July 8 (Bloomberg) -- Pepsi Bottling Group Inc. said 2008 sales may rise at the slowest pace in at least 11 years after cash-strapped consumers bought fewer drinks and the bottler increased prices to counter higher sweetener costs.

Revenue may advance 5 percent to 6 percent this year, less than the 6 percent to 7 percent gain the company previously expected, sending the shares 2.7 percent lower in New York trading. Profit will climb to $2.30 to $2.38 a share, Pepsi Bottling reiterated today.

The bottler, PepsiCo Inc.'s largest distributor, raised prices in the U.S. and Mexico, boosting second-quarter profit 7.4 percent. Further price increases may be necessary to offset higher ingredient and packaging costs, even as sales volumes decline, Chief Executive Officer Eric Foss said in a conference call.

``We consider the result uninspiring,'' Mark Swartzberg, an analyst at Stifel, Nicolaus & Co., said today in a note. The numbers are ``representative of the fundamental challenges facing most of the beverages sector, challenges we do not see abating in the foreseeable future.'' He recommends investors hold the shares.

Pepsi Bottling fell 78 cents to $27.88 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 29 percent this year, compared with a 35 percent decline by larger Coca-Cola Enterprises Inc. The Standard & Poor's 500 Consumer Staples Index has retreated 6.1 percent in the same period.

``Bottlers have been shunned in light of increasing commodities and an economic slowdown in the U.S.,'' Carlos Laboy, an analyst at Credit Suisse Holdings USA, said today in a note. He recommends investors hold the shares.

Profit Gains

Second-quarter net income advanced to $174 million, or 78 cents a share, from $162 million, or 70 cents, a year earlier, the Somers, New York-based company said in a statement. Profit beat analysts' estimates by 3 cents.

Sales for the three months ended June 14 climbed 4.8 percent to $3.52 billion from $3.36 billion. Pepsi Bottling boosted prices to blunt higher costs for corn sweetener, aluminum cans and oil.

Eleven analysts surveyed by Bloomberg estimated Pepsi Bottling's average profit in the second quarter would be 75 cents a share. Ten predicted average sales of $3.54 billion.

Analysts surveyed by Bloomberg estimate profit to climb in 2008 to $2.34 a share on sales of $14.4 billion, a 6 percent increase.

Volume `Worries'

``Worries over weaker volume growth are offset by Pepsi Bottling Group's demonstrated ability to take more price, drive higher savings and pull other levers to navigate through this difficult environment,'' Bill Pecoriello, an analyst with Morgan Stanley, said today in a note. He recommends investors hold the shares.

Corn futures climbed to a record $7.9925 on June 27 as global reserves are forecast to fall to a 24-year low by the end of August. Crude oil has gained 88 percent in the past year.

The cost of goods for the quarter climbed 8 percent. Chief Financial Officer Alfred Drewes reiterated the company expects those expenses to rise 6 percent for the year.

Net revenue per case climbed 8 percent, led by Europe and Mexico. Revenue per case increased 5 percent in the U.S. and Canada, which account for nearly three-fourths of annual sales.

The higher prices contributed to a slowdown in sales volume, a key measure of performance. The amount of drinks sold worldwide declined 3 percent as volume in the U.S. and Canada fell 4 percent. Other factors included the shift of the Easter holiday into the first quarter and cutbacks by cash-strapped consumers.

In May, Coca-Cola Enterprises said meeting its forecast for 2008 earnings would be ``challenging'' as U.S. consumers limit purchases of soda and water. Earnings per share in the second quarter may decline in the ``mid-to-high single digits'' on a percentage basis, the Atlanta-based company said.

PepsiCo is Pepsi Bottling's biggest shareholder, with a third of its stock.

To contact the reporter on this story: Duane D. Stanford in Atlanta dstanford2@bloomberg.net.

Last Updated: July 8, 2008 16:46 EDT