Great opportunities can often present themselves under the strangest circumstances. They can seem outlandish, unusual, and downright risky at first glance.
But, unless cash just falls into your lap, there is no reward without a certain degree of risk.
The story of Pepsi’s relationship with the USSR is unconventional to say the least. It shows us how embracing unexpected opportunities might end up fostering long-term, mutually beneficial, business relationships.
Networking opportunities can present themselves at any time
In 1959, while attending the American National Exhibition in Moscow, Vice-President Nixon and Premier Khrushchev were having a heated debate about politics, when a Pepsi executive attempted to calm the two leaders.
He forced a break in the conversation by offering Khrushchev a cup of a cool, sugary drink. A photographer swept in, the Premier smiled, a picture was quickly taken, and a moment was enshrined in history.
That drink was Pepsi and, according to the story, a love for the soda soon swept the nation. The Soviet Union was hooked and needed to find a way to import the beverage.
Now, like many historical anecdotes, I’d take that story with a pinch of salt. However, some parts are true.
The two leaders did meet up at the exhibition and did indeed share a Pepsi, in a moment carefully orchestrated by an ambitious Pepsi executive.
Whether it was a life-changing moment that sent a delirious Khrushchev strolling through the capital in a “Pepsi Fever” haze, infecting the unsuspecting populace with an insatiable need for cola, well that is debatable.
Soviet demand for Pepsi was growing though and by the early 1960s the USSR was keen to strike a trade deal with Pepsi to get their product into Eastern Europe. However, they faced a major obstacle – their currency was essentially being boycotted outside of the Soviet Bloc.
They would need to come up with an alternative way to pay for their shipments of the soft drink.
Networking opportunities can strike at any time. By being proactive, taking risks, and putting yourself out there in a positive manner, you put yourself in a position to meet a whole range of potential new clients.
That executive took his chance, managed to get an iconic photo taken, and soon Pepsi buzz was breaching the iron curtain.
Don’t be afraid to consider alternative methods of payment
The Soviet Union wanted Pepsi, but the rouble wasn’t widely accepted worldwide. So, they rolled back the years and resorted to the oldest form of trading, the art of bartering.
The USSR had an abundance of a universal currency that wasn’t widely available in the western world: vodka!
Throughout the 60s and 70s, the USSR traded shipments of Stolichnaya vodka for containers full of Pepsi. The Soviets had their influx of American soda and Pepsi cornered the market on premium Russian vodka.
They also managed to convince the USSR to stop their main rivals, Coca-Cola, from doing any business in the country. Overall, Pepsi made billions of dollars from their initial vodka-based agreement.
Potential clients will likely come from all walks of life and at different points in their financial journey.
Percentage based fees may make sense with clients that have built up cash savings and assets, but younger potential clients may not be able to afford or be worth pursuing on a percentage-based option.
Being open to alternative payment methods like fixed fees might stop you missing out on clients who could become extremely valuable partners in the future.
Long-term business relationships are built on trust and understanding
In the late 1980s, the initial agreement was about to expire, but this time, Soviet vodka wasn’t going to be sufficient as an influx of Swedish vodka into the American market had reduced the value of Pepsi’s vodka holdings.
However, Pepsi was keen to continue doing business with the USSR and was open to alternative offers. They probably didn’t expect what came next.
The Russians offered up a flotilla of 17 submarines, a cruiser, a frigate, and a destroyer – worth approximately three billion dollars – in exchange for their next Pepsi delivery.
The historical exchange meant that, for a brief period of time, Pepsi were the owners of the sixth largest navy in the world.
Their nautical reign was short lived though. Rather than putting the Pepsi navy to work by taking their battle with Coca-Cola from the shops to the high seas, they opted to sell off the rusty vessels as scrap metal and the Pepsi navy was no more.
This appeased the US government who weren’t too happy about a private corporation suddenly having command of over a dozen Soviet warships.
The head of Pepsi International, Donald Kendall, was well aware of the irony of the USSR handing an American corporation a military fleet, quipping to a national security advisor that he was “disarming the Soviet Union faster than you are”.
The deal wasn’t profitable for Pepsi, but Kendall had his eyes on long-term benefits.
Behind the scenes, Kendall was using trusted relationships, built up over decades of trading, to assemble a vast arrangement involving the construction of brand-new 28,000-ton Soviet oil tankers. Pepsi would become a middleman, trading oil tankers for Pepsi before selling them onto their intended recipient, a Norwegian shipping firm.
The deal would not only deliver billions of dollars of profit for the corporation but would also allow them to expand into the Russian market in new ways, through diversifying into other industries and by gaining access for their sister brands such as Pizza Hut.
Long-term business relationships are built on the trust fostered from having mutually beneficial goals.
You can help your clients in a variety of ways outside of simple financial advice, for example, providing the emotional support needed during difficult times to help them through tricky periods.
You won’t see any profits from being compassionate and understanding, but you’ll lay the foundations of a long-term relationship.
Know when a relationship has run its course
Unfortunately for Pepsi, fate intervened in their oil tanker plans, as the Soviet Union collapsed and Pepsi’s long-lasting relationship with Eastern Europe was broken up and diluted among the many, new splinter nations.
The oil tanker agreement was torn up and soon Russia was met with an influx of American products and businesses to the detriment of Pepsi’s market dominance.
Pepsi’s interests in Russia didn’t completely disappear though. As recently as 2020, Pepsi reported revenue of $3 billion in Russia, making it the corporation’s third-largest market after Mexico and the United States.
Pepsi’s tumultuous love affair with the USSR leaves us with one final valuable lesson – relationships can run their course and potentially turn “sour”.
Knowing when it’s time to “raise anchor” can save both parties a lot of pain and hardship, as well as prevent a long-term relationship from sinking into disrepair.
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Alternatively, reach out to us to learn more obscure facts about Soviet economic history, such as when they traded drums of crude oil for West African cocoa beans.