When one thinks of Russia’s favorite drink, vodka comes to mind. But what if another, softer drink captivated the hearts of the Soviet Union? In one of the craziest business deals in history, Russia sold Pepsi an entire military arsenal of vehicles to satisfy their craving for the popular soda, making them the sixth-largest naval fleet in the world.
It all started at the American National Exhibit in Moscow in 1959 when then-Vice President Richard Nixon and Soviet leader Nikita Khrushchev became locked in the infamous Kitchen Debate, an argument about the perks of capitalism versus communism. To cool down the heated discussion, Donald Kendall, the head of Pepsi’s international division, told Nixon to offer Khrushchev a taste of the fruits of capitalism’s labor: Pepsi.
It was love at first sip for Khrushchev, who urged his comrades to join him in trying the tasty beverage.
Kendall was taking a risk having Pepsi appear at the American National Exhibit. Higher-ups thought the effort was a waste of time and money. Kendall told Nixon that he “had to get a Pepsi in Khrushchev’s hand” to preserve his reputation.
Kendall’s fizzy gamble paid off, using the PR success from the exhibit to become Pepsi CEO in 1963. Now in the captain’s chair, Kendall had a primary focus on finally bringing that sweet sugary goodness to the Soviet Union.
Despite Khrushchev’s immediate love for the American beverage, it took several years and a lot of negotiating until all of Russia could share a Pepsi with their comrades in 1972.
Getting Pepsi into the country wasn’t a smooth transaction. Since the Soviet ruble had no value outside of Russia, both parties had to resort to more traditional bartering methods to reach a deal. In exchange for every bottle of Pepsi sold, Russia would provide the soda giant with an equal amount of Stolichnaya vodka to resell in the U.S.
While Russians enjoyed slurping up the American delicacy, Pepsi reaped recognition as the first capitalist product to break through the Iron Curtain.
By the late 1980s, Pepsi realized that Russia’s soda consumption far outpaced the power of the American boozehound. Combined with a lack of sales due to Americans protesting the Soviet-Afghan war, they had a surplus of vodka and a shortage of cold hard cash.
With an untransferable currency and now vodka off the table, Russia was scrambling for a new way to satisfy its bubbly appetite. However, there was one outrageous option: using the country’s abundance of military vehicles to win the battle of thirst.
In a bizarre agreement, Russia sold Pepsi 17 submarines, a frigate, a cruiser, and a destroyer in 1989 to keep soda flowing into its citizens’ mouths. With all this firepower, Pepsi indirectly became the sixth-largest naval fleet in the world.
Their reign didn’t last long, though. Rather than using the newly acquired fleet (made up of obsolete vessels ) to take their epic war with Coca-Cola from the shelves to the seas, Pepsi sold it off as scrap metal. (Guess we know why Pepsi doesn’t have any iron in it.)
Kendall was aware of the irony of Russia handing a U.S. corporation a military fleet, telling national security advisor Brent Scowcroft he was “disarming the Soviet Union faster than you are.”
A year later, Kendall arranged the “Deal of the Century,” where the USSR would build Pepsi 10 oil tankers to pay for three billion dollars’ worth of Pepsi.
Unfortunately for Pepsi, the fall of the Soviet Union in 1991 made it a lot harder for the capitalist soda giant to conduct business in Russia. Kendall struggled to make new business deals with the new Republics in town.
Redrawn borders also divided the pop powerhouse’s vital assets. Their oil tankers were being built in Ukraine (who wanted a cut of that sweet American soda money), while their bottling plant was in Belarus. Pepsi’s dealings in Russia ultimately exploded like a shaken-up can of soda.
Pepsi’s glory days with Russia have since fizzled out, following Coca-Cola’s fast break into the country during the Moscow Olympic Games in 1980. Still, Pepsi can treasure when, if only for a split second, they were the apple — nay, soda — of Russia’s eye, and the most powerful soda company on the planet.
November 14, 2024
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