| Monday May 30th 2016

A clever way to use a “worthless” currency

Foreign investment is a tricky game. Not only must a company profit, it also has to transfer the profits home.

Companies have done creative things to convert currency, and my favorite example is Pizza Hut in the former Soviet Union:Russian Pizza Hut

For example, consider the situation faced by Pizza Hut when it wanted to open a chain of restaurants in the former Soviet Union. The Russian ruble was not convertible, so Pizza Hut could not take the profits from its restaurants out of the Soviet Union in the form of dollars. There was no mechanism to exchange the rubles it earned in Russia for dollars, so the investment in the Soviet Union was essentially worthless to a U.S. company. However, Pizza Hut arranged to use the ruble profit from the restaurants to buy Russian vodka, which it then shipped to the United States and sold for dollars.

Financial Management: Theory & Practice

I was always curious which vodka brand they bartered with, and whether Pizza Hut enhanced profits with the vodka trade. Either way, this example is probably the world’s most clever use of vodka.

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