When The Soviet Union Exchanged Their Warships For Pepsi

What are you willing to give to take a sip of your favorite drink? Money? Time? Effort? How about submarines and some warships? A fair deal, if you’re going to ask the Soviets, as there was one time when they traded their ships for Pepsi.

The Creation of the Sugary Elixir

Pepsi is a carbonated soft drink originally created in 1893 by Caleb Bradham as Brad’s Drink. Later on, it was changed to Pepsi-Cola before it was finally shortened to Pepsi.

The drink was originally advertised as a relief to dyspepsia, with cola being its flavor. It was during the Great Depression when cola gained its popularity. Pepsi’s profit doubled from 1936 to 1938.

Unexpected Cultural Exchange

In 1959, the American government arranged the “American National Exhibition” in Sokolniki Park, Moscow, to showcase American products like cars, fashion, art, even an entire American house model. The purpose was to show the Russians the benefits of capitalism. American companies like like Disney, IBM, Dixie Cup Inc., and of course, Pepsi we all eager to sponsor the event.

In 1959, then-President Dwight Eisenhower sent his Vice President Richard Nixon to attend the opening. As Nixon showed the mock-up American kitchen to Soviet leader Khrushchev, they had a heated exchange about communism versus capitalism. The scene was later labeled as the Kitchen Debate. The debate was so heated that Pepsi executive Donald M. Kendall had to intervene and offered Khrushchev a cup of their syrupy soft drink. Some say that it was Kendall’s agenda to have the Russians taste of their carbonated drink and expand Pepsi in their country. Whatever his purpose was when he handed the drink, Pepsi became the hero of the day.

A few years later, Pepsi closed a deal with the Soviet Union to permanently bring their product into their country. It was a great deal, but there was one problem: Soviet rubles were not accepted throughout the world, so unless you spend the money in Russia, they’re practically worthless. They came up with an idea and resorted to the traditional way of business through bartering. Do you know what Russia had that was better than their currency and accepted throughout the world?

Vodka!

The new agreement was that Russia would pay Pepsi in Stolichnaya vodka instead, which sounded like a fair deal. Stoly was so good that it was only made for export, Russians couldn’t buy it(Or most anything else it would seem).

By the late 1980s, Russians were reportedly drinking around a billion servings of Pepsi a year. They really loved its syrupy goodness. Everything was going well until the USSR invaded Afghanistan, and the American people didn’t like that. In response, they boycotted all Russian products in the US, including Stolichnaya vodka. The vodka sales dropped significantly, and Pepsi felt that the deal wasn’t worth it anymore. This would become a recurring problem for Pepsi,  the Soviets would do something bad, and American consumers would respond by boycotting virtually the only Russian export product in the U.S., Stolichnaya vodka

The Drink That’s Worth a Couple Ships

Russia loved Pepsi so much that they didn’t let it go without a fight. So they thought, if the vodka wasn’t worth it anymore, then perhaps their warships would. So in exchange for the sodas, they sent 17 submarines, a Soviet cruiser, a destroyer, a frigate, and some oil tankers. This instantly made PepsiCo the owner of the sixth-largest navy in the world, at least for a while.  In this case, Pepsi would act as a broker, laying off the ships to Swedish breaking yards that would scrap the ships for their steel.

As Kendall told President George H.W. Bush’s national security adviser, “We’re disarming the Soviet Union faster than you are.” 

Soviet Union’s new offer sounded like a huge win for Pepsi had the vehicles not be in terrible condition. The ships were rusty, and only one was in a better condition, although it required constant pumping to not sink. The oil tankers were a different story and Pepsi would lease them to recoup their money in a currency that could be spent.