Pepsi: almost the best selling cola in the world. For well over a century Coca Cola and Pepsi have been vying for dominance, but in one particular case, Pepsi dramatically outpaced Coca Cola.
As you’ll see today, Pepsi achieved what no other American company could do: it conquered the heart of America’s greatest rival, the Soviet Union.
Our story begins in the late 1950s. Stalin was dead and from the ensuing power struggle, Nikita Khrushchev emerged as the victor. His vision for the future of the Soviet Union was quite different from his predecessor’s: unlike Stalin, Nikita wanted to reform the country and to improve the lives of the population. He decided to end the Gulag system of labor camps and to open up the country’s borders so that citizens could travel and see the world.
The ultimate expression of his liberal policies was the ambitious decision to host an American National Exhibition right back home in Moscow. The US government was happy to oblige, and in the summer of 1959 the Americans brought in an impressive array of items: from art& tv sets to automobiles and fashion. The US was keen on showing the merits of capitalism to the USSR and it spared no effort in doing so. It even went so far as to build a model house to showcase just how well off the average American was living.
Over six weeks, three million soviet citizens would visit the exhibition. And yet, despite the publicity, the true purpose of the exhibition was to open up the Soviet Union to international trade.
You see, the American government had supplied the exhibition with the products of 450 American companies, who were very eager to do business with the USSR. And you guessed it, Pepsi was among the first in line to support this radical endeavor.
The day before the exhibition opened, Donald Kendall, the head of Pepsi’s international division, approached then-Vice President Nixon with a simple request. Nixon had to get a Pepsi into the hands, of Nikita Khrushchev.
The very next day at the exhibition’s opening, Nixon welcomed Khrushchev at the site of the model house’s kitchen, and there the two men engaged in a fierce but friendly debate on the merits of communism and capitalism.
This exchange came to be known as the “kitchen debate”, and immediately after it, Nixon led Khrushchev to a refreshment booth filled with nothing but Pepsi. Khrushchev liked it very much and encouraged everyone to partake: most people enjoyed it, although some described Pepsi as “smelling like shoe wax”. In any case, this colossal PR victory catapulted Donald Kendall through the ranks at Pepsi and within four years he had become the company’s CEO.
His prime focus was making Pepsi available to the average Soviet citizen, but trade with the Soviet Union was much harder than you'd imagine. You see, the Essentially worth essentially worthless outside the USSR. The Kremlin determine forbade any on end forbade anyone from taking the currency abroad.
It took Kendall almost finally to negotiate a solution: for every bottle of Pepsi sold, the Pepsi receives a would receive an equivalent amount of Stolichnaya vodka to be sold in America. Pepsi became the product sold list product sold in the USSR and the deal turned out surprisingly well:
by the late 1980 s the Soviets drank a billion servings of Pepsi per year. But Americans could only drink so much vodka, so eventually, Kendall had to figure out a different medium of exchange.
In the spring of 1989 incredible news: Pepsi would become the proud owner of 17 diesel submarine, a cruiser, a frigate, and a destroyer, courtesy of the Soviet Union. For a brief moment, Pepsi had become the 7th largest navies in the world, until it turned around sold everything for scrap.
When confronted about the exchange by the US national security advisor, Kendall said: “I’m disarming faster than union faster than you are”.
Just a year later Kendall arranged an even more ambitious plan: he’d hire the USSR to build 10 oil exchange forms in exchange for about a billion dollars worth of Pepsi. The media called it the “Deal of the Century”… but then, the Soviet Union collapsed. Pepsi’s massive returned increment turned into a frantic scramble to salvage its Russian assets. Amid hyperinflation borders national borders and a very corrupt process of privatization, Pepsi would stand to lose everything. Suddenly, they had to over satiate with over a dozen different states, and not all of them were willing to cooperate.
The shipyard building For example, for example, was in Ukraine, while their plastic bottling plant was in Belarus. Over the next year, Pepsi all itself devotes all its energy to reclaim its assets, and amid this chaos, on the company would make a very opportunistic move.
In the wake of Pepsi's struggle, Coca Cola entered the Russian market aggressively. They bought the dollar rises for cents on the dollar during the privatization and went so far in the specialized cocoa they sent specialized Coca Cola cans to the Russian space station.
Unsurprisingly, Coke’s massive campaign paid off: by 1996 it had overtaken Pepsi as Russia’s most popular cola. Nevertheless, today, Russia remains Pepsi’s largest market outside the US, and despite the setback in the early 90 s the Pepsi Company is as profitable as ever. In the end, while Coca Cola might be more popular than Pepsi today, it is Pepsi that truly conquered the Soviet Union.
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