In 1989, PepsiCo Inc – the multinational food and drinks giant that makes Pepsi cola – reportedly made an arrangement to get its hands on an ample fleet of submarines and warships through an unlikely deal with the Soviet Union. Coca-Cola must have been terrified.
An article in the New York Times reported at the time that Pepsico’s deal with the Soviets included 17 submarines, worth just $150,000 each, plus a cruiser, a frigate, and a destroyer.
The bizarre tale of Pepsi trying to acquire a fleet of Soviet subs closely links to the deep problems faced by the dwindling USSR in the late 1980s. In a last-ditch attempt to pump life back into the stagnating economy, Soviet leader Mikhail Gorbachev pushed through a number of "Perestroika" reforms aiming to encourage enterprise and open up more free trade, allowing more interaction with Western capitalism.
Meanwhile, Pepsico was vying for soda supremacy against Coca-Cola and was keen to do business with Moscow, hoping to get a foothold into this burgeoning consumer market. They already had 21 bottling plants in the Soviet Union, but were eager to open 26 more.
There was just one issue: money.
Since the Soviet ruble was not internationally exchangeable, it was difficult to get money in and out of the country. One way to overcome this was to trade through hard goods instead. So, when Pepsico and Moscow struck up their deal, the corporation agreed to take its profits in the form of Soviet-built ships.
The deal appeared to involve copious amounts of vodka, as you might expect. The Washington Post reported in 1990 that another part of the deal saw Pepsico obtain exclusive distribution rights for Stolichnaya vodka in the US and allowed them to open up two Pizza Hut restaurants – a chain owned by Pepsico at the time – in Moscow.
Perhaps coincidentally, Gorbachev also starred in a 1998 television commercial for Pizza Hut (video above).
It's often reported that this deal would technically give Pepsico the world's "sixth-biggest navy" at the time, armed with a squadron of 17 submarines and a number of battleships. As enticing as that story may be, it would be a bit of a stretch to call this fleet a naval force. It’s safe to say this bunch of Pepsi-Soviet warships were well past their prime. The subs and ships were to be sold for scrap and likely consisted of antiquated, rusted technology that the Soviets weren’t too bothered about losing.
There is also doubt as to whether the deal actually went ahead in the end, however. A 1992 article published in the Los Angeles Times explains that the Pepsico-Soviet deal effectively crumbled when the USSR was dissolved and the plan never came to full fruition, although there were perhaps some "barter" arrangements of cola syrup for Soviet ships at some point in the brief partnership.
Further, a video by History Matters suggests (without listing a source) that all scrapped Soviet ships have been accounted for and, in fact, the deal ended up involving the USSR simply building freight ships for Pepsi.
Regardless, it appears that Pepsi was sure of its side of the story.
“We're disarming the Soviet Union faster than you are,'' Donald M. Kendall, the CEO of Pepsico, reportedly told a national security adviser of US President George Bush Senior.