How Pepsi Once Owned The World's Sixth Largest Navy

It's a no-brainer that Pepsi is an iconic brand renowned globally. But could you ever imagine a company or brand, even if it's as big as Pepsi, owning a navy? And that too one as big as the world's 6th largest? No matter how weird or unimaginable it sounds, it¡¯s true!

Pepsi once owned the world's sixth-largest navy for a brief period. Eager to know how? Read on as we unfold this true story.

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The US-Russia Clash

In the aftermath of the Russian launch of the Sputnik 1 satellite in 1957, the United States was looking to regain the centre stage globally and show to the world that its economical model was better than the communist one presented by the USSR.

So, in 1959, the then-US President Dwight D. Eisenhower felt the best way to do this was to bring American culture to the Russians and to show them the benefits of a capitalist society.

To accomplish this objective, the American government arranged the American National Exhibition in Moscow¡®s Sokolniki Park. In this exhibition, a host of American brands sponsored booths were present, including Pepsi, Disney, IBM, etc. Then-US Vice President Richard Nixon too attended the opening.

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The Heated Argument & Entry Of Pepsi

During the exhibition, Richard Nixon and Soviet Union leader Nikita Khrushchev got into a heated argument over the topic of communism versus capitalism, and the efficacy of their respective economic models.

At that moment, the Head of Pepsi International Donald Kendall offered the Soviet leader a Pepsi to cool down the situation, which he drank and apparently enjoyed as well. This publicity coup accelerated Kendall¡¯s career and he became the company¡¯s president and chief executive officer in 1963.

A Deal Between Pepsi & The USSR

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Some years after that exhibition, the USSR wanted to strike a deal with Pepsi in 1972, but since their money wasn¡¯t accepted throughout the world, there was an issue as to how the Russian government would pay for the exchange. That¡¯s when the idea came: vodka.

Under the new deal, the Soviet Union would provide vodka from its state-owned brand, Stolichnaya, for resale in the US, in exchange for Pepsi. Consequently, Pepsi became the first company to secure such an agreement between America and the USSR during the Cold War.

Stolichnaya rapidly experienced immediate popularity upon entering the US market. In 1973 itself, it was selling about 30,000 cases annually in the country, and by 1980, its sales had topped a whopping 1 million cases a year, making it the second most popular vodka in America.

Soviet¡¯s Desperate Attempt To Not Lose Pepsi: The Navy

By the late 1980s, the USSR¡¯s agreement with Pepsi was about to expire.

However, unlike in previous years, their vodka now wouldn¡¯t be enough to satisfy Pepsi to continue or renew the agreement. This was due to the Soviet invasion of Afghanistan, to which the American people responded by boycotting Russian products, including vodka.

But, the Soviets didn¡¯t want to lose Pepsi, so they put forth a rather unorthodox trade idea with Pepsi. They stated that in exchange for its product, they would give Pepsi a fleet of ships, including 17 submarines, a frigate, a cruiser, a handful of oil tankers and a destroyer, hence instantly making Pepsi the owner of the sixth-largest navy on the planet.

The Journey To The Scrapyard

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Despite this, the newly established Pepsi navy was far from battle-ready, with the ships and submarines in serious disrepair, with only one of the ships being truly seaworthy,, while all of the submarines had serious rust issues.

Nonetheless, the United States government was certainly not pleased to see a corporation suddenly command enough naval firepower to square off with some nations in entirety.

Pepsi¡¯s CEO, Donald Kendall, who had first introduced Khrushchev to the beverage, responded to America¡¯s complaints by reminding the Pentagon that he had just managed to reduce the number of ships at the Soviet¡¯s disposal by a considerable number. Kendall memorably said, ¡°I¡¯m dismantling the Soviet Union faster than you are!

Eventually, Pepsi sold the ships to a Swedish recycling company for scrap, as the company needed to recoup the cost of shipping its product to the USSR.

Regardless of this, it remains true that for some time, Pepsi was the owner of one of the world¡¯s largest navies, showing what can happen when a country¡¯s citizens really love a particular consumer product.

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