Pepsi and the Soviet Union: An Unusual Case of Business Bartering

Bartering has been growing in popularity all across the world of business. The internet has opened up the contra dealing marketplace to a huge extent, and made it easy for smaller businesses to take advantage. However, the concept is far from new, and it’s always interesting to look back on some of the odder ways in which it has been leveraged in the past.

Perhaps the most famous deal was struck between one of the most well-known companies on the planet and the planet’s largest sovereign nation – PepsiCo and the former Soviet Union.

PepsiCo were seeking a way to increase their market share within the former communist nation. This would typically have involved setting up bottling plants, selling in roubles, and then taking that currency to the central bank to exchange for dollars. However, the USSR had no access to dollars, so a barter trade was devised in order to side-step the whole issue of currency altogether.

Instead of selling their soft drinks for cash, PepsiCo entered a barter agreement in which the Soviets payed in the form of Stolichnaya ‘Stoli’ Russian vodka. This was then sold in the United States by a third party. Pepsi captured a huge share of the market in the Soviet Union, and then prospered themselves by selling on the then-protected Stoli vodka.

By 1990, this bartering arrangement reached the value of $3 billion when PepsiCo started trading not just for vodka but for freighters and tankers which had been earmarked for scrap. The Soviet Union traded at least ten, with a total value in excess of $300 million. PepsiCo then used the foreign exchange credits from the sale and leasing of those ships in order to finance Pizza Hut restaurants in Moscow.

All this was accomplished without money changing hands. The arrangement lasted from 1974 right up to the collapse of the Soviet Union, and Coca-Cola only overtook Pepsi in popularity within the Russian market in 2005.

Of course, most bartering arrangements aren’t of quite the same scale, with small businesses now using sites like Contradealer for a more simple exchange of services. However, it’s always interesting to hear of the ways in which major corporations – or even countries – avoided problems concerning currency in order to strike a more advantageous deal.