10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 24, 2007 (12 weeks)

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-14893

THE PEPSI BOTTLING GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-4038356
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Pepsi Way, Somers, New York	10589
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ      NO o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ           Accelerated Filer o           Non-Accelerated Filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o      NO þ

Number of shares of Common Stock outstanding as of April 21, 2007: 226,828,537

The Pepsi Bottling Group, Inc.
Index

			Page No.
Part I		Financial Information
	Item 1.	Financial Statements
		Condensed Consolidated Statements of Operations — 12 weeks ended March 24, 2007 and March 25, 2006		2
		Condensed Consolidated Statements of Cash Flows — 12 weeks ended March 24, 2007 and March 25, 2006		3
		Condensed Consolidated Balance Sheets — March 24, 2007 and December 30, 2006		4
		Notes to Condensed Consolidated Financial Statements		5-14
	Item 2.	Management’s Financial Review		15-21
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		22
	Item 4.	Controls and Procedures		22
Part II		Other Information
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23
	Item 6.	Exhibits		24
EX-10.1: PRIVATE LIMITED COMPANY AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION
EX-99.1: BOTTLING GROUP LLC FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 24, 2007.

PART I — FINANCIAL INFORMATION

Item 1.

The Pepsi Bottling Group, Inc.
Condensed Consolidated Statements of Operations
in millions, except per share amounts, unaudited

	12 Weeks Ended
	March		March
	24, 2007		25, 2006
Net revenues	$	2,466	$	2,367
Cost of sales		1,343		1,271
Gross profit		1,123		1,096
Selling, delivery and administrative expenses		1,003		975
Operating income		120		121
Interest expense, net		66		61
Other non-operating expenses, net		1		—
Minority interest		8		6
Income before income taxes		45		54
Income tax expense		16		20
Net income	$	29	$	34
Basic earnings per share	$	0.13	$	0.14
Weighted-average shares outstanding		227		237
Diluted earnings per share	$	0.12	$	0.14
Weighted-average shares outstanding		233		243
Dividends declared per common share	$	0.11	$	0.08

See accompanying notes to Condensed Consolidated Financial Statements.

2

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

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Cash Flows – Operations
Net income	$	29		$	34
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		144			139
Deferred income taxes		(9	)		(17	)
Stock-based compensation		14			16
Other non-cash charges and credits, net		74			72
Changes in operating working capital, excluding effects of acquisitions:
Accounts receivable, net		(13	)		(5	)
Inventories		(125	)		(95	)
Prepaid expenses and other current assets		(27	)		(15	)
Accounts payable and other current liabilities		(32	)		(35	)
Income taxes payable		1			17
Net change in operating working capital		(196	)		(133	)
Casualty insurance payments		(15	)		(14	)
Pension contributions		(1	)		—
Other, net		(19	)		(16	)
Net Cash Provided by Operations		21			81
Cash Flows – Investments
Capital expenditures		(174	)		(175	)
Acquisitions, net of cash acquired		(49	)		—
Proceeds from sale of property, plant and equipment		4			3
Other investing activities, net		6			4
Net Cash Used for Investments		(213	)		(168	)
Cash Flows – Financing
Short-term borrowings, net		265			106
Payments of long-term debt		(8	)		(61	)
Dividends paid		(26	)		(19	)
Excess tax benefit from exercise of stock options		1			3
Proceeds from exercise of stock options		16			15
Purchases of treasury stock		(141	)		(125	)
Net Cash Provided by (Used for) Financing		107			(81	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(4	)		2
Net Decrease in Cash and Cash Equivalents		(89	)		(166	)
Cash and Cash Equivalents – Beginning of Period		629			502
Cash and Cash Equivalents – End of Period	$	540		$	336
Supplemental Cash Flow Information
Interest paid	$	77		$	76
Income taxes paid	$	23		$	17
Changes in accounts payable related to capital expenditures	$	(30	)	$	(35	)
Capital lease additions	$	2		$	7

See accompanying notes to Condensed Consolidated Financial Statements.

3

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

	(Unaudited)
	March			December
	24, 2007			30, 2006
ASSETS
Current Assets
Cash and cash equivalents	$	540		$	629
Accounts receivable, less allowance of $47 at March 24, 2007 and $50 at December 30, 2006		1,353			1,332
Inventories		657			533
Prepaid expenses and other current assets		299			255
Total Current Assets		2,849			2,749
Property, plant and equipment, net		3,768			3,785
Other intangible assets, net		3,793			3,768
Goodwill		1,485			1,490
Other assets		171			135
Total Assets	$	12,066		$	11,927
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	1,637		$	1,677
Short-term borrowings		623			357
Current maturities of long-term debt		11			17
Total Current Liabilities		2,271			2,051
Long-term debt		4,757			4,754
Other liabilities		1,296			1,205
Deferred income taxes		1,234			1,293
Minority interest		544			540
Total Liabilities		10,102			9,843
Shareholders’ Equity
Common stock, par value $0.01 per share: authorized 900 shares, issued 310 shares		3			3
Additional paid-in capital		1,764			1,751
Retained earnings (includes impact from adopting FIN 48 in fiscal year 2007 of $5)		2,717			2,708
Accumulated other comprehensive loss		(381	)		(361	)
Treasury stock: 84 shares and 80 shares at March 24, 2007 and December 30, 2006, respectively, at cost		(2,139	)		(2,017	)
Total Shareholders’ Equity		1,964			2,084
Total Liabilities and Shareholders’ Equity	$	12,066		$	11,927

See accompanying notes to Condensed Consolidated Financial Statements.

4

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

Note 1—Basis of Presentation

     We prepare our unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect the results of operations, financial position and cash flows of The Pepsi Bottling Group, Inc., as well as the related footnote disclosures. Actual results could differ from these estimates. These interim financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain information and disclosures required for comprehensive annual financial statements. Therefore the Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 30, 2006 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. Certain reclassifications were made in our Condensed Consolidated Financial Statements to 2006 amounts to conform to the 2007 presentation including a reclassification of certain miscellaneous costs incurred with product losses in the trade. We reclassified approximately $18 million from selling, delivery and administrative expenses to cost of goods sold in our Condensed Consolidated Statement of Operations for the 12 weeks ended March 25, 2006. Beginning with our fiscal year 2007, we have recorded trade-related product losses in cost of goods sold.

     When used in these Condensed Consolidated Financial Statements, “PBG,” “we,” “our,” “us” and the “Company” each refers to The Pepsi Bottling Group, Inc. and, where appropriate, to Bottling Group, LLC (“Bottling LLC”), our principal operating subsidiary.

     We consolidate in our financial statements, entities in which we have a controlling financial interest, as well as variable interest entities where we are the primary beneficiary. Minority interest in earnings and ownership has been recorded for the percentage of these entities not owned by PBG for each respective period.

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

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

     At March 24, 2007, PepsiCo, Inc. (“PepsiCo”) owned 85,511,358 shares of our common stock, consisting of 85,411,358 shares of common stock and 100,000 shares of Class B common stock. All shares of Class B common stock that have been authorized have been issued to PepsiCo. At March 24, 2007, PepsiCo owned approximately 37.8% of our outstanding common stock and 100% of our outstanding Class B common stock, together representing 44.0% of the voting power of all classes of our voting stock. In addition, PepsiCo owns approximately 6.7% of the equity of Bottling LLC. We fully consolidate the results of Bottling LLC and present PepsiCo’s share as minority interest in our Condensed Consolidated Financial Statements.

Note 2—Seasonality of Business

     The results for the first quarter are not necessarily indicative of the results that may be expected for the full year because sales of our products are seasonal, especially in our Europe segment where sales volumes tend to be more sensitive to weather conditions. The seasonality of our operating results arises from higher sales in the second and third quarters versus the first and fourth quarters of the year, combined with the impact of fixed costs, such as depreciation and interest, which are not significantly impacted by business seasonality. From a cash flow perspective, the majority of our cash flow from operations is generated in the third and fourth quarters.

5

Note 3—New Accounting Standards

SFAS No. 157

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for reporting fair value and expands disclosures about fair value measurements. SFAS 157 becomes effective beginning with our first quarter 2008 fiscal period. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

SFAS No. 158

     In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). Effective December 30, 2006 the Company adopted the balance sheet recognition provisions of this standard and accordingly recognized the funded status of each of the pension, postretirement plans, and other similar plans we sponsor. Effective for fiscal year ending 2008, we will be required to measure our plan’s assets and liabilities as of the end of the fiscal year instead of our current measurement date of September 30. We are currently evaluating the impact of the change in measurement date on our Consolidated Financial Statements.

SFAS No. 159

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which allows entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will become effective beginning with our first quarter 2008 fiscal period. We are currently evaluating the potential impact of this standard on our Consolidated Financial Statements.

6

Note 4—Earnings per Share

     The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:

	12 Weeks Ended
	March 24,		March 25,
Shares in millions	2007		2006
Average number of shares outstanding during period on which basic earnings per share is based		227		237
Add — Incremental shares under stock compensation plans		6		6
Number of shares on which diluted earnings per share is based		233		243
Basic and diluted net income applicable to common shareholders	$	29	$	34
Basic earnings per share	$	0.13	$	0.14
Diluted earnings per share	$	0.12	$	0.14

     Diluted earnings per share reflect the potential dilution that could occur if the stock options or other equity awards from our stock compensation plans were exercised and converted into common stock that would then participate in net income. Options to purchase approximately 243 thousand shares at March 24, 2007 and 6.2 million shares at March 25, 2006 are not included in the computation of diluted earnings per share because the option exercise prices were greater than the average market price of the Company’s common stock during the related periods and the effect of including the options in the computation would be antidilutive.

Note 5—Share-Based Compensation

     We offer stock option awards and restricted stock units as our primary form of long-term incentive compensation. Stock option awards generally vest over three years and have a 10 year term. Restricted stock unit awards generally vest over three years and are settled in shares of PBG stock after the vesting period.

     Share-based compensation expense is recognized only for share-based payments expected to vest. We estimate forfeitures both at the date of grant as well as throughout the vesting period, based on the Company’s historical experience and future expectations. The Company uses the Black-Scholes-Merton option-valuation model to value stock option awards. The fair value of restricted stock unit awards is based on the fair value of PBG stock on the date of grant.

7

     Total impact of share-based compensation in our Condensed Consolidated Statements of Operations is as follows:

	12 Weeks Ended
	March 24,			March 25,
	2007			2006
Total share-based compensation expense	$	14		$	16
Income tax benefit		(4	)		(5	)
Minority interest		(1	)		(1	)
Net income impact	$	9		$	10

     During each of the 12 week periods ended March 24, 2007 and March 25, 2006, we granted approximately 3 million options at a weighted average fair value of $8.15 and $8.62, respectively.

     During each of the 12 week periods ended March 24, 2007 and March 25, 2006, we granted approximately 1 million restricted stock units at a weighted average fair value of $30.85 and $29.32, respectively.

     Unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the incentive plans amounted to $113 million as of March 24, 2007. That cost is expected to be recognized over a weighted-average period of 2.3 years.

Note 6—Balance Sheet Details

	March			December
	24, 2007			30, 2006
Accounts Receivable
Trade accounts receivable	$	1,158		$	1,163
Allowance for doubtful accounts		(47	)		(50	)
Accounts receivable from PepsiCo		179			168
Other receivables		63			51
	$	1,353		$	1,332
Inventories
Raw materials and supplies	$	254		$	201
Finished goods		403			332
	$	657		$	533
Property, Plant and Equipment, net
Land	$	288		$	291
Buildings and improvements		1,409			1,404
Manufacturing and distribution equipment		3,741			3,705
Marketing equipment		2,432			2,425
Capital leases		61			60
Other		167			172
		8,098			8,057
Accumulated depreciation		(4,330	)		(4,272	)
	$	3,768		$	3,785

8

	March		December
	24, 2007		30, 2006
Accounts Payable and Other Current Liabilities
Accounts payable	$	533	$	525
Accounts payable to PepsiCo		295		234
Trade incentives		145		194
Accrued compensation and benefits		183		237
Other accrued taxes		88		111
Accrued interest		63		74
Other current liabilities		330		302
	$	1,637	$	1,677

Note 7—Other Intangible Assets, net and Goodwill

     The components of other intangible assets are as follows:

	March			December
	24, 2007			30, 2006
Intangibles subject to amortization:
Gross carrying amount:
Customer relationships and lists	$	52		$	54
Franchise/distribution rights		45			45
Other identified intangibles		32			32
		129			131
Accumulated amortization:
Customer relationships and lists		(12	)		(11	)
Franchise/distribution rights		(28	)		(27	)
Other identified intangibles		(16	)		(16	)
		(56	)		(54	)
Intangibles subject to amortization, net		73			77
Intangibles not subject to amortization:
Carrying amount:
Franchise rights		3,174			3,128
Distribution rights		287			297
Trademarks		208			215
Other identified intangibles		51			51
Intangibles not subject to amortization		3,720			3,691
Total other intangible assets, net	$	3,793		$	3,768

     During the first quarter, we acquired franchise and bottling rights for select Cadbury Schweppes brands in Northern California from Nor-Cal Beverage Company, Inc. Through this acquisition, PBG has added Dr Pepper, Squirt and Hawaiian Punch to its beverage portfolio.

     Intangible asset amortization expense was $2 million and $3 million for the 12 weeks ended March 24, 2007 and March 25, 2006, respectively. Amortization expense for each of the next five years is estimated to be approximately $9 million or less.

9

     The changes in the carrying value of goodwill by reportable segment for the 12 weeks ended March 24, 2007 are as follows:

	U.S. &
	Canada		Europe		Mexico			Total
Balance at December 30, 2006	$	1,229	$	16	$	245		$	1,490
Purchase price allocations relating to acquisitions		1		—		—			1
Impact of foreign currency translation		1		—		(7	)		(6	)
Balance at March 24, 2007	$	1,231	$	16	$	238		$	1,485

Note 8— Pension and Postretirement Medical Benefit Plans

     Employee Benefit Plans

     We sponsor pension and other postretirement medical benefit plans in various forms in the United States and other similar plans outside the United States, covering employees who meet specified eligibility requirements.

     Defined Benefit Pension Plans

     Our U.S. employees participate in noncontributory defined benefit pension plans, which cover substantially all full-time salaried employees, as well as most hourly employees. Benefits generally are based on years of service and compensation, or stated amounts for each year of service. Effective January 1, 2007, newly hired salaried and non-union employees will not be eligible to participate in our U.S. defined benefit pension plans. All of our qualified plans are funded and contributions are made in amounts not less than the minimum statutory funding requirements and not more than the maximum amount that can be deducted for U.S. income tax purposes.

     Defined Contribution Benefits

     Nearly all of our U.S. employees are also eligible to participate in our 401(k) savings plans, which are voluntary defined contribution plans. We make matching contributions to the 401(k) savings plans on behalf of participants eligible to receive such contributions. If a participant has one or more but less than 10 years of eligible service, our match will equal $0.50 for each dollar the participant elects to defer up to 4% of the participant’s pay. If the participant has 10 or more years of eligible service, our match will equal $1.00 for each dollar the participant elects to defer up to 4% of the participant’s pay. In addition, newly hired employees who are not eligible for the defined benefit pension plan will instead receive an additional Company contribution equal to two percent of their compensation into their 401(k) account.

     The assets, liabilities and expense associated with our international plans were not significant to our results of operations and are not included in the tables presented below.

10

     Components of our U.S. pension expense for the 12 weeks ended March 24, 2007 and March 25, 2006 are as follows:

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Service cost	$	13		$	12
Interest cost		21			19
Expected return on plan assets		(24	)		(22	)
Amortization of prior service cost		1			2
Amortization of net loss		9			9
Net pension expense for the defined benefit plans		20			20
Defined contribution plans expense		6			5
Total U.S. pension expense recognized in the Condensed Consolidated Statements of Operations	$	26		$	25

     There were no contributions made to our U.S. pension plans for the 12 weeks ended March 24, 2007.

     Postretirement Medical Benefits

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

     Components of our U.S. postretirement benefits expense for the 12 weeks ended March 24, 2007 and March 25, 2006 are as follows:

	12 Weeks Ended
	March		March
	24, 2007		25, 2006
Service cost	$	1	$	1
Interest cost		5		5
Amortization of net loss		1		1
U.S. postretirement benefits expense recognized in the Condensed Consolidated Statements of Operations	$	7	$	7

Note 9—Income Taxes

     In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the determination of whether tax benefits, either permanent or temporary, should be recorded in the financial statements. We adopted FIN 48 as of the beginning of our 2007 fiscal year and, as a result recognized a $5 million increase to retained earnings from the cumulative effect of adoption.

     As of the beginning of our 2007 fiscal year, the total amount of gross unrecognized tax benefits, which are reported in other liabilities in our Condensed Consolidated Balance Sheet, is $239 million. Of this amount, approximately $181 million would impact our effective tax rate over time, if recognized. In addition, we accrue interest and any necessary penalties related to unrecognized tax positions in our provision for income taxes. As of January 1, 2007, we accrued approximately $83 million of gross interest and penalties, which are included in other liabilities.

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     We file annual income tax returns in the United States (“U.S.”) federal jurisdiction, various U.S. state and local jurisdictions, and in various foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most probable outcome. We adjust these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular uncertain tax position would usually require the use of cash. The resolution of a matter could be recognized as an adjustment to our provision for income taxes and our effective tax rate in the period of resolution.

     The number of tax years that remain open and subject to tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include the U.S., Mexico, Canada and Russia. In the U.S., the IRS statute of limitations for our 2001 and 2002 tax years is scheduled to close on June 30, 2007. We cannot reasonably estimate the impact on our Condensed Consolidated Financial Statements resulting from the expiration of the statute of limitations at this time. The IRS initiated their audit of our U.S. income tax returns for the 2003 through 2005 tax years in the second quarter of 2007.

     In Canada, income tax audits have been completed for all tax years through the 2004 tax year. We are in agreement with the audit results except for one matter which we continue to dispute for our 1999 through 2004 tax years. We cannot reasonably estimate the impact on our Condensed Consolidated Financial Statements resulting from the outcome of this matter. The audit of our Canadian tax return for the 2005 tax year is scheduled to commence in the third quarter of 2007.

     In Russia, tax audits have been concluded for our 2002 through 2004 tax years. We continue to dispute certain matters relating to these tax years and do not anticipate the resolution of the open matters to significantly impact our financial statements. Our 2005 and 2006 tax years remain open in Russia and may be subject to audit in the future.

     The Mexican statute of limitations for the 2001 tax year is scheduled to close in the second quarter of 2007 and we cannot reasonably estimate the impact on our Condensed Consolidated Financial Statements resulting from the expiration of this statute of limitations at this time. The statute of limitations for our 2002 through 2006 Mexican tax returns remains open and may be subject to audit in the future.

Note 10—Segment Information

     We operate in one industry, carbonated soft drinks, and other ready-to-drink beverages, and all of our segments derive revenue from these products. We conduct business in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. PBG manages and reports operating results through three reportable segments – U.S. & Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico. The operating segments of the U.S. and Canada are aggregated into a single reportable segment due to their economic similarity as well as similarity across products, manufacturing and distribution methods, types of customers and regulatory environments.

     Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment. We evaluate the performance of these segments based on operating income or loss. Operating income or loss is exclusive of net interest expense, minority interest, foreign exchange gains and losses and income taxes.

12

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Net Revenues
U.S. & Canada	$	2,102		$	2,036
Europe		176			148
Mexico		188			183
Worldwide net revenues	$	2,466		$	2,367
Operating Income (Loss)
U.S. & Canada	$	143		$	141
Europe		(25	)		(22	)
Mexico		2			2
Worldwide operating income		120			121
Interest expense, net		66			61
Other non-operating expenses, net		1			—
Minority interest		8			6
Income before income taxes	$	45		$	54

	March		December
	24, 2007		30, 2006
Total Assets
U.S. & Canada	$	9,266	$	9,044
Europe		1,071		1,072
Mexico		1,729		1,811
Worldwide total assets	$	12,066	$	11,927

Note 11—Comprehensive Income

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Net income	$	29		$	34
Net currency translation adjustment		(32	)		24
Cash flow hedge adjustment (a)		1			8
Amortization of prior service cost/loss in net periodic pension/postretirement cost to expense (b)		6			N/A
Pension liability adjustment (c)		5			N/A
Comprehensive income	$	9		$	66

(a)	Net of minority interest and taxes of $0 million and $6 million for the 12 weeks ended March 24, 2007 and March 25, 2006, respectively.
(b)	Net of minority interest and taxes of $5 million for the 12 weeks ended March 24, 2007.
(c)	Net of minority interest and taxes of $3 million for the 12 weeks ended March 24, 2007.

Note 12—Contingencies

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

13

Note 13—Subsequent Event

     On March 1, 2007, subsequent to the close of the quarter for our Europe segment, together with PepsiCo we formed PR Beverages Limited, a venture comprising PepsiCo’s concentrate and PBG’s bottling businesses in Russia. The venture will enable us to strategically invest in Russia to accelerate our growth.

     We have a majority interest in the venture and maintain management of the day-to-day operations. Accordingly, beginning with our second quarter, we will consolidate the venture into our financial results and record minority interest related to PepsiCo’s 40 percent interest in the venture. We do not anticipate this transaction to have a material impact on our Consolidated Statement of Operations.

     PepsiCo is considered a related party due to the nature of our franchise relationship and its ownership interest in our Company. Accordingly, concentrate purchases by the venture will be considered related party transactions.

14

Item 2.
Management’s Financial Review

Tabular dollars in millions, except per share data

Overview

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

     PBG operates in one industry, carbonated soft drinks, and other ready-to-drink beverages, and all of our segments derive revenue from these products. PBG manages and reports operating results through three reportable segments – U.S. & Canada, Europe which consists of operations in Spain, Greece, Russia and Turkey, and Mexico. Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment.

     Management’s Financial Review should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, which include additional information about our accounting policies, practices and the transactions that underlie our financial results.

Critical Accounting Policies

     The preparation of our consolidated financial statements in conformity with U.S. GAAP often requires us to make judgments, estimates and assumptions regarding uncertainties that affect the results of operations, financial position and cash flows of the Company, as well as the related footnote disclosures. Management bases its estimates on knowledge of our operations, markets in which we operate, historical trends, and other assumptions. Actual results could differ from these estimates under different assumptions or conditions.

     As discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006, management considers the following policies to be the most important to the portrayal of PBG’s financial condition and results of operations because they require the use of estimates, assumptions and the application of judgment:

• Allowance for Doubtful Accounts;

• Recoverability of Goodwill and Intangible Assets with Indefinite Lives;

• Pension and Postretirement Medical Benefit Plans;

• Casualty Insurance Costs;

• Share-Based Compensation; and

• Income Taxes.

Income Taxes

     In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the manner in which tax positions, either permanent or temporary, should be reflected in the financial statements.

15

     In accordance with the adoption of FIN 48, we evaluate our tax positions to determine if it is more likely than not that a tax position is sustainable, based on its technical merits. If a tax position does not meet the more likely than not standard, a full reserve is established. Additionally, for a position that is determined to, more likely than not, be sustainable, we measure the benefit at the greatest cumulative probability of being realized and establish a reserve for the balance. A material change in our tax reserves could have a significant impact on our results.

Financial Performance Results

	12 Weeks Ended
	March		March		%
	24, 2007		25, 2006		Change
Net revenues	$	2,466	$	2,367		4	%
Gross profit	$	1,123	$	1,096		3	%
Operating income	$	120	$	121		0	%
Net income	$	29	$	34		(16	)%
Diluted earnings per share1	$	0.12	$	0.14		(12	)%

^1–   Percentage change for diluted earnings per share is calculated by using earnings per share data that is expanded to the fourth decimal place.

Financial Performance Discussion

     For the first quarter of 2007, diluted earnings per share decreased 12 percent and net income decreased 16 percent when compared with the similar period in the prior year. These results included a non-cash-tax charge of $4 million or $0.02 of diluted earnings per share as a result of adopting FIN 48 in the first quarter. Please see Note 9 in the Notes to Condensed Consolidated Financial Statements for further discussion on FIN 48.

     The decline in net income and diluted earnings per share was primarily attributable to flat operating income and increased interest expense as a result of higher debt balances and higher effective interest rates.

     Our operating income results for the quarter reflected strong revenue growth driven by positive growth across each reportable segment, which was partially offset by an increase in cost of sales. Worldwide net revenue per case grew by four percent during the first quarter of 2007 versus the prior year. Worldwide physical case volume was about flat in the first quarter of 2007 versus the prior year reflecting a one-percent decline in the U.S. and Canada and offset by strong growth in Europe and the impact of acquisitions in Mexico.

     Worldwide cost of sales per case for the quarter increased five percent versus the prior year driven primarily by increases in raw material costs such as concentrate and sweetener. Selling, delivery and administrative (“SD&A”) expenses increased three percent in the first quarter versus the prior year, reflecting wage and benefit increases, partially offset by cost productivity initiatives associated with technology improvements in our warehouses, improving our product configuration to eliminate complexity and streamlined customer account management. As a result, operating income of $120 million was about flat for the quarter versus the first quarter of 2006.

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Full-Year 2007 Outlook

     Our full-year 2007 outlook is unchanged, other than operating income, from the Company’s previous guidance discussed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2006. In March of 2007, we announced the formation of PR Beverages Limited, a venture comprised of PepsiCo Inc.’s (“PepsiCo”) concentrate and PBG’s bottling businesses in Russia. As a result of consolidating the venture, our operating income is now expected to increase five to seven percent, up three percentage points from the Company’s previous guidance of two to four percent. The increase in operating income will be offset by PepsiCo’s 40 percent minority interest in the venture. Therefore, the venture will not have any impact on diluted earnings per share.

     For the full-year 2007, we expect to generate more than $1.3 billion in cash flow from operations and spend approximately $780 million on capital expenditures.

First Quarter 2007 Results

Except where noted, tables and discussion are presented as compared to the similar period in the prior year.

Volume

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
				U.S. &
	Worldwide			Canada			Europe			Mexico
Base volume		0	%		(1	)%		8	%		(3	)%
Acquisitions		0	%		—			—			5	%
Total Volume change		0	%		(1	)%		8	%		2	%

     Our reported worldwide physical case volume was about flat in the first quarter of 2007, driven by a one percent decline in our U.S. and Canada segment and offset primarily by strong growth in Europe and the impact of acquisitions in our Mexico segment.

     Volume in the U.S. decreased one percent, reflecting a two-percent decline in our cold drink channel and a flat performance in our take-home channel. Year over year comparisons were impacted by strong growth in the prior year. Volume declines in the quarter in these channels were attributable to softer volume in supermarkets and small format locations.

     From a brand perspective, in the U.S., our non-carbonated portfolio grew approximately 13 percent, driven by a 45-percent increase in Trademark Lipton, coupled with strong double-digit growth in water and energy drinks. The growth in our non-carbonated portfolio was more than offset by declines in our CSD portfolio which decreased five percent due primarily to declines in both Trademark Pepsi and flavored CSDs.

     In Canada, overall volume growth of one percent was driven primarily by double-digit growth in Trademark Aquafina and in ournon-carbonated portfolio, and partially offset by a two-percent decline in CSDs. Growth in non-carbonated brands was boosted by solid gains from innovation including the introduction of Dole Sparklers.

     In our Europe segment, overall volume grew eight percent, driven primarily by a double-digit increase in Russia. Volume growth in Russia was generated primarily by double-digit increases across CSDs, water and other non-carbonated products.

     In our Mexico segment, overall volume increased two percent versus the prior year, driven by the impact from prior year acquisitions and partially offset by a three percent decline in base business volume. This decrease was mostly due to an eight-percent decline in CSDs which was partially attributable to abnormally cold weather in the North region of Mexico. Similarly, volume

17

in our water portfolio was soft with bottled water flat to prior year and jugs down slightly. Volume in other non-carbonated products increased by high double-digits as a result of a strong portfolio of products, including Sun Light, Be Light, Gatorade and Aquas Frescos.

Net Revenues

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
				U.S. &
	Worldwide			Canada			Europe			Mexico
Volume impact		0	%		(1	)%		8	%		(3	)%
Net price per case impact (rate/mix)		4	%		4	%		5	%		5	%
Acquisitions		0	%		—			—			5	%
Currency translation		0	%		0	%		6	%		(4	)%
Total Net Revenues change		4	%		3	%		19	%		3	%

     Worldwide net revenues were $2.5 billion for the first quarter of 2007, a four-percent increase over the similar period in the prior year. The increase in net revenues for the quarter was driven by increases in net price per case across all of our segments. In the first quarter, our U.S. & Canada segment, which includes 12 weeks of results versus our Mexico and Europe segments, which include only the months of January and February, generated the majority of our revenues, at approximately 85 percent of our worldwide revenues. Our Europe segment generated seven percent of our revenues and Mexico generated the remaining eight percent.

     In the U.S. & Canada, net revenues increased three percent in the first quarter of 2007, reflecting increases in net price per case. In the U.S., net revenue per case increased by four percent, driven by a five-percentage-point improvement in rate as a result of a favorable pricing environment, and offset by a one-percentage-point decline in mix.

     In Europe, net revenues increased 19 percent in the first quarter of 2007 as a result of strong volume growth and increases in net price per case, coupled with the positive impact of foreign currency translation.

     Net revenues in Mexico grew three percent in the first quarter of 2007. The growth was attributable to strong net price per case increases and the impact of prior year acquisitions, partially offset by volume declines and the negative impact of foreign currency translation.

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Cost of Sales

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
	Worldwide
Volume impact		0	%
Cost per case impact		6	%
Acquisitions		0	%
Currency translation		0	%
Total Cost of Sales change		6	%

     Cost of sales was $1.3 billion in the first quarter of 2007, a six-percent increase over the prior year. The growth in cost of sales was driven by cost per case increases across all of our segments as a result of raw material cost increases such as concentrate and sweetener.

     In the U.S. and Canada, cost of sales increased in line with worldwide trends, driven by cost per case increases.

     In Europe, cost of sales grew in line with revenue growth, reflecting strong volume growth and cost per case increases, coupled with the negative impact of foreign currency translation.

     In Mexico, cost of sales increased in line with revenue growth, driven by the impact of acquisitions in the prior year and cost per case increases. These increases were partially offset by volume declines and the positive impact of foreign currency translation.

Selling, Delivery and Administrative Expenses

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
	Worldwide
Cost impact		3	%
Acquisitions		0	%
Currency translation		0	%
Total SD&A change		3	%

     Worldwide SD&A expenses were $1.0 billion in the first quarter of 2007, a three-percent increase over the prior year. This increase was primarily attributable to higher wage and benefit costs across all of our segments, and partially offset by cost productivity initiatives associated with technology improvements in our warehouses, improving our product configuration to eliminate complexity and streamlined customer account management.

Interest Expense, net

     Net interest expense increased $5 million in the first quarter of 2007, largely due to additional interest associated with higher debt balances and higher effective interest rates.

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Income Tax Expense

     Our effective tax rate for the first quarter of 2007 was 36.3%, compared with our effective tax rate of 36.1% in the first quarter of 2006. The slight increase in our effective tax rate is driven by higher tax contingencies as a result of adopting FIN 48, primarily offset by an increased U.S. manufacturing deduction allowable in 2007 as compared to the prior year and other favorable tax adjustments.

Liquidity and Financial Condition

Cash Flows

     In the first quarter of 2007, PBG generated $21 million of net cash provided by operations, which was $60 million lower than the cash generated in 2006. The decrease in net cash provided by operations was driven primarily by higher purchases of certain raw materials.

     In the first quarter of 2007, cash used for investments was $213 million, which was $45 million higher than the cash used for investments in 2006. The increase in cash used for investments reflects the acquisition of franchise and bottling rights of select Cadbury Schweppes brands in California, United States. Through this acquisition, PBG has added Dr Pepper, Squirt and Hawaiian Punch to its beverage portfolio.

     In the first quarter of 2007, we generated $107 million from financing activities as compared with a use of $81 million in 2006. This increase in cash from financing was driven primarily by higher short-term borrowings and lower repayments on our international debt in the current year. Increases in borrowings were due to higher working capital needs, acquisitions and additional share repurchases.

Liquidity and Capital Resources

     Our principal sources of cash come from our operating activities, and the issuance of debt and bank borrowings. We believe that these cash inflows will be sufficient to fund capital expenditures, benefit plan contributions, acquisitions, share repurchases, dividends and working capital requirements for the foreseeable future.

     We had $368 million and $115 million of outstanding commercial paper, at March 24, 2007 and December 30, 2006, respectively.

     On March 22, 2007, the Company’s Board of Directors approved an increase in the Company’s quarterly dividend from $0.11 to $0.14 per share on the outstanding common stock of the Company. This action resulted in a 27-percent increase in our quarterly dividend.

Contractual Obligations

     As of March 24, 2007, there have been no material changes outside the normal course of business in the contractual obligations disclosed in Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, under the caption “Contractual Obligations.”

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Cautionary Statements

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

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

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

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

• material changes from expectations in the cost or availability of raw materials, ingredients or packaging materials;

• limitations on the availability of water or obtaining water rights;

• an inability to achieve cost savings;

• material changes in capital investment for infrastructure and an inability to achieve the expected timing for returns on cold-drink equipment and related infrastructure expenditures;

• decreased demand for our product resulting from changes in consumers’ preferences;

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

• impact of competitive activities on our business;

• impact of customer consolidations on our business;

• changes in product category consumption;

• unfavorable weather conditions in our markets;

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

• loss of business from a significant customer;

• failure or inability to comply with laws and regulations;

• changes in laws, regulations and industry guidelines governing the manufacture and sale of food and beverages, including restrictions on the sale of carbonated soft drinks in schools;

• litigation, other claims and negative publicity relating to the alleged unhealthy properties of soft drinks;

• changes in laws and regulations governing the environment, transportation, employee safety, labor and government contracts;

• changes in accounting standards and taxation requirements (including unfavorable outcomes from audits performed by various tax authorities);

• unforeseen economic and political changes;

• possible recalls of our products;

• interruptions of operations due to labor disagreements;

• changes in our debt ratings;

• material changes in expected interest and currency exchange rates and unfavorable market performance of our pension plan assets; and

• an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.

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Item 3.
Quantitative and Qualitative Disclosures About Market Risk

     There have been no material changes to our market risks as disclosed in Item 7 to our Annual Report on Form 10-K for the year ended December 30, 2006.

Item 4.
Controls and Procedures

     PBG’s management carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to PBG and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to PBG’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

     In addition, PBG’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in PBG’s internal control over financial reporting. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

PBG Purchases of Equity Securities

     In the first quarter of 2007, we repurchased approximately 4 million shares of PBG common stock. Since the inception of our share repurchase program in October 1999, we have repurchased 123 million shares of PBG common stock. Our share repurchases for the first quarter of 2007, are as follows:

					Total Number of Shares		Maximum Number of
	Total Number		Average Price		Purchased as Part of		Shares that May Yet Be
	of Shares		Paid per		Publicly Announced		Purchased Under the
Period	Purchased1		Share2		Plans or Programs 3		Plans or Programs 3
Period 1 12/31/06—01/27/07		2,565,400	$	31.06		2,565,400		28,832,800
Period 2 01/28/07—02/24/07		1,210,800	$	31.60		1,210,800		27,622,000
Period 3 02/25/07—03/24/07		732,300	$	31.11		732,300		26,889,700
Total		4,508,500	$	31.21		4,508,500

1	Shares have only been repurchased through publicly announced programs.
2	Average share price excludes brokerage fees.
3	The PBG Board has authorized the repurchase of shares of common stock on the open market and through negotiated transactions as follows:

	Number of Shares
	Authorized to be
Date Share Repurchase Program was Publicly Announced	Repurchased
October 14, 1999		20,000,000
July 13, 2000		10,000,000
July 11, 2001		20,000,000
May 28, 2003		25,000,000
March 25, 2004		25,000,000
March 24, 2005		25,000,000
December 15, 2006		25,000,000
Total shares authorized to be repurchased as of March 24, 2007		150,000,000

Unless terminated by resolution of the PBG Board, each share repurchase program expires when we have repurchased all shares authorized for repurchase thereunder.

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Item 6.

Exhibits

Exhibit No.
10.1	Private Limited Company Agreement of PR Beverages Limited dated as of March 1, 2007 among PBG Beverages Ireland Limited, PepsiCo (Ireland), Limited and PR Beverages Limited.
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes–Oxley Act of 2002
32.1	Certification by the Chief Executive Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002
32.2	Certification by the Chief Financial Officer pursuant to Section 906 of the Sarbanes–Oxley Act of 2002
99.1	Bottling Group LLC Form 10-Q for the quarterly period ended March 24, 2007, as required by the SEC as a result of Bottling Group LLC’s guarantee of up to $1,000,000,000 aggregate principal amount of our 7% Senior Notes due in 2029.

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SIGNATURES

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

THE PEPSI BOTTLING GROUP, INC.

(Registrant)

Date: April 30, 2007	/s/ Andrea L. Forster
	Andrea L. Forster
	Vice President and Controller
Date: April 30, 2007	/s/ Alfred H. Drewes
	Alfred H. Drewes
	Senior Vice President and Chief Financial Officer

EX-10.1

Exhibit 10.1

EXECUTION VERSION

PRIVATE LIMITED COMPANY AGREEMENT

OF

PR BEVERAGES LIMITED

MARCH 1, 2007

TABLE OF CONTENTS

	ARTICLE I
	DEFINITIONS
Section 1.01	Defined Terms	2
Section 1.02	Interpretation	9
	ARTICLE II
	FORMATION OF THE COMPANY
Section 2.01	Formation	9
Section 2.02	Registered Office	10
Section 2.03	Name	10
Section 2.04	Purpose and Character of Business	10
Section 2.05	Duration	10
Section 2.06	Filings, Reports and Formalities	10
Section 2.07	Closing	10
	ARTICLE III
	CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS
Section 3.01	Share Capital Accounts/Subscription to Shares	11
Section 3.02	Capital Contribution by PBG Ireland	12
Section 3.03	Obligation of PepsiCo Ireland	12
Section 3.04	Return of Contributions	12
Section 3.05	Additional Issuance of Shares; Additional Classes of Shares	12
Section 3.06	Liability of Members; Ability to Bind the Company	13
Section 3.07	Establishment of Capital Accounts	13
Section 3.08	Maintenance of Capital Accounts	13
Section 3.09	Revaluation of Capital Accounts	14

ii 

	ARTICLE IV
	PROFITS AND LOSSES
Section 4.01	Determination of Profits and Losses	15
Section 4.02	Allocations	15
Section 4.03	Allocations for US Federal Income Tax Purposes	17
Section 4.04	Partial Year Allocations	17
Section 4.05	Adjustment of Allocations	17
Section 4.06	Excess Nonrecourse Liabilities	17
	ARTICLE V
	DISTRIBUTIONS; WITHHOLDING
Section 5.01	Distributions to the Members	18
Section 5.02	Withholding	19
	ARTICLE VI
	BOARD OF DIRECTORS
Section 6.01	Number of Directors	19
Section 6.02	Board Composition / Term	20
Section 6.03	Chairman	20
Section 6.04	Meetings	20
Section 6.05	Duties	20
Section 6.06	Procedures Following Board Deadlock or Deadlock of Members under Section 6.05	23

iii 

	ARTICLE VII
	GOVERNANCE OF COMPANY AND BUSINESS
Section 7.01	Governance Principles	24
Section 7.02	Management Team	25
Section 7.03	Business Reviews	26
Section 7.04	Conflicts	27
Section 7.05	Authorized Signatories / Related Party Agreements	27
	ARTICLE VIII
	RECORDS, ACCOUNTING MATTERS, TAX MATTERS
Section 8.01	Maintenance & Review of Records and Financial Controls	28
Section 8.02	Audit / Preparation of Financial Reports	28
Section 8.03	Accounting Method	29
Section 8.04	Tax Matters	29
Section 8.05	Confidentiality	32
Section 8.06	Services Agreement	33
	ARTICLE IX
	RESTRICTIONS ON TRANSFER
Section 9.01	Restrictions on Transfers	33
Section 9.02	Transfers to Affiliates	33
	ARTICLE X
	DISSOLUTION AND TERMINATION
Section 10.01	Events of Dissolution	34
Section 10.02	Dissolution Process	34

iv 

	ARTICLE XI
	REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.01	Representations and Warranties of Members	37
Section 11.02	Representations and Warranties of PBG Ireland	38
Section 11.03	Non-Competition Covenants	39
	ARTICLE XII
	MISCELLANEOUS
Section 12.01	Partial Invalidity	40
Section 12.02	Notices	40
Section 12.03	Amendment	41
Section 12.04	Consents; Waivers	41
Section 12.05	Choice of Law and Forum	41
Section 12.06	Multiple Counterparts	41
Section 12.07	Entire Agreement	41
Section 12.08	Binding Effect; Assignment	42
Section 12.09	No Third-Party Beneficiaries	42
Section 12.10	Expenses	42
Section 12.11	Press Releases	42

v 

SCHEDULE A — Percentage Interests

SCHEDULE B — Initial Board of Directors

EXHIBIT A — PBG Ireland Contribution Agreement

EXHIBIT B1 and B2 — The Notes

EXHIBIT C — Concentrate Sub-License

EXHIBIT D — Contract Manufacturing Agreement

EXHIBIT E1 and E2 — Services Agreements

EXHIBIT F1, F2, F3 and F4 — International Master Bottling Agreements

EXHIBIT G1 and G2 – Belarus Temporary Distribution Authorizations

vi 

PRIVATE LIMITED COMPANY AGREEMENT

of

PR BEVERAGES LIMITED

     This Private Limited Company Agreement (the “Agreement”) is concluded this 1st day of March 2007 between PBG Beverages Ireland Limited (“PBG Ireland”) and PepsiCo (Ireland), Limited (“PepsiCo Ireland”) (each a “Member” and, collectively, the “Members”) and PR Beverages Limited (“the Company”).

PRELIMINARY STATEMENT

     WHEREAS, PepsiCo and its Affiliates have licensed (i) PBG to make, sell and deliver within the Russian Federation certain beverages under PepsiCo’s trademarks and (ii) PBG Affiliates to sell and deliver within the Russian Federation snack foods under their trademarks;

     WHEREAS, PBG Ireland and PepsiCo Ireland desire to establish a joint venture for the purposes set out in this Agreement;

     WHEREAS, the Company has been incorporated in accordance with the laws of the Republic of Ireland;

     WHEREAS the Members intend hereby to participate in the Company in accordance with this Agreement and the Companies Acts,
1963 – 2006 of the Republic of Ireland as amended from time to time (the “Acts”);

     WHEREAS, the Members desire to enter into this Agreement and to cause the Company to become a party into all those other agreements and instruments annexed hereto and incorporated herein; and

1

     WHEREAS, the Members desire to provide for the operation and management of the Company for the purposes and in accordance with the provisions stated herein;

     NOW, THEREFORE, in consideration of the mutual covenants, promises and agreements contained herein, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

     Section 1.01 Defined Terms. As used in this Agreement and unless the context otherwise requires, the following terms shall have the respective meanings set forth below:

     “Acts” have the meaning set forth in the fourth Whereas clause of this Agreement.

     “Adjusted Capital Account Deficit” means, for U.S. income tax purposes as determined with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

          (i) credit to such Capital Account any amounts that such Member is deemed obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

          (ii) debit to such Capital Account the items described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).

     The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Affiliate” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.

     “Agreement” has the meaning set forth in the introductory paragraph hereof.

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     “Annual Operating Plan” or “AOP” means the operating plan for the Business for the first Year of the Strategic Plan. Such plan shall set forth in reasonable detail satisfactory to each Member, the advertising and marketing plans (including key marketing initiatives, brand/package strategies, channel strategies, pricing and CDA strategies), management plans (including training programs and operational and human resources initiatives), and restructuring plans, if any, of the Company with respect to the Business. The Annual Operating Plan shall also include a financial plan setting forth the projected profit and loss accounts, cash flows and balance sheet items (including capitalization plans, capital expenditures, debt levels and methods of financing the operations of the Company) of the Company for such Year.

     “Appraiser” means any internationally recognized, independent business appraisal firm.

     “Auditors” means the Irish statutory external auditors of the Company that may be appointed by the Company from time to time.

     “Board of Directors” or “Board” means the Board of Directors of the Company as described in Article VI.

     “Business” means any commercial activity undertaken by the Company from time to time.

     “Capex” shall have the meaning ascribed to it in section 11.02(c).

     “Capital Account” means the account maintained with respect to a Member in order to facilitate the application of U.S. income tax principles and determined in accordance with the provisions of Sections 3.07, 3.08 and 3.09 hereof.

     “CDA” means a Customer Development Agreement.

     “Closing” means the date this Agreement is concluded, as set forth in the introductory paragraph to this Agreement.

     “CMCI” means The Concentrate Manufacturing Company of Ireland.

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     “Code” means the United States Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law).

     “Company” means PR Beverages Limited.

     “Company Articles” means articles of association of the Company which are to be adopted by the Company on or before Closing.

     “Concentrate” means concentrate for the manufacture of the Pepsi Products.

     “Concentrate Sub-License” means the agreement between PepsiCo Ireland and the Company and attached hereto as Exhibit C.

     “Contract Manufacturing Agreement” means the agreement between the Company and CMCI and attached hereto as Exhibit D.

     “Contributed Companies” means all those companies the ownership of which is treated as a capital contribution to the Company not in exchange for shares pursuant to the Contribution Agreement and such predecessor companies, including, but not limited to, PepsiCo Holdings OOO, Pepsi-Cola Soft Drink Factory of Sochi, Pepsi International Bottlers (Samara) LLC, Pepsi International Bottlers (Ekaterinburg) LLC, Pepsi Bottling Group (St. Petersburg) LLC, Pepsi Bottling Group GmbH and Tanglewood Finance, Sarl.

     “Contribution Agreement” means the agreement between PBG Ireland and the Company reflecting PBG Ireland’s capital contribution to the Company not in exchange for Shares and attached hereto as Exhibit A.

     “Controls,” “is Controlled by” or “under common Control with” means (i) the direct or indirect ownership of more than fifty percent (50%) of the equity interests (or interests convertible into or otherwise exchangeable for equity interests) in a Person, or (ii) possession of the direct or indirect right to vote in excess of fifty percent (50%) of the voting securities or elect in excess of fifty percent (50%) of the Board of Directors or other governing body of a Person (whether by securities, ownership, contract or otherwise).

     “Director” means an individual serving as a member of the Board.

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     “Dissolution Value” shall have the meaning set forth in Section 10.02(a).

     “Encumber” shall have the meaning set forth in Section 9.01.

     “Escalation Process” means the Members’ good faith attempts over a period of one month to resolve any matter, which was the subject of a tied vote of the Board, through discussions between the PBG CFO and PI CFO and, if they are unable to resolve the matter, then through discussions between the PBG CEO and PI CEO; provided, however, that the Members shall ensure that such Escalation Process shall be shortened if (a) the disputed matter concerns a potential acquisition by the Company, a Member, or an Affiliate of a Member of a business some of the assets of which are within the Russian Federation and (b) the potential purchaser believes in good faith that it will be prejudiced in the associated bidding process if the Escalation Process is not shortened to less than one month.

     “Final Determination” means (a) a decision, judgment, decree or other order by any court of competent jurisdiction which has become final and is either no longer subject to appeal or for which a determination not to appeal has been made, or (b) any written disposition or agreement issued by, or entered into with, a taxing authority, as the case may be, relating to any tax matter which is final and prohibits such taxing authority, the Company or the Contributed Companies from seeking any further legal or administrative remedies with respect to such tax matter.

     “Fiscal Year” means, except as otherwise required by the Code, the 12-month (or shorter) period ending on the last day of December of each year.

     “Indebtedness” shall have that meaning ascribed to it in section 11.02(c).

     “Ineffective Transfers” shall have the meaning set forth in Section 9.01.

     “Insolvent” means the Company is unable to pay its debts within the meaning of Section 213(e) of the Companies Acts, 1963.

     “Irish GAAP” means the generally accepted accounting principles of the Republic of Ireland.

     “Management Team” means the individuals described in Section 7.02.

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     “Master Bottling Agreements” means the bottling agreements issued by PepsiCo or its Affiliates to the Company authorizing the Company through its Affiliates in Russia to manufacture, sell or distribute within the Russian Federation any beverage under any trademark belonging to PepsiCo or its Affiliates. The Master Bottling Agreements to be executed at Closing are attached hereto as Exhibits F.

     “Marketing Team” shall have the meaning set forth in Section 7.02(c).

     “Member” has the meaning set forth in the introductory paragraph to this Agreement.

     “Net Income” and “Net Loss” are defined for U.S. Federal income tax purposes and mean for a Fiscal Year (i) the taxable income or taxable loss of the Company for such Fiscal Year for U.S. Federal income tax purposes (taking into account any separately stated items), (ii) increased by the amount of any tax-exempt income of the Company for such Fiscal Year (including income of the Company not recognized pursuant to Code Section 959), (iii) decreased by the amount of any Code Section 705(a)(2)(B) expenditures (within the meaning of Treasury Regulation Section 1.704-1(b)(2)(iv)(b)) of the Company for such Fiscal Year, and (iv) including, upon a distribution by the Company of assets in kind, the amount of gain or loss that would have been realized had such assets been sold at their fair market value (as determined by the Tax Matters Member) for the Fiscal Year in which such distribution is made, except that depreciation, depletion, amortization, income and gain (or loss) with respect to Company assets shall be computed with reference to their fair market value at the time of contribution to the Company or a Revaluation under Section 3.09 rather than with respect to their adjusted basis in the Company (as permitted by Treasury Regulation Section 1.704-1(b)(2)(iv)(g)). Net Income or Net Loss shall also include any Revaluation Gain or Revaluation Loss.

     “Notes” means those promissory notes issued by PepsiCo Ireland to the Company or to its Affiliate, PBG Beverages International Limited, and attached hereto as Exhibits B1 and B2.

     “Ordinary Course” means the Company’s business in the Russian Federation of making, marketing, selling and distributing Pepsi Products and other beverage products being distributed by the Company in Russia from time to time.

     “PBG” means The Pepsi Bottling Group, Inc.

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     “PBG CEO” means the Chief Executive Officer of PBG.

     “PBG CFO” means the Chief Financial Officer of PBG.

     “PBG Ireland” has the meaning set forth in the introductory paragraph to this Agreement.

     “PBG Tie Breaker” means PBG’s right under Section 6.06(b).

     “PepsiCo International” or “PI” means PepsiCo International, a division of PepsiCo, Inc.

     “PepsiCo” means PepsiCo, Inc.

     “PepsiCo Ireland” has the meaning set forth in the introductory paragraph to this Agreement.

     “Pepsi Products” means any beverage products manufactured, sold or delivered (from time to time) by the Russian Affiliates under the authority of PepsiCo or its Affiliates.

     “Percentage Interest” means, with respect to any Member as of any date, the percentage of interests of the Company held by such Member as set forth in Schedule A attached hereto, as may be amended from time to time by the Members.

     “Person” means a natural person, partnership (whether general or limited), limited liability company, trust, estate, association, corporation, custodian, nominee or any other individual or entity in its own or any representative capacity.

     “PI CEO” means the Chief Executive Officer of PepsiCo International or such other PepsiCo senior executive of equivalent seniority chosen by PepsiCo if PepsiCo International ceases to be a division of PepsiCo.

     “PI CFO” means the Chief Financial Officer of PepsiCo International or such other PepsiCo senior executive in the event PepsiCo International is no longer a division of PepsiCo.

     “PI Veto Rights” means PepsiCo’s right under section 6.06(c).

     “Post-JV Financial Terms” shall have the meaning ascribed to it in Section 10.02(c).

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     “Post-JV MBA Terms” shall have the meaning ascribed to it in Section 10.02(c).

     “Pre-Closing NOLs” means an amount equal to 366,548,000 Russian roubles.

     “Pre-Closing Tax Period” means any tax period or portion thereof ending on or before the Closing Date.

     “Revaluation” has the meaning set forth in Section 3.09(a).

     “Revaluation Gain” and “Revaluation Loss” have the meanings set forth in Section 3.09(c).

     “Russia GM” means the General Manager of the Company’s business in the Russian Federation and head of the Management Team.

     “Russian Beverage Business” means any business (or that part of any business) engaged in the manufacture, sale, marketing or distribution of beverages in the Russian Federation.

     “Securities Act” means the United States Securities Act of 1933, as amended.

     “Section 704(c) Property” means for U.S. income tax purposes any property that is contributed to the Company at a time when its adjusted tax basis differs from its fair market value and any Company property that, immediately after a Revaluation under Section 3.09, has an adjusted tax basis that differs from its fair market value.

     “Shares” means any share in the authorized share capital of the Company (whether ordinary or otherwise), conferring on the holder thereof all those rights and obligations set out herein, in the Company Articles and in the Acts.

     “Strategic Plan” means a three-Year business plan, the first Year of which constitutes the Annual Operating Plan. The business plan for the last two Years of the Strategic Plan shall reflect projections of sales, marketing and advertising plans and capital expenditures relating thereto for such Years. The Strategic Plan shall be made so that each Year (or at such other times as the Board may agree) the Strategic Plan shall contain updated projections.

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     “Tax Matters Member” means PBG which shall act as the “tax matters partner” of the Company within the meaning of Section 6231(a)(7) of the Code and in any similar capacity under applicable state, local or foreign tax law.

     “Third Appraiser” is defined in Section 10.02(a).

     “Transfer” shall have the meaning set forth in Section 9.01.

     “Treasury Regulations” means the regulations issued under the Code.

     “US GAAP” means generally accepted accounting principles of the United States.

     “Year” means each Fiscal Year of the Company.

     Section 1.02 Interpretation. Each definition in this Agreement includes the singular and the plural, and reference to the neuter gender includes the masculine and feminine where appropriate. References to (i) any statute or regulations means such statute or regulations as amended at the time and include any successor legislation or regulations and (ii) any agreement means such agreement as amended at the time. The words “include” or “including” shall mean including without limitation based on the item or items listed. The headings to the Articles and Sections are for convenience of reference and shall not affect the meaning or interpretation of this Agreement. Except as otherwise stated, reference to Articles, Sections, Schedules, and Exhibits mean the Articles, Sections, Schedules, and Exhibits of this Agreement. The Schedules and Exhibits are hereby incorporated by reference into and shall be deemed a part of this Agreement.

ARTICLE II

FORMATION OF THE COMPANY

     Section 2.01 Formation. The parties hereby acknowledge that PBG has caused the Company to be incorporated in anticipation of the execution of this Agreement.

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     Section 2.02 Registered Office. The registered office of the Company shall be:

Kilnagleary, Carrigaline, Co.
Cork, Ireland

     Section 2.03 Name. The name of the Company shall be PR Beverages Limited. The Company Articles shall be adopted as the articles of association of the Company.

     Section 2.04 Purpose and Character of Business. The general purposes of the Company are (i) conducting the Business in accordance with this Agreement, and all applicable laws, with a particular view to maximizing the sales in the Russian Federation of Pepsi Products and snack foods (while and only if the Company is the exclusive distributor of PepsiCo snack foods in the Russian Federation) by enhancing the production, distribution and marketing thereof, and (ii) increasing the profitability and value of the Business. The Members shall ensure that the Business shall be operated in the best interests of the Company.

     Section 2.05 Duration. The Company shall continue in perpetuity, unless it is sooner dissolved pursuant to Section 10.01.

     Section 2.06 Filings, Reports and Formalities. The Members shall procure that the Board shall cause the Company to make all filings and to submit all reports required to be filed or submitted under the Acts with respect to the Company, and shall cause the Company to make such filings or take such other actions required under the laws of any jurisdiction where the Company conducts business. Throughout the term of the Company, the Company shall comply with all requirements necessary to maintain the private limited liability status of the Company and the limited liability of the Members under the laws of the Republic of Ireland and of each other jurisdiction in which the Company does business.

     Section 2.07 Closing. This Agreement shall become effective as of the Closing. At Closing, the Members shall take or cause to be taken the following steps, which shall be approved by resolutions of the Board of Directors or Members (as the case may be):

(i) adoption of the Company Articles and amendment of memorandum of association;

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(ii)	appointment of the Directors of the Company; and
(iii)	appointment of KPMG-Ireland as the Auditors.

     At Closing, the Members or their respective Affiliates shall execute the following documents with the Company and/or shall cause the Company to execute them (as appropriate) and each shall be effective as of the Closing:

1.	PBG Ireland Contribution Agreement.
2.	Concentrate Sub-Licence.
3.	Contract Manufacturing Agreement.
4.	Services Agreements.
5.	The Master Bottling Agreements.
6.	The Notes.
7.	Belarus Temporary Distribution Authorizations.

ARTICLE III

CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS

     Section 3.01 Share Capital Accounts / Subscription to Shares. The authorized share capital of the Company is €100 divided into 100 ordinary shares, having all those rights and obligations attaching thereto as set out in the Company Articles. The initial issued share capital of the Company shall be held as follows:

Shareholder	Number of Shares	Amount Credited as Paid Up
PepsiCo Ireland	40 Ordinary Shares	€40
PBG Ireland	60 Ordinary Shares	€60

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     Section 3.02 Capital Contribution by PBG Ireland. PBG Ireland shall make a capital contribution to the Company, not in exchange for shares, pursuant to the Contribution Agreement attached hereto as Exhibit A, which PBG Ireland shall enter into with the Company at the Closing.

     Section 3.03 Obligation of PepsiCo Ireland. PepsiCo Ireland shall issue the Notes to the Company or to its Affiliate, PBG Beverages International Limited (not in exchange for shares), and execute the Concentrate Sub-License with the Company (not in exchange for shares) at Closing. PepsiCo Ireland shall procure (not in exchange for shares) that the Concentrate Manufacturing Company of Ireland shall execute the Contract Manufacturing Agreement with the Company at Closing.

     Section 3.04 Return of Contributions. No interest shall accrue on any share capital or capital contributions of the Company. No Member shall have the right to withdraw or to be repaid any share capital or capital contribution made by such Member.

     Section 3.05 Additional Issuance of Shares; Additional Classes of Shares.

          (a) In order to raise additional capital, acquire assets, redeem or retire debt of the Company or for any other purpose, the Company may, by unanimous consent of the Members, issue Shares in addition to those initially issued pursuant to Section 3.01 to any Member or redeem or transfer Shares.

          (b) If the Company issues new Shares in accordance with Section 3.05(a), the Members may unanimously determine that such Shares be issued from time to time in one or more classes thereof, or one or more series of such classes of Shares, which classes or series shall have, subject to the provisions of applicable law, such designations, preferences and relative, participating, optional or other special rights as shall be approved by the unanimous consent of the Members including, without limitation, with respect to: (i) the allocation of Percentage Interests to each such class or series; (ii) the right of each such class or series to share in distributions; (iii) the rights of each such class or series upon dissolution and liquidation of the Company; (iv) the price at which, and the terms and conditions upon which, each such class or series may be redeemed by the Company, if any such class or series is so redeemable; (v) the rate

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at which, and the terms and conditions upon which, each such class or series may be converted into another class or series of Shares; and (vi) the right of each such class or series to vote on Company matters, including matters relating to the relative rights, preferences and privileges of such class or series, if any such class or series is granted any voting rights.

          (c) If the Company issues new Shares or redeems or transfers existing Shares in accordance with this Section 3.05, the Members shall adjust each Member’s Percentage Interest accordingly, by amendment to Schedule A, attached hereto.

     Section 3.06 Liability of Members; Ability to Bind the Company.

          (a) No Member shall be personally liable for the debts, obligations or liabilities of the Company or any Affiliate of the Company solely by reason of being a Member of the Company. Notwithstanding any provision herein to the contrary, in no event shall the liability of any Member for the debts, obligations or liabilities of the Company exceed such Member’s share capital, which shall be irrevocable, unconditional, and non-repayable.

          (b) A Share shall be personal property for all purposes. All property owned by the Company shall be deemed to be owned by the Company as an entity, and no Member shall be deemed to own any such property or any portion thereof.

          (c) Unless otherwise provided herein, no Member in its capacity as such, shall have the right to act for or on behalf of or otherwise bind the Company.

     Section 3.07 Establishment of Capital Accounts. In order to facilitate the application of U.S. income tax principles, there shall be established for each Member on the books of the Company a capital account (a “Capital Account”). Capital Accounts shall be maintained in accordance with Section 3.08 hereof and adjusted as provided in Section 3.09 and Article IV hereof. For U.S. income tax purposes, the Capital Account balance of each Member immediately after the Closing shall be established and acknowledged by all Members immediately after Closing.

     Section 3.08 Maintenance of Capital Accounts. In order to facilitate the application of U.S. income tax principles, Capital Accounts shall be maintained as set forth in this Section 3.08.

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          (a) The Capital Account of each Member shall be increased by (i) the amount of all cash contributed by such Member to the Company; (ii) the fair market value of any property contributed by such Member to the Company (net of any liabilities secured by such property that the Company is considered to assume or take subject to under Section 752 of the Code); and (iii) the amount of any Net Income (or items of gross income) allocated to such Member under Article IV hereof. The Capital Account of PepsiCo Ireland shall not be increased by reason of its issuance of the Notes to the Company, and shall be increased from time to time by the amount of principal paid by PepsiCo Ireland on the Notes.

          (b) The Capital Account of each Member shall be decreased by (i) the amount of any cash distributed to such Member by the Company; (ii) the fair market value of any property distributed to such Member by the Company (net of any liabilities secured by such property that such Member is considered to assume or take subject to under Section 752 of the Code); and (iii) the amount of any Net Loss (or items of loss or deduction) allocated to such Member under Article IV hereof.

          (c) The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to apply the concepts of Treasury Regulations under Section 704(b) of the Code and, to the extent not inconsistent with other provisions of this Agreement, shall be interpreted and applied in a manner consistent with such Treasury Regulations.

     Section 3.09 Revaluation of Capital Accounts. In order to facilitate the application of U.S. income tax principles, a revaluation of the Capital Accounts shall occur as set forth in this Section 3.09.

          (a) Upon the occurrence of an event described in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), if determined by the Tax Matters Member to be advisable after consulting with the other Member, the Capital Accounts of all the Members shall be revalued based on the fair market value of all the assets of the Company as of the time of such event (a “Revaluation”). Upon a Revaluation, for purposes of Section 3.07, 3.08 and Article IV of this Agreement, the Company shall be deemed to sell all its assets in a single transaction for an aggregate amount realized equal to their fair market value. Such deemed sale price shall be apportioned among the assets based on their relative fair market values. The fair market value of all the Company’s

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assets, and the apportionment of the deemed sale price among those assets, in connection with a Revaluation shall be determined by the Tax Matters Member after consultation with the other Member.

          (b) The Company shall engage in a Revaluation immediately before its dissolution, liquidation or termination.

          (c) The gains and losses that would result from the deemed sale of the Company’s assets pursuant to a Revaluation shall be treated as a Revaluation Gain or Revaluation Loss.

ARTICLE IV

PROFITS AND LOSSES

     Section 4.01 Determination of Profits and Losses. The profits and losses of the Company shall be determined (a) for Irish statutory purposes, in accordance with the Acts and Irish GAAP (provided it does not conflict with the Acts) and (b) for all other purposes, in accordance with the Acts and U.S. GAAP (provided it does not conflict with the Acts).

     Section 4.02 Allocations. For each Fiscal Year of the Company, and in order to facilitate the application of U.S. income tax principles, there shall be allocated among the Members the following amounts:

          (a) Net Income and Net Loss. Except as provided in Sections 4.02(b), (c) or (d) below, for each Fiscal Year, there shall be allocated to each Member an amount of Net Income or Net Loss equal to (i) Net Income or Net Loss times (ii) the Member’s Percentage Interest.

          (b) Limitation on Net Loss Allocations. No allocation of Net Loss shall be made under Sections 4.02(a) to the extent such allocation would cause the Capital Account of any Member to have an Adjusted Capital Account Deficit. Instead, such Net Loss shall be allocated as follows:

               (i) Such Net Loss shall first be allocated to those Members that do not

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have an Adjusted Capital Account Deficit in proportion to their respective Percentage Interest until any further allocation of Net Loss will cause any other Member to have an Adjusted Capital Account Deficit.

               (ii) If any further allocation of Net Loss under paragraph 4.02(b)(i) will cause any Member to have an Adjusted Capital Account Deficit, such Net Loss shall be allocated to those Members that do not have Adjusted Capital Account Deficits in proportion to their respective Percentage Interests. This paragraph 4.02(b)(ii) shall continue to be applied in a like manner until any further allocations of Net Loss cause all such Members to have an Adjusted Capital Account Deficit.

               (iii) Any remaining Net Loss shall next be allocated to the Members in proportion to their respective Percentage Interests.

          (c) Regulatory Allocations.

               (i) If the Company recognizes any nonrecourse deductions (within the meaning of Treasury Regulation Section 1.704-2(c)), partner nonrecourse deductions (within the meaning of Treasury Regulation Section 1.704-2(i)(2)), partnership minimum gain (within the meaning of Treasury Regulation Section 1.704-2(d)), or partner nonrecourse debt minimum gain (within the meaning of Treasury Regulation Section 1.704-2(i)(3)), the Company shall allocate such items among the Members in accordance with the provisions of Treasury Regulation Section 1.704-2.

               (ii) The Company shall specially allocate items of income and gain when and to the extent required to satisfy the “qualified income offset” requirement within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).

               (iii) If any Member would have an Adjusted Capital Account Deficit at the end of any Fiscal Year after all other allocations under this Section 4.02 have been tentatively made, then such Member shall be allocated items of gross income for such Fiscal Year to eliminate such deficit as quickly as possible.

          (d) Allocations in Final Period. In the period ending with the dissolution and

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termination of the Company as provided in Article X, the Net Income or Net Loss of the Company (or items thereof) shall be allocated so that, to the extent possible, the balance in the Capital Account of each Member immediately before such dissolution and termination is equal to the amount to be distributed to such Member pursuant to Section 10.02(d) hereof.

     Section 4.03 Allocations for U.S. Federal Income Tax Purposes. The Company’s ordinary income and losses, capital gains and losses and other items as determined for U.S. Federal income tax purposes (and each item of income, gain, loss or deduction entering into the computation thereof) shall be allocated among the Members in the same proportions as the corresponding “book” items are allocated under Section 4.02. Notwithstanding the foregoing sentence, U.S. Federal income tax items relating to any Section 704(c) Property shall be allocated among the Members in accordance with Section 704(c) of the Code, using the traditional method described in Treasury Regulation Section 1.704-3(b), to take into account the difference between the fair market value and the tax basis of such Section 704(c) Property as of the date of its contribution to the Company or Revaluation under Section 3.09, as applicable. Items described in this Section 4.03 shall neither be credited nor charged to the Capital Accounts of the Members.

     Section 4.04 Partial Year Allocations. Partial year allocations shall be made on a “book closing” or “daily proration” or “weighted average” or other appropriate basis as determined by the Tax Matters Member, after consultation with the other Member, when required by a short Fiscal Year of the Company, the entry or withdrawal of a Member, the transfer of any Shares by or to a Member or for any other reason determined by the Tax Matters Member.

     Section 4.05 Adjustment of Allocations. In order to facilitate the application of U.S. income tax principles, with respect to the allocations required under Sections 4.02, 4.03 and 4.04, the Tax Matters Member after consulting with the other Member shall have the power to adjust such allocations as may be necessary to maintain substantial economic effect, or to insure that such allocations are in accordance with the interests of the Member, in each case within the meaning of the Code and the Treasury Regulations. All matters concerning allocations for U.S. Federal, state and local and foreign income tax purposes, including accounting procedures, not

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expressly provided for by the terms of this Agreement shall be determined by the Tax Matters Member, after consultation with the other Member.

     Section 4.06 Excess Nonrecourse Liabilities. For purposes of allocating excess nonrecourse liabilities consistent with Treasury Regulation Section 1.752-3(a)(3), each Member shall have an interest in partnership profits equal to its Percentage Interest.

ARTICLE V

DISTRIBUTIONS; WITHHOLDING

     Section 5.01 Distributions to the Members. Other than distributions made upon the Company’s dissolution, which shall be made in accordance with Section 10.02, all other distributions shall be made as follows:

          (a) Dividends.

               (i) The Members shall procure, subject as provided in sub-clause (iii) below and in the absence of agreement to the contrary, that in respect of each Year:

                    (A) 100 per cent of the profits of the Company (available for distribution within the meaning of the Acts) shall be distributed by way of cash dividends by the Company within three (3) months after the end of that Year, and in pursuance thereof an interim dividend shall be declared and paid during the last three (3) months of that Year and a final dividend shall be declared and paid not later than three (3) months after the end of that Year and such interim dividend shall be not less than seventy five (75) per cent of the total amount estimated by the Board to be required to be distributed under this section;

                    (B) the Affiliates of the Company shall declare and pay to the Company sufficient and timely dividends to ensure the Company’s compliance with this section;

               (ii) In deciding whether in respect of any Year the Company has profits available for distribution the parties hereto shall procure that the Auditors shall certify in advance whether such profits are available or not and the amount thereof (if any). In giving such

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certificate the Auditors shall act as experts and not arbitrators and their determination shall be binding on the parties hereto.

               (iii) No dividend shall be declared and/or paid by the Company:

                    (A) which is prohibited by any legal commitment binding upon the Company from time to time;

                    (B) which would render the Company unable to pay its debts as and when they fall due;

                    (C) the amount of which is reasonably required to be retained as prudent and proper reserves including an allowance for future working capital and capital investments required by the prevailing AOP and Strategic Plan, such sum to be determined by the Board within three (3) months after the end of the relevant Year; and

                    (D) the amount of which should be retained as proper provision for corporate tax or other tax liabilities or for other actual liabilities of the Company as determined by the Board.

               (iv) Any distribution under this Section 5.01(a) shall be made to the Members in accordance with their Percentage Interests.

          (b) Other Distributions. Except as otherwise provided in this Section 5.01, any distribution must be approved in accordance with Article VI.

     Section 5.02 Withholding. All amounts withheld pursuant to any applicable tax law with respect to any payment or distribution to a Member shall be treated as amounts distributed to such Member.

ARTICLE VI

BOARD OF DIRECTORS

     Section 6.01. Number of Directors. The Company shall maintain a Board of Directors, as required under the Acts, which shall have eight (8) Directors. Each Director shall have one

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vote on each matter with respect to which the Board of Directors holds a vote. Any action shall be effective only upon the affirmative vote of a majority of the Directors in attendance at a duly held meeting of the Board (or in accordance with Section 6.06) or the unanimous written consent of all Directors.

     Section 6.02. Board Composition / Term.

          (a) At least two Directors shall be Irish residents. Each Member shall appoint one such Director. The Irish resident Directors initially appointed by PBG Ireland and PepsiCo Ireland are identified on Schedule B to this Agreement.

          (b) Each of PBG Ireland and PepsiCo Ireland shall appoint three other Directors. The Directors initially appointed by PBG Ireland and PepsiCo Ireland are identified on Schedule B to this Agreement.

          (c) Each Director shall serve until his or her successor is appointed by PBG Ireland or PepsiCo Ireland, as applicable. Each Member shall, subject to Section 6.02(a), have the right to remove and replace their respective appointees in their respective discretion and to fill any vacancy caused by the removal, resignation or death of their respective appointees; provided, however, that each Member shall ensure that at least three of their respective appointees shall be senior executives of their respective European operations. Directors shall not be compensated for their services by the Company, but shall be reimbursed by the appointing Member for their expenses associated with being a Director.

     Section 6.03 Chairman. The Chairman of the Board shall be appointed by PBG Ireland and shall initially be the President of PBG Europe.

     Section 6.04. Meetings. The Board shall meet at least quarterly in Ireland at a time and place as mutually agreed by the Members provided that at least four Directors (two each appointed by different Members) attend such meetings in person or by telephone from within Ireland. Additional meetings shall be convened at the written request of either Member with the consent of the other Member, which consent shall not be unreasonably withheld. At each meeting of the Board, a quorum shall exist if at least four Directors are present (in person or by telephone) with at least two of such Directors having been appointed by each member.

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     Section 6.05. Duties. The Board shall have all such duties, obligations and authority as set out in the Company Articles and the Acts and that are required of a board of directors under the Acts or under Irish company law generally. In addition, the Board shall have the duties, obligations and authority set out in the subsections of this Section 6.05. The Board shall have no other duty, obligation or authority except as provided under this Section 6.05 the Company Articles, the Acts or under Irish Company law.

          (a) Generally. The Board shall establish the overall direction and strategy of the Company and the Business and shall oversee the annual and quarterly performance of the Business, and shall evaluate the progress of the Business against certain key performance indicators as the Board may determine from time to time.

          (b) Strategic Plan and AOP. By November of each year (commencing in 2007) the Board shall, with the input and/or participation of senior management of PBG and PI and the Management Team, meet to discuss and approve the Strategic Plan and the Annual Operating Plan for the upcoming Year. PBG and PI have agreed on the AOP for 2007 and the Strategic Plan for 2007 to 2009 (inclusive) prior to the Closing. The Board shall also have the authority to approve any material change to the AOP within a given Year.

          (c) Other Responsibilities. The Company shall not undertake any of the following activities without the prior written approval of the Board or, in the case of a tie vote of the Board, following completion of those procedures set out in Section 6.06:

               (i) The adoption or material modification of an AOP; including, without limitation, the assumption of material liabilities greater than those provided for in the AOP;

               (ii) Entering into any contract, commitment or arrangement which is materially inconsistent with the applicable AOP;

               (iii) Making or committing to make any capital expenditure or capital investment (or series of related expenditures or investments) in excess of US$1,500,000, unless such higher amount is specifically approved as part of the AOP;

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               (iv) Incurring any indebtedness for borrowed money or creating any encumbrance or security over the assets of the Company which (in each case) is inconsistent with the applicable AOP;

               (v) Making any loans which in aggregate exceed $100,000 to any person or grant any guarantee or indemnity, in any case other than in the ordinary course of business;

               (vi) The sale or transfer of all or a material part of the assets of the Company;

               (vii) Entering into, amending or terminating any transactions between the Company and any Member;

               (viii) Introducing any new products to the Business (in the case of products to be sold under any trademark belonging to PepsiCo or its Affiliates, such introduction shall require the written assent of the PepsiCo Ireland Directors)

               (ix) Changing the Company’s:

                    (A) Auditors (with approval of the Members);

                    (B) Accounting reference date; or

                    (C) Business name (with approval of the Members);

               (x) Commencing any litigation or arbitration other than in the ordinary course of business.

          (d) Members’ Reservation of Powers. The Members specifically reserve to themselves and do not delegate to the Board any power to:

               (i) amend this Agreement (including the dividend policy);

               (ii) permit any Member to transfer, assign, pledge or otherwise hypothecate all or part of its Shares in the Company;

               (iii) alter or amend the Company Articles or memorandum of

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association from the form adopted pursuant to Section 2;

               (iv) enter into voluntary liquidation while the Company is solvent;

               (v) carry out any form of restructuring of the Company’s share capital;

               (vi) increase the number of Directors or alter the permitted number of Directors approved by each Member; and

               (vii) issue new shares or redeem or transfer existing Shares in accordance with Section 3.05.

          All of the foregoing matters shall require the unanimous consent of both Members and in the absence thereof shall be subject to the procedures for resolving deadlock set forth in Section 6.06.

     Section 6.06. Procedures Following Board Deadlock or Deadlock of Members Under Section 6.05.

          (a) Escalation Process. If in the event a vote by the Board on a particular matter is tied or the Members are deadlocked over a matter listed under Section 6.05(d), the Members shall attempt to resolve such disputed matter through the Escalation Process.

          (b) PBG Tie-Breaker. If a matter that is the subject of the Escalation Process is not resolved following the Escalation Process, the matter shall be submitted (within 10 days of the conclusion of the Escalation Process) to the PBG CEO whose decision shall be final and binding on the Members and, subject to compliance with the Acts, the Company, except as provided under Section 6.06(c).

          (c) PI Veto Rights. Notwithstanding anything to the contrary in this Agreement, the PI CEO may veto any of the following matters, which has been determined by vote of the PBG CEO pursuant to Section 6.06(b):

               (i) Any acquisition, divestiture or other capital expenditure outside the Ordinary Course.

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               (ii) Any effort to engage in a line of business outside the Ordinary Course.

               (iii) Any acquisition or divestiture in the Ordinary Course in excess of eighty-five million US dollars (US$85,000,000).

               (iv) Amendment of this Agreement (including the Exhibits and Schedules).

               (v) The issuance of all forms of shares or securities by the Company or its subsidiaries.

               (vi) Any external financing by the Company or its subsidiaries in excess of that contemplated by the approved AOP.

               (vii) Any decision not to pay a cash dividend, despite the availability of profits for such purposes in accordance with Section 5.01(a).

               (viii) Any transaction involving the Company or one of its subsidiaries and PBG or one of its subsidiaries.

          (d) Deadlock Regarding Capital Expenditure or Strategic Plan. Where the matter that is the subject of a tied vote by the Board is a capital expenditure or a Strategic Plan, then (i) in the case of a disputed item of capital expenditure, the Company shall not incur such item until such matter is resolved in accordance with subsections (a), (b) and (c) of the Section 6.06, and (ii) in the case of a disputed Strategic Plan, it shall not become effective until it is approved in accordance with this Section 6.06 and, in pending such resolution, the Company and Business shall operate in accordance with the most recently approved Strategic Plan.

ARTICLE VII

GOVERNANCE OF COMPANY AND BUSINESS

     Section 7.01. Governance Principles. The governance of the Company and the Business shall be guided by the following principles:

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          (a) Communication Principles. The Company has been formed on the principle that each Member and their respective representatives shall have full visibility into the operations, performance, finances, key initiatives (including capacity/capex, strategic initiatives, etc.), marketing (including strategy, spend, etc.), and other aspects of the Company and the Business. The Company, through the Management Team, shall provide to PBG and PI clear and detailed written reports on the (i) past and current performance of the Business and (ii) forecasts (including the drivers of such forecasts) of the Company and the Business. The Board and the Management Team shall proactively communicate any material business issues relating to the Company and the Business to the Members in written reports in such form and with such content as the Board and/or Management Team may determine with a view to minimizing the reporting burden on the day-to-day operation of the Business. The Members shall procure that the Board shall as soon as practicable after Closing, pass a written resolution delegating the day to day management of the Business to the Management Team, and noting that the Management Team shall report to the Board in accordance with this Article VII.

          (b) Management Principles. The Company has been formed on the principles that the Business will be operated in the best interests of the Company and that the management rights of each Member shall be established independent of such Member’s ownership interest in the Company. The Members, through their representatives on the Board and Management Team and their participation in the meetings described in Section 7.03, shall actively and mutually participate in the development of the Strategic Plan and the AOP, including the associated capacity plans and shall jointly develop marketing and sales plans related to the Business. Notwithstanding the foregoing, the Management Team shall be responsible for the day-to-day management of the Business.

     Section 7.02. Management Team.

          (a) Composition. The Management Team shall be comprised of the Russia GM and his or her direct reports, who shall include a Chief Financial Officer and a Vice President of Marketing. The Russia GM shall be the head of the Management Team and shall report to the Chairman of Board. The appointment and/or renewal of the Russia GM, Chief Financial Officer and the Vice President of Marketing shall be approved in writing by each Member’s head of

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European operations; provided, however, that the Russia GM and the Chief Financial Officer shall be appointed by PBG, and the Vice President of Marketing and the director of juice shall be appointed by PI.

          (b) Responsibilities. The Russia GM shall have full and final authority over the day-to-day operation of the Business within the Russian Federation in accordance with the prevailing AOP, and shall resolve any dispute within the Management Team related thereto. The Russia GM shall be responsible for and is hereby empowered to do or cause to be done all actions reasonably necessary to ensure the execution of the prevailing AOP, without any further approval of the Board or the Members. The Russia GM shall obtain Board approval only if a required action constitutes a material change to the prevailing AOP.

          (c) Marketing Team. The Business shall have a Marketing Team, consisting of the Vice President of Marketing, as well as marketing personnel from PBG. The appointment or removal of any director-level marketing employee employed in connection with a new line of business or acquisition, including any director of juice, shall be approved by PI. The Vice President of Marketing shall have dual reporting lines to the Russia GM and to the head of Marketing for PI’s European operations, who shall jointly set the Vice President of Marketing’s performance objectives and undertake his or her performance reviews. The Russia GM and the head of Marketing for PI’s European operations shall jointly participate and contribute to other development activities related to Marketing Team, including the people planning process, career development plans and training.

     Section 7.03. Business Reviews.

          (a) Monthly Business Reviews. Each month by means of a sixty-minute phone call, the Management Team shall provide a review of the Business to the management of PI Europe and PBG Europe. Such meetings shall be integrated into other meetings involving the participants, and the parties shall agree on the templates/scorecards for such meetings to report on the performance of the Business versus the prevailing AOP and Strategic Plan.

          (b) Quarterly Business Reviews. The Management Team shall provide a written review of the Business to the Board at each quarterly meeting of the Board. Such review

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shall address, among other things, operations, key performance indicators and progress against strategic goals.

     Section 7.04. Conflicts. Notwithstanding anything to the contrary in this Agreement or any Exhibit or Schedule hereto, in the event of any conflict between the provisions of Article VI or VII of this Agreement and the provisions of any Master Bottling Appointments relating to annual operating and strategic plans (including, without limitation, plans related to marketing, sales, distribution and manufacturing capacity), finances, or capital, the provisions of Articles VI and VII of this Agreement shall govern. For the avoidance of doubt all provisions of the Master Bottling Agreements (including those relating to annual operating and strategic plans, finances or capital) shall prevail in the event of a conflict with any provisions of this Agreement, save where the provisions of the Master Bottling Agreement relating to operating and strategic plans (including, without limitation, plans related to marketing, sales, distribution and manufacturing capacity), finances or capital conflict with Articles VI and VII of the Agreement (in which case the latter shall prevail). In the event of any conflict between the provisions of this Agreement and the Company Articles, the former shall prevail and the Members shall, subject to compliance with the Acts, promptly cause the Company Articles to be appropriately amended to remove any such conflict.

     Section 7.05 Authorized Signatories / Related Party Agreements. Each duly appointed officer (i.e. any director or secretary) of the Company shall have the authority to execute such documents as are necessary or appropriate to evidence any transaction involving the Company that is approved in accordance with Articles VI and VII hereof; provided however, that with respect to any document evidencing a transaction involving the Company or one of its Affiliates and a Member or one of its Affiliates only an officer appointed by the Member who is not a party (directly or through its Affiliate) to the transaction shall be authorized to execute such document on behalf of the Company. As an initial matter, both Members hereby acknowledge and agree to the Company’s entering into the following agreements with its Members or one of their respective Affiliates: (a) the services agreements attached hereto as Exhibits E1 and E2; and (b) the short-term US$1 million working capital loan from a PBG Affiliate to the Company, which shall be effective on the Closing.

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ARTICLE VIII

RECORDS, ACCOUNTING MATTERS, TAX MATTERS

     Section 8.01 Maintenance & Review of Records and Financial Controls. The Company shall maintain, at the registered office of the Company, books, records, and accounts showing separately, in accordance with PBG’s usual policies, all items that in any way affect the financial and tax computations called for by this Agreement, and shall make the records, and accounts available for inspection and copying by any Member or its authorized representative at all reasonable times. Each Member shall have the right to review all financial books, records, reports and statements of the Company, and the Company shall ensure that PBG’s external auditor shall have such access to the Company’s financial books, records, reports, statements, and internal controls and processes as shall be necessary to support PBG’s consolidation of the Company’s results. PBG shall ensure that the financial controls to which the Company shall be subject shall comply fully with all applicable legislation, including, to the extent determined applicable by PBG, the Sarbanes-Oxley Act of 2002.

     Section 8.02. Audit / Preparation of Financial Reports.

          (a) PBG shall perform an annual audit of the financial books, records, reports, statements, and internal controls and processes of the Company to ensure that all such items are in accordance with PBG’s financial and accounting policies. PBG shall perform such audit through its internal audit function. The scope and timeline of such audit shall be mutually agreed by the Members, and PI shall have the right to participate in the audit performed by PBG. PBG shall cause to be prepared and furnished to the Members, within one hundred eighty (180) days after the close of the Year, audited financial statements of the Company.

          (b) PBG shall prepare or cause to be prepared, within five (5) business days after the close of each month, a financial report for such month, and shall cause a copy of the report to be furnished to the other Members. Such copy shall include a balance sheet as of the last day of the calendar month and a statement of income or profit and loss for the calendar month and the year-to-date period including that calendar month. The statement of income or profit and loss shall disclose the amount of and any changes in profit or loss, and shall show in

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particular the amounts of depreciation, amortization, interest, and extraordinary income or charges, whether or not included in the operating income.

          (c) The Company shall be responsible for any fees and expenses associated with PBG’s services provided under (a) above in accordance with the services agreement attached hereto as Exhibit E1.

     Section 8.03 Accounting Method. The Company shall prepare its financial statements in accordance with the Acts and US GAAP, applied in accordance with PBG’s accounting policies.

     Section 8.04 Tax Matters.

          (a) Tax Matters Member. The Tax Matters Member shall manage or cause to be managed all administrative tax proceedings conducted at the Company level by the U.S. Internal Revenue Service or other taxing authorities. All costs and expenses reasonably incurred by the Tax Matters Member while acting in such capacity shall be reimbursed by the Company without mark-up. The Tax Matters Member shall consult with the other Members with respect to any position or adjustment that could materially adversely affect the other Members. The Tax Matters Member shall perform the following:

               (i) Cause all required tax returns (including information returns) of the Company and its subsidiaries to be timely filed. The Tax Matters Member shall cause the Company’s tax returns to be prepared using accounting principles approved by any relevant tax authority applied in accordance with PBG’s usual accounting policies.

               (ii) Deliver a U.S. Internal Revenue Service Form K-1 (or an equivalent form) to each Member at such time as would reasonably enable such Member or its direct or indirect owners to prepare and timely file its or their U.S. Federal income tax returns (including applicable extensions of time to file).

               (iii) Furnish or cause to be furnished to the Members, within sixty (60) days after the close of the taxable year of the Company, all tax information with respect to the Company as may be required by the other Members for the preparation of any non-U.S separate

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tax return which they may be required to file.

               (iv) Furnish the name, address, Percentage Interest and taxpayer identification number of each Member to any taxing authority and take such action as may be reasonably necessary to constitute every Member as a “notice partner” as that term is defined in Code Section 6231.

               (v) Refuse to extend the statute of limitations with respect to tax items of the Company without the unanimous written consent of the Members.

          (b) Tax Treatment. It is the intention of the Members, and the Members agree, that the Company shall be treated as a partnership for purposes of U.S. Federal, state and local income taxes, and further agree not to take any position or make any election, in a tax return or otherwise, inconsistent with that treatment. Accordingly, the provisions of this Agreement are intended, among other things, to achieve for the Members an allocation of the profits and losses of the Company (including the effect of any entities treated as disregarded from their owners that the Company owns under U.S. federal income tax law) for U.S. federal income tax purposes consistent with the requirements of the provisions of the Code and the Treasury Regulations applicable to partnerships. In this regard, it is intended that the economic interests of the Members reflect the Percentage Interests set forth in Schedule A.

          (c) Member Action. Nothing in this Section 8.04 shall limit the ability of any Member to take any action in their individual capacity relating to administrative proceedings of Company matters that is left to the determination of any individual Member under the Code or under any similar foreign, state or local provision. With respect to any tax matter relating individually to a Member, such Member shall rely on the advice of its own tax advisor and shall not be entitled to rely on the advice of the Tax Matters Member.

          (d) Tax Elections. Except as otherwise provided in this Agreement, all elections required or permitted to be made by the Company under the Code (or other applicable tax law) and all material decisions with respect to the calculation of its taxable income or tax loss or other tax items under the Code (or other applicable tax law) or any other matter relating to taxes shall be made in such manner as may be determined by the Tax Matters Member after

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reasonable consultation with the other Members, and such determinations shall be conclusive and binding on all Members.

          (e) Tax Withholding. Notwithstanding any provision in this Agreement to the contrary, the Tax Matters Member is authorized to take or cause to be taken any and all actions that it reasonably determines to be necessary or appropriate to insure that the Company satisfies its withholding and tax payment obligations under Section 1441, 1445, 1446 or any other provision of the Code (or other applicable foreign laws). The Tax Matters Member may cause the Company to withhold any amount that it determines is required to be withheld from any amounts otherwise distributable to any Member under Articles V or X hereof; provided, however, that such amount shall be deemed to have been distributed to such Members for purposes of this Agreement.

          (f) Pre-Formation Tax Obligations of Members. Notwithstanding any provision in this Agreement to the contrary, the Members shall:

               (i) Share any liabilities for income taxes (including, but not limited to, profits taxes) of the Contributed Companies with respect to any Pre-Closing Tax Period as follows:

                         (A) If (a) the Russian taxing authorities make Final Determinations that result in any liability of the Contributed Companies for income taxes with respect to any Pre-Closing Tax Period, and (b) the amount of such Final Determinations exceed in the aggregate the amount of the Pre-Closing NOLs, then PBG Ireland or its Affiliates shall indemnify and hold harmless PepsiCo Ireland or its Affiliates for an amount equal to the product of (x) the aggregate amounts of any such Final Determinations in excess of the Pre-Closing NOLs and (y) PepsiCo Ireland’s Percentage Interest.

                         (B) If any non-Russian taxing authority makes a Final Determination that results in any liability of the Contributed Companies for income taxes with respect to any Pre-Closing Tax Period, PBG Ireland or its Affiliates shall indemnify and hold harmless PepsiCo Ireland or its Affiliates for an amount equal to the product of (x) the amount of any such Final Determination and (y) PepsiCo Ireland’s Percentage Interest.

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                         (C) Notwithstanding any provision in this Section 8.04(f)(i) to the contrary, if a taxing authority makes a Final Determination for any income tax liability of the Contributed Companies with respect to any Pre-Closing Tax Period set forth in (A) or (B) above that includes non-deductible interest, penalties and/or similar charges, PBG Ireland or its Affiliates shall indemnify and hold harmless PepsiCo Ireland or its Affiliates for an amount equal to the product of (x) the amount of any such non-deductible interest, penalties and/or similar charges and (y) PepsiCo Ireland’s Percentage Interest.

                         (D) If PBG Ireland or its Affiliates is required to indemnify PepsiCo Ireland or its Affiliates pursuant to this Section 8.04(f)(i), the Members shall cooperate in good faith to ensure this indemnification is made in a tax-efficient manner.

               (ii) Share any Final Determinations resulting in liabilities for taxes included in the determination of net operating profit before income taxes (including, but not limited to, value added, property, unified social, employment, transport, advertising and land taxes and any interest, penalties and similar charges thereon) of the Contributed Companies with respect to any Pre-Closing Tax Period in accordance with their Percentage Interests; and

               (iii) Each be responsible for their liabilities for all other taxes not specifically set forth in Section 8.04(f)(i) and (ii) above with respect to any Pre-Closing Tax Period.

          (g) If the Company makes a transfer of cash or property to one or more Members that is not made in proportion to the Percentage Interests of all Members, then either (i) the Members shall unanimously agree as to the U.S. income tax treatment of such a transfer or (ii) the Company shall obtain a “more likely than not” opinion from a major law firm as to the appropriate treatment of such transfer under the U.S. “disguised sale” rules (i.e., Section 707(a) of the Code) and the Members shall treat the transfer accordingly.

     Section 8.05 Confidentiality. All Company and Business records and accounts, including reports, shall be treated as confidential and the Members shall take or cause to be taken such reasonable precautions to prevent the disclosure thereof to any unauthorized Person for a period ending ten (10) years following the dissolution and winding-up of the Company.

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     Section 8.06 Services Agreements. Each Member (or its Affiliates) shall be reimbursed by the Company for the reasonable direct costs and expenses (subject to a mutually agreed mark up) of any and all services such Member (or any of its Affiliates) performs on behalf of the Company under this Article VIII or otherwise. The services provided by the Members as of the Closing shall be those set out in the services agreements attached hereto as Exhibits E1 and E2. Provided the Board has so authorized the Company, the Company shall enter into additional services agreements with the Members or their Affiliates on such terms and conditions as the parties may agree.

ARTICLE IX

RESTRICTIONS ON TRANSFER

     Section 9.01 Restrictions on Transfers. Except as otherwise provided in Section 9.02, no Member may sell, assign, convey, transfer, give, donate or otherwise dispose of (collectively, “Transfer”) or mortgage, pledge, hypothecate, assign as security or otherwise encumber (collectively, “Encumber”), or contract to Transfer or Encumber, any of its Shares, without the prior written consent of the other Member, which consent may be withheld or conditioned in each such other Member’s sole discretion. No purported Transfer or Encumbrance made in breach of the previous sentence (an “Ineffective Transfer”), shall be recognized by the Company. An Ineffective Transfer shall be void and shall not be recorded as a transfer on the transfer records of the Company.

     Section 9.02 Transfers to Affiliates. A Member may freely, upon notice to the other Member and with the consent of the other Member (such consent not to be unreasonably withheld or delayed), transfer its Shares to any of its Affiliates provided that any such transferee shall agree prior to such transfer to be bound by the terms of this Agreement.

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ARTICLE X

DISSOLUTION AND TERMINATION

     Section 10.01 Events of Dissolution. The Company shall continue in perpetuity until dissolved. The Company shall be dissolved and its affairs shall be wound up immediately if any of the following occur:

          (a) the Company’s dissolution is unanimously agreed in writing by the Members;

          (b) the Company is deemed Insolvent;

          (c) six (6) months have passed since the date on which a Member provides written notice to the other Member that the Company shall be dissolved by virtue of such Member having a disagreement with the other about the strategic direction of the Business, provided that the disagreement has been the subject of (i) the Escalation Process, (ii) the PBG Tie Breaker and (if dissolution is initiated by PBG) the PepsiCo Veto, and (iii) three (3) months have lapsed since the PBG Tie Breaker and (if applicable) the PepsiCo Veto. As an example, for purposes of this Section 10.01(c), disagreement about the strategic direction of the Business shall include a disagreement regarding the Strategic Plan;

          (d) the termination of the Concentrate Sub-Licence due to the Company’s material breach thereof, which breach is the direct result of actions taken by the Company without the approval of PepsiCo;

          (e) the termination of the Master Bottling Agreements due to the Company’s material breach thereof, which breach is the direct result of actions taken by the Company without the approval of PepsiCo;

          (f) The closing of the acquisition by PepsiCo, independently of the Company, of a business that is primarily a Russian Beverage Business which the Company has declined to purchase having been so offered by PepsiCo in accordance with Section 11.03.

     Section 10.02 Dissolution Process. Subject to applicable law, the Company shall be dissolved in accordance with this Section 10.02.

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          (a) Dissolution Value of the Company. Each Member shall select an Appraiser, and the two selected Appraisers shall jointly select a third Appraiser (the “Third Appraiser”), each of which shall appraise the fair market value of the Company. In determining the fair market value of the Company, each Appraiser shall include in its appraisal the entire fair market value of the Company, its subsidiaries and the Business, including without limitation, (i) the fair market value of those Master Bottling Agreements related to the Business in effect on the date of dissolution or, if such agreements are not in effect on the date of dissolution, as most recently in effect prior to the date of dissolution; (ii) the financial relationship between PepsiCo and the Company, including without limitation, the fair market value of any bottler funding provided by PepsiCo and the fair market value of the Company’s rights to procure concentrate at cost under the Concentrate Sub-License and Contract Manufacturing Agreement, and (iii) the fair market value of the goodwill of the Company and the Business. For the sake of clarity, such valuation will reflect the fair market value of the Company, its Affiliates and the Business determined (i) without regard to whether any component thereof had apparent value as of the date of this Agreement and (ii) as if neither a dissolution of the Company nor a termination of the Concentrate Sub-License or Master Bottling Agreements has occurred or will occur. From the final appraisals of the three Appraisers, the dissolution value of the Company shall be the average of the two closest appraisals (the “Dissolution Value”).

          (b) Division of Dissolution Value. The Dissolution Value shall be divided between the Members in accordance with their Percentage Interests, as reflected on Schedule A, as provided in subsections (c) through (g) below.

          (c) New Master Bottling Agreement / Financial Terms. Upon the dissolution of the Company, PepsiCo and PBG shall discuss whether PBG shall become the authorized bottler in the Russian Federation. If the parties are unable to agree, then PBG or one of its Affiliates shall immediately become the authorized bottler of Pepsi Products in the Russian Federation following dissolution of the Company. In such event, PBG and PepsiCo shall endeavour to agree to the terms of new Master Bottling Agreements for the Russian Federation (the “Post-JV MBA Terms”) and new financial terms associated therewith in particular the price of concentrate and the principles according to which advertising and marketing activities shall be funded (the “Post-JV Financial Terms”); provided, however, that if PBG and PepsiCo are unable to agree on

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the Post-JV MBA Terms, then the parties shall default to the express written terms of the master bottling agreements between PepsiCo (or one of its Affiliates) and PBG for the Russian Federation in effect immediately prior to the Closing. If 90 (ninety) days before the dissolution of the Company is complete, PepsiCo and PBG are unable to agree to the Post-JV Financial Terms, the Third Appraiser shall determine fair, reasonable and economically viable Post-JV Financial Terms consistent with the parties’ mutual intention to divide the Dissolution Value in accordance with the Members’ Percentage Interests. The Appraiser’s determination shall be final and binding on the parties. The Post-JV Financial Terms (so determined by the Third Appraiser) shall remain in force for five years following the dissolution of the Company, subject to each party’s right to renegotiate such terms in light of any material adverse change in market conditions impacting the parties’ relationship in the Russian Federation.

          (d) Distribution of the Company’s Assets. Upon the dissolution of the Company, the Company’s rights under the Concentrate Sub-License shall revert to the licensor identified in that agreement, and, if PBG becomes the authorized bottler, all other tangible and intangible assets comprised in the Business within the Russian Federation shall revert to PBG. The distribution of the remaining assets of the Company and the assumption of the Company’s liabilities shall be determined unanimously by the Members.

          (e) Valuation of Distributed Assets. Each Member shall select one of the Appraisers to determine the percentage share of Dissolution Value such Member (together with its Affiliate(s)) actually shall receive or has received from the distribution in kind of the Company’s assets and the assumption of the Company’s liabilities, as the case may be; provided, however, that such determination shall also take into effect the value of the Post-JV MBA Terms and Post-JV Financial Terms. If the Members are unable to agree on which Appraiser shall make such determination, the Third Appraiser shall make such determination.

          (f) True Up Payment. If according to the Appraiser’s determination made in accordance with Section 10.02(e), the percentage share of Dissolution Value received by a Member (or by its Affiliate(s)) exceeds that Member’s Percentage Interest, such Member shall make a cash payment to the other Member equal to that excess percentage times the Dissolution Value. The Member receiving any such cash payment shall be solely responsible for any

36

applicable taxes on such payment; provided, however, that the paying Member agrees to reasonably cooperate with the receiving Member to ensure the payment is made in a tax-efficient manner.

          (g) Timing. The distribution and true-up payment, if any, made pursuant to this Section 10.02 shall be made by the end of the Year in which dissolution occurs, or, if later, within ninety (90) days after the date of such dissolution.

ARTICLE XI

REPRESENTATIONS, WARRANTIES AND COVENANTS

     Section 11.01 Representations and Warranties of Members. Each Member hereby represents, warrants and covenants as follows:

          (a) Such Member is duly organized or formed, validly existing and, if applicable, in good standing under the laws of the jurisdiction of its formation.

          (b) Such Member has the right, power and authority to enter into this Agreement, to become a Member and to perform its obligations under this Agreement, and this Agreement is a legal, valid and binding obligation of such Member.

          (c) The execution and delivery of this Agreement does not violate or conflict with the charter, bylaws or formation documents of such Member or any agreement, judgment, license, permit, order or other document applicable to or binding upon such Member or any of its properties; and no consent, approval, authorization or order of any court or government authority or third party is required with respect to such Member in connection with the execution and delivery of this Agreement.

          (d) Neither Member nor any of its Affiliates has employed or retained any broker, agent or finder in connection with this Agreement, or paid or agreed to pay any brokerage fee, finder’s fee, commission or similar payment to any Person on account of this Agreement or the transactions provided for herein.

37

          (e) Except for a change of law over which the affected Member has no control (and the affected Member shall immediately notify the other Members when the affected Member learns of such occurrence), the foregoing representations and warranties shall remain true and accurate during the term of the Company, and such Member shall neither take action nor permit action to be taken which would cause any of the foregoing representations to become untrue or inaccurate.

          (f) The undersigned Members understand (i) that the Shares have not been registered under the Securities Act or any state securities laws because the Company is issuing these Shares in reliance upon the exemptions from the registration requirements of the Securities Act or applicable state securities laws providing for issuance of securities not involving a public offering, (ii) that the Company has relied upon the fact that the Shares are to be held by each Member for investment, and (iii) that exemption from registration under the Securities Act or applicable state securities laws would not be available if the Shares were acquired by a Member with a view to distribution. Accordingly, each Member hereby confirms to the Company that such Member is acquiring its Shares for such own Member’s account, for investment and not with a view to the resale or distribution thereof. Each Member shall not transfer, sell or offer for sale all or any portion of the Shares unless there is an effective registration or other qualification relating thereto under the Securities Act and under any applicable state securities laws or unless the holder of Shares delivers to the Company an opinion of counsel, satisfactory to the Company, that such registration or other qualification under the Securities Act and applicable state securities laws is not required in connection with such transfer, offer or sale. Each Member understands that the Company is under no obligation to register the Shares or to assist such Member in complying with any exemption from registration under the Securities Act or any state securities laws if such Member should, at a later date, wish to dispose of the Shares.

     Section 11.02 Representations and Warranties of PBG Ireland. PBG Ireland hereby represents and warrants and covenants as follows:

          (a) Prior to Closing the Company has transacted no business whatsoever and incurred no liabilities.

          (b) The management accounts of PBG’s Affiliates in the Russian Federation

38

dated December 31, 2006 are not misleading in any material respect.

          (c) The total indebtedness of the Company’s Russian Affiliates at Closing (the “Indebtedness”) shall be equal to all capital expenditures incurred by them between 1^st of January 2007 and Closing (the “Capex”). Within thirty (30) days after Closing, the parties shall determine the Indebtedness and Capex and the extent and mechanism of any true-up necessary if the Indebtedness does not equal the Capex.

     Section 11.03 Non-Competition Covenants.

          (a) While this Agreement is in effect, neither PBG nor any of its Affiliates will engage, directly or indirectly, in a Russian Beverage Business or in the manufacture, sale, marketing or distribution of any snack foods in the Russian Federation other than through the Company, unless it receives the advance written consent of PepsiCo.

          (b) While this Agreement is in effect, neither PepsiCo nor any of its Affiliates will engage, directly or indirectly, in a Russian Beverage Business, other than through the Company, unless PepsiCo receives the advance written consent of PBG; provided, however, PepsiCo may, independently of the Company and without having to obtain the prior consent of the Company, acquire either (i) a multi-national company that has primary operations outside of the Russian Federation but that also has a Russian Beverage Business, or (ii) a Russian business which is not primarily a Russian Beverage Business but is nevertheless engaged in a Russian Beverage Business, or (iii) a Russian business which is primarily a Russian Beverage Business, provided that in the case of (i), (ii) or (iii) PepsiCo has, as soon as practicable and in good faith, offered the Company the right to purchase the Russian Beverage Business (or that part of the target business which is a Russian Beverage Business) and if the Company declines such offer, then PepsiCo may acquire and operate such Russian Beverage Business independently of the Company without being in breach of this Section 11.02 (b), it being understood that the closing of an acquisition under (iii) shall cause the dissolution of the Company pursuant to Section 10.01(f).

39

ARTICLE XII

MISCELLANEOUS

     Section 12.01 Partial Invalidity. In case any one or more of the covenants, agreements, or provisions hereof shall be invalid, illegal, or unenforceable in any respect, the validity of the remaining covenants, agreements, or provisions hereof shall be in no way affected, prejudiced, or disturbed thereby.

     Section 12.02 Notices. Except as otherwise provided herein, all notices or other communications required or permitted to be given hereunder shall be in writing, shall be given by recorded delivery, or personally delivered with confirmation of delivery obtained, and shall be deemed to have been duly given when received at the address specified below:

If to PBG Ireland:
Kilnagleary, Carrigaline, Co.
Cork, Ireland
Attn: President

With a copy to:
The Pepsi Bottling Group
1 Pepsi Way
Somers, NY 10589
Attn: General Counsel

If to PepsiCo Ireland:
Second Floor, Williams House
20 Reid Street,
Hamilton HM12
Bermuda
Attn: Director

With a copy to:
PepsiCo, Inc.

700 Anderson Hill Road
Purchase, NY 10577
Attn: International Counsel

40

Any Member shall have the right to change its address for notice hereunder from time to time to such other address as may hereafter be furnished in writing by such Member to the other Members.

     Section 12.03 Amendment. This Agreement may be modified or amended at any time only upon the unanimous consent of the Members, which shall be evidenced by the Members executing a writing effecting such amendment.

     Section 12.04 Consents; Waivers. No consent or waiver, express or implied, by the Company or any Member to or of any breach or default by any Member in the performance by such Member of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such Member hereunder. Failure on the part of the Company or the other Members to complain of any act or failure to act of the other Member or to declare the other Members in default, irrespective of how long such failure continues, shall not constitute a waiver by the Company or such Members of the rights of the Company or such Member hereunder.

     Section 12.05 Choice of Law and Forum. This Agreement and all rights and liabilities of the Members hereunder shall be subject to and governed by the substantive laws (and not the choice of law rules) of the State of New York, United States notwithstanding the conflict of laws rules thereof, and any disputes arising hereunder or relating to this Agreement shall be submitted to the exclusive jurisdiction of the United States District Court for the Southern District of New York.

     Section 12.06 Multiple Counterparts. This Agreement may be executed and acknowledged in multiple counterparts, each of which shall be an original, but all of which shall be and constitute one instrument.

     Section 12.07 Entire Agreement. This Agreement, including all Exhibits, Schedules and Appendices, constitutes the entire agreement between the parties with respect to the subject

41

matter hereof. This Agreement supersedes any prior agreement or understanding among the parties, written or oral, and may not be modified or amended in any manner other than as set forth herein.

     Section 12.08 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the Company and the Members. No assignment of rights or delegation of duties arising under this Agreement may be made by any party hereto except as otherwise provided herein.

     Section 12.09 No Third-Party Beneficiaries. This Agreement is for the sole benefit of the Members and their permitted assigns, and nothing herein expressed or implied shall give or be construed to give to any Person, other than the Members and such assigns, any legal or equitable rights hereunder.

     Section 12.10 Expenses. (a) Each of the parties hereto shall pay the fees and expenses of its respective counsel, accountants and other experts (including any broker, finder, advisor or intermediary) and shall pay all other expenses incurred by it in connection with the negotiation, preparation and execution of this Agreement and the consummation of the transactions contemplated hereby.

     Section 12.11 Press Releases. Each of the Members hereby agrees that, except as otherwise required by law or stock exchange regulations, any press release or other public announcement regarding the transactions contemplated by this Agreement or the business and/or operations of the Company shall be made only with the mutual consent of the Members.

[signatures follow on next page]

42

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date and year first above written.

PepsiCo (Ireland) Limited			PBG Beverages Ireland Limited
By:		/s/ R. Brian Leman	By:		/s/ Inigo Madariaga
Name: R. Brian Leman			Name: Inigo Madariaga
Title: Director			Title: Director
PR Beverages Limited
By:		/s/ Andrew Mulhall
Name: Andrew Mulhall
Title: Director
Acknowledged:
PepsiCo, Inc.			The Pepsi Bottling Group, Inc.
By:		/s/ Michael D. White	By:		/s/ David Yawman
Name: Michael D. White			Name: David Yawman
Title: CEO, PepsiCo International,			Title: Vice President, Assistant
	Vice Chairman, PepsiCo, Inc.			General Counsel

43

Schedule A – Percentage Interests

PBG Ireland: 60%

PepsiCo Ireland: 40%

44

EX-31.1

Exhibit 31.1

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric J. Foss, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Pepsi Bottling Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2007	/s/ Eric J. Foss
	Eric J. Foss
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alfred H. Drewes, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Pepsi Bottling Group, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2007	/s/ Alfred H. Drewes
	Alfred H. Drewes
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of The Pepsi Bottling Group, Inc. (the “Company”) certifies to his knowledge that:

(1)	The Quarterly Report on Form 10-Q of the Company for the quarter ended March 24, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Act”); and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company as of the dates and for the periods referred to in the Form 10-Q.

/s/ Eric J. Foss  

Eric J. Foss 

President and
Chief Executive Officer 

April 30, 2007 

The foregoing certification (the “Certification”) is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

A signed original of the Certification has been provided to the Company and will be retained by the Company in accordance with Rule 12b-11(d) of the Act and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of The Pepsi Bottling Group, Inc. (the “Company”) certifies to his knowledge that:

(1)	The Quarterly Report on Form 10-Q of the Company for the quarter ended March 24, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Act”); and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company as of the dates and for the periods referred to in the Form 10-Q.

/s/ Alfred H. Drewes  

Alfred H. Drewes 

Senior Vice President and
Chief Financial Officer 

April 30, 2007 

The foregoing certification (the “Certification”) is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

A signed original of the Certification has been provided to the Company and will be retained by the Company in accordance with Rule 12b-11(d) of the Act and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 24, 2007 (12 weeks)

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 333-80361-01

BOTTLING GROUP, LLC

(Exact name of registrant as specified in its charter)

Delaware	13-4042452
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Pepsi Way, Somers, New York	10589
(Address of principal executive offices)	(Zip Code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o           Accelerated Filer o           Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

Bottling Group, LLC
Index

		Page No.
Part I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations - 12 weeks ended March 24, 2007 and March 25, 2006		2
	Condensed Consolidated Statements of Cash Flows - 12 weeks ended March 24, 2007 and March 25, 2006		3
	Condensed Consolidated Balance Sheets - March 24, 2007 and December 30, 2006		4
	Notes to Condensed Consolidated Financial Statements		5-12
Item 2.	Management’s Financial Review		13-20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21
Item 4.	Controls and Procedures		21
Part II	Other Information
Item 6.	Exhibits		22

PART I — FINANCIAL INFORMATION

Item 1.

Bottling Group, LLC

Condensed Consolidated Statements of Operations

in millions, unaudited

	12 Weeks Ended
	March		March
	24, 2007		25, 2006
Net revenues	$	2,466	$	2,367
Cost of sales		1,343		1,271
Gross profit		1,123		1,096
Selling, delivery and administrative expenses		1,004		977
Operating income		119		119
Interest expense		53		45
Interest income		44		29
Other non-operating expenses, net		1		—
Minority interest		1		—
Income before income taxes		108		103
Income tax expense		6		5
Net income	$	102	$	98

See accompanying notes to Condensed Consolidated Financial Statements.

2

Bottling Group, LLC

Condensed Consolidated Statements of Cash Flows

in millions, unaudited

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Cash Flows – Operations
Net income	$	102		$	98
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		144			139
Deferred income taxes		(6	)		(10	)
Stock-based compensation		14			16
Other non-cash charges and credits, net		43			42
Changes in operating working capital, excluding effects of acquisitions:
Accounts receivable, net		(13	)		(5	)
Inventories		(125	)		(95	)
Prepaid expenses and other current assets		81			32
Accounts payable and other current liabilities		14			11
Income taxes payable		—			4
Net change in operating working capital		(43	)		(53	)
Pension contributions		(1	)		—
Other, net		(19	)		(16	)
Net Cash Provided by Operations		234			216
Cash Flows – Investments
Capital expenditures		(174	)		(171	)
Acquisitions, net of cash acquired		(49	)		—
Proceeds from sale of property, plant and equipment		4			3
Notes receivable from PBG, net		(98	)		(199	)
Other investing activities, net		6			—
Net Cash Used for Investments		(311	)		(367	)
Cash Flows – Financing
Short-term borrowings, net		12			56
Payments of long-term debt		(8	)		(61	)
Net Cash Provided by (Used for) Financing		4			(5	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		(4	)		2
Net Decrease in Cash and Cash Equivalents		(77	)		(154	)
Cash and Cash Equivalents – Beginning of Period		441			346
Cash and Cash Equivalents – End of Period	$	364		$	192
Supplemental Cash Flow Information
Interest paid	$	38		$	37
Income taxes paid	$	12		$	12
Changes in accounts payable related to capital expenditures	$	(30	)	$	(35	)
Capital lease additions	$	2		$	7

See accompanying notes to Condensed Consolidated Financial Statements.

3

Bottling Group, LLC

Condensed Consolidated Balance Sheets

in millions

	(Unaudited)
	March			December
	24, 2007			30, 2006
ASSETS
Current Assets
Cash and cash equivalents	$	364		$	441
Accounts receivable, less allowance of $47 at March 24, 2007 and $50 at December 30, 2006		1,343			1,331
Inventories		657			533
Prepaid expenses and other current assets		281			355
Total Current Assets		2,645			2,660
Property, plant and equipment, net		3,758			3,776
Other intangible assets, net		3,793			3,768
Goodwill		1,485			1,490
Notes receivable from PBG		3,245			3,147
Other assets		121			114
Total Assets	$	15,047		$	14,955
LIABILITIES AND OWNERS’ EQUITY
Current Liabilities
Accounts payable and other current liabilities	$	1,539		$	1,559
Short-term borrowings		255			242
Current maturities of long-term debt		10			16
Total Current Liabilities		1,804			1,817
Long-term debt		3,762			3,759
Other liabilities		924			863
Deferred income taxes		396			406
Minority interest		19			18
Total Liabilities		6,905			6,863
Owners’ Equity
Owners’ net investment (includes impact from adopting FIN 48 in fiscal year 2007 of ($45))		8,748			8,681
Accumulated other comprehensive loss		(606	)		(589	)
Total Owners’ Equity		8,142			8,092
Total Liabilities and Owners’ Equity	$	15,047		$	14,955

See accompanying notes to Condensed Consolidated Financial Statements.

4

Notes to Condensed Consolidated Financial Statements

Tabular dollars in millions, except per share amounts

Note 1—Basis of Presentation

     Bottling Group, 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 Group, 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 prepare our unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which requires us to make judgments, estimates and assumptions that affect the results of operations, financial position and cash flows of Bottling Group, LLC, as well as the related footnote disclosures. Actual results could differ from these estimates. These interim financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include certain information and disclosures required for comprehensive annual financial statements. Therefore the Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements for the fiscal year ended December 30, 2006 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. Certain reclassifications were made in our Condensed Consolidated Financial Statements to 2006 amounts to conform to the 2007 presentation including a reclassification of certain miscellaneous costs incurred with product losses in the trade. We reclassified approximately $18 million from selling, delivery and administrative expenses to cost of goods sold in our Condensed Consolidated Statement of Operations for the 12 weeks ended March 25, 2006. Beginning with our fiscal year 2007, we have recorded trade-related product losses in cost of goods sold.

     When used in these Condensed Consolidated Financial Statements, “Bottling LLC,” “we,” “our,” “us” and the “Company” each refers to Bottling Group, LLC (“Bottling LLC”).

     We consolidate in our financial statements, entities in which we have a controlling financial interest, as well as variable interest entities where we are the primary beneficiary. Minority interest in earnings and ownership has been recorded for the percentage of these entities not owned by Bottling LLC for each respective period.

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

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

     In conjunction with PBG’s initial public offering and other subsequent transactions, PBG and PepsiCo, Inc. (“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 93.3% of Bottling LLC and PepsiCo owns the remaining 6.7% as of March 24, 2007.

Note 2—Seasonality of Business

     The results for the first quarter are not necessarily indicative of the results that may be expected for the full year because sales of our products are seasonal, especially in our Europe segment where sales volumes tend to be more sensitive to weather conditions. The seasonality of our operating results arises from higher sales in the second and third quarters versus the first and fourth quarters of the year, combined with the impact of fixed costs, such as depreciation and interest, which are not

5

significantly impacted by business seasonality. From a cash flow perspective, the majority of our cash flow from operations is generated in the third and fourth quarters.

Note 3—New Accounting Standards

SFAS No. 157

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for reporting fair value and expands disclosures about fair value measurements. SFAS 157 becomes effective beginning with our first quarter 2008 fiscal period. We are currently evaluating the impact of this standard on our Consolidated Financial Statements.

SFAS No. 158

     In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS 158”). Effective December 30, 2006 we adopted the balance sheet recognition provisions of this standard and accordingly recognized the funded status of each of the pension, postretirement and other similar plans PBG sponsors. Effective for fiscal year ending 2008, we will be required to measure our plan’s assets and liabilities as of the end of the fiscal year instead of our current measurement date of September 30. We are currently evaluating the impact of the change in measurement date on our Consolidated Financial Statements.

SFAS No. 159

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”), which allows entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 will become effective beginning with our first quarter 2008 fiscal period. We are currently evaluating the potential impact of this standard on our Consolidated Financial Statements.

Note 4—Share-Based Compensation

     We offer PBG stock option awards and restricted stock units as our primary form of long-term incentive compensation. Stock option awards generally vest over three years and have a 10 year term. Restricted stock unit awards generally vest over three years and are settled in shares of PBG stock after the vesting period.

     Share-based compensation expense is recognized only for share-based payments expected to vest. We estimate forfeitures both at the date of grant as well as throughout the vesting period, based on the Company’s historical experience and future expectations. The Company uses the Black-Scholes-Merton option-valuation model to value stock option awards. The fair value of restricted stock unit awards is based on the fair value of PBG stock on the date of grant.

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     Total share-based compensation expenses is recognized in selling, delivery and administrative expenses in our Condensed Consolidated Statements of Operations is as follows:

	12 Weeks Ended
	March 24,		March 25,
	2007		2006
Total share-based compensation expense	$	14	$	16

     During each of the 12 week periods ended March 24, 2007 and March 25, 2006, we granted approximately 3 million options at a weighted average fair value of $8.15 and $8.62, respectively.

     During each of the 12 week periods ended March 24, 2007 and March 25, 2006, we granted approximately 1 million restricted stock units at a weighted average fair value of $30.85 and $29.32, respectively.

     Unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the incentive plans amounted to $113 million as of March 24, 2007. That cost is expected to be recognized over a weighted-average period of 2.3 years.

Note 5—Balance Sheet Details

	March			December
	24, 2007			30, 2006
Accounts Receivable
Trade accounts receivable	$	1,158		$	1,163
Allowance for doubtful accounts		(47	)		(50	)
Accounts receivable from PepsiCo		179			168
Other receivables		53			50
	$	1,343		$	1,331

Inventories
Raw materials and supplies	$	254	$	201
Finished goods		403		332
	$	657	$	533

Property, Plant and Equipment, net
Land	$	288		$	291
Buildings and improvements		1,409			1,404
Manufacturing and distribution equipment		3,741			3,705
Marketing equipment		2,432			2,425
Capital leases		61			60
Other		156			162
		8,087			8,047
Accumulated depreciation		(4,329	)		(4,271	)
	$	3,758		$	3,776
Accounts Payable and Other Current Liabilities
Accounts payable	$	533		$	525
Accounts payable to PepsiCo		295			234
Trade incentives		145			194
Accrued compensation and benefits		183			237
Other accrued taxes		88			111
Accrued interest		59			49
Other current liabilities		236			209
	$	1,539		$	1,559

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Note 6—Other Intangible Assets, net and Goodwill

     The components of other intangible assets are as follows:

	March			December
	24, 2007			30, 2006
Intangibles subject to amortization:
Gross carrying amount:
Customer relationships and lists	$	52		$	54
Franchise/distribution rights		45			45
Other identified intangibles		32			32
		129			131
Accumulated amortization:
Customer relationships and lists		(12	)		(11	)
Franchise/distribution rights		(28	)		(27	)
Other identified intangibles		(16	)		(16	)
		(56	)		(54	)
Intangibles subject to amortization, net		73			77
Intangibles not subject to amortization:
Carrying amount:
Franchise rights		3,174			3,128
Distribution rights		287			297
Trademarks		208			215
Other identified intangibles		51			51
Intangibles not subject to amortization		3,720			3,691
Total other intangible assets, net	$	3,793		$	3,768

     During the first quarter, we acquired franchise and bottling rights for select Cadbury Schweppes brands in Northern California from Nor-Cal Beverage Company, Inc. Through this acquisition, Bottling LLC has added Dr Pepper, Squirt and Hawaiian Punch to its beverage portfolio.

     Intangible asset amortization expense was $2 million and $3 million for the 12 weeks ended March 24, 2007 and March 25, 2006, respectively. Amortization expense for each of the next five years is estimated to be approximately $9 million or less.

     The changes in the carrying value of goodwill by reportable segment for the 12 weeks ended March 24, 2007 are as follows:

	U.S. &
	Canada		Europe		Mexico			Total
Balance at December 30, 2006	$	1,229	$	16	$	245		$	1,490
Purchase price allocations relating to acquisitions		1		—		—			1
Impact of foreign currency translation		1		—		(7	)		(6	)
Balance at March 24, 2007	$	1,231	$	16	$	238		$	1,485

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Note 7— Pension and Postretirement Medical Benefit Plans

     Employee Benefit Plans

     PBG sponsors pension and other postretirement medical benefit plans in various forms in the United States and other similar plans outside the United States, covering employees who meet specified eligibility requirements.

     Defined Benefit Pension Plans

     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. Effective January 1, 2007, newly hired salaried and non-union employees will not be eligible to participate in PBG’s U.S. defined benefit pension plans. All of PBG’s qualified plans are funded and contributions are made in amounts not less than the minimum statutory funding requirements and not more than the maximum amount that can be deducted for U.S. income tax purposes.

     Defined Contribution Benefits

     Nearly all of 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. In addition, newly hired employees who are not eligible for the defined benefit pension plan will instead receive an additional Company contribution equal to two percent of their compensation into their 401(k) account.

     The assets, liabilities and expense associated with our international plans were not significant to our results of operations and are not included in the tables presented below.

     Components of our U.S. pension expense for the 12 weeks ended March 24, 2007 and March 25, 2006 are as follows:

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Service cost	$	13		$	12
Interest cost		21			19
Expected return on plan assets		(24	)		(22	)
Amortization of prior service cost		1			2
Amortization of net loss		9			9
Net pension expense for the defined benefit plans		20			20
Defined contribution plans expense		6			5
Total U.S. pension expense recognized in the Condensed Consolidated Statements of Operations	$	26		$	25

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     There were no contributions made to PBG’s U.S. pension plans for the 12 weeks ended March 24, 2007.

     Postretirement Medical Benefits

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

     Components of our U.S. postretirement benefits expense for the 12 weeks ended March 24, 2007 and March 25, 2006 are as follows:

	12 Weeks Ended
	March		March
	24, 2007		25, 2006
Service cost	$	1	$	1
Interest cost		5		5
Amortization of net loss		1		1
U.S. postretirement benefits expense recognized in the Condensed Consolidated Statements of Operations	$	7	$	7

Note 8—Income Taxes

     Bottling LLC is a limited liability company, classified 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 distributive shares of income, deductions and credits of Bottling LLC are allocated to Bottling LLC’s owners based on their percentage ownership in Bottling LLC. However, certain domestic and foreign affiliates pay income taxes in their respective jurisdictions. Such amounts are reflected in our Consolidated Statements of Operations.

     In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in an income tax return. FIN 48 addresses the determination of whether tax benefits, either permanent or temporary, should be recorded in the financial statements. We adopted FIN 48 as of the beginning of our 2007 fiscal year and, as a result recognized a $45 million decrease to owners’ net investment from the cumulative effect of adoption.

     As of the beginning of our 2007 fiscal year, the total amount of gross unrecognized tax benefits, which are reported in other liabilities in our Condensed Consolidated Balance Sheet, is $82 million. Of this amount, approximately $70 million would impact our effective tax rate over time, if recognized. In addition, we accrue interest and any necessary penalties related to unrecognized tax positions in our provision for income taxes. As of January 1, 2007, we accrued approximately $42 million of gross interest and penalties, which are included in other liabilities.

     A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most probable outcome. We adjust these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular uncertain tax position would usually require the use of cash. The resolution of a matter could be recognized as an adjustment to our provision for income taxes and our effective tax rate in the period of resolution.

     We file annual income tax returns in various United States (“U.S.”) state and local jurisdictions, and in various foreign jurisdictions. A number of years may elapse before an uncertain tax position, for which we have unrecognized tax benefits, is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our unrecognized tax benefits reflect the most probable outcome. We adjust these unrecognized tax benefits, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular uncertain tax position would usually require the use of cash. The resolution of a matter could be recognized as an adjustment to our provision for income taxes and our effective tax rate in the period of resolution.

     The number of tax years that remain open and subject to tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include Canada, Russia and Mexico. In Canada, income tax audits have been completed for all tax years through the 2004 tax year. We are in agreement

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with the audit results except for one matter which we continue to dispute for our 1999 through 2004 tax years. We cannot reasonably estimate the impact on our Condensed Consolidated Financial Statements resulting from the outcome of this matter. The audit of our Canadian tax return for the 2005 tax year is scheduled to commence in the third quarter of 2007.

     In Russia, tax audits have been concluded for our 2002 through 2004 tax years. We continue to dispute certain matters relating to these tax years and do not anticipate the resolution of the open matters to significantly impact our financial statements. Our 2005 and 2006 tax years remain open in Russia and may be subject to audit in the future.

     The Mexican statute of limitations for the 2001 tax year is scheduled to close in the second quarter of 2007 and we cannot reasonably estimate the impact on our Condensed Consolidated Financial Statements resulting from the expiration of this statute of limitations at this time. The statute of limitations for our 2002 through 2006 Mexican tax returns remains open and may be subject to audit in the future.

Note 9—Segment Information

     We operate in one industry, carbonated soft drinks, and other ready-to-drink beverages, and all of our segments derive revenue from these products. We conduct business in all or a portion of the United States, Mexico, Canada, Spain, Russia, Greece and Turkey. Bottling LLC manages and reports operating results through three reportable segments – U.S. & Canada, Europe (which includes Spain, Russia, Greece and Turkey) and Mexico. The operating segments of the U.S. and Canada are aggregated into a single reportable segment due to their economic similarity as well as similarity across products, manufacturing and distribution methods, types of customers and regulatory environments.

     Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment. We evaluate the performance of these segments based on operating income or loss. Operating income or loss is exclusive of net interest expense, minority interest, foreign exchange gains and losses and income taxes.

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Net Revenues
U.S. & Canada	$	2,102		$	2,036
Europe		176			148
Mexico		188			183
Worldwide net revenues	$	2,466		$	2,367
Operating Income (Loss)
U.S. & Canada	$	142		$	139
Europe		(25	)		(22	)
Mexico		2			2
Worldwide operating income		119			119
Interest expense		53			45
Interest income		44			29
Other non-operating expenses, net		1			—
Minority interest		1			—
Income before income taxes	$	108		$	103

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	March		December
	24, 2007		30, 2006
Total Assets
U.S. & Canada	$	12,247	$	12,072
Europe		1,071		1,072
Mexico		1,729		1,811
Worldwide total assets	$	15,047	$	14,955

Note 10—Comprehensive Income

	12 Weeks Ended
	March			March
	24, 2007			25, 2006
Net income	$	102		$	98
Currency translation adjustment		(34	)		26
Cash flow hedge adjustment (a)		1			13
Amortization of prior service cost/loss in net periodic pension/postretirement cost to expense		11			N/A
Pension liability adjustment (b)		5			N/A
Comprehensive income	$	85		$	137

(a)	Net of taxes of $0 million and $1 million for the 12 weeks ended March 24, 2007 and March 25, 2006, respectively.
(b)	Net of taxes of $3 million for the 12 weeks ended March 24, 2007.

Note 11—Contingencies

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

Note 12—Subsequent Event

     On March 1, 2007, subsequent to the close of the quarter for our Europe segment, together with PepsiCo we formed PR Beverages Limited, a venture comprising PepsiCo’s concentrate and Bottling LLC’s bottling businesses in Russia. The venture will enable us to strategically invest in Russia to accelerate our growth.

     We have a majority interest in the venture and maintain management of the day-to-day operations. Accordingly, beginning with our second quarter, we will consolidate the venture into our financial results and record minority interest related to PepsiCo’s 40 percent interest in the venture. We do not anticipate this transaction to have a material impact on our Consolidated Statement of Operations.

     PepsiCo is considered a related party due to the nature of our franchise relationship and its ownership interest in our Company. Accordingly, concentrate purchases by the venture will be considered related party transactions.

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Item 2.
Management’s Financial Review

Tabular dollars in millions

Overview

     Bottling Group, LLC (referred to as “Bottling LLC,” “we,” “our,” “us” and “Company”) is the principal operating subsidiary of The Pepsi Bottling Group (“PBG”) and consists of substantially all of the operations and the assets of PBG. We have the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in all or a portion of the United States, Mexico, Canada, Spain, Greece, Russia and Turkey.

     Bottling LLC operates in one industry, carbonated soft drinks, and other ready-to-drink beverages, and all of our segments derive revenue from these products. Bottling LLC manages and reports operating results through three reportable segments – U.S. & Canada, Europe which consists of operations in Spain, Greece, Russia and Turkey, and Mexico. Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the financial results in each reportable segment.

     Management’s Financial Review should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, which include additional information about our accounting policies, practices and the transactions that underlie our financial results.

Critical Accounting Policies

     The preparation of our consolidated financial statements in conformity with U.S. GAAP often requires us to make judgments, estimates and assumptions regarding uncertainties that affect the results of operations, financial position and cash flows of the Company, as well as the related footnote disclosures. Management bases its estimates on knowledge of our operations, markets in which we operate, historical trends, and other assumptions. Actual results could differ from these estimates under different assumptions or conditions.

     As discussed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2006, management considers the following policies to be the most important to the portrayal of Bottling LLC’s financial condition and results of operations because they require the use of estimates, assumptions and the application of judgment:

• Allowance for Doubtful Accounts;

• Recoverability of Goodwill and Intangible Assets with Indefinite Lives;

• Pension and Postretirement Medical Benefit Plans;

• Share-Based Compensation; and

• Income Taxes.

Income Taxes

     In 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which provides specific guidance on the financial statement recognition, measurement, reporting and disclosure of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 addresses the manner in which tax positions, either permanent or temporary, should be reflected in the financial statements.

     In accordance with the adoption of FIN 48, we evaluate our tax positions to determine if it is more likely than not that a tax position is sustainable, based on its technical merits. If a tax position does not meet the more likely than not standard, a full reserve is established. Additionally, for a position that is determined to, more likely than not, be sustainable, we measure the benefit at the

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greatest cumulative probability of being realized and establish a reserve for the balance. A material change in our tax reserves could have a significant impact on our results.

Financial Performance Results

	12 Weeks Ended
	March		March		%
	24, 2007		25, 2006		Change
Net revenues	$	2,466	$	2,367		4	%
Gross profit	$	1,123	$	1,096		3	%
Operating income	$	119	$	119		0	%
Net income	$	102	$	98		4	%

Financial Performance Discussion

     For the first quarter of 2007, net income increased four percent when compared with the similar period in the prior year. These results included a non-cash-tax charge of $2 million as a result of adopting FIN 48 in the first quarter. Please see Note 8 in the Notes to Condensed Consolidated Financial Statements for further discussion on FIN 48.

     The increase in net income was primarily attributable to flat operating income and increased interest income as a result of higher effective interest rates on our notes receivable coupled with additional loans made to PBG, partially offset by higher interest expense largely due to higher effective interest rates on our outstanding debt balances.

     Our operating income results for the quarter reflected strong revenue growth driven by positive growth across each reportable segment, which was partially offset by an increase in cost of sales. Worldwide net revenue per case grew by four percent during the first quarter of 2007 versus the prior year. Worldwide physical case volume was about flat in the first quarter of 2007 versus the prior year reflecting a one-percent decline in the U.S. and Canada and offset by strong growth in Europe and the impact of acquisitions in Mexico.

     Worldwide cost of sales per case for the quarter increased five percent versus the prior year driven primarily by increases in raw material costs such as concentrate and sweetener. Selling, delivery and administrative (“SD&A”) expenses increased three percent in the first quarter versus the prior year, reflecting wage and benefit increases, partially offset by cost productivity initiatives associated with technology improvements in our warehouses, improving our product configuration to eliminate complexity and streamlined customer account management. As a result, operating income of $119 million was flat for the quarter versus the first quarter of 2006.

Full-Year 2007 Outlook

     Our full-year 2007 outlook is unchanged, other than operating income, from the Company’s previous guidance discussed in our Annual Report on Form 10-K for the fiscal year ended December 30, 2006. In March of 2007, we announced the formation of PR Beverages Limited, a venture comprised of PepsiCo Inc.’s (“PepsiCo”) concentrate and PBG’s bottling businesses in Russia. As a result of consolidating the venture, our operating income is expected to increase.

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The increase in operating income will be offset by PepsiCo’s 40 percent minority interest in the venture.

First Quarter 2007 Results

     Except where noted, tables and discussion are presented as compared to the similar period in the prior year.

Volume

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
				U.S. &
	Worldwide			Canada			Europe			Mexico
Base volume		0	%		(1	)%		8	%		(3	)%
Acquisitions		0	%		—			—			5	%
Total Volume change		0	%		(1	)%		8	%		2	%

     Our reported worldwide physical case volume was about flat in the first quarter of 2007, driven by a one percent decline in our U.S. and Canada segment and offset primarily by strong growth in Europe and the impact of acquisitions in our Mexico segment.

     Volume in the U.S. decreased one percent, reflecting a two-percent decline in our cold drink channel and a flat performance in our take-home channel. Year over year comparisons were impacted by strong growth in the prior year. Volume declines in the quarter in these channels were attributable to softer volume in supermarkets and small format locations.

     From a brand perspective, in the U.S., our non-carbonated portfolio grew approximately 13 percent, driven by a 45-percent increase in Trademark Lipton, coupled with strong double-digit growth in water and energy drinks. The growth in our non-carbonated portfolio was more than offset by declines in our CSD portfolio which decreased five percent due primarily to declines in both Trademark Pepsi and flavored CSDs.

     In Canada, overall volume growth of one percent was driven primarily by double-digit growth in Trademark Aquafina and in ournon-carbonated portfolio, and partially offset by a two-percent decline in CSDs. Growth in non-carbonated brands was boosted by solid gains from innovation including the introduction of Dole Sparklers.

     In our Europe segment, overall volume grew eight percent, driven primarily by a double-digit increase in Russia. Volume growth in Russia was generated primarily by double-digit increases across CSDs, water and other non-carbonated products.

     In our Mexico segment, overall volume increased two percent versus the prior year, driven by the impact from prior year acquisitions and partially offset by a three percent decline in base business volume. This decrease was mostly due to an eight-percent decline in CSDs which was partially attributable to abnormally cold weather in the North region of Mexico. Similarly, volume in our water portfolio was soft with bottled water flat to prior year and jugs down slightly. Volume in other non-carbonated products increased by high double-digits as a result of a strong portfolio of products, including Sun Light, Be Light, Gatorade and Aquas Frescos.

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Net Revenues

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
				U.S. &
	Worldwide			Canada			Europe			Mexico
Volume impact		0	%		(1	)%		8	%		(3	)%
Net price per case impact (rate/mix)		4	%		4	%		5	%		5	%
Acquisitions		0	%		—			—			5	%
Currency translation		0	%		0	%		6	%		(4	)%
Total Net Revenues change		4	%		3	%		19	%		3	%

     Worldwide net revenues were $2.5 billion for the first quarter of 2007, a four-percent increase over the similar period in the prior year. The increase in net revenues for the quarter was driven by increases in net price per case across all of our segments. In the first quarter, our U.S. & Canada segment, which includes 12 weeks of results versus our Mexico and Europe segments, which include only the months of January and February, generated the majority of our revenues, at approximately 85 percent of our worldwide revenues. Our Europe segment generated seven percent of our revenues and Mexico generated the remaining eight percent.

     In the U.S. & Canada, net revenues increased three percent in the first quarter of 2007, reflecting increases in net price per case. In the U.S., net revenue per case increased by four percent, driven by a five-percentage-point improvement in rate as a result of a favorable pricing environment, and offset by a one-percentage-point decline in mix.

     In Europe, net revenues increased 19 percent in the first quarter of 2007 as a result of strong volume growth and increases in net price per case, coupled with the positive impact of foreign currency translation.

     Net revenues in Mexico grew three percent in the first quarter of 2007. The growth was attributable to strong net price per case increases and the impact of prior year acquisitions, partially offset by volume declines and the negative impact of foreign currency translation.

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Cost of Sales

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
	Worldwide
Volume impact		0	%
Cost per case impact		6	%
Acquisitions		0	%
Currency translation		0	%
Total Cost of Sales change		6	%

     Cost of sales was $1.3 billion in the first quarter of 2007, a six-percent increase over the prior year. The growth in cost of sales was driven by cost per case increases across all of our segments as a result of raw material cost increases such as concentrate and sweetener.

     In the U.S. and Canada, cost of sales increased in line with worldwide trends, driven by cost per case increases.

     In Europe, cost of sales grew in line with revenue growth, reflecting strong volume growth and cost per case increases, coupled with the negative impact of foreign currency translation.

     In Mexico, cost of sales increased in line with revenue growth, driven by the impact of acquisitions in the prior year and cost per case increases. These increases were partially offset by volume declines and the positive impact of foreign currency translation.

Selling, Delivery and Administrative Expenses

	12 Weeks Ended
	March 24, 2007 vs.
	March 25, 2006
	Worldwide
Cost impact		3	%
Acquisitions		0	%
Currency translation		0	%
Total SD&A change		3	%

     Worldwide SD&A expenses were $1.0 billion in the first quarter of 2007, a three-percent increase over the prior year. This increase was primarily attributable to higher wage and benefit costs across all of our segments, and partially offset by cost productivity initiatives associated with technology improvements in our warehouses, improving our product configuration to eliminate complexity and streamlined customer account management.

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Interest Expense

     Interest expense increased $8 million in the first quarter of 2007, largely due to higher effective interest rates.

Interest Income

     Interest income increased $15 million in the first quarter of 2007, driven primarily by higher effective interest rates coupled with additional loans made to PBG.

Income Tax Expense

     Bottling LLC is a limited liability company, classified 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 distributive shares of income, deductions and credits of Bottling LLC are allocated to Bottling LLC’s owners based on their percentage ownership in Bottling LLC. However, certain domestic and foreign affiliates pay income taxes in their respective jurisdictions. Such amounts are reflected in our Consolidated Statements of Operations. Our effective tax rate for the 12 weeks ended March 24, 2007 and March 25, 2006 was 5.8% and 4.9%, respectively. The increase in our effective tax rate is driven by higher tax contingencies as a result of adopting FIN 48.

Liquidity and Financial Condition

Cash Flows

     In the first quarter of 2007, Bottling LLC generated $234 million of net cash provided by operations, which was $18 million higher than the cash generated in 2006. The increase in net cash provided by operations was driven primarily by higher interest income received from PBG, partially offset by higher purchases of certain raw materials.

     In the first quarter of 2007, cash used for investments was $311 million, which was $56 million lower than the cash used for investments in 2006. The decrease in cash used for investments reflects a lower increase in notes receivable from PBG, partially offset by the acquisition of franchise and bottling rights of select Cadbury Schweppes brands in California, United States. Through this acquisition, Bottling LLC has added Dr Pepper, Squirt and Hawaiian Punch to its beverage portfolio.

     In the first quarter of 2007, we generated $4 million from financing activities as compared with a use of $5 million in 2006. This increase in cash from financing was driven primarily by lower repayments on our international debt in the current year, partially offset by lower short-term borrowings.

Liquidity and Capital Resources

     Our principal sources of cash come from our operating activities, and the issuance of debt and bank borrowings. We believe that these cash inflows will be sufficient to fund capital expenditures, benefit plan contributions, acquisitions, and working capital requirements for the foreseeable future.

Contractual Obligations

     As of March 24, 2007, there have been no material changes outside the normal course of business in the contractual obligations disclosed in Item 7 to our Annual Report on Form 10-K for the fiscal year ended December 30, 2006, under the caption “Contractual Obligations.”

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Off-Balance Sheet Arrangements

     PBG has committed revolving credit facilities of $450 million and $550 million which expire in March 2011 and April 2009, respectively. PBG’s combined committed credit facilities of $1 billion are guaranteed by us and support PBG’s $1 billion commercial paper program.

     PBG had $368 million and $115 million of outstanding commercial paper, at March 24, 2007 and December 30, 2006, respectively.

     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.

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Cautionary Statements

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

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

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

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

• material changes from expectations in the cost or availability of raw materials, ingredients or packaging materials;

• limitations on the availability of water or obtaining water rights;

• an inability to achieve cost savings;

• material changes in capital investment for infrastructure and an inability to achieve the expected timing for returns on cold-drink equipment and related infrastructure expenditures;

• decreased demand for our product resulting from changes in consumers’ preferences;

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

• impact of competitive activities on our business;

• impact of customer consolidations on our business;

• changes in product category consumption;

• unfavorable weather conditions in our markets;

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

• loss of business from a significant customer;

• failure or inability to comply with laws and regulations;

• changes in laws, regulations and industry guidelines governing the manufacture and sale of food and beverages, including restrictions on the sale of carbonated soft drinks in schools;

• litigation, other claims and negative publicity relating to the alleged unhealthy properties of soft drinks;

• changes in laws and regulations governing the environment, transportation, employee safety, labor and government contracts;

• changes in accounting standards and taxation requirements (including unfavorable outcomes from audits performed by various tax authorities);

• unforeseen economic and political changes;

• possible recalls of our products;

• interruptions of operations due to labor disagreements;

• changes in our debt ratings;

• material changes in expected interest and currency exchange rates and unfavorable market performance of PBG’s pension plan assets; and

• an inability to achieve strategic business plan targets that could result in an intangible asset impairment charge.

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Item 3.

Quantitative and Qualitative Disclosures About Market Risk

     There have been no material changes to our market risks as disclosed in Item 7 to our Annual Report on Form 10-K for the year ended December 30, 2006.

Item 4.

Controls and Procedures

     Bottling LLC’s management carried out an 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 our last fiscal quarter. Based upon this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to Bottling LLC and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Bottling LLC’s management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

     In addition, Bottling LLC’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Principal Executive Officer and our Principal Financial Officer, of changes in Bottling LLC’s internal control over financial reporting. Based on this evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that there were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 6.

Exhibits

Exhibit No.
10.1	Private Limited Company Agreement of PR Beverages Limited dated as of March 1, 2007 among PBG Beverages Ireland Limited, PepsiCo (Ireland), Limited and PR Beverages Limited.
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
99.1	The Pepsi Bottling Group, Inc. (“PBG”) Form 10-Q for the quarterly period ended March 24, 2007, as required by the SEC as a result of our guarantee of up to $1,000,000,000 aggregate principal amount of our 7% Senior Notes due in 2029.

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SIGNATURES

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

BOTTLING GROUP, LLC (Registrant)
Date: April 30, 2007	/s/ Andrea L. Forster
	Andrea L. Forster
	Principal Accounting Officer and Managing Director
Date: April 30, 2007	/s/ Alfred H. Drewes
	Alfred H. Drewes
	Principal Financial Officer

Exhibit 31.1

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric J. Foss, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bottling Group, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2007	/s/ Eric J. Foss
	Eric J. Foss
	Principal Executive Officer

Exhibit 31.2

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alfred H. Drewes, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Bottling Group, LLC;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 30, 2007	/s/ Alfred H. Drewes
	Alfred H. Drewes
	Principal Financial Officer

Exhibit 32.1

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Bottling Group, LLC (the “Company”) certifies to his knowledge that:

(1)	The Quarterly Report on Form 10-Q of the Company for the quarter ended March 24, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Act”); and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company as of the dates and for the periods referred to in the Form 10-Q.

/s/ Eric J. Foss  

Eric J. Foss 

Principal Executive Officer
April 30, 2007 

The foregoing certification (the “Certification”) is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

A signed original of the Certification has been provided to the Company and will be retained by the Company in accordance with Rule 12b-11(d) of the Act and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Bottling Group, LLC (the “Company”) certifies to his knowledge that:

(1)	The Quarterly Report on Form 10-Q of the Company for the quarter ended March 24, 2007 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Act”); and
(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial conditions and results of operations of the Company as of the dates and for the periods referred to in the Form 10-Q.

/s/ Alfred H. Drewes  

Alfred H. Drewes 

Principal Financial Officer
April 30, 2007 

The foregoing certification (the “Certification”) is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code).

A signed original of the Certification has been provided to the Company and will be retained by the Company in accordance with Rule 12b-11(d) of the Act and furnished to the Securities and Exchange Commission or its staff upon request.