How PepsiCo and Coca-Cola clashed for control of the Soviet Union

[Yankee-stani]

The Soviet Union was the only country in the world where Coca-Cola lost the market to its eternal opponent.
The Soviets first got acquainted with Coca-Cola in the 1930s, when an official delegation visited America. Colonizing the USSR with the iconic U.S. brand was deemed too expensive at the time, but there was an idea to set up production lines with completely different ingredients. Instead of coca leaves Georgian tea was proposed. However, the new drink - Ruscola as it was dubbed - would never see the light of day.

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After World War II, Coca-Cola had a chance to get inside the Soviet bloc thanks to a famous personality. Marshal Georgy Zhukov, one the war's most famous Soviet generals, had developed a taste for Coke, after being introduced to the fizzy concoction by Allied forces commander General Dwight D. Eisenhower.

Zhukov, however, couldn’t openly drink an American branded drink. He asked the company to create a special Cola, colorless like vodka, and not in such a “funny-looking bottle.” Soon he got dozens of bottles of White Coke, topped with a red star on the crown cap.

Zhukov didn’t try to promote Coca-Cola in the USSR, preferring to keep it for personal use only.

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Coca-Cola seemed destined to enter the Soviet market - but old rivals PepsiCo were to beat the company to it.

In 1959, at the U.S. National Exhibition in Moscow, vice-president Richard Nixon did a favor for his friend, Pepsi CEO Donald McIntosh "Don" Kendall, and guided Nikita Khrushchev to the Pepsi stand. The Soviet leader was so amazed with the drink that he drank half a dozen glasses.

A photo of Khrushchev with a Pepsi cup covered the front pages the next day - giving the brand a massive boost. “Khrushchev wants to be sociable,” echoed Pepsi’s U.S. advertising of the time: “Be sociable, have a Pepsi.” It was a big blow for Coca-Cola.

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Negotiations to bring Pepsi to the Soviet Union took more than a decade: the drink only arrived in 1972, when PepsiCo started supplying concentrate and equipment for future factories. The first Pepsi plant opened in Novorossiysk on the Black Sea coast in 1974.

N. Arkhangelskiy/Sputnik
Monetising the drink proved more difficult. Soviet rubles were not traded internationally, since the Kremlin forbade currency exports. The solution was to use barter. Pepsi concentrate was swapped for Stolichnaya vodka and the popular spirit's U.S. distribution rights.

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Coca-Cola bosses were horrified to see Pepsi become the first American brand to take root in the Soviet Union and jealous that the massive, potentially lucrative Soviet market was eluding them. Coca-Cola CEO J. Paul Austin parlayed his friendship with U.S. President Jimmy Carter to get direct access to Soviet leaders. As a result of their talks Coca-Cola finally came to the USSR. In 1979, limited quantities of fizzy orange drink, Fanta, appeared in Moscow, Kiev and Tallinn.

Vladimir Fedorenko/Sputnik
The Moscow Olympics of 1980 presented Coca-Cola with a golden opportunity. Although the U.S. declared a boycott of the games following the Soviet invasion of Afghanistan, Coke ignored it, pointing to the fact that it had been sponsor and partner of the Olympics since 1928. As a multinational company it was above politics, it added. Thus Coca-Cola became the main drink of the Moscow Games.

Boris Kavashkin/TASS
In 1986, Coca-Cola production finally began in the Soviet Union. Lada cars were swapped for the concentrate. It wasn’t a profitable agreement, since it took three days to reconstruct each car before putting it on the European market. Coca-Cola bosses saw it as a loss leader and a way into the Soviet market, where they could take on their arch-rival Pepsi - and perhaps one day eject it.

Vladimir Rodionov/Sputnik
With Coca-Cola's entrance into the Soviet market in the late 1980s, the struggle of the fizzy drinks behemoths heated up. PepsiCo was the first foreign corporation to start advertising on Soviet TV, with spots featuring Michael Jackson. Coca-Cola became the first foreign company to place an advertising banner on the roof of a downtown Moscow building.

Valery Khristoforov/TASS
In 1989, PepsiCo and the Soviet government signed an incredible barter deal, swapping concentrate for 17 decommissioned submarines and three warships, which the company sold for scrap.

“We’re disarming the Soviet Union faster than you are,” Kendall quipped to Brent Scowcroft, President George H.W. Bush’s national security adviser.

Ivan Vtorov/Wikipedia
After the fall of the Soviet Union, the two soda giants found themselves in a new world: instead of one closed Soviet market, they inherited a dozen new ones in former Soviet republics. The two corporations began a new battle to win the hearts and cash of potential customers.

Valentin Kuzmin/TASS
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[Yankee-stani]

How did Pepsi become the first American brand to take root in the Soviet Union?

Did you know that PepsiCo tried to deal in Soviet submarines and tankers, and had a monopoly on selling Stolichnaya vodka in the U.S.?
“We had a very beautiful uniform, like that of doctors: white robes, hats, clothes made personally for each worker. We were all proud of our work, and it was very prestigious to work here,” recalled Valentina Merezhko, a resident of the southern city of Novorossiysk (link in Russian). She was one of the lucky ones who worked in the USSR’s first Pepsi plant, which opened its doors in 1974, making up to 160,000 bottles of Pepsi per shift.

The head of the company at that time, Donald M. Kendall, named it “the best and most modern PepsiCo plant in the world.” He must have been surprised that the plant was completed in just 11 months – something never achieved before with any other Pepsi plant.

Kendall had been dreaming of it for years, but it was in the summer of 1959 that good fortune came his way at the U.S. National Exhibition in Moscow’s Sokolniki Park. At that time, he was in charge of Pepsi’s international operations, and asked Richard Nixon, then U.S. Vice President, to help him “get a Pepsi in [Nikita] Khrushchev’s hand.” Nixon agreed, and the rest is history. The company was eager to enter the Russian market, especially since Pepsi’s key competitor, Coca-Cola, was not active there.

Nikita Khrushchev (left) tastes Pepsi in 1959 at the U.S. National Exhibition in Moscow. He is watched by U.S. Vice President Richard Nixon (center) and Donald Kendall (right).

Fai/Legion Media
In between talks with the Soviet leader on their countries’ rivalry in the production of consumer goods, Nixon fulfilled his promise to Kendall and the above picture was taken. This was the best advertisement that a company could possibly want in the Soviet Union at that time!

Nixon actually tricked Khrushev, asking to taste two types of Pepsi: one made in the U.S., and one made in Moscow (our guess is that the Americans brought concentrate to Moscow and added local water). Of course, the Soviet leader preferred the latter and then promoted it to everyone at the exhibition. The press went crazy and published photos of Khrushchev holding a Pepsi with the caption, “Khrushchev wants to be sociable,” which was a reference to Pepsi’s slogan in the U.S. at that time: “Be sociable, have a Pepsi.”

Barter for Vodka
It wasn’t until 1972, however, when Pepsi became the first capitalistic brand produced in the Soviet Union. According to the agreement, PepsiCo started to supply concentrate and equipment for 10 future production plants where concentrate was to be diluted, bottled and distributed across the country.

One issue to solve, however, was payment. Soviet rubles could not be internationally exchanged because of Kremlin currency controls, which made it illegal not only to trade them internationally but also to take the currency abroad. Therefore, a barter deal was made whereby Pepsi concentrate was swapped for Stolichnaya vodka and the right for its distribution in the U.S. – liter per liter.

Originally, it was expected that the first plant would appear in Sochi, but due to the lack of fresh water sources nearby it was decided to build it in Novorossiysk. When the plant opened, Soviet people often would visit Novorossiysk with two goals: a holiday on the Black Sea, and to try Pepsi.

Apart from Kendall and his board of directors, Soviet leader Leonid Brezhnev also came to see the first Pepsi plant.

Vladimir Musaelyan/MAMM/MDF/TASS
By the end of 1982 seven more plants appeared: in Moscow, Leningrad, Kyiv, Tashkent, Tallinn, Alma-Ata and Sukhumi.

Teenagers celebrate the end of school, Moscow, 1981.

Ivan Vtorov
In 1973-1981, as many as 1.9 million decaliters of Stolichnaya vodka worth $25 million was shipped to the U.S., and 32.3 million decaliters of Pepsi was produced, earning the Kremlin 303.3 million rubles. The barter deal with the USSR only allowed the company to profit from vodka sales in the U.S. – it didn’t benefit from Pepsi sales in the Soviet Union.

A Pepsi stand in Moscow, 1983.

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The price for a bottle of the American soft drink was twice the cost of Soviet drinks (lemonad was 10 kopecks), and one could buy a 0.33 liter bottle for 45 kopecks, and then return the glass bottle to get 10 kopecks back.

In 1988, Pepsi was the first Western brand to place a paid commercial on Soviet TV. The ad featured none other than Michael Jackson.

Pepsi’s warships
Following the American reaction to Soviet intervention in Afghanistan in 1979, the sales of vodka plummeted and PepsiCo started to look for something else to barter. The company founded a peculiar way to continue its business – Soviet warships.

In May 1989, Pepsi bought 17 submarines (for $150,000 each), a cruiser, a frigate and a destroyer, which all were later resold for scrap. Plus, the company bought new Soviet oil tankers and later leased them or sold them in partnership with a Norwegian company. It was then that Kendall famously remarked, addressing U.S. national security adviser Brent Scowcroft, “We're disarming the Soviet Union faster than you are.”

A 1990 Pepsi commercial in the USSR: “New generation choses Pepsi.”

A year later, the company signed a historical $3 billion deal with the Kremlin to swap 10 Soviet tankers and freighters worth more than $300 million for Pepsi concentrate.

Despite Kendall’s hopes that this would foster PepsiCo’s further expansion in the country, the collapse of the Soviet Union ruined his plans and the company never claimed the ships. They were located in a newly independent Ukraine that wanted to bargain something for itself. Suddenly, PepsiCo had to deal with 15 states instead of one. The worst part – its key competitor, Coca-Cola, now entered the market, and PepsiCo struggled to hold on to its market share in Russia.

Pepsi from a Moscow-based plant, 1991.

Vladimir Akimov/Sputnik
Today, Pepsi enjoys a strong position on the Russian market producing a wide range of items. Yet, from time to time, Russians nostalgically recall the unique taste of Pepsi in a glass bottle saying that it tasted better than today because plastic ruins the taste.

Here’s something that shows the extent of this nostalgia: One lucky owner of an original Soviet-era Pepsi bottle offered to sell it for 6,400 rubles ($110) – an already expired product, of course, but still a nice find for lovers of vintage items!

Want to know more about life in the Soviet Union and daily habits in those times? Check out 10 things you can only understand if you lived in the USSR.

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White Coke: The capitalist drink Soviet generals couldn’t get enough of


Coca-Cola made a worldwide splash in WWII, but the capitalism-tinged soft drink was kept well away from the USSR. The privilege was only extended to one man, who happened to be the greatest Soviet war hero…
It’s hard to imagine a world without Coca-Cola. Love it or leave it, it’s just there – an unavoidable sugary temptation for those who drink it, something to constantly refuse for those who don’t, and a Santa Claus-endorsed symbol of consumerism for all involved. It’s no wonder, then, that the Soviet Union tried to keep the world’s best-known soft drink from vaulting over the Iron Curtain.

However, it appears the rules were bent just once. When Red Army General Georgy Zhukov expressed a desire for the syrupy soda in the latter stages of WWII, his wish was not only granted, but the company went out of its way to produce a special edition drink for the decorated war hero. How did this happen?

A divisive drink
“Coca-Cola, the drink that fights back,” read one Coca-Cola ad from 1943; “Have a Coke = Soldier, refresh yourself,” another. The idea that Coke symbolizes America and American global presence is not just speculation, but an image that the brand itself has aggressively promoted throughout its history.

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WWII was Coke’s most successful marketing campaign; the soda giant built 64 factories in re-captured North African and European territories (from which over 5 billion bottles were distributed to soldiers). Images of G.I.’s washing down ice cold bottles of Coke (“the taste of home”) were seen worldwide.

The Soviet Union was not completely impervious to Western branding: Ford played a significant role in 1930s Soviet industrialization projects, while Pepsi became the first mass-marketed American brand in the USSR in the 1970s. Coke, however, was a different story: Tom Standage, author of A History of the World in Six Glasses, argues that Coca-Cola long avoided the communist behemoth for marketing purposes, and was fearful that its profits would fill up state coffers.

The Coke-filled faultline between communism and capitalism was well-marked. The first man to cross it was no capitalist, but Marshal Zhukov, the man who drove the Nazis out of Stalingrad and marched them back to Berlin.

However, there was simply no way he could be seen drinking the stuff.

Zhukov’s biggest call
It’s rumored that Zhukov was first given a taste of Coke by General Dwight D. Eisenhower, and immediately fell for the sugary sensation. Trapped between a rock and a hard place, converted “Coke addict” Zhukov now had to navigate a way between his sweet tooth and his ideological allegiances.

The solution he came up with? “White Coke.”

According to Mark Pendergrast in For God, Country and Coca-Cola, Zhukov’s feelings became known to General Mark W. Clark, the U.S. commander in Austria in 1946, and a special request was made to Coca-Cola for the creation of a transparent soda. His only demand was that the drink was not “put in that funny-looking bottle” and made “a different color.”

Marshal Georgy Konstaninovich and General Dwight D. Eisenhower at a rendition of the USSR and USA national anthems during Eisenhower's Moscow visit

Sputnik
The final product, produced in Brussels, was caramel-free and packaged in a straight-edged bottle. The goal of this? To make White Coke a vodka lookalike, deemed a much more acceptable public tipple than the supposed capitalist dishwater. A red star was even embezzled on the drink’s cap as an acceptable form of Communist/Coca-Cola branding collaboration.

For their troubles, Coca-Cola was given free passage to the Soviet-controlled parts of Vienna without any bureaucratic minefields.

The White Coke project was halted after the 50 crates were produced in 1946 for Zhukov. Although it was little more than a low-key favor between two generals, it’s indicative of the pre-Cold War era’s spryness, when senior Soviet and American government officials went to great lengths to inspirit the countries’ alliance.

And although he may not have lived to see his idea’s legacy, Zhukov was a visionary in a way: in 1992, Coca-Cola released their own “Tab Clear” crystal cola, which was pulled by 1994.

Global Look Press
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