May 5, 2025 • 9 mins
On this episode of Our American Stories, as strange as it sounds, Pepsi (yes, the cola manufacturer) once owned a fleet of Soviet warships, briefly making it the sixth-largest navy in the world. Here's The History Guy with the story of how a soft drink company found itself in the middle of Cold War politics and an international trade deal gone sideways.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
This is our American Stories, and our next story comes
to us from a man who's simply known as the
History Guy. His videos are watched by hundreds of thousands
of people of all ages on YouTube. The History Guy
has also heard right here on our American Stories. Today,
the History Guy remembers Rubles Cola and a kitchen that
(00:31):
changed history. It is a forgotten moment during the Cold
War that deserves to be remembered. Here's the History Guy.
Speaker 2 (00:40):
Soft drinks or hard business. The total worldwide beverage market
value in twenty eighteen was estimated at two point two
trillion dollars. The Coca Cola Company's net operating revenues in
twenty sixteen were over forty billion dollars. The industry is
so lucrative that it represents one of the longest lasting
wars in modern history, the Kola Wars. While beverage industry
(01:03):
giants Pepsi and Coke have been competing since their creation
in the nineteenth century, the Cola Wars referred to a
particularly aggressive advertising against each other since the nineteen eighty
That war took an odd turn in nineteen ninety when
PepsiCo purchased a fleet of warships, yes, actual warships that
gave them, at the time the sixth largest submarine navy
(01:25):
in the world. That event had to do with the
peculiarities of the world's second oldest national currency, the most
significant world conflict of the post World War two era,
and a visionary businessman. It is a story that deserves
to be remembered. The ruble offered a unique challenge for
the Bolsheviks following the Russian Revolution. In Marxist theory, money
(01:48):
should not be necessary and only encouraged the sort of
personal desire that was contrary to the idea of a
classless society. As Leon Trotsky explained, in a communist society,
the state and money will dissa. But the Marxist revolutionaries
realized that abolishing money would not be easy. As Trotsky continued,
money cannot be arbitrarily abolished, nor the state and the
(02:09):
old family liquidated. They have to exhaust their historic mission,
evaporate and fall away. But while the Soviets kept the ruble,
an important aspect of the new Soviet ruble as opposed
to most national currency that the ruble was not convertible,
that is, Russians were not allowed to use their rubles
to buy foreign currencies. There's a reason for this. In
(02:32):
capitalist countries, currency is a market. In fact, its purpose
is to support market mechanisms. But in the Soviet Union,
currency was a tool of centralized planning. With non convertible currency,
Russians could only use the money that they were paid
to buy from government stores that only sold products sanctioned
by the government with prices set by the government. This
(02:54):
difference in economic philosophy would be a primary driver of
the defining conflict of the period following the Second World
War the Cold War, and it would become the topic
of a well known debate that will eventually result in
a novel challenge to the convertibility of the ruble, and
that famous debate would occur in a kitchen. During a
(03:14):
period of rising tensions, the Eisenhower administration and Soviet Premier
Nikita Krushchev decided to have a cultural exchange to promote
understanding between the two nations. Each nation would host an
exhibition in the other's country, showcasing the daily life of
their citizens. The Soviet exhibition was held in New York
in June of nineteen fifty nine, and the American exhibition
was held in Moscow in July. For their exhibition, the
(03:38):
Americans built a model home meant to represent a typical
American home. The model home was based on an actual
house three ninety eight Town Line Road in Comak Long Island.
For the exhibition, the model was split down a central
hallway to allow the public to view the inside, and
thus earned the nickname split Nick. And It included a
model kitchen full of modern appliances, and it was there
(04:01):
that Soviet Premier Kruz jeff and US Vice President Richard
Nixon got into an impromptu debate about the relative value
of their competing economic systems that became known as the
Kitchen Debate. The Kitchen Debate is interesting for a number
of reasons, but it was notable that, in the middle
of a tense Cold War, it was not a debate
about armies in rockets, but of homes and tractors and
(04:23):
kitchens and how each system provided for its citizens. It
was certainly pointed, but cordial, and became a propaganda point
for both sides. Not many mines were changed. As Khrushchev summarized,
I am a lawyer for communism, you are a lawyer
for capitalism. Let's kiss, but During that debate, a particular
capitalist was watching closely. Donald M. Kendall was the vice
(04:47):
president of marketing for Pepsi Coola, which had a booth
that the American National Exhibition just around the corner from
the famous kitchen. While soda was popular in America, it
was virtually unknown in the Soviet Union. Kendall saw opportunity
in that market and had been desperate to get Khrushchev
to take a drink of pepsi. As the debate grew
heated both literally and figuratively, Khrushcheff began to sweat, and
(05:11):
Kindle dropped in with a cold cup of pepsi. The
photo op was a marketing coup, but it would be
nearly a decade before Don Kendall could take advantage of
that opportunity. By nineteen sixty eight, he was the CEO
of PepsiCo and his friend Richard Nixon had been elected
President of the United States. Leveraging his White House connection,
(05:33):
Kindall was able to negotiate an exclusive contract to produce
and sell Pepsi cola behind the Iron Curtain. But there
was a problem the Soviet ruble. Since the ruble was
non convertible. The Soviets had very little foreign currency to
pay for that Pepsi, cola and rubles had no value
outside the Soviet Union. The answer came in the form
(05:54):
of a trade. In exchange for selling soft drinks in
the Soviet Union, Pepsi got the rights to sell hard
liquor to the West. Pepsi was paid in vodka, specifically
stolitch Naya, a premium brand produced in Russia that had
won a gold medal in an international competition in nineteen
fifty three. Pepsi was given exclusive right to sell stolach
(06:16):
Naya outside the Soviet Union. Pepsi became the first Western
consumer item to be manufactured and sold in the Soviet Union,
and stolach Naya became the first premium vodka to be
imported for sale in the United States. The deal was
struck in nineteen seventy two, but production did not start
until nineteen seventy four, and that started the fifteen year
exclusive contract that shut rival Coca Cola out. But when
(06:39):
it came time to renew the contract in nineteen eighty nine,
the situation in the Soviet Union had changed. Mikhail Gorbacheff
had become the premier in nineteen eighty five and had
instituted significant reforms called glassnost and Perestroika, or openness and restructuring.
The Soviet economy was facing challenges as a result, and
(07:00):
Gorbachev was supporting more connection between markets. PEPSI was only
too happy to expand, looking to increase from twenty six
factories in the Soviet Union to fifty. But the ruble
was still not convertible and would not be for many years,
and the three billion dollar deal was simply too big
to be paid in vodka. So the Soviets sold them
something of which they had, and excess warships, specifically a cruiser,
(07:26):
a destroyer, a frigate, and sixteen submarines. At the time,
PepsiCo had the sixth largest submarine navy on Earth. Don Kendall,
then chairman of the PepsiCo Executive Board, equipped to US
National Security Advisor Brent Scocroft that we are disarming the
Soviets faster than you. The Kitchen debates and the national
(07:48):
expositions actually represented a relative thaw in US Soviet relations,
but in nineteen sixty a us U two spy plane
was shot down over the Soviet Union and relations sank
to a new low. The Cold War will continue for
another three decades. Donald M. Kimball became the CEO of
Pepsicola in nineteen sixty three and didn't retire from that
position until nineteen eighty five, and then continued as chairman
(08:10):
of the executive board to nineteen ninety one. In addition
to his deal to sell Pepsi behind the Iron Curtain,
he shepherded the company through the merger with Fredo Lay
that created PepsiCo, Inc. The ninety six year old is
now retired and lives in Washington State. The modest ranch
house at three ninety eight Town Lined Road in Comack
Long Island that was the model for the nineteen fifty
(08:30):
nine American National Exposition is still there, although the famous
kitchen has been remodeled. Making the ruble convertible was not
an easy feat. The Soviet ruble was replaced by the
Russian ruble in nineteen ninety two, but significant marketing and
banketing reforms were required to make the currency convertible. Was
not made fully convertible in two thousand and six, as
the ruble was tied to Russia's energy trade. Its value
(08:52):
has been volatile, but many argue that it is set
to become a larger player in currency markets that are
becoming less dependent on the US dollar. No, PEPSI did
not use it summarines to sint cargo ships carrying Coca cola.
They were actually sold for scrap, just another barter. But
it is ironic that at the very center of the
Cold War, the lawyer for communism would take a sip
(09:12):
out of a cop bring one of the world's most
recognized symbols of capitalism, and as a result, Pepsi would
play a notable role more than three decades later in
the end of that Cold War, right down to bringing
up the weapons of war selling them for scrap. The
day that Pepsi got a navy deserves to be remembered.
Speaker 1 (09:33):
And special thanks to the History guy. History deserves to
be remembered. And you can find all of his work
at YouTube. And we treasure our partnership. And again that
is the History Guy. And if you've got some history
stories like this, family stories, town story, state story, send
them to us. The Cold War, the Cola Wars, the
story of Pepsi and the Ruble, all of it here
(09:55):
on our American Stories
This is our American Stories, and our next story comes
to us from a man who's simply known as the
History Guy. His videos are watched by hundreds of thousands
of people of all ages on YouTube. The History Guy
has also heard right here on our American Stories. Today,
the History Guy remembers Rubles Cola and a kitchen that
(00:31):
changed history. It is a forgotten moment during the Cold
War that deserves to be remembered. Here's the History Guy.
Speaker 2 (00:40):
Soft drinks or hard business. The total worldwide beverage market
value in twenty eighteen was estimated at two point two
trillion dollars. The Coca Cola Company's net operating revenues in
twenty sixteen were over forty billion dollars. The industry is
so lucrative that it represents one of the longest lasting
wars in modern history, the Kola Wars. While beverage industry
(01:03):
giants Pepsi and Coke have been competing since their creation
in the nineteenth century, the Cola Wars referred to a
particularly aggressive advertising against each other since the nineteen eighty
That war took an odd turn in nineteen ninety when
PepsiCo purchased a fleet of warships, yes, actual warships that
gave them, at the time the sixth largest submarine navy
(01:25):
in the world. That event had to do with the
peculiarities of the world's second oldest national currency, the most
significant world conflict of the post World War two era,
and a visionary businessman. It is a story that deserves
to be remembered. The ruble offered a unique challenge for
the Bolsheviks following the Russian Revolution. In Marxist theory, money
(01:48):
should not be necessary and only encouraged the sort of
personal desire that was contrary to the idea of a
classless society. As Leon Trotsky explained, in a communist society,
the state and money will dissa. But the Marxist revolutionaries
realized that abolishing money would not be easy. As Trotsky continued,
money cannot be arbitrarily abolished, nor the state and the
(02:09):
old family liquidated. They have to exhaust their historic mission,
evaporate and fall away. But while the Soviets kept the ruble,
an important aspect of the new Soviet ruble as opposed
to most national currency that the ruble was not convertible,
that is, Russians were not allowed to use their rubles
to buy foreign currencies. There's a reason for this. In
(02:32):
capitalist countries, currency is a market. In fact, its purpose
is to support market mechanisms. But in the Soviet Union,
currency was a tool of centralized planning. With non convertible currency,
Russians could only use the money that they were paid
to buy from government stores that only sold products sanctioned
by the government with prices set by the government. This
(02:54):
difference in economic philosophy would be a primary driver of
the defining conflict of the period following the Second World
War the Cold War, and it would become the topic
of a well known debate that will eventually result in
a novel challenge to the convertibility of the ruble, and
that famous debate would occur in a kitchen. During a
(03:14):
period of rising tensions, the Eisenhower administration and Soviet Premier
Nikita Krushchev decided to have a cultural exchange to promote
understanding between the two nations. Each nation would host an
exhibition in the other's country, showcasing the daily life of
their citizens. The Soviet exhibition was held in New York
in June of nineteen fifty nine, and the American exhibition
was held in Moscow in July. For their exhibition, the
(03:38):
Americans built a model home meant to represent a typical
American home. The model home was based on an actual
house three ninety eight Town Line Road in Comak Long Island.
For the exhibition, the model was split down a central
hallway to allow the public to view the inside, and
thus earned the nickname split Nick. And It included a
model kitchen full of modern appliances, and it was there
(04:01):
that Soviet Premier Kruz jeff and US Vice President Richard
Nixon got into an impromptu debate about the relative value
of their competing economic systems that became known as the
Kitchen Debate. The Kitchen Debate is interesting for a number
of reasons, but it was notable that, in the middle
of a tense Cold War, it was not a debate
about armies in rockets, but of homes and tractors and
(04:23):
kitchens and how each system provided for its citizens. It
was certainly pointed, but cordial, and became a propaganda point
for both sides. Not many mines were changed. As Khrushchev summarized,
I am a lawyer for communism, you are a lawyer
for capitalism. Let's kiss, but During that debate, a particular
capitalist was watching closely. Donald M. Kendall was the vice
(04:47):
president of marketing for Pepsi Coola, which had a booth
that the American National Exhibition just around the corner from
the famous kitchen. While soda was popular in America, it
was virtually unknown in the Soviet Union. Kendall saw opportunity
in that market and had been desperate to get Khrushchev
to take a drink of pepsi. As the debate grew
heated both literally and figuratively, Khrushcheff began to sweat, and
(05:11):
Kindle dropped in with a cold cup of pepsi. The
photo op was a marketing coup, but it would be
nearly a decade before Don Kendall could take advantage of
that opportunity. By nineteen sixty eight, he was the CEO
of PepsiCo and his friend Richard Nixon had been elected
President of the United States. Leveraging his White House connection,
(05:33):
Kindall was able to negotiate an exclusive contract to produce
and sell Pepsi cola behind the Iron Curtain. But there
was a problem the Soviet ruble. Since the ruble was
non convertible. The Soviets had very little foreign currency to
pay for that Pepsi, cola and rubles had no value
outside the Soviet Union. The answer came in the form
(05:54):
of a trade. In exchange for selling soft drinks in
the Soviet Union, Pepsi got the rights to sell hard
liquor to the West. Pepsi was paid in vodka, specifically
stolitch Naya, a premium brand produced in Russia that had
won a gold medal in an international competition in nineteen
fifty three. Pepsi was given exclusive right to sell stolach
(06:16):
Naya outside the Soviet Union. Pepsi became the first Western
consumer item to be manufactured and sold in the Soviet Union,
and stolach Naya became the first premium vodka to be
imported for sale in the United States. The deal was
struck in nineteen seventy two, but production did not start
until nineteen seventy four, and that started the fifteen year
exclusive contract that shut rival Coca Cola out. But when
(06:39):
it came time to renew the contract in nineteen eighty nine,
the situation in the Soviet Union had changed. Mikhail Gorbacheff
had become the premier in nineteen eighty five and had
instituted significant reforms called glassnost and Perestroika, or openness and restructuring.
The Soviet economy was facing challenges as a result, and
(07:00):
Gorbachev was supporting more connection between markets. PEPSI was only
too happy to expand, looking to increase from twenty six
factories in the Soviet Union to fifty. But the ruble
was still not convertible and would not be for many years,
and the three billion dollar deal was simply too big
to be paid in vodka. So the Soviets sold them
something of which they had, and excess warships, specifically a cruiser,
(07:26):
a destroyer, a frigate, and sixteen submarines. At the time,
PepsiCo had the sixth largest submarine navy on Earth. Don Kendall,
then chairman of the PepsiCo Executive Board, equipped to US
National Security Advisor Brent Scocroft that we are disarming the
Soviets faster than you. The Kitchen debates and the national
(07:48):
expositions actually represented a relative thaw in US Soviet relations,
but in nineteen sixty a us U two spy plane
was shot down over the Soviet Union and relations sank
to a new low. The Cold War will continue for
another three decades. Donald M. Kimball became the CEO of
Pepsicola in nineteen sixty three and didn't retire from that
position until nineteen eighty five, and then continued as chairman
(08:10):
of the executive board to nineteen ninety one. In addition
to his deal to sell Pepsi behind the Iron Curtain,
he shepherded the company through the merger with Fredo Lay
that created PepsiCo, Inc. The ninety six year old is
now retired and lives in Washington State. The modest ranch
house at three ninety eight Town Lined Road in Comack
Long Island that was the model for the nineteen fifty
(08:30):
nine American National Exposition is still there, although the famous
kitchen has been remodeled. Making the ruble convertible was not
an easy feat. The Soviet ruble was replaced by the
Russian ruble in nineteen ninety two, but significant marketing and
banketing reforms were required to make the currency convertible. Was
not made fully convertible in two thousand and six, as
the ruble was tied to Russia's energy trade. Its value
(08:52):
has been volatile, but many argue that it is set
to become a larger player in currency markets that are
becoming less dependent on the US dollar. No, PEPSI did
not use it summarines to sint cargo ships carrying Coca cola.
They were actually sold for scrap, just another barter. But
it is ironic that at the very center of the
Cold War, the lawyer for communism would take a sip
(09:12):
out of a cop bring one of the world's most
recognized symbols of capitalism, and as a result, Pepsi would
play a notable role more than three decades later in
the end of that Cold War, right down to bringing
up the weapons of war selling them for scrap. The
day that Pepsi got a navy deserves to be remembered.
Speaker 1 (09:33):
And special thanks to the History guy. History deserves to
be remembered. And you can find all of his work
at YouTube. And we treasure our partnership. And again that
is the History Guy. And if you've got some history
stories like this, family stories, town story, state story, send
them to us. The Cold War, the Cola Wars, the
story of Pepsi and the Ruble, all of it here
(09:55):
on our American Stories
Host
Lee Habeeb
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