Love at First Sip
It all started at the American National Exhibit in Moscow in 1959 when then-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.
Donald Kendall’s Soda Scheme
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.
The Barter System Returns
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.
A Force to be Reckoned With?
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.
Everything Fizzles Out Eventually
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.
By James Whelan, contributor for Ripleys.com
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Source: How Pepsi Came To Own A Soviet Naval Fleet
by Ripley's Believe It or Not!
As an expert with a deep understanding of historical and business contexts, let's delve into the intriguing narrative of how Pepsi, the iconic American beverage company, came to own a Soviet naval fleet. My knowledge extends beyond mere recitation of facts; I bring a nuanced perspective that connects the dots in this captivating tale.
The story begins in 1959 at the American National Exhibit in Moscow during the infamous Kitchen Debate between Richard Nixon and Nikita Khrushchev. Donald Kendall, head of Pepsi's international division, seized a pivotal moment by offering Khrushchev a taste of Pepsi to diffuse the tension. This marked the inception of a unique relationship between Pepsi and the Soviet Union.
Donald Kendall's strategic move at the American National Exhibit paid off, propelling him to become Pepsi's CEO in 1963. His vision extended beyond a one-time event; he aimed to introduce the sweetness of Pepsi to the Soviet Union. Despite initial skepticism and hurdles, Kendall's persistence led to a landmark deal in 1972, allowing Russians to enjoy Pepsi in exchange for Stolichnaya vodka.
The 1980s brought unforeseen challenges. Pepsi found itself with surplus vodka and a shortage of cash due to various factors, including the Soviet-Afghan war. In an unprecedented turn of events, Russia, facing a surplus of military vehicles, agreed to sell Pepsi 17 submarines, a frigate, a cruiser, and a destroyer in 1989. This unusual barter deal made Pepsi, indirectly, the sixth largest naval fleet in the world.
The irony wasn't lost on Kendall, who acknowledged the unusual nature of Russia handing over military assets to a U.S. corporation. The acquired fleet, however, was eventually sold off as scrap metal, ending Pepsi's brief stint as a naval power.
In 1991, the fall of the Soviet Union posed challenges for Pepsi in Russia. The redrawn borders and geopolitical shifts complicated business dealings, leading to a decline in Pepsi's influence. Coca-Cola's rapid entry into the Russian market during the Moscow Olympic Games in 1980 further eclipsed Pepsi's standing.
The article, penned by James Whelan for Ripleys.com, captures the highs and lows of Pepsi's journey in Russia. It explores not only the business intricacies but also the geopolitical dynamics that shaped this unique chapter in the history of a soda giant. As an enthusiast with comprehensive knowledge of the subject matter, I find this narrative not only fascinating but also a testament to the unpredictable intersections of business, diplomacy, and history.
