Pepsi: A military superpower, once?
If I tell you that Pepsi was once the sixth-largest military in the world?
Are we joking!?
Yeah yeah, we’ll give you a minute to absorb the headline. But before we dive into the details, let us give you some context.
It is a story of 1959. There were efforts from both the sides, USSR and America to build diplomatic relations and for that, Americans wanted to show Moscow the power and benefits of capitalism ideology. They organized a “National American National Exhibition" in Moscow and sent the then-Vice President Richard Nixon to attend the opening — but things were about to take a turn for the worse.
Soviet leader Khrushchev was unimpressed with the exhibition display and believed that Russia would have all the displayed technology like colour televisions etc. in some years and there is nothing that can be flaunted about by the US. Adding to that, Khrushchev commented on America’s resolution against USSR’s presence in Eastern Europe and went on criticizing the capitalist philosophy of the US by saying that they don’t really understand communalism. (Woah, burn!) The argument was heating up every second.
One of the Pepsi representatives at the exhibition, Donald Kendell handed a cool refreshing can of Pepsi to Khrushchev. (We were also astonished at his guts, though!).Contrary to Khrushchev’s feelings for America and its governing philosophy, he fell in love with the content of the glass- Pepsi. This is how Pepsi Cola became the first capitalist product that entered USSR and became an instant hit. But there was a bigger challenge: Payment. The Russian currency was not acceptable worldwide as hence, they came up with a different arrangement. As a payment, Russia gave Pepsi exclusive rights to the distribution of Stolichnaya Vodka in Russia, meaning that they were the only company that was permitted to sell Vodka legally in the country. This arrangement worked until 1980 but after that, the value of Vodka was not high enough to cover the full payment.
And here comes the bomb-dropper, quite literally.
In exchange for 3 billion worth of Pepsi, Russia paid Pepsi via 17 submarines, one cruiser, frigate, and destroyer. Okay, this is hilarious. What would a beverage company do with submarines and boats? This is what made Pepsi, the sixth-largest military in the world. Pepsi was the first to get this distinction. Pepsi later sold the fleet to a Swedish company for scrap recycling.
Remember Kendell? The guy who offered Khrushchev the drink? He later even joked on the National television that his company was better at disarming USSR than the US government. (This man is really cool!)
Adding to that, Pepsi even guarded its monopoly quite well in Russia as, under an exclusive agreement with the Russian government, its competitor, Coca-cola was only allowed to sell Fanta and Minute Maid in Russia and nothing else. Not even its trademark black drink. Adding to that, a lot of sceptics also called this Pepsi-USSR deal an encouragement for Russia to build more military equipment to fund its Pepsi purchases.
Few more submarines later, with the breakdown of the Soviet Union in 1999, Pepsi, instead of dealing with a single state, now had to broker with 15 countries. Worse, Coca-Cola aggressively entered the former Soviet Union, and Pepsi struggled to keep its advantage. Kendall, who had since retired, lamented that the Soviet Union had essentially gone out of business. Over several months, Pepsi pieced parts of the deal back together.
Jump to present. Russia is still Pepsi's second-biggest market outside of the United States. But their pioneering lustre has faded. It didn't help that Pepsi had been around for so long that other sodas seemed novel by comparison. After only a few years, Coke beat out Pepsi as Russia's most popular cola.
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