Russia Once Traded 17 Submarines for Access to More Pepsi. Here’s the Story. [VIDEO]
When Americans think of Pepsi, many simply think soft drink. Russians know the soft drink brand for an entirely different reason. During the height of the Cold War, Pepsico bought 17 Russian submarines. The amount was considered pennies on the dollar. In return, Pepsi would begin to build distilleries in Russia. But how did this peculiar venture come to fruition?
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In 1959, there was an event called the “American National Exhibition.” The event, which is commonly referred to as the “Kitchen Debate,” had Soviet Premier Nikita Khrushchev participate in a debate of sorts with Richard Nixon, who was Vice President at the time.
The event took place in Moscow during a particularly warm period. Nixon noticed his visibly hot counterpart, Khrushchev, and pointed him towards a Pepsi stand located nearby.
The head of Pepsi’s overseas operation, Donald M. Kendall, handed over a bottle of Pepsi to the Soviet leader. Khrushchev took a gulp and immediately loved it – so much so that he started promoting the brand right then and there in front of thousands. “Drink the Pepsi-Cola made in Moscow. It is much better than the Pepsi made in the U.S,” he said.
After the great PR, Kendall realized this could mean millions of dollars for the company with Russians embracing Pepsi.
“I had to get a Pepsi in Khrushchev’s hands, or I’m in the doghouse back home,” Kendall remembered. “I had to get a picture.” It wasn’t done overnight, but Kendall got a deal done with Russia 13 years later. Kendall, who was friends with Nixon, eventually put 21 plants in Russia.
The deal gave Pepsi something that their rival didn’t have — mass distribution in Russia. Kendall was able to sign a three billion dollar deal. The only issue was the Russians were tight on cash in 1989.
One thing they did have plenty of was military equipment. Russia delivered 17 submarines, a cruiser, a frigate and a destroyer all to Pepsi in America. In that year, those wartime items were then sold for $150,000. Even sold for scraps, it made up the difference.
Following the unorthodox trade, Kendall poked fun at the U.S. government by claiming, ‘We’re disarming the Soviet Union faster than you are.” And that is how Pepsi gained 17 Russian submarines.