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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]   Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934
                  For the Fiscal Year Ended December 27, 2003

                                       or

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 (No Fee Required)

               For the transition period from ________ to ________

                       Commission file number 333-80361-01

                               BOTTLING GROUP, LLC
             (Exact name of Registrant as Specified in its Charter)

           ORGANIZED IN DELAWARE                          13-4042452
      (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)

                ONE PEPSI WAY
               SOMERS, NEW YORK                                  10589
  (Address of Principal Executive Offices)                    (Zip code)

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

                            -------------------------
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
        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. YES [X] 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. [X]

INDICATE BY CHECKMARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS DEFINED
IN EXCHANGE ACT RULE 12b-2). YES [ ] NO [X]

         THE AGGREGATE MARKET VALUE OF BOTTLING GROUP, LLC CAPITAL STOCK HELD
BY NON-AFFILIATES OF BOTTLING GROUP, LLC AS OF JUNE 14, 2003 WAS $0.

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                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     Bottling Group, LLC ("Bottling LLC") is the principal operating subsidiary
of The Pepsi Bottling Group, Inc. ("PBG") and consists of substantially all of
the operations and assets of PBG. Bottling LLC, which is fully consolidated by
PBG, consists of bottling operations located in the United States, Canada,
Spain, Greece, Russia, Turkey and Mexico. Prior to its formation, Bottling LLC
was an operating unit of PepsiCo, Inc. ("PepsiCo"). When used in this Report,
"Bottling LLC," "we," "us" and "our" each refers to Bottling Group, LLC and,
where appropriate, its subsidiaries.

     PBG was incorporated in Delaware in January, 1999, as a wholly owned
subsidiary of PepsiCo to effect the separation of most of PepsiCo's
company-owned bottling businesses. PBG became a publicly traded company on March
31, 1999. As of February 20, 2004, PepsiCo's ownership represented 40.8% of the
outstanding common stock and 100% of the outstanding Class B common stock,
together representing 46.0% of the voting power of all classes of PBG's voting
stock.

     PepsiCo and PBG contributed bottling businesses and assets used in the
bottling business to Bottling LLC in connection with the formation of Bottling
LLC. As a result of the contributions of assets and other subsequent
transactions, PBG owns 93.2% and PepsiCo owns the remaining 6.8% as of
December 27, 2003.

     PBG has made available, free of charge, the following governance materials
on its website at http://www.pbg.com under Corporate Governance: PBG's Corporate
Governance Principles and Practices, PBG's Worldwide Code of Conduct, PBG's
Audit and Affiliated Transactions Committee Charter, PBG's Compensation and
Management Development Committee Charter and PBG's Nominating and Corporate
Governance Committee Charter. These governance materials are available in print,
free of charge, to any shareholder upon request.

PRINCIPAL PRODUCTS

         We are the world's largest manufacturer, seller and distributor of
Pepsi-Cola beverages. The beverages sold by us include PEPSI-COLA, DIET PEPSI,
MOUNTAIN DEW, AQUAFINA, SIERRA MIST, LIPTON BRISK, DIET MOUNTAIN DEW, SOBE,
DOLE, and PEPSI VANILLA, and, outside the U.S., PEPSI-COLA, KAS, AQUA MINERALE,
MANZANITA SOL, and MIRINDA. In some of our territories, we have the right to
manufacture, sell and distribute soft drink products of companies other than
PepsiCo, including DR PEPPER, SQUIRT and through October 2003, ALL SPORT. We
also have the right in some of our territories to manufacture, sell and
distribute beverages under trademarks that we own, including ELECTROPURA and
GARCI CRESPO.

         We have the exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages in all or a portion of 41 states and the District of
Columbia in the U.S., nine Canadian provinces, Spain, Greece, Russia, Turkey and
all or a portion of 21 states in Mexico. In 2003, approximately 72% of our net
revenues were generated in the United States, 11% of our net revenues were
generated in Mexico and the remaining 17% was generated in Canada, Spain,
Greece, Russia and Turkey. We have an extensive direct store distribution system
in the United States, Mexico and Canada. In Russia, Spain, Greece and Turkey, we
use a combination of direct store distribution and distribution through
wholesalers, depending on local marketplace considerations.

RAW MATERIALS AND OTHER SUPPLIES

         We purchase the concentrates to manufacture Pepsi-Cola beverages and
other beverage products from PepsiCo and other beverage companies.

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         In addition to concentrates, we purchase sweeteners, glass and plastic
bottles, cans, closures, syrup containers, other packaging materials, carbon
dioxide and some finished goods. We generally purchase our raw materials, other
than concentrates, from multiple suppliers. PepsiCo acts as our agent for the
purchase of such raw materials in the United States and Canada and, with respect
to some of our raw materials, in certain of our international markets. The Pepsi
beverage agreements, as defined below, provide that, with respect to the
beverage products of PepsiCo, all authorized containers, closures, cases,
cartons and other packages and labels may be purchased only from manufacturers
approved by PepsiCo. There are no materials or supplies used by PBG that are
currently in short supply. The supply or cost of specific materials could be
adversely affected by various factors, including price changes, strikes, weather
conditions and governmental controls.

PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

         Our portfolio of beverage products includes some of the best recognized
trademarks in the world and includes PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW,
AQUAFINA, SIERRA MIST, LIPTON BRISK, DIET MOUNTAIN DEW, SOBE, DOLE, and PEPSI
VANILLA, and, outside the U.S., PEPSI-COLA, KAS, AQUA MINERALE, MANZANITA SOL,
and MIRINDA. In some of our territories, we have the right to manufacture, sell
and distribute beverage products of companies other than PepsiCo, including DR
PEPPER, SQUIRT and through October 2003, ALL SPORT. We also have the right in
some of our territories to manufacture, sell and distribute beverages under
trademarks that we own, including ELECTROPURA and GARCI CRESPO. The majority of
our volume is derived from brands licensed from PepsiCo or PepsiCo joint
ventures.

         We conduct our business primarily pursuant to PBG's beverage agreements
with PepsiCo. Although Bottling LLC is not a direct party to these agreements,
as the principal operating subsidiary of PBG, it enjoys certain rights and is
subject to certain obligations as described below. These agreements give us the
exclusive right to market, distribute, and produce beverage products of PepsiCo
in authorized containers in specified territories.

         Set forth below is a description of the Pepsi beverage agreements and
other bottling agreements from which we benefit and under which we are obligated
as the principal operating subsidiary of PBG.

         Terms of the Master Bottling Agreement. The Master Bottling Agreement
under which we manufacture, package, sell and distribute the cola beverages
bearing the PEPSI-COLA and PEPSI trademarks in the U.S. was entered into in
March of 1999. The Master Bottling Agreement gives us the exclusive and
perpetual right to distribute cola beverages for sale in specified territories
in authorized containers of the nature currently used by us. The Master Bottling
Agreement provides that we will purchase our entire requirements of concentrates
for the cola beverages from PepsiCo at prices, and on terms and conditions,
determined from time to time by PepsiCo. PepsiCo may determine from time to time
what types of containers to authorize for use by us. PepsiCo has no rights under
the Master Bottling Agreement with respect to the prices at which we sell our
products.

     Under the Master Bottling Agreement we are obligated to:

     (1)  maintain such plant and equipment, staff, and distribution and vending
          facilities that are capable of manufacturing, packaging and
          distributing the cola beverages in sufficient quantities to fully meet
          the demand for these beverages in our territories;

     (2)  undertake adequate quality control measures prescribed by PepsiCo;

     (3)  push vigorously the sale of the cola beverages in our territories;

     (4)  increase and fully meet the demand for the cola beverages in our
          territories;

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     (5)  use all approved means and spend such funds on advertising and other
          forms of marketing beverages as may be reasonably required to push
          vigorously the sale of cola beverages in our territories; and

     (6)  maintain such financial capacity as may be reasonably necessary to
          assure performance under the Master Bottling Agreement by us.

     The Master Bottling Agreement requires us to meet annually with PepsiCo to
discuss plans for the ensuing year and the following two years. At such
meetings, we are obligated to present plans that set out in reasonable detail
our marketing plan, our management plan and advertising plan with respect to the
cola beverages for the year. We must also present a financial plan showing that
we have the financial capacity to perform our duties and obligations under the
Master Bottling Agreement for that year, as well as sales, marketing,
advertising and capital expenditure plans for the two years following such year.
PepsiCo has the right to approve such plans, which approval shall not be
unreasonably withheld. In 2003, PepsiCo approved our plans.

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

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

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

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

     The Master Bottling Agreement provides that PepsiCo may in its sole
discretion reformulate any of the cola beverages or discontinue them, with some
limitations, so long as all cola beverages are not discontinued. PepsiCo may
also introduce new beverages under the PEPSI-COLA trademarks or any modification
thereof. When that occurs, we are obligated to manufacture, package, distribute
and sell such new beverages with the same obligations as then exist with respect
to other cola beverages. We are prohibited from producing or handling cola
products, other than those of PepsiCo, or products or packages that imitate,
infringe or cause confusion with the products, containers or trademarks of
PepsiCo. The Master Bottling Agreement also imposes requirements with respect to
the use of PepsiCo's trademarks, authorized containers, packaging and labeling.

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

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     Under the Master Bottling Agreement, PepsiCo has agreed not to withhold
approval for any acquisition of rights to manufacture and sell PEPSI trademarked
cola beverages within a specific area - currently representing approximately
12.6% of PepsiCo's U.S. bottling system in terms of volume - if we have
successfully negotiated the acquisition and, in PepsiCo's reasonable judgment,
satisfactorily performed our obligations under the Master Bottling Agreement. We
have agreed not to acquire or attempt to acquire any rights to manufacture and
sell PEPSI trademarked cola beverages outside of that specific area without
PepsiCo's prior written approval.

     The Master Bottling Agreement is perpetual, but may be terminated by
PepsiCo in the event of our default. Events of default include:

          (1)  PBG's insolvency, bankruptcy, dissolution, receivership or the
               like;

          (2)  any disposition of any voting securities of one of our bottling
               subsidiaries or substantially all of our bottling assets without
               the consent of PepsiCo;

          (3)  PBG's entry into any business other than the business of
               manufacturing, selling or distributing non-alcoholic beverages or
               any business which is directly related and incidental to such
               beverage business; and

          (4)  any material breach under the contract that remains uncured for
               120 days after notice by PepsiCo.

     An event of default will also occur if any person or affiliated group
acquires any contract, option, conversion privilege, or other right to acquire,
directly or indirectly, beneficial ownership of more than 15% of any class or
series of PBG's voting securities without the consent of PepsiCo. As of February
20, 2004, to our knowledge, no shareholder of PBG, other than PepsiCo, held more
than 10.6% of PBG's Common Stock.

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

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

         Terms of the Non-Cola Bottling Agreements. The beverage products
covered by the non-cola bottling agreements are beverages licensed to PBG by
PepsiCo, consisting of MOUNTAIN DEW, AQUAFINA, DIET MOUNTAIN DEW, MOUNTAIN DEW
CODE RED, SLICE, SIERRA MIST, FRUITWORKS, and MUG root beer and cream soda. The
non-cola bottling agreements contain provisions that are similar to those
contained in the Master Bottling Agreement with respect to pricing, territorial
restrictions, authorized containers, planning, quality control, transfer
restrictions, term, and related matters. PBG's non-cola bottling agreements will
terminate if PepsiCo terminates PBG's Master Bottling Agreement. The exclusivity
provisions contained in the non-cola bottling agreements would prevent us from
manufacturing, selling or distributing beverage products which imitate, infringe
upon, or cause confusion with, the beverage products covered by the non-cola
bottling agreements. PepsiCo may also elect to discontinue the manufacture, sale
or distribution of a non-cola beverage and terminate the applicable non-cola
bottling agreement upon six months notice to us.

         Terms of Certain Distribution Agreements. PBG also has agreements with
PepsiCo granting PBG exclusive rights to distribute AMP and DOLE in all of PBG's
territories and SOBE in certain

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specified territories. The distribution agreements contain provisions generally
similar to those in the Master Bottling Agreement as to use of trademarks, trade
names, approved containers and labels and causes for termination. PBG also has
the right to sell and distribute GATORADE in Spain, Greece and Russia and in
certain limited channels of distribution in the U.S. Some of these beverage
agreements have limited terms and, in most instances, prohibit us from dealing
in similar beverage products.

         Terms of the Master Syrup Agreement. The Master Syrup Agreement grants
PBG the exclusive right to manufacture, sell and distribute fountain syrup to
local customers in PBG territories. The Master Syrup Agreement also grants PBG
the right to act as a manufacturing and delivery agent for national accounts
within PBG territories that specifically request direct delivery without using a
middleman. In addition, PepsiCo may appoint PBG to manufacture and deliver
fountain syrup to national accounts that elect delivery through independent
distributors. Under the Master Syrup Agreement, PBG will have the exclusive
right to service fountain equipment for all of the national account customers
within PBG's territories. The Master Syrup Agreement provides that the
determination of whether an account is local or national is at the sole
discretion of PepsiCo.

         The Master Syrup Agreement contains provisions that are similar to
those contained in the Master Bottling Agreement with respect to pricing,
territorial restrictions with respect to local customers and national customers
electing direct-to-store delivery only, planning, quality control, transfer
restrictions and related matters. The Master Syrup Agreement has an initial term
of five years which will expire in 2004, however, the Master Syrup Agreement
will automatically renew for additional five-year periods unless PepsiCo
terminates it for cause. PepsiCo has the right to terminate the Master Syrup
Agreement without cause at any time during a renewal term upon twenty-four
months notice. In the event PepsiCo terminates the Master Syrup Agreement
without cause, PepsiCo is required to pay us the fair market value of PBG's
rights thereunder.

         PBG's Master Syrup Agreement will terminate if PepsiCo terminates PBG's
Master Bottling Agreement.

         Terms of Other U.S. Bottling Agreements. The bottling agreements
between PBG and other licensors of beverage products, including Cadbury
Schweppes plc for DR PEPPER, SCHWEPPES, CANADA DRY AND HAWAIIAN PUNCH, the
Pepsi/Lipton Tea Partnership for LIPTON BRISK and LIPTON'S ICED TEA, the North
American Coffee Partnership for STARBUCKS FRAPPUCCINO and The Monarch Beverage
Company, Inc. for ALL SPORT (which agreement terminated in October 2003),
contain provisions generally similar to those in the Master Bottling Agreement
as to use of trademarks, trade names, approved containers and labels, sales of
imitations, and causes for termination. Some of these beverage agreements have
limited terms and, in most instances, prohibit us from dealing in similar
beverage products.

         Terms of the Country Specific Bottling Agreements. The country specific
bottling agreements contain provisions generally similar to those contained in
the Master Bottling Agreement and the non-cola bottling agreements and, in
Canada, the Master Syrup Agreement with respect to authorized containers,
planning, quality control, transfer restrictions, term, causes for termination
and related matters. These bottling agreements differ from the Master Bottling
Agreement because, except for Canada, they include both fountain syrup and
non-fountain beverages. Certain of these bottling agreements contain provisions
that have been modified to reflect the laws and regulations of the applicable
country. For example, the bottling agreements in Spain do not contain a
restriction on the sale and shipment of Pepsi-Cola beverages into our territory
by others in response to unsolicited orders. In addition, the bottling
agreements for Mexico and Turkey contain provisions which restrict our ability
to manufacture, sell and distribute beverages sold under non-PepsiCo trademarks.

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SEASONALITY

         Our peak season is the warm summer months beginning with Memorial Day
and ending with Labor Day. Approximately 66% of our operating income is
typically earned during the second and third quarters. Approximately 75% of cash
flow from operations is typically generated in the third and fourth quarters.

COMPETITION

         The carbonated soft drink market and the non-carbonated beverage market
are highly competitive. Our competitors in these markets include bottlers and
distributors of nationally advertised and marketed products, bottlers and
distributors of regionally advertised and marketed products, as well as bottlers
of private label soft drinks sold in chain stores. Among our major competitors
are bottlers that distribute products from The Coca-Cola Company including
Coca-Cola Enterprises Inc., Coca-Cola Hellenic Bottling Company S.A., Coca-Cola
FEMSA S.A. de C.V. and Coca-Cola Bottling Co. Consolidated. Our market share for
carbonated soft drinks sold under trademarks owned by PepsiCo in our U.S.
territories ranges from approximately 15.4% to approximately 38.8%. Our market
share for carbonated soft drinks sold under trademarks owned by PepsiCo for each
country, outside the U.S., in which we do business is as follows: Canada 40.9%;
Russia 24.7%; Turkey 21.5%; Spain 12.8% and Greece 11.3% (including market share
for our IVI brand). In addition, market share for our territories and the
territories of other bottlers in Mexico is 14.5% for carbonated soft drinks sold
under trademarks owned by PepsiCo and carbonated water sold under the GARCI
CRESPO trademark. Actions by our major competitors and others in the beverage
industry, as well as the general economic environment could have an impact on
our future market share.

         We compete primarily on the basis of advertising and marketing programs
to create brand awareness, price and promotions, retail space management,
customer service, consumer points of access, new products, packaging innovations
and distribution methods. We believe that brand recognition, availability and
consumer and customer goodwill are primary factors affecting our competitive
position.

GOVERNMENTAL REGULATION APPLICABLE TO BOTTLING LLC

         Our operations and properties are subject to regulation by various
federal, state and local governmental entities and agencies in the United States
as well as foreign government entities and agencies in Canada, Spain, Greece,
Russia, Turkey and Mexico. As a producer of food products, we are subject to
production, packaging, quality, labeling and distribution standards in each of
the countries where we have operations, including, in the United States, those
of the federal Food, Drug and Cosmetic Act. The operations of our production and
distribution facilities are subject to laws and regulations relating to the
protection of the environment in the countries in which we do business. In the
United States, we are subject to the laws and regulations of the Department of
Transportation, and various federal, state and local occupational and
environmental laws. These laws and regulations include the Occupational Safety
and Health Act, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act and laws relating to the operation, maintenance of
and financial responsibility for fuel storage tanks.

         We believe that our current legal, operational and environmental
compliance programs are adequate and that we are in substantial compliance with
applicable laws and regulations of the countries in which we do business. We do
not anticipate making any material expenditures in connection with environmental
remediation and compliance. However, compliance with, or any violation of,
future laws or regulations could require material expenditures by us or
otherwise have a material adverse effect on our business, financial condition
and results of operations.

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         Bottle and Can Legislation

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

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

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

         The European Commission issued a packaging and packing waste directive
that was incorporated into the national legislation of most member states. This
has resulted in targets being set for the recovery and recycling of household,
commercial and industrial packaging waste and imposes substantial
responsibilities upon bottlers and retailers for implementation. Similar
legislation has been enacted in Turkey.

         In 2003, Mexico adopted legislation regulating the disposal of solid
waste products. In response to this new legislation, PBG Mexico entered into
agreements with local and federal Mexican governmental authorities which require
PBG Mexico, and other participating bottlers, to provide for collection and
recycling of certain minimum amounts of plastic bottles.

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

         Soft Drink Excise Tax Legislation

         Specific soft drink excise taxes have been in place in certain states
for several years. The states in which we operate that currently impose such a
tax are West Virginia, Arkansas and Tennessee and, with respect to fountain
syrup only, Washington. In Mexico, there are excise taxes on any sweetened
beverage products produced without sugar, including our diet soft drinks.

         Value-added taxes on soft drinks vary in our territories located in
Canada, Spain, Greece, Russia, Turkey and Mexico, but are consistent with the
value-added tax rate for other consumer products. In addition, there is a
special consumption tax applicable to cola products in Turkey.

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

         Trade Regulation

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

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         California Carcinogen and Reproductive Toxin Legislation

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

         Mexican Water Regulation

         In Mexico, we pump water from our own wells and we purchase water
directly from municipal water companies pursuant to concessions obtained from
the Mexican government on a plant-by-plant basis. The concessions are generally
for 10-year terms and can generally be renewed by us prior to expiration with
minimal cost and effort. Our concessions may be terminated if, among other
things, (a) we use materially more water than permitted by the concession, (b)
we use materially less water than required by the concession, or (c) we fail to
complete agreed-upon construction or improvements. Our concessions generally
satisfy our current water requirements and we believe that we are generally in
compliance in all material respects with the terms of our existing concessions.

EMPLOYEES

         As of December 27, 2003, we employed approximately 66,000 full-time
workers, of whom approximately 33,300 were employed in the United States and
approximately 23,200 were employed in Mexico. Approximately 10,900 of our
full-time workers in the United States are union members and approximately
17,000 of our workers outside the United States are union members. We consider
relations with our employees to be good and have not experienced significant
interruptions of operations due to labor disagreements with the exception of a
labor dispute in our Mississauga facility in Ontario, Canada, which was
successfully resolved in August 2003.

FINANCIAL INFORMATION ON INDUSTRY SEGMENTS AND GEOGRAPHIC AREAS

See Note 13 to Bottling LLC's Consolidated Financial Statements set forth in
Item 8 below.

ITEM 2.  PROPERTIES

         As of December 27, 2003, we operated 98 soft drink production
facilities worldwide, of which 91 were owned and 7 were leased. In addition, one
facility used for the manufacture of soft drink packaging materials was operated
by a PBG joint venture in Turkey. Of our 514 distribution facilities, 323 are
owned and 191 are leased. We believe that our bottling, canning and syrup
filling lines and our distribution facilities are sufficient to meet present
needs. We also lease headquarters office space in Somers, New York.

         We also own or lease and operate approximately 40,900 vehicles,
including delivery trucks, delivery and transport tractors and trailers and
other trucks and vans used in the sale and distribution of our soft drink
products. We also own more than 1.8 million soft drink dispensing and vending
machines.

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         With a few exceptions, leases of plants in the United States and Canada
are on a long-term basis, expiring at various times, with options to renew for
additional periods. Most international plants are leased for varying and usually
shorter periods, with or without renewal options. We believe that our properties
are in good operating condition and are adequate to serve our current
operational needs.

ITEM 3.  LEGAL PROCEEDINGS

         From time to time we are a party to various litigation proceedings
arising in the ordinary course of our business, none of which, in the opinion of
management, is likely to have a material adverse effect on our financial
condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

         None.

EXECUTIVE OFFICERS OF THE REGISTRANT

         Set forth below is information pertaining to our executive officers who
held office as of March 1, 2004

JOHN T. CAHILL, 46, is the Principal Executive Officer of Bottling LLC. He is
also PBG's Chairman of the Board and Chief Executive Officer. He had been PBG's
Chief Executive Officer since September 2001. Previously, Mr. Cahill served as
PBG's President and Chief Operating Officer from August 2000 to September 2001.
Mr. Cahill has been a member of PBG's Board of Directors since January 1999 and
served as PBG's Executive Vice President and Chief Financial Officer prior to
becoming President and Chief Operating Officer in August 2000. He was Executive
Vice President and Chief Financial Officer of the Pepsi-Cola Company from April
1998 until November 1998. Prior to that, Mr. Cahill was Senior Vice President
and Treasurer of PepsiCo, having been appointed to that position in April 1997.
In 1996, he became Senior Vice President and Chief Financial Officer of
Pepsi-Cola North America. Mr. Cahill joined PepsiCo in 1989 where he held
several other senior financial positions through 1996.

ALFRED H. DREWES, 48, is the Principal Financial Officer of Bottling LLC. He is
also PBG's Senior Vice President and Chief Financial Officer. Appointed to this
position in June 2001, Mr. Drewes previously served as Senior Vice President and
Chief Financial Officer of Pepsi Beverages International ("PBI"). Mr. Drewes
joined PepsiCo in 1982 as a financial analyst in New Jersey. During the next
nine years, he rose through increasingly responsible finance positions within
Pepsi-Cola North America in field operations and headquarters. In 1991, Mr.
Drewes joined PBI as Vice President of Manufacturing Operations, with
responsibility for the global concentrate supply organization.

ANDREA L. FORSTER, 44, is the Principal Accounting Officer of Bottling LLC. She
is also Vice President and Controller of PBG. In September 2000, Ms. Forster was
also named Corporate Compliance Officer for PBG. Following several years with
Deloitte Haskins and Sells, Ms. Forster joined PepsiCo in 1987 as a Senior
Analyst in External Reporting. She progressed through a number of positions in
the accounting and reporting functions and, in 1998, was appointed Assistant
Controller of the Pepsi-Cola Company. She was named Assistant Controller of PBG
in 1999.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         There is no public trading market for the ownership of Bottling LLC.

                                       9
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

SELECTED FINANCIAL AND OPERATING DATA

in millions

<TABLE>
<CAPTION>
FISCAL YEARS ENDED                                                 2003        2002        2001       2000(1)      1999
                                                                 --------    --------    --------    --------    --------
<S>                                                              <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
   Net revenues ..............................................   $ 10,265    $  9,216    $  8,443    $  7,982    $  7,505
   Cost of sales .............................................      5,215       5,001       4,580       4,405       4,296
                                                                 --------    --------    --------    --------    --------
   Gross profit ..............................................      5,050       4,215       3,863       3,577       3,209
   Selling, delivery and administrative expenses .............      4,089       3,318       3,185       2,986       2,813
   Unusual impairment and other charges and credits (2) ......         --          --          --          --         (16)
                                                                 --------    --------    --------    --------    --------
   Operating income ..........................................        961         897         678         591         412
   Interest expense, net .....................................        143          98          78          89         129
   Other non-operating expenses, net .........................          7           7          --           1           1
   Minority interest .........................................         --           9          14           8           5
                                                                 --------    --------    --------    --------    --------
   Income before income taxes ................................        811         783         586         493         277
   Income tax (benefit) expense (3)(4) .......................         84          49          (1)         22           4
                                                                 --------    --------    --------    --------    --------
   Income before cumulative effect of change in accounting
      principle ..............................................        727         734         587         471         273
   Cumulative effect of change in accounting principle, net of
      tax ....................................................          6          --          --          --          --
                                                                 --------    --------    --------    --------    --------
   Net income ................................................   $    721    $    734    $    587    $    471    $    273
                                                                 ========    ========    ========    ========    ========

BALANCE SHEET DATA (AT PERIOD END):
   Total assets ..............................................   $ 12,886    $ 10,916    $  8,677    $  8,228    $  7,799
   Long-term debt ............................................      3,497       3,541       2,299       2,286       2,284
   Minority interest .........................................         --          --         154         147         141
   Accumulated other comprehensive loss ......................       (503)       (596)       (416)       (253)       (222)
   Owners' equity ............................................   $  5,902    $  5,186    $  4,596    $  4,321    $  3,928
</TABLE>

(1)      Our fiscal year 2000 results were impacted by the inclusion of an extra
         week in our fiscal year. The extra week increased net income by $12
         million.

(2)      Unusual impairment and other charges and credits comprise of the
         following:

-        $45 million non-cash compensation charge in the second quarter of 1999.

-        $53 million vacation accrual reversal in the fourth quarter of 1999.

-        $8 million restructuring reserve reversal in the fourth quarter of
         1999.

(3)      Fiscal year 2001 includes Canada tax law change benefits of $25
         million.

(4)      Fiscal year 2003 includes Canada tax law change expense of $11 million.

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

See "Management's Financial Review" set forth in Item 8 below.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See "Management's Financial Review" set forth in Item 8 below.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and notes thereto of PBG, included in PBG's Annual
Report on Form 10-K and filed with the SEC on March 11, 2004, are hereby
incorporated by reference as required by the SEC as a result of our guarantee
of up to $1,000,000,000 aggregate principal amount of PBG's 7% Senior Notes
due in 2029.

MANAGEMENT'S FINANCIAL REVIEW

TABULAR DOLLARS IN MILLIONS

FINANCIAL PERFORMANCE SUMMARY

                                       10
<PAGE>

     Our 2003 financial results reflected a number of economic and marketplace
challenges we faced in our largest markets. Our full-year results for the U.S.
and Mexico did not meet our original expectations, but we saw significant
improvement during the second half of the year. We continued our
well-established trends of generating strong cash flows from operations,
increasing pricing in the marketplace, and improving cost performance.
Additionally, Europe had a strong year, with solid topline and profit results
driven by volume growth, net price increases and benefits from foreign exchange.

     In 2003, we generated net income of $721 million. Our operating income grew
7% versus 2002 to $961 million, reflecting the impact of our Mexican acquisition
of Pepsi-Gemex in November 2002.

     We were very pleased with our cash flow performance in 2003 as we continued
our strong track record of growing our cash from operations. We generated $1.2
billion of cash from operations, net of approximately $162 million that we
contributed into PBG's pension plans, which are solidly funded. With these
strong cash flows, we utilized $644 million for capital investments to grow our
business. Additionally, during 2003 we took advantage of favorable interest
rates and issued $1.2 billion in debt with a combined effective interest rate of
less than 4% primarily for the repayment of our $1 billion 5.38% senior notes
due in February 2004, ensuring a stable debt level at a lower cost to the
Company.

     From a revenue perspective in the U.S., we were able to increase our
pricing in the marketplace by 2% during 2003 through consistent execution of our
strategies during the year. However, we were faced with a number of challenges
in the U.S., including changes in consumer preferences, declines in our cold
drink business and weakness in retail traffic. These factors contributed to
volume in the U.S. falling below our expectations, declining by 3% in the first
half of 2003 but improving to flat in the second half (before the impact of our
acquisitions), as we rebuilt momentum in our business. Despite these challenges,
we believe our product portfolio is well positioned to capture the opportunity
presented by changing consumer preferences. By and large, our brands are either
number one or a strong number two across the beverage spectrum. Additionally, we
have a strong position in the important cold drink channel, which is our most
profitable business.

     We managed our U.S. operating costs very effectively during 2003. Even
though our operating costs did increase slightly during the year due to higher
pension, employee benefit and casualty costs, we were able to largely offset
these increases with productivity gains due to improvements in our operational
efficiencies and selling execution in the marketplace.

     Our Mexico business represents approximately 9% of our worldwide operating
income. Our first full year results in this market did not meet our expectations
due to a weak economy, competitive pressures and the steady devaluation of the
Mexican peso. However, we are encouraged about the future opportunities in
Mexico. Mexico represents an important growth market for us as its soft drink
consumption per capita is second in the world only to the United States. We also
sell a great portfolio of products, including the number one water brand in
Mexico, ELECTROPURA.

     During 2003, we successfully fine-tuned our pricing architecture and
packaging configuration in Mexico to ensure we are providing the right consumer
value. We consolidated a number of our warehouses and distribution systems in
Mexico to capitalize on productivity gains and to provide better service for our
customers. We also implemented a standard organization structure to improve our
capability and reduce redundancies. These operational changes have already
resulted in significant cost savings.

                                       11
<PAGE>

OUTLOOK

     In 2004, we expect solid worldwide operating income growth in the
mid-single digits versus the prior year. We expect our worldwide volume to grow
in the low single digits and net revenue per case growth of about 1%. We plan to
spend between $675 million and $700 million in capital investments.

     Our U.S. priorities in 2004 will be to improve our revenue growth by
revitalizing cold drink performance, improving Trademark PEPSI trends and
continuing to increase pricing. We will do this through new brand and package
innovation to meet changing consumer tastes, increased media spending on brand
PEPSI by PepsiCo and execution of brand PEPSI-led promotions throughout 2004. In
the U.S. we expect volume to increase 1% to 2% for the full year. Net revenue
per case is expected to increase approximately 2% in 2004, with three quarters
of the growth coming from rate increases and the remainder of the growth coming
from the mix of products we sell. We anticipate our U.S. operating income will
grow in the mid-single digits.

     In Mexico, our focus will be to continue to drive consumer value,
strengthen our execution and build brand equity. We expect our physical case
volume in Mexico to grow in the low single digits versus 2003 and our net
revenue per case to be down slightly in pesos. We expect our operating income in
U.S. dollars to be flat to down in the high single digits in 2004, reflecting
continued progress from an operating standpoint offset by an anticipated
devaluation of the peso.

     As we move through 2004, we will continue to focus upon the key building
blocks of our past success, great brands, the right people and our selling
execution process. Our front line sales people have the tools needed to provide
our customers with the right products at the right time. In combination, our
approach to the marketplace will allow us to continue to be a world-class
selling organization in every location where we do business.

OVERVIEW

     Bottling, LLC is the principal operating subsidiary of PBG and consists of
substantially all of the operations and assets of PBG. Bottling LLC, which is
consolidated by PBG, has the exclusive right to manufacture, sell and distribute
Pepsi-Cola beverages in all or a portion of the United States, Mexico, Canada,
Spain, Greece, Russia and Turkey.

     We believe our financial success is largely dependent on the number of
physical cases we sell and the net price we achieve on a per-case basis.
Physical cases represent the number of units that are actually produced,
distributed and sold. Each case of product, regardless of package configuration,
represents one physical case. Our net price on a per case basis is impacted by
how much we charge for the product, the mix of brands and packages we sell, and
the channels in which the product is sold. For example, we realize a higher net
revenue per case on 20-ounce chilled bottles sold in a convenience store than
two-liter unchilled bottles sold in a grocery store. Our profitability is also
dependent on how well we manage our raw material, manufacturing, distribution
and other overhead costs. In order to achieve profitable growth, we need to
extend the same discipline and focus we employ in revenue execution to cost
productivity.

     The following discussion and analysis covers the key drivers behind our
business performance in 2003 and is categorized into six major sections. The
first three sections discuss critical accounting policies, related party
transactions and items that affect the comparability of historical or future
results. The next two sections provide an analysis of our results of operations
and liquidity and financial condition. The last section contains a discussion of
our market risks and cautionary statements. The discussion and analysis
throughout Management's Financial Review should be read in conjunction with the
Consolidated Financial Statements and the related accompanying notes.

CRITICAL ACCOUNTING POLICIES

     The preparation of our Consolidated Financial Statements in conformity with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") requires us to make estimates and assumptions that affect the reported
amounts in our Consolidated Financial Statements and the related accompanying
notes, including various claims and contingencies related to lawsuits, taxes,
environmental and other matters arising out of the normal course of business. We
use our best judgment, based on the advice of external experts and our knowledge
of existing facts and circumstances and actions that we may undertake in the
future, in determining the estimates that affect our Consolidated Financial
Statements.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS - A portion of our accounts receivable will
not be collected due to customer disputes and bankruptcies. Estimating an
allowance for doubtful accounts requires significant

                                       12
<PAGE>

management judgment and is dependent upon the overall economic environment and
our customers' viability. We provide reserves for these situations based on the
evaluation of the aging of our trade receivable portfolio and an in-depth
analysis of our high-risk customers. Our reserves contemplate our historical
loss rate on receivables, specific customer situations and the economic
environments in which we operate. We have effective credit controls in place to
manage these exposures and believe that our allowance for doubtful accounts
adequately provides for these risks.

     Our allowance for doubtful accounts was $72 million, $67 million and $42
million as of December 27, 2003, December 28, 2002 and December 29, 2001,
respectively. Our allowance for doubtful accounts represents management's best
estimate of probable losses inherent in our portfolio. The following is an
analysis of the allowance for doubtful accounts for the fiscal years ended
December 27, 2003, December 28, 2002 and December 29, 2001:

<TABLE>
<CAPTION>
                              ALLOWANCE FOR DOUBTFUL
                                     ACCOUNTS
                                     --------
                               2003    2002    2001
                               ----    ----    ----
<S>                           <C>      <C>     <C>
Beginning of the year ......   $ 67    $ 42    $ 42
Bad debt expense ...........     12      32       9
Additions from acquisitions       -      14       -
Accounts written off .......     (8)    (22)     (9)
Foreign currency translation      1       1       -
                               ----    ----    ----
End of the year ............   $ 72    $ 67    $ 42
                               ====    ====    ====
</TABLE>

     RECOVERABILITY OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE LIVES -
During 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets," which requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead be tested for
impairment. Effective the first day of fiscal year 2002, we no longer amortize
goodwill and certain other indefinite-lived intangible assets, but evaluate them
for impairment annually.

     Our identified intangible assets principally arise from the allocation of
the purchase price of businesses acquired, and consist primarily of franchise
rights, distribution rights and brands. We assign amounts to such identified
intangibles based on their estimated fair values at the date of acquisition. The
determination of the expected life will be dependent upon the use and underlying
characteristics of the identified intangible asset. In determining whether our
intangible assets have an indefinite useful life, we consider the following, as
applicable: the nature and terms of underlying agreements; our intent and
ability to use the specific asset contained in an agreement; the age and market
position of the products within the territories we are entitled to sell; the
historical and projected growth of those products; and costs, if any, to renew
the agreement.

     We evaluate our identified intangible assets with indefinite useful lives
for impairment annually on an individual basis or by asset groups on a
country-by-country basis, depending on the nature of the intangible asset. We
measure impairment as the amount by which the carrying value exceeds its
estimated fair value.

     The fair value of our franchise rights and distribution rights is measured
using a multi-period excess earnings method that is based upon estimated
discounted future cash flows, including a terminal value, which assumes the
franchise rights and distribution rights will continue in perpetuity. We deduct
a contributory charge from our net after-tax cash flows for the economic return
attributable to our working capital, other intangible assets and property plant
and equipment, which represents the required cash flow to support these assets.
The net discounted cash flows in excess of the fair returns on these assets
represent the fair value of our franchise rights and distribution rights.

     The fair value of our brands is measured using a multi-period royalty
saving method, which reflects the savings realized by owning the brand and,
therefore, not having to pay a royalty fee to a third party. In valuing our
brands, we have selected an estimated industry royalty rate relating to each
brand and then applied it to the forecasted revenues associated with each brand.
The net discounted after-tax cash flows from these royalty charges represent the
fair value of our brands.

     Our discount rate utilized in each fair value calculation is based upon our
weighted-average cost of capital plus an additional risk premium to reflect the
risk and uncertainty inherent in separately acquiring the identified intangible
asset between a willing buyer and a willing seller. The additional risk premium
associated with our discount rate effectively eliminates the benefit that we
believe results from synergies, scale and our assembled workforce, all of which
are components of goodwill. Each year we re-evaluate our

                                       13
<PAGE>

assumptions in our discounted cash flow model to address changes in our business
and marketplace conditions.

     Based upon our annual impairment analysis performed in the fourth quarter
of 2003, the estimated fair values of our identified intangible assets with
indefinite lives exceeded their carrying amounts.

     We evaluate goodwill on a country-by-country basis ("reporting unit") for
impairment. We evaluate each reporting unit for impairment based upon a two-step
approach. First, we compare the fair value of our reporting unit with its
carrying value. Second, if the carrying value of our reporting unit exceeds its
fair value, we compare the implied fair value of the reporting unit's goodwill
to its carrying amount to measure the amount of impairment loss. In measuring
the implied fair value of goodwill, we would allocate the fair value of the
reporting unit to each of its assets and liabilities (including any unrecognized
intangible assets). Any excess of the fair value of the reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of
goodwill.

     We measure the fair value of a reporting unit as the discounted estimated
future cash flows, including a terminal value, which assumes the business
continues in perpetuity, less its respective net debt (net of cash and cash
equivalents). Our long-term terminal growth assumptions reflect our current
long-term view of the marketplace. Our discount rate is based upon our weighted
average cost of capital for each reporting unit. Each year we re-evaluate our
assumptions in our discounted cash flow model to address changes in our business
and marketplace conditions.

     Based upon our annual impairment analysis in the fourth quarter of 2003,
the estimated fair value of our reporting units exceeded their carrying value
and as a result, we did not need to proceed to the second step of the impairment
test.

     Considerable management judgment is necessary to estimate discounted future
cash flows in conducting an impairment test for goodwill and other identified
intangible assets, which may be impacted by future actions taken by us and our
competitors and the volatility in the markets in which we conduct business. A
change in assumptions in our cash flows could have a significant impact on the
fair value of our reporting units and other identified intangible assets, which
could then result in a material impairment charge to our results of operations.

     PENSION AND POSTRETIREMENT BENEFIT PLANS - PBG sponsors pension and other
postretirement benefit plans in various forms, covering employees who meet
specified eligibility requirements. We account for PBG's defined benefit pension
and postretirement benefit plans using actuarial models required by SFAS No. 87,
"Employers' Accounting for Pensions," and SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." The amounts necessary to fund
future payouts under these plans are subject to numerous assumptions and
variables including anticipated discount rate, expected rate of return on plan
assets and future compensation levels. We evaluate these assumptions with our
actuarial advisors on an annual basis and we believe that they are appropriate
and within acceptable industry ranges, although an increase or decrease in the
assumptions or economic events outside our control could have a material impact
on reported net income.

     The assets, liabilities and assumptions used to measure expense for any
fiscal year are determined as of September 30 of the preceding year
("measurement date"). The discount rate assumption used in the pension and
postretirement benefit plans' accounting is based on current interest rates for
high-quality, long-term corporate debt as determined on each measurement date.
In evaluating the rate of return on assets for a given fiscal year, we consider
the 10-15 year historical return of the pension investment portfolio, reflecting
the weighted return of the plan asset allocation. Over the past three fiscal
years the composition of the plan assets was approximately 70%-75% equity
investments and 25%-30% fixed income securities, which primarily consist of U.S.
government and corporate bonds. Differences between actual and expected returns
are generally recognized in the net periodic pension calculation over five
years. To the extent the amount of all unrecognized gains and losses exceeds 10%
of the larger of the benefit obligation or plan assets, such amount is amortized
over the average remaining service life of active participants. The rate of
future compensation increases is based upon historical experience and
management's best estimate regarding future expectations. We amortize prior
service costs on a straight-line basis over the average remaining service period
of employees expected to receive benefits.

     For PBG's postretirement plans that provide medical and life insurance
benefits, we review external data and our historical health care cost trends
with our actuarial advisors to determine the health care cost trend rates.
During 2003, the Medicare Prescription Drug, Improvement and Modernization Act
of 2003 (the "Act") was passed into law. The reported postretirement benefit
obligation in our Consolidated Balance Sheet does

                                       14
<PAGE>

not reflect the effects of the Act. We do provide prescription drug benefits to
Medicare-eligible retirees but have elected to defer recognition of the Act
until the FASB provides guidance regarding its accounting treatment. This
deferral election is permitted under FASB Staff Position FAS 106-1. We do not
believe the adoption of the Act will have a material impact on our consolidated
results.

     We used the following weighted-average assumptions to compute our pension
and postretirement expense:

<TABLE>
<CAPTION>
                                                                                   2003       2002       2001
                                                                                   ----       ----       ----
<S>                                                                                <C>        <C>        <C>
Discount rate...............................................................       6.75%      7.50%      7.75%
Expected return on plan assets (net of administrative expenses).............       8.50%      9.50%      9.50%
Rate of compensation increase...............................................       4.34%      4.33%      4.62%
</TABLE>

     During 2003, our defined benefit pension and postretirement expenses
totaled $77 million. In 2004, our defined benefit pension and postretirement
expenses will increase by $12 million to $89 million due primarily to the
following factors:

     -    A decrease in our weighted-average discount rate for our pension and
          postretirement expense from 6.75% to 6.25%, reflecting declines in the
          yields of long-term corporate bonds. This assumption change will
          increase our 2004 defined benefit pension and postretirement expense
          by approximately $15 million.

     -    Amortization of prior asset losses resulting from differences between
          our expected and actual return on plan assets, changes in demographics
          and medical trend rates, and other plan changes will increase our 2004
          defined benefit pension and postretirement expense by approximately
          $11 million.

     -    Contributions of $162 million to PBG's pension plan during 2003 will
          reduce our 2004 defined benefit pension expense by approximately $14
          million. PBG's plans have been funded to be in compliance with the
          funding provisions of the Employee Retirement Income Security Act of
          1974 and have been made in accordance with applicable tax regulations
          that provide for current tax deductions for our contributions and for
          taxation to the employee of plan benefits when the benefits are
          received.

     INCOME TAXES - We are a limited liability company, taxable as a partnership
for U.S. tax purposes and, as such, generally will pay no U.S. federal or state
income taxes. Our federal and state distributable shares of income, deductions
and credits will be allocated to our owners based on their percentage of
ownership. However, certain domestic and foreign affiliates pay taxes in their
respective jurisdictions and record related deferred income tax assets and
liabilities. The tax bases of our assets and liabilities reflect our best
estimate of the tax benefit and costs we expect to realize. Significant
management judgment is required in determining our effective tax rate and in
evaluating our tax position. We establish reserves when, despite our belief that
our tax return positions are supportable, we believe these positions may be
challenged. We adjust these reserves as warranted by changing facts and
circumstances. A change in our tax reserves could have a significant impact on
our results of operations.

     A number of years may elapse before a particular matter for which we have
established a reserve is audited and finally resolved. The number of years for
which we have audits that are open varies depending on the tax jurisdiction. The
U.S. Internal Revenue Service is currently examining our and PepsiCo's joint tax
returns for 1994 through 1997 and our tax returns for 1999 and 2000. We expect
that these audits will be completed in 2004. While it is often difficult to
predict the final outcome or the timing of the resolution, we believe that our
reserves reflect the probable outcome of known tax contingencies. Favorable
resolutions would be recognized as a reduction of our tax expense in the year of
resolution. Unfavorable resolutions would be recognized as a reduction to our
reserves, a cash outlay for settlement and a possible increase to our annual tax
provision.

RELATED PARTY TRANSACTIONS

     PepsiCo is considered a related party due to the nature of our franchisee
relationship and its ownership interest in our company. Over 80% of our volume
is derived from the sale of Pepsi-Cola beverages. In addition, at December 27,
2003, PepsiCo owned 6.8% of our equity.

     PBG has entered into a number of agreements with PepsiCo since its initial
public offering. Although we are not a direct party to these contracts, as the
principal operating subsidiary of PBG, we derive direct benefit from them. Our
business is conducted primarily under beverage agreements with PepsiCo,
including a master bottling agreement, non-cola bottling agreement and a master
syrup agreement. Additionally, under a shared services agreement, we obtain
various services from PepsiCo, which include procurement of raw materials

                                       15
<PAGE>

and certain information technology and administrative services.

     We review our annual marketing, advertising, management and financial plans
each year with PepsiCo for its approval. If we fail to submit these plans, or if
we fail to carry them out in all material respects, PepsiCo can terminate our
beverage agreements. Because we depend on PepsiCo to provide us with
concentrate, bottler incentives and various services, changes in our
relationship with PepsiCo could have a material adverse effect on our business
and financial results.

     As part of our franchise relationship, we purchase concentrate from
PepsiCo, pay royalties and produce or distribute other products through various
arrangements with PepsiCo or PepsiCo joint ventures. Total net amounts paid or
payable to PepsiCo or PepsiCo joint ventures for these arrangements was $2,521
million, $2,153 million and $1,927 million in 2003, 2002 and 2001, respectively.

     In order to promote PepsiCo beverages, PepsiCo, at its discretion, provides
us with various forms of bottler incentives. These incentives are mutually
agreed-upon between PepsiCo and us and cover a variety of initiatives, including
direct marketplace support, capital equipment funding and advertising support.
Based on the objectives of the programs and initiatives, we record bottler
incentives as an adjustment to net revenues, cost of sales or selling, delivery
and administrative expenses. Beginning in 2003, due to the adoption of Emerging
Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a Customer (Including
a Reseller) for Certain Consideration Received from a Vendor," we have changed
our accounting methodology for the way we record bottler incentives. See Note 2
in Notes to our Consolidated Financial Statements for a discussion on the change
in classification of these bottler incentives. Bottler incentives received from
PepsiCo, including media costs shared by PepsiCo, were $646 million, $560
million and $554 million for 2003, 2002 and 2001, respectively. Changes in our
bottler incentives and funding levels could materially affect our business and
financial results.

     We manufacture and distribute fountain products and provide fountain
equipment service to PepsiCo customers in some territories in accordance with
the Pepsi beverage agreements. Amounts received from PepsiCo for these
transactions are offset by the cost to provide these services and are reflected
in our Consolidated Statements of Operations in selling, delivery and
administrative expenses. Net amounts paid or payable by PepsiCo to us for these
services were approximately $200 million, $200 million and $185 million, in
2003, 2002 and 2001, respectively.

     We provide and receive various services from PepsiCo and PepsiCo affiliates
pursuant to a shared services agreement and other arrangements. In the absence
of these agreements, we would have to obtain such services on our own. We might
not be able to obtain these services on terms, including cost, that are as
favorable as those we receive from PepsiCo. Total net expenses incurred with
PepsiCo and PepsiCo affiliates were approximately $62 million, $57 million and,
$133 million during 2003, 2002 and 2001, respectively.

     We purchase snack food products from Frito-Lay, Inc., a subsidiary of
PepsiCo, for sale and distribution in all of Russia except Moscow. Amounts paid
or payable to PepsiCo and its affiliates for snack food products were $51
million, $44 million and $27 million in 2003, 2002 and 2001, respectively. Our
agreement with Frito-Lay expires in 2004; however, we expect to renew the
agreement and continue our relationship with Frito-Lay.

     For further audited information about our relationship with PepsiCo and its
affiliates see Note 14 in Notes to Consolidated Financial Statements.

ITEMS THAT AFFECT HISTORICAL OR FUTURE COMPARABILITY

         Gemex Acquisition

     In November 2002, we acquired all of the outstanding capital stock of
Gemex. Our total acquisition cost consisted of a net cash payment of $871
million and assumed debt of approximately $318 million. See Note 16 in Notes to
our Consolidated Financial Statements for additional information relating to
Gemex and other bottling operations we have acquired in 2003 and 2002.

         SFAS No. 142

     During 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment.
Effective the first day of fiscal year 2002, we no longer amortize goodwill and
certain other intangible assets, but evaluate them for impairment annually. See
Note 2 in Notes to our Consolidated Financial Statements and the preceding
section entitled Critical Accounting Policies for additional information.

                                       16
<PAGE>

         EITF Issue No. 02-16

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

     See Note 2 in Notes to Consolidated Financial Statements, for additional
information and pro forma adjustments for bottler incentives that would have
been made to our reported results for the 52 weeks ended December 28, 2002 and
December 29, 2001 assuming that EITF Issue No. 02-16 had been in place for all
periods presented.

     Concentrate Supply

     We buy concentrate, the critical flavor ingredient for our products, from
PepsiCo, its affiliates and other brand owners who are the sole authorized
suppliers. Concentrate prices are typically determined annually. In February
2003, PepsiCo announced an increase of approximately 2% in the price of U.S.
concentrate. PepsiCo has recently announced a further increase of approximately
0.7%, effective February 2004.

FINANCIAL OVERVIEW

RESULTS OF OPERATIONS - 2003

VOLUME

2003 Worldwide Volume by Geography

         [PIE CHART]

<TABLE>
<S>                   <C>
Other                 21%
Mexico                18%
U.S.                  61%
</TABLE>

2003 Worldwide Volume by Brand

            [PIE CHART]

<TABLE>
<S>                            <C>
Non-Carbonated Products        23%
Other Carbonated Flavors       31%
Trademark Pepsi                46%
</TABLE>

     The brands we sell are some of the best recognized trademarks in the world
and include PEPSI-COLA, DIET PEPSI, MOUNTAIN DEW, AQUAFINA, SIERRA MIST, LIPTON
BRISK, DIET MOUNTAIN DEW, SOBE, DOLE, and PEPSI VANILLA, and outside the U.S.,
PEPSI-COLA, KAS, AQUA MINERALE, MANZANITA SOL, and MIRINDA. In some of our
territories, we also have the right to manufacture, sell and distribute soft
drink products of companies other than PepsiCo, Inc., including DR PEPPER and
SQUIRT and trademarks we own including ELECTROPURA and GARCI CRESPO. The charts
above show the percentage of our worldwide volume by geography and by the brands
we sell, which are grouped by trademark PEPSI (e.g., PEPSI-COLA, DIET PEPSI,
PEPSI VANILLA), other carbonated flavors (e.g. MOUNTAIN DEW, SIERRA MIST, KAS)
and non-carbonated products (e.g., AQUAFINA, LIPTON BRISK, ELECTROPURA).

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                        52-WEEKS ENDED
                                                     DECEMBER 27, 2003 VS.
                                                       DECEMBER 28, 2002
                                                       -----------------
<S>                                                  <C>
Acquisitions ....................                             20%
Base business ...................                              0%
                                                             ---
    Total Worldwide Volume Change                             20%
                                                             ===
</TABLE>

     Our full-year reported worldwide physical case volume increased 20% in 2003
versus 2002. The increase in reported worldwide volume was due entirely to our
acquisitions. Our acquisition of Gemex contributed over 90% of the growth
resulting from acquisitions.

     In the U.S., our base business volume decreased 2% versus 2002 due to
changes in consumer preferences, declines in our cold drink business and
weakness in retail traffic. (The term "base business" reflects territories that
we owned and operated for comparable periods in both the current year and the
prior year.) However, during the second half of 2003, we saw improvement in our
cold drink business as we began to implement changes to ensure that we have the
right consumer value and the right space allocation for our products in the cold
vaults. From a brand perspective, as consumers sought more variety, we saw
declines in brand PEPSI, partially offset by strong growth in AQUAFINA and
lemon-lime volume, led by SIERRA MIST, coupled with product introductions such
as PEPSI VANILLA and MOUNTAIN DEW LIVEWIRE.

     Outside the U.S., our base business volume increased by 4%. The increase in
base business volume outside the U.S. was driven by warm summer weather in
Europe, coupled with a strong performance in Russia, resulting from growth in
AQUA MINERALE and the launch of PEPSI X.

NET REVENUES

<TABLE>
<CAPTION>
                                                         52-WEEKS ENDED
                                                     DECEMBER 27, 2003 VS.
                                                       DECEMBER 28, 2002
                                                       -----------------
<S>                                                  <C>
Acquisitions ......................                           11%
                                                             ---
Base business:
    EITF Issue No. 02-16 impact ...                           (3)%
    Currency translation ..........                            2%
    Rate / mix impact (pricing) ...                            1%
    Volume impact .................                            0%
                                                             ---
Base business change ..............                            0%
                                                             ---

Total Worldwide Net Revenues Change                           11%
                                                             ===
</TABLE>

     Net revenues were $10.3 billion in 2003, an 11% increase over the prior
year. Approximately 72% of our net revenues was generated in the United States,
11% of our net revenues was generated in Mexico and the remaining 17% was
generated outside the United States and Mexico. The increase in net revenues in
2003 was driven primarily by our acquisition of Gemex, which contributed more
than 85% of the growth resulting from acquisitions. Our base business net
revenues were flat in 2003 versus 2002. In 2003, base business net revenues were
favorably impacted by foreign currency translation and price increases, offset
by the reclassification of certain bottler incentives from net revenues to cost
of sales resulting from the adoption of EITF Issue No. 02-16.

     In the U.S., net revenues decreased 2% in 2003 versus 2002. The decrease in
U.S. net revenues was due to a decline in volume and the impact of adopting EITF
Issue No. 02-16. This was partially offset by a 2% increase in marketplace
pricing and incremental revenue from acquisitions. Net revenues outside the U.S.
grew approximately 74% in 2003 versus 2002. The increase in net revenues outside
the U.S. was driven by our Gemex acquisition and an increase in our base
business revenues of 13%. The increase in base business net revenues outside the
U.S. was the result of favorable foreign currency translation in Canada and
Europe, volume growth, and a 3% increase in pricing, partially offset by a
decline due to the impact of adopting EITF Issue No. 02-16.

     In 2004, we expect our worldwide net revenue per case to grow about 1% as
compared with 2003.

                                       18
<PAGE>

COST OF SALES

<TABLE>
<CAPTION>
                                                 52-WEEKS ENDED
                                              DECEMBER 27, 2003 VS.
                                                DECEMBER 28, 2002
                                                -----------------
<S>                                           <C>
Acquisitions .......................                   10%
                                                      ---
Base business:
    EITF Issue No. 02-16 impact ....                  (10)%
    Cost per case impact ...........                    2%
    Currency translation ...........                    2%
    Volume impact ..................                    0%
                                                      ---
Base business change ...............                   (6)%
                                                      ---
Total Worldwide Cost of Sales Change                    4%
                                                      ===
</TABLE>

     Cost of sales was $5.2 billion in 2003, a 4% increase over 2002. The
increase in cost of sales was due primarily to our acquisition of Gemex, which
contributed over 80% of the growth resulting from acquisitions, partially offset
by a decline in our base business costs. The decline in base business cost of
sales was due primarily to the reclassification of certain bottler incentives
from net revenues and selling, delivery and administrative expenses to cost of
sales resulting from the adoption of EITF Issue No. 02-16, partially offset by
increases in cost per case and the negative impact of foreign currency
translation.

     In the U.S., cost of sales decreased 7% in 2003 versus 2002. The decrease
in U.S. cost of sales was driven by volume declines and the impact of adopting
EITF Issue No. 02-16, partially offset by cost per case increases and
incremental costs from acquisitions. In the U.S., cost per case increased by 3%
resulting from higher concentrate and resin costs, coupled with the mix of
products we sell.

     Our base business cost of sales outside the U.S. decreased approximately 1%
in 2003 versus 2002. The decrease in base business cost of sales outside the
U.S. was driven from the impact of adopting EITF Issue No. 02-16, partially
offset by the negative impact of foreign currency translation in Canada and
Europe, and increases in both cost per case and volume.

     In 2004, we expect our worldwide cost of sales per case will increase in
the low single digits as compared with 2003.

SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                    52-WEEKS ENDED
                                                 DECEMBER 27, 2003 VS.
                                                   DECEMBER 28, 2002
                                                   -----------------
<S>                                              <C>
 Acquisitions .......................                     14%
                                                         ---
 Base business:
     EITF Issue No. 02-16 impact ....                      6%
     Currency translation ...........                      2%
     Cost performance ...............                      1%
                                                         ---
 Base business change ...............                      9%
                                                         ---

Total Worldwide Selling, Delivery and
Administrative Expenses Change ......                     23%
                                                         ===
</TABLE>

     Selling, delivery and administrative expenses were $4.1 billion in 2003, a
23% increase over 2002. The increase in selling, delivery and administrative
expenses was driven primarily by our acquisition of Gemex and increases in our
base business costs. Gemex contributed more than 90% of the growth resulting
from acquisitions. The 9% increase in our base business selling, delivery and
administrative expenses was due to the reclassification of certain bottler
incentives from selling, delivery and administrative expenses to cost of sales
resulting from the adoption of EITF Issue No. 02-16, coupled with the impact of
foreign currency translation in Canada and Europe and an increase in our base
business cost performance. Our base business cost performance increased 1% as a
result of higher pension, employee benefit and casualty costs, partially offset
by a reduction in our bad debt expense and productivity gains due to
improvements in our operational efficiencies and selling execution to the
marketplace.

                                       19
<PAGE>

     In 2004, we expect our worldwide selling, delivery and administrative
expenses in dollars will increase in the low single digits as compared with
2003.

OPERATING INCOME

<TABLE>
<CAPTION>
                                                    52-WEEKS ENDED
                                                 DECEMBER 27, 2003 VS.
                                                   DECEMBER 28, 2002
                                                   -----------------
<S>                                              <C>
Acquisitions ..........................                   7%
                                                        ---
Base business:
    Gross margin rate/mix impact .....                    1%
    Volume ............................                   0%
    SD&A impact .......................                  (2)%
    Currency translation ..............                   1%
                                                        ---
Base business change ..................                   0%
                                                        ---

Total Worldwide Operating Income Change                   7%
                                                        ===
</TABLE>

     Operating income was $961 million in 2003, a 7% increase over 2002. The
increase in operating income was due primarily to our acquisition of Gemex. The
flat performance in our base business operating income resulted from increased
selling, delivery and administrative expenses, offset by the improvement in the
net impact of gross margin rate and mix in the U.S. and Europe, coupled with the
favorable impact of foreign currency translation in Canada and Europe.

     In 2004, we expect our worldwide operating income to grow in the mid single
digits versus 2003.

INTEREST EXPENSE

     Interest expense increased by $46 million to $177 million in 2003 largely
due to the additional interest associated with the $1 billion 4.63% senior notes
used to finance our acquisition of Gemex in November 2002 and the additional
$1.2 billion of debt issued during 2003. This was partially offset by the lower
effective interest rate achieved on our fixed rate long-term debt from the use
of interest rate swaps.

INTEREST INCOME

     Interest income increased $1 million to $34 million in 2003 due to
additional loans made to PBG, partially offset by lower interest rates.

INCOME TAX EXPENSE BEFORE RATE CHANGE

     Bottling LLC is a limited liability company, taxable as a partnership for
U.S. tax purposes and, as such, generally pays no U.S. federal or state income
taxes. The federal and state distributable share of income, deductions and
credits of Bottling LLC are allocated to Bottling LLC's owners based on
percentage ownership. However, certain domestic and foreign affiliates pay
income taxes in their respective jurisdictions. Such amounts are reflected in
our Consolidated Statements of Operations. Our full-year effective tax rate for
2003 was 9.0% before our income tax rate change expense. This rate corresponds
to an effective tax rate of 6.4% in 2002. The increase in the effective tax rate
is primarily due to our international acquisitions.

INCOME TAX RATE CHANGE EXPENSE (BENEFIT)

     In December 2003, legislation was enacted changing certain Canadian
provincial income tax rates. These rate changes increased deferred tax
liabilities by $11 million and resulted in a non-cash charge in 2003.

                                       20
<PAGE>

RESULTS OF OPERATIONS - 2002

VOLUME

     Our worldwide reported physical case volume increased 8% in 2002,
reflecting a 6% increase in volume resulting from our acquisitions and a 2%
increase in base volume. In the U.S., reported volume increased by 2%,
reflecting a 1% increase from acquisitions and a 1% increase in base volume. The
weakness in the economy and less travel caused softness in our U.S. results in
the second half of the year. However, take-home volume, particularly in food
stores, as well as volume in our convenience and gas segment continues to grow.
Additionally, U.S. volume growth continued to benefit from innovation, as well
as the strong growth of Aquafina, offset by declines in trademark Pepsi. Outside
the U.S., our volumes increased 32%, reflecting a 29% increase from our
acquisitions in Turkey and Mexico. Volume outside the U.S. from our base
business increased 3% due to double-digit growth in Russia driven by the strong
performance of trademark Pepsi and Aqua Minerale, our water product, which was
partially offset by volume declines in Spain.

NET REVENUES

     Reported net revenues were $9.2 billion in 2002, a 9% increase over the
prior year, reflecting an 8% increase in volume and a 1% increase in net revenue
per case. In the U.S., reported net revenues increased 5%, reflecting a 3%
increase in net revenue per case and a 2% increase in volumes. Net revenue per
case growth in the U.S. benefited from rate increases combined with lapping of
account level investment spending in the fourth quarter of 2001. Reported net
revenues outside the U.S. grew approximately 32%, reflecting a 32% increase in
volume, offset by a 1% decrease in net revenue per case. Net revenue per case
outside the U.S. grew 3% after excluding the impact of acquisitions. The
favorable impact of currency translation contributed more than 1% to our net
revenue per case growth in 2002 outside the United States.

COST OF SALES

     Cost of sales was $5.0 billion in 2002, a 9% increase over the prior year,
reflecting an 8% increase in volume and a 1% increase in cost of sales per case.
In the U.S., cost of sales increased by 5%, reflecting a 3% increase in cost of
sales per case and a 2% increase in volume. The increase in U.S. cost of sales
per case was driven by higher concentrate costs and mix shifts into higher cost
packages. Cost of sales outside the U.S. grew by 31%, reflecting a 32% increase
in volume, offset by a 1% decrease in cost of sales per case.

SELLING, DELIVERY AND ADMINISTRATIVE EXPENSES

     Selling, delivery and administrative expenses grew $133 million, or 4% in
2002. Had we adopted SFAS No. 142 on the first day of 2001, amortization expense
would have been lowered by $129 million in 2001. The impact of the adoption of
SFAS No. 142 was largely offset by increased selling, delivery and
administrative expenses resulting from our acquisitions in Mexico and Turkey.
Excluding acquisitions and the effects of adopting SFAS No. 142, selling,
delivery and administrative expenses were up 4% for the year, driven by growth
in our business and our continued investment in marketing equipment partially
offset by favorable productivity gains. Selling, delivery and administrative
expenses were also favorably impacted as we lapped higher labor costs associated
with labor contract negotiations in the prior year, partially offset by
increased accounts receivable reserves resulting from the deterioration of the
financial condition of certain customers.

OPERATING INCOME

     Operating income was $897 million in 2002, representing a 32% increase over
2001. This growth reflects the positive impact from higher pricing, volume
growth from our acquisitions and base business, and the adoption of SFAS No. 142
during 2002, partially offset by increased selling, delivery and administrative
expenses. This growth was a reflection of higher pricing, volume growth from our
acquisitions and base business, partially offset by increased selling, delivery
and administrative expenses resulting from growth in our business.

INTEREST EXPENSE

     Interest expense decreased by $1 million in 2002 primarily reflecting the
lower interest rate environment partially offset by increased interest expense
from our issuance of $1 billion in debt, the proceeds of which were used to
finance our acquisition of Gemex.

                                       21
<PAGE>

INTEREST INCOME

     Interest income decreased $21 million, or 39%, due to lower interest rates
partially offset by additional loans with PBG.

OTHER NON-OPERATING EXPENSE, NET

     Net other non-operating expense in 2002 increased $7 million, due primarily
to the amortization of premiums associated with derivative instruments that were
used to mitigate currency risk in our acquisition of Gemex.

MINORITY INTEREST

     Prior to 2002, PBG had a direct minority ownership in one of our
subsidiaries. Accordingly, our Consolidated Financial Statements reflect PBG's
share of consolidated net income as minority interest in our Consolidated
Statements of Operations. The decrease in minority interest expense over the
prior period is due to the fact that in October 2002 PBG made an equity
contribution to us of its minority ownership in our subsidiary, thereby
eliminating PBG's minority interest from that point forward. As a result of this
transaction, PBG's ownership in us interest increased from 93.0% to 93.2%.

INCOME TAX EXPENSE BEFORE RATE CHANGE

     We are a limited liability company, taxable as a partnership for U.S. tax
purposes and, as such, generally pay no U.S. federal or state income taxes. We
allocate the federal and state distributable share of income, deductions and
credits to our owners based on percentage ownership. However, certain of our
domestic and foreign affiliates pay income taxes in their respective
jurisdictions. Such amounts are reflected in our Consolidated Statements of
Operations.

LIQUIDITY AND FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

     As a result of the strong cash flows that we generate from our operations,
we have been able to fund most of our capital investments and acquisitions, with
the exception of Gemex, which was financed through the issuance of $1 billion of
senior notes. We believe that our future cash flows from operations and
borrowing capacity will be sufficient to fund capital expenditures,
acquisitions, and working capital requirements for the foreseeable future.

     We have available short-term bank credit lines of approximately $302
million and $167 million at December 27, 2003 and December 28, 2002,
respectively. These lines were used to support the general operating needs of
our businesses outside the United States. The weighted-average interest rate for
used lines of credit outstanding at December 27, 2003, and December 28, 2002,
was 4.17% and 8.85%, respectively.

     During the second quarter of 2003, we issued $250 million of Senior Notes
with a coupon rate of 4.13%, maturing on June 15, 2015. We used the net proceeds
of this offering primarily for general operating needs.

     During the third quarter of 2003, we filed a shelf registration statement
with the Securities and Exchange Commission (the "SEC") that was declared
effective by the SEC on September 5, 2003. Under this registration statement we
have the capability to issue, in one or more offerings, up to $1 billion in
senior notes. Pursuant to the shelf registration statement, on October 7, 2003,
we completed an offering of $500 million 2.45% senior notes due on October 16,
2006. In addition, on November 17, 2003, we completed an offering of $400
million 5.0% senior notes due on November 15, 2013. In February 2004, we have
used the net proceeds from these offerings for the repayment of a portion of our
$1 billion principal amount of 5.38% senior notes. Pending such use, the net
proceeds were invested in several short-term instruments with original
maturities of three months or less and were classified as cash and cash
equivalents in our Consolidated Balance Sheet.

     Each of the senior notes mentioned above has redemption features and
covenants that will, among other things, limit our ability and the ability of
our restricted subsidiaries to create or assume liens, enter into sale and
lease-back transactions, engage in mergers or consolidations and transfer or
lease all or substantially all of our assets.

     We believe we are in compliance with all debt covenants in our indenture
agreements and credit facilities.

                                       22
<PAGE>

         Contractual Obligations

The following table summarizes our contractual obligations as of December 27,
2003:

<TABLE>
<CAPTION>
                                                 PAYMENTS DUE BY PERIOD
                                    --------------------------------------------------
                                            LESS THAN                          MORE THAN
CONTRACTUAL OBLIGATIONS             TOTAL    1 YEAR    1-3 YEARS   3-5 YEARS    5 YEARS
-----------------------             ------  ---------  ---------   ---------   ---------
<S>                                 <C>     <C>        <C>         <C>         <C>
Long-term debt obligations(1)       $4,668   $1,167      $  520     $   28       $2,953
Capital lease obligations(2)            11        6           2         --            3
Operating leases(2)                    171       34          46         32           59
Purchase obligations:
     Raw material obligations(3)       216       --         162         54           --
     Capital  expenditure
     obligations(4)                     74       74          --         --           --
     Other obligations(5)              261      138          50         28           45
Other long-term liabilities(6)          20        4           8          4            4
                                    ------   ------      ------     ------       ------
TOTAL                               $5,421   $1,423      $  788     $  146       $3,064
                                    ======   ======      ======     ======       ======
</TABLE>

(1)  See Note 7 in Notes to our Consolidated Financial Statements for additional
     information relating to our long-term debt obligations.

(2)  See Note 8 in Notes to our Consolidated Financial Statements for additional
     information relating to our lease obligations.

(3)  Represents obligations to purchase raw materials pursuant to contracts
     entered into by PepsiCo on our behalf.

(4)  Represents commitments to suppliers under capital expenditure related
     contracts or purchase orders.

(5)  Represents noncancellable agreements that specify fixed or minimum
     quantities and agreements that include termination penalty clauses.

(6)  Primarily relates to contractual obligations associated with non-compete
     contracts that resulted from business acquisitions. The table excludes
     other long-term liabilities included in our Consolidated Financial
     Statements, such as pension, postretirement and other non-contractual
     obligations. The timing of payments under these obligations cannot be
     reasonably estimated. See Note 10 in Notes to our Consolidated Financial
     Statements for a discussion of our future pension and postretirement
     contributions.

     Off-Balance Sheet Arrangements

     PBG has a $500 million commercial paper program that is supported by two
$250 million credit facilities. Both credit facilities are guaranteed by us.
During the second quarter of 2003, PBG renegotiated the credit facilities. One
of the credit facilities expires in April 2004, which PBG intends to renew, and
the other credit facility expires in April 2008. There are certain financial
covenants associated with these credit facilities. PBG has used these credit
facilities to support their commercial paper program in 2003 and 2002, however,
there were no borrowings outstanding under these credit facilities at December
27, 2003, or December 28, 2002.

     On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us. We also guarantee, that to the extent there is available
cash, we will distribute pro rata to all owners sufficient cash such that
aggregate cash distributed to PBG will enable PBG to pay its taxes and make
interest payments on the $1 billion 7% senior notes due 2029. During 2003 and
2002, we made cash distributions to our owners totaling $97 million and $156
million, respectively. Any amounts in excess of taxes and interest payments were
used by PBG to repay loans to us.

     Capital Expenditures

                                       23
<PAGE>

     Our business requires substantial infrastructure investments to maintain
our existing level of operations and to fund investments targeted at growing our
business. Capital infrastructure expenditures totaled $644 million, $623 million
and $593 million during 2003, 2002 and 2001, respectively.

     In 2004, we expect our capital expenditures to be approximately 6%
to 7% of net revenues.

     Acquisitions

     During 2003 we acquired the operations and exclusive right to manufacture,
sell and distribute beverages from three franchise bottlers. The following
acquisitions occurred for an aggregate purchase price of $91 million in cash and
the assumption of liabilities of $13 million:

     -    Pepsi-Cola Buffalo Bottling Corp. of Buffalo, New York in February.

     -    Cassidy's Beverage Limited of New Brunswick, Canada in February.

     -    Olean Bottling Works, Inc. of Olean, New York in August.

     During 2003, we also paid $5 million for the purchase of certain
distribution rights relating to SOBE and DR. PEPPER. In addition, we paid $4
million for purchase obligations relating to acquisitions made in the prior
year.

     During 2002, we acquired the operations and exclusive right to manufacture,
sell and distribute beverages of several different PepsiCo franchise bottlers.
The following acquisitions occurred for an aggregate purchase price of $921
million in cash and $382 million of assumed debt:

     -    Fruko Mesrubat Sanayii A.S. and related companies of Turkey in March.

     -    Pepsi-Cola Bottling Company of Aroostook, Inc., of Presque Isle, Maine
          in June.

     -    Seaman's Beverages Limited of the Canadian province of Prince Edward
          Island in July.

     -    Pepsi-Gemex, S.A. de C.V. of Mexico in November.

     -    Kitchener Beverages Limited of Ontario, Canada in December.

     The Mexican and Turkish acquisitions were made to allow us to increase our
markets outside the United States. Our U.S. and Canadian acquisitions were made
to enable us to provide better service to our large retail customers. We expect
these acquisitions to reduce costs through economies of scale.

     We intend to continue to pursue other acquisitions of independent PepsiCo
bottlers in the U.S., Mexico and Canada, particularly in territories contiguous
to our own, where they create value for our owners. We also intend to continue
to evaluate other international acquisition opportunities as they become
available.

CASH FLOWS

     Fiscal 2003 Compared with Fiscal 2002

     Our net cash provided by operations of $1,203 million was driven by the
strong cash flow generated from the sale of our products. Net operating cash
flow grew by $96 million over the prior year due primarily to the incremental
cash generated by our Mexican business. This increase was partially offset by
higher tax payments for jurisdictions outside the U.S. and the settlement of our
New Jersey wage and hour litigation.

     Net cash used for investments decreased by $550 million to $1,286 million,
reflecting lower acquisition spending during 2003 and the lapping of a $181
million investment in our debt defeasance trust in the prior year, partially
offset by increases in notes receivable from PBG and capital expenditures.

     Net cash provided by financing increased by $348 million to $1,025 million,
driven by an increase in our proceeds from long-term debt, lower short and
long-term borrowing repayments and decreased distributions to owners.

                                       24
<PAGE>

     Fiscal 2002 Compared with Fiscal 2001

     Net cash provided by operations increased $34 million to $1,107 million
reflecting strong operating income growth, partially offset by an increase in
our pension contributions.

     Net cash used for investments increased by $887 million to $1,836 million,
primarily due to the acquisitions we made during the year, coupled with the
investment in our debt defeasance trust and an increase in capital expenditures
as we continue to invest in small bottle production lines and cold drink
equipment.

     Net cash provided by financing increased by $850 million to $677 million,
driven by proceeds received from our issuance of $1.0 billion of 4.63% senior
notes to finance our acquisition of Gemex and decreased distributions to the
owners, offset by a reduction of short and long-term borrowings, primarily
outside the United States.

MARKET RISKS AND CAUTIONARY STATEMENTS

     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In the normal course of business, our financial position is routinely
subject to a variety of risks. These risks include the risk associated with the
price of commodities purchased and used in our business, interest rates on
outstanding debt and currency movements of non-U.S. dollar denominated assets
and liabilities. We are also subject to the risks associated with the business
environment in which we operate, including the collectibility of accounts
receivable. We regularly assess all of these risks and have policies and
procedures in place to protect against the adverse effects of these exposures.

     Our objective in managing our exposure to fluctuations in commodity prices,
interest rates, and foreign currency exchange rates is to minimize the
volatility of earnings and cash flows associated with changes in the applicable
rates and prices. To achieve this objective, we primarily enter into commodity
forward contracts, commodity futures and options on futures contracts and
interest rate swaps. Our company policy prohibits the use of derivative
instruments for trading or speculative purposes, and we have procedures in place
to monitor and control their use.

     A sensitivity analysis has been prepared to determine the effects that
market risk exposures may have on the fair values of our debt and other
financial instruments. To perform the sensitivity analysis, we assessed the risk
of loss in fair values from the hypothetical changes in commodity prices,
interest rates, and foreign currency exchange rates on market-sensitive
instruments. Information provided by this sensitivity analysis does not
necessarily represent the actual changes in fair value that we would incur under
normal market conditions because, due to practical limitations, all variables
other than the specific market risk factor were held constant. In addition, the
results of the analysis are constrained by the fact that certain items are
specifically excluded from the analysis, while the financial instruments that
relate to the financing or hedging of those items are included. As a result, the
reported changes in the values of some financial instruments that affect the
results of the sensitivity analysis are not matched with the offsetting changes
in the values of the items that those instruments are designed to finance or
hedge.

      Commodity Price Risk

     We are subject to market risks with respect to commodities because our
ability to recover increased costs through higher pricing may be limited by the
competitive environment in which we operate. We use futures contracts and
options on futures in the normal course of business to hedge anticipated
purchases of certain commodities used in our operations. With respect to
commodity price risk, we currently have various contracts outstanding for
commodity purchases in 2004, which establish our purchase prices within defined
ranges. We had $19 million in unrealized deferred gains and $16 million in
unrealized losses based on the commodity rates in effect on December 27, 2003
and December 28, 2002, respectively. We estimate that a 10% decrease in
commodity prices with all other variables held constant would have resulted in a
decrease in the fair value of our financial instruments of $17 million and $32
million at December 27, 2003 and December 28, 2002, respectively.

     Interest Rate Risk

     The fair value of our fixed-rate long-term debt is sensitive to changes in
interest rates. Interest rate changes would result in gains or losses in the
fair market value of our debt, representing differences between market interest
rates and the fixed-rate on the debt. As a result of the market risk, we
effectively converted $1.8 billion of our fixed-rate debt to floating-rate debt
through the use of interest rate swaps. The fair value of

                                       25
<PAGE>
our interest rate swaps resulted in an increase to our swap and debt instruments
of $3 million and $23 million at December 27, 2003 and December 28, 2002,
respectively.

     We estimate that a 10% decrease in interest rates with all other variables
held constant would have resulted in a net increase in the fair value of our
financial instruments, both our fixed-rate debt and our interest rate swaps, of
$75 million and $60 million at December 27, 2003 and December 28, 2002,
respectively.

     Foreign Currency Exchange Rate Risk

     In 2003, approximately 28% of our net revenues came from outside the United
States. Social, economic, and political conditions in these international
markets may adversely affect our results of operations, cash flows, and
financial condition. The overall risks to our international businesses include
changes in foreign governmental policies, and other political or economic
developments. These developments may lead to new product pricing, tax or other
policies, and monetary fluctuations, which may adversely impact our business. In
addition, our results of operations and the value of the foreign assets and
liabilities are affected by fluctuations in foreign currency exchange rates.

     As currency exchange rates change, translation of the statements of
operations of our businesses outside the U.S. into U.S. dollars affects
year-over-year comparability. We generally have not hedged against currency
risks because cash flows from our international operations are usually
reinvested locally. In addition, we historically have not entered into hedges to
minimize the volatility of reported earnings. Based on our overall evaluation of
market risk exposures for our foreign currency financial instruments at December
27, 2003 and December 28, 2002, near-term changes in foreign currency exchange
rates would not materially affect our consolidated financial position, results
of operations or cash flows in those periods.

     Foreign currency gains and losses reflect both transaction gains and losses
in our foreign operations, as well as translation gains and losses arising from
the re-measurement into U.S. dollars of the net monetary assets of businesses in
highly inflationary countries. Turkey and Russia were considered highly
inflationary economies for accounting purposes in 2002. Beginning in 2003,
Russia is no longer considered highly inflationary, and as a result, changed its
functional currency from the U.S. dollar to the Russian ruble. There was no
material impact on our consolidated financial statements as a result of Russia's
change in functional currency in 2003.

     In 2003, approximately 11% of our net revenues was derived from Mexico. In
2003, the Mexican peso devalued by approximately 8%. Future significant
movements in the Mexican peso could have a material impact on our financial
results.

     Unfunded Deferred Compensation Liability

     Our unfunded deferred compensation liability is subject to changes in PBG's
stock price as well as price changes in certain other equity and fixed income
investments. Employees participating in our deferred compensation program can
elect to defer all or a portion of their compensation to be paid out on a future
date or dates. As part of the deferral process, employees select from phantom
investment options that determine the earnings on the deferred compensation
liability and the amount that they will ultimately receive. Employee investment
elections include PBG stock and a variety of other equity and fixed-income
investment options.

     Since the plan is unfunded, employees' deferred compensation amounts are
not directly invested in these investment vehicles. Instead, we track the
performance of each employee's investment selections and adjust his or her
deferred compensation account accordingly. The adjustments to the employees'
accounts increases or decreases the deferred compensation liability reflected on
our Consolidated Balance Sheets with an offsetting increase or decrease to our
selling, delivery and administrative expenses.

     We use prepaid forward contracts to hedge the portion of our deferred
compensation liability that is based on PBG's stock price. Therefore, changes in
compensation expense as a result of changes in PBG's stock price are
substantially offset by the changes in the fair value of these contracts. We
estimate that a 10% unfavorable change in PBG's year-end stock price would have
reduced the fair value from these commitments by $2 million in 2003 and 2002.

CAUTIONARY STATEMENTS

     Except for the historical information and discussions contained herein,
statements contained in this annual report on Form 10-K may constitute
forward-looking statements as defined by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on currently
available competitive, financial and economic data and our operating plans.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to be materially different. Among the events and

                                       26
<PAGE>

uncertainties that could adversely affect future periods are:

-    changes in our relationship with PepsiCo that could have a material adverse
     effect on our business and financial results;

-    restrictions imposed by PepsiCo on our raw material suppliers that could
     increase our costs;

-    decreased demand for our product resulting from changes in consumers'
     preferences;

-    an inability to achieve volume growth through product and packaging
     initiatives;

-    lower-than-expected net pricing resulting from marketplace competition and
     competitive pressures that may cause channel and product mix to shift from
     more profitable cold drink channels and packages;

-    material changes from expectations in the cost of raw materials and
     ingredients;

-    an inability to achieve cost savings;

-    an inability to achieve the expected timing for returns on cold drink
     equipment and related infrastructure expenditures;

-    material changes in expected levels of bottler incentive payments from
     PepsiCo;

-    changes in product category consumption;

-    unfavorable weather conditions in our markets;

-    unforeseen economic and political changes;

-    possible recalls of our products;

-    an inability to meet projections for performance in newly acquired
     territories;

-    changes in laws and regulations, including restrictions on the sale of
     carbonated soft drinks in schools, changes in food and drug laws,
     transportation regulations, employee safety rules, labor laws, accounting
     standards, taxation requirements (including unfavorable outcomes from
     audits performed by various tax authorities) and environmental laws;

-    changes in our debt ratings; and

-    material changes in our expected interest and currency exchange rates and
     unfavorable market performance of PBG's pension plan assets.

                                       27
<PAGE>

BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS

in millions

FISCAL YEARS ENDED DECEMBER 27, 2003, DECEMBER 28, 2002 AND DECEMBER 29, 2001

<TABLE>
<CAPTION>
                                                                     2003      2002      2001
                                                                     ----      ----      ----
<S>                                                                 <C>       <C>       <C>
NET REVENUES ....................................................   $10,265   $ 9,216   $ 8,443
Cost of sales ...................................................     5,215     5,001     4,580
                                                                    -------   -------   -------
GROSS PROFIT ....................................................     5,050     4,215     3,863

Selling, delivery and administrative expenses ...................     4,089     3,318     3,185
                                                                    -------   -------   -------
OPERATING INCOME ................................................       961       897       678

Interest expense ................................................       177       131       132
Interest income .................................................        34        33        54
Other non-operating expenses, net ...............................         7         7        --
Minority interest ...............................................        --         9        14
                                                                    -------   -------   -------

INCOME BEFORE INCOME TAXES ......................................       811       783       586
Income tax expense before rate change ...........................        73        49        24
Income tax rate change expense (benefit) ........................        11        --       (25)
                                                                    -------   -------   -------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE       727       734       587

Cumulative effect of change in accounting principle, net of
tax .............................................................         6        --        --
                                                                    -------   -------   -------

NET INCOME ......................................................   $   721   $   734   $   587
                                                                    =======   =======   =======
</TABLE>

     See accompanying notes to Consolidated Financial Statements.

                                       28
<PAGE>

BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS

in millions

FISCAL YEARS ENDED DECEMBER 27, 2003, DECEMBER 28, 2002 AND DECEMBER 29, 2001

<TABLE>
<CAPTION>
                                                                                2003       2002       2001
                                                                                ----       ----       ----
<S>                                                                           <C>        <C>        <C>
CASH FLOWS--OPERATIONS
Net income ................................................................   $   721    $   734    $   587
Adjustments to reconcile net income to net cash provided by operations:
   Depreciation ...........................................................       556        443        379
   Amortization ...........................................................        12          8        135
   Cumulative effect of change in accounting principle ....................         6         --         --
   Deferred income taxes ..................................................        63         37         (9)
   Other non-cash charges and credits, net ................................       155        103        155
   Changes in operating working capital, excluding effects of acquisitions:
      Accounts receivable, net ............................................       (20)       (19)       (28)
      Inventories, net ....................................................         4         13        (50)
      Prepaid expenses and other current assets ...........................         6         14        (26)
      Accounts payable and other current liabilities ......................       (93)       (23)        53
                                                                              -------    -------    -------
        Net change in operating working capital ...........................      (103)       (15)       (51)
                                                                              -------    -------    -------
   Pension contributions ..................................................      (162)      (151)       (86)
   Other, net .............................................................       (45)       (52)       (37)
                                                                              -------    -------    -------
NET CASH PROVIDED BY OPERATIONS ...........................................     1,203      1,107      1,073
                                                                              -------    -------    -------

CASH FLOWS--INVESTMENTS
Capital expenditures ......................................................      (644)      (623)      (593)
Acquisitions of bottlers ..................................................      (100)      (921)       (52)
Sales of property, plant and equipment ....................................        10          6          6
Notes receivable from PBG, Inc., net ......................................      (552)      (117)      (310)
Investment in debt defeasance trust .......................................        --       (181)        --
                                                                              -------    -------    -------
NET CASH USED FOR INVESTMENTS .............................................    (1,286)    (1,836)      (949)
                                                                              -------    -------    -------

CASH FLOWS--FINANCING
Short-term borrowings, net--three months or less ..........................         8        (78)        50
Net proceeds from issuances of long-term debt .............................     1,141      1,031         --
Payments of long-term debt ................................................       (27)      (120)        --
Distributions to owners ...................................................       (97)      (156)      (223)
                                                                              -------    -------    -------
NET CASH PROVIDED BY (USED FOR) FINANCING .................................     1,025        677       (173)
                                                                              -------    -------    -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS ..............        10         (8)        (7)
                                                                              -------    -------    -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................       952        (60)       (56)
CASH AND CASH EQUIVALENTS--BEGINNING OF YEAR ..............................       202        262        318
                                                                              -------    -------    -------
CASH AND CASH EQUIVALENTS--END OF YEAR ....................................   $ 1,154    $   202    $   262
                                                                              =======    =======    =======
</TABLE>

     See accompanying notes to Consolidated Financial Statements.

                                       29
<PAGE>

BOTTLING GROUP, LLC

CONSOLIDATED BALANCE SHEETS

in millions

DECEMBER 27, 2003 AND DECEMBER 28, 2002

<TABLE>
<CAPTION>
                                                                       2003        2002
                                                                       ----        ----
<S>                                                                  <C>         <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................................   $  1,154    $    202
Accounts receivable, less allowance of $72 in 2003 and $67 in 2002        994         922
Inventories ......................................................        374         378
Prepaid expenses and other current assets ........................        194         152
Investment in debt defeasance trust ..............................        168          12
                                                                     --------    --------
   TOTAL CURRENT ASSETS ..........................................      2,884       1,666

Property, plant and equipment, net ...............................      3,423       3,308
Other intangible assets, net .....................................      3,562       3,495
Goodwill .........................................................      1,386       1,192
Notes receivable from PBG ........................................      1,506         954
Investment in debt defeasance trust ..............................         --         170
Other assets .....................................................        125         131
                                                                     --------    --------
   TOTAL ASSETS ..................................................   $ 12,886    $ 10,916
                                                                     ========    ========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities ...................   $  1,163    $  1,138
Short-term borrowings ............................................         67          51
Current maturities of long-term debt .............................      1,178          16
                                                                     --------    --------
   TOTAL CURRENT LIABILITIES .....................................      2,408       1,205

Long-term debt ...................................................      3,497       3,541
Other liabilities ................................................        628         675
Deferred income taxes ............................................        451         309
                                                                     --------    --------
   TOTAL LIABILITIES .............................................      6,984       5,730
                                                                     --------    --------
OWNERS' EQUITY
Owners' Equity ...................................................      6,409       5,782
Accumulated other comprehensive loss .............................       (503)       (596)
Deferred compensation ............................................         (4)         --
                                                                     --------    --------
   TOTAL OWNERS' EQUITY ..........................................      5,902       5,186
                                                                     --------    --------
      TOTAL LIABILITIES AND OWNERS' EQUITY .......................   $ 12,886    $ 10,916
                                                                     ========    ========
</TABLE>

     See accompanying notes to Consolidated Financial Statements.

                                       30
<PAGE>

BOTTLING GROUP, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN OWNERS' EQUITY

in millions

FISCAL YEARS ENDED DECEMBER 27, 2003, DECEMBER 28, 2002 AND DECEMBER 29, 2001

<TABLE>
<CAPTION>
                                                                           ACCUMULATED
                                                OWNERS'                      OTHER
                                                  NET          DEFERRED   COMPREHENSIVE              COMPREHENSIVE
                                               INVESTMENT    COMPENSATION     LOSS         TOTAL     INCOME/(LOSS)
                                               ----------    ------------     ----         -----     -------------
<S>                                            <C>           <C>          <C>             <C>        <C>
BALANCE AT DECEMBER 30, 2000 .............     $  4,574      $     --      $   (253)      $ 4,321
  Comprehensive income:
      Net income .........................          587            --            --           587       $   587
      Currency translation adjustment ....           --            --           (48)          (48)          (48)
      Minimum pension liability adjustment           --            --           (96)          (96)          (96)
      Cash flow hedge adjustment .........           --            --           (19)          (19)          (19)
                                                                                                        -------
  Total comprehensive income .............                                                              $   424
                                                                                                        =======
  Cash distributions to owners ...........         (223)           --            --          (223)
  Non-cash contribution from owner .......           74            --            --            74
                                                -------      --------      --------       -------

BALANCE AT DECEMBER 29, 2001 .............        5,012            --          (416)        4,596
  Comprehensive income:
      Net income .........................          734            --            --           734       $   734
      Currency translation adjustment ....           --            --            25            25            25
      Minimum pension liability adjustment           --            --          (216)         (216)         (216)
      Cash flow hedge adjustment .........           --            --            11            11            11
                                                                                                        -------
  Total comprehensive income .............                                                              $   554
                                                                                                        =======
  Non-cash contribution from owner .......          192            --            --           192
  Cash distributions to owners ...........         (156)           --            --          (156)
                                                -------      --------      --------       -------

BALANCE AT DECEMBER 28, 2002 .............        5,782            --          (596)        5,186
   Comprehensive income:
      Net income .........................          721            --            --           721       $   721
      Currency translation adjustment ....           --            --            96            96            96
      Minimum pension liability adjustment           --            --           (34)          (34)          (34)
      Cash flow hedge adjustment .........           --            --            31            31            31
                                                                                                        -------
   Total comprehensive income ............                                                              $   814
                                                                                                        =======
   Cash distributions to owners ..........          (97)           --            --           (97)
   Non-cash distributions from owners ....           (4)           --            --            (4)
   Stock compensation ....................            7            (4)           --             3
                                                -------      --------      --------       -------

BALANCE AT DECEMBER 27, 2003 .............      $ 6,409      $     (4)      $  (503)      $ 5,902
                                                =======      ========      ========       =======
</TABLE>

See accompanying notes to Consolidated Financial Statements.

                                       31
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Tabular dollars in millions

NOTE 1--BASIS OF PRESENTATION

     Bottling Group, LLC (collectively referred to as "Bottling LLC," "we,"
"our" and "us") is the principal operating subsidiary of The Pepsi Bottling
Group, Inc. ("PBG") and consists of substantially all of the operations and
assets of PBG. Bottling LLC, which is consolidated by PBG, has the exclusive
right to manufacture, sell and distribute from Pepsi-Cola beverages, in all or a
portion of the United States, Mexico, Canada, Spain, Greece, Russia and Turkey.

     In conjunction with PBG's initial public offering and other subsequent
transactions, PBG and PepsiCo contributed bottling businesses and assets used in
the bottling businesses to Bottling LLC. As a result of the contribution of
these assets, PBG owns 93.2% of Bottling LLC and PepsiCo owns the remaining 6.8%
as of December 27, 2003.

     Certain reclassifications were made in our Consolidated Financial
Statements to 2002 and 2001 amounts to conform to the 2003 presentation.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") requires us to make estimates and assumptions that affect reported
amounts of assets, liabilities, revenues, expenses and disclosure of contingent
assets and liabilities. Actual results could differ from these estimates.

     BASIS OF CONSOLIDATION - The accounts of all of our wholly and
majority-owned subsidiaries are included in the accompanying Consolidated
Financial Statements. We have eliminated intercompany accounts and transactions
in consolidation.

     FISCAL YEAR - Our U.S. and Canadian operations report using a fiscal year
that consists of 52 weeks, ending on the last Saturday in December. Every five
or six years a 53rd week is added. Fiscal years 2003, 2002 and 2001 consisted of
52 weeks. Our remaining countries report using a calendar-year basis.
Accordingly, we recognize our quarterly business results as outlined below:

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

     REVENUE RECOGNITION - We recognize revenue when our products are delivered
to customers. Sales terms allow for a right of return if product freshness has
expired or breakage has occurred.

     SALES INCENTIVES - We offer certain sales incentives to our customers,
which are accounted for as a reduction in our net revenues when incurred. A
number of these arrangements are based upon annual and quarterly targets that
generally do not exceed one year. Based upon forecasted volume and other
performance criteria, net revenues in our Consolidated Statements of Operations
are reduced by the expected amounts to be paid out to our customers.

     ADVERTISING AND MARKETING COSTS - We are involved in a variety of programs
to promote our products. We include advertising and marketing costs in selling,
delivery and administrative expenses and expense such costs in the fiscal year
incurred. Advertising and marketing costs were $453 million, $441 million and
$389 million in 2003, 2002 and 2001, respectively, before bottler incentives
received from PepsiCo and other brand owners.

     BOTTLER INCENTIVES - PepsiCo and other brand owners, at their sole
discretion, provide us with various forms of bottler incentives. These
incentives are mutually agreed-upon between us and PepsiCo and other brand
owners and cover a variety of initiatives, including direct marketplace support,
capital equipment funding and advertising support. Based on the objective of the
programs and initiatives, we record bottler incentives as an adjustment to net
revenues, cost of sales or selling, delivery and administrative expenses.
Beginning in 2003, due to the adoption of Emerging Issues Task Force ("EITF")
Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor," we

                                       32
<PAGE>

have changed our accounting methodology for the way we record bottler
incentives. Prior to 2003, we classified worldwide bottler incentives received
from PepsiCo and other brand owners as adjustments to net revenues and selling,
delivery and administrative expenses depending on the objective of the program.
In accordance with EITF Issue No. 02-16, we have classified certain bottler
incentives as a reduction of cost of sales, beginning in 2003 as follows:

-    Direct marketplace support represents PepsiCo's and other brand owners'
     agreed-upon funding to assist us in offering sales and promotional
     discounts to retailers and is generally recorded as an adjustment to cost
     of sales beginning in 2003. If the direct marketplace support is a
     reimbursement for a specific, incremental and identifiable program, the
     funding is recorded as an adjustment to net revenues. Prior to 2003, all
     direct marketplace support was recorded as an adjustment to net revenues.

-    Capital equipment funding is designed to help offset the costs of
     purchasing and installing marketing equipment, such as vending machines and
     glass door coolers at customer locations and is recorded as a reduction of
     cost of sales beginning in 2003. Prior to 2003, capital equipment funding
     was recorded as a reduction to selling, delivery and administrative
     expenses.

-    Advertising support represents agreed-upon funding to assist us for the
     cost of media time and promotional materials and is generally recorded as
     an adjustment to cost of sales. Advertising support that represents
     reimbursement for a specific, incremental and identifiable media cost, is
     recorded as a reduction to advertising and marketing expenses within
     selling, delivery and administrative expenses. Prior to 2003, all funding
     for media costs was recorded as an adjustment to selling, delivery and
     administrative expenses.

     Total bottler incentives recognized as adjustments to net revenues, cost of
sales and selling, delivery and administrative expenses in our Consolidated
Statements of Operations were as follows:

<TABLE>
<CAPTION>
                                                       52-WEEKS ENDED
                                                     2003   2002   2001
                                                     ----   ----   ----
<S>                                                  <C>    <C>    <C>
Net revenues ...................................     $ 55   $293   $293
Cost of sales ..................................      527     --     --
Selling, delivery and administrative expenses...      108    311    305
                                                     ----   ----   ----
   Total bottler incentives ....................     $690   $604   $598
                                                     ====   ====   ====
</TABLE>

     See "New Accounting Standards" for the pro-forma disclosure to our reported
results for the 52-weeks ended December 28, 2002 and December 29, 2001, assuming
that EITF Issue No. 02-16 had been in place for all periods presented.

     SHIPPING AND HANDLING COSTS - We record the majority of our shipping and
handling costs within selling, delivery and administrative expenses. Such costs
totaled $1,397 million, $1,172 million and $1,092 million in 2003, 2002 and
2001, respectively.

     FOREIGN CURRENCY GAINS AND LOSSES - We translate the balance sheets of our
foreign subsidiaries that do not operate in highly inflationary economies at the
exchange rates in effect at the balance sheet date, while we translate the
statements of operations at the average rates of exchange during the year. The
resulting translation adjustments of our foreign subsidiaries are recorded
directly to accumulated other comprehensive loss. Foreign currency gains and
losses reflect both transaction gains and losses in our foreign operations, as
well as translation gains and losses arising from the remeasurement into U.S.
dollars of the net monetary assets of businesses in highly inflationary
countries. Turkey and Russia were considered highly inflationary economies for
accounting purposes in 2002 and 2001. Beginning in 2003, Russia is no longer
considered highly inflationary, and as a result, changed its functional currency
from the U.S. dollar to the Russian ruble. There was no material impact on our
consolidated financial statements as a result of Russia's change in functional
currency in 2003.

     PENSION AND POSTRETIREMENT BENEFIT PLANS - PBG sponsors pension and other
postretirement benefit plans in various forms covering substantially all
employees who meet eligibility requirements. We account for PBG's defined
benefit pension and postretirement benefit plans using actuarial models required
by Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers'
Accounting for Pensions," and SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions."

     The assets, liabilities and assumptions used to measure expense for any
fiscal year are determined as of September 30 of the preceding year
("measurement date"). Differences between actual and expected returns are
generally recognized in the net periodic pension calculation over five years. To
the extent the amount of all unrecognized gains and losses exceeds 10% of the
larger of the benefit obligation or plan assets, such

                                       33
<PAGE>

amount is amortized over the average remaining service life of active
participants. We amortize prior service costs on a straight-line basis over the
average remaining service period of employees expected to receive benefits. For
additional unaudited information, see "Critical Accounting Policies" in
Management's Financial Review.

     INCOME TAXES - We are a limited liability company, taxable as a partnership
for U.S. tax purposes and, as such, generally will pay no U.S. federal or state
income taxes. Our federal and state distributable share of income, deductions
and credits will be allocated to our owners based on their percentage of
ownership. However, certain domestic and foreign affiliates pay taxes in their
respective jurisdictions and record related deferred income tax assets and
liabilities. The tax bases of our assets and liabilities reflect our best
estimate of the tax benefit and costs we expect to realize. Valuation allowances
are established where expected future taxable income does not support the
recognition of the related deferred tax asset. For additional unaudited
information, see "Critical Accounting Policies" in Management's Financial
Review.

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

     ALLOWANCE FOR DOUBTFUL ACCOUNTS - We determine our allowance for doubtful
accounts based on the evaluation of the aging of our trade receivable portfolio
and an in-depth analysis of our high-risk customers. Our reserves contemplate
our historical loss rate on receivables, specific customer situations, and the
economic environments in which we operate. For additional unaudited information,
see "Critical Accounting Policies" in Management's Financial Review.

     INVENTORIES - We value our inventories at the lower of cost or net
realizable value. The cost of our inventory in the majority of locations is
computed on the first-in, first-out method. In Turkey, we compute the cost of
our inventories at the lower of cost computed using the weighted-average cost
method.

     PROPERTY, PLANT AND EQUIPMENT - We state property, plant and equipment
("PP&E") at cost, except for PP&E that has been impaired, for which we write
down the carrying amount to estimated fair market value, which then becomes the
new cost basis.

     GOODWILL AND OTHER INTANGIBLE ASSETS, NET - During 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment. Effective the first day of fiscal year 2002, we no longer amortize
goodwill and certain intangible assets, but evaluate them for impairment
annually. See "New Accounting Standards" for the pro-forma disclosure to our
reported results for the 52-weeks ended December 29, 2001, assuming that SFAS
No. 142 had been in place for all periods presented.

     We evaluate our identified intangible assets with indefinite useful lives
for impairment annually on an individual basis or by asset groups on a
country-by-country basis, depending on the nature of the intangible asset. We
measure impairment as the amount by which the carrying value exceeds its
estimated fair value. Based upon our annual impairment analysis performed in the
fourth quarter of 2003, the estimated fair values of our identified intangible
assets with indefinite lives exceeded their carrying amounts.

     We evaluate goodwill on a country-by-country basis ("reporting unit") for
impairment. We evaluate each reporting unit for impairment based upon a two-step
approach. First, we compare the fair value of our reporting unit with its
carrying value. Second, if the carrying value of our reporting unit exceeds its
fair value, we compare the implied fair value of the reporting unit's goodwill
to its carrying amount to measure the amount of impairment loss. In measuring
the implied fair value of goodwill, we would allocate the fair value of the
reporting unit to each of its assets and liabilities (including any unrecognized
intangible assets). Any excess of the fair value of the reporting unit over the
amounts assigned to its assets and liabilities is the implied fair value of
goodwill. Based upon our annual impairment analysis in the fourth quarter of
2003, the estimated fair value of our reporting units exceeded their carrying
value, and as a result, we did not need to proceed to the second step of the
impairment test.

     Other identified intangible assets that are subject to amortization are
amortized over the period in which we expect to receive economic benefit and are
reviewed for impairment when facts and circumstances indicate that the carrying
value of the asset may not be recoverable. The determination of the expected
life will be dependent upon the use and underlying characteristics of the
intangible asset. In our evaluation of the intangible assets, we consider the
nature and terms of the underlying agreements, the customer's attrition rate,
competitive environment, and brand history, as applicable. If the carrying value
is not recoverable, impairment is measured as the amount by which the carrying
value exceeds its estimated fair value. Fair value is generally estimated based
on either appraised value or other valuation techniques. For additional

                                       34
<PAGE>

unaudited information, see "Critical Accounting Policies" in Management's
Financial Review.

     INVESTMENT IN DEBT DEFEASANCE TRUST - In 2002 we purchased $181 million in
U.S. government securities and placed those securities into an irrevocable
trust, for the sole purpose of funding payments of principal and interest on the
$160 million of 9.75% senior notes maturing in March 2004, in order to defease
their respective covenants. These marketable securities have maturities that
coincide with the scheduled interest payments of the senior notes and ultimate
payment of principal. We have categorized these marketable securities as
held-to-maturity as we have the positive intent and ability to hold these
securities to maturity. Held-to-maturity securities are carried at amortized
cost. At December 27, 2003, total amortized cost for these held-to-maturity
securities is $168 million and is recorded in the current portion of investment
in debt defeasance trust in our Consolidated Balance Sheets. At December 28,
2002, total amortized costs for these held-to-maturity securities was $182
million, of which $12 million was recorded as current and the remaining $170
million was recorded as long-term in investment in debt defeasance trust in our
Consolidated Balance Sheets.

     FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - We use derivative instruments
to hedge against the risk associated with the price of commodities purchased and
used in our business, interest rates on outstanding debt and in 2002, certain
currency exposures. Our use of derivative instruments is limited to interest
rate swaps, forward contracts, futures and options on futures contracts. Our
company policy prohibits the use of derivative instruments for trading or
speculative purposes, and we have procedures in place to monitor and control
their use.

     All derivative instruments are recorded at fair value as either assets or
liabilities in our Consolidated Balance Sheets. Derivative instruments are
generally designated and accounted for as either a hedge of a recognized asset
or liability ("fair value hedge") or a hedge of a forecasted transaction ("cash
flow hedge").

     For a fair value hedge, both the effective and ineffective portions of the
change in fair value of the derivative instrument, along with an adjustment to
the carrying amount of the hedged item for fair value changes attributable to
the hedged risk, are recognized in earnings. For derivative instruments that
hedge interest rate risk, the fair value adjustments are recorded to interest
expense, net, in the Consolidated Statements of Operations.

     For a cash flow hedge, the effective portion of changes in the fair value
of the derivative instrument that are highly effective are deferred in
accumulated other comprehensive loss until the underlying hedged item is
recognized in earnings. The applicable gain or loss recognized in earnings is
recorded consistent with the expense classification of the underlying hedged
item.

     The ineffective portion of fair value changes on qualifying cash flow
hedges is recognized in earnings immediately and is recorded consistent with the
expense classification of the underlying hedged item. If a fair value or cash
flow hedge were to cease to qualify for hedge accounting or be terminated, it
would continue to be carried on the balance sheet at fair value until settled,
but hedge accounting would be discontinued prospectively. If a forecasted
transaction was no longer probable of occurring, amounts previously deferred in
accumulated other comprehensive loss would be recognized immediately in
earnings.

     On occasion, we enter into derivative instruments that do not qualify for
hedge accounting. These instruments are reflected in the Consolidated Balance
Sheets at fair value with changes in fair value recognized in earnings.

     We also may enter into a derivative instrument for which hedge accounting
is not required because it is entered into to offset changes in the fair value
of an underlying transaction recognized in earnings ("natural hedge"). These
instruments are reflected in the Consolidated Balance Sheets at fair value with
changes in fair value recognized in earnings.

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

                                       35
<PAGE>
set forth below:

<TABLE>
<CAPTION>
                                                                52-WEEKS ENDED
                                                            2003     2002     2001
                                                           -----    -----    -----
<S>                                                        <C>      <C>      <C>
Net income:
As reported ...........................................    $ 721    $ 734    $ 587
Add: Total stock-based employee compensation expense
         included in reported net income ..............        4       --       --
Less: Total stock-based employee compensation expense
         under fair value-based method for all awards..      (74)     (70)     (64)
                                                           -----    -----    -----
Pro forma .............................................    $ 651    $ 664    $ 523
                                                           =====    =====    =====
</TABLE>

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

     During 2003, PBG issued restricted stock awards to certain key members of
senior management, which vest over periods ranging from three to five years from
the date of grant. These restricted PBG stock awards are earned only if the
Company achieves certain performance targets over a three-year period. These
restricted PBG stock awards are considered variable awards pursuant to APB
Opinion No. 25, which requires the related compensation expense to be
re-measured each period until the performance targets are met and the amount of
the awards becomes fixed. When the restricted PBG stock award was granted,
deferred compensation was recorded as a reduction to owners' equity, and such
amount has been adjusted quarterly and amortized on a straight-line basis over
the vesting periods. As of December 27, 2003, the deferred compensation balance
remaining to be amortized is approximately $4 million. The Company recognized
approximately $1 million of expense in 2003 relating to these equity awards.

     COMMITMENTS AND CONTINGENCIES - We are subject to various claims and
contingencies related to lawsuits, taxes, environmental and other matters
arising out of the normal course of business. Liabilities related to commitments
and contingencies are recognized when a loss is probable and reasonably
estimable.

     NEW ACCOUNTING STANDARDS

     SFAS No. 142

     During 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for impairment.
Effective the first day of fiscal year 2002 we no longer amortize goodwill and
certain franchise rights, but evaluate them for impairment annually. The
following table provides pro forma disclosure of the elimination of goodwill and
certain franchise rights amortization in 2001, as if SFAS No. 142 had been
adopted at the beginning of 2001:

<TABLE>
<CAPTION>
                                             2003   2002   2001
                                             ----   ----   ----
<S>                                          <C>    <C>    <C>
Reported net income ......................   $721   $734   $587
   Add back: Goodwill amortization .......     --     --     35
   Add back: Franchise rights amortization     --     --     88
                                             ----   ----   ----
Adjusted net income ......................   $721   $734   $710
                                             ====   ====   ====
</TABLE>

                                       36
<PAGE>
     EITF Issue No. 02-16

     As discussed above in Note 2, the EITF reached a consensus on Issue No.
02-16, addressing the recognition and income statement classification of various
cash consideration given by a vendor to a customer. In accordance with EITF
Issue No. 02-16, we have classified certain bottler incentives as a reduction of
cost of sales beginning in 2003. In the first quarter of 2003, we have recorded
a transition adjustment of $6 million, net of taxes of $1 million, for the
cumulative effect on prior years. This adjustment reflects the amount of bottler
incentives that can be attributed to our 2003 beginning inventory balances. This
accounting change did not have a material effect on our income before cumulative
effect of change in accounting principle for the 52-weeks ended December 27,
2003. Assuming that EITF Issue No. 02-16 had been in place for all periods
presented, the following pro forma adjustments would have been made to our
reported results for the 52-weeks ended December 28, 2002 and December 29, 2001:

<TABLE>
<CAPTION>
                                                                 52-WEEKS ENDED DECEMBER 28, 2002
                                                                 --------------------------------
                                                                    AS     EITF 02-16    PROFORMA
                                                                 REPORTED  ADJUSTMENT     RESULTS
                                                                 --------  ----------     -------
<S>                                                              <C>       <C>           <C>
Net revenues ..............................................       $9,216     $ (290)      $8,926
Cost of sales .............................................        5,001       (491)       4,510
Selling, delivery and administrative expenses..............        3,318        201        3,519
                                                                  ------     ------       ------
Operating income ..........................................       $  897     $   --       $  897
                                                                  ======     ======       ======
</TABLE>

<TABLE>
<CAPTION>
                                                                 52-WEEKS ENDED DECEMBER 29, 2001
                                                                 --------------------------------
                                                                    AS      EITF 02-16   PROFORMA
                                                                 REPORTED   ADJUSTMENT    RESULTS
                                                                 --------   ----------    -------
<S>                                                              <C>        <C>          <C>
Net revenues ..............................................        $8,443     $ (278)     $8,165
Cost of sales .............................................         4,580       (468)      4,112
Selling, delivery and administrative expenses .............         3,185        190       3,375
                                                                   ------     ------      ------
Operating income ..........................................        $  678     $   --      $  678
                                                                   ======     ======      ======
</TABLE>

     Assuming EITF Issue No. 02-16 had been adopted for all periods presented,
pro forma net income for the 52-weeks ended December 27, 2003, December 28, 2002
and December 29, 2001, would have been as follows:

<TABLE>
<CAPTION>
                                                                         52-WEEKS ENDED
                                                                         --------------
                                                               DECEMBER     DECEMBER      DECEMBER
                                                               27, 2003     28, 2002      29, 2001
                                                               --------     --------      --------
<S>                                                            <C>          <C>           <C>
Net income:
  As reported..............................................      $721         $734          $587
  Pro forma ...............................................       727          734           587
</TABLE>

     SFAS No. 149

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

     FIN 46

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

                                       37
<PAGE>

     SFAS No. 146

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

     FIN 45

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

     Equity Award Accounting

     The FASB is planning to issue an exposure draft proposing to expense the
fair value of equity awards beginning in 2005. We are currently evaluating the
impact of this proposed standard on our financial statements.

NOTE 3 -- INVENTORIES

<TABLE>
<CAPTION>
                                                 2003      2002
                                                 ----      ----
<S>                                             <C>       <C>
Raw materials and supplies..                    $ 140     $ 162
Finished goods .............                      234       216
                                                -----     -----
                                                $ 374     $ 378
                                                =====     =====
</TABLE>

NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                               2003        2002
                                               ----        ----
<S>                                           <C>        <C>
Land ......................................   $   241    $   228
Buildings and improvements ................     1,185      1,126
Manufacturing and distribution equipment...     3,028      2,768
Marketing equipment .......................     2,131      2,008
Other .....................................       176        154
                                              -------    -------
                                                6,761      6,284
Accumulated depreciation ..................    (3,338)    (2,976)
                                              -------    -------
                                              $ 3,423    $ 3,308
                                              =======    =======
</TABLE>

We calculate depreciation on a straight-line basis over the estimated lives of
the assets as follows:

<TABLE>
<S>                                          <C>
Buildings and improvements ...............   20-33 years
Manufacturing and distribution equipment..   2-15 years
Marketing equipment ......................   3-7 years
</TABLE>

                                       38
<PAGE>

NOTE 5  - OTHER INTANGIBLE ASSETS, NET AND GOODWILL

<TABLE>
<CAPTION>
                                                        2003          2002
                                                        ----          ----
<S>                                                    <C>           <C>
Intangibles subject to amortization:
   Gross carrying amount:
     Customer relationships and lists ..               $    42       $    --
     Franchise rights ..................                    23            20
     Other identified intangibles ......                    27            24
                                                       -------       -------
                                                            92            44
                                                       -------       -------
   Accumulated amortization:
     Customer relationships and lists ..                    (3)           --
     Franchise rights ..................                   (10)           (6)
     Other identified intangibles ......                   (12)           (9)
                                                       -------       -------
                                                           (25)          (15)
                                                       -------       -------
Intangibles subject to amortization, net                    67            29
                                                       -------       -------
Intangibles not subject to amortization:
   Carrying amount:
     Franchise rights ..................                 2,908         3,424
     Distribution rights ...............                   286            --
     Trademarks ........................                   207            --
     Other identified intangibles ......                    94            42
                                                       -------       -------
Intangibles not subject to amortization                  3,495         3,466
                                                       -------       -------
Total other intangible assets, net .....               $ 3,562       $ 3,495
                                                       =======       =======
Goodwill ...............................               $ 1,386       $ 1,192
                                                       =======       =======
</TABLE>

     Total other intangible assets, net and goodwill increased by approximately
$261 million due to the following:

<TABLE>
<CAPTION>
                                                                        OTHER
                                                                      INTANGIBLE
                                                            GOODWILL ASSETS, NET   TOTAL
                                                            -------- -----------   -----
<S>                                                         <C>      <C>          <C>
Balance at December 28, 2002 .............................   $ 1,192   $ 3,495    $ 4,687
Purchase price allocations relating to recent acquisitions       163        66        229
Impact of foreign currency translation ...................        31         8         39
Increase in pension asset ................................        --         5          5
Amortization of intangible assets ........................        --       (12)       (12)
                                                             -------   -------    -------
Balance at December 27, 2003 .............................   $ 1,386   $ 3,562    $ 4,948
                                                             =======   =======    =======
</TABLE>

     See Note 16 - Acquisitions for further information relating to the changes
of goodwill and other intangible assets, net.

                                       39
<PAGE>

     For intangible assets subject to amortization, we calculate amortization
expense over the period we expect to receive economic benefit. Total
amortization expense was $12 million, $8 million and $135 million in 2003, 2002
and 2001, respectively. The weighted-average amortization period for each
category of intangible assets and its estimated aggregate amortization expense
expected to be recognized over the next five years are as follows:

<TABLE>
<CAPTION>
                                                       ESTIMATED AGGREGATE AMORTIZATION EXPENSE TO BE
                                                                         INCURRED
                                        WEIGHTED-                    ------------------
                                         AVERAGE                     FISCAL YEAR ENDING
                                       AMORTIZATION                  ------------------
                                          PERIOD         2004       2005    2006    2007    2008
                                          ------         ----       ----    ----    ----    ----
<S>                                    <C>               <C>        <C>     <C>     <C>     <C>
Customer relationships and lists...      17 years         $2         $2      $2      $2      $ 2
Franchise rights ..................      5 years          $5         $5      $2      $1      $--
Other identified intangibles ......      6 years          $5         $4      $3      $2      $ 1
</TABLE>

NOTE 6--ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES

<TABLE>
<CAPTION>
                                                                   2003       2002
                                                                   ----       ----
<S>                                                               <C>        <C>
Accounts payable ................                                 $  392     $  394
Trade incentives ................                                    220        210
Accrued compensation and benefits                                    162        181
Other accrued taxes .............                                    114         57
Other current liabilities .......                                    275        296
                                                                  ------     ------
                                                                  $1,163     $1,138
                                                                  ======     ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                     2003     2002
                                                                     ----     ----
<S>                                                                 <C>      <C>
Short-term borrowings
   Current maturities of long-term debt .........................   $1,178   $   16
   Other short-term borrowings ..................................       67       51
                                                                    ------   ------
                                                                    $1,245   $   67
                                                                    ======   ======
Long-term debt
   5.63% (5.06% effective rate**)  senior notes due 2009 ........   $1,300   $1,300
   5.38% (3.54% effective rate**)  senior notes due 2004 ........    1,000    1,000
   4.63% (4.59% effective rate)  senior notes due 2012 ..........    1,000    1,000
   2.45% (1.87% effective rate**)  senior notes due 2006 ........      500       --
   5.00% (5.12% effective rate)  senior notes due 2013 ..........      400       --
   4.13% (4.48% effective rate)  senior notes due 2015 ..........      250       --
   9.75% (3.77% effective rate***)  senior notes due 2004 .......      160      160
   Other (average rate 2.85%) ...................................       67       68
                                                                    ------   ------
                                                                     4,677    3,528
   Add:  SFAS No. 133 adjustment * ..............................        3       23
         Fair value adjustment relating to purchase accounting ..        3       14
   Less: Unamortized discount, net ..............................        8        8
         Current maturities of long-term debt ...................    1,178       16
                                                                    ------   ------
                                                                    $3,497   $3,541
                                                                    ======   ======
</TABLE>

* In accordance with the requirements of SFAS No. 133, the portion of our
fixed-rate debt obligations that is hedged is reflected in our Consolidated
Balance Sheets as an amount equal to the sum of the debt's carrying value plus a
SFAS No. 133 fair value adjustment representing changes recorded in the fair
value of the hedged debt obligations attributable to movements in market
interest rates.

** Effective interest rates include the impact of the gain/loss realized on swap
   instruments and represent the rates that were achieved in 2003.

*** Effective interest rate includes the impact resulting from the fair value
adjustment relating to our acquisition of Gemex.

                                       40
<PAGE>

     Maturities of long-term debt as of December 27, 2003, are 2004: $1,173
million, 2005: $15 million, 2006: $505 million, 2007: $28 million, 2008: $0
million and thereafter, $2,956 million. The maturities of long-term debt do not
include the non-cash impact of the SFAS No. 133 adjustment, and the interest
effect of the fair value adjustment relating to purchase accounting and
unamortized discount.

     The $1.3 billion of 5.63% senior notes and the $1.0 billion of 5.38% senior
notes are guaranteed by PepsiCo.

     The $1.0 billion of 4.63% senior notes will be guaranteed by PepsiCo
starting in February 2004, in accordance with the terms set forth in the related
indenture.

     During the second quarter of 2003, we issued $250 million of senior notes
with a coupon rate of 4.13%, maturing on June 15, 2015. We used the net proceeds
of this offering for general operating needs.

     During the third quarter of 2003, we filed a shelf registration statement
with the Securities and Exchange Commission (the "SEC") that was declared
effective by the SEC on September 5, 2003. Under this registration statement, we
have the capability to issue, in one or more offerings, up to $1 billion in
senior notes. Pursuant to the shelf registration statement on October 7, 2003,
we completed the offering of $500 million 2.45% senior notes due on October 16,
2006. In addition, on November 17, 2003, we completed an offering of $400
million 5.0% senior notes due on November 15, 2013. In February 2004, we intend
to utilize the net proceeds from these offerings for the repayment of a portion
of our $1 billion principal amount of 5.38% senior notes. Pending such use, the
net proceeds have been invested in several short-term instruments with original
maturities of three months or less and are classified as cash and cash
equivalents in our Consolidated Balance Sheet.

     Each of the senior notes mentioned above has redemption features and
covenants and will, among other things, limit our ability and the ability of our
restricted subsidiaries to create or assume liens, enter into sale and
lease-back transactions, engage in mergers or consolidations and transfer or
lease all or substantially all of our assets.

     The $160 million of 9.75% senior notes were issued by Pepsi-Gemex, S.A. de
C.V. of Mexico ("Gemex"). In December 2002, we purchased $181 million of U.S.
government securities and placed those securities into an irrevocable trust. The
trust has been established for the sole purpose of funding payments of principal
and interest on the $160 million of 9.75% senior notes maturing in March 2004,
in order to defease its respective covenants. We estimate that the U.S.
government securities will be sufficient to satisfy all future principal and
interest requirements of the senior notes. See Note 2 for further information
relating to these instruments.

     We have available short-term bank credit lines of approximately $302
million and $167 million at December 27, 2003 and December 28, 2002,
respectively. These lines were used to support the general operating needs of
our businesses outside the United States. The weighted-average interest rate for
used lines of credit outstanding at December 27, 2003, and December 28, 2002,
was 4.17% and 8.85%, respectively.

     Amounts paid to third parties for interest, net of cash received from our
interest rate swaps, were $173 million, $128 million and $123 million in 2003,
2002 and 2001, respectively.

     At December 27, 2003, we have outstanding letters of credit and surety
bonds valued at $12 million from financial institutions primarily to provide
collateral for estimated insurance requirements.

                                       41
<PAGE>

NOTE 8--LEASES

     We have noncancellable commitments under both capital and long-term
operating leases, which consist principally of buildings, office equipment and
machinery. Capital and operating lease commitments expire at various dates
through 2023. Most leases require payment of related executory costs, which
include property taxes, maintenance and insurance.

     Our future minimum commitments under noncancellable leases are set forth
below:

<TABLE>
<CAPTION>
                      LEASES
                Capital   Operating
                -------   ---------
<S>             <C>       <C>
2004 ........    $  6        $ 34
2005 ........       1          26
2006 ........       1          20
2007 ........      --          17
2008 ........      --          15
Later years..       3          59
                 ----        ----
                 $ 11        $171
                 ====        ====
</TABLE>

     At December 27, 2003, the present value of minimum payments under capital
leases was $9 million, after deducting $2 million for imputed interest. Our
rental expense was $69 million, $62 million and $40 million for 2003, 2002 and
2001, respectively.

NOTE 9--FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

     CASH FLOW HEDGES - We are subject to market risk with respect to the cost
of commodities because our ability to recover increased costs through higher
pricing may be limited by the competitive environment in which we operate. We
use future and option contracts to hedge the risk of adverse movements in
commodity prices related to anticipated purchases of aluminum and fuel used in
our operations. These contracts, which generally range from one to 12 months in
duration, establish our commodity purchase prices within defined ranges in an
attempt to limit our purchase price risk resulting from adverse commodity price
movements, and are designated as hedges and qualify for cash flow hedge
accounting treatment.

     The net amount of deferred losses from our commodity hedging that we
recognized into cost of sales in our Consolidated Statements of Operations was
$2 million in 2003 and $22 million in 2002. As a result of our commodity hedges,
$19 million of deferred gains and $16 million of deferred losses remained in
accumulated other comprehensive loss in our Consolidated Balance Sheets, based
on the commodity rates in effect on December 27, 2003, and December 28, 2002,
respectively. Assuming no change in the commodity prices as measured on December
27, 2003, $19 million of the deferred gain will be recognized in our cost of
sales over the next 12 months. The ineffective portion of the change in fair
value of these contracts was not material to our results of operations in 2003
or 2002.

     FAIR VALUE HEDGES - We finance a portion of our operations through
fixed-rate debt instruments. We effectively converted $1.8 billion of our senior
notes to floating rate debt through the use of interest rate swaps with the
objective of reducing our overall borrowing costs. These interest rate swaps
meet the criteria for fair value hedge accounting and are 100% effective in
eliminating the market rate risk inherent in our long-term debt. Accordingly,
any gain or loss associated with these swaps is fully offset by the opposite
market impact on the related debt. The change in fair value of the interest rate
swaps was a decrease of $20 million in 2003 and an increase of $16 million in
2002. The current portion of the fair value change of our swap and debt has been
recorded in prepaid expenses and other current assets and current maturities of
long-term debt in our Consolidated Balance Sheets. The long-term portion of the
fair value change of our swaps and debt has been recorded in other assets and
long-term debt in our Consolidated Balance Sheets.

     UNFUNDED DEFERRED COMPENSATION LIABILITY - Our unfunded deferred
compensation liability is subject to changes in PBG's stock price as well as
price changes in other equity and fixed income investments. Participating
employees in our deferred compensation program can elect to defer all or a
portion of their compensation to be paid out on a future date or dates. As part
of the deferral process, employees select from phantom investment options that
determine the earnings on the deferred compensation liability and the amount
that they will ultimately receive. Employee investment elections include PBG's
stock and a variety of other equity and fixed income investment options.

     Since the plan is unfunded, employees' deferred compensation amounts are
not directly invested in these

                                       42
<PAGE>

investment vehicles. Instead, we track the performance of each employee's
investment selections and adjust his or her deferred compensation account
accordingly. The adjustments to the employees' accounts increases or decreases
the deferred compensation liability reflected on our Consolidated Balance Sheets
with an offsetting increase or decrease to our selling, delivery and
administrative expenses.

     We use prepaid forward contracts to hedge the portion of our deferred
compensation liability that is based on PBG's stock price. At December 27, 2003,
we had a prepaid forward contract for 638,000 shares at an exercise price of
$23.33, which was accounted for as a natural hedge. This contract requires cash
settlement and has a fair value at December 27, 2003, of $15 million recorded in
prepaid expenses and other current assets in our Consolidated Balance Sheets.
The fair value of this contract changes based on the change in PBG's stock price
compared with the contract exercise price. We recognized $1 million in losses in
2003 and $1 million in gains in 2002, resulting from the change in fair value of
these prepaid forward contracts. The earnings impact from these instruments is
classified as selling, delivery and administrative expenses.

     OTHER DERIVATIVES - During 2002, we entered into option contracts to
mitigate certain foreign currency risks in anticipation of our acquisition of
Gemex. Although these instruments did not qualify for hedge accounting, they
were deemed derivatives since they contained a net settlement clause. These
options expired unexercised and the cost of these options of $7 million has been
recorded in other non-operating expenses, net in our Consolidated Statements of
Operations in 2002.

     OTHER FINANCIAL ASSETS AND LIABILITIES - Financial assets with carrying
values approximating fair value include cash and cash equivalents and accounts
receivable. Financial liabilities with carrying values approximating fair value
include accounts payable and other accrued liabilities and short-term debt. The
carrying value of these financial assets and liabilities approximates fair value
due to their short maturities and since interest rates approximate current
market rates for short-term debt.

     Long-term debt at December 27, 2003, had a carrying value and fair value of
$4.7 billion and $4.8 billion, respectively, and at December 28, 2002, had a
carrying value and fair value of $3.5 billion and $3.7 billion, respectively.
The fair value is based on interest rates that are currently available to us for
issuance of debt with similar terms and remaining maturities.

NOTE 10--PENSION AND POSTRETIREMENT BENEFIT PLANS

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

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

                                       43
<PAGE>

<TABLE>
<CAPTION>
                                                                         PENSION
                                                                  --------------------
Components of pension expense:                                    2003    2002    2001
                                                                  ----    ----    ----
<S>                                                               <C>     <C>     <C>
Service cost ..................................................   $ 37    $ 28    $ 25
Interest cost .................................................     63      56      50
Expected return on plan assets ................................    (67)    (66)    (57)
Amortization of prior service amendments ......................      6       6       4
Amortization of net loss ......................................     13      --      --
Special termination benefits ..................................     --       1      --
                                                                  ----    ----    ----
Net pension expense for the defined benefit plans .............   $ 52    $ 25    $ 22
                                                                  ----    ----    ----

Defined contribution plans expense ............................   $ 19    $ 18    $ 17
                                                                  ----    ----    ----

Total pension expense recognized in the Consolidated
Statements of Operations ......................................   $ 71    $ 43    $ 39
                                                                  ====    ====    ====
</TABLE>

     POSTRETIREMENT BENEFITS

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

<TABLE>
<CAPTION>
                                                                     POSTRETIREMENT
                                                                  --------------------
Components of postretirement benefits expense:                    2003    2002    2001
                                                                  ----    ----    ----
<S>                                                               <C>     <C>     <C>
   Service cost ...............................................   $  3    $  3    $  3
   Interest cost ..............................................     19      17      16
   Amortization of net loss ...................................      5       2       1
   Amortization of prior service amendments ...................     (2)     (6)     (6)
                                                                  ----    ----    ----
   Net postretirement benefits expense recognized in
   the Consolidated Statements of Operations ..................   $ 25    $ 16    $ 14
                                                                  ====    ====    ====
</TABLE>

    CHANGES IN THE PROJECTED BENEFIT OBLIGATIONS

<TABLE>
<CAPTION>
                                                    PENSION           POSTRETIREMENT
                                              ------------------    ------------------
                                                2003       2002       2003      2002
                                                ----       ----       ----      ----
<S>                                           <C>        <C>        <C>        <C>
Obligation at beginning of year..........     $   953    $   760    $   286    $   228
Service cost ............................          37         28          3          3
Interest cost ...........................          63         56         19         17
Plan amendments .........................          11         22         --         --
Actuarial loss ..........................         112        127         22         55
Benefit payments ........................         (47)       (41)       (18)       (17)
Special termination benefits ............          --          1         --         --
                                              -------    -------    -------    -------
Obligation at end of year ...............     $ 1,129    $   953    $   312    $   286
                                              =======    =======    =======    =======
</TABLE>

     CHANGES IN THE FAIR VALUE OF ASSETS

<TABLE>
<CAPTION>
                                                           PENSION              POSTRETIREMENT
                                                        --------------          --------------
                                                        2003     2002            2003     2002
                                                        ----     ----            ----     ----
<S>                                                     <C>      <C>            <C>      <C>
Fair value at beginning of year.....................    $ 538    $ 578          $ --     $ --
Actual return on plan assets .......................      121      (61)           --       --
Asset transfers ....................................       --       11            --       --
Employer contributions .............................      197       51            18       17
Benefit payments ...................................      (47)     (41)          (18)     (17)
                                                        -----    -----          ----     ----
Fair value at end of year ..........................    $ 809    $ 538          $ --     $ --
                                                        =====    =====          ====     ====
</TABLE>

                                       44
<PAGE>

     ADDITIONAL PLAN INFORMATION

<TABLE>
<CAPTION>
                                                              PENSION          POSTRETIREMENT
                                                           ---------------     ---------------
                                                            2003     2002       2003     2002
                                                           ------   ------     ------   ------
<S>                                                        <C>      <C>        <C>      <C>
Projected benefit obligation.........................      $1,129   $  953     $  312   $  286
Accumulated benefit obligation.......................       1,006      843        312      286
Fair value of plan assets (1)........................         899      663         --       --
</TABLE>

(1) Includes fourth quarter employer contributions.

     The accumulated and projected obligations for all plans exceed the fair
value of assets.

     FUNDED STATUS RECOGNIZED ON THE CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               PENSION          POSTRETIREMENT
                                                               -------          --------------
                                                            2003     2002       2003     2002
                                                            ----     ----       ----     ----
<S>                                                         <C>      <C>        <C>      <C>
Funded status at end of year .............................  $(320)   $(415)     $(312)   $(286)
Unrecognized prior service cost ..........................     46       41         (7)      (9)
Unrecognized loss ........................................    453      407        127      110
Fourth quarter employer contribution......................     90      125          6        6
                                                            -----    -----      -----    -----
Net amounts recognized ...................................  $ 269    $ 158      $(186)   $(179)
                                                            =====    =====      =====    =====
</TABLE>

     NET AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  PENSION       POSTRETIREMENT
                                                                  -------       --------------
                                                               2003     2002     2003     2002
                                                               ----     ----     ----     ----
<S>                                                           <C>      <C>      <C>      <C>
Other liabilities .........................................   $(124)   $(196)   $(186)   $(179)
Intangible assets .........................................      47       42       --       --
Accumulated other comprehensive loss ......................     346      312       --       --
                                                              -----    -----    -----    -----
Net amounts recognized ....................................   $ 269    $ 158    $(186)   $(179)
                                                              =====    =====    =====    =====

Increase in minimum liability included in accumulated
other comprehensive loss ..................................   $  34    $ 216    $  --    $  --
                                                              =====    =====    =====    =====
</TABLE>

     At December 27, 2003, and December 28, 2002, the accumulated benefit
obligation of all PBG pension plans exceeded the fair market value of the plan
assets resulting in the recognition of the unfunded liability as a minimum
balance sheet liability. As a result of this additional liability, our
intangible asset increased by $5 million to $47 million in 2003, which equals
the amount of unrecognized prior service cost in the plans. The remainder of the
liability that exceeded the unrecognized prior service cost was recognized as an
increase to accumulated other comprehensive loss of $34 million and $216 million
in 2003 and 2002, respectively.

     ASSUMPTIONS

     The assets, liabilities and assumptions used to measure pension and
postretirement expense for any fiscal year are determined as of September 30 of
the preceding year ("measurement date"). The discount rate assumption used in
our pension and postretirement benefit plans' accounting is based on current
interest rates for high-quality, long-term corporate debt as determined on each
measurement date. In evaluating our rate of return on assets for a given fiscal
year, we consider the 10-15 year historical return of the pension investment
portfolio, reflecting the weighted return of the plan asset allocation.

     We evaluate these assumptions with our actuarial advisors on an annual
basis and we believe they are within accepted industry ranges, although an
increase or decrease in the assumptions or economic events outside our control
could have a direct impact on reported net earnings.

                                       45
<PAGE>

     The weighted-average assumptions used to measure net expense for years
ended:

<TABLE>
<CAPTION>
                                                  Pension            Postretirement
                                                  -------            --------------
                                           2003    2002    2001    2003    2002    2001
                                           ----    ----    ----    ----    ----    ----
<S>                                        <C>     <C>     <C>     <C>     <C>     <C>
Discount rate .....................        6.75%   7.50%   7.75%   6.75%   7.50%   7.75%
Expected return on plan assets(1)..        8.50%   9.50%   9.50%   N/A     N/A     N/A
Rate of compensation increase .....        4.34%   4.33%   4.62%   4.34%   4.33%   4.62%
</TABLE>

(1) Expected return on plan assets is presented after administration expenses.

 The weighted-average assumptions used to measure the benefit liability as of
the end of the period were as follows:

<TABLE>
<CAPTION>
                                                            PENSION        POSTRETIREMENT
                                                         -------------     --------------
                                                         2003    2002      2003    2002
                                                         ----    ----      ----    ----
<S>                                                      <C>     <C>       <C>     <C>
Discount rate ..................................         6.25%   6.75%     6.25%   6.75%
Rate of compensation increase...................         4.20%   4.34%     4.20%   4.34%
</TABLE>

     FUNDING AND PLAN ASSETS

<TABLE>
<CAPTION>
                                                                 ALLOCATION PERCENTAGE
                                                              --------------------------
                                                              TARGET    ACTUAL    ACTUAL
                                                              ------    ------    ------
  Asset Category                                               2004      2003      2002
                                                               ----      ----      ----
<S>                                                           <C>       <C>       <C>
Equity securities...............................              70%-75%     74%      71%
Debt securities.................................              25%-30%     26%      29%
</TABLE>

     The table above shows the target allocation and actual allocation. PBG's
target allocations of the plan assets reflect the long-term nature of our
pension liabilities. None of the assets are invested directly in equity or debt
instruments issued by Bottling LLC, PBG, PepsiCo or any bottling affiliates of
PepsiCo, although it is possible that insignificant indirect investments exist
through our broad market indices. PBG's equity investments are diversified
across all areas of the equity market (i.e., large, mid and small capitalization
stocks as well as international equities). PBG's fixed income investments are
also diversified and consist of both corporate and U.S. government bonds. We
currently do not invest directly into any derivative investments. The plan's
assets are held in a pension trust account at our trustee's bank.

     PBG's pension investment policy and strategy are mandated by the Pension
Investment Committee (PIC) and is overseen by PBG's Board of Directors'
Compensation Committee. The plan assets are invested using a combination of
enhanced and passive indexing strategies. The performance of the plan assets is
benchmarked against market indices and reviewed by the PIC. Changes in
investment strategies, asset allocations and specific investments are approved
by the PIC prior to execution.

     HEALTH CARE COST TREND RATES

     We have assumed an average increase of 11.0% in 2004 in the cost of
postretirement medical benefits for employees who retired before cost sharing
was introduced. This average increase is then projected to decline gradually to
5.0% in 2013 and thereafter.

     Assumed health care cost trend rates have an impact on the amounts reported
for postretirement medical plans. A one-percentage point change in assumed
health care costs would have the following effects:

<TABLE>
<CAPTION>
                                                                                           1%              1%
                                                                                           --              --
                                                                                         INCREASE        DECREASE
                                                                                         --------        --------
<S>                                                                                      <C>             <C>
Effect on total fiscal year 2003 service and interest cost components..................     $ 1            $ (1)
Effect on the fiscal year 2003 accumulated postretirement benefit obligation...........     $10            $ (9)
</TABLE>

     During 2003, the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (the "Act") was passed into law. The reported postretirement benefit
obligation in our Consolidated Balance Sheet does not reflect the effects of the
Act. We do provide prescription drug benefits to Medicare-eligible retirees but
have elected to defer recognition of the Act until the FASB provides guidance
regarding its accounting treatment. This deferral election is permitted under
FASB Staff Position FAS 106-1. We do not believe the

                                       46
<PAGE>
adoption of the Act will have a material impact on our consolidated results.

 PENSION AND POSTRETIREMENT CASH FLOW

     Our contributions are made in accordance with applicable tax regulations
that provide us and our owners with current tax deductions for our contributions
and for taxation to the employee of plan benefits when the benefits are
received. We do not fund PBG's pension plan and postretirement plans when our
contributions would not be tax deductible or when benefits would be taxable to
the employee before receipt. Of the total pension liabilities at December 27,
2003, $59 million relates to plans not funded due to these unfavorable tax
consequences.

<TABLE>
<CAPTION>
EMPLOYER CONTRIBUTIONS                                                          PENSION            POSTRETIREMENT
                                                                                -------            --------------
<S>                                                                             <C>                <C>
2002.........................................................................     $151                   $19
2003.........................................................................      162                    18
2004 (expected)..............................................................      100                    20
</TABLE>

     Our 2004 expected contributions are intended to meet or exceed the IRS
minimum requirements and provide us with current tax deductions.

NOTE 11 -- EMPLOYEE STOCK OPTION PLANS

     Under PBG's long-term incentive plan, PBG stock options are issued to
middle and senior management employees and vary according to salary and level.
Except as noted below, PBG options granted in 2003, 2002 and 2001 had exercise
prices ranging from $18.25 per share to $25.50 per share, $23.25 per share to
$29.25 per share, and $18.88 per share to $22.50 per share, respectively, expire
in 10 years and generally become exercisable 25% after one year, an additional
25% after two years, and the remainder after three years.

     In 2001, two additional PBG option grants were made to certain senior
management employees. One grant had an exercise price of $19.50 per share,
expires in 10 years and became exercisable on the grant date. The other grant
had an exercise price of $22.50 per share, expires in 10 years and becomes
exercisable in 5 years.

     The following table summarizes option activity during 2003:

<TABLE>
<CAPTION>
                                                                                                 WEIGHTED-AVERAGE
Options in millions                                                               OPTIONS         EXERCISE PRICE
                                                                                  -------        ----------------
<S>                                                                               <C>            <C>
Outstanding at beginning of year ........................................          37.4               $15.53
   Granted ..............................................................           8.1                23.27
   Exercised ............................................................          (3.1)               11.27
   Forfeited ............................................................          (1.1)               22.44
                                                                                   ----
Outstanding at end of year ..............................................          41.3               $17.19
                                                                                   ====               ======
Exercisable at end of year ..............................................          26.9               $13.93
                                                                                   ====               ======
Weighted-average fair value of options granted during the year...........                             $ 9.29
                                                                                                      ======
</TABLE>

                                       47
<PAGE>

     The following table summarizes option activity during 2002:

<TABLE>
<CAPTION>
                                                                                WEIGHTED-AVERAGE
Options in millions                                                    OPTIONS   EXERCISE PRICE
                                                                       -------  ----------------
<S>                                                                    <C>      <C>
Outstanding at beginning of year ................................       39.7         $13.20
   Granted ......................................................        6.4          25.32
   Exercised ....................................................       (8.1)         11.63
   Forfeited ....................................................       (0.6)         16.89
                                                                        ----
Outstanding at end of year ......................................       37.4         $15.53
                                                                        ====         ======
Exercisable at end of year ......................................       19.9         $12.59
                                                                        ====         ======
Weighted-average fair value of options granted during the year...                    $10.89
                                                                                     ======
</TABLE>

     The following table summarizes option activity during 2001:

<TABLE>
<CAPTION>
                                                                                WEIGHTED-AVERAGE
Options in millions                                                    OPTIONS   EXERCISE PRICE
                                                                       -------  ----------------
<S>                                                                    <C>      <C>
Outstanding at beginning of year ................................        33.2        $10.75
   Granted ......................................................        10.2         20.47
   Exercised ....................................................        (1.8)        10.84
   Forfeited ....................................................        (1.9)        12.01
                                                                         ----
Outstanding at end of year ......................................        39.7        $13.20
                                                                         ====        ======
Exercisable at end of year ......................................         6.6        $13.38
                                                                         ====        ======
Weighted-average fair value of options granted during the year...                    $ 8.55
                                                                                     ======
</TABLE>

     Stock options outstanding and exercisable at December 27, 2003:

<TABLE>
<CAPTION>

                                                OPTIONS OUTSTANDING         OPTIONS EXERCISABLE
                                                -------------------         -------------------
                                                    WEIGHTED-
                                                     AVERAGE
                                                    REMAINING   WEIGHTED-             WEIGHTED-
Options in millions                                CONTRACTUAL   AVERAGE               AVERAGE
                                                     LIFE IN    EXERCISE              EXERCISE
RANGE OF EXERCISE PRICE                    OPTIONS    YEARS       PRICE    OPTIONS     PRICE
-----------------------                    -------    -----     --------   -------    --------
<C>                                        <C>     <C>          <C>        <C>        <C>
$ 9.38-$11.49....................             7.2      6.00      $ 9.39       7.2      $ 9.39
$11.50-$15.88....................            12.0      5.06      $11.63      12.0      $11.61
$15.89-$22.50....................             9.1      7.12      $20.44       5.7      $20.50
$22.51-$29.25....................            13.0      8.54      $24.36       2.0      $25.35
                                             ----                            ----
                                             41.3      6.77      $17.19      26.9      $13.93
                                             ====      ====      ======      ====      ======
</TABLE>

                                       48
<PAGE>

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

<TABLE>
<CAPTION>
                                                        2003           2002          2001
                                                        ----           ----          ----
<S>                                                   <C>            <C>            <C>
Risk-free interest rate......................           2.9%           4.5%           4.6%
Expected life ...............................         6 years        6 years        6 years
Expected volatility .........................            37%            37%            35%
Expected dividend yield......................          0.17%          0.16%          0.20%
</TABLE>

NOTE 12--INCOME TAXES

     We are a limited liability company, taxable as a partnership for U.S. tax
purposes and, as such, generally pay no U.S. federal or state income taxes. Our
federal and state distributable share of income, deductions and credits are
allocated to our owners based on their percentage of ownership. However, certain
domestic and foreign affiliates pay income taxes in their respective
jurisdictions.

     The details of our income tax provision are set forth below:

<TABLE>
<CAPTION>
                                                                     2003    2002    2001
                                                                     ----    ----    ----
<S>                                                                  <C>     <C>     <C>
Current:
           Federal ...........................................       $  7    $ (3)   $  2
           Foreign ...........................................         12      11       4
           State .............................................          1       4       2
                                                                     ----    ----    ----
                                                                       20      12       8
                                                                     ----    ----    ----
Deferred:
           Federal ...........................................         33      32      15
           Foreign ...........................................         18       2      (1)
           State .............................................          2       3       2
                                                                     ----    ----    ----
                                                                       53      37      16
                                                                     ----    ----    ----
                                                                       73      49      24
           Cumulative effect of change in accounting principle         (1)     --      --
           Rate change expense/(benefit) .....................         11      --     (25)
                                                                     ----    ----    ----
                                                                     $ 83    $ 49    $ (1)
                                                                     ====    ====    ====
</TABLE>

     Our income tax provision includes a nonrecurring increase in income tax
expense of $11 million and a nonrecurring reduction in income tax expense of $25
million due to enacted tax rate changes in Canada during the 2003 and 2001
respective tax years.

     Our reconciliation of income taxes calculated at the U.S. federal statutory
rate to our provision for income taxes is set forth below:

<TABLE>
<CAPTION>
                                                                   2003     2002     2001
                                                                   ----     ----     ----
<S>                                                               <C>      <C>      <C>
Income taxes computed at the U.S. federal statutory rate.....      35.0%    35.0%    35.0%
Income taxable to owners ....................................     (23.4)   (26.4)   (28.5)
State income tax, net of federal tax benefit ................       0.3      0.6      0.4
Impact of results outside of U.S. and Mexico ................      (8.1)    (6.2)    (9.8)
Impact of Mexico operations .................................     (12.4)      --       --
Changes in valuation allowances .............................      14.9      1.4      1.3
Goodwill and other nondeductible expenses ...................       1.5      0.8      2.7
Other, net ..................................................       1.2      1.2      3.0
                                                                   ----     ----     ----
                                                                    9.0      6.4      4.1
Rate change expense (benefit) ...............................       1.4       --     (4.3)
                                                                   ----     ----     ----
Total effective income tax rate .............................      10.4%     6.4%    (0.2)%
Cumulative effect of change in accounting principle .........        --       --       --
                                                                   ----     ----     ----
Total effective income tax rate .............................      10.4%     6.4%    (0.2)%
                                                                   ====      ===     ====
</TABLE>

                                       49
<PAGE>

     The details of our 2003 and 2002 deferred tax liabilities (assets) are set
forth below:

<TABLE>
<CAPTION>
                                                            2003     2002
                                                            ----     ----
<S>                                                         <C>      <C>
Intangible assets and property, plant and equipment.....    $ 480    $ 368
Other ..................................................       34        9
                                                            -----    -----
Gross deferred tax liabilities .........................      514      377
                                                            -----    -----
Net operating loss carryforwards .......................     (270)    (149)
Employee benefit obligations ...........................      (19)     (31)
Various liabilities and other ..........................      (55)     (56)
                                                            -----    -----
Gross deferred tax assets ..............................     (344)    (236)
Deferred tax asset valuation allowance .................      271      147
                                                            -----    -----

Net deferred tax assets ................................      (73)     (89)
                                                            -----    -----
Net deferred tax liability .............................    $ 441    $ 288
                                                            =====    =====

Included in:
Prepaid expenses and other current assets ..............    $ (10)   $ (21)
Deferred income taxes ..................................      451      309
                                                            -----    -----
                                                            $ 441    $ 288
                                                            =====    =====
</TABLE>

     We have net operating loss carryforwards totaling $807 million at December
27, 2003, which are available to reduce future taxes in the U.S., Spain, Greece,
Russia, Turkey and Mexico. Of these carryforwards, $6 million expire in 2004 and
$801 million expire at various times between 2005 and 2023. We have established
a full valuation allowance for the net operating loss carryforwards attributable
to Spain, Greece, Russia, Turkey and Mexico based upon our projection that it is
more likely than not that these losses will not be realized. In addition, at
December 27, 2003, we have tax credit carryforwards in the U.S. of $7 million
with an indefinite carryforward period and in Mexico of $12 million, which
expire at various times between 2008 and 2013.

     Our valuation allowances, which reduce deferred tax assets to an amount
that will more likely than not be realized, have increased by $124 million in
2003 and $25 million in 2002.

     Approximately $22 million of our valuation allowance relating to our
deferred tax asset at December 27, 2003 would be applied to goodwill if reversed
in future years.

     Deferred taxes are not recognized for temporary differences related to
investments in foreign subsidiaries that are essentially permanent in duration.
Determination of the amount of unrecognized deferred taxes related to these
investments is not practicable.

     Income taxes receivable from taxing authorities were $34 million at
December 27, 2003 and income taxes payable were $11 million at December 28,
2002. Such amounts are recorded within prepaid expenses and other current assets
and accounts payable and other current liabilities in our Consolidated Balance
Sheets, respectively. Income taxes receivable from related parties were $6
million and $3 million at December 27, 2003, and December 28, 2002,
respectively. Such amounts are recorded within accounts payable and other
current liabilities in our Consolidated Balance Sheets. Amounts paid to taxing
authorities for income taxes were $37 million, $0, and $11 million in 2003, 2002
and 2001 respectively.

NOTE 13--GEOGRAPHIC DATA

     We operate in one industry, carbonated soft drinks and other ready-to-drink
beverages. We conduct business in the U.S., Mexico, Canada, Spain, Russia,
Greece, and Turkey.

<TABLE>
<CAPTION>
                                NET REVENUES
                        ---------------------------
                         2003      2002       2001
                         ----      ----       ----
<S>                     <C>       <C>       <C>
U.S. ..............     $ 7,406   $ 7,572   $ 7,197
Mexico ............       1,105       164        --
Other countries ...       1,754     1,480     1,246
                        -------   -------   -------
                        $10,265   $ 9,216   $ 8,443
                        =======   =======   =======
</TABLE>


                                       50
<PAGE>

<TABLE>
<CAPTION>
                        LONG-LIVED ASSETS
                        -----------------
                          2003     2002
                          ----     ----
<S>                     <C>       <C>
U.S. ..............     $ 7,220   $ 6,537
Mexico ............       1,432     1,586
Other countries....       1,350     1,127
                        -------   -------
                        $10,002   $ 9,250
                        =======   =======
</TABLE>

NOTE 14 -- RELATED PARTY TRANSACTIONS

     PepsiCo is considered a related party due to the nature of our
franchisee relationship and its ownership interest in our Company.

     PBG has entered into a number of agreements with PepsiCo since its initial
public offering. Although we are not a direct party to these contracts, as the
principal operating subsidiary of PBG, we derive direct benefit from them.
Accordingly, set forth below are the most significant agreements that govern our
relationship with PepsiCo:

     (1)  The master bottling agreement for cola beverages bearing the
          "Pepsi-Cola" and "Pepsi" trademarks in the United States; master
          bottling agreements and distribution agreements for non-cola products
          in the United States, including Mountain Dew; and a master fountain
          syrup agreement in the United States;

     (2)  Agreements similar to the master bottling agreement and the non-cola
          agreements for each country in which we operate, including Canada,
          Spain, Russia, Greece, Turkey and Mexico, as well as a fountain syrup
          agreement for Canada, similar to the master syrup agreement;

     (3)  A shared services agreement whereby PepsiCo provides us or we provide
          PepsiCo with certain support, including information technology
          maintenance, procurement of raw materials, shared space, employee
          benefit administration, credit and collection, and international tax
          and accounting services. The amounts paid or received under this
          contract are equal to the actual costs incurred by the company
          providing the service. During 2001, a PepsiCo affiliate provided
          casualty insurance to us; and

     (4)  Transition agreements that provide certain indemnities to the parties,
          and provide for the allocation of tax and other assets, liabilities,
          and obligations arising from periods prior to the initial public
          offering. Under our tax separation agreement, PepsiCo maintains full
          control and absolute discretion for any combined or consolidated tax
          filings for tax periods ended on or before the initial public
          offering.

     Additionally, we review our annual marketing, advertising, management and
financial plans each year with PepsiCo for its approval. If we fail to submit
these plans, or if we fail to carry them out in all material respects, PepsiCo
can terminate our beverage agreements. If our beverage agreements with PepsiCo
are terminated for this or for any other reason, it would have a material
adverse effect on our business and financial results.

     BOTTLER INCENTIVES AND OTHER ARRANGEMENTS - We share a business objective
with PepsiCo of increasing the availability and consumption of Pepsi-Cola
beverages. Accordingly, PepsiCo, at its discretion, provides us with various
forms of bottler incentives to promote its beverages. These incentives are
mutually agreed-upon between us and PepsiCo and cover a variety of initiatives,
including direct marketplace support, capital equipment funding and advertising
support. Based on the objectives of the programs and initiatives, we record
bottler incentives as an adjustment to net revenues, cost of sales or selling,
delivery and administrative expenses. Beginning in 2003, due to the adoption of
Emerging Issues Task Force ("EITF") Issue No. 02-16, "Accounting by a Customer
(Including a Reseller) for Certain Consideration Received from a Vendor," we
have changed our accounting methodology for the way we record bottler
incentives. See Note 2 - Summary of Significant Accounting Policies for a
discussion on the change in classification of these bottler incentives.

     Bottler incentives received from PepsiCo, including media costs shared by
PepsiCo, were $646 million, $560 million and $554 million for 2003, 2002 and
2001, respectively. Changes in our bottler incentives and funding levels could
materially affect our business and financial results.

                                       51
<PAGE>

     PURCHASES OF CONCENTRATE AND FINISHED PRODUCT - We purchase concentrate
from PepsiCo, which is the critical flavor ingredient used in the production of
carbonated soft drinks and other ready-to-drink beverages. PepsiCo determines
the price of concentrate annually at its discretion. We also pay a royalty fee
to PepsiCo for the Aquafina trademark. Amounts paid or payable to PepsiCo and
its affiliates for concentrate and royalty fees were $1,971 million, $1,699
million and $1,584 million in 2003, 2002 and 2001, respectively.

     We also produce or distribute other products and purchase finished goods
and concentrate through various arrangements with PepsiCo or PepsiCo joint
ventures. During 2003, 2002 and 2001, total amounts paid or payable to PepsiCo
or PepsiCo joint ventures for these transactions were $556 million, $464 million
and $375 million, respectively.

     We provide manufacturing services to PepsiCo and PepsiCo affiliates in
connection with the production of certain finished beverage products. During
2003, 2002 and 2001, total amounts paid or payable by PepsiCo for these
transactions were $6 million, $10 million and $32 million, respectively.

     FOUNTAIN SERVICE FEE - We manufacture and distribute fountain products and
provide fountain equipment service to PepsiCo customers in some territories in
accordance with the Pepsi beverage agreements. Amounts received from PepsiCo for
these transactions are offset by the cost to provide these services and are
reflected in our Consolidated Statements of Operations in selling, delivery and
administrative expenses. Net amounts paid or payable by PepsiCo to us for these
services were approximately $200 million, $200 million and $185 million, in
2003, 2002 and 2001, respectively.

     OTHER TRANSACTIONS - Prior to 2002, Hillbrook Insurance Company, Inc., a
subsidiary of PepsiCo, provided insurance and risk management services to us
pursuant to a contractual agreement. Total premiums paid to Hillbrook Insurance
Company, Inc. during 2001 were $58 million.

     We provide and receive various services from PepsiCo and PepsiCo affiliates
pursuant to a shared services agreement and other arrangements, including
information technology maintenance, procurement of raw materials, shared space,
employee benefit administration, credit and collection, and international tax
and accounting services. Total net expenses incurred were approximately $62
million, $57 million and, $133 million during 2003, 2002 and 2001, respectively.

     We purchase snack food products from Frito-Lay, Inc., a subsidiary of
PepsiCo, for sale and distribution in all of Russia except Moscow. Amounts paid
or payable to PepsiCo and its affiliates for snack food products were $51
million, $44 million and $27 million in 2003, 2002 and 2001, respectively.

     Under tax sharing arrangements we have with PepsiCo we received $7 million,
$3 million and $4 million in tax related benefits from PepsiCo in 2003, 2002 and
2001, respectively.

     The Consolidated Statements of Operations include the following income
(expense) amounts as a result of transactions with PepsiCo and its affiliates:

<TABLE>
<CAPTION>
                                                                  2003        2002       2001
                                                                  ----        ----       ----
<S>                                                              <C>        <C>        <C>
Net revenues:
  Bottler incentives .......................................     $    21    $   257    $   262
                                                                 =======    =======    =======
Cost of sales:
  Purchases of concentrate and finished products,
      and Aquafina royalty fees ............................     $(2,527)   $(2,163)   $(1,959)
  Bottler incentives .......................................         527         --         --
  Manufacturing and distribution service reimbursements ....           6         10         32
                                                                 -------    -------    -------
                                                                 $(1,994)   $(2,153)   $(1,927)
                                                                 =======    =======    =======
Selling, delivery and administrative expenses:
  Bottler incentives .......................................     $    98    $   303    $   292
  Fountain service fee .....................................         200        200        185
  Frito-Lay purchases ......................................         (51)       (44)       (27)
  Insurance fees ...........................................          --         --        (58)
  Shared services ..........................................         (62)       (57)      (133)
                                                                 -------    -------    -------
                                                                 $   185    $   402    $   259
                                                                 =======    =======    =======
Income tax expense .........................................     $     7    $     3    $     4
                                                                 =======    =======    =======
</TABLE>

                                       52
<PAGE>
     We are not required to pay any minimum fees to PepsiCo, nor are we
obligated to PepsiCo under any minimum purchase requirements.

     As part of our acquisition in Turkey (see Note 16), we paid PepsiCo $8
million for its share of Fruko Mesrubat Sanayii A.S. and related entities in
2002. In addition, we sold certain brands to PepsiCo from the net assets
acquired for $16 million in 2002.

     As part of our acquisition of Gemex (see Note 16), PepsiCo received $297
million in 2002 for the tender of its shares for its 34.4% ownership in the
outstanding capital stock of Gemex. In addition, PepsiCo made a payment to us
for $17 million in 2002, to facilitate the purchase and ensure a smooth
ownership transition of Gemex.

     We paid PepsiCo $3 million, $10 million and $9 million during 2003, 2002
and 2001, respectively, for distribution rights relating to the SoBe brand in
certain Bottling LLC-owned territories in the U.S. and Canada.

     The $1.3 billion of 5.63% senior notes and the $1.0 billion of 5.38% senior
notes issued on February 9, 1999, are guaranteed by PepsiCo. In addition,
the $1.0 billion of 4.63% senior notes issued on November 15, 2002, will also be
guaranteed by PepsiCo starting in February 2004 in accordance with the terms set
forth in the related indenture.

     Amounts payable to PepsiCo and its affiliates were $20 million and $26
million at December 27, 2003, and December 28, 2002, respectively. Such amounts
are recorded within accounts payable and other current liabilities in our
Consolidated Balance Sheets.

     PBG is considered a related party, as we are the principal operating
subsidiary of PBG and we make up substantially all of the operations and assets
of PBG. At December 27, 2003, PBG owned approximately 93.2% of our equity.

     Beginning in 2002, PBG provides insurance and risk management services to
us pursuant to a contractual agreement. Total premiums paid to PBG during 2003
and 2002 were $98 million and $86 million, respectively.

     We have loaned PBG $552 million and $117 million during 2003 and 2002,
respectively, net of repayments. During 2003, these loans were made through a
series of 1-year notes, with interest rates ranging from 1.6% to 1.9%. Total
intercompany loans owed to us from PBG at December 27, 2003 and December 28,
2002, were $1,506 million and $954 million, respectively. The proceeds were used
by PBG to pay for interest, taxes, dividends, share repurchases and
acquisitions. Accrued interest receivable from PBG on these notes totaled $22
million at December 27, 2003 and December 28, 2002, and is included in prepaid
expenses and other current assets in our Consolidated Balance Sheets.

     Total interest income recognized in our Consolidated Statements of
Operations relating to outstanding loans with PBG was $26 million, $24 million
and $44 million, in 2003, 2002 and 2001, respectively.

     On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us.

     PBG has a $500 million commercial paper program that is supported by two
$250 million credit facilities. Both credit facilities are guaranteed by us.
During the second quarter of 2003, PBG renegotiated the credit facilities. One
of the credit facilities expires in April 2004, which PBG intends to renew, and
the other credit facility expires in April 2008. There are certain financial
covenants associated with these credit facilities. PBG has used these credit
facilities to support their commercial paper program in 2003 and 2002, however,
there were no borrowings outstanding under these credit facilities at December
27, 2003, or December 28, 2002.

We also guarantee that to the extent there is available cash, we will
distribute pro rata to PBG and PepsiCo sufficient cash such that the aggregate
cash distributed to PBG will enable PBG to pay its taxes and make interest
payments on the $1 billion 7% senior notes due 2029. During 2003 and 2002, we
made cash distributions to PBG and PepsiCo totaling $97 million and $156
million, respectively. Any amounts in excess of taxes and interest payments
were used by PBG to repay loans to us.

Managing Director and Officers

     One of our managing directors is an employee of PepsiCo and the other
managing directors and officers are employees of PBG.

                                       53
<PAGE>

NOTE 15 -- CONTINGENCIES

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

NOTE 16 -- ACQUISITIONS

     During 2003 we acquired the operations and exclusive right to manufacture,
sell and distribute Pepsi-Cola beverages from three franchise bottlers. The
following acquisitions occurred for an aggregate purchase price of $91 million
in cash and assumption of liabilities of $13 million:

-    Pepsi-Cola Buffalo Bottling Corp. of Buffalo, New York in February.

-    Cassidy's Beverage Limited of New Brunswick, Canada in February.

-    Olean Bottling Works, Inc. of Olean, New York in August.

     As a result of these acquisitions, we have assigned $7 million to goodwill,
$76 million to franchise rights and $5 million to non-compete arrangements. The
goodwill and franchise rights are not subject to amortization. The non-compete
agreements are being amortized over five years. The allocations of the purchase
price for these acquisitions are still preliminary and will be determined based
on the estimated fair value of assets acquired and liabilities assumed as of the
dates of acquisitions. The operating results of each of our acquisitions are
included in the accompanying consolidated financial statements from its
respective date of purchase. These acquisitions were made to enable us to
provide better service to our large retail customers. We expect these
acquisitions to reduce costs through economies of scale.

     During 2003, we also paid $5 million for the purchase of certain franchise
rights relating to SOBE and DR. PEPPER and paid $4 million for purchase
obligations relating to acquisitions made in the prior year.

     During 2002, we acquired the operations and exclusive right to manufacture,
sell and distribute Pepsi-Cola beverages from several PepsiCo franchise
bottlers. The following acquisitions occurred for an aggregate amount of $921
million in cash and $382 million of assumed debt:

     -   Fruko Mesrubart Sanayii A.S. and related entities of Turkey in March.

     -   Pepsi-Cola Bottling Company of Aroostook, Inc., of Presque Isle Maine
         in June.

     -   Seaman's Beverages Limited of the Canadian province of Prince Edward
         Island in July.

     -   Pepsi-Gemex, S.A. de C.V. of Mexico in November.

     -   Kitchener Beverages Limited of Ontario, Canada in December.

     For our 2002 acquisitions, we made additional purchase price allocations to
goodwill and other intangible assets, net of approximately $136 million in 2003.
The final allocations of the purchase prices were determined based on the fair
value of assets acquired and liabilities assumed as of the date of acquisition.
During 2003, the allocations of the purchase prices for these acquisitions were
finalized. As a result of our final purchase price allocations to our 2002
acquisitions, the total amount that we have assigned to goodwill and other
intangibles, net in our Consolidated Balance Sheets were $302 million and $835
million, respectively.

                                       54
<PAGE>

     The largest of our 2002 acquisitions was Gemex, where we acquired all of
its outstanding capital stock. Our total cost for the purchase of Gemex was a
net cash payment of $871 million and assumed debt of approximately $318 million.
The following table summarizes the final allocation of fair values of the assets
acquired and liabilities assumed in connection with our acquisition of Gemex,
net of cash acquired:

<TABLE>
<CAPTION>

                                                                           GEMEX
                                                                        PRELIMINARY         PURCHASE      GEMEX FINAL
                                                    USEFUL LIFE          ALLOCATION        ACCOUNTING     ALLOCATION
                                                      (YEARS)               2002           ADJUSTMENTS       2003
                                                      -------               ----           -----------       ----
<S>                                                 <C>                 <C>                <C>            <C>
ASSETS
  Current assets..................................                         $  101             $   4         $  105
  Fixed assets....................................     5-33                   505                 2            507
  Intangible assets subject to amortization:
     Customer relationships and lists ............     17-20                   --                46             46
  Goodwill........................................                            126               161            287
  Indefinite lived intangible assets
     Franchise rights.............................  Indefinite                808              (621)           187
     Trademarks...................................  Indefinite                 --               225            225
     Distribution rights..........................  Indefinite                 --               311            311
     Other identified intangibles.................  Indefinite                 --                10             10
  Other assets....................................                             15                (9)             6
                                                                           ------             -----         ------
           TOTAL ASSETS...........................                         $1,555             $ 129         $1,684
                                                                           ------             -----         ------
LIABILITIES
  Accounts payable and other current liabilities..                            141                24            165
  Short-term borrowings...........................                              5                --              5
  Long-term debt..................................                            300                13            313
  Deferred income taxes...........................                            137                92            229
  Other liabilities...............................                            101                --            101
                                                                           ------             -----         ------
           TOTAL LIABILITIES......................                         $  684             $ 129         $  813
                                                                           ------             -----         ------
NET ASSETS ACQUIRED...............................                         $  871             $  --         $  871
                                                                           ======             =====         ======
</TABLE>

     As noted in the table above, we have adjusted the preliminary allocation of
goodwill relating to Gemex by $161 million in 2003. These adjustments resulted
primarily from revised estimates of the fair value of our intangible assets of
$29 million and the recognition of deferred tax liabilities of $92 million. In
addition, we have adjusted the preliminary allocation of goodwill of Gemex for
pre-acquisition contingencies of $17 million and severance and other facility
closing costs of $23 million. These adjustments were made in accordance with our
previously established acquisition plans.

     The following unaudited pro-forma operating information summarizes our
consolidated results of operations as if the Gemex acquisition had occurred on
the first day of fiscal year 2002 and 2001.

<TABLE>
<CAPTION>
                                             2002      2001
                                             ----      ----
<S>                                        <C>       <C>
Net revenues .............                 $10,297   $ 9,617
Income before income taxes                 $   811   $   612
Net income ...............                 $   753   $   605
</TABLE>

                                       55
<PAGE>

NOTE 17--ACCUMULATED OTHER COMPREHENSIVE LOSS

      The balances related to each component of accumulated other comprehensive
loss were as follows:

<TABLE>
<CAPTION>
                                              2003     2002     2001
                                              ----     ----     ----
<S>                                          <C>      <C>      <C>
Currency translation adjustment ........     $(180)   $(276)   $(301)
Cash flow hedge adjustment .............        23       (8)     (19)
Minimum pension liability adjustment ...      (346)    (312)     (96)
                                             -----    -----    -----
Accumulated other comprehensive loss ...     $(503)   $(596)   $(416)
                                             =====    =====    =====
</TABLE>

NOTE 18--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                           FIRST        SECOND         THIRD         FOURTH
2003                                      QUARTER       QUARTER       QUARTER        QUARTER     FULL-YEAR
----                                      -------       -------       -------        -------     ---------
<S>                                       <C>           <C>           <C>            <C>         <C>
Net revenues...........................    $1,874        $2,532        $2,810         $3,049      $10,265
Gross profit...........................       947         1,242         1,372          1,489        5,050
Operating income.......................       119           276           360            206          961
Net income.............................        70           229           307            115          721
</TABLE>

<TABLE>
<CAPTION>
                                            FIRST       SECOND         THIRD         FOURTH
2002                                       QUARTER      QUARTER       QUARTER        QUARTER     FULL-YEAR
----                                       -------      -------       -------        -------     ---------
<S>                                        <C>          <C>           <C>            <C>         <C>
Net revenues...........................    $1,772        $2,209        $2,455         $2,780       $9,216
Gross profit...........................       830         1,024         1,118          1,243        4,215
Operating income.......................       135           272           338            152          897
Net income.............................       107           240           287            100          734
</TABLE>

                                       56
<PAGE>

                          Independent Auditors' Report

Owners of
Bottling Group, LLC:

     We have audited the accompanying consolidated balance sheets of Bottling
Group, LLC and subsidiaries as of December 27, 2003 and December 28, 2002, and
the related consolidated statements of operations, cash flows and changes in
owners' equity for each of the fiscal years in the three-year period ended
December 27, 2003. These consolidated financial statements are the
responsibility of management of Bottling Group, LLC. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bottling
Group, LLC and subsidiaries as of December 27, 2003 and December 28, 2002, and
the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended December 27, 2003, in conformity with
accounting principles generally accepted in the United States of America.

     As discussed in Note 2 to the consolidated financial statements, the
company adopted FASB 142, "Goodwill and Other Intangible Assets," as of December
30, 2001 and Emerging Issues Task Force Issue No. 02-16, "Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a
Vendor," as of December 29, 2002.

/s/ KPMG LLP

New York, New York

January 27, 2004

                                       57
<PAGE>

     ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
     FINANCIAL DISCLOSURE

         None.

     ITEM 9A. CONTROLS AND PROCEDURES

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

                                    PART III

     ITEM 10. MANAGING DIRECTORS OF BOTTLING LLC

     The name, age and background of each of Bottling LLC's Managing Directors
     is set forth below.

     JOHN T. CAHILL, 46, is a Managing Director of Bottling LLC. Mr. Cahill is
     also PBG's Chairman of the Board and Chief Executive Officer. He had been
     PBG's Chief Executive Officer since September 2001. Previously, Mr. Cahill
     served as PBG's President and Chief Operating Officer from August 2000 to
     September 2001. Mr. Cahill has been a member of PBG's Board of Directors
     since January 1999 and served as PBG's Executive Vice President and Chief
     Financial Officer prior to becoming President and Chief Operating Officer
     in August 2000. He was Executive Vice President and Chief Financial Officer
     of the Pepsi-Cola Company from April 1998 until November 1998. Prior to
     that, Mr. Cahill was Senior Vice President and Treasurer of PepsiCo, having
     been appointed to that position in April 1997. In 1996, he became Senior
     Vice President and Chief Financial Officer of Pepsi-Cola North America. Mr.
     Cahill joined PepsiCo in 1989 where he held several other senior financial
     positions through 1996.

     PAMELA C. MCGUIRE, 56, is a Managing Director of Bottling LLC. She is also
     the Senior Vice President, General Counsel and Secretary of PBG. She was
     the Vice President and Division Counsel of the Pepsi-Cola Company from 1989
     to March 1998, at which time she was named its Vice President and Associate
     General Counsel. Ms. McGuire joined PepsiCo in 1977 and held several other
     positions in its legal department through 1989.

     MATTHEW M. MCKENNA, 53, is a Managing Director of Bottling LLC. He is also
     the Senior Vice President of Finance of PepsiCo. Previously he was Senior
     Vice President and Treasurer and before that, Senior Vice President, Taxes.
     Prior to joining PepsiCo in 1993 as Vice President, Taxes, he was a partner
     with the law firm of Winthrop, Stimson, Putnam & Roberts in New York.

     Pursuant to Item 401(b) of Regulation S-K, the executive officers of
Bottling LLC are reported in Part I of this Report. Executive officers are
elected by the Managing Directors of Bottling LLC, and their terms of office
continue until their successors are appointed and qualified or until their
earlier resignation or removal. There are no family relationships among our
executive officers. Managing Directors are elected by a majority of members of
Bottling LLC and their terms of office continue until their successors are
appointed and qualified or until their earlier resignation or removal, death or
disability.

                                       58
<PAGE>

     ITEM 11. EXECUTIVE COMPENSATION

         SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
     provides information on compensation earned and PBG's stock options awarded
     for the years indicated by PBG to Bottling LLC's Principal Executive
     Officer and the two other executive officers of Bottling LLC as of the end
     of the 2003 fiscal year in accordance with the rules of the Securities and
     Exchange Commission. These three individuals are referred to as the named
     executive officers.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                              LONG TERM  COMPENSATION
                                   ANNUAL COMPENSATION                                   AWARDS                PAYOUTS
                                   -------------------                                   ------                -------
                                                                                              Securities
                                                            Other Annual       Restricted    Under- Lying                All Other
 Name and Principal                                         Compensation      Stock Awards     Options        LTIP      Compensation
    Position          Year        Salary($)   Bonus($)           ($)               ($)           (#)       Payouts ($)       ($)
    --------          ----        ---------   --------           ---               ---           ---       -----------       ---
<S>                   <C>         <C>         <C>           <C>               <C>            <C>           <C>          <C>
John T. Cahill        2003        $817,692    $515,630         $26,409(1)      $1,500,000(2)   526,596      $      0      $ 8,141(3)
Principal             2002         721,154     681,500          32,227                  0      287,129             0        6,843
Executive Officer     2001         636,712     870,000          12,566                  0      739,300       442,200        6,821

Alfred H. Drewes      2003         372,231     140,630          14,475(4)       1,500,000(2)   127,660       241,050(5)     8,000(6)
Principal Financial   2002         355,923     217,550          13,060                  0      113,109       218,962        6,338
Officer               2001         175,000     268,090           7,522                  0      135,758             0            0

Andrea L. Forster     2003         193,307      50,000           4,695(4)               0       34,043             0        7,624(6)
Principal             2002         187,923      92,700           5,744                  0       29,941       111,219        7,498
Accounting Officer    2001         180,154     106,920           4,695                  0       43,622             0        6,800
</TABLE>

(1)  This amount reflects (i) benefits from the use of corporate transportation
     and (ii) payment of the executive's tax liability with respect to certain
     Company provided perquisites.

(2)  This amount reflects the dollar value of the maximum number of restricted
     shares of PBG Common Stock available to the executive under a Special
     Leadership Award authorized by PBG's Compensation Subcommittee in January
     2003 and granted to the executive on March 1, 2003 (the "Grant Date"). The
     actual number of shares retained by the executive will range from 0 to a
     maximum of 63,830 depending upon the financial performance of PBG for the
     3-year period commencing on the Grant Date and the executive's continued
     active employment with PBG through December 31, 2007. If the performance
     condition is met, fifty percent of the award will vest on December 31, 2005
     and the remaining fifty percent will vest on December 31, 2007. Dividends
     that are declared and paid by the Company on the shares of restricted stock
     shall be deferred until the shares have vested. Upon forfeiture of any such
     shares, the deferred dividends shall also be forfeited. The dollar value of
     the award was calculated by multiplying the average of the high and low
     trading price, rounded up to the nearest quarter, of PBG's common stock on
     the Grant Date, by the maximum number of shares awarded.

(3)  This amount reflects (i) a standard PBG matching contribution in PBG Common
     Stock to the executive's 401(k) account and (ii) a premium amount of
     $141.00 for Mr. Cahill, imputed as income in connection with his waiver of
     rights to future compensation payments under the Company's executive income
     deferral plan and the arrangement entered into by PBG whereby such waived
     amounts were used for the purpose of purchasing insurance for his benefit
     and that of his designated beneficiary.

(4)  This amount reflects payment of the executive's tax liability with respect
     to certain PBG provided perquisites.

(5)  This amount reflects the cash payout of a variable award granted in 2000
     based, in part, upon PBG performance targets pre-established by PBG's
     Compensation Subcommittee.

(6)  This amount reflects a standard PBG matching contribution in PBG Common
     Stock to the executive's 401(k) account.

                                       59
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

         PBG holds 93.2% and PepsiCo indirectly holds 6.8% of the ownership of
Bottling LLC.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Although Bottling LLC may not be a direct party to the following
transactions, as the principal operating subsidiary of PBG, it derives certain
benefits from them. Accordingly, set forth below is information relating to
certain transactions between PBG and PepsiCo. In addition, set forth below is
information relating to certain transactions between Bottling LLC and PBG
("PBG/Bottling LLC Transactions").

     STOCK OWNERSHIP AND DIRECTOR RELATIONSHIPS WITH PEPSICO. PBG was initially
incorporated in January 1999 as a wholly owned subsidiary of PepsiCo to effect
the separation of most of PepsiCo's company-owned bottling businesses. PBG
became a publicly traded company on March 31, 1999. As of February 20, 2004,
PepsiCo's ownership represented 40.8% of the outstanding Common Stock and 100%
of the outstanding Class B Common Stock together representing 46.0% of the
voting power of all classes of PBG's voting stock. PepsiCo also owns
approximately 6.8% of the equity of Bottling Group, LLC, PBG's principal
operating subsidiary. In addition, Matthew M. McKenna, a Managing Director of
Bottling LLC, is an executive officer of PepsiCo.

     AGREEMENTS AND TRANSACTIONS WITH PEPSICO AND AFFILIATES. PBG and PepsiCo
(and certain of its affiliates) have entered into transactions and agreements
with one another, incident to their respective businesses, and PBG and PepsiCo
are expected to enter into material transactions and agreements from time to
time in the future. As used in this section, "PBG" includes the Company and its
subsidiaries.

     Material agreements and transactions between PBG and PepsiCo (and certain
of its affiliates) during 2003 are described below.

     Beverage Agreements and Purchases of Concentrates and Finished Products.
PBG purchases concentrates from PepsiCo and manufactures, packages, distributes
and sells carbonated and non-carbonated beverages under license agreements with
PepsiCo. These agreements give PBG the right to manufacture, sell and distribute
beverage products of PepsiCo in both bottles and cans and fountain syrup in
specified territories. The agreements also provide PepsiCo with the ability to
set prices of such concentrates, as well as the terms of payment and other terms
and conditions under which PBG purchases such concentrates. In addition, PBG
bottles water under the Aquafina trademark pursuant to an agreement with
PepsiCo, which provides for the payment of a royalty fee to PepsiCo. In certain
instances, PBG purchases finished beverage products from PepsiCo.

     During 2003, total payments by PBG to PepsiCo for concentrates, royalties
and finished beverage products were approximately $2.2 billion.

     PBG Manufacturing Services. PBG provides manufacturing services to PepsiCo
in connection with the production of certain finished beverage products. In
2003, amounts paid or payable by PepsiCo to PBG for these services were
approximately $5.9 million.

     Purchase of Distribution Rights. During 2003, PBG paid PepsiCo
approximately $2.9 million for distribution rights relating to the SoBe brand in
certain PBG-owned territories in the United States and Canada.

     Transactions with Joint Ventures in which PepsiCo holds an equity interest.
PBG purchases tea concentrate and finished beverage products from the
Pepsi/Lipton Tea Partnership, a joint venture of Pepsi-Cola North America, a
division of PepsiCo, and Lipton (the "Partnership"). During 2003, total amounts
paid or payable to PepsiCo for the benefit of the Partnership were approximately
$142.7 million.

     PBG purchases finished beverage products from the North American Coffee
Partnership, a joint venture of Pepsi-Cola North America and Starbucks. During
2003, amounts paid or payable to the North American Coffee Partnership by PBG
were approximately $149.2 million.

                                       60
<PAGE>

     Under tax sharing arrangements we have with PepsiCo and PepsiCo joint
ventures, we received $6.6 million in tax related benefits in 2003.

     Purchase of Snack Food Products from Frito-Lay, Inc. PBG purchases snack
food products from Frito-Lay, Inc., a subsidiary of PepsiCo, for sale and
distribution through all of Russia except for Moscow. In 2003, amounts paid or
payable by PBG to Frito-Lay, Inc. were approximately $50.8 million. Our
agreement with Frito-Lay expires in 2004, however we expect to renew the
agreement and continue our relationship with Frito-Lay.

     Shared Services. PepsiCo provides various services to PBG pursuant to a
shared services agreement and other arrangements, including information
technology maintenance and the procurement of raw materials. During 2003,
amounts paid or payable to PepsiCo for these services totaled approximately
$71.5 million.

     Pursuant to the shared services agreement and other arrangements, PBG
provides various services to PepsiCo, including employee benefit, credit and
collection, international tax and accounting services. During 2003, payments to
PBG from PepsiCo for these services totaled approximately $6.4 million.

     Rental Payments. Amounts paid or payable by PepsiCo to PBG for rental of
office space at certain PBG facilities were approximately $3.3 million in 2003.

     National Fountain Services. PBG provides certain manufacturing, delivery
and equipment maintenance services to PepsiCo's national fountain customers. In
2003, net amounts paid or payable by PepsiCo to PBG for these services were
approximately $199.5 million.

     Bottler Incentives. PepsiCo provides PBG with various forms of marketing
support. The level of this support is negotiated annually and can be increased
or decreased at the discretion of PepsiCo. These bottler incentives are intended
to cover a variety of programs and initiatives, including direct marketplace
support (including point-of-sale materials), capital equipment funding and
advertising support. For 2003, total bottler incentives paid or payable to PBG
or on behalf of PBG by PepsiCo approximated $646.2 million.

     PBG provides certain administrative support services to PepsiAmericas, Inc.
and Pepsi Bottling Ventures LLC. In 2003, amounts paid or payable by
PepsiAmericas, Inc. and Pepsi Bottling Ventures LLC to PBG for these services
were approximately $255,000.

     PepsiCo Guarantees. The  $1.3 billion of 5.63% senior notes and the $1.0
billion of 5.38% senior notes issued on February 9, 1999, by us are guaranteed
by PepsiCo in accordance with the terms set forth in the related indentures. In
addition, the $ 1.0 billion of 4.63% senior notes issued on November 15, 2002,
are also guaranteed by PepsiCo starting in February 2004 in accordance with the
terms set forth in the related indenture.

      PBG/Bottling LLC Transactions. PBG is considered a related party, as we
are the principal operating subsidiary of PBG and we make up substantially all
of the operations and assets of PBG. At December 27, 2003, PBG owned
approximately 93.2% of our equity.

     PBG provides insurance and risk management services to us pursuant to a
contractual agreement. Total premiums paid to PBG during 2003 were $98 million.

     We have loaned PBG $552 million during 2003 net of repayments. During 2003,
these loans were made through a series of 1-year notes, with interest rates
ranging from 1.6% to 1.9%. Total intercompany loans owed to us from PBG at
December 27, 2003 were $1,506 million. The proceeds were used by PBG to pay for
interest, taxes, dividends, share repurchases and acquisitions. Accrued interest
receivable from PBG on these notes totaled $22 million at December 27, 2003, and
is included in prepaid expenses and other current assets in our Consolidated
Balance Sheets.

     Total interest income recognized in our Consolidated Statements of
Operations relating to outstanding loans with PBG was $26 million in 2003.

     On March 8, 1999, PBG issued $1 billion of 7% senior notes due 2029, which
are guaranteed by us.

                                       61
<PAGE>

     PBG has a $500 million commercial paper program that is supported by two
$250 million credit facilities. Both credit facilities are guaranteed by us.
During the second quarter of 2003, PBG renegotiated the credit facilities. One
of the credit facilities expires in April 2004, which PBG intends to renew, and
the other credit facility expires in April 2008. There are certain financial
covenants associated with these credit facilities. PBG has used these credit
facilities to support their commercial paper program in 2003 and 2002, however,
there were no borrowings outstanding under these credit facilities at December
27, 2003 or December 28, 2002.

     Bottling Group, LLC Distribution. We also guarantee that to the extent
there is available cash, we will distribute pro rata to PBG and PepsiCo
sufficient cash such that the aggregate cash distributed to PBG will enable PBG
to pay its taxes and make interest payments on the $1 billion 7% senior notes
due 2029. During 2003, in accordance with our Limited Liability Company
Agreement we made cash distributions to PepsiCo in the amount of $6.8 million,
and to PBG in the amount of $90.5 million. Any amounts in excess of taxes and
interest payments were used by PBG to repay loans to us.

     Relationships and Transactions with Management and Others. One of our
managing directors is an employee of PepsiCo and the other managing directors
and officers are employees of PBG. Linda G. Alvarado, a member of PBG's Board of
Directors, together with her husband and children, own and operate Taco Bell and
Pizza Hut restaurant companies that purchase beverage products from PBG. In
2003, the total amount of these purchases was approximately $317,740.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     In addition to retaining KPMG LLP to audit Bottling LLC's consolidated
financial statements for 2004, Bottling LLC and its affiliates retained KPMG
LLP, as well as other accounting firms to provide various services in 2004, and
expect to continue to do so in the future. The aggregate fees billed for
professional services by KPMG LLP in 2003 and 2002 were as follows:

     AUDIT FEES. The aggregate fees billed by KPMG LLP for professional services
rendered for the audit of Bottling LLC's consolidated financial statements, the
reviews of its interim financial statements included in PBG's Forms 10-Q and all
statutory audits were approximately $3.5 million for the fiscal year ended
December 27, 2003 and approximately $4.5 million for the fiscal year ended
December 28, 2002.

AUDIT-RELATED FEES. The aggregate fees billed by KPMG LLP for professional
services rendered primarily related to due diligence work on acquisitions,
accounting consultation for a proposed transaction, audits of employee benefit
plans and other audit related services were approximately $500,000 for the
fiscal year ended December 27, 2003 and approximately $1.1 million for the
fiscal year ended December 28, 2002.

TAX FEES. The aggregate fees billed by KPMG LLP for professional services
rendered, including assistance with tax audits, advice on mergers and
acquisitions, tax transition services and tax compliance in certain foreign
jurisdictions were approximately $140,000 for the fiscal year ended December 27,
2003 and approximately $120,000 for the fiscal year ended December 28, 2002.

ALL OTHER FEES. There were no fees billed by KPMG LLP for other services
rendered during each of the fiscal years ended December 27, 2003 and December
28, 2002.

PRE-APPROVAL POLICIES AND PROCEDURES. In 2003, PBG adopted a policy which
defines audit, audit-related, tax and other services to be provided to PBG and
its subsidiaries by PBG's independent auditors ("Auditor Services") and requires
such Auditor Services to be pre-approved by PBG's Audit and Affiliated
Transactions Committee. In accordance with PBG's policy and applicable SEC rules
and regulations, PBG's Audit Committee adopted a policy in 2003 requiring
pre-approval by the Committee or its Chairperson of Auditor Services provided to
PBG and its Subsidiaries. If Auditor Services are required prior to a regularly
scheduled Audit Committee meeting, the Audit Committee Chairperson is authorized
to approve such services, provided that they are consistent with PBG's policy
and that the full Audit Committee is advised of such services at the next
regularly scheduled Audit Committee meeting.

                                       62
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  1. Financial Statements. The following consolidated financial
statements of Bottling LLC and its subsidiaries, are incorporated by reference
into Part II, Item 8 of this Report:

Consolidated Statements of Operations - Fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001.

Consolidated Statements of Cash Flows - Fiscal years ended December 27, 2003,
December 28, 2002 and December 29, 2001.

Consolidated Balance Sheets - December 27, 2003 and December 28, 2002.

Consolidated Statements of Changes in Owners' Equity - Fiscal years ended
December 27, 2003, December 28, 2002 and December 29, 2001.

Notes to Consolidated Financial Statements.

Independent Auditors' Report.

The financial statements and notes thereto of PBG, included in PBG's Annual
Report on Form 10-K and filed with the SEC on March 11, 2004, are hereby
incorporated by reference as required by the SEC as a result of our guarantee of
up to $1,000,000,000 aggregate principal amount of PBG's 7% Senior Notes due in
2029.

                                       63
<PAGE>

                  2.       Financial Statement Schedules. The following report
and financial statement schedule of Bottling LLC and its subsidiaries are
included in this Report on the page indicated:

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                               <C>
Independent Auditors' Report on Schedule and Consent............................................  F-2

Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
              December 27, 2003, December 28, 2002 and December 29, 2001........................  F-3
</TABLE>

                  3.       Exhibits

                           See Index to Exhibits on pages E-1 - E-3.

         (b)      Reports on Form 8-K

         On October 3, 2003, pursuant to the terms of a registration statement
on Form S-3 (Registration Statement No. 333-108225 which permits us to issue up
to an aggregate of $1.0 billion of our senior notes), we filed a Current Report
on Form 8-K including the following exhibits relating to the offering of an
aggregate of $500,000,000 of our 2.45% Senior Notes due October 16, 2006: the
Underwriting Agreement, the Indenture and the Form of Note.

         On November 13, 2003, pursuant to the terms of the Registration
Statement, we filed a Current Report on Form 8-K including the following
exhibits relating to the offering of an aggregate of $400,000,000 of our 5.00%
Senior Notes due November 15, 2013: the Underwriting Agreement and the Form of
Note.

                                       64
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, Bottling Group, LLC has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:  March 9, 2004

                                            Bottling Group, LLC

                                            By:  /s/ John T. Cahill
                                                 ---------------------------
                                            John T. Cahill
                                            Principal 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 Bottling
Group, LLC and in the capacities and on the date indicated.

<TABLE>
<CAPTION>
    SIGNATURE                                                   TITLE                        DATE
<S>                                                <C>                                  <C>
/s/ John T. Cahill                                 Principal Executive Officer and      March 9, 2004
------------------                                 Managing Director
John T. Cahill

/s/ Alfred H. Drewes                               Principal Financial Officer          March 9, 2004
--------------------
Alfred H. Drewes

/s/ Andrea L. Forster                              Principal Accounting Officer         March 9, 2004
---------------------
Andrea L. Forster

/s/ Pamela C. McGuire                              Managing Director                    March 9, 2004
---------------------
Pamela C. McGuire

/s/ Matthew M. McKenna                             Managing Director                    March 9, 2004
----------------------
Matthew M. McKenna
</TABLE>

                                      S-1
<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
                                                                                                         PAGE
                                                                                                         ----
<S>                                                                                                      <C>
Independent Auditors' Report on Schedule and Consent...................................................  F-2
Schedule II - Valuation and Qualifying Accounts for the fiscal years ended
    December 27, 2003, December 28, 2002 and December 29, 2001.........................................  F-3
</TABLE>

                                      F-1
<PAGE>

                    INDEPENDENT AUDITORS' REPORT AND CONSENT

The Owners of
Bottling Group, LLC:

The audits referred to in our report dated January 27, 2004, included the
related financial statement schedule as of December 27, 2003, and for each of
the fiscal years in the three-year period ended December 27, 2003, included in
this Form 10-K. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

We consent to the incorporation by reference in the registration statement No.
333-108225 on Form S-3 of Bottling Group, LLC of our report (incorporated by
reference in the December 27, 2003, annual report on Form 10-K of Bottling
Group, LLC) dated January 27, 2004 with respect to the consolidated balance
sheets of Bottling Group, LLC as of December 27, 2003 and December 28, 2002, and
the related consolidated statements of operations, cash flows and changes in
owners' equity for each of the fiscal years in the three-year period ended
December 27, 2003 and of our report on the related financial statement schedule
dated March 10, 2004 (which report appears above). Our report on the
consolidated financial statements refers to the adoption of FASB 142, "Goodwill
and Other Intangible Assets," as of December 30, 2001 and Emerging Issues Task
Force Issue No. 02-16, "Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor," as of December 29, 2002.

/s/ KPMG LLP

New York, New York
March 10, 2004

                                       F-2
<PAGE>

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                               BOTTLING GROUP, LLC
                                   IN MILLIONS

<TABLE>
<CAPTION>
                                           Balance
                                              At         Charged to                       Accounts         Foreign        Balance At
                                          Beginning       Cost and                        Written          Currency         End Of
                                          Of Period       Expenses       Acquisitions       Off           Translation       Period
                                          ---------       --------       ------------       ---           -----------       ------
<S>                                       <C>            <C>             <C>              <C>             <C>             <C>
DESCRIPTION

FISCAL YEAR ENDED
DECEMBER 27, 2003
  Allowance for losses on trade
  accounts receivable ...............       $  67           $ 12             $ --           $ (8)            $  1            $ 72

FISCAL YEAR ENDED
DECEMBER 28, 2002
  Allowance for losses on trade
  accounts receivable ...............       $  42           $ 32             $ 14           $(22)            $  1            $ 67

FISCAL YEAR ENDED
DECEMBER 29, 2001
  Allowance for losses on trade
  accounts receivable ...............       $  42           $  9             $ --           $ (9)            $ --            $ 42
</TABLE>

                                                  F-3
<PAGE>

                                INDEX TO EXHIBITS

EXHIBIT

3.1               Articles of Formation of Bottling Group, LLC ("Bottling LLC")
                  which is incorporated herein by reference from Exhibit 3.4 to
                  Bottling LLC's Registration Statement on Form S-4
                  (Registration No. 333-80361)

3.2               Amended and Restated Limited Liability Company Agreement of
                  Bottling LLC which is incorporated herein by reference from
                  Exhibit 3.5 to Bottling LLC's Registration Statement on Form
                  S-4 (Registration No. 333-80361)

4.1               Indenture dated as of February 8, 1999 among Pepsi Bottling
                  Holdings, Inc., PepsiCo, Inc. and The Chase Manhattan Bank, as
                  trustee, relating to $1,000,000,000 5 3/8% Senior Notes due
                  2004 and $1,300,000,000 5 5/8% Senior Notes due 2009, which is
                  incorporated herein by reference to Exhibit 10.9 to PBG's
                  Registration Statement on Form S-1 (Registration No.
                  333-70291).

4.2               First Supplemental Indenture dated as of February 8, 1999
                  among Pepsi Bottling Holdings, Inc., Bottling Group, LLC,
                  PepsiCo, Inc. and The Chase Manhattan Bank, as trustee,
                  supplementing the Indenture dated as of February 8, 1999 among
                  Pepsi Bottling Holdings, Inc., PepsiCo, Inc. and The Chase
                  Manhattan Bank, as trustee, which is incorporated herein by
                  reference to Exhibit 10.10 to PBG's Registration Statement on
                  Form S-1 (Registration No. 333-70291).

4.3               Indenture, dated as of March 8, 1999, by and among The Pepsi
                  Bottling Group, Inc. ("PBG"), as obligor, Bottling Group, LLC,
                  as guarantor, and The Chase Manhattan Bank, as trustee,
                  relating to $1,000,000,000 7% Series B Senior Notes due 2029,
                  which is incorporated herein by reference to Exhibit 10.14 to
                  PBG's Registration Statement on Form S-1 (Registration No.
                  333-70291).

4.5               U.S. $250,000,000 364-Day Second Amended and Restated Credit
                  Agreement, dated as of May 1, 2002 among PBG, Bottling Group,
                  LLC, JPMorgan Chase Bank, Citibank, N.A., Bank of America,
                  N.A., Deutsche Bank AG New York Branch and/or Cayman Islands
                  Branch, Credit Suisse First Boston, The Northern Trust
                  Company, Lehman Commercial Paper Inc., Royal Bank of Canada,
                  Banco Bilbao Vizcaya, The Bank of New York, Fleet National
                  Bank, State Street Bank and Trust Company, JPMorgan Chase
                  Bank, as Agent, Banc of America Securities LLC and J.P. Morgan
                  Securities Inc. as Co-Lead Arrangers and Joint Book Managers
                  and Bank of America, N.A. and Citibank, N.A., as
                  Co-Syndication Agents, which is incorporated herein by
                  reference to Exhibit 4.6 to Bottling LLC's Annual Report on
                  Form 10-K for the year ended December 28, 2002.

4.6               U.S. $250,000,000 5-Year Credit Agreement, dated as of April
                  30, 2003 among The Pepsi Bottling Group, Inc., Bottling Group,
                  LLC, Citibank, N.A., Bank of America, N.A., Credit Suisse
                  First Boston, Cayman Islands Branch, Deutsche Bank AG New York
                  Branch, JPMorgan Chase Bank, The Northern Trust Company,
                  Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria,
                  HSBC Bank USA, Fleet National Bank, The Bank of New York,
                  State Street Bank and Trust Company, Comerica Bank, Wells
                  Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup
                  Global Markets Inc. and Banc of America Securities LLC, as
                  Joint Lead Arrangers and Book Managers and Citibank, N.A.,
                  Bank of America, N.A., Credit Suisse First Boston, and
                  Deutsche Bank Securities Inc. as Syndication Agents, which is
                  incorporated herein by reference to Exhibit 4.7 to Bottling
                  LLC's registration statement on Form S-4/A (Registration No.
                  333-102035).

                                      E-1

<PAGE>

4.7               U.S. $250,000,000 364-Day Credit Agreement, dated as of April
                  30, 2003 among The Pepsi Bottling Group, Inc., Bottling Group,
                  LLC, Citibank, N.A., Bank of America, N.A., Credit Suisse
                  First Boston, Cayman Islands Branch, Deutsche Bank AG New York
                  Branch, JPMorgan Chase Bank, The Northern Trust Company,
                  Lehman Brothers Bank, FSB, Banco Bilbao Vizcaya Argentaria,
                  HSBC Bank USA, Fleet National Bank, The Bank of New York,
                  State Street Bank and Trust Company, Comerica Bank, Wells
                  Fargo Bank, N.A., JPMorgan Chase Bank, as Agent, Citigroup
                  Global Markets Inc. and Banc of America Securities LLC, as
                  Joint Lead Arrangers and Book Managers and Citibank, N.A.,
                  Bank of America, N.A., Credit Suisse First Boston, and
                  Deutsche Bank Securities Inc. as Syndication Agents, which is
                  incorporated herein by reference to Exhibit 4.8 to Bottling
                  LLC's registration statement on Form S-4/A (Registration No.
                  333-102035).

4.8               Indenture, dated as of November 15, 2002, among Bottling
                  Group, LLC, PepsiCo, Inc., as Guarantor, and JPMorgan Chase
                  Bank, as Trustee, relating to $1 Billion 4-5/8% Senior Notes
                  due November 15, 2012, which is incorporated herein by
                  reference to Exhibit 4.7 to Bottling LLC's Annual Report on
                  Form 10-K for the year ended December 28, 2002.

4.9               Registration Rights Agreement, dated as of November 7, 2002
                  relating to the $1 Billion 4-5/8% Senior Notes due November
                  15, 2012, which is incorporated herein by reference to Exhibit
                  4.8 to Bottling LLC's Annual Report on Form 10-K for the year
                  ended December 28, 2002.

4.10              Indenture, dated as of June 10, 2003 by and between Bottling
                  Group, LLC, as Obligor, and JPMorgan Chase Bank, as Trustee,
                  relating to $250,000,000 4-1/8 % Senior Notes due June 15,
                  2015, which is incorporated herein by reference to Exhibit 4.1
                  to Bottling LLC's registration statement on Form S-4
                  (Registration No. 333-106285).

4.11              Registration Rights Agreement dated June 10, 2003 by and among
                  Bottling Group, LLC, J.P. Morgan Securities Inc., Lehman
                  Brothers Inc., Banc of America Securities LLC, Citigroup
                  Global Markets Inc, Credit Suisse First Boston LLC, Deutsche
                  Bank Securities Inc., Blaylock & Partners, L.P. and Fleet
                  Securities, Inc, relating to $250,000,000 4-1/8 % Senior Notes
                  due June 15, 2015, which is incorporated herein by reference
                  to Exhibit 4.3 to Bottling LLC's registration statement on
                  Form S-4 (Registration No. 333-106285).

4.12              Indenture, dated as of October 1, 2003, by and between
                  Bottling Group, LLC, as Obligor, and JPMorgan Chase Bank, as
                  Trustee, which is incorporated herein by reference to Exhibit
                  4.1 to Bottling LLC's Form 8-K dated October 3, 2003.

4.13              Form of Note for the $500,000,000 2.45% Senior Notes due
                  October 16, 2006, which is incorporated herein by reference to
                  Exhibit 4.2 to Bottling LLC's Form 8-K dated October 3, 2003.

4.14              Form of Note for the $400,000,000 5.00% Senior Notes due
                  November 15, 2013, which is incorporated herein by reference
                  to Exhibit 4.1 to Bottling LLC's Form 8-K dated November 13,
                  2003.

12*               Statement re Computation of Ratios.

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<PAGE>

21*               Subsidiaries of Bottling LLC.

23*               Report and Consent of KPMG LLP.

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

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

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

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

-------------
* Filed herewith

                                      E-3