foreign  governmental  policies,  and other political or economic  developments.
These  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.  Foreign  currency gains and
losses reflect  transaction  gains and losses as well as  translation  gains and
losses  arising from the  re-measurement  into U.S.  dollars of the net monetary
assets of businesses in highly inflationary countries.

Item 4.
Controls and Procedures
-----------------------
     PBG's management carried out an evaluation (the "Evaluation"),  as required
by Rule 13a-15(b) of the Securities  Exchange Act of 1934 (the "Exchange  Act"),
with the  participation  of our Chief Executive  Officer and our Chief Financial
Officer, of the effectiveness of our disclosure  controls and procedures,  as of
the end of the  period  covered  by this  report on Form  10-Q.  Based  upon the
Evaluation,  the  Chief  Executive  Officer  and  the  Chief  Financial  Officer
concluded  that our  disclosure  controls and procedures are effective in timely
alerting  them to  material  information  relating  to PBG and its  consolidated
subsidiaries  required to be included in our Exchange Act reports filed with the
SEC. In addition,  there were no changes in our internal  control over financial
reporting  identified in connection with the Evaluation that occurred during our
last fiscal quarter that have materially  affected,  or are reasonably likely to
materially affect, our internal control over financial reporting.

                                      -20-

<PAGE>


                           PART II - OTHER INFORMATION


Item 2.
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
--------------------------------------------------------------------------------

PBG Purchases of Equity Securities
----------------------------------

     In the third  quarter of 2004,  we  repurchased  approximately  6.8 million
shares.  Since the  inception of our share  repurchase  program in October 1999,
80.2  million  shares  of PBG  common  stock  have been  repurchased.  Our share
repurchases for the third quarter of 2004, are as follows:

<TABLE>
<CAPTION>

                                                                                       Maximum Number (or Approximate
                      Total Number of                   Total Number of Shares (or      Dollar Value) of Shares (or
                        Shares (or      Average Price   Units) Purchased as Part of        Units) that May Yet Be
                          Units)       Paid per Share    Publicly Announced Plans or     Purchased Under the Plans or
Period                  Purchased1        (or Unit)2             Programs 3                      Programs 3
------                  ----------     --------------    ---------------------------    -------------------------------

<S>    <C>              <C>                 <C>                 <C>                             <C>
Period 7                1,611,800           $30.00              1,611,800                       24,947,200
--------
06/13/04-
07/10/04

Period 8                2,405,500           $29.26              2,405,500                       22,541,700
--------
07/11/04-
08/07/04

Period 9                2,775,500           $26.94              2,775,500                       19,766,200
--------                ---------                               --------
08/08/04-
09/04/04

Total                   6,792,800           $28.49              6,792,800                       19,766,200
                        =========                               =========
</TABLE>

     1Shares have only been repurchased through publicly announced programs.

     2Average share price excludes brokerage fees.

     3The PBG Board has authorized the repurchase of shares of common stock on
     the open market and through  negotiated  transactions as follows:
<TABLE>
<CAPTION>

                                                                                  Number of Shares
                                                                                  Authorized to be
                    Date Share Repurchase Program was Publicly Announced            Repurchased
<S>                                                                                 <C>
     October 14, 1999.......................................................         20,000,000
     July 13, 2000..........................................................         10,000,000
     July 11, 2001..........................................................         20,000,000
     May 28, 2003...........................................................         25,000,000
     March 25, 2004.........................................................         25,000,000
                                                                                    -----------
     Total shares authorized to be repurchased as of Sept. 4, 2004..........        100,000,000
                                                                                    ===========
     Unless terminated by resolution of the PBG Board, each share repurchase
     program expires when we have repurchased all shares authorized for
     repurchase thereunder.
</TABLE>

                                      -21-

<PAGE>


Item 5.

Other Information
-----------------
     The  financial  statements  of Bottling  LLC,  included  in Bottling  LLC's
Quarterly  Report on Form 10-Q and filed with the SEC on October 13,  2004,  are
hereby  incorporated by reference as required by the SEC as a result of Bottling
LLC's guarantee of up to  $1,000,000,000  aggregate  principal  amount of our 7%
Senior Notes due in 2029.

Item 6.

Exhibits and Reports on Form 8-K
--------------------------------

ITEM 6 (a). EXHIBITS
--------------------

Exhibit No.
-----------
10.1   Form of Employee  Restricted  Stock  Agreement under the PBG 2004 Long-
       Term Incentive Plan

10.2   Form of  Employee  Stock  Option  Agreement  under  the PBG 2004  Long-
       Term Incentive Plan

10.3   Form of Non-Employee Director Annual Stock Option Agreement under the PBG
       Directors' Stock Plan

10.4   Form of Non-Employee Director Restricted Stock Agreement under the PBG
       Directors' Stock Plan

10.5   PBG Executive Incentive Compensation Plan which is incorporated herein
       by reference to Exhibit B to PBG's Proxy Statement for the 2000 Annual
       Meeting of Shareholders

10.6   Summary of the material terms of the PBG Executive Incentive Compensation
       Plan

11.1   Computation of Basic and Diluted Earnings Per Share

15.1   Accountants' Acknowledgement

31.1   Certification by the Chief Executive Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002

31.2   Certification by the Chief Financial Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002

32.1   Certification by the Chief Executive Officer pursuant to Section 906 of
       the Sarbanes-Oxley Act of 2002

                                      -22-

<PAGE>


32.2   Certification by the Chief Financial Officer pursuant to Section 906 of
       the Sarbanes-Oxley Act of 2002

ITEM 6 (b). REPORTS ON FORM 8-K
-------------------------------

     On July 8, 2004, we announced our results for the second quarter ended June
12, 2004, and also increased our full year 2004 earnings per share and cash flow
forecast.

                                      -23-

<PAGE>


                                   SIGNATURES


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




                                              The Pepsi Bottling Group, Inc.
                                              ------------------------------
                                                    (Registrant)






Date: October 13, 2004                          /s/ Andrea L. Forster
      ----------------                          ---------------------
                                                Andrea L. Forster
                                                Vice President and Controller






Date: October 13, 2004                          /s/  Alfred H. Drewes
      ----------------                          ---------------------
                                                Alfred H. Drewes
                                                Senior Vice President and
                                                Chief Financial Officer