PepsiCo and Coca-Cola have been at each other’s throats for a long time now, but PepsiCo takes the lead in a real life war scenario as they had a fleet for them, with love from (now) Russia.
Nearing the end of the Cold War, the USSR came out and made amends with the USA under the liberal leadership of Nikita Khrushchev. This led to Khrushchev being invited to the USA and even the White House, to showcase the different cultures and lifestyles.
There were exhibitions in the summer of 1959, where, in Moscow, the USSR could have a feel of living in a capitalist country and vice versa in New York. This opened up the market of the USSR for US companies like IBM, Disney, etc., and PepsiCo took full advantage of it.
Caught And Bowled
On the eve of the event, Pepsi executive and future CEO Donald M. Kendell insisted Richard Nixon make Khrushchev sip Pepsi. After the debate, Nixon took Khrushchev to a soft drink vending booth and offered the premier a Pepsi.
Khrushchev and his associates loved Pepsi, and after negotiations, PepsiCo started exporting its syrup to the USSR in 1972, leading to the ousting of Coca-Cola in the USSR market.
Pepsi’s introduction to the USSR market was nothing short of enthralling as it was the first company from a capitalist country to set foot as a consumer product that became very popular.
However, there was a slight problem in the payment system, where PepsiCo could not accept Russian Rubles as the currency, for its value was controlled by the Soviet Government.
PepsiCo came up with a brilliant mode of accepting payment, in the form of accepting Stolichnaya vodka, in exchange. The vodka exchange went well as PepsiCo’s Soviet market did exceedingly well for years.
There was another hiccup when the Soviets invaded Afghanistan in 1980. With people boycotting Soviet products as a result, PepsiCo had to get the money in some other form.
In 1989, the Soviet government and PepsiCo signed a weird agreement in which PepsiCo acted as a middleman to scrap 17 old submarines and three warships including a frigate, a cruiser, and a destroyer, which the company sold for scrap, and the tale has just begun.
When the Soviet Union fell in 1991, it laid waste to the $300 billion deal, which was probably the start of all the troubles that they would face in that region. They were fostering a healthy prospect of getting Pizza Hut, which eventually had abysmal performance thanks to the local ingredients that they were forced to use.
Suddenly, their long balancing act turned into a scramble to protect its assets in a free-for-all made more complex by redrawn borders, inflation, and privatization.
Cheese had to be sourced from Lithuania that was asking for the payments to be made in Dollars, and in order to save costs, PepsiCo shifted to plastic bottles, which originated from Belarus, also asking for payments.
That was not all that got stuck, Pepsi’s partially-built ships were stranded in newly-independent Ukraine, which wanted a cut of the sales.
While PepsiCo had to broker deals between 15 countries, Coca-Cola’s aggressive expansion ended the monopoly they enjoyed for about a couple of decades now. Russia is currently PepsiCo’s second-biggest market outside of the United States, but their pioneering advantage has faded.
It didn’t help that PepsiCo had been around for so long that other sodas seemed novel by comparison. After only a few years, Coke beat out Pepsi as Russia’s most popular cola.
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