Pepsi’s Unlikely Military: How a Soda Giant Commanded Warships

You might have heard of world nations that hold the largest militaries. However, for a soda company to hold the 6th largest military in the world seems straight out of a Hollywood movie.

In 1989, PepsiCo Inc. acquired 17 submarines, a cruiser, a frigate and a destroyer from the Soviet Union. The fact that Pepsi possessed the 6th largest fleet is not far from the truth. According to an analysis of Jane’s fighting ships 1898-90, a country operating a squadron of 17 submarines would have tied with India for possessing the seventh-largest fleet of attack submarines. This means Pepsi technically tied with India for the position of the 6th largest fleet in the world. 

The question here is how a soda company came to possess such a large fleet. Also, how it was more of a business transaction rather than a possession of an operating military fleet.

How Pepsi Became The 6th Largest Military Fleet If The World

The story began 30 years earlier in 1959. According to the U.S. state government website, both the USA and USSR agreed to hold exhibitions in each other’s countries to showcase their achievement and lifestyle.

At the opening of the U.S. exhibit in Moscow on July 24, 1959, U.S. Vice President Richard Nixon and Soviet leader Nikita Khrushchev engaged in a rather heated debate. This debate was about their respective political and economic systems inside the model of a modern American kitchen. This discussion became known as the “kitchen debate.”

RELATED ARTICLE: The 10 Bizarre Historical Events That Actually Happened

One of the attractions at this exhibition was a Pepsi vending machine. The story goes that following this heated exchange, Pepsi Vice President Donald Kendall offered Khrushchev a glass of Pepsi.

At the exhibition, the USSR got the first taste of Pepsi. Being the first time a Soviet leader had publicly tasted an American product, it became a historic moment.

Don Kendall, the CEO of PepsiCo at that time saw this opportunity. After years of negotiations, Pepsi became the first ‘capitalistic’ product to be sold in the USSR in 1972.

But there was a major obstacle in Pepsi’s way. It could not take the payment in USSR’s then currency-Soviet Rubles as it could not be converted to any other currencies and had no value outside of the USSR. 

Pepsi came up with a very unique solution to this payment problem. A barter system.

Instead of rubles, Pepsi would receive Stolichnaya vodka, which it would then sell in the US and other countries. This deal would work well for both the parties as both the products would gain a new market.

In 1989, the Soviet’s invasion of Afghanistan led the U.S to impose sanctions on their products, including Vodka. This meant that Pepsi could no longer sell Stolichnaya vodka in the USA. This led to re-negotiations of the deal between Pepsi and the USSR.

Donald Kendall asked for $3 Billion dollars worth of payment for his syrup but the Soviet fell short of offering any hard currency for this payment. Instead they proposed a very unconventional and out-of-the-box alternative solution.

RELATED ARTICLE: 15 Ridiculous Things Billionaires Spend Money On!

The solution was to give Pepsi Naval vessels which included 17 submarines, a cruiser, a frigate and a destroyer. The New York Times report screamed: “Pepsi will be bartered for Ships and Vodka in Deal with Soviets.” It was the largest-ever deal between an American corporation and the Soviet Union.

As a result of this deal, Pepsi, at one point, possessed the 6th largest military fleet in the world. The narrative of being the owner of the 6th largest fleet is not completely true since the fleet consisted of decommissioned battleships that had been retired from active duty.

Having no intentions of operating these ships, Pepsi quickly sold them to a Swedish company for scrap metal.

In 2004, Kendall received the Order of Friendship from President Vladimir Putin for his contributions to Russian commerce.

As fascinating as this historical event is, the story is more about finding an unconventional solution when the problems like these arise.