The Cold War’s weirdest barter: how Pepsi briefly owned Soviet warships

Pepsi’s Secret Fleet: Cold War’s Strangest Naval Power

The Birthplace of Pepsi-Cola in New Bern, North Carolina connects to one of the Cold War’s strangest chapters.

In 1959, Pepsi executive Donald Kendall got Soviet Premier Khrushchev to sip the cola during the famous Kitchen Debate in Moscow.

That publicity stunt launched Pepsi into the Soviet Union by 1972, trading cola syrup for vodka since rubles were worthless.

By 1989, cash-strapped Soviets offered something incredible: 17 submarines and warships worth $3 billion for expanded Pepsi operations, briefly making the soda company the world’s seventh-largest naval power.

This wild story of cola diplomacy started right here at Bradham’s original soda fountain.

Nixon Got Tricked Into Serving Pepsi to Khrushchev

Don Kendall was in a bind at the Moscow American embassy in 1959.

As Pepsi’s international boss, he told Vice President Nixon that Pepsi thought his Moscow trip was a waste of money.

Kendall needed a win and asked Nixon to help get "a Pepsi in Khrushchev’s hand" to make the trip worth it. Nixon agreed to help create this photo moment.

Kendall’s career and Pepsi’s global future depended on this bold move.

The Cold War Cooled Down With a Sip of Cola

On July 24, 1959, Nixon took Soviet leader Khrushchev to the Pepsi booth during the American National Exhibition. Kendall served Khrushchev two Pepsis – one made with American water and one with Russian water.

Photographers crowded around as the Communist boss sipped the American soda. The photos became marketing gold for Pepsi, giving them publicity no ad campaign could match.

This sip changed soft drink history forever.

A Small-Town Pharmacist’s Recipe Reached the Kremlin

Kendall’s Moscow success landed him the Pepsi CEO job in 1963. The drink he gave Khrushchev started in a small pharmacy in New Bern, North Carolina.

Caleb Bradham, a local pharmacist, created "Brad’s Drink" in 1893, later calling it Pepsi-Cola in 1898 after its pepsin and kola nut mix.

The company went broke in 1923, but the brand lived on through several owners before growing into the global name that broke through the Iron Curtain.

Soviet Citizens Lined Up for Their First Taste of America

Pepsi made history in 1972 as the first American product sold in the Soviet Union. This created a unique problem – Soviet money had no value outside the USSR.

Pepsi and the Soviets found a clever fix: Pepsi traded syrup for rights to sell Stolichnaya vodka in America.

This deal gave Pepsi a monopoly in the Soviet market while Coca-Cola stayed locked out, unable to crack the communist market.

Russians Drank Pepsi While Americans Sipped Stolichnaya

The trade worked great for both sides. Pepsi sold Stolichnaya across America while Soviets made cola in their country.

By the late 1980s, Soviets drank over a billion servings of Pepsi yearly from 21 bottling plants across the USSR. Stolichnaya grabbed 70% of the imported vodka market in the US by 1977.

The partnership peaked in 1988 when Michael Jackson starred in the first paid TV commercials ever shown in the Soviet Union – for Pepsi.

The Afghan War Put Pepsi in a Tough Spot

Everything changed when Soviet tanks rolled into Afghanistan in 1979. American shoppers boycotted Russian products to protest the invasion.

Stolichnaya sales crashed across the United States, leaving Pepsi stuck with extra vodka and a failing business plan. Americans refused to buy anything Soviet during the occupation.

Pepsi needed to find another way for the Soviets to pay for their cola since the vodka trade turned sour.

The Soviets Offered Warships Instead of Cash

In spring 1989, the cash-poor Soviet government made a wild offer to expand Pepsi operations: 17 submarines, a cruiser, a frigate, and a destroyer worth about $3 billion.

This strange deal briefly tied PepsiCo with India for the world’s seventh-largest submarine force. CEO Kendall joked with President Bush’s security advisor: "We’re disarming the Soviet Union faster than you are.

" For a moment, a soda company owned more naval power than many countries.

Pepsi Quickly Scrapped Its Accidental Navy

Pepsi never wanted to become a naval power. The company sold the old warships to a Norwegian scrap metal company right away.

The ships were retired, couldn’t sail, and had zero military value. Pepsi simply acted as a middleman rather than planning to run a fleet.

The deal made a few million dollars while giving the desperate Soviets hard currency they badly needed. The cola company got paid, and the Soviets got rid of outdated military junk.

Pepsi Bet Big on Soviet Business

The warship deal led to bigger things in 1990 when Pepsi signed the largest American-Soviet business deal ever, worth $3 billion over ten years.

The Soviets agreed to build 10 commercial oil tankers and cargo ships for Pepsi to rent or sell worldwide. The agreement also doubled Pepsi bottling plants in the Soviet Union.

The company even planned to open Pizza Hut restaurants in Moscow. Pepsi execs called it "the deal of the century.

The Soviet Collapse Left Pepsi Scrambling

December 1991 brought the sudden collapse of the Soviet Union, shattering Pepsi’s massive investment plans.

The company now faced the daunting task of renegotiating with 15 separate successor nations, each with different laws and economic conditions.

Coca-Cola seized this moment of chaos to aggressively enter former Soviet markets for the first time. Pepsi lost its monopoly advantage as borders opened to Western competition.

The carefully constructed business empire Pepsi had built over decades crumbled along with the Soviet state.

A Soda Company Helped End the Cold War

Despite these setbacks, Russia remained Pepsi’s second-largest market outside the US through 2020. Donald Kendall received the Order of Friendship from Vladimir Putin for his economic contributions to Russia.

Pepsi generated $3 billion annually in Russia until the 2022 Ukraine invasion forced another business pullback.

The story of Pepsi’s journey from a New Bern pharmacy to trading for Soviet warships shows how commerce sometimes succeeds where diplomacy fails.

A simple soft drink managed to cross boundaries that seemed impenetrable during the Cold War’s darkest days.

Visiting The Birthplace of Pepsi-Cola in New Bern, NC

You can visit the birthplace of Pepsi-Cola at 256 Middle Street in New Bern for free. Browse memorabilia and historical displays Monday through Saturday 10 a.

m. to 6 p.

m. , Sunday noon to 4 p.

m. Try fresh Pepsi fountain drinks and floats from their working vintage soda fountain.

Check out the Pepsi Family Center exhibit at the nearby North Carolina History Center for interactive displays, plus see the historical marker outside honoring Caleb Bradham.

This article was created with AI assistance and human editing.

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