THE TIME PEPSI BOUGHT NAVAL SHIPS FROM THE SOVIET UNION

As the Soviet Union careened towards dissolution in 1990, PepsiCo found itself an unlikely participant in one of the most peculiar deals of the dying empire.

With rubles worthless outside of the crumbling communist bloc, Pepsi's Soviet operations were starved of hard currency. Seeking to slake Russians' enduring thirst for vodka, Pepsi hatched a novel solution: a barter trade with the Kremlin.

On the table were Pepsi's surplus canning concentrates and syrups, their fountain dispensers bereft of dollars to convert into cold hard vodka.

In return, the Kremlin offered what they had in abundance—the remnants of a once mighty naval fleet now rendered obsolete.

And so in the spring of 1990, U.S. and Soviet negotiators hammered out a barter deal that would see a fizzy American soda replace 17 battle-weary submarines, 2 mothballed cruisers, a destroyer, and a clutch of smaller vessels with the sickly-sweet scent of Pepsi.

It was a landmark moment in the end days of the Cold War, as swords were traded for soda bottles and military hardware valued in the billions was exchanged for sugary syrup worth a fraction.

For Pepsi's bean counters, it must have felt like a miracle—assets received far outstripping the negligible cost of concentrate.

Yet their dreams of becoming admirals of capitalism's newest ragtag flotilla soon sunk amidst the turbulence of Russia's transition to a market economy.

Bereft of skilled crews or ports of call, the fleet swiftly became a rusting liability. By year's end, PepsiCo's Soviet naval ambitions had run aground, as its ships were auctioned off and scrapped at the very ports they once called home.

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PEPSICO MADE A DEAL WITH THE SOVIET UNION DUE TO A VODKA SHORTAGE

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As the Soviet regime tottered in the late 1980s, PepsiCo found itself navigating choppy economic waters.

Though the company had operated in the USSR since the early 1970s, exporting its sweet cola syrup to be mixed and bottled for thirsty Soviet consumers, its operations were hamstrung by tight currency restrictions.

With rubles useless on international markets, Pepsi's Soviet divisions were starved of the hard currency needed to pay the American parent company.

Yet Russians' enduring vodka thirst presented an opportunity to quench Pepsi's currency woes.

If the company could somehow secure vodka, the national tipple could be exported globally in exchange for precious dollars or deutschmarks.

The problem?

Pepsi lacked the rubles within the Soviet Union to buy vodka for export in the first place. And with strict limits on exchanging rubles for other currencies, they were locked out from the very vodka trade they aimed to profit from.  

An unorthodox solution was hatched: use Pepsi's surplus cola concentrate as a bartering chip with the Kremlin.

Swapping syrup for spirits would allow Pepsi to source vodka without being handcuffed by currency controls.

It was an ingenious, if odd-ball resolution to the challenges of doing business on the crumbling edifice of a communist economy.

One that would see Pepsi import billions of dollars worth of top-shelf vodka in exchange for a song, and lead them into even more bizarre Soviet bartering the following year.

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PEPSI DID NOT BUY THE SHIPS—IT WAS A BARTER AGREEMENT

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When news broke in 1990 that PepsiCo had acquired a Soviet naval fleet, sensational headlines portrayed the soda giant buying military hardware like a kid in a candy store.

The reality was far more nuanced. Rather than purchasing ships outright, Pepsi had in fact bartered for the fleet, exchanging its sweet syrup for the Soviet Union's cold steel.

With the USSR disintegrating and the ruble spiraling into freefall, Pepsi’s operations were unable to repatriate profits or pay for imported ingredients.

Instead, a unique barter deal for Pepsi concentrate was struck with the crumbling Soviet regime in the twilight of the Cold War.

On one side: Pepsi's surplus cola cans and bottling supplies, excess inventory rotting in Soviet warehouses.

On the other: 17 submarines, 3 warships and a clutch of patrol boats—aging vessels deemed expendable as the once mighty Soviet fleet rusted at port. Rather than exchanging cash, each side bartered assets that were abundant yet worthless to them alone.

So while headlines portrayed a trivial consumer biz buying military hardware, the reality was far more nuanced.

Teetering under debts and deficits, the Soviets leveraged aging steel for scarce dollars; Pepsi exchanged mere syrup for assets worth billions. A peculiar barter born of necessity as an empire dissolved into chaos.

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THE SHIPS WERE NOT PRIMARILY MILITARY VESSELS–MOST WERE CARGO SHIPS AND TANKERS

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When PepsiCo's fleet of Soviet ships first hit headlines in 1990, the mind conjured up images of soda-fizzled warships and cola-filled submarines. The reality was far less dramatic.

For all the military hardware in Pepsi's barter bonanza, the majority of vessels were distinctly civilian in nature.

Yes, the deal included 17 submarines straight from the Soviet navy's arsenal along with 3 retired warships.

Yet the remaining vessels were far from battle-ready.

Instead, workhorse ships better suited to carrying cargo than missiles or torpedoes filled out Pepsi’s new fleet. Dry goods carriers, oil tankers and fishing trawlers—worn down from decades plying Soviet maritime trade rather than stalking NATO fleets.

So while the oddball images of destroyers and submarines retrofitted with Pepsi livery were eye-catching, they presented only part of the picture.

Had Pepsi sought to launch a private navy, far more useful were the cargo hulls and engineering equipment they now possessed.

Yet transforming the motley fleet into one capable of military conversion was an altogether different and implausible prospect.

In the end, missiles and torpedoes were far scarcer than Soviet reports suggested on Pepsi’s ramshackle flotilla. And cold hard cargo would prove its most useful asset.

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PEPSI DID NOT INTEND TO OPERATE THE SHIPS THEMSELVES

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When PepsiCo stunned the world in 1990 by acquiring part of the Soviet Union’s naval fleet, wild speculation arose around the soda giant’s intention to operate the ships.

Images emerged of Pepsi becoming an improbable maritime conglomerate, its logo emblazoned across destroyers and submarines.

The reality was far more prosaic.

Swiftly it became apparent that Pepsi had little intention of playing naval commander with its motley flotilla.

Bereft of skilled crews to operate the vessels and port infrastructure to house them, the fleet swiftly became a costly liability floating aimlessly at harbor.

Like the rusting navy it had been bartered from, Pepsi similarly lacked the capacity or expertise to reroll obsolete military assets into civilian trade.

Instead, it was the ships’ barter value that interested Pepsi, not their use as seafaring assets. With the Soviet regime circling collapse, and the ruble plummeting in value, the aging vessels presented an opportunity to recoup vast sums of stable hard currency.

So while Soviet bargain hunters snapped up Pepsi concentrate, the soda giant offloaded the ships as swiftly as negotiations allowed.

In the space of months, PepsiCo’s dreams of becoming an oceanic trading empire evaporated. Sold for scrap, or to those with maritime knowledge far outstripping Pepsi’s own, the loss-making fleet rapidly departed.

And with it disappeared visions of a reborn Pepsi armada playing the seven seas. For PepsiCo, known for selling fizzy drinks not maritime exploits, running cargo proved a stretch too far.

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PEPSICO QUICKLY REALIZED THEY LACKED EXPERTISE AND RESOURCES TO MAINTAIN OR OPERATE THE SHIPS

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When PepsiCo secured a motley fleet of Soviet vessels in a 1990 barter deal, they swiftly realized they had bitten off more than they could chew.

Where Soviet naval commanders had once overseen missile cruisers and nuclear submarines, Pepsi found itself dangerously out of its depth playing captain.

Bereft of skilled sailors to maintain the aging fleet, Pepsi’s ships rapidly deteriorated as they sat rusting at harbor.

With no infrastructure to house them, the company scrambled to offload the financial liability of creaking ships needing constant upkeep and repair. Engine parts proved impossible to source as Soviet supply chains collapsed along with the empire itself.  

The fleet swiftly moved from curiosity to catastrophe for Pepsi’s balance sheet.

Their core business was selling soda, not securing standing rigging or overhauling diesel engines.

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THE SHIPS' VALUE WAS LOWER THAN THE VODKA THEY HAD HOPED TO ACQUIRE

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When PepsiCo brokered an eye-catching deal for part of the Soviet Union’s naval fleet in 1990, they envisioned tapping into a lucrative export market for premium vodka in exchange for a motley flotilla.

Yet the harsh reality soon set in that the vessels were worth far less than the vodka profits they had been swapped for.  

Initially, it seemed a masterstroke - obtaining 17 submarines, 3 warships and assorted civilian vessels in return for Pepsi concentrate worth a pittance.

After all, the aging ships cost the Soviets dearly to operate while fetchingly handsome sums as they were sold for scrap or to foreign navies.

However, with the USSR disintegrating before their eyes, buyers evaporated almost as quickly as Soviet power. Bereft of crews or infrastructure to maintain them, the ships rapidly degraded in port.

Desperate for hard currency, Soviet officials offloaded obsolete vessels for cents on the dollar. And so by the time PepsiCo entered fire sales to cut their losses, the fleet’s value had sunk far below the billions in vodka exports they had targeted.

Instead of becoming spirit barons with a navy at their command, PepsiCo had only briefly rented the Soviet Union’s rusting steel. And the Cyrillic lettering fading on their second-hand warships would soon serve as an analogy for the transfer of superpower itself as the communist empire was swept into the dustbin of history.

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PEPSICO SOLD THE SHIPS TO SCRAP METAL COMPANIES AND SHIPPING LINES OVER NEXT FEW YEARS

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As PepsiCo swiftly realized they lacked the capacity to operate the Soviet fleet they had temporarily inherited, an urgent question arose—how to divest themselves of this costly naval liability?

With the ships deteriorating at harbor and proving impossible to crew or maintain, the company wasted no time auctioning them off to the highest bidders able to take the rusting vessels off their hands.

A motley collection of scrap merchants, salvage companies, and adventurous shipping firms picked over the remnants of Pepsi’s navy as the Soviet Union collapsed.

Offloaded for pennies on the dollar, the flagship of Pepsi’s fleet—a missile cruiser—was sold to a Chinese businessman for scrap metal.

Several submarines found their way into private ownership, becoming museum curiosities scattered from Britain to the Cayman Islands. Other vessels were sold to Indian and Pakistani shipbreakers, their steel carcasses picked clean on the shores of the Indian Ocean.

As the large warships proved difficult to sell in a declining market, many second line merchant ships and fishing trawlers were more easily offloaded to Soviet buyers.

Bereft of expertise or the desire to dabble in maritime trade, Pepsi delegated the complex disposal job to brokers, who slowly whittled away their client’s naval entanglements. And so, piecemeal, the ships departed often to ambiguous fates - a peculiar postscript to a peculiar chapter of Cold War history.