Pepsi Wins From Cold Thaw

PepsiCo's (PEP) massive new investment in Russia is rooted in smart decisions the company started making during the height of the Cold War, when investing in Russia was thought of not only unwise, but also, by many, as unAmerican.

Last week, The New York Times' Media Decoder blog looked back 50 years at the American National Exhibition in Moscow in July 1959. That's when the famous "kitchen debate" took place between Richard Nixon and Nikita Khrushchev. It was also when Pepsi became "the official soda of the Cold War," according to Media Decoder's Stuart Elliot.

After the kitchen debate, Nixon took Khrushchev over to the Pepsi exhibit, where the bellicose Soviet leader took a sip. Elliot notes that the guy who engineered the whole thing, Donald Kendall, then head of Pepsi-Cola International, won big kudos for the publicity the event drew for the company. This despite the fact that other Pepsi execs (not to mention Red Scaremongers) had warned him against putting the soft drink in a Soviet context.

Kendall, who as CEO went on to make deals that solidified Pepsi's presence behind the Iron Curtain, is back in Moscow this week to mark the anniversary of the 1959 event, which ultimately made Pepsi the first Western company to sell products inside the Soviet Union. (Coca-Cola (KO) didn't enter the market until after the Berlin Wall came down.)

In his company is his successor, PepsiCo CEO Indra Nooyi.

Today, we learn that Nooyi was planning to use the event, backdropped by President Obama's visit, to announce that her company, along with Pepsi's biggest bottler, Pepsi Bottling Group, will invest $1 billion over the next three years. That will include building the biggest bottling plant in the world, outside Moscow. That will bring the companies' total investment in Russia to more $4 billion, according to Bloomberg News.

Having roots in Russia, and elsewhere in the developing world, is helping PepsiCo overcome sinking demand for soft drinks in the United States and in some other Western markets.

For now, though, business in Russia isn't so great either. Pepsi is banking on the retail economy to pick up again, which of course it will. Retail sales in Russia, despite the recent bump, have increased by an average 13 percent annually since 1998.

The Times notes that other American companies including Boeing (BA) and Deere & Co. (DE) are also using the Obama visit to announce major Russian deals, and that some Russian companies are touting deals with American firms.

Have any lessons been learned here? What happens next with Cuba will tell the tale.