Pepsi is one of the most iconic American brands in the world, and you’re bound to start an argument over whether it or Coca-Cola is the more superior soft drink. The company has a rather unique history, which involves a Cold War-era deal with Russia and its temporary ownership of the sixth-largest navy in the world.
Richard Nixon versus Nikita Khrushchev
In the aftermath of the Russian launch of the Sputnik 1 satellite, the United States was looking to regain its place on the world stage and show that its economical model was better than the communist one presented by the USSR. In 1959, then-President Dwight D. Eisenhower felt the best way to do this was to bring American culture to the Russians, to show them the benefits of a capitalist society.
To accomplish this, the American government arranged the American National Exhibition in Moscow‘s Sokolniki Park. A host of American brands sponsored booths and exhibits, including Pepsi, Disney, IBM, and Dixie Cup Inc., and then-Vice President Richard Nixon attended the opening.
While there, Nixon and Russian President Nikita Khrushchev got into a heated debate over the topic of communism versus capitalism and the efficacy of their economic models. In an effort to simmer down the tension, Head of Pepsi International Donald Kendall offered the Soviet leader a Pepsi, which he drank and immensely enjoyed.
A deal between Pepsi and the USSR
Years after the exhibition, the USSR wished to make a deal with Pepsi to ensure its products would remain in the country permanently. However, as their money wasn’t accepted throughout the world, there was an issue as to the Russian government would pay for the exchange. That’s when the idea came: vodka.
Under the new deal, the Soviet Union would provide vodka from its state-owned brand, Stolichnaya, for re-sale in the US, in exchange for Pepsi. As a result, the soda company was the first to secure such an agreement between America and the USSR during the Cold War.
Stolichnaya experienced immediate popularity upon entering the US market. In 1973, it was selling about 30,000 cases annually in the country, and by 1978 had reached 200,000 annual sales. By 1980, its sales had topped 1 million cases a year, making it the second most popular vodka in America.
Exchanging Pepsi for a fleet of ships
By the late 1980s, the USSR’s agreement with Pepsi was due to expire. However, unlike in previous years, their vodka wouldn’t be enough to satisfy the American company. This was due to the Soviet invasion of Afghanistan, which led to the American people boycotting Russian products, including vodka. Swedish vodka brand Absolut quickly surpassed Stolichnaya in popularity.
The Soviets didn’t want to lose Pepsi, so they opted for a rather unorthodox trade with the soda company. In exchange for its product, they would give Pepsi a fleet of ships, including 17 submarines, a frigate, a cruiser, and a destroyer.
While the country’s Cold War budget had resulted in a surplus of equipment for its Armed Forces, the ships and submarines given to Pepsi were in serious disrepair. Only one of the ships was truly seaworthy, while all of the submarines had serious rust issues. The majority also listed to one side.
A naval fleet sent to the scrapyard
The US government was not happy about the deal Pepsi had made with the USSR and made its feelings known. In response to the uproar, Kendall reminded the Pentagon that he’d managed to reduce the number of vessels at the Russians’ disposal, memorably saying, “I’m dismantling the Soviet Union faster than you are.”
Eventually, Pepsi sold the ships to a Swedish recycling company for scrap, as the company needed to recoup the cost of shipping its product to the USSR. Regardless, for a time, it was the owner of one of the world’s largest navies, showing what can happen when a country’s citizens really love a particular consumer product.