The USSR was isolated. The communist state closed itself off from the world. It was illegal to take their currency out of the country. Traveling abroad was sanctioned directly by the government. Every aspect of daily life was heavily controlled. In the midst of the Cold War between the Soviet Union and the United States, there was no way a capitalist, american product could be sold within the hermit state. Except the one man that made it happen, Don Kendall.
Born to dairy farmers in a small town in Washington, Kendall was born in 1921. As a young man, he dropped out of college to serve in the second world war. Upon returning home, Kendall began working for pepsi. He rose through the ranks quickly, from working at the Pepsi bottling plant to being promoted to an executive.
With Coca Cola spreading internationally, Kendall knew Pepsi had to expand. Coca Cola already held a monopoly in the United States and Europe following the second world war, but Kendall found a potential market elsewhere. The opportunistic man recognised the Soviet Union as an unexplored market with great potential. But with tensions running high between the opposing superpowers, establishing an American, capitalist business in the communist state seemed far-fetched.
In 1959, an opportunity for Kendall arose. President Eisenhower and Soviet leader Khrushchev, in an effort to forge a warmer relationship, held exhibits. Eisenhower held a Soviet exhibit in New York, and Khrushchev held an American exhibit in Moscow. Vice President Richard Nixon was invited to attend the exhibit in Moscow, showcasing American products. American companies sponsored booths, and Kendall saw this as his opportunity. During this period of high tension between the superpowers, many American companies were wary of associating themselves with the USSR, but not Kendall. The story goes that Khrushchev and Nixon traded heated remarks on communism and capitalism, in what's known as the kitchen debate, as they argued near a model of an american kitchen. Kendall swooped in, offering Khrushchev the sugary beverage. He was quoted telling the soviet premier he had "... two Pepsis here. This one's made in New York, and this one's made in Moscow. I'd like you to try them both, Premier Khrushchev, and tell me which one tastes better." (Stenberg). While Kendall’s stunt made Pepsi a name for itself in the Soviet Union, reignited tension between two superpowers in the 60s meant the Soviet market was closed off. But this wasn’t the end for the determined Pepsi executive. In 1971, Kendall had a second chance. Nixon, now president, along with Soviet Chief executive Alexei Kosygin held an international business conference. After Kendall surprised Kosygin with a pepsi-shaped radio, he agreed to begin negotiations on Pepsi’s entrance to the Soviet market.
The deal was Pepsi could hold a soda-monopoly in the country from 1972 to 1985, when the deal would be revisited. It was a landmark deal, as Pepsi had become the first capitalist product to be sold in the communist state. But one major issue arose. Soviet currency was worthless around the world, and could not be translated into any other currency. So the USSR and Pepsi set up an exchange. In return for Pepsi, the Soviets would provide the company with Vodka to sell in the United States. Plane loads of Pepsi syrup flew into the Soviet Union, while planes full of vodka would return home. The deal was a success. Soon enough, a billion servings of Pepsi were being consumed by Russians. Meanwhile, Americans enjoyed Stolichnaya, the Russian vodka Pepsi sold. However, following the Soviet invasion of Afghanistan in 1989, Americans began to boycott Russian goods. So, in 1989, the Soviet Union signed a deal with Pepsi, handing over seventeen submarines and three warships, allowing the company to double the number of plants they had in the Soviet Union. While the company did eventually lease and sell the submarines and warships for scrap metal, this bizzare deal made Pepsi the sixth largest military in the world at one point. The profitable friendship between the two continued, and in 1990, Pepsi and the USSR signed a three billion dollar deal, the largest ever between the Soviet Union and an American company.
Unfortunately for Kendall, Pepsi’s Soviet monopoly fell with the collapse of the Soviet Union. The company's resources were now scattered across many newly independent states. The fall of the communist state meant their deal had fallen through, and Coca Cola entered the market, with Pepsi struggling to keep up. Coca Cola soon overtook Pepsi as the country’s most popular cola. While Pepsi no longer holds its monopoly, its effort to expand its business into the once isolated state was remarkable. Pepsi’s expansion into the Soviet Union is a peculiar story of a sugary alliance between opposing global superpowers.
Resources
Conradi, Peter. “PepsiCo Sets $3 Billion Barter Deal with Soviets.” The Washington Post, WP Company, 10 Apr. 1990, https://www.washingtonpost.com/archive/business/1990/04/10/pepsico-sets-3-billion-barter-deal-with-soviets/d5c3d727-2808-463a-b956-15245ae11bed/?utm_term=.e63fd8086c27
Ewbank, Anne. “When the Soviet Union Paid Pepsi in Warships.” Atlas Obscura, Atlas Obscura, 10 June 2021, https://www.atlasobscura.com/articles/soviet-union-pepsi-ships.
Kirkpatrick, Tim. “How Pepsi Briefly Became the 6th Largest Military in the World.” Business Insider, Business Insider, 26 July 2018, https://www.businessinsider.com/how-pepsi-briefly-became-the-6th-largest-military-in-the-world-2018-7?r=US&IR=T.
Stenberg, Mark. “How the CEO of Pepsi, by Bartering Battleships and Vodka, Negotiated Cold War Diplomacy and Brought His Soda to the Soviet Union.” Business Insider, Business Insider, 11 Nov. 2020, https://www.businessinsider.com/ceo-of-pepsi-brought-soda-to-the-soviet-union-2020-11?r=US&IR=T.
Image sources
Nixon Presidential Library and Museum, Public domain, via Wikimedia Commons, https://commons.wikimedia.org/wiki/File:1959_Khrushchev,_Nixon,_Brezhnev.jpg
MichaelVaV, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Donald_Mcintosh_Kendall.jpg
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