The joint venture, called the Ukrainian Development Corporation, is Pepsi's first in the Ukrainian market and signals a major change in its business approach with the breakup of the "former Soviet Union.
The agreement also represents the largest deal ever to be signed between Western and Ukrainian interests for the export of manufactured products from the Ukraine, according to a company statement.
It comes at a time when Westerners have expressed disappointment at the pace of reforms in the Ukraine and
observers have said the government of Leonid Kravchuk has been backsliding in its program to modernize the economy.
Under the deal, PepsiCo will purchase commercial tankers over eight years for hard currency. With the profits from these purchases, the company plans to open Pizza Huts in every major Ukrainian city and to build bottling plants in an effort to triple consumption of Pepsi-Cola.
The ships will be built by the Zaliv Shipyards, a military producer in the Black Sea port of Kerch. Pepsi said part of its $1 billion will be spent in a major investment to modernize the facility.
Under a previous agreement, PepsiCo has exported and sold $300 million worth of ships since 1989, Karl Nigl, a Pepsi area vice president, said in a telephone interview from London on Thursday.
Since the break up of the Soviet Union, PepsiCo has been forced to renegotiate a $3 billion agreement it signed with the Soviet Union in 1990 to double production of Pepsi-Cola and expand its sales of vodka to the United States.
The agreement also called for the Soviet Union to build 10 ships to be sold or leased by PepsiCo in return for foreign credits.
It is now negotiating new deals separately with Russia and the former republics.
In September, it signed a deal with Russia to export an estimated $1. 5 billion of vodka.
It also has agreements with republics in Central Asia to export cotton, and with Belarus for the production and export of resin used in plastic bottles. In Ukraine, Pepsi-Cola now leads its traditional competitor, Coca-Cola, by 4 to 1 in the market, Nigl said. Under the new deal, PepsiCo's international soft drink division plans to increase the number of bottling plants in Ukraine from seven to 12 over two years. Additional investments are also planned for enhancing its sales and distribution.
Hoping to copy the success of its two Pizza Hut restaurants in Moscow, which have set sales records since opening in 1990, PepsiCo is completing a market study in Ukraine and hopes to develop a network of local suppliers and upgrade food processing standards, particularly in the meat and dairy industries.
The first Pizza Hut restaurants are slated to open in 1993.
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