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 outpaced Coca Cola in a dramatic fashion.
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.
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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 actually 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 the course of 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.
In fact, 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 Soviet ruble was essentially worthless outside the USSR.
The Kremlin determined its value and forbade anyone from taking the currency abroad.
It took Kendall almost a decade to finally negotiate a solution: for every bottle of
Pepsi sold, the Pepsi company would receive an equivalent amount of Stolichnaya vodka
to be sold in America.
Pepsi became the first capitalist product sold in the USSR and the deal turned out surprisingly
well: by the late 1980s 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 he announced incredible news: Pepsi would become the proud owner of
17 diesel submarines, a cruiser, a frigate and a destroyer, courtesy of the Soviet Union.
For a brief moment, Pepsi had become the 7th largest navy 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 the Soviet 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 tankers for him 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 trade arrangement turned into a frantic scramble to salvage its Russian
assets.
In the midst of hyperinflation, redrawn national borders and a very corrupt process of privatization,
Pepsi would stand to lose everything.
Suddenly, they had to negotiate with over a dozen different states, and not all of them
were willing to cooperate.
The shipyard building Pepsi’s tankers, for example, was in Ukraine, while their plastic
bottling plant was in Belarus.
Over the next year Pepsi would devote all its energy to reclaim its assets, and in the
midst of this chaos, one company would make a very opportunistic move.
In the wake of Pepsi's struggle, Coca Cola entered the Russian market aggressively.
They bought out factories for cents on the dollar during the privatization and went so
far in their marketing that 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 90s 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.
Now, if you enjoyed the smooth visuals of this video and have been thinking “Hmm,
I’d actually want to learn how to do that”, I have very good news for you.
Skillshare have a great course on this effect, which is called parallax, and if you wanna
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So go check Skillshare out, I’m sure you can learn a lot on there.
In any case, thanks a lot for watching and huge thanks to all my patrons on Patreon for
making these videos possible.
We’ll see each other in two weeks, and until then, stay smart.