July 26, 2024 • 9 mins
On this episode of Our American Stories, as odd it may seem, the History Guy tells the story of how Pepsi came to own a fleet of Soviet naval ships.
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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 diss 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 than 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 Khrushchef 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 opportunity in
that market and had been desperate to get Khrushchev to
take a drink of pepsi. As the debate grew heated
(05:07):
both literally and figuratively, Khrushchef began to sweat, and 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
(05:29):
the United States. Leveraging his White House connection, 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
(05:51):
Soviet Union. The answer came in the form 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
(06:14):
given exclusive right to sell stolage 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
(06:37):
Coca Cola out. But when 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
(06:58):
was facing challenges as a result, and 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
(07:21):
they had, and excess warships, specifically a cruiser, 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
(07:44):
faster than you. The Kitchen debates and the national 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
(08:05):
in nineteen sixty three and didn't retire from that position
until nineteen eighty five, and then continued as chairman 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
(08:25):
at three ninety eight Town Lined Road in Comack Long
Island that was the model for the nineteen fifty 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
(08:46):
made fully convertible in two thousand and six, as the
ruble was tied to Russia's energy trade. Its value 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
(09:07):
it is ironic that at the very center of the
Cold War, the lawyer for communism would take a sip
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
(09:28):
day that Pepsi got a navy deserves to be remembered.
Speaker 1 (09:34):
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 diss 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 than 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 Khrushchef 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 opportunity in
that market and had been desperate to get Khrushchev to
take a drink of pepsi. As the debate grew heated
(05:07):
both literally and figuratively, Khrushchef began to sweat, and 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
(05:29):
the United States. Leveraging his White House connection, 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
(05:51):
Soviet Union. The answer came in the form 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
(06:14):
given exclusive right to sell stolage 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
(06:37):
Coca Cola out. But when 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
(06:58):
was facing challenges as a result, and 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
(07:21):
they had, and excess warships, specifically a cruiser, 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
(07:44):
faster than you. The Kitchen debates and the national 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
(08:05):
in nineteen sixty three and didn't retire from that position
until nineteen eighty five, and then continued as chairman 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
(08:25):
at three ninety eight Town Lined Road in Comack Long
Island that was the model for the nineteen fifty 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
(08:46):
made fully convertible in two thousand and six, as the
ruble was tied to Russia's energy trade. Its value 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
(09:07):
it is ironic that at the very center of the
Cold War, the lawyer for communism would take a sip
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
(09:28):
day that Pepsi got a navy deserves to be remembered.
Speaker 1 (09:34):
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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