SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549
                            FORM 10-K/A-1
(Mark One)
<checked-box>    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
                                      or
<square>       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 1-13914

                   PEPSI-COLA PUERTO RICO BOTTLING COMPANY
           (Exact name of Registrant as specified in its Charter)

           DELAWARE                         ###-##-####
 (State or other jurisdiction of          (I.R.S. Employer 
 incorporation or organization)            Identification No.)
          

       CARRETERA 865 KM. 0.4
       BO. CANDELARIA ARENAS
       TOA BAJA, PUERTO RICO                    00949
(Address of principal executive office)       (Zip code)

Registrant's telephone number, including area code: (787) 251-2000

   Securities registered pursuant to Section 12(b) of the Act:

  TITLE OF EACH CLASS             NAME OF EXCHANGE ON WHICH REGISTERED
 Class B Common Stock,                  New York Stock Exchange
    Par Value $.01 

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

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

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

      Based upon the closing price of the Class  B Common Stock on December 19,
1997, as reported on the New York Stock Exchange Composite Tape (as reported by
THE WALL STREET JOURNAL), the aggregate market value  of the Registrant's Class
B Common Stock held by non-affiliates of the Registrant  as  of  such  date was
approximately $111,375,000.

      As  of  December  19,  1997, there were 21,500,000 shares of Common Stock
issued and outstanding.  This  amount  includes  5,000,000  shares  of  Class A
Common Stock and 16,500,000 shares of Class B Common Stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

      Selected  portions of the 1997 Proxy Statement of Pepsi-Cola Puerto  Rico
Bottling Company  are incorporated by reference into Part III of this Form 10-K
to the extent provided herein.

<PAGE>

       At the request  of  the staff of the Securities and Exchange Commission,
pursuant to Rule 12b-15 under  the Securities Exchange Act of 1934, as amended,
Pepsi-Cola Puerto Rico Bottling  Company  (the  "Company")  hereby  amends  the
Company's  annual report on Form 10-K as filed with the Securities and Exchange
Commission on  December  31,  1997  (the  "Annual  Report")  to clarify certain
disclosures  that  were referred to by the  staff in its  comment  letter dated
March  19, 1998.  This Form 10-K/A-1  restates  Item  1  of  the  Annual Report
to clarify certain  information  regarding the Company's Business Strategy  and
correct certain typographical errors, and restates Item 7 of the Annual  Report
to clarify certain information regarding the possible effects of  BAESA's  long
term  restructuring  plan  on  the  Company's  rights and obligations under the
credit facility with Banco Popular.


<PAGE>
                                    PART I

ITEM 1.     BUSINESS

GENERAL

      Pepsi-Cola Puerto Rico Bottling  Company  (the  "Company")  is  a holding
company   which,  through  its  manufacturing  and  distribution  subsidiaries,
produces, sells  and  distributes  a  variety  of  soft  drink  and fruit juice
products,  isotonics  and  bottled  water  in  the Commonwealth of Puerto  Rico
("Puerto  Rico"), pursuant to exclusive franchise  arrangements  with  PepsiCo,
Inc. ("PepsiCo") and other franchise arrangements.  The Company also has rights
to sell PepsiCo  products  to  distributors  in  the  U.S. Virgin Islands.  The
Company produces, sells and distributes soft drink products  under  the  Pepsi-
Cola, Diet Pepsi, Pepsi Free, Slice, Wonder Kola, On-Tap, Teem and Mountain Dew
trademarks  pursuant  to  exclusive  franchise  arrangements with PepsiCo.  The
Company  produces  (through  an  arrangement  with  a  co-packer),   sells  and
distributes  isotonics  under  the All Sport trademark pursuant to an exclusive
franchise arrangement with PepsiCo.   In  addition, the Company produces, sells
and  distributes  tonic  water, club soda and  ginger  ale  under  the  Seagram
trademark under an exclusive  arrangement  with  Joseph E. Seagram & Sons, Inc.
("Seagram") and sells and distributes fruit juice  products  under  the Welch's
trademark and distributes bottled water under its own Cristalia trademark.

      The  Company  was  incorporated  and  acquired  the  franchise rights  to
produce,  sell  and distribute PepsiCo soft drink products in  Puerto  Rico  in
1987.  In 1989, the  Company  became one of the founding shareholders of Buenos
Aires  Embotelladora  S.A. ("BAESA"),  which  was  incorporated  and  commenced
operations in the Buenos Aires metropolitan area in that year.

      A subsidiary of the  Company  manufactures  and sells plastic bottles and
"preforms" (small molded plastic units which are expanded  with  air to produce
plastic bottles).

      For its fiscal year ended September 30, 1997, the Company had a loss from
operations  of  ($21.4)  million  (including  ($13.2)  million  related to  the
settlement  of  civil  litigation),  compared to ($26.8) million during  fiscal
1996.  This loss from the Company's operations  resulted primarily from intense
competitive  pressures in Puerto Rico which produced  net  lower  sales  prices
reflecting increased  discounts offered to customers, and cost (including legal
fees)  associated with the  settlement  of  certain  shareholder  class  action
lawsuits  against  the  Company  and  some  of  its  directors  and the ongoing
investigation  by  the  Securities and Exchange Commission (the "SEC")  of  the
circumstances surrounding  certain accounting irregularities which precipitated
the shareholder lawsuits.

      This annual report on  Form  10-K  contains forward looking statements of
expected  future  developments.   The  Company   wishes  to  insure  that  such
statements are accompanied by meaningful cautionary  statements pursuant to the
safe  harbor  established in the Private Securities Litigation  Reform  Act  of
1995.  The forward  looking  statements  in this report refer to the ability of
the Company to implement pricing initiatives  in  a  manner  that  improves the
pricing  environment  in the marketplace, its ability to generate cost  savings
through the consolidation of existing operations, its ability to pay dividends,
its expected future capital expenditures and the ability to achieve its goal of
restoring the profitability  of its Puerto Rico bottling operations as a result
of  these  pricing  initiatives  and   cost  savings.   These  forward  looking
statements  reflect management's expectations  and  are  based  upon  currently
available data;  however,  actual  results  are  subject  to  future events and
uncertainties which could materially impact actual performance.   The Company's
future  performance  also involves a number of risks and uncertainties.   Among
the  factors  that can cause  actual  performance  to  differ  materially  are:
continued competitive  pressures  with  respect  to pricing in the Puerto Rican
market  notwithstanding  the  implementation  of the pricing  initiatives,  the
inability  to  achieve  cost  savings  due to unexpected  developments  at  the
Company's  new  plant  and  other  factors,  changed  plans  regarding  capital
expenditures,  adverse  developments with respect  to  economic,  climatic  and
political conditions in Puerto  Rico,  and  the  impact  of  such conditions on
consumer spending.

                                  1

<PAGE>

PRINCIPAL MARKET

      The  principal  market  for  the  Company's  products is Puerto  Rico,  a
commonwealth  of  the  United  States with a population  of  approximately  3.7
million inhabitants.

      Currently, approximately 35%  of  the  population of Puerto Rico is under
the  age of 18 and 45% of the population is under  the  age  of  25  which  the
Company  believes  is  significant  because young people are major consumers of
soft drinks.

      Although the Company has rights  to sell PepsiCo products to distributors
in the U.S. Virgin Islands, it is not required  to  do  so  under its franchise
agreements with PepsiCo.  During the fiscal year ended September 30, 1997, less
than  1%  of  the Company's sales by volume were to distributors  in  the  U.S.
Virgin Islands.

THE BEVERAGE INDUSTRY IN PUERTO RICO

      CONSUMPTION AND MARKET TRENDS

      The Puerto Rican soft drink market is characterized by relatively low per
capita consumption  as  compared  to  the  United  States.   In  addition,  the
imposition  of  the Carbonated Beverage Tax (in effect from 1991 to 1993) had a
material adverse  effect  on per capita consumption of soft drinks in the years
in which it was in effect.   See "Item 7.  Management's Discussion and Analysis
of  Financial  Condition  and  Results   of   Operations   -  General  Overview
- Carbonated Beverage Tax."  Consumption levels have generally  increased since
the replacement of the Carbonated Beverage Tax in January 1994 but  remain  low
compared  to  consumption levels in the United States.  In 1995, the annual per
capita consumption  of soft drink products in Puerto Rico was approximately 410
eight-ounce servings,  as  compared with approximately 816 eight-ounce servings
in the United States.  Based  on  information from Asesores (as defined below),
the soft drink market grew approximately  12.8%  in  the  12 month period ended
August 31, 1997.

      MARKET SHARE AND SALES DATA

      This  subsection  contains  information regarding the Puerto  Rican  soft
drink industry and the Company's market  share  thereof.   Certain  information
regarding the Puerto Rican soft drink take-home market segment (retail sales to
customers)  has been obtained or derived from data published by Asesores,  Inc.
("Asesores"),  an  independent  research company.  Asesores publishes bimonthly
estimates of beverage consumption  in  the  soft drink take-home market segment
based  on  information  obtained  through weekly  surveys  of  the  consumption
patterns of panels of individual consumers  throughout  Puerto  Rico.  The data
for the surveys are collected in two ways: product presence is verified through
an inventory "pantry check;" and information on purchases during the prior week
is  collected  utilizing  personal interviews.  For each product category,  the
recorded information includes  in-home presence, brand and type, size, quantity
purchased,  price  and establishment  where  the  product  is  purchased.   The
universe of the study  is  defined  as  "all family households in Puerto Rico."
The sample is stratified and proportional  by  geographic area, urban and rural
zone,  socio-economic  levels  and  age  group.   The   consumption  and  sales
information relating to the take-home market segment may  not be representative
of sales of the Company's products as a whole.

      The Company plans to report market share data obtained from A.C. Nielsen,
an independent research company.  The Company plans to report  data provided by
A.C.  Nielsen  because the Company believes that the methodology used  by  A.C.
Nielsen to derive  market  share  data represents a more recognized measurement
system, and is consistent with that  generally  used  in  the  United States to
derive  market  share  data  for  the soft drink bottling business.   The  A.C.
Nielsen service has only recently been  made  available for use in Puerto Rico.
The data collection for this service began approximately three years ago.  A.C.
Nielsen market share data is presented for comparison purposes in this report.

      As used throughout this Form, the term "soft  drink"  refers generally to
carbonated, nonalcoholic beverages.  Soft drink products can  be  classified as
colas or other flavored soft drinks.  References to the term "case"  throughout
this  report  refer  to 192 ounces of finished beverage product (24 eight-ounce
servings).

                                  2

<PAGE>

      SOFT DRINK PRODUCTS

      The cola and flavored  soft  drinks  segments  represented  approximately
52.8%  and  13.6%,  respectively,  of  the soft drink market in Puerto Rico  in
fiscal year 1997.  The following chart shows the Company's case sales volume of
cola soft drinks for the periods indicated:

<TABLE>
<CAPTION>
                                                                              COMPANY COLA
                                                                                 VOLUME
CALENDAR YEAR                                                           (IN MILLIONS OF CASES)(1)
-------------                                                           -------------------------
<S>                                                                                <C>
1990...................................................................            21.4
1991...................................................................            22.5
1992...................................................................            21.6
1993...................................................................            21.9
1994...................................................................            24.8
1995 *.................................................................            24.9
1996 *.................................................................            25.9
1997 *.................................................................            27.4

------------------------
(1) SOURCE: Asesores
 *  Represents cola sales volume for the twelve month period ended on September 30 of the respective years.

</TABLE>

      Sales of cola and  flavored  soft  drinks represented approximately 82.0%
and 6.8%, respectively, of the Company's total  soft  drink sales volume in the
fiscal  year  1997.   Sales  of  cola  and  flavored  soft  drinks  represented
approximately 85.4% and 7.1%, respectively, of the Company's total net sales in
fiscal year 1997.

      The following chart reflects the Company's share of the  soft  drink  and
cola take-home market segments in Puerto Rico for the periods indicated:

<TABLE>
<CAPTION>
                                                      COMPANY SHARE OF            COMPANY SHARE OF
                                                    SOFT DRINK TAKE-HOME           COLA TAKE-HOME
CALENDAR YEAR                                         MARKET SEGMENT(1)           MARKET SEGMENT(1)
-------------                                       --------------------          -----------------
<S>                                                          <C>                        <C>
1990................................................         47.3%                      58.7%
1991................................................         47.8                       60.7
1992................................................         53.1                       61.4
1993................................................         49.1                       59.5
1994................................................         49.3                       56.7
1995 *..............................................         49.4                       56.5
1996 *..............................................         47.3                       54.2
1997 *..............................................         42.6                       47.8

------------------------
(1)  SOURCE:  Asesores
* For these years, the data given in the table is for the twelve month period ended on August 31.

</TABLE>

      In fiscal year 1997, approximately 80% of the Company's net sales of cola
soft drinks was to supermarkets, grocery stores, cash and carry wholesalers and
similar  businesses  in  the take-home segment of the market, and approximately
20% was to restaurants and  soda  fountains  and other distribution channels in
the non-take-home market segment.

      OTHER PRODUCTS

      The Company's total sales volume of non-carbonated  beverages,  including
water,   fruit  juices,  iced  teas  and  isotonics,  was  3.7  million  cases,
representing approximately 11.7% and 11.2% of the Company's total sales volume,
and approximately  8.1%  and  7.5%  of the Company's total net sales, in fiscal
year 1996 and fiscal year 1997, respectively.   The  Company estimates that the
industry sales volume of such beverages in Puerto Rico  was 34 million cases in
fiscal year 1997.

                                  3

<PAGE>

BUSINESS STRATEGY

      The Company's current business strategy is to restore  the  profitability
of  its  Puerto Rican bottling operations.  The Company intends to pursue  this
strategy through  the  implementation  of  new  pricing initiatives designed to
address  the current intense price competition in  the  soft  drink  market  in
Puerto Rico,  the  realization  of  efficiencies  and  cost savings through the
consolidation  of its existing operations in its new bottling  facility  during
fiscal year 1997, and the implementation of further cost cutting measures.  The
Company through  the  implementation  of  new  pricing  initiatives  intends to
increase  the average net price of its goods sold by (i) increasing the  number
of full service  vending machines in the market, and (ii) increasing the volume
sold by the Company  to  the "cold market", and smaller independent supermarket
account segments through improved service using the route presell or route sell
method.   There  can  be  no assurance,  however,  that  the  Company  will  be
successful in achieving its  goal  of restoring the profitability of its Puerto
Rican bottling operations.

      The Company completed, during  the  fiscal year 1996, the construction of
the Toa Baja plant and the consolidation of  its  operations  in  this facility
during  1997.   The  Toa  Baja  plant  has  3 bottling lines and increased  the
Company's annual production capacity by 60% (at  comparable  utilization rates)
to  approximately 44 million cases per year.  The Company commenced  operations
at the  Toa  Baja  plant in the third fiscal quarter of 1996 and has closed the
R<i'>o Piedras plant  which  is  currently  for  sale.  The plastics production
facility moved to Toa Baja in the first quarter of  fiscal  year 1997.  Several
facilities leased by the Company in the San Juan area and elsewhere  in  Puerto
Rico  were closed as a result of the completion and consolidation of operations
in the  Toa  Baja  plant.  The Company has realized significant savings through
its move to the new Toa Baja facility.

      The  Company  is   also  expanding  its  bottled  water  distribution  by
introducing new package formats in twenty-ounce and two liter sizes.

FRANCHISE ARRANGEMENTS

      PEPSICO PRODUCTS

      The Company has entered  into  a  master franchise commitment letter (the
"Franchise Commitment Letter") with PepsiCo with respect to the sale of PepsiCo
soft  drink  products  in  Puerto Rico.  The  Company  has  also  entered  into
exclusive  bottling  appointment   agreements   (each  an  "Exclusive  Bottling
Appointment"  and  collectively,  with  the Franchise  Commitment  Letter,  the
Concentrate  Price  Agreement  and the Cooperative  Advertising  and  Marketing
Agreement between PepsiCo (or its  affiliates)  and the Company, the "Franchise
Arrangements")  for the relevant trademarks of Pepsi-Cola,  Diet  Pepsi,  Pepsi
Free, Diet Pepsi Free, Lemon-Lime Slice, Diet Lemon-Lime Slice, Mandarin Orange
Slice, Diet Mandarin  Orange  Slice,  Teem,  Diet Teem, Mirinda, On-Tap, Wonder
Kola, Mountain Dew and All Sport.  The Franchise Arrangements grant the Company
exclusive rights to produce, bottle, sell and  distribute  PepsiCo  soft  drink
products in Puerto Rico.  The Franchise Arrangements also authorize the Company
to supply canned beverages to the U.S. Virgin Islands, provided that it remains
competitive in price, quality and quantity.  The Company has the right of first
refusal to purchase distribution rights for PepsiCo products in the U.S. Virgin
Islands  when  such  rights become available.  If the Company wishes to bottle,
sell or distribute any  flavored  soft drink or other carbonated beverage other
than the products covered by the Exclusive  Bottling  Appointments, PepsiCo has
the right of first refusal to provide the Company with concentrate for any such
soft  drink  or  to supply the Company with such other carbonated  beverage  at
prevailing market  prices.   The  Franchise Commitment Letter runs concurrently
with the Exclusive Bottling Appointments and will terminate in the event of the
termination or expiration of the Exclusive  Bottling  Appointments.  All of the
Franchise Arrangements have the provisions described below.

      The  Franchise Arrangements require the Company to  purchase  its  entire
requirements  of  concentrates  and  syrups  for  all of the PepsiCo soft drink
products from certain affiliates of PepsiCo.  Pursuant to the Concentrate Price
Agreement  between the Company and PepsiCo, PepsiCo  charges  the  Company  the
actual price  of a unit of concentrate that is paid by bottlers for the same or
similar concentrate  in  the  continental  United States on an equivalent yield
basis  based  upon  the  then  current domestic list  price  for  each  of  the
respective PepsiCo products.

                                  4

<PAGE>

      The Franchise Commitment Letter  requires  the  Company to attain certain
minimum market share and distribution (in terms of sales  volume) levels of the
cola  market  and  flavored  soft drink market, and minimum levels  of  capital
expenditures.   The Exclusive Bottling  Appointments  require  the  Company  to
maintain the share,  distribution  and expenditure targets for the PepsiCo soft
drink products set forth in the Franchise Commitment Letter.  The flavored soft
drink market share level requirements  and the capital expenditure requirements
only apply through 1992 and 1991, respectively.  The Company is required to, at
all times, maintain (i) a minimum market  share  of 56.7% in the cola market as
measured  by the rolling average of the last six consumer  consumption  surveys
(each covering  two  months)  conducted  by Asesores, and (ii) an annual growth
rate of sales volume for bottles, cans and post-mix of soft drinks in excess of
the soft drink industry annual average growth  rate  for  bottles  and  cans in
Puerto  Rico,  as  measured  by  Asesores.  The Company has not during the past
fiscal year met certain market share and distribution requirements contained in
the Franchise Commitment Letter.  Based on the market data provided by Asesores
for the six consumer surveys in the period ended August 31, 1997, the Company's
market share for cola soft drinks  was 49.5%. The Company's annual sales growth
rate for soft drinks for the twelve  month  period  ended  August  31, 1997 was
approximately  4.7% as compared to the industry average annual growth  rate  of
approximately 12.8%  for the same period, as measured by Asesores.  The Company
has not received any notice  from PepsiCo regarding any violations and does not
believe that there is any risk  to  the  Company of being adversely affected by
them.  The Company and PepsiCo are working together to address the issue of the
Company's  failure  to  meet  the market share  and  distribution  requirements
contained  in  the Franchise Commitment  Letter.   In  the  event  the  Company
materially fails to achieve such aggregate market share distribution or capital
expenditure requirements  and  such failure continues for a period of 12 months
following notice thereof from PepsiCo,  then  PepsiCo  has the right to require
the Company to dispose of the bottling business, plant and  operating assets to
a  purchaser satisfactory to PepsiCo, or, if such purchaser is  not  found,  to
terminate  the  agreement.  As required by the Exclusive Bottling Appointments,
the  Company  has also  developed  a  postmix  department  with  the  necessary
infrastructure  to  provide  effective  service  to the food service channel of
distribution.

      The Company is obligated under the Franchise  Arrangements to use, handle
and  process  the  concentrates purchased from PepsiCo and  to  bottle,  label,
package and distribute  the  PepsiCo  soft  drink  products  in accordance with
PepsiCo's instructions.  The Company must maintain and operate  its  plants and
all  sales  and  distribution  equipment  in  clean and sanitary conditions  in
accordance  with  PepsiCo's standards and specifications,  and  otherwise  must
satisfy PepsiCo's quality  control standards.  The Company must comply with all
standards and specifications  with respect to the treatment and purification of
water used in manufacturing PepsiCo soft drink products and the maintenance and
operation of water treatment and  purifying  equipment.   The Company must also
conduct tests of the PepsiCo soft drink products and the water  used  in  their
manufacture, maintain records of such testing and permit PepsiCo access to  its
facilities for inspection purposes.

      The  Company is required to test market and introduce new packages, sizes
and products  as  PepsiCo may direct and promote and advertise the PepsiCo soft
drink products.  The  Company  is also required to make capital expenditures to
maintain a sufficient inventory of bottles, cartons, containers and cases.

      The Franchise Arrangements  also  require  the  Company  to  display  all
advertising  and  promotional  materials furnished by PepsiCo or its affiliates
and to incur mutually agreed upon  marketing,  advertising  and sales promotion
expenditures.  See "- Marketing."

      The Franchise Arrangements require the Company to not exceed  a  ratio of
senior debt to subordinated debt to equity of 65 to 25 to 10.

      The  Exclusive  Bottling  Appointments  have  ten-year  terms expiring on
November   5,   2003.   Each  of  the  Exclusive  Bottling  Appointments   will
automatically be extended for an additional five-year term expiring on November
5, 2008, provided  the  Company  is  not  in  breach  of  any provisions of the
Franchise  Arrangements.   Thereafter, each agreement is automatically  renewed
for additional five-year terms  unless either party gives written notice of its
intention not to renew the agreement  at  least  18 months prior to the date of
expiration of the term.  PepsiCo may terminate the  Franchise  Arrangements  if
the  Company  fails  to  comply  in  any  material  respect  with the terms and
conditions of the Franchise Arrangements, subject to a right to cure in certain
instances.   In  addition, PepsiCo may terminate the Franchise Arrangements  if
there is a change  of  effective control of the Company without 

                                  5

<PAGE>

PepsiCo's prior written consent.  For purposes  of  the Franchise Arrangements, 
a  change of effective  control  of  the  Company  shall  be  deemed to have 
occurred if the Essential Shareholders (as defined below), directly or 
indirectly, cease to own or have the power to vote in the aggregate at least a  
majority  of the voting stock  of  the  Company.  The "Essential Shareholders"
are the members  of  the Charles  H. Beach  Voting  Trust  and  the  Michael  
J.  Gerrits  Voting  Trust (together,  the  "Essential  Shareholders")  
controlled by Charles H. Beach and Michael J. Gerrits, respectively.  The 
Essential Shareholders are thus required under the terms of the Franchise 
Arrangements  to  retain voting control of the Company.  See "Security 
Ownership" in the Company's  Proxy  Statement  for 1997 incorporated 
herein by reference.

      In  September 1996, in connection with his continued service as President
and Chief Executive  Officer,  Mr. Rafael Nin, requested and was granted by the
Essential Shareholders and certain  other shareholders, a ten-year voting trust
(the "Voting Trust") which entitles him to vote, but not own, 5,000,000 Class A
Shares representing a controlling interest  in the Company.  In connection with
the execution of the Voting Trust agreement, PepsiCo consented to the change of
effective control of the Company from the Essential  Shareholders  to  Mr. Nin,
acting as voting trustee (the "Trustee").  The initial term of the Voting Trust
is  five  years and is automatically renewed for an additional five-year period
unless either PepsiCo or the Trustee notifies the other party of non-renewal at
least six months  prior to the end of the initial five-year term, provided that
PepsiCo may not unreasonably  withhold  its consent to the additional five-year
period.  Under the terms of the Voting Trust,  Mr. Nin is entitled to resign as
Trustee at any time, which results in a termination  of  the  Voting Trust.  If
the  Voting  Trust  is  terminated because of the resignation or death  of  the
Trustee,  PepsiCo has the  right  for  a  period  of  ninety  days  after  such
resignation  or  death  to  appoint  a  new  Trustee to replace Mr. Nin for the
remaining term of the Voting Trust, subject to  the  approval of the beneficial
owners of a majority of the Class A Shares.  Upon the termination of the Voting
Trust  at the expiration of its term, the Class A Shares  held  in  the  Voting
Trust will  be  returned  to  the  Essential  Shareholders and the terms of the
Franchise  Arrangements  applicable to the Essential  Shareholders  will  again
become effective.

      In connection with the  Voting  Trust,  Mr.  Nin  was  granted a two-year
option, expiring in September 1998 at $1 per share, on the Class  A Shares held
in the Voting Trust, to be exercised for the exclusive benefit of the Company.

      OTHER PRODUCTS

      The Company has reached agreement on the terms of a soft drink  trademark
license  and  bottling  agreement  with  Seagram  for  the  exclusive rights to
produce, sell and distribute tonic water, club soda and ginger  ale  under  the
Seagram  trademark  in Puerto Rico.  The Company must purchase concentrate from
Seagram at a price per  unit  mutually  agreed upon by Seagram and the Company.
The Company is obligated to meet specified  production levels.  The Company may
not produce, sell or distribute any other tonic  water, club soda or ginger ale
other than the Seagram trademark.  The Company has  further  agreed to maintain
certain production and quality control standards, and to use its  best  efforts
to  advertise and promote the sale, distribution and consumption of the Seagram
products  in  the franchise territory.  The license and bottling agreement with
Seagram is effective  through  January 31, 2000 and is renewable for successive
ten-year terms thereafter at the option of Seagram.  The agreement with Seagram
may be terminated in the event that  the Company does not comply with its terms
and, in the case of the Company's bankruptcy,  appointment  of  a  receiver  or
assignment for the benefit of creditors.

      The  Company has a sales and distribution agreement with Welch Foods Inc.
("Welch's")  for  the  rights to sell and distribute non-carbonated fruit juice
beverages  under the Welch's  trademark  in  Puerto  Rico.   The  Company  must
purchase the  product  from certain authorized sellers and may not manufacture,
sell or distribute certain  specified  brand  names  which compete with Welch's
products.  The Company is actively negotiating the renewal of this distribution
agreement.

      FRANCHISE PROTECTION

      The Company's Franchise Arrangements with PepsiCo  are subject to Act No.
75 of June 24, 1964 of Puerto Rico, as amended ("Act 75"),  which provides that
a company that grants distribution rights to a distributor 

                                  6

<PAGE>

in  Puerto Rico may not  unilaterally terminate, perform any act detrimental to
or refuse to renew its agreement with the distributor without just cause, and 
would be required to pay damages to the distributor as specified in Act 75 in 
the event of a termination, impairment or non-renewal without just cause, which
are specific acts set forth in Act 75 which are attributable to the 
distribution.  Act 75 does not protect a distributor in the event of a breach 
by such distributor.

PROPRIETARY TRADEMARKS

      The Company  produces,  sells and distributes bottled water under its own
Cristalia trademark in one-gallon  and  five-gallon  containers.  The Company's
sales of Cristalia bottled water totaled $4.9 million  in  fiscal year 1997 and
accounted for 4.9% of the Company's net sales and 9.4% of sales  volume for the
fiscal year 1997.

PRODUCTION

      Soft  drinks are produced by mixing water, concentrate and sweetener  and
injecting  carbon   dioxide   gas  into  the  mixture  to  produce  carbonation
immediately prior to bottling.   Prior  to  mixing,  the  water is processed to
eliminate mineral salts, chlorinated and then passed through purification tanks
containing sand filters, to eliminate remaining impurities, and carbon filters,
to  eliminate  chlorine taste, copper and odors.  The purified  water  is  then
combined with processed  sugar  and  concentrate.   Following  carbonation  the
mixture  is  bottled  in  prewashed  bottles  or  aluminum  cans.   The Company
maintains a laboratory area at its production facility, where raw materials are
tested  and  samples  of  soft  drink  products  are analyzed to ensure quality
control.

      The raw materials used by the Company in the  production  of  soft drinks
include  concentrate,  syrup,  water,  sugar  or high factor corn syrup, carbon
dioxide  gas,  glass and plastic bottles, aluminum  cans  and  other  packaging
material.   The  Company   is  obligated  under  the  terms  of  the  Franchise
Arrangements to obtain concentrate  for  the  production of soft drink products
from  PepsiCo  or  its  affiliates.  The Company obtains  water  from  publicly
available supplies (such  as  municipal water systems) and from its own drilled
wells.  The Company obtains all  of its sweetener requirements from a number of
independent suppliers and distributors  located in the United States and Puerto
Rico.  The Company does not directly purchase  low calorie sweetener for use in
diet soft drinks because these sweeteners are already  contained  in  the  diet
soft  drink  concentrates  purchased by the Company.  The Company purchases its
supplies of carbon dioxide gas from a number of independent suppliers in Puerto
Rico and elsewhere.  The Company purchases plastic bottles used in the bottling
process principally from its  plastics  operation  and  from  other independent
suppliers as needed.  The Company also manufactures preforms which are utilized
in the bottle manufacturing process.  Preforms were also sold to  BAESA  during
the first fiscal quarter of 1996.  All bottles used in the bottling process  of
Cristalia  products  are  purchased by the Company from a number of independent
suppliers.  The Company purchases its aluminum can requirements from Crown Cork
& Seal.

      None of the raw materials or supplies used by the Company is currently in
short supply, although the  available  supply  of  certain  materials  could be
adversely affected in the future due to reasons outside the Company's control.

                                  7

<PAGE>

      The  following  table sets forth the principal raw materials utilized  in
the  soft drink production  process  and  the  approximate  percentage  of  the
Company's total cost in fiscal year 1997 represented by each of them.

<TABLE>
<CAPTION>
                                                             PERCENTAGE OF
                                                              FISCAL YEAR
RAW MATERIAL                                                   1997 Cost
------------                                                ----------------
<S>                                                               <C>
Packaging...............................................          41.5
Concentrate.............................................          36.8
Sugar/fructose..........................................          15.2
Carbon dioxide gas......................................           1.4
Other...................................................           5.1
                                                                 -----
          Total                                                  100.0%
                                                                 =====
</TABLE>

      The  Company  produces  bottled  water under its Cristalia trademark at a
facility located in Ponce.  The water obtained  from a spring and several wells
is passed through purification tanks containing sand filters and carbon filters
and subjected to reverse osmosis treatment to filter out impurities and certain
minerals.  After the water is passed through an ozonator for further treatment,
it  is  bottled  in  one- and five-gallon containers.   The  Company  currently
produces soft drinks at  its  plant  in  Toa Baja and bottled water at a leased
facility in Ponce.

      The Company moved its manufacturing operations from R<i'>o Piedras to Toa
Baja during the third quarter of fiscal year  1996.   The following chart shows
the approximate effective production capacity, number of  shifts  and  bottling
lines,  and  average  fiscal  year  1997  capacity utilization for the Toa Baja
plant:

<TABLE>
<CAPTION>
                                   APPROXIMATE EFFECTIVE      NUMBER OF              AVERAGE 1997
PLANT                              PRODUCTION CAPACITY(1)   BOTTLING LINES     CAPACITY UTILIZATION(2)
-----                              ----------------------   --------------     -----------------------
<S>                                    <C>                        <C>                   <C>
Toa Baja........................       44,347 (2 shifts)           3                    68%

</TABLE>
------------------------
(1)      Approximate  effective  production  capacity  is  expressed  in 
         thousands of cases per year, assuming the number of shifts indicated.
         Effective production capacity is a plant's theoretical  installed 
         capacity, adjusted for seasonal variations in demand as well as 
         regular maintenance and repair.
(2)      Actual production in fiscal year 1997 expressed as a percentage of 
         approximate effective production capacity.

      The  Company  produced all of its products during fiscal year 1997 in its
soft drink plant in Toa  Baja  and  in  its  water  plant  in Ponce (the "Water
Plant").  The remaining volume is purchased from outside sources.  The Toa Baja
plant is located approximately 15 miles west of San Juan and the Water Plant is
located  on  the  southern  portion of the island of Puerto Rico.   The  R<i'>o
Piedras plant has been cleared  of  all producing equipment and is currently on
the market for sale.

DISTRIBUTION

      Once the bottling process is complete,  the  Company  packages  its  soft
drink  products  in  cases,  tanks  and  boxes  for distribution throughout its
franchise territory.  The Company uses three primary  methods  of  distribution
for  its  soft  drink  products:  conventional  routes,  bulk presell and route
presell  delivery.   In  the conventional route form of distribution,  a  truck
owned or leased by the Company  is  loaded with the Company's beverage products
and  visits  each of the Company's customers  along  an  assigned  distribution
route.  The customer  places  orders  and accepts delivery of the amount of the
Company's products needed at that time.   The  drivers  and sales persons which
deliver  the  Company's  products  along  the  conventional  route  system  are
employees  of  the  Company  in  Puerto Rico.  The conventional route  form  of
distribution is the main form of distribution  currently used by the Company in
Puerto Rico.

      Under  the  bulk presell method of distribution,  the  Company's  account
representatives and  key account salespersons visit customers assigned to their
route and fill out order  forms  for  the Company's products.  These orders are
processed at the Company's plant and the products are delivered the next day in
trailer loads by 

                                  8

<PAGE>

independent truck drivers or in bulk (less than trailer loads) by the Company's
employees in Company-owned or leased trucks.  The bulk presell method is mostly
used for wholesalers and large retailers.

      The  Company  intends  to  emphasize   the   "route  presell"  method  of
distribution for its conventional routes where feasible  to  capitalize  on its
planned  introduction  of  new products and packaging formats.  Under the route
presell method, employees of  the  Company  visit  customers  assigned to their
route and take orders which are processed at the end of the day.   The  ordered
products are then delivered the next day by the Company's employees in Company-
owned or leased trucks.  The Company believes this method provides better route
coverage  in  densely  populated  areas and facilitates the distribution of the
Company's existing products as well as the introduction of new products.

      As of September 30, 1997, the  Company had approximately 135 distribution
routes (conventional, bulk and presell)  and its transportation fleet consisted
of approximately 113 trucks.  The Company's  products  are  also distributed to
restaurants and soda fountains in post-mix form.

      In  addition,  the Company has approximately 1,289 "single  service"  and
1,831 "full service" vending  machines  throughout Puerto Rico.  In the "single
service" format, the proprietor of the location  of  the  machine  purchases  a
minimum  amount  of  the Company's products while in the "full service" format,
the Company pays a commission  to  the  proprietor and supplies and retains the
profit  from  sales  from  the  machines.   The   Company  is  responsible  for
refurbishing and maintaining the vending machines and  there  is  no charge for
installation  and  maintenance  or  rental fees for the vending machines.   The
Company's  bottled  water  is  distributed   to  customers  in  private  homes,
businesses and government agencies some of which  have coolers installed by the
Company.  The Company receives a rental payment for  each  cooler  installed by
the Company.

      In the fiscal year 1997, approximately 48% of the Company's net sales was
to supermarkets and grocery stores, 34% was to "cash and carry's" (small, high-
volume  wholesalers)  and  similar businesses, 13% was to restaurants and  soda
fountains and 5% was through  other  distribution  channels.   The Company also
distributes  its  products  through vending machines and is in the  process  of
rapidly expanding its placement  of  vending  machines  throughout Puerto Rico.
The  Company's  Cristalia  brand  bottled  water  is  distributed   to  private
homeowners,  businesses  and  government agencies.  Most sales to the Company's
customers are on a credit basis,  with  payment due approximately 30 days after
delivery.  Credit sales and cash sales accounted  for approximately 93% and 7%,
respectively, of the Company's total sales in the fiscal year 1997.

MARKETING

      The  Company  has  entered into a cooperative advertising  and  marketing
agreement with affiliates of PepsiCo in Puerto Rico.  This arrangement provides
for  advertising  of Pepsi-Cola  and  other  PepsiCo  soft  drink  products  on
television and radio  stations,  billboards,  newspapers  and other media.  The
total amount spent by the Company on advertising pursuant to  this  cooperative
arrangement  in  any year is determined by the amount set forth in that  year's
cooperative marketing agreement.

      A primary basis  of  competition  among  soft drink bottling companies is
sales  promotion  activities,  including  television,   radio   and   billboard
advertising  and  point of purchase promotional devices, such as display  racks
and cases, clocks,  neon  signs and other merchandise and equipment bearing the
Pepsi logo and placed in retail outlets where the Company's products are sold.

      The Company also uses  point-of-purchase  promotional devices approved by
PepsiCo  in  marketing  its  products.   These products  consist  primarily  of
prominent  in-store  displays such as racks  and  cases.   These  products  are
delivered to the Company's  customers  by  distribution  trucks along with soft
drink  deliveries.   The  Company  shares  the  cost of these point-of-purchase
promotional devices, excluding design costs, with  PepsiCo.  PepsiCo reimburses
the  Company  for PepsiCo's share of its marketing expenditures.   PepsiCo  may
from time to time  during  the  year  pay  for marketing expenditures directly,
subject to agreement with the Company, and will  be  credited for such payments
toward PepsiCo's share of marketing expenditures.

                                  9

<PAGE>

      The Company has entered into long-term arrangements to offer discounts to
selected customers, such as the major supermarket chains  in  Puerto Rico.  The
Company  has  also  entered  into  cooperative  marketing agreements  with  its
customers  relating  to  special  displays and promotional  campaigns  for  the
Company's products.

      During fiscal year 1997, two customers accounted for approximately 20% of
the Company's sales.  One of these  customers,  the  Pueblo  supermarket  chain
("Pueblo")  in  Puerto  Rico, accounted for approximately 6.5% of the Company's
sales during fiscal year  1997.   In  July  1997, Pueblo terminated a long-term
marketing arrangement with the Company which  had  been in effect since January
1995, pursuant to which Pepsi-Cola products were given  special  prominence  in
Pueblo  supermarkets  in  terms  of  shelf  space  and  special  displays.   In
connection  with  the  termination of this arrangement with the Company, Pueblo
entered into a similar arrangement  with  the  Coca-Cola  bottling  company  in
Puerto  Rico  under  which the same prominence was given to Coca-Cola products.
As a result of the termination  of  this arrangement with Pueblo, the Company's
sales to Pueblo have declined substantially.   Although  the Company's sales to
Pueblo  have been adversely affected by these circumstances,  the  Company  was
successful in consummating a new marketing arrangement with another substantial
customer  resulting  in  increased  sales  of  the  Company's  products to that
customer which have substantially offset the decline in sales to  Pueblo.   The
second  customer  which  accounted  for the balance of the 20% of the Company's
sales (referred to above) was Montalvo,  a large "cash and carry" (high volume)
wholesaler.

      The Company frequently uses promotional  campaigns  such  as concerts and
sports events, merchandise giveaways, contests and similar programs to increase
sales  of  its  products.  These programs are typically heavily advertised  and
frequently result  in  increased sales and higher per capita consumption of the
Company's products during the time the program is being conducted.

      The Company sells  its soft drink and water products in a variety of non-
returnable and returnable  bottles,  both  glass and plastic, and in cans, in a
variety of sizes.  The Company currently sells  its  products  in  15 different
packaging  formats.   The Company continually examines sales data and  customer
preferences in order to develop a mix of packaging formats which consumers will
consider most desirable  in  order to increase sales and per capita consumption
of the Company's products.  All  the  packaging formats utilized by the Company
for PepsiCo soft drink products are subject to the approval of PepsiCo.

      A primary basis of competition in  the soft drink industry in Puerto Rico
is the "image" that a particular soft drink  has  among consumers.  The Company
intends to continue to promote the image of PepsiCo products among consumers in
Puerto  Rico  by  means of advertising which depicts PepsiCo  products  as  the
preferred soft drink products among consumers.

      The Company uses  its management information systems in order to evaluate
sales data for purposes of  forecasting  future  sales  and  establishing sales
quotas  and  forecasts.   Based  on  the information compiled in the  Company's
historical sales records, the Company may initiate one or more of the marketing
programs  described  above in order to increase  sales  volume  or  per  capita
consumption of its soft drink products.

COMPETITION

      The  soft drink industry  in  Puerto  Rico  is  highly  competitive.   In
addition, during  fiscal year 1997, the Company faced intense price competition
resulting in substantially  lower  net  sale  prices.   The Company's principal
competitors in Puerto Rico are the local bottlers and distributors of Coca-Cola
in  the  cola  market  and  Seven-Up  in the flavored soft drink  market.   The
Company's other competitors include bottlers and distributors of nationally and
regionally advertised and marketed products,  as  well  as  bottlers of smaller
private label soft drinks, which private label soft drinks the Company believes
have  historically represented approximately 5% of total soft  drink  sales  in
Puerto  Rico.   During fiscal year 1996, the Coca-Cola franchise was sold to an
investor group headed  by  a Florida-based businessman and the Seven-Up Company
was sold in part to its management  group  in  a leveraged buy-out transaction.
These two transactions have resulted in a significant  increase  in competition
in  the  Puerto  Rican  soft  drink  market,  increasing the Company's discount
expenditures during fiscal year 1997.

                                  10

<PAGE>

      Carbonated  soft  drink  products  compete with  other  major  commercial
beverages,  such  as coffee, milk and beer,  as  well  as  non-carbonated  soft
drinks, citrus and non-citrus fruit drinks and other beverages.

      The principal methods of competition in the soft drink industry in Puerto
Rico are pricing, advertising  and  product  image.   In  addition, the Company
provides  discounts  to  certain  of  its  large customers such as  supermarket
chains,  fast food chains and other retail outlets  which  carry  PepsiCo  soft
drink products.   The following charts compare the market share of PepsiCo soft
drink products and Coca-Cola soft drink products in the Puerto Rican soft drink
take-home market at the end of the periods indicated.

<TABLE>
<CAPTION>
                                                                     SOFT DRINK TAKE-HOME MARKET SHARE(1)
CALENDAR YEAR                                                     PEPSICO PRODUCTS        COCA-COLA PRODUCTS
-------------                                                     ----------------        ------------------
<S>                                                                        <C>                    <C>
1990 ..............................................................        47.3%                  29.7%
1991 ..............................................................        47.8                   24.5
1992 ..............................................................        53.1                   28.7
1993 ..............................................................        49.1                   33.0
1994 ..............................................................        49.3                   33.0
1995 (for the twelve-month period ended August 31, 1995) ..........        49.4                   32.3
1996 (for the twelve-month period ended August 31, 1996) ..........        47.3                   32.6
1997 (for the twelve-month period ended August 31, 1997) ..........        42.6                   44.1

</TABLE>
------------------------
(1)  SOURCE: Asesores

<TABLE>
<CAPTION>
                                                                   SOFT DRINK TAKE-HOME MARKET SHARE(1)
                                                                ------------------------------------------
CALENDAR YEAR                                                   PEPSICO PRODUCTS        COCA-COLA PRODUCTS
-------------                                                   ------------------------------------------
<S>                                                                   <C>                    <C>
1995 (for the twelve-month period ended September 30, 1995)....       33.1                   28.0
1996 (for the twelve-month period ended September 30, 1996)....       34.2                   30.0
1997 (for the twelve-month period ended September 30, 1997)....       33.0                   40.7

</TABLE>
------------------------
(1)  SOURCE: A.C. Nielsen

PLASTIC PRODUCTS

      Beverage Plastics  Company, a subsidiary of the Company, manufactures and
sells non-returnable plastic  bottles  and  preforms.   In  1997,  the  plastic
bottles  manufactured  by  that  subsidiary were used entirely in the Company's
soft drink production and distribution business, and the preforms were all used
in the manufacture of plastic bottles.

GOVERNMENT REGULATION

      The Company's operations are  subject  to the regulatory oversight of the
U.S. Department of Agriculture and Department  of  Labor,  the  Food  and  Drug
Administration,   the   Occupational  Safety  and  Health  Administration,  the
Environmental Protection  Agency  and  the  Puerto  Rico  Environmental Quality
Board.

      The  Company is required to obtain municipal licenses  for  its  bottling
plants.  The  Company  is  currently  in  compliance  with  such  requirements.
Additionally, the Company routinely obtains the necessary approvals  to operate
certain  machinery  and  equipment, such as boilers, steamers, compressors  and
precision instruments, from municipal authorities.

      ENVIRONMENTAL REGULATION

      The Company has entered into a stipulation, dated September 11, 1990 (the
"Stipulation") with the Puerto Rico Aqueduct and Sewer Authority ("PRASA") with
respect to the discharge of  waste  water  in  excess  of  pretreatment  permit
limitations.   Pursuant  to the terms of the Stipulation, PRASA and the Company
agreed  on  a  

                                  11

<PAGE>

compliance plan by which the Company would have invested approximately $1.0 
million for the construction of a waste water treatment plant in its bottling 
facilities and would pay an administrative penalty to PRASA.  The Company  
also entered into a settlement with PRASA covering surcharges to be paid by
the Company for the discharge of waste water in excess of surcharge limits.
Under the terms of the settlement, the Company agreed  to pay  PRASA  the 
amount of $60,000 in accord and satisfaction for any surcharges which might 
have  been  computed  and  notified on or before June 1, 1991.  The settlement
provides for surcharges as follows:  (a) $48,000 for the period from June 1, 
1991 to December 31, 1991; (b) $10,000 per  month  for  the period from January
1, 1992 through and until June 30, 1993; and (c) $12,500  per month for the 
period from July 1, 1993 through and until the waste treatment  facility at the
Toa Baja plant is completely built and operational.  The settlement  also
provides for additional surcharges if certain limits are exceeded.  The 
Company received a  permit  from PRASA to operate its Toa Baja plant while a PH
Equalization  Facility  is  being placed in service and the discharge of  waste
water is characterized.  The  Company may, at a later date, either build the PH
Equalization Facility or may enter  into  an  agreement  with  Commonwealth  of
Puerto  Rico  with respect to the discharge of waste water and the payment of a
fee to handle such  discharge  on  a  permanent  basis.  Such decision would be
subject to final approval of PRASA and the Commonwealth  of  Puerto  Rico.  The
characterization  process  will  provide  the  information  needed to obtain  a
permanent  permit.  The Company hopes that the results of the  characterization
of the discharge of waste water will permit it to make use of a municipal waste
treatment facility, for which it would pay a monthly fee, and thereby avoid the
need to construct  a  separate  waste water treatment plant adjacent to its Toa
Baja manufacturing facility.  The  Company  places  a  high priority on quality
control  and industrial safety and believes that it is in  material  compliance
with all other  applicable regulations.  The Company received the Quality Award
from PepsiCo in 1993  and  1994.  The International Bottled Water Association's
Quality Award has been received  by  the  Company's Water Plant for 1994, 1995,
1996 and 1997.

      TAXATION

      The Puerto Rican government currently imposes an excise tax on carbonated
beverages of 5% of the "taxable price in Puerto  Rico."   The "taxable price in
Puerto  Rico" for a product manufactured in Puerto Rico is effectively  defined
under the Puerto Rico Excise Act as 72% of the manufacturer's sales price.  The
Company is thus subject to an excise tax at an effective rate of 3.6% (or 5% of
72%) of the sales price of its soft drink products.

EMPLOYEES

      At   September  30,  1997,  the  Company  had  568  full-time  employees,
approximately  63%  of  which  were  represented by a labor union.  The Company
believes  that  its  relationship  with  its  employees  and  their  unions  is
excellent.  The Company has not experienced  any  strike or work stoppage since
the Company was acquired in 1987.  Labor relations  are  generally  governed by
union  agreements  entered  into from time to time between the Company and  its
employees.  The Company has entered  into three such agreements, with its union
employees  in  its manufacturing and distributing  subsidiaries,  its  plastics
subsidiary and its  bottled  water  division,  respectively.   A  new agreement
relating  to  the  Company's  manufacturing  and distributing subsidiaries  was
signed  on  November  25,  1997 and expires on December  31,  2001.   This  new
agreement provides the Company  with  a reduction in operating costs as part of
its strategy to increase and maintain operating  efficiencies.   The  agreement
relating  to  its  plastics subsidiary expired on October 1, 1996.  The Company
currently is in the  process  of  renegotiating  this  agreement. The Company's
agreement relating to the bottled water division became  effective  in  January
1995 and expires on December 31, 1998.

                                  12

<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY

      The  executive  officers  of  the  Company  are  elected  by the Board of
Directors  and serve at its discretion.  There is no family relationship  among
any of the officers  or  directors.   The  following  table  sets forth certain
information regarding the executive officers of the Company.

<TABLE>
<CAPTION>
NAME                                      AGE       POSITION                                      OFFICER SINCE
<S>                                       <C>       <C>                                                <C>
Rafael Nin...........................     53        President and Chief Executive Officer              1996
C. Leon Timothy......................     62        Senior Vice President - Investor Relations         1990
A. David V<e'>lez....................     43        Vice President -  Chief Operating Officer          1997
Reinaldo Rodriguez...................     52        Vice President -  Human Resources                  1996
David Lee Virginia...................     47        Vice President -  Chief Financial Officer          1996
Jos<e'> Gonz<a'>lez..................     40        Vice President -  Internal Audit                   1996

</TABLE>

      The following is a brief description of the business background  of  each
of the executive officers of the Company.

      Rafael  Nin  has  been  a Director of the Company since May 1987.  He was
elected President and Chief Executive  Officer  in  June  1996.   He has been a
Director  of Bestov Foods S.A., a Pizza Hut franchise in Argentina since  1992,
and is President  and Chief Executive Officer of Kana Development, Inc., a land
development company, since 1983.

      C. Leon Timothy  has  been  a  Senior Vice President of the Company since
February 1990 and a Director of the Company  since  December  1992.   He  was a
Director  of  BAESA from April 1990 until July 1996 and a Senior Vice President
of BAESA responsible for shareholder relations until July 1996.

      A. David  V<e'>lez  has been a Vice President of the Company in charge of
operations  since  March,  1997.   He  was  the  General  Manager  for  BAESA's
operations in R<i'>o de Janeiro  from  October 1995 to February 1997.  Prior to
that he was the General Manager for PepsiCo's Miami bottling operations.

      Reinaldo Rodriguez has been Vice President  of  the  Company in charge of
Human  Resources  since  September  1996  and from 1987 to 1990.  He  was  Vice
President in charge of Human Resources for BAESA from 1990 to July 1996, and he
was Personnel Director for Pepsi Cola Metropolitan  Bottling  Company from 1982
to 1987.

      David Lee Virginia has been Vice President of the Company  in  charge  of
Finance  since  September  1996.   He  was  Planning  Director  for  Pepsi Cola
Engarrafadora  Ltda from 1994 to 1996.  He was employed with BAESA in a  number
of positions including  Vice  President - Treasurer from 1992 to September 1994
and he was Vice President in charge  of  Finance  for  Pepsi  Cola  Puerto Rico
Bottling  Co.  from 1987 to 1992.  Mr. Virginia was also the Vice President  of
Finance of Specialty Frozen Products LP from January 1993 to August 1993.

      Jos<e'> Gonz<a'>lez has been a Vice President of the Company in charge of
Internal Audit since  September  1996.   He was previously Audit Manager, since
December 1995.  He was Controller and Operations  Manager  for The West Company
from 1993 to 1995 and Assistant Controller and Account Manager for Nypro Puerto
Rico Inc. from 1989 to 1993.  Previous positions include Senior  Accountant for
Motorola of Puerto Rico and Senior Auditor for Coopers & Lybrand,  from 1985 to
1992.

INVESTMENT IN BAESA

      In  addition to conducting its own bottling operations, the Company  owns
12,345,348  shares,  or  approximately  17% of the outstanding capital stock of
BAESA  as  of  September  30,  1997,  and, through  June  30,  1996,  exercised
significant influence over the management  of  BAESA,  subject  to the right of
PepsiCo and certain of its affiliates (collectively, "Pepsi Cola International"
or "PCI") to approve certain management decisions.  As of July 1, 1996, PepsiCo
assumed  operating control of BAESA and the Company does not control,  or  have

                                  13

<PAGE>

significant  influence  over,  the  management  or  operations  of  BAESA.  The
financial  information  relating  to  the Company set forth below reflects  the
operations of the Company and its equity interest in the net earnings of BAESA.
The transfer of operating control from  the  Company to PepsiCo, which had been
scheduled to take place on December 1, 1999 under a Partnership Agreement dated
November  1, 1993 between an affiliate of the Company  and  PCI  governing  the
corporate governance  of BAESA (the "Partnership Agreement"), resulted from the
decision by Charles Beach  (who  at the time was the chief executive officer of
both the Company and BAESA) pursuant to the terms of the Partnership Agreement,
to accelerate the transfer of operating  control of BAESA to PepsiCo to July 1,
1996.  On May 9, 1997, the Buenos Aires Stock  Exchange  suspended  trading  of
BAESA's  Class  B Shares after its fiscal second quarter results for the period
ended March 31, 1997  showed  a  negative  net worth under Argentine accounting
principles of $18.7 million.  The New York Stock  Exchange  also halted trading
in BAESA's American Depository Shares.  On December 5, 1997,  BAESA announced a
financial restructuring which would result in the issuance of additional equity
by BAESA in exchange for a portion of its outstanding debt, and  would  (if the
Company  does  not elect to exercise its preemptive rights to purchase its  PRO
RATA share of the  additional  equity)  result in the Company's 17% interest in
the outstanding capital stock of BAESA being  diluted  to a .34% interest.  The
Company withdrew its interest in BAESA Shareholder Associates,  and  liquidated
Argentine  Bottling  Associates,  two  partnerships, which previously held  the
Company's  interest  in BAESA during fiscal  year  1997.   These  actions  have
resulted in the Company  holding  its BAESA shares directly, and eliminates for
future periods, the accounting requirement that the Company report on an equity
basis the results of operations of BAESA.


                                  14

<PAGE>

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

GENERAL OVERVIEW

      The  following  discussion  of  the financial condition  and  results  of
operations of the Company should be read  in conjunction with this overview and
the Consolidated Financial Statements of the Company, and the Notes thereto, as
of fiscal year ended September 30, 1997 ("fiscal  year  1997"), the fiscal year
ended  September  30,  1996  ("fiscal  year  1996") and the fiscal  year  ended
September 30, 1995 ("fiscal year 1995").

      PRESENTATION OF FINANCIAL INFORMATION

      In addition to conducting its own bottling  operations,  the Company owns
12,345,348  shares,  or approximately 17% of the outstanding capital  stock  of
BAESA  as  of September  30,  1997,  and,  through  June  30,  1996,  exercised
significant  influence  over  the  management of BAESA, subject to the right of
PepsiCo, Inc. ("PepsiCo") and certain  of  its affiliates (collectively, "Pepsi
Cola International" or "PCI") to approve certain  management  decisions.  As of
July 1, 1996, PepsiCo assumed operating control of BAESA and the  Company  does
not  control,  or have significant influence over, the management or operations
of BAESA.  The financial  information  relating  to the Company set forth below
reflects  the  operations of the Company and its equity  interest  in  the  net
earnings of BAESA.   On  May 9, 1997, the Buenos Aires Stock Exchange suspended
trading of BAESA's Class B  Shares  after its fiscal second quarter results for
the period ended March 31, 1997 showed  a  negative  net  worth under Argentine
accounting  principles  of  $18.7  million.  The New York Stock  Exchange  also
halted trading in BAESA's American Depository  Shares.   On  December  5, 1997,
BAESA announced a financial restructuring which would result in the issuance of
additional  equity by BAESA in exchange for a portion of its outstanding  debt,
and would (if  the  Company does not elect to exercise its preemptive rights to
purchase its PRO RATA  share  of the additional equity) result in the Company's
17% interest in the outstanding  capital stock of BAESA being diluted to a .34%
interest.  The Company withdrew its  interest  in BAESA Shareholder Associates,
and   liquidated  Argentine  Bottling  Associates,  two   partnerships,   which
previously held the Company's interest in BAESA during fiscal year 1997.  These
actions  have  resulted  in  the Company holding its BAESA shares directly, and
eliminates for future periods,  the  accounting  requirement  that  the Company
report on an equity basis the results of operations of BAESA.

      ACCOUNTING IRREGULARITIES

      During  1996,  the  Company  discovered  accounting  irregularities  that
required  it to restate its financial results for the first and second quarters
ended December 31, 1995 and March 31, 1996.  These irregularities resulted in a
substantial  understatement  of  certain  expenses,  primarily  discounting and
marketing  expenses,  and  a  corresponding overstatement of operating  income.
This restatement resulted in an operating loss in both quarters.

      After discovering the accounting  irregularities,  the Company's Board of
Directors  retained  Rogers  &  Wells  as  independent  counsel to  conduct  an
investigation  of  the  circumstances  which  resulted  in the  irregularities.
Rogers  &  Wells,  working  with  the  independent  accounting  firm  of  Price
Waterhouse,  which was retained to assist with the investigation,  conducted  a
thorough investigation  of  these  circumstances  and  made  its  report to the
Company's Board of Directors.

      The decision to retain Rogers & Wells (working with Price Waterhouse) was
made  by  the  Company's  full  Board of Directors, and not a special committee
composed entirely of disinterested  directors,  because  at  the  time  of that
decision the Company had only one disinterested director and because the  Board
felt  that it was appropriate, under these circumstances, for that decision  to
be made  by  the full Board of Directors.  Prior to the investigation, Rogers &
Wells had acted as special securities counsel for the Company, including acting
as  counsel in  connection  with  the  Company's  initial  public  offering  in
September  1995.   The results of the investigation were communicated orally to
the Company's Board  of  Directors and no written report was issued by Rogers &
Wells.  The decision not to  request  a  written report from Rogers & Wells was
based  on  the  advice  of the Company's counsel,  including  Rogers  &  Wells,
handling  shareholder  litigation   which   arose   out   of   the   accounting
irregularities  (which now has been settled) that there was a substantial  risk
that any such written  report  would  not  qualify  for  the  protection of 

                                  15

<PAGE>

the attorney/client privilege and thus that an oral rather than a written 
report to the Board of Directors was advisable.  In connection with the 
investigation, Rogers & Wells was given complete access to all employees,
officers and directors of the Company and all of its books and records.   The
core investigation took place over a period of approximately two months and 
included in excess of 30 interviews of the Company employees, officers and 
directors and review of numerous documents.

      Taking  into  consideration  the  findings  of  the  investigation and in
consultation   with   the   Company's  independent  auditors  regarding   their
materiality, the Company concluded  that  the  irregularities  did  not  have a
material  effect  on  any  Company  financial statements prior to the first and
second quarters of fiscal 1996, and thus  that  no  restatements  for any prior
periods were required.

      Based  on  the  Company's  investigation,  the Company believes that  the
accounting irregularities involved a series of entries  made  in  the Company's
accounting records by certain employees of the Company which had the  effect of
improperly  recording  certain  expenses  (primarily  marketing and discounting
expenses) as non-chargeable items, or of not recording  such  expenses  at all.
These  entries  resulted  in  a  corresponding  overstatement  of the Company's
operating income.

      In consultation with its auditors, and with Price Waterhouse  LLP,  which
assisted  with  the  independent  counsel  investigation  into  the  accounting
irregularities, the Company has taken definitive steps to insure that  internal
management   and   accounting   controls   will   prevent   future   accounting
irregularities.   Certain  employees  who the Company believes were principally
involved in causing the accounting irregularities are no longer employed by the
Company  or remain under strict supervision.   In  addition,  the  Company  has
replaced the  senior officer in charge of the Company's accounting records with
an individual whose  integrity  is  not in question.  The Company has adopted a
comprehensive series of strict new internal  management and accounting controls
including  implementation  of  strict  control  over  preparation,  review  and
documentation of all entries to the Company's books  of account, monthly review
of all journal entries by the Company's independent internal audit function and
adoption of a corporate code of ethics.  There is, as  well, a heightened level
of awareness on the part of the internal audit committee.   The chairmanship of
the committee has been assigned to a person very experienced  in  the  field of
public  accounting.   Analysis  of  sensitive  and  critical  accounts is being
reviewed  at the highest levels of management.  Furthermore, implementation  of
procedures to liquidate those accounts related to credits and discounts granted
to customers  on  a  timely  basis,  so  as  to reduce the level of uncertainty
inherent in estimating the appropriate balance  accrued  at  the  end  of  each
month, have been implemented.  Finally, a process of mutual reconciliation with
the Company's franchisor in so far as amounts due from and to it at the end  of
each month has been implemented.

      SEASONALITY

      The  historical  results  of  operations  of  the  Company  have not been
significantly seasonal.  The Company believes that this could have  been partly
attributable  to existing capacity constraints while operating out of  the  old
plant which might  have  prevented  the  Company  from meeting increased demand
during  peak periods.  However, the Company anticipates  that  its  results  of
operations  in  the  future  may be somewhat seasonal in the summer and holiday
seasons.

      CARBONATED BEVERAGE TAX

      Prior to May 1991, carbonated  beverages  were  not subject to any excise
taxes in Puerto Rico.  From May 24, 1991 through December  31, 1993, the Puerto
Rican government imposed the Carbonated Beverage Tax of 13.5 cents per liter on
all  carbonated  beverages  manufactured  in,  or  imported  to,  Puerto  Rico,
including  extracts  or  syrups  used  as  raw material for the manufacture  of
finished  products.   The  imposition  of the Carbonated  Beverage  Tax  had  a
material adverse effect on the operations,  sales  and  profits  of  soft drink
bottlers  in Puerto Rico, including the Company, due to the resulting depressed
level of demand  and  the Company's inability to pass on the full effect of the
tax to its customers.   As  of January 1, 1994, the Carbonated Beverage Tax was
repealed and carbonated beverages  were  subjected  to the lower general excise
tax imposed on most consumer goods in Puerto Rico.  The  current  excise tax on
carbonated  beverages  is  5%  of the "taxable price in Puerto Rico," which  is
defined as 72% of the manufacturer's  sales  price for products manufactured in
Puerto Rico.  The Company is thus currently 

                                  16

<PAGE>

subject  to  an  excise  tax  at an effective  rate  of  3.6%  (or 72% of 5%) of
the sales  price of  its soft drink products which represents  approximately 1.5
cents per liter.

      The amount of excise taxes  paid  by  the  Company  on  its  products  is
deducted  from  the Company's gross sales; thus the Company's net sales reflect
this deduction.   The  Company's  net  sales decreased significantly during the
periods in which the Carbonated Beverage  Tax  was  in  effect.   The amount of
excise tax paid by the Company was $6.0 million in the fiscal year  1994,  $2.3
million in the fiscal year 1995, $2.5 million in the fiscal year 1996, and $2.4
million  in  the  fiscal year 1997 corresponding to approximately 4%, 2%, 2.4%,
and 2.5% of gross sales, respectively.

      INCOME TAXES

      The Company's  income is subject to various methods of taxation.  Certain
of the Company's wholly  owned  subsidiaries  qualify  and  have  elected to be
treated as Section 936 Corporations under the Internal Revenue Code.   Pursuant
to  such  election,  the  majority  of  income  derived  from  the  Puerto Rico
operations  of  such  subsidiaries is entitled to a tax credit for purposes  of
U.S. Federal income taxation.   Nevertheless,  such  operations  are subject to
Puerto Rican taxation (at graduated statutory rates between 22% and 45% through
June  30, 1995 and between 22% and 43% for tax years beginning after  June  30,
1995).  However, the Company has been subject to a lower effective Puerto Rican
tax rate  due to the availability of net operating losses from its Puerto Rican
operations  which  offset Puerto Rican taxable earnings and the availability of
certain tax exemptions  granted  by the Puerto Rican tax authority with respect
to the Company's plastics operations.

      In this connection, on August  20,  1996,  the U.S. Congress adopted, and
President Clinton signed into law, the Small Business  Job Protection Act which
generally repealed the Section 936 tax reductions.  A ten-year phase out of the
Section 936 tax credit was adopted for existing credit claimants and the credit
was eliminated for companies establishing new Puerto Rico  operations  and  for
existing  companies  that  add  substantial new lines of business within Puerto
Rico.  This Act is effective for  tax  years beginning after December 31, 1995.
Existing claimants may elect to utilize  reduced credit bases on the applicable
percentage  limitations  or  utilize the economic  activity  limitations.   The
Company has been utilizing the  economic  activity  limitations  and  does  not
anticipate changing its election.

      As   of  September  30,  1997,  the  Company  and  its  subsidiaries  had
approximately $68.9 million in net operating losses available to offset against
future earnings for purposes of Puerto Rican taxation and $37.7 million in U.S.
net operating  losses.   The net operating losses belong to the Company and its
manufacturing and distributing  subsidiaries.   For  Puerto  Rican and U.S. tax
purposes,   related  entities  such  as  the  Company  and  its  wholly   owned
subsidiaries  may  not  join in the filing of a consolidated income tax return.
As a result, the net operating  losses  of  one  entity  may not be absorbed or
utilized to offset the taxable income of any other related  entity.   Only  the
entity  that  generated  losses  may  use  such losses to offset its own future
taxable income.  See "Note 7 to the Consolidated  Financial  Statements  of the
Company."

                                  18

<PAGE>

THE COMPANY

      GENERAL

      The  following  table  sets  forth  certain  financial  information  as a
percentage of net sales for the Company for the periods indicated.

<TABLE>
<CAPTION>
                                                                            FISCAL YEAR
                                                              --------------------------------------------
                                                           1997                1996               1995
                                                              ----                ----                ----
<S>                                                           <C>                 <C>                <C>
Net Sales                                                  100.0%              100.0%             100.0%
Cost of Sales                                               68.8                72.8               59.4
Gross Profit                                                31.2                27.2               40.6
Selling and Marketing Expenses                              30.5                41.3               26.6
Administrative Expenses                                      8.5                 9.3                5.5
Intangibles and Fixed Asset Write-offs and Restructuring      .5                 2.6                 -
Charges
Settlement expenses                                         13.3                   -                 -
Income (Loss) from Operations                              (21.6)              (26.1)               8.5

</TABLE>

      FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996

      NET  SALES.   Net  sales for the Company decreased $3.7 million, or 3.6%,
for fiscal year 1997 from  fiscal  year  1996, to $99.2 million.  This decrease
was primarily the result of the significant  increase  in discounts provided to
customers, partially offset by a 4.0% increase in sales  volume  in fiscal year
1997 as compared to fiscal year 1996.  The increase in discounts resulted  from
intense  competitive  activity.   The average net sales price on an eight ounce
serving equivalent basis decreased  during  fiscal  year  1997 by approximately
7.3% as compared to fiscal year 1996.

      COST OF SALES.  Cost of sales for the Company decreased  by $6.7 million,
or  8.9%, to $68.3 million  for fiscal year 1997 from fiscal year  1996.   This
decrease  was  primarily the result of lower raw material costs and lower labor
costs, partially  offset  by  a  4.0%  increase  in  sales volume and by higher
depreciation costs for the new manufacturing facility  in  fiscal  year 1997 as
compared to fiscal year 1996.

      GROSS PROFIT.  Gross profit for the Company increased by $3.0  million to
$30.9 million for fiscal year 1997 from $27.9 million in fiscal year 1996.   As
a  percentage of net sales, gross profit increased to 31.2% in fiscal year 1997
from  27.2%  in  fiscal  year  1996.   The  increase  was  primarily due to the
increased  sales  volume  of  4.0%, offset in part by lower average  net  sales
price, and the lower cost of sales  which  was  due to lower raw material costs
and labor costs, partially offset by the increased  depreciation  costs  of the
Toa Baja Plant.

      SELLING  AND  MARKETING  EXPENSES.  The Company has a number of marketing
arrangements with PepsiCo pursuant  to  which  the  Company is required to make
certain  investments  in marketing, new products, packaging  introductions  and
certain capital goods.   The Company receives reimbursements from PepsiCo for a
portion of such expenditures,  which  it  is  able to use to offset traditional
marketing  expenses  or to acquire fixed assets.   The  Company's  selling  and
marketing expenses are shown net of all such reimbursements from PepsiCo.

      Selling  and marketing  expenses  for  the  Company  decreased  by  $12.2
million, or 28.8%, to $30.2 million for fiscal year 1997 from fiscal year 1996.
This decrease was  primarily  due  to  reductions in marketing spending of $8.2
million, reductions in labor costs of $1.5  million,  reductions  in  fleet and
other  maintenance  costs of $1.8 million, a reduction in insurance expense  of
$.5 million and net reductions in security and other expenses of $.2 million in
fiscal year 1997 as compared  to  fiscal  year  1996.   As  a percentage of net
sales,  selling  and marketing expenses decreased to 30.5% during  1997  fiscal
year as compared to 41.3% for fiscal year 1996.

      ADMINISTRATIVE   EXPENSES.    Administrative  expenses  for  the  Company
decreased by $1.2 million, or 12.3%,  to  $8.4 million, for 1997 fiscal year as
compared to fiscal year 1996.  This decrease  was primarily the result of lower
professional fees incurred in fiscal year 1997,  due in part to the recovery of
$1.5  million  from  the Company's 

                                  18

<PAGE>

officers and directors  liability insurance carrier, as compared to fiscal year
1996.   As a percentage of net sales, administrative expenses decreased to 8.5%
during fiscal year 1997 from  9.3% in fiscal year 1996.

      SETTLEMENT OF LITIGATION.  The Company's results of operations for fiscal
year  1997  were  affected  by  the  incurrence  of a non-cash expense of $13.2
million  in  connection  with  the  Company's  settlement   of   certain  civil
litigation,  representing  the  estimated value of 2.5 million Class  B  Shares
which were transferred as part of  the  settlement.   Because these shares were
contributed to the Company by the Company's founding shareholders,  and because
the  Company  received  a  $4.0  million  recovery from its liability insurance
carrier, the net effect on the Company's equity  of  the settlement transaction
was  a  $1.5  million  gain,  which can be viewed as a recovery  of  previously
expensed legal cost.  There was  no  similar  non-cash  expense incurred during
fiscal  year  1996.   For  further  information  regarding the  effect  on  the
Company's  results  of  operations  of  certain transactions  relating  to  the
settlement, see Note 12B of Notes to Consolidated Financial Statements.

      RESTRUCTURING CHARGES.  The Company's  results  of  operations for fiscal
year ended 1997 were affected by the incurrence of a nonrecurring restructuring
charge of $.5 million.  This charge was for the costs associated  with employee
terminations  which  resulted  in  a  reduction of the Company's work force  by
approximately  5%.  During fiscal year 1996,  a  charge  of  $2.9  million  was
recorded.  The 1996  charge  was  recorded  in  connection with the fixed asset
write-down of $1.4 million related to the closing of all bottling operations in
the Company's old bottling plant, which is now for  sale,  and  $1.5 million in
pension asset write-offs and costs associated with employee terminations.

      INCOME  (LOSS)  FROM OPERATIONS.  Income (loss) from operations  for  the
Company increased to ($21.4)  million  during  fiscal  year  1997, from ($26.8)
million for fiscal year 1996.  The increase is the result of (i)  a  $3 million
improvement in gross profit resulting from higher unit sales volume of  4%, and
lower  raw  material  and  labor  costs,  partially offset by lower net selling
prices due to increased discounts offered to  customers and higher depreciation
expense, (ii) lower selling and marketing costs  of  $12.2 million, (iii) lower
administrative  expenses  of  $1.2  million,  (iv)  the incurrence  of  noncash
settlement  of  litigation  costs  of  $13.2 million, and  (v)  a  decrease  in
restructuring charges of $2.2 million.

      EQUITY IN NET EARNINGS (LOSS) OF BAESA.  Based on information made public
by BAESA, equity in net loss of BAESA, net  of  income tax, amounted to ($51.5)
million for fiscal year 1996. The Company's equity  in  the  loss  reported  by
BAESA for fiscal year 1996 was such that it reduced the Company's investment to
zero,  meaning  that  no further equity in losses of BAESA would be reported by
the Company until BAESA  reported  profits  sufficient  to  produce  a positive
investment  in  BAESA  on  the  Company's  balance sheet.  No such profits were
realized during fiscal year 1997.  As a result  of  withdrawal  of  partnership
interest  in  BAESA  Shareholder  Associates  and  the liquidation of Argentine
Bottling Associates, an affiliated partnership through  which  the Company held
its  investment  in  BAESA,  the  Company  will  no  longer  be subject to  the
accounting  requirement  that  requires  the Company to report the  results  of
operations of BAESA on an equity basis.

      INCOME TAX BENEFIT.  Income tax benefit  was $3.3 million for fiscal year
1997  as  compared  to $1.2 million for fiscal year  1996.   The  increase  was
primarily due to income tax benefit arising from the carry back of current year
losses to fiscal year 1994.

      NET INCOME (LOSS).   Net  loss  for fiscal year 1997 was ($19.5) million,
compared to ($74.3) million for fiscal  year 1996.  Net loss during fiscal year
1997 primarily reflects loss before equity  in  net  loss  of  BAESA of ($19.5)
million, as compared to ($22.9) million of loss before equity in  net  loss  of
BAESA and equity in net loss of BAESA of ($51.5) million for fiscal year 1996.

      FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995

      NET  SALES.   Net  sales  for  the Company decreased by $11.4 million, or
10.0%, for fiscal year 1996 from fiscal  year  1995,  to  $102.9 million.  This
decrease  was  primarily  the result of the significant increase  in  discounts
provided to customers, partially  offset  by a 4.5% increase in sales volume in
fiscal year 1996 as compared to fiscal year  1995.   The  increase in discounts
resulted from intense competitive activity.  The average net  sales price on an

                                  19

<PAGE>

eight  ounce  serving  equivalent  basis decreased during fiscal year  1996  by
approximately 14.5% as compared to fiscal year 1995.

      COST OF SALES.  Cost of sales  for the Company increased by $7.1 million,
or 10.5%, for fiscal year 1996 from fiscal  year  1995, to $75.0 million.  This
increase resulted primarily from the increase in sales  volume, the increase in
the costs of certain raw materials, the costs associated  with  the start-up of
the  new manufacturing facility in Toa Baja, and the inefficiencies  associated
with operating  both  manufacturing facilities, during the transition period to
the new plant which occurred in the third quarter.

      GROSS PROFIT.  Gross profit for the Company decreased by $18.5 million to
$27.9 million for fiscal  year 1996 from $46.5 million in fiscal year 1995.  As
a percentage of net sales,  gross profit decreased to 27.2% in fiscal year 1996
from  40.6%  in fiscal year 1995  due  to  the  higher  discounts  provided  to
customers, increased  sales  volume  at  the  corresponding  lower  average net
selling  prices,  and  the  higher  cost  of  sales  due  to raw material price
increases, higher temporary costs of production associated with the start-up of
the new manufacturing plant in Toa Baja, and the operation  of both the old and
new  production  facilities  during the start-up of the Toa Baja  manufacturing
facility.

      SELLING AND MARKETING EXPENSES.   The  Company  has a number of marketing
arrangements with PepsiCo pursuant to which the Company  is  required  to  make
certain  investments  in  marketing,  new products, packaging introductions and
certain capital goods.  The Company receives  reimbursements from PepsiCo for a
portion of such expenditures, which it is able  to  use  to  offset traditional
marketing  expenses  or  to  acquire fixed assets.  The Company's  selling  and
marketing expenses are shown net of all such reimbursements from PepsiCo.

      Selling and marketing expenses  for  the Company increased $12.0 million,
or 39.4%, to $42.5 million for fiscal year 1996  from  fiscal  year 1995.  This
increase  was  primarily  the  result of increased marketing activities  during
fiscal  year  1996  resulting  primarily   from   a   significant  increase  in
competition,  expenses associated with the launch of Teem,  a  lemon/lime  soft
drink, which was  launched during October 1995, as well as additional marketing
activities undertaken  to  promote  the Company's products.  This increase also
resulted from recognizing in fiscal year  1996  certain  prepaid  marketing and
expense items carried over from prior periods.

      ADMINISTRATIVE   EXPENSES.    Administrative  expenses  for  the  Company
increased by $3.3 million, or 53.4%,  for  fiscal  year  1996  from fiscal year
1995, to $9.6 million.  This increase was primarily a result of $1.4 million of
cost  of  increased professional services associated with the Company  being  a
public company  and the transition to the new management, $0.9 million of legal
and accounting costs  associated  with  the  restatement  of  first  and second
quarter results and professional fees associated with certain civil litigation,
a  $0.5  million expense incurred in connection with the accelerated transition
of management  control  of  BAESA  to PepsiCo, effective July 1, 1996, and $0.5
million  in  expenses  associated  with   the   Company's  study  of  expansion
opportunities  within  Western  Europe.   As  a  percentage   of   net   sales,
administrative expenses increased to 9.3% during fiscal year 1996 from 5.5%  in
fiscal year 1995.

      RESTRUCTURING  CHARGES.   The  Company's results of operations for fiscal
year  1996  have  been  affected  by  the incurrence  of  several  nonrecurring
restructuring charges of $2.7 million.   These  charges  were  comprised of the
following:  (i)  a $1.4 million fixed asset write-down related to  closing  all
bottling operations  in the Company's old bottling plant, which is now for sale
and (ii) $1.3 million  in  pension  asset  write-offs and costs associated with
employee terminations.

      INCOME (LOSS) FROM OPERATIONS.  Income  (loss)  from  operations  for the
Company decreased to ($26.8) million during fiscal year 1996, from $9.7 million
for  fiscal year 1995.  The decrease was the result of lower average net sales,
the increased discounts offered to customers, a significant increase in selling
and marketing expenditures, higher professional fees, the restructuring charges
of $2.7  million,  and  the recognition of certain charges, including marketing
and other expenses, and the  write-off  prepaid  tax  carried  over  from prior
periods.

                                  20

<PAGE>

      GAIN  ON  EARLY  TERMINATION OF SUPPLY AGREEMENT.  This item consists  of
gain realized from the cancellation  of the preform supply agreement with BAESA
and corresponding extinguishment of any  debt  due to BAESA.  See Note 8 to the
Consolidated Financial Statements.

      EQUITY   IN  NET  EARNINGS  (LOSS)  OF  BAESA.   Based   on   information
disseminated  after  July  1,  1996  by  BAESA  (when  the  Company  no  longer
controlled, or  had significant influence over, the management or operations of
BAESA), equity in  net  loss  of  BAESA, net of income tax, amounted to ($51.5)
million during fiscal year 1996, compared  to $5.6 million in fiscal year 1995.
The decrease is attributable to the losses incurred  by  BAESA  for fiscal year
1996 as reported in BAESA's public announcement.  The Company's equity  in  the
loss  reported  by  BAESA  reduced  the  Company's investment in BAESA to zero,
meaning that no further equity in losses of  BAESA  would  be  reported  by the
Company   until  BAESA  reported  profits  sufficient  to  produce  a  positive
investment  in BAESA on the Company's balance sheet.  As a result of withdrawal
of partnership  interest in BAESA Shareholder Associates and the liquidation of
Argentine Bottling  Associates,  an  affiliated  partnership  through which the
Company held its investment in BAESA, the Company will no longer  be subject to
the accounting requirement that requires the Company to report the  results  of
operations of BAESA on an equity basis.

      NET INCOME (LOSS).  Net loss during fiscal year 1996 was ($74.3) million,
compared  to  income of $15.1 million during fiscal year 1995.  Net loss during
fiscal year 1996  primarily reflects loss before equity in net earnings loss of
BAESA of ($22.9) million, and equity in net loss of BAESA, net of income tax of
($51.5) million, as  compared  to income before equity in net earnings of BAESA
of $9.4 million and equity in earnings  of  BAESA  of  $5.6  million during the
fiscal year 1995.

      LIQUIDITY AND CAPITAL RESOURCES

      At  September 30, 1997, the Company had $19.4 million of  cash  and  cash
equivalents and indebtedness for borrowed money, including short-term and long-
term borrowings  and  capital lease obligations of $31.5 million, which in turn
included $7.3 million of current and short-term obligations.

      The  Company has announced  that  its  current  priority  is  to  restore
profitability with respect to its Puerto Rican operations.  In that connection,
the Company previously made a decision to set aside its expansion plans.  As of
September 30,  1997,  the  Company has used approximately $23.5 million, net of
interest earnings, of the cash set aside from its September 1995 initial public
offering to support these efforts  for  the  repayment  of  indebtedness and by
additions to the Company's working capital which has been and  continues  to be
affected  as  a  result  of  the Company's net operating losses, and to cover a
portion of the cost of the offering.   In  addition,  on  April  8,  1997,  the
Company  completed  the  refinancing of its remaining debt to include a payment
schedule which more closely matches the life of its production assets.

      Net cash provided by  (used  in) operating activities for the Company was
($7.5) million for fiscal year 1997  as compared with ($6.8) million for fiscal
year 1996 and $16.5 million for fiscal  year  1995.   The  net cash provided by
(used in) operating activities excluding the portion due to  changes  in assets
and liabilities was $.4 million during fiscal year 1997, ($19.8) million during
fiscal  year  1996,  and  $13.8  million during fiscal year 1995.  The net cash
provided by (used in) operating activities  that  was  due to changes in assets
and  liabilities  was  ($7.9)  million during fiscal year 1997,  $13.0  million
during fiscal year 1996, and $2.7  million  during  fiscal  year  1995.   As of
September  30,  1997, the Company had $68.9 million in net operating loss carry
forwards available to offset future Puerto Rican income taxes and $37.7 million
in net operating  loss  carryforwards  available  to offset future U.S. taxable
income.

      Net cash provided by (used in) investing activities  for  the Company was
$8.5 million for fiscal year 1997, as compared with ($33.0) million  for fiscal
year  1996  and  ($5.9)  million  for fiscal year 1995.  Purchases of property,
plant and equipment, net of disposals, amounted to ($4.4) million during fiscal
year 1997 as compared with ($22.9)  million  during fiscal year 1996 and ($8.8)
million during fiscal year 1995.  Purchases of short term investments were zero
during fiscal year 1997 as compared to ($12.9)  for  fiscal  year 1996 and zero
for  fiscal year 1995.  The short-term investments in 1996 consisted  of  short
term discount  notes  which  the  Company held until maturity in 1997.  No such
purchases were made during fiscal year  1997  or 1995.  Dividends received from
BAESA 

                                  21

<PAGE>

amounted to zero in fiscal year 1997 as compared  with  $2.8  million in fiscal
year  1996  and  $2.8  million  in  fiscal year 1995.  In view  of  the current
financial  difficulties  being  experienced  by BAESA as reported in its recent
public announcements, the Company does not believe  that  BAESA  will  be  in a
position  to  pay  dividends  on  its  shares  in  the  foreseeable future.  In
addition,  because the Company exerts no influence over BAESA,  even  if  BAESA
does return to profitability, the Company would not be able to affect decisions
made by BAESA  with  respect  to  the  payment  of dividends.  As a result, the
Company  is  unable  to  predict  whether or when BAESA  will  pay  any  future
dividends.  Also, if BAESA proceeds  with  its  previously  announced financial
restructuring, and the Company does not elect to exercise its preemptive rights
to  purchase  additional  equity  in  BAESA, the Company's current  17%  equity
interest in BAESA will be diluted to a .34% equity interest.

      Cash flows provided by (used in)  financing  activities  for  the Company
were  ($.2)  million  for  fiscal year 1997 as compared with $12.3 million  for
fiscal year 1996 and $34.2 million  for  fiscal  year  1995.   The  significant
financing activity for the Company in fiscal year 1997 was the net repayment of
indebtedness  of ($.2) million.  The significant financing activities  for  the
Company in fiscal  year  1996 were the payment of dividends and the issuance of
notes payable of $47.9 million,  offset  by  the  repayment  of  debt  of $30.2
million.   The  significant financing activities of the Company in fiscal  year
1995 were from the  issuance  of 3.5 million Class B Common Shares in a primary
offering in the Company's initial  public  offering  as  well as the payment of
dividends and the repayment of debt.  In the future, the payment  of  dividends
will be dependent on the achievement of adequate levels of profitability in the
Company's  Puerto  Rican operations, and, under certain conditions, the consent
by Banco Popular.  The  Company  does  not  expect to pay any dividends for the
foreseeable future.

      In November 1994, the Company and its subsidiaries  entered into a Credit
Agreement  (the "Credit Agreement") with Banco Popular.  The  Credit  Agreement
provided for  borrowings  by  the  Company  from  time to time of $5 million in
revolving  loans, $8.8 million in term loans and $15  million  in  nonrevolving
loans.  In December  1995, Banco Popular increased the amount the Company could
borrow  under  revolving  loans.   As  of  March  31,  1996,  the  Company  had
outstanding  under  the  Credit  Agreement  revolving  loans  in  an  aggregate
principal amount  of $10.0 million, term loans in an aggregate principal amount
of $5.3 million and  nonrevolving  loans  in  an  aggregate principal amount of
$15.0 million.  On April 8, 1997, the Company entered  into  a  Second Restated
Credit  Agreement (the "Second Restated Credit Agreement") with Banco  Popular.
The effect  of this new agreement was to restructure the existing debt into two
portions, a long-term  loan  of $25.0 million and a short term revolving credit
facility of $5.0 million.  Both portions bear interest at 2.5% over LIBOR.  The
Second  Restated Credit Agreement  was  entered  into  to  refinance  the  debt
outstanding under the Credit Agreement which had become due.

      The  weighted  average  interest rate on such borrowings was 8.2% for the
fiscal year 1997.  Beginning on  May  1,  1997,  the Company became required to
make monthly payments of principal in the amount of  $.83  million with respect
to the new term loan for the first two years of the loan with annual escalating
monthly payments thereafter until the end of the tenth year  of the loan (April
1, 2007) when a $11.8 million balloon payment is due.  The Company  may  prepay
certain of the loans subject to the terms and conditions of the Second Restated
Credit Agreement.

      Under  the terms of the Second Restated Credit Agreement, the Company  is
subject to the following financial restrictions:  (i) the Company must maintain
a minimum ratio  of  Total Liabilities to Tangible Net Worth (as defined in the
Second Restated Credit  Agreement)  of  not more than 1.50 to 1 for fiscal year
1998 and for each fiscal year thereafter during the term of the Second Restated
Credit Agreement; (ii) a ratio of Operating Cash Flow to Total Debt Service (as
defined in the Second Restated Credit Agreement)  of 1.00 to 1 through June 30,
1998, 1.30 to 1 from September 30, 1998 through June  30,  1999,  and  1.5 to 1
thereafter;  (iii)  a  minimum  Tangible Net Worth of (as defined in the Second
Restated Credit Agreement) $39.5  million  on  September  30,  1998  and of $42
million,  $44.5  million and $47 million, respectively, by September 30,  1999,
2000, 2001, and thereafter.   The  Company  is  also  required to maintain with
Banco Popular a minimum cash balance of $10 million less certain prepayments of
indebtedness under the term loan, and under certain conditions  this amount may
be reduced to zero.  In addition, under certain circumstances, the  Company may
be  required  to  prepay a portion of the debt.  Specifically, net proceeds  of
capital asset dispositions  over  $.25  million  per year, insurance recoveries
other  than for business interruption not promptly  applied  toward  repair  or
replacement,  a  portion of excess cash flow (as 

                                  22

<PAGE>

defined in the Second Restated Credit Agreement), and a portion of net proceeds
associated with any sale  of  Class  A Shares, require early  repayment  of the
amounts outstanding under  this  agreement.  Certain of the  repayment  amounts
offset the  minimum  cash  balance  requirement. The entire principal amount of
loans   outstanding   under   the  Second  Restated  Credit  Agreement  becomes
immediately  due  and payable, if  the  Company violates any of these financial
restrictions.  In  addition,  the  Company may not pay  dividends  (other  than
amounts declared by and received from BAESA as dividends)  without  the consent
of  Banco  Popular under  the  Second  Restated Credit Agreement.  Furthermore,
depending upon the type of the restructuring plan that may be adopted by BAESA,
there may be certain indirect effects on the Company's rights  and  obligations
under the  credit facility.  For example, if BAESA  makes a  rights offering as
part  of  its  long  term  restructuring  plan,  and  if the Company chooses to
exercise  its rights in such rights offering, then Company may need the written
consent  of  Banco  Popular prior to the exercise of its rights. Similarly, the
Company's ability to  use  any proceeds that it may receive either from sale of
BAESA's  stock  or  through  any  future  distributions  made  by BAESA to  its
shareholders, may  be  restricted  by  certain financial covenants contained in
the Second Restated  Credit  Agreement.  However,  the  Company  believes  that
BAESA's  long  term  restructuring  plan  will  not have a direct and immediate
effect  on the rights and  obligations of the Company under the credit facility
with Banco Popular.

      As a result of the Company initially providing to Banco Popular incorrect
financial statements for the first and second quarters  ended December 31, 1995
and  March  31,  1996,  and  certain other circumstances, the  Company  was  in
technical default of the terms  of  the  Credit Agreement during part of fiscal
year 1996.  The Company has, however, received  from  Banco  Popular  a written
waiver  of  such  default.   The  Company believes that it is currently in full
compliance with the terms of the Second Restated Credit Agreement.

      Pursuant to the Second Restated Credit Agreement, the Company has granted
Banco  Popular  a  security  interest  in  all  its  machinery  and  equipment,
receivables, inventory and the real property  on  which  the Toa Baja plant and
the Rio Piedras plant are located.

      The Company's franchise arrangements with PepsiCo require the Company not
to exceed a ratio of senior debt to subordinated debt to equity  of 65 to 25 to
10.   The  Company  is  currently  in  compliance  with  these covenants.   See
"Business of the Company - Franchise Arrangements."

      Capital expenditures for the Company totaled $4.8 million  in fiscal year
1997, $24.2 million in fiscal year 1996 and $10.4 million in fiscal  year 1995.
The  Company's  capital  expenditures  have  been financed by a combination  of
borrowings  from  third parties and internally generated  funds.   The  Company
estimates that its  capital  expenditures  for the Company for the fiscal years
ending September 30, 1998 and 1999 will be approximately  $4  million  in  each
year.

                                  23

<PAGE>
                                  SIGNATURES

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

                                 PEPSI-COLA PUERTO  RICO  BOTTLING COMPANY

                                          By:   /s/ RAFAEL NIN
                                                -------------------------------
                                                Name:  Rafael Nin
                                                Title:  Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on behalf of the
Registrant in the capacities and on the 13th day of April, 1998.

<TABLE>
<CAPTION>
           SIGNATURES                                                TITLE
            ----------                                                  -----
<S>                                                          <C>
/S/ RAFAEL NIN                                               Director and Chief Executive
-------------------------                                       Officer
Rafael Nin                                        

/S/ JOHN WILLIAM BECK                                        Director and Chairman
-------------------------				     of the Board of Directors
John William Beck

/S/ CHARLES R. KRAUSER                                       Director
-------------------------
Charles R. Krauser

/S/ BASIL K. VASILIOU                                        Director
-------------------------
Basil K. Vasiliou 

/S/ C. LEON TIMOTHY                                          Director
-------------------------
C. Leon Timothy

/S/ RICHARD REISS                                            Director
-------------------------
Richard Reiss

/S/ SUTTON KEANY                                             Director
-------------------------
Sutton Keany


/S/ DAVID L. VIRGINIA                                        Vice President and
-------------------------                                       Chief Financial Officer
David L. Virginia                                          


/S/ WANDA RIVERA ORTIZ                                       Chief Accounting Officer
-------------------------
Wanda Rivera Ortiz

</TABLE>