Pepsi Bottling Group (NYSE: PBG), a competitive colleague of Coca-Cola Enterprises (NYSE: CCE), reported earnings for the third quarter earlier in the week. I didn't find the release too exciting, to be honest. Revenues went up 2% to $3.8 billion. Earnings came in at $1.06 per share. In last year's quarter, Pepsi Bottling Group booked a bottom line equal to 98 cents per share, after adjustments. In terms of expectations, the company beat the analysts on Wall Street by two pennies better.

While an earnings beat is certainly a nice thing, let's take a look at what is perhaps one of the more important metrics when it comes to beverage manufacturers: case volume. I'm afraid there's nothing to write home about as far as this statistic is concerned. Case volume took a dive around the globe by a disappointing 6%. Management cited hard economic times as a contributing factor. Imagine that. You'd think that products found in the portfolios of Coca-Cola (NYSE: KO) and PepsiCo (NYSE: PEP) would be pretty defensive in a tough economic period. Apparently, Pepsi Bottling Group found it difficult to distribute more of its drinks this past quarter.

Long term, I think Pepsi Bottling Group will be okay. But I think both PepsiCo and Coke need to find better ways of convincing people to continue to drink their flagship carbonated beverages. They've been on the decline over the past several years. As a stock, Pepsi Bottling Group isn't on my watch list. I already own shares of Coke, but even with that bias, I can honestly say that I wouldn't want to enter the bottler at this time. I'm not impressed with either the growth or the year-to-date stock performance.

Disclosure: I own Coke; positions can change at any time.

Pepsi Bottling Group (NYSE: PBG) issued its Q2 earnings numbers today, and the market apparently wasn't impressed. As of 2:45, the shares are off well over 4%.

The numbers weren't bad in some respects, but a couple areas weren't encouraging. Sales increased about 5%, and earnings per diluted share expanded by 12% to $0.78. That was more than enough to beat the analysts, who were looking for about $0.75 per share, according to Briefing.com. However, worldwide case volume declined 3%. Case volume is one of the most important metrics for a beverage company, so this is very disheartening. Also, cash from operations dropped to $89 million for the six-month period from a year-ago level of $158 million. There was no free cash flow, but management does expect positive free cash flow for the fiscal year.

Considering the bottler's forward guidance and dividend yield, the shares are somewhat cheap. But they are basically at a 52-week low in a bad market, so I wouldn't bother with them. When it comes to investing in the beverage sector, I prefer owning a PepsiCo (NYSE: PEP) or a Coca-Cola (NYSE: KO). In fact, I own the latter. Avoiding bottlers like Pepsi Bottling Group and Coca-Cola Enterprises (NYSE: CCE) makes sense for the long-term since the bottlers will always have greater exposure to capital-expenditure requirements.

Disclosure: I own Coke; positions can change at any time.

I don't think I'll ever own a bottling group over a Coca-Cola (NYSE: KO) or a PepsiCo (NYSE: PEP). The cash-flow and margin scenarios with the sellers of concentrate is a much better long-term story. With that bias stated, let me check out Pepsi Bottling Group's (NYSE: PBG) first-quarter results, which were reported on Wednesday.

Net sales expanded by 7% to $2.7 billion. On a reported basis, earnings per share didn't budge whatsoever -- it was 12 cents this year, and it was 12 cents last year. On an adjusted basis, earnings were 13 cents -- hey, a penny is a penny, I guess. In fact, I see that Briefing.com is reporting that Pepsi Bottling Group beat the Street's outlook by a penny. Talk about symmetry. Operational cash flow was flat, coming in at $20 million, which was a million bucks less than the operational cash flow seen in the previous year's comparable quarter (by the way, I know that the pun "flat" has been used way too many times when talking about a beverage concern). As can be seen, the bottler lost the growth game this time around. It's only the first quarter, though, so we'll have to wait and see how the rest of the year shapes up. Right now, the company expects earnings of $2.30 to $2.38 on an adjusted basis.

Now, I don't hate Pepsi Bottling Group or anything like that (well, except for the fact that it distributes products that compete with my beloved Coca-Cola company, shares of which I own); it's a respectable company linked to a powerful beverage brand, and it has been pretty good on the dividend-increasing front (it recently upped its quarterly payout by over 20%). But I've always been prone to PepsiCo and Coke since they don't have to deal with the capital requirements for distribution; instead, they are the big marketers supporting the bottlers. If you want exposure to sugar water, I figure you may want to check out those two businesses first.

Disclosure: I own shares of Coca-Cola; positions can change at any time.

PepsiCo (NYSE: PEP) did a little buying in the marketplace today. No, I'm not talking about share buybacks -- I'm talking about an acquisition in Russia.

PepsiCo teamed up with Pepsi Bottling Group (NYSE: PBG) to take on a majority position in Russia's largest juice business, JSC Lebedyansky. The price tag was significant -- $1.4 billion (890 million euro). This AP news item indicates that it is the largest transaction for the beverage maker since its purchase of Quaker Oats.

Coca-Cola (NYSE: KO), watch out, because this is all about being competitive in the world marketplace, which means it's all about being competitive against you! It's also about hedging against the challenging growth rates in case volumes seen in the domestic marketplace, as well as taking on international exposure to gain the benefit of a weaker dollar. Consumer companies know that it's smart to think globally these days, so acquisitions like these take on major importance. Plus, PepsiCo cannot live on carbonated sodas alone, so any opportunity to broaden its portfolio base beyond its flagship brand is a welcome strategy (Coke knows this to be true, too).

It's difficult to argue that this is anything but a cool move -- I'd like to argue, since I own shares of Coca-Cola, but alas, I can't find a proper contrarian angle. So, nice move, Pepsi, you did good today, you got a decent asset in a growing international territory, and the price tag won't break the bank. But don't worry, my bubbly friend -- I'm sure Coke is taking note of this, seeing what it needs to do to remain competitive against you (at least, I hope that's what the brains in Atlanta are doing).

Disclosure: I own shares of Coca-Cola; positions can change at any time.

The world's largest maker of Pepsi-Cola beverages is not PepsiCo (NYSE: PEP) itself, but a 1999 PepsiCo spin-off with the clearest mission statement in corporate America.

Pepsi Bottling Group (NYSE: PBG) is engaged in the manufacture, sale and distribution of Pepsi-Cola beverages. The firm operates about 300 manufacturing and distribution facilities and delivers Pepsi-Cola, Aquafina water, Lipton's Iced Tea, Mountain Dew, Tropicana juice, Starbucks Frappuccino and Slice to stores and third-party distributors. PBG operates in North America and Europe, accounting for more than half of the Pepsi-Cola beverages sold in North America and about 40% of the worldwide volume. Coca-Cola Enterprises (NYSE: CCE) is a major competitor.

There was good news for PBG investors last week, when Goldman Sachs raised its rating on the beverage group to "attractive." The analyst noted the potential for improved performance, as costs for most of the commodities used to make and bottle beverages stabilize.

So who is the world's largest manufacturer, seller and distributor of Pepsi-Cola beverages? Here's a hint. It is not PepsiCo (NYSE: PEP). It is, in fact, a 1999 PepsiCo spin-off headquartered in Somers, New York.

Pepsi Bottling Group (NYSE: PBG) is engaged in the manufacture, sale and distribution of Pepsi-Cola beverages. The firm operates about 300 manufacturing and distribution facilities and delivers Pepsi-Cola, Dr Pepper, Aquafina water, Lipton's Iced Tea, Mountain Dew, Tropicana juice, Starbucks Frappuccino and Slice to stores and third-party distributors. PBG operates in North America and Europe, accounting for more than half of the Pepsi-Cola beverages sold in North America and about 40 percent of the worldwide volume. Coca-Cola Enterprises (NYSE: CCE) is a major competitor.

The company pleased investors earlier in the week, when it reported Q2 EPS of $0.70 and revenues of $3.36 billion. Analysts had been expecting $0.63 and $3.29 billion. Management also guided FY07 EPS to $2.02-$2.07, versus Street consensus of $1.98. PBG shares popped into the initial stage of a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with three "strong buys," one "buy," ten "holds" and one "sell." The PBG P/E ratio (16.08), Price to Sales ratio (0.62), Price to Book ratio (3.64), Price to Cash Flow ratio (6.81), Price to Free Cash Flow ratio (29.56) and Return on Equity (24.91%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 58% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $30.13 and $36.47. A stop-loss of $31.35 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.