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 6, 2003
                                 -----------------

                                       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.
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 4, 2003:
262,777,484


<PAGE>



                         The Pepsi Bottling Group, Inc.
                         ------------------------------
                                      Index
<TABLE>
<CAPTION>

                                                                                                           Page No.
                                                                                                           --------
<S>        <C>                                     <C>                                                         <C>
Part I                Financial Information

        Item 1.       Financial Statements

                      Condensed Consolidated Statements of Operations -
                           12 and 36-weeks ended September 6, 2003 and September 7, 2002                        2

                      Condensed Consolidated Statements of Cash Flows -
                           36-weeks ended September 6, 2003 and September 7, 2002                               3

                      Condensed Consolidated Balance Sheets -
                           September 6, 2003 and December 28, 2002                                              4

                      Notes to Condensed Consolidated Financial Statements                                   5-11

                      Independent Accountants' Review Report                                                   12

        Item 2.       Management's Discussion and Analysis of Financial Condition and
                      Results of Operations                                                                 13-19

        Item 3.       Quantitative and Qualitative Disclosures About Market Risk                               19

        Item 4.       Controls and Procedures                                                                  19

Part II               Other Information

      Item 5.         Other Information                                                                        20

      Item 6.         Exhibits and Reports on Form 8-K                                                         20
</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
                                                                                 6, 2003     7, 2002         6, 2003     7, 2002
                                                                                 -------     -------         -------     -------

<S>                                                                               <C>         <C>             <C>         <C>
 Net revenues..................................................................   $2,810      $2,455          $7,216      $6,436
 Cost of sales.................................................................    1,438       1,337           3,655       3,464
                                                                                  ------      ------          ------      ------

 Gross profit..................................................................    1,372       1,118           3,561       2,972
 Selling, delivery and administrative expenses.................................    1,014         780           2,812       2,228
                                                                                  ------      ------          ------      ------

 Operating income..............................................................      358         338             749         744
 Interest expense, net.........................................................       56          45             166         136
 Other non-operating expenses, net.............................................        2           3               5           3
 Minority interest.............................................................       21          21              41          45
                                                                                  ------      ------          ------      ------

 Income before income taxes....................................................      279         269             537         560
 Income tax expense............................................................       96          91             184         189
                                                                                  ------      ------          ------      ------

 Income before cumulative effect of change in accounting
 principle.....................................................................      183         178             353         371
 Cumulative effect of change in accounting principle, net of
 tax and minority interest.....................................................        -           -               6           -
                                                                                  ------      ------          ------      ------

 Net income....................................................................   $  183      $  178          $  347      $  371
                                                                                  ======      ======          ======      ======

 Basic earnings per share before  cumulative  effect of change
 in accounting principle.......................................................   $ 0.68      $ 0.63          $ 1.29      $ 1.31
 Cumulative effect of change in accounting principle...........................        -           -           (0.02)          -
                                                                                  ------      ------          ------      ------
 Basic earnings per share......................................................   $ 0.68      $ 0.63          $ 1.27      $ 1.31
                                                                                  ======      ======          ======      ======

 Weighted-average shares outstanding...........................................      268         283             273         282

 Diluted  earnings  per  share  before  cumulative  effect  of
 change in accounting principle................................................   $ 0.67      $ 0.61          $ 1.26      $ 1.26
 Cumulative effect of change in accounting principle...........................        -           -           (0.02)          -
                                                                                  ------      ------          ------      ------
 Diluted earnings per share....................................................   $ 0.67      $ 0.61          $ 1.24      $ 1.26
                                                                                  ======      ======          ======      ======

 Weighted-average shares outstanding...........................................      274         294             280         294
</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
                                                                                 6, 2003     7, 2002
                                                                                 -------     -------
Cash Flows - Operations
<S>                                                                                <C>         <C>
 Net income....................................................................    $ 347        $371
 Adjustments to reconcile net income to net cash provided by operations:
   Depreciation................................................................      380         291
   Amortization................................................................        6           5
   Deferred income taxes.......................................................       56          82
   Cumulative effect of change in accounting principle.........................        6           -
   Other non-cash charges and credits, net.....................................      232         168
   Changes in operating working capital, excluding effects of acquisitions:
     Accounts receivable, net..................................................     (324)       (281)
     Inventories, net..........................................................      (52)        (35)
     Prepaid expenses and other current assets.................................      (14)          3
     Accounts payable and other current liabilities............................       44          47
                                                                                   -----       -----
   Net change in operating working capital ....................................     (346)       (266)
                                                                                   -----       -----
   Pension contributions.......................................................      (15)          -
   Other, net..................................................................      (34)        (44)
                                                                                   -----       -----

Net Cash Provided by Operations................................................      632         607
                                                                                   -----       -----

Cash Flows - Investments
 Capital expenditures...........................................................    (428)       (437)
 Acquisitions of bottlers.......................................................     (97)        (34)
 Sale of property, plant and equipment..........................................       5           4
                                                                                   -----       -----

Net Cash Used for Investments...................................................    (520)       (467)
                                                                                   -----       -----

Cash Flows - Financing
 Short-term borrowings - three months or less...................................      30         (76)
 Proceeds from issuance of long-term debt.......................................     247          38
 Payments of long-term debt.....................................................     (13)         (4)
 Dividends paid.................................................................      (8)         (8)
 Proceeds from exercise of stock options........................................      28          84
 Purchases of treasury stock....................................................    (363)       (165)
                                                                                   -----       -----

Net Cash Used for Financing.....................................................     (79)       (131)
                                                                                   -----       -----

Effect of Exchange Rate Changes on Cash and Cash Equivalents....................       1           1
                                                                                   -----       -----
Net Increase in Cash and Cash Equivalents.......................................      34          10
Cash and Cash Equivalents - Beginning of Period.................................     222         277
                                                                                   -----       -----
Cash and Cash Equivalents - End of Period.......................................   $ 256       $ 287
                                                                                   =====       =====
Supplemental Cash Flow Information
Net third-party interest paid...................................................   $ 186       $ 192
                                                                                   =====       =====
Income taxes paid...............................................................   $  65       $  52
                                                                                   =====       =====
</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   December
                                                                                   6, 2003    28, 2002
                                                                                   -------    --------
Assets
<S>                                                                                  <C>         <C>
Current Assets
  Cash and cash equivalents....................................................    $   256     $   222
  Accounts receivable, less allowance of $71 at
        September 6, 2003 and $67 at December 28, 2002.........................      1,264         922
  Inventories..................................................................        428         378
  Prepaid expenses and other current assets....................................        199         203
  Investment in debt defeasance trust..........................................        175          12
                                                                                   -------     -------
          Total Current Assets.................................................      2,322       1,737

Property, plant and equipment, net.............................................      3,371       3,308
Other intangible assets, net...................................................      3,593       3,495
Goodwill.......................................................................      1,227       1,192
Investment in debt defeasance trust............................................          -         170
Other assets...................................................................        148         141
                                                                                   -------     -------
          Total Assets.........................................................    $10,661     $10,043
                                                                                   =======     =======

Liabilities and Shareholders' Equity
Current Liabilities
  Accounts payable and other current liabilities...............................    $ 1,295     $ 1,179
  Short-term borrowings........................................................         83          51
  Current maturities of long-term debt.........................................        693          18
                                                                                   -------     -------
          Total Current Liabilities............................................      2,071       1,248

Long-term debt.................................................................      4,103       4,539
Other liabilities..............................................................        883         819
Deferred income taxes..........................................................      1,333       1,265
Minority interest..............................................................        392         348
                                                                                   -------     -------
          Total Liabilities....................................................      8,782       8,219

Shareholders' Equity
   Common stock, par value $0.01 per share:
        authorized 900 shares, issued 310 shares...............................          3           3
   Additional paid-in capital..................................................      1,748       1,750
   Retained earnings...........................................................      1,404       1,066
   Accumulated other comprehensive loss........................................       (428)       (468)
   Deferred compensation.......................................................         (5)          -
   Treasury stock: 45 shares and 30 shares at September 6, 2003 and
        December 28, 2002, respectively.........................................      (843)       (527)
                                                                                   -------     -------
          Total Shareholders' Equity...........................................      1,879       1,824
                                                                                   -------     -------
           Total Liabilities and Shareholders' Equity..........................    $10,661     $10,043
                                                                                   =======     =======
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements.
                                       -4-

<PAGE>



Notes to Condensed Consolidated Financial Statements
Tabular dollars in millions
--------------------------------------------------------------------------------

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.

     As of September 6, 2003, PepsiCo Inc.'s ("PepsiCo")  ownership consisted of
39.9% of our outstanding common stock and 100% of our outstanding Class B common
stock,  together  representing  45.1% 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 6, 2003,
the Condensed  Consolidated  Statements  of  Operations  for the 12 and 36-weeks
ended  September 6, 2003 and  September 7, 2002 and the  Condensed  Consolidated
Statements of Cash Flows for the 36-weeks ended  September 6, 2003 and September
7, 2002  have not been  audited,  but have  been  prepared  in  conformity  with
accounting  principles  generally  accepted  in the United  States  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 28, 2002 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.

     Beginning in 2003, Russia is no longer considered highly inflationary,  and
as a result, changed its functional currency from the U.S. dollar to the Russian
ruble. There was no material impact on our consolidated  financial statements as
a result of Russia's change in functional currency in 2003.

     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

     Certain reclassifications were made in our Condensed Consolidated Financial
Statements to 2002 amounts to conform to the 2003 presentation.

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>

<TABLE>
<CAPTION>


Note 3 - Inventories
                                                                                  September    December
                                                                                   6, 2003     28, 2002
                                                                                   -------     --------
<S>                                                                                <C>         <C>
Raw materials and supplies.....................................................    $   169     $   162
Finished goods.................................................................        259         216
                                                                                   -------     -------
                                                                                   $   428     $   378
                                                                                   =======     =======

Note 4 - Property, plant and equipment, net
                                                                                  September    December
                                                                                   6, 2003     28, 2002
                                                                                   -------     --------
Land...........................................................................    $   236     $   228
Buildings and improvements.....................................................      1,148       1,126
Manufacturing and distribution equipment.......................................      2,919       2,768
Marketing equipment............................................................      2,104       2,008
Other..........................................................................        175         154
                                                                                   -------     -------
                                                                                     6,582       6,284
Accumulated depreciation.......................................................     (3,211)     (2,976)
                                                                                   -------     -------
                                                                                   $ 3,371     $ 3,308
                                                                                   =======     =======

Note 5 - Other intangible assets, net and Goodwill
                                                                                  September    December
                                                                                   6, 2003     28, 2002
                                                                                   -------     --------
Intangibles subject to amortization:
   Gross carrying amount:
     Franchise rights..........................................................    $    23     $    20
     Other identifiable intangibles............................................         25          24
                                                                                   -------     -------
                                                                                        48          44
                                                                                   -------     -------
   Accumulated amortization:
     Franchise rights..........................................................         (8)         (6)
     Other identifiable intangibles............................................        (13)         (9)
                                                                                   -------     -------
                                                                                       (21)        (15)
                                                                                   -------     -------
Intangibles subject to amortization, net.......................................         27          29
                                                                                   -------     -------

Intangibles not subject to amortization:
   Carrying amount:
     Franchise rights..........................................................      3,524       3,424
     Other identifiable intangibles............................................         42          42
                                                                                   -------     -------
Intangibles not subject to amortization........................................      3,566       3,466
                                                                                   -------     -------
Total other intangible assets, net.............................................    $ 3,593     $ 3,495
                                                                                   =======     =======

Goodwill.......................................................................    $ 1,227     $ 1,192
                                                                                   =======     =======
</TABLE>

     Total other intangible  assets, net and goodwill increased by approximately
$133  million  due  to  purchase  price  allocations   relating  to  our  recent
acquisitions  of $120  million,  coupled with the impact from  foreign  currency
translation of $19 million,  offset by amortization  of intangible  assets of $6
million.

     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 $6 million  and $5  million  for the
36-weeks  ended  September  6, 2003 and  September  7, 2002,  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:

                                     - 6 -

<PAGE>

<TABLE>
<CAPTION>

                                       Weighted-Average   Estimated Aggregate Amortization Expense to be Incurred
                                       ----------------   -------------------------------------------------------
                                        Amortization
                                        ------------
                                           Period
                                           ------
                                                          Balance of             Fiscal Year Ending
                                                          ----------     ---------------------------------
                                                            2003         2004      2005      2006     2007
                                                            ----         ----      ----      ----     ----
<S>                                        <C>              <C>           <C>       <C>       <C>      <C>
Franchise rights.........................  5 years          $1            $5        $4        $2       $1
Other identifiable intangibles...........  7 years          $1            $4        $3        $2       $1
</TABLE>

Note 6 - Acquisitions

     During 2003 we acquired the operations and exclusive  right to manufacture,
sell and distribute  Pepsi-Cola beverages from three PepsiCo franchise bottlers.
The  following  acquisitions  occurred  for an aggregate  purchase  price of $91
million in cash and liabilities of $12 million:

   o   Pepsi-Cola Buffalo Bottling Corp. of Buffalo, New York in February 2003
   o   Cassidy's Beverage Limited of New Brunswick, Canada in February 2003
   o   Olean Bottling Works, Inc. of Olean, New York in August 2003

     These  acquisitions were made to enable us to provide better service to our
large retail  customers.  We expect these  acquisitions  to reduce costs through
economies of scale.

     As a result of these  acquisitions,  we have  assigned  $80  million of the
purchase  price to  intangible  assets,  of which $15  million  was  assigned to
goodwill and $65 million to franchise rights.  The goodwill and franchise rights
are not subject to amortization. The allocations of the purchase price for these
acquisitions are still preliminary and will be determined based on the estimated
fair  value of  assets  acquired  and  liabilities  assumed  as of the  dates of
acquisitions.

     In addition,  we made  purchase  price  allocations  of  approximately  $40
million  during  the first  36-weeks  of 2003,  primarily  relating  to our 2002
acquisition of Pepsi-Gemex,  S.A. de C.V. of Mexico ("Gemex"). The allocation of
the purchase  price of Gemex is still  preliminary,  pending final  valuation of
certain assets. We will be finalizing the purchase price allocation for Gemex in
the fourth quarter of 2003.

     During 2003, we paid  approximately  $3 million to PepsiCo for distribution
rights relating to the SoBe brand in certain PBG-owned territories in the United
States,  which are being  amortized  over their  estimated  useful  life of five
years.  In  addition,  we paid $3 million for purchase  obligations  relating to
acquisitions made in the prior year.

Note 7 - Treasury Stock

     In the first 36-weeks of 2003 and 2002, we repurchased  approximately  17.2
million  shares for $363 million and  approximately  6.4 million shares for $165
million,  respectively.  During the second  quarter,  we completed  our original
share  repurchase  program of 50 million shares of common stock.  PBG's Board of
Directors  announced  a new share  repurchase  program at the  Company's  Annual
Meeting in May 2003,  under which 25 million  additional  shares of common stock
may be repurchased.  Approximately  7.6 million shares have been  repurchased to
date under the new program.

                                     - 7 -

<PAGE>

Note 8 - 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
                                                         6, 2003         7, 2002        6, 2003       7, 2002
                                                         -------         -------        ------        -------
<S>                                                      <C>             <C>           <C>           <C>
U.S................................................      $ 1,929         $ 1,961       $ 5,222       $ 5,406
Mexico.............................................          298               -           763             -
Other countries....................................          583             494         1,231         1,030
                                                         -------         -------       -------       -------
                                                         $ 2,810         $ 2,455       $ 7,216       $ 6,436
                                                         =======         =======       =======       =======

Long-Lived Assets                                       September       December
-----------------                                        6, 2003        28, 2002
                                                         -------        --------
U.S................................................      $ 5,691         $ 5,593
Mexico.............................................        1,368           1,586
Other countries....................................        1,280           1,127
                                                         -------         -------
                                                         $ 8,339         $ 8,306
                                                         =======         =======
</TABLE>


Note 9 - Stock-Based Compensation

     During 2002,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 148  "Accounting for
Stock-Based   Compensation-Transition  and  Disclosure,  an  Amendment  of  FASB
Statement  No.  123,"  which  provides  alternative  methods of  accounting  for
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  based upon the fair value of the PBG stock on
the date of grant.  As allowed by SFAS No. 148,  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.  If we had  measured
compensation cost for the stock-based  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:

<TABLE>
<CAPTION>

                                                                          12-weeks Ended             36-weeks Ended
                                                                          --------------             --------------
                                                                    September      September     September      September
                                                                     6, 2003        7, 2002       6, 2003        7, 2002
                                                                     -------        -------       -------        -------
Net income:
<S>                                                                   <C>            <C>           <C>            <C>
As reported.....................................................      $  183         $  178        $  347         $  371
Add:  Total stock-based employee compensation expense
      included in reported net income, net of taxes and
      minority interest.........................................           -              -             2              -
Less: Total stock-based employee compensation expense
      under fair value-based method for all awards,
      net of taxes and minority interest........................         (12)            (9)          (32)           (31)
                                                                      ------         ------        ------         ------
Pro forma.......................................................      $  171         $  169        $  317         $  340
                                                                      ======         ======        ======         ======

Earnings per share:
   Basic - as reported..........................................      $ 0.68         $ 0.63        $ 1.27         $ 1.31
   Basic - pro forma............................................        0.64           0.60          1.16           1.21
   Diluted - as reported........................................      $ 0.67         $ 0.61        $ 1.24         $ 1.26
   Diluted - pro forma..........................................        0.63           0.58          1.14           1.16
</TABLE>

                                     - 8 -

<PAGE>



     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.

     In the first quarter of 2003, we issued  restricted stock awards to certain
key members of senior management,  which vest over periods ranging from three to
five years from the date of grant. These restricted stock awards are earned only
if the Company achieves certain  performance  targets over a three-year  period.
These  restricted  share awards are considered  variable  awards pursuant to APB
Opinion  No.  25,  which  requires  the  related   compensation  expense  to  be
re-measured each period until the performance  targets are met and the amount of
the awards becomes fixed. When the restricted stock award was granted,  deferred
compensation  of  approximately  $6  million  was  recorded  as a  reduction  to
shareholders'  equity,  and such amount will be adjusted quarterly and amortized
on a straight-line  basis over the vesting periods. As of September 6, 2003, the
deferred  compensation  balance  remaining to be amortized is  approximately  $5
million.

Note 10 - New Accounting Standards

     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. In the prior year 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. We have
recorded  a  transition  adjustment  of $6  million,  net of taxes and  minority
interest of $1 million,  for the cumulative  effect on prior years, in the first
quarter of 2003. This adjustment  reflects the amount of bottler incentives that
can be attributed to our 2003  beginning  inventory  balances.  This  accounting
change did not have a material effect on our income before  cumulative effect of
change in accounting  principle in the third quarter and first  36-weeks of 2003
and is not expected to have a material effect on such amounts for the balance of
fiscal  2003.  Assuming  that  EITF  Issue  No.  02-16 had been in place for all
periods  presented,  the following pro forma adjustments would have been made to
our reported results for the 12 and 36-weeks ended September 7, 2002:

<TABLE>
<CAPTION>

                                                                           12-weeks Ended September 7, 2002
                                                                           ---------------------------------
                                                                       As              EITF 02-16       Pro Forma
                                                                    Reported           Adjustment        Results
                                                                    --------           ----------        -------
<S>                                                                  <C>                <C>               <C>
Net revenues................................................         $2,455             $ (72)            $2,383
Cost of sales...............................................          1,337              (125)             1,212
Selling, delivery and administrative expenses...............            780                53                833
                                                                     ------             -----             ------
Operating income............................................         $  338             $   -             $  338
                                                                     ======             =====             ======


                                                                           36-weeks Ended September 7, 2002
                                                                           --------------------------------
                                                                       As              EITF 02-16       Pro Forma
                                                                    Reported           Adjustment        Results
                                                                    --------           ----------        -------
Net revenues................................................         $6,436            $ (202)            $6,234
Cost of sales...............................................          3,464              (339)             3,125
Selling, delivery and administrative expenses...............          2,228               139              2,367
                                                                     ------            ------             ------
Operating income............................................         $  744            $   (2)            $  742
                                                                     ======             =====              =====
</TABLE>

                                   - 9 -
<PAGE>



     Assuming  EITF Issue No. 02-16 had been adopted for all periods  presented,
pro forma net  income  and  earnings  per  share for the 12 and  36-weeks  ended
September 6, 2003 and September 7, 2002, would have been as follows:

<TABLE>
<CAPTION>

                                                               12-weeks Ended              36-weeks Ended
                                                               --------------              --------------
                                                           September    September     September     September
                                                            6, 2003      7, 2002       6, 2003       7, 2002
                                                            -------      -------       -------       -------
     Net income:
<S>                                                          <C>           <C>          <C>           <C>
       As reported....................................       $  183        $ 178        $  347        $  371
       Pro forma......................................          183          178           353           370

     Earnings per share:
       Basic - as reported............................       $ 0.68       $ 0.63        $ 1.27        $ 1.31
       Basic - pro forma..............................         0.68         0.63          1.29          1.31

       Diluted - as reported..........................       $ 0.67       $ 0.61        $ 1.24        $ 1.26
       Diluted - pro forma............................         0.67         0.61          1.26          1.26
</TABLE>

     During 2003,  the FASB issued SFAS No. 149,  "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  149  amends  and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred to as derivatives) and for hedging activities under SFAS
No. 133,  "Accounting for Derivative  Instruments and Hedging  Activities." This
statement is effective  for  contracts  entered into or modified  after June 30,
2003.  The  adoption  of SFAS No.  149 did not  have a  material  impact  on our
Condensed Consolidated Financial Statements.

     During 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with  Exit or  Disposal  Activities."  SFAS  No.  146 is  effective  for exit or
disposal activities  initiated after December 31, 2002. The adoption of SFAS No.
146 did not have a  material  impact  on our  Condensed  Consolidated  Financial
Statements.

     In  November  2002,  the FASB  issued  Interpretation  No.  45 ("FIN  45"),
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of  Others,  an  interpretation  of FASB
Statements  No. 5, 57, and 107 and  Rescission of FASB  Interpretation  No. 34,"
which  addresses  the  disclosures  to be made by a guarantor in its interim and
annual financial statements about its obligations under guarantees.  FIN 45 also
requires  the  recognition  of a liability  by a guarantor  at the  inception of
certain  guarantees  that are entered into or modified  after December 31, 2002.
The  adoption  of  FIN 45  did  not  have a  material  impact  on our  Condensed
Consolidated Financial Statements.

     In  January  2003,  the FASB  issued  Interpretation  No.  46  ("FIN  46"),
"Consolidation  of Variable  Interest Entities an Interpretation of ARB No. 51,"
which  addresses  consolidation  by business  enterprises  of variable  interest
entities that either:  (1) do not have sufficient  equity  investment at risk to
permit the entity to finance  its  activities  without  additional  subordinated
financial support, or (2) the equity investors lack an essential  characteristic
of a  controlling  financial  interest.  The  adoption  of FIN 46 did not have a
material impact on our Condensed Consolidated Financial Statements.

                                     - 10 -

<PAGE>



Note 11 - Short-term Borrowings and Long-term Debt

     We intend to refinance  all or a portion of our $1 billion of 5 3/8% senior
notes upon their maturity in February 2004.

     During the second  quarter,  Bottling  Group,  LLC issued  $250  million of
Series B Senior  Notes with a coupon rate of 4 1/8%,  which has a yield of 4.4%,
maturing on June 15, 2015.  These notes are general  unsecured  obligations  and
rank on an  equal  basis  with  all of our  other  existing  and  future  senior
unsecured  indebtedness  and  rank  senior  to all of our  existing  and  future
subordinated  indebtedness.  These  senior  notes have  redemption  features and
covenants similar to our other senior notes.

     PBG has a $500 million  commercial  paper  program that is supported by two
$250 million credit  facilities,  which are guaranteed by Bottling  Group,  LLC.
During the second quarter,  PBG renegotiated the credit  facilities.  One of the
credit facilities expires in April 2004 and the other credit facility expires in
April 2008.

     During the third quarter,  Bottling Group,  LLC filed a shelf  registration
statement  with the  Securities  and  Exchange  Commission  (the "SEC") that was
declared  effective  by the SEC on September  5, 2003.  Under this  registration
statement  we may issue,  in one or more  offerings,  up to $1 billion in senior
notes.  On October 7, 2003,  we  completed  the  offering of $500 million of our
2.45%  senior notes due on October 16, 2006  pursuant to the shelf  registration
statement.  We  intend  to use the  net  proceeds  from  this  offering  for the
repayment at maturity of a portion of our $1 billion  principal amount of 5 3/8%
senior notes due in February 2004 ("February 2004 Senior Notes") and as such, we
have  reclassified  $500 million of the February  2004 Senior Notes from current
maturities of long-term  debt to long-term  debt in our  Condensed  Consolidated
Balance Sheets as of September 6, 2003.  Pending such use, the net proceeds will
be invested in short-term  instruments with an original maturity of three months
or less.

Note 12 - Comprehensive Income
<TABLE>
<CAPTION>

                                                                 12-weeks Ended            36-weeks Ended
                                                                 --------------            --------------
                                                           September    September     September     September
                                                            6, 2003      7, 2002       6, 2003       7, 2002
                                                            -------      -------       -------       -------
<S>                                                            <C>         <C>            <C>          <C>
Net income..................................................  $ 183        $ 178         $ 347         $ 371
Currency translation adjustment.............................   (112)           4            30            31
Cash flow hedge adjustment (a) (b)..........................      2          (17)            9            (1)
                                                               ----        -----          ----          ----
Comprehensive income........................................  $  73        $ 165         $ 386         $ 401
                                                              =====        =====         =====         =====
</TABLE>

(a)  Net of minority  interest  and taxes of $1 and $12 for the  12-weeks  ended
     September 6, 2003 and September 7, 2002, respectively.
(b)  Net of  minority  interest  and taxes of $7 and $1 for the  36-weeks  ended
     September 6, 2003 and September 7, 2002, respectively.

Note 13 - 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 expected
to have a  material  adverse  effect on our  results  of  operations,  financial
condition or liquidity.

                                     - 11 -

<PAGE>



                     Independent Accountants' Review Report

The Board of Directors and Shareholders
The Pepsi Bottling Group, Inc.:

We have reviewed the accompanying  condensed  consolidated  balance sheet of The
Pepsi Bottling  Group,  Inc. as of September 6, 2003, and the related  condensed
consolidated  statements of operations for the twelve and thirty-six weeks ended
September  6,  2003  and  September  7,  2002  and  the  condensed  consolidated
statements of cash flows for the  thirty-six  weeks ended  September 6, 2003 and
September 7, 2002.  These condensed  consolidated  financial  statements are the
responsibility of the Company'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  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 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 accounting  principles  generally  accepted in the
United States of America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United States of America,  the consolidated balance sheet of The
Pepsi Bottling Group, Inc. as of December 28, 2002, and the related consolidated
statements of operations,  changes in shareholders'  equity,  and cash flows for
the  fifty-two  week period then ended not presented  herein;  and in our report
dated  January  28,  2003,  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 28, 2002,
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 30, 2003, except as to Note 11, which is as of October 7, 2003

                                     - 12 -

<PAGE>



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


OVERVIEW
--------
     The Pepsi  Bottling  Group,  Inc.  ("PBG" or the  "Company") is the world's
largest manufacturer,  seller and distributor of Pepsi-Cola beverages. 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.  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. In the third quarter of 2003,
approximately  69% of our net revenues were generated in the United States,  10%
of our net  revenues  were  generated  in  Mexico  and the  remaining  21%  were
generated outside the United States and Mexico.  For the first 36-weeks of 2003,
approximately  72% of our net revenues were generated in the United States,  11%
of our net  revenues  were  generated  in  Mexico  and the  remaining  17%  were
generated outside the United States and Mexico.


ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY
----------------------------------------------------
Gemex Acquisition
-----------------
     In November  2002,  we acquired  all of the  outstanding  capital  stock of
Pepsi-Gemex,  S.A.  de C.V.  of Mexico  ("Gemex").  Our total  acquisition  cost
consisted   of  a  net  cash  payment  of  $871  million  and  assumed  debt  of
approximately  $305  million.  The  Gemex  acquisition  was  made to allow us to
increase our markets outside the United States. Gemex was the largest Pepsi-Cola
bottler  in  Mexico  and the  largest  bottler  outside  the  United  States  of
Pepsi-Cola soft drink products based on sales volume.  Gemex produced,  sold and
distributed a variety of soft drink products under the PEPSI-COLA,  PEPSI LIGHT,
PEPSI  MAX,  MIRINDA,  7 UP,  DIET 7 UP,  KAS,  MOUNTAIN  DEW,  POWER  PUNCH and
MANZANITA SOL trademarks,  under exclusive  franchise and bottling  arrangements
with  PepsiCo  and  certain  affiliates  of  PepsiCo.  Gemex  also had rights to
produce,  sell and distribute in Mexico soft drink  products of other  companies
and it produced, sold and distributed purified and mineral water in Mexico under
the trademarks  ELECTROPURA and GARCI CRESPO,  respectively.  As a result of the
acquisition of Gemex, we own the ELECTROPURA and GARCI CRESPO brands.

New Accounting Standards
------------------------
     See  Note  10 -  New  Accounting  Standards,  in  our  Notes  to  Condensed
Consolidated  Financial Statements,  for a detailed discussion of new accounting
standards that were adopted in 2003.

RESULTS OF OPERATIONS
----------------------
Volume


                                                     Worldwide
                                                     ---------
                                                   Volume Drivers
                                                   --------------
                                       12-weeks Ended         36-weeks Ended
                                       --------------         --------------
                                    September 6, 2003 vs.  September 6, 2003 vs.
                                    ---------------------  ---------------------
                                     September 7, 2002       September 7, 2002
                                     -----------------       -----------------
Acquisitions.......................        21 %                     23  %
Base business......................         1 %                     (1) %
                                           ----                     -----
  Total Worldwide Change...........        22 %                     22  %
                                           ====                     =====

     Our reported worldwide physical case volume increased 22% in both the third
quarter and first 36-weeks of 2003,  when compared with similar periods of 2002.
The increase in reported

                                     - 13 -

<PAGE>



worldwide  volume  was  driven by our  acquisitions.  Our  acquisition  of Gemex
contributed over 95% and 90% of the growth  resulting from  acquisitions for the
third quarter and first 36-weeks of 2003,respectively.  Our base business volume
(base business  reflects  territories  that we owned and operated for comparable
periods in both the current year and the prior year)  increased 1% for the third
quarter and  decreased 1% for the first  36-weeks of 2003,  when  compared  with
similar periods of 2002.

     In the U.S.,  our reported  volume  increased by 1% in the third quarter of
2003 and  decreased by 1% for the first  36-weeks of 2003,  when  compared  with
similar  periods of 2002.  On a  quarter-to-date  basis,  the  increase  in U.S.
reported  volume was driven by  incremental  volume from  acquisitions.  For the
quarter,  our U.S. base business volume was flat versus the comparable period in
the prior year, resulting from improvement in large and small format segments in
our take home  business  offset by  declines  in our cold drink  business.  On a
year-to-date basis, the decrease in U.S. reported volume was driven primarily by
the  overlap  of  innovation  in the first  half of last year and a soft  retail
environment,  partially offset by incremental volume from  acquisitions.  From a
brand  perspective in the U.S.,  brand PEPSI  declines were partially  offset by
strong growth in AQUAFINA and incremental lemon-lime volume, led by SIERRA MIST,
coupled  with  product  introductions  such as PEPSI  VANILLA and  MOUNTAIN  DEW
LIVEWIRE.

     Outside the U.S., reported volume increased by 77% and 102%,  respectively,
in the third quarter and the first 36-weeks of 2003,  when compared with similar
periods of 2002.  The  increase  in volume  was driven by our Gemex  acquisition
coupled with increases in our base business of 4% and 3%, respectively,  for the
quarter  and on a  year-to-date  basis.  The  increase in base  business  volume
outside  the U.S.  was driven by strong  growth in Spain,  coupled  with a solid
performance in Russia, resulting from the launch of PEPSI X and LIPTON ICE TEA.

Net Revenues

                                                     Worldwide
                                                     ---------
                                                    Net Revenues
                                                    ------------
                                                      Drivers
                                                      -------
                                      12-weeks Ended         36-weeks Ended
                                      --------------         --------------
                                   September 6, 2003 vs.   September 6, 2003 vs.
                                   ---------------------   ---------------------
                                     September 7, 2002       September 7, 2002
                                     -----------------       -----------------
Acquisitions.......................         13  %                 13  %
                                           ------                -------
Base business:
  EITF Issue No. 02-16 impact......         (3) %                 (3) %
  Volume impact....................          1  %                 (1) %
  Currency translation.............          2  %                  2  %
  Rate / mix impact................          1  %                  1  %
                                           ------               ------
Base business change...............          1  %                 (1) %
                                           ------                ------

Total Worldwide Change.............         14  %                 12  %
                                           ======                ======

     Net revenues  were $2.8 billion for the third  quarter and $7.2 billion for
the first 36-weeks in 2003, a 14% and 12% increase over similar periods in 2002,
respectively.  The  increase  in  net  revenues  was  driven  primarily  by  our
acquisition of Gemex, which contributed over 90% and 85% of the growth resulting
from   acquisitions   for  the  third  quarter  and  first   36-weeks  of  2003,
respectively.  Our base  business net revenues  increased 1% for the quarter and
decreased 1% for the first 36-weeks of 2003,  when compared with similar periods
in 2002. For the quarter, base business net revenues were positively impacted by
improved net rate and mix, favorable currency translations and volume increases,
partially offset by the  reclassification of certain bottler incentives from net
revenues to cost of sales  resulting  from the adoption of Emerging  Issues Task
Force ("EITF") Issue No. 02-16, "Accounting by a Customer (Including a Reseller)
for Certain Consideration Received from a Vendor," at the beginning of 2003 (See
Note 10 to the Condensed  Consolidated  Financial Statements for a more detailed
description of the newly adopted accounting

                                     - 14 -

<PAGE>



standard).  On a  year-to-date  basis,  the  decrease in our base  business  net
revenues was driven by the adoption of EITF Issue No. 02-16 and volume declines,
partially  offset by an increase in the net impact of rate and mix and favorable
foreign currency translations.

     In the U.S.,  net revenues  decreased 2% in the third quarter and 3% in the
first 36-weeks of 2003,  when compared with the similar periods of 2002. For the
quarter, the decrease in net revenues in the U.S. is due primarily to the impact
of adopting  EITF Issue No.  02-16,  partially  offset by an increase in the net
impact  of  rate  and  mix  and  incremental  revenue  from  acquisitions.  On a
year-to-date basis, net revenues in the U.S. decreased primarily from the impact
of adopting  EITF Issue No. 02-16 and volume  declines,  partially  offset by an
increase  in the net  impact  of  rate  and mix  and  incremental  revenue  from
acquisitions.  For both the third quarter and on a year-to-date  basis,  our net
rate  and  mix  impact   reflects  an  approximate  2%  price  increase  in  the
marketplace,  partially  offset by a negative mix impact of 1%,  resulting  from
declines in cold drink volume.

     Net revenues outside the U.S. grew  approximately  78% in the third quarter
and 94% for the first 36-weeks of 2003 when compared with the similar periods of
2002.  For both the third quarter and the first  36-weeks of 2003, the increases
were driven by our Gemex  acquisition  and increases in our base  business.  The
increases in our base business net revenues outside the U.S. for the quarter and
on  a  year-to-date   basis  was  the  result  of  favorable   foreign  currency
translations,   increases  in  the  net  impact  of  rate  and  mix  and  volume
performance,  partially  offset by a decline due to the impact of adopting  EITF
Issue No. 02-16.

     For the full year,  worldwide  net revenues are expected to increase in the
low double  digits as a  percentage  of growth  versus the prior year,  with the
majority of the increase  resulting  from our Gemex  acquisition.  Worldwide net
revenue per case is expected  to be down in the mid to high  single-digits  as a
percentage  of growth for the full year of 2003,  as  compared  with the similar
period in 2002. The decline in our worldwide net revenue per case will be driven
by country  mix as a result of our Gemex  acquisition  and the  adoption of EITF
Issue No.  02-16.  Net revenue per case  results in the U.S.  are expected to be
down two percent for the full year of 2003 versus the comparable  period in 2002
reflecting the adoption of EITF Issue No. 02-16.  We expect U.S.  pricing in the
marketplace  to continue to be solid,  up about two percent for the full year of
2003.  For the fourth  quarter of 2003 in the U.S., we expect a  combination  of
pricing and mix to be up two percent,  with net revenue per case down one to two
percent  versus the comparable  period in 2002,  reflecting the adoption of EITF
Issue No. 02-16.

Cost of Sales

                                                     Worldwide
                                                     ---------
                                                    Cost of Sales
                                                    ------------
                                                      Drivers
                                                      -------
                                       12-weeks Ended        36-weeks Ended
                                       --------------        --------------
                                    September 6, 2003 vs.  September 6, 2003 vs.
                                    ---------------------  ---------------------
                                      September 7, 2002      September 7, 2002
                                      -----------------      -----------------
Acquisitions.......................         12  %                12  %
                                           ------               -------
Base business:
  EITF Issue No. 02-16 impact......        (10) %               (10) %
  Cost per case impact.............          3  %                 3  %
  Volume impact....................          1  %                (1) %
  Currency translation.............          2  %                 2  %
                                           ------               ------
Base business change...............         (4) %                (6) %
                                           ------               ------

Total Worldwide Change.............          8  %                 6  %
                                           ======               ======

     Cost of sales was $1.4  billion in the third  quarter and $3.7  billion for
the first 36-weeks of 2003, an 8% and 6% increase over similar  periods in 2002,
respectively.  The  increase  in cost  of  sales  was  driven  primarily  by our
acquisition of Gemex, which contributed over 90% and 80% of the growth resulting
from acquisitions in the third quarter and the first 36-weeks of 2003,

                                     - 15 -

<PAGE>



respectively,  partially  offset by declines in our base business costs. For the
quarter,   base   business   cost  of  sales   declined  due  primarily  to  the
reclassification  of certain  bottler  incentives from net revenues and selling,
delivery  and  administrative  expenses  to cost of  sales  resulting  from  the
adoption of EITF Issue No. 02-16, partially offset by increases in cost per case
and  volume  and the  negative  impact of foreign  currency  translations.  On a
year-to-date  basis,  base business cost of sales decreased due primarily to the
impact of adopting EITF Issue No. 02-16 and volume declines, partially offset by
cost per case increases and the negative impact of foreign currency translation.

     In the U.S., cost of sales decreased 5% in the third quarter and 7% for the
first 36-weeks of 2003,  when compared with the similar periods of 2002. For the
quarter,  the  decrease  in our U.S.  cost of sales was  driven by the impact of
adopting EITF Issue No. 02-16,  partially  offset by cost per case increases and
incremental costs from acquisitions.  On year-to-date basis, the decrease in our
U.S. cost of sales was driven by the impact of adopting EITF Issue No. 02-16 and
volume  declines,  partially  offset by cost per case increases and  incremental
costs from  acquisitions.  In the U.S.,  cost per case increased 3% for both the
third quarter and on a year-to-date  basis,  resulting  from higher  concentrate
costs and the mix of products we sell.

     Cost of sales outside the U.S. grew  approximately 54% in the third quarter
and 66% for the first 36-weeks of 2003,  when compared with the similar  periods
of 2002. The increases in cost of sales outside the U.S., for the quarter and on
a  year-to-date  basis,  were  driven by our Gemex  acquisition,  the  impact of
foreign  currency  translation,  and increases in both cost per case and volume,
partially offset by a reduction resulting from the impact of adopting EITF Issue
No. 02-16.

     For the balance of the year,  we expect our cost of sales to grow at a rate
similar to that  experienced  during the first  three-quarters  of the year. The
expected  growth  in our cost of sales  will be  driven  primarily  by our Gemex
acquisition  and cost per case  increases in the U.S.,  partially  offset by the
adoption of EITF Issue No. 02-16.

Selling, Delivery and Administrative Expenses

                                                     Worldwide
                                                     ---------
                                                    SD&A Drivers
                                                    ------------
                                      12-weeks Ended         36-weeks Ended
                                      --------------         --------------
                                   September 6, 2003 vs.   September 6, 2003 vs.
                                   ---------------------   ---------------------
                                     September 7, 2002      September 7, 2002
                                     -----------------       -----------------
Acquisitions.......................         16  %                 17  %
                                           ------                -------
Base business:
  EITF Issue No. 02-16 impact......          8  %                  6  %
  Currency translation.............          3  %                  2  %
  Cost performance.................          3  %                  1  %
                                           ------                ------
Base business change...............         14  %                  9  %
                                           ------                ------

Total Worldwide Change.............         30  %                 26  %
                                           ======                ======

     Selling,  delivery  and  administrative  expenses  were $1.0 billion in the
third  quarter and $2.8  billion for the first  36-weeks of 2003,  a 30% and 26%
increase over similar  periods in 2002,  respectively.  The increase in selling,
delivery and administrative  expenses was driven primarily by our acquisition of
Gemex and increases in our base business costs.  Gemex  contributed over 95% and
90% of the growth  resulting from  acquisitions  for the third quarter and first
36-weeks of 2003, respectively. Increases in our base business selling, delivery
and  administrative  expenses in both the third  quarter  and first  36-weeks of
2003, were driven by the  reclassification  of certain  bottler  incentives from
selling,  delivery and  administrative  expenses to cost of sales resulting from
the  adoption  of EITF  Issue No.  02-16,  coupled  with the  impact of  foreign
currency  translation  and  incremental  costs  in the base  business.  Our base
business  cost  performance  increased  3% and 1%,  respectively,  in the  third
quarter and on a  year-to-date  basis,  driven  largely by increases in pension,
benefit and casualty  costs,  partially  offset by reductions in labor and other
costs.

                                     - 16 -

<PAGE>



     For the balance of the year,  we expect the rate of growth of our  selling,
delivery and  administrative  expenses to be similar to that experienced  during
the first three quarters of the year.  Expected  increases in selling,  delivery
and  administrative   expenses  will  be  driven   predominantly  by  our  Gemex
acquisition and the adoption of EITF Issue No. 02-16.



Operating Income

                                                     Worldwide
                                                     ---------
                                                  Operating Income
                                                  ----------------
                                                      Drivers
                                                      -------
                                      12-weeks Ended         36-weeks Ended
                                      --------------         --------------
                                   September 6, 2003 vs.   September 6, 2003 vs.
                                   ---------------------   ---------------------
                                     September 7, 2002       September 7, 2002
                                     -----------------       -----------------
Acquisitions.......................           10  %                   8  %
                                             ------                ------
Base business:
  Volume impact....................            2  %                  (6) %
  Rate/mix impact..................           14  %                  14  %
  Cost of sales per case impact....          (14) %                 (14) %
  SD&A impact......................           (8)                    (2) %
  Currency translation.............            2  %                   1  %
                                            ------                 ------
Base business change...............           (4) %                  (7) %
                                            ------                 ------

Total Worldwide Change.............            6  %                   1  %
                                           =======                 ======

     Operating income was $358 million in the third quarter and $749 million for
the first 36-weeks of 2003, a 6% and 1% respective increase over similar periods
in 2002. The increase in operating  income for the quarter and on a year-to-date
basis was driven  primarily  by our  acquisition  of Gemex  partially  offset by
decreases in our base business.  On a  quarter-to-date  basis, our base business
operating  income  decreased  primarily  from higher product costs and increased
costs  associated  with  our  selling,  delivery  and  administrative  expenses,
partially  offset by rate increases in the U.S.  marketplace,  volume growth and
the favorable impact of foreign currency translations.  On a year-to-date basis,
our base business  operating  income  decreased  primarily  from higher  product
costs, volume declines and increased costs associated with our selling, delivery
and  administrative  expenses,  partially  offset by rate  increases in the U.S.
marketplace and the favorable impact of foreign currency translations.

     For the full year we expect operating profit to grow  approximately  7%, as
compared with the prior-year periods. Expected increases in operating income for
the full  year of 2003  will be  driven  by  improving  trends  in the U.S.  and
contributions from our Gemex acquisition.

Interest Expense, net

     Interest   expense,   net   increased  by  $11  million  and  $30  million,
respectively, in the third quarter and the first 36-weeks of 2003, when compared
with similar periods of 2002, largely due to the additional  interest associated
with the $1 billion 4 5/8% senior notes used to finance our acquisition of Gemex
in November 2002,  partially offset by the favorable impact of the interest rate
swaps on $1.3 billion of our fixed rate long-term debt.

Income Tax Expense

     PBG's estimated full year effective tax rate for 2003 is 34.3%,  before the
cumulative effect of change in accounting principle, and has been applied to our
third quarter 2003 results.  Our effective tax rate in the third quarter of 2002
was 33.8%. The slight increase in the effective tax rate is primarily due to the
unfavorable mix in anticipated  pre-tax income in jurisdictions  with higher tax
rates.


                                     - 17 -

<PAGE>



Liquidity and Capital Resources
-------------------------------
Cash Flows

     Net cash  provided by  operations  increased by $25 million to $632 million
for the first  36-weeks of 2003,  when compared with the similar period in 2002,
reflecting an increase in the mix of non-cash expenses, such as depreciation and
long-term  benefit  costs,  partially  offset by the  increased use of cash from
working capital, principally from the timing of payments, coupled with a decline
in net income.

     Net cash used for investments  increased by $53 million to $520 million for
the first  36-weeks of 2003,  when  compared  with the  similar  period in 2002,
reflecting higher acquisition spending,  partially offset by declines in capital
expenditures.

     Net cash used for financing decreased by $52 million for the first 36-weeks
of 2003 when compared with the similar period in 2002, driven by the issuance of
$250  million  in  long-term  debt  and  other  short-term  borrowing  activity,
partially offset by higher share repurchases and lower stock option exercises.

     For the full year in 2003,  we  expect  to  achieve  net cash  provided  by
operations of over $1.0 billion. In addition,  we expect capital expenditures to
be approximately $675 million for the full year in 2003.

Short-term Borrowings and Long-term Debt

     We intend to refinance  all or a portion of our $1 billion of 5 3/8% senior
notes upon their maturity in February 2004. We are currently in compliance  with
all debt covenants in our indenture agreements.

     During the second quarter Bottling Group, LLC issued $250 million of Series
B  Senior  Notes  with a  coupon  rate of 4 1/8%,  which  have a yield  of 4.4%,
maturing on June 15, 2015.  These notes are general  unsecured  obligations  and
rank on an  equal  basis  with  all of our  other  existing  and  future  senior
unsecured  indebtedness  and  rank  senior  to all of our  existing  and  future
subordinated  indebtedness.  These  senior  notes have  redemption  features and
covenants similar to our other senior notes.

     PBG has a $500 million  commercial  paper  program that is supported by two
$250 million credit facilities.  During the second quarter, PBG renegotiated the
credit  facilities.  One of the credit facilities  expires in April 2004 and the
other  credit  facility  expires  in April  2008.  Both  credit  facilities  are
guaranteed by Bottling Group, LLC.

     During the third quarter,  Bottling Group,  LLC filed a shelf  registration
statement  with the  Securities  and  Exchange  Commission  (the "SEC") that was
declared  effective  by the SEC on September  5, 2003.  Under this  registration
statement  we may issue,  in one or more  offerings,  up to $1 billion in senior
notes.  On October 7, 2003,  we  completed  the  offering of $500 million of our
2.45%  senior notes due on October 16, 2006  pursuant to the shelf  registration
statement.  We  intend  to use the  net  proceeds  from  this  offering  for the
repayment at maturity of a portion of our $1 billion  principal amount of 5 3/8%
senior notes due in February 2004 ("February 2004 Senior Notes") and as such, we
have  reclassified  $500 million of the February  2004 Senior Notes from current
maturities of long-term  debt to long-term  debt in our  Condensed  Consolidated
Balance Sheets as of September 6, 2003.  Pending such use, the net proceeds will
be invested in short-term  instruments with an original maturity of three months
or less.

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

                                     - 18 -

<PAGE>



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 bottler incentive  payments from PepsiCo,
material  changes in our  expected  interest  and currency  exchange  rates,  an
inability to achieve cost savings, an inability to achieve volume growth through
product and packaging initiatives,  competitive pressures that may cause channel
and product mix to shift from more  profitable cold drink channels and packages,
weather conditions in our markets,  political  conditions in our markets outside
the United States and Canada,  possible recalls of our products, an inability to
meet  projections  for  performance in newly acquired  territories,  unfavorable
market performance of our pension plan assets,  unfavorable outcomes from audits
performed by various tax authorities and changes in our debt ratings.

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 the  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.   Beginning  in  2003,   Russia  is  no  longer   considered   highly
inflationary,  and changed its functional  currency from the U.S.  dollar to the
Russian ruble. The impact to our consolidated  financial  statements as a result
of Russia's change in functional currency in 2003 was not material.

     We acquired  Gemex in November 2002.  Approximately  10% and 11% of our net
revenues  were  derived from Mexico in the third  quarter and first  36-weeks of
2003,  respectively.  Since the beginning of the year, the Mexican peso devalued
by approximately  7%. Future movements in the Mexican peso could have a material
impact on our financial results.

Item 4.
Controls and Procedures
-----------------------
     PBG's management carried out an evaluation (the "Evaluation"),  as required
by Rule 13a-15(d) 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.

                                     - 19 -

<PAGE>



                           PART II - OTHER INFORMATION

Item 5.
Other Information
-----------------
     The financial statements of Bottling Group, LLC ("Bottling LLC"),  included
in  Bottling  LLC's  Quarterly  Report on Form  10-Q and  filed  with the SEC on
October 17, 2003, 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.
-----------
4         Indenture,  dated as of June 10, 2003, by and between  Bottling Group,
          LLC, as Obligor,  and JPMorgan  Chase Bank, as Trustee,  relating to 4
          1/8% Senior Notes due June 15, 2015

11        Computation of Basic and Diluted Earnings Per Share

15        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

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, 2003, the Company  furnished a current Form 8-K Report announcing its
financial results for its second quarter ended June 14, 2003.

On September 3, 2003,  the Company  confirmed its third  quarter 2003  financial
guidance and provided an update for its full year 2003 forecast.

                                      - 20 -

<PAGE>



                                   SIGNATURES


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 thereunto duly authorized.










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






Date:    October 17, 2003                    /s/ Andrea L. Forster
         ----------------                        -----------------
                                                 Andrea L. Forster
                                                 Vice President and Controller






Date:    October 17, 2003                    /s/ Alfred H. Drewes
         ----------------                        ----------------
                                                 Alfred H. Drewes
                                                 Senior Vice President and
                                                 Chief Financial Officer