The Pepsi Navy: How Pepsi Acquired 17 Soviet Submarines in 1989

Did you know that in 1989, Pepsi acquired a fleet of 17 submarines from the Soviet Union? For a brief period, this astonishing deal made Pepsi the owner of what was then the seventh-largest submarine fleet in the world. Pepsi-cola CEO Donald Kendall was the main reason Pepsi was able to work out a business partnership with the Soviet Union. This might sound like the beginning of a naval war between Pepsi and Coca-Cola, but the reality is more nuanced. Pepsi had long enjoyed a unique relationship with the Soviet Union, making it the beverage of choice in communist territories at a time when such partnerships were rare. While Pepsi and Coca-Cola had always been fierce competitors, acquiring a fleet of submarines seemed like a surreal escalation in their rivalry.

However, before you imagine a naval showdown between the two soda giants, it’s important to note that Pepsi wasn’t buying these submarines for its use. Instead, Pepsi acted as a middleman in the transaction. The Soviet Union, looking to offload its aging submarines for scrap, approached Pepsi, and the company brokered a deal, passing the submarines along to a Norwegian shipping firm. In return, Pepsi secured expanded access to the Soviet market—a clever strategic move rather than a bid to build a corporate navy.

In 1972, Pepsi became the first major U.S. company to break into the Soviet market. This achievement was particularly noteworthy given the challenges of Cold War-era trade and currency restrictions. One major hurdle was the non-convertibility of the Soviet ruble, which could not be exchanged on international markets.

Pepsi’s once-thriving relationship with Russia has significantly cooled over time, especially after Coca-Cola made a bold entrance into the Soviet market during the 1980 Moscow Olympic Games. Despite Coca-Cola’s aggressive push, Pepsi can still look back on its moment of triumph when it was not just the preferred drink of communist Russia, but for a brief period, the most powerful soda brand in the world. Pepsi had enjoyed a unique status in the Soviet Union, becoming a symbol of Western products in a closed-off economy.

However, the collapse of the Soviet Union in 1991 marked a turning point for Pepsi’s fortunes in the region. The political and economic upheaval that followed made it increasingly difficult for Pepsi, a quintessentially capitalist corporation, to navigate the complexities of doing business in post-Soviet Russia. What was once a stronghold became a far more challenging market, leaving Pepsi to reflect on its fleeting reign as the soda of choice for an entire nation.