Intro
In this episode of “Slow Burn,” the focus is on Pizza Hut’s venture into the Soviet Union in 1990. The episode explores the challenges, successes, and impact of Pizza Hut’s entry into the communist country during a time of political and economic transformation.
Main Takeaways
Rita Schimmiehorn’s Journey and Pizza Hut’s Role in History
- Rita Schimmiehorn’s love for Pizza Hut in her hometown in the 1970s
- How she financed her weekly Pizza Hut habit by cleaning her friend’s brother’s apartment
- Rita’s career progression at Pizza Hut and becoming a training manager
- The unexpected call Rita received from Pizza Hut’s HR department offering her a job overseas in Russia
- Pizza Hut’s role in one of the most significant inflection points in modern history
Pizza Hut’s Entry into the Soviet Union
- King’s Hawaiian’s use of SAP technology to ensure consistent product quality
- Don Kendall’s obsession with entering the Soviet market
- Pepsi’s success in becoming the first US consumer product widely available in the USSR
- Kendall’s belief that corporations were the best hope for international diplomacy
- Don Kendall’s dream of opening a Pizza Hut in Moscow seemed impossible due to the communist system in the USSR
- Mikhail Gorbachev’s Peristraika plan allowed for experimentation with capitalism, including partnerships with foreign businesses
- PepsiCo planned to open a chain of pizza parlors in the Soviet Union, making Pizza Hut the first American restaurant chain in the USSR
- Andy Raffla worked hard to win over Soviet bureaucrats by giving them a taste of the Pizza Hut experience and catering to their needs
- After years of work, Pizza Hut was declared suitable for ordinary Soviet families and the joint venture was approved
Overcoming Challenges and Making Pizza Hut Moscow a Reality
- Andy had to move to Moscow and figure out how the Soviet Union worked to make the Pizza Hut joint venture happen
- The country was struggling, especially with the food supply situation
- Moscow officials were unhelpful in finding a location for Pizza Hut, suggesting places in the middle of a forest
- Andy found a local partner, Alex Antoniadi, who knew how to navigate the Soviet bureaucracy and understood the concept of profit
- The partnership convinced the city of Moscow to give them locations for two Pizza Hut restaurants, one on Kutazovsky prospect and the other on the main road leading to Red Square.
- Turning spaces into Pizza Huts required a huge amount of work and building materials
- Construction workers sometimes ran out of supplies and needed vodka to keep working
- Andy and Alex had to buy all materials outside of Russia at an extraordinary price
- It cost $3 million for two Pizza Huts, which was about 8 times the usual cost
- PepsiCo’s deal with the Soviet Union allowed Andy to acquire Soviet submarines and tankers to sell for American cash to pay for the Pizza Huts
The Impact and Legacy of Pizza Hut Moscow
- Pizza Hut lost the race to open the first American fast food chain in Moscow to McDonald’s in 1990
- Pizza Hut wanted to sell a whole American lifestyle while McDonald’s sold Big Macs and fries
- Pizza Hut was importing something totally new, a casual sit-down restaurant that served a quality meal for a reasonable price
- Pizza Hut hired 300 people, many with advanced degrees, but almost no one had experience with Western restaurant service
- Pizza Hut flew in its best trainers from all over the world to teach the new Russian employees the Pizza Hut way of doing things
- Finding suppliers for toppings was a major challenge due to Soviet bureaucracy and shortages
- The first pizza made in Russia was a supreme without mushrooms, but with cheese, pepperoni, sausage, hamburger, onion, and green peppers
- The salad bar was a huge hit with customers, who had never experienced such a concept before
- Customers used breadsticks as edible support columns to make the walls of their salad bowls taller
- Pizza Hut faced challenges such as local customers preferring pepperoni pizza and not understanding follow-up with customers to see if they were enjoying their meals.
- Pizza Hut delivered pizzas to the Russian Parliament during a political crisis, gaining global attention
- Boris Yeltsin, the face of the anti-coup resistance, received the pizzas and later thanked Pizza Hut for their help
- The fall of the Soviet Union led to political instability and economic collapse in post-Soviet states
- Pizza Hut faced challenges such as sudden rent increases and eventually shut down their Moscow locations
- Despite the challenges, those involved in the Pizza Hut Moscow project do not regret their experiences and believe in the potential of economic reform such as Perestroika
- Gorbachev saw the economic potential of modernization and reform in the Soviet Union
- Pizza Hut Moscow project showed that business could be done in Russia
- Gorbachev defended his legacy in a Pizza Hut commercial in 1997
- Pizza Hut brought people together in post-Soviet Russia
- Yum Brands tried to enter the Russian market with KFCs, but left after Putin’s invasion of Ukraine
- Moscow pizza ads still remembered for their pepperoni and red checker tablecloths
Summary
Rita Schimmiehorn’s Journey and Pizza Hut’s Role in History
Rita Schimmiehorn’s love for Pizza Hut in her hometown in the 1970s led to her career progression at the company. She eventually received an unexpected job offer to work in Russia, marking the beginning of Pizza Hut’s involvement in one of the most significant inflection points in modern history.
Pizza Hut’s Entry into the Soviet Union
Pizza Hut’s entry into the Soviet Union was driven by Don Kendall’s obsession with the Soviet market and his belief in the power of corporations for international diplomacy. With Mikhail Gorbachev’s Peristraika plan allowing for experimentation with capitalism, PepsiCo planned to open a chain of pizza parlors in the USSR, making Pizza Hut the first American restaurant chain in the country.
Overcoming Challenges and Making Pizza Hut Moscow a Reality
Making Pizza Hut Moscow a reality required navigating the complexities of the Soviet bureaucracy and finding suitable locations. Andy Raffla, along with his local partner Alex Antoniadi, worked tirelessly to overcome obstacles and acquire building materials from outside of Russia. Despite the high costs and challenges, they managed to turn two spaces into Pizza Huts.
The Impact and Legacy of Pizza Hut Moscow
Although Pizza Hut lost the race to open the first American fast food chain in Moscow to McDonald’s, its introduction of a casual sit-down restaurant concept and the popular salad bar left a lasting impact on Russian customers. The project faced challenges such as finding suppliers for toppings and adapting to local preferences, but Pizza Hut managed to gain global attention by delivering pizzas to the Russian Parliament during a political crisis. However, the fall of the Soviet Union led to the closure of Pizza Hut’s Moscow locations.
Conclusion
The story of Pizza Hut’s venture into the Soviet Union showcases the challenges and triumphs of doing business in a communist country during a time of political and economic transformation. Despite the eventual closure of the Moscow locations, Pizza Hut Moscow left a legacy of introducing American-style dining to post-Soviet Russia and demonstrating the potential of economic reform.
