By Geoffrey Smith
April 25, 2017

Not much happens in the town of Lebedyan (pop. 22,850), a couple of hundred miles southwest of Moscow. It has two main boasts – being home to Russia’s first horse-racing track (est. 1826), and to Pepsico’s (pep) operations in the country.

But it’s in the news today, after one of Pepsi’s warehouses collapsed, triggering a quasi-Biblical flood of fruit juice through the streets.

The collapse caused thousands of gallons of orange, tomato, apple and other juices to leak and flow out into the nearby River Don. A video taken by a local citizen and published on the site of newspaper Moskovsky Komsolets showed the extent of the havoc. A Pepsi spokesperson confirmed that two associates were injured and taken to hospital, where they were in a stable condition. Pepsi said it was “working closely with the local services to identify the cause of the incident and assess the situation and the impact on the surrounding area.”

Pepsi was one of the few U.S. companies to break into Russia during Soviet times. It lost its early lead over long-term rival Coca-Cola after the end of the Cold War but leapfrogged it with the $1.4 billion acquisition of 75% of local juice-maker Lebedyansky Sok in 2008 (a deal it did together with the smaller Pepsi Bottling Group). It raised its bet on the country after the 2008 financial crisis with a $1 billion expansion, and with another $3.8 billion deal for rival Wimm-Bill-Dann. The company’s CEO Indra Nooyi, has been an enthusiastic supporter of President Vladimir Putin on public stages such as the World Economic Forum in Davos.

Although wary of foreign companies that look at Russia mainly as a place to boost sales, Putin has generally been loyal to foreign investors like Pepsi who invest in hard assets that form the basis of local communities, such as Lebedyansky. However, U.S. companies often fall victim to apparently arbitrary legal rulings at times when relations between the U.S. and Russia are strained. McDonald’s was subjected to a wide-ranging shutdown of its restaurants in the months that followed the imposition of U.S. sanctions against Russia in 2014 in response to its partial invasion of Ukraine.


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