The Stoli-Pepsi Barter Deal

In 1972 Pepsi became the first foreign product sold in the then USSR. However instead of selling their product for cash, Pepsi entered into a barter trade agreement with the Soviet government and took payment in the form of Stolichnaya “Stoli” Russian vodka.

At the time, the Soviet Union had limited access to foreign currency because they were not a major exporter (such capitalism was at odds with the communist ideology).

Typically, Pepsi would have set up bottling plants and sold their product for Rubles which they would have taken to the central bank in exchange for dollars. However the USSR, without access to dollars, was reticent to approve the sale of foreign products. The barter trade eloquently got around the currency issue and enabled Pepsi to secure exclusive rights to the Stolichnaya name in the US, not to mention establishing themselves in the massive Soviet market.

By 1990, the barter trade reached a value of $3 billion with Pepsi trading its product not only for vodka but also for ocean going freighters and tankers which were earmarked to be sold as scrap. By this point, Pepsi Co was not just selling syrup but was expanding in the fast food business via its Pizza Hut franchise.

The barter agreement carried on through the end of the cold war in the early 1990s. Then, after the break-up of the USSR, there were various disputes over who had the right to use the Stolichnaya name. Ultimately the courts ruled that Pepsi would retain the exclusive rights to the name in the US.

Pepsi was not, however, able to maintain exclusivity in Russia. With the Soviet collapse, Coca-Cola was introduced to the Russian market and captured a significant market share eventually overtaking Pepsi in 2005.

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Factoid: It is worth noting that Smirnoff, unlike Soli, is produced in the US and is not a product of Russia.