Pepsi became the first Western product sold in the Soviet Union, and for a brief moment, it was the 6th largest military in the world. It all started during the Cold War.
In 1958, President Dwight Eisenhower and Soviet Premier Nikita Khrushchev agreed to hold expositions in each other’s countries to share ideas and to demonstrate how the citizens of each country lived.
The Soviet National Exhibit was held in New York City, opening in June of 1959. The main focus was the Soviet satellite, the Sputnik. The exhibit also featured the Soviet industry, agriculture, aviation, fashion, and musical performances. Luxury vehicles driven by government officials were also part of the exhibit. Americans were not impressed with the Soviet exhibit at all.
The American National Exhibition took place a month later at Sokol’niki Park, Moscow, and attracted almost 3 million visitors during the summer. People stood in long lines to get a glimpse of how Americans lived and to see the products of America’s free enterprise system; automobiles, Polaroid cameras, General Electric appliances, washing machines, color televisions, models of single-family homes, and voting machines. American art and fashion were also featured, and a film to show a day in the life of an average American. Four hundred fifty companies contributed to the exhibit, such as General Motors, IBM, General Mills, Kodak, Macy’s, RCA, Sears, Whirlpool, Dixie Cup, and Pepsi, even though none of their products could be sold in the Soviet Union.
Vice President Richard Nixon met with Soviet Premier Nikita Khrushchev at the exhibition, and the two got into a heated discussion in the kitchen of a model home, which later became known as the Kitchen Debate. Khrushchev became noticeably sweaty while speaking to Nixon, which prompted Pepsi’s vice president of marketing, Donald M. Kendall, to give Khrushchev a cup of the carbonated, sugary beverage. It resulted in the infamous photo of Khrushchev drinking Pepsi for the very first time — one that Russians remembered long after the exhibit was over.
Eventually, Donald Kendall would become president of Pepsi, and a few years later, the company merged with Frito Lay and became Pepsico in 1965. Kendall made use of his friendship with then-President Nixon to make a trade agreement with the USSR to bring Pepsi to the Russians. The only obstacle was that the ruble could not be exchanged in the international market, so their solution was to pay for Pepsi with Stolichnaya vodka. It was a historical agreement: Pepsi was the first American product sold in the USSR. Pepsi became the favorite beverage among Russians in the late 80s — they consumed approximately a billion servings a year — and Americans enjoyed the Stolichnaya vodka.
The Pepsico-USSR agreement was about to expire in 1989, but this time vodka would not be enough to cover the cost, so they had to come up with a new plan. American newspapers reported the bizarre new deal on April 9, 1990 — Pepsi signed a three billion dollar agreement, but this time they would receive 17 submarines, a frigate, a cruiser, and a destroyer in exchange for Pepsi! The unusual exchange made Pepsi the 6th most powerful military in the world for a few days before they sold the fleet to a Swedish company for recycling.
Kendall bragged to Brent Scowcroft, the United States National Security Adviser under President Bush, “We are disarming the USSR faster than you.”