Pepsi Bottling Group Inc., the largest Pepsi bottler, announced Tuesday that profits were up in its second quarter, attributing the growth to strong sales of its non-carbonated drinks.

PBG said it posted a net income of $148 million for the second quarter of 2006 or a diluted earnings per share of $0.61. The firm recorded an increase of 3 percent in EPS from 2005.

PBG added revenue grew by 10 percent on a worldwide basis. The revenue for 2006 was $3.1 billion, an increase of around 9 percent from $2.8 billion in 2005.

We're very pleased with the continued growth we've seen in our topline performance, said John T. Cahill, PBG Chairman and Chief Executive Officer. "In the U.S. and Canada, our non-carbonated beverages were the preferred choice of consumers, growing at a double-digit rate,' Cahill said

The sales strengths included brands such as Lipton Iced Tea and Tropicana juices, as well as stronger water sales for Aquafina. He noted, however that carbonated drink sales were flat in the U.S. market.

In addition, the company increased expectations for 2006 by adjusting upward its volume and financial guidelines to a growth of four percent per year, with the U.S. growing by three percent.

Cahill also said the company was advancing its "Customer Connect' service agenda to reduce instances of out-of-stocks throughout its supply chain to boost volume growth.

PBG spokeswoman Amy Polacko says that the program, which began in January, has been well received. It is meant to help both large and small clients manage the level of their stocks through a multifaceted approach.

Among the most common problems facing retailers are low stocks and weekend delivery scheduling problems, she said. The Connect plan uses new tools to manage warehouse levels, logistics and in-store execution.

"After implementing the new agenda, it made an improvement in all the service metrics. This in turn helps generate business services,' Polacko said.

PBG manufactures, sells and distributes Pepsi-Cola beverages with operations in the United States, Mexico, Canada, Russia, Spain, Turkey and Greece.

It became an independent, publicly traded company in 1999. However Pepsico Inc. retains a 40 percent stake in the bottler. Pepsico in turn, manufactures and sells concentrated beverage syrup and finished goods to PBG.

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