Hidden History: PepsiCo, the world’s sixth largest military

Thu Sep 06, 2018

You would be forgiven for thinking that the American multinational food and beverage company PepsiCo only has numerous lines of delicious snacks to its name. However, as this section has demonstrated time and time again, times of intense human conflict oftentimes breed the most bizarre stories of innovation and circumstance. In this case, we take a closer look at how the competing economic ideologies of the Cold War led to the household brand name PepsiCo briefly becoming the world’s sixth largest military power, if only for a few days.

The story begins in July 1959 under the administration of U.S. President Dwight David Eisenhower. His vice president at the time, Richard Nixon, was sent to represent the U.S. in Moscow at the American National Exhibition, designed to show Soviet citizens the American lifestyle and the supposed superiority of capitalism. At this exhibition, Vice President Nixon and First Secretary of the Communist Party Nikita Khrushchev explored the displays of American technology and consumerism under the hot July sun. First Secretary Khrushchev was particularly prone to sweating, and the increasingly heated discussion he was having with Vice President Nixon certainly did not help.

It was then that the two leaders happened to pass by a display of Pepsi, led by Pepsi’s Vice President of Marketing, Donald Kendall. Seizing the opportunity, Kendall ran to help First Secretary Khrushchev by handing him a cup of ice-cold, sugary goodness. The picture taken of First Secretary Khrushchev is perhaps one of the best unintentional advertisements the company has ever had (in addition to having some rather ironic echoes in the face of more modern advertising attempts to connect the drink to political circumstances).

This story does not pick back up until 1972 with Richard Nixon now the president of the U.S and Kendall now the president of PepsiCo. For years, Kendall (like many other American capitalists) had been seeking ways to tap into the Soviet market and its millions of potential customers. By using his close political position to President Nixon, Kendall was able to reach a trade agreement that would bring Pepsi into the Union of Soviet Socialist Republics (USSR). However, the USSR reached a quandary on how it would actually go about paying to have the product imported and distributed through the company. The solution that was reached was rather simple: vodka. The USSR would trade its large stockpiles of Stolichnaya vodka for the carbonated deliciousness. Thus, in 1972 Pepsi became the first American product to be mass sold in the USSR while also becoming the sole importer of Stolichnaya vodka into the U.S.

In 1989, this trade agreement was due for renegotiation. Already operating over 20 factories across the USSR, PepsiCo’s renegotiated trade deal was valued at around $3 billion (about $5.9 billion today). A stockpile of Stolichnaya vodka was simply not going to cut it. So, the USSR logically traded in the next best thing it had: a fleet of naval warships. So, in 1989, in exchange for continuing to have Pepsi distributed throughout the country, the USSR gave PepsiCo 17 submarines, one cruiser, one frigate, and a destroyer.

This fleet made PepsiCo, for at least a few days, the world’s sixth largest military power. Not seeing much use for a fleet capable of launching a national invasion, PepsiCo quickly sold the fleet to a Swedish company to be recycled into scrap metal. PepsiCo President Kendall would then go on record to tell the U.S. National Security Advisor Colin Powell that “we are disarming the USSR faster than you.”