How Pepsi Won the USSR … And Then Almost Lost Everything

How Pepsi Won the USSR … And Then Almost Lost Everything


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. This video is brought to you by Skillshare. The first 500 people to sign up with the link
in the description will get a 2 month free trial. 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 check it out, I’ll give a two-month free
trial of Skillshare to the first 500 people to use the link in the description. Skillshare is a great platform for learning
really any skill, easily and affordably. For as little as $10 a month you gain access
to thousands of professional classes that are easy to follow even if you’re a complete
beginner. 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.

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