Keeping Pabst Blue Ribbon Cool

On a July afternoon, Evan and Daren Metropoulos, the new owners of Pabst Brewing, showed up at the lounge on the 35th floor of the Mandarin Oriental in midtown Manhattan. They had come to discuss their plans for Pabst, which their father and co-owner, C. Dean Metropoulos, bought in May for about $250 million.
The Oriental does not serve Pabst Blue Ribbon, the company's flagship brew, so the brothers ordered a lemonade and an iced tea. A hotel like the Mandarin may seem an unlikely meeting place for the owners of a beer that has long traded on its working-class image—the Lutz Tavern, a dive in Portland, Ore., is more like it, where 16-ounce tallboys go for $1.75. But the Metropoulos brothers were very much at home. They were passing through on their way to a wedding in Rhinebeck, N.Y., of an old friend from Martha's Vineyard, Mass., where they have summered since they were boys. Evan, 29, divides his time between Miami Beach, Los Angeles, and New York City. Daren, 27, lives in Los Angeles, in Hugh Hefner's old residence, a 7,300-square-foot English manor house he recently bought for $18 million.
Evan, in a green polo shirt and gold necklace, has a generous build and gregarious manner. Ideas for the future of Pabst's portfolio of brands spilled out of him in an entrepreneurial stream of consciousness. Daren, who occasionally interrupted, was in a navy blazer and button-down shirt. He is narrower, quieter, and cleaner shaven than his effusive brother.
Evan had been thinking about Red White & Blue beer, one of the company's roughly two dozen defunct brands, which they hope to revive. "What if we made that the military beer?" asked Evan. "What if we gave a huge portion of the proceeds to military charities—a grassroots program with military families? Why shouldn't Red White & Blue be the absolute American beer for the American soldier? We'll bring, you know, the Rotary Club, the veterans."
"To help collaborate and get involved," added Daren.
"To support our troops," Evan continued. "We could develop a whole beer brand around our troops. So that when you see Red White & Blue at your barbecue, you know that money's supporting people who have died for our country. Those are ways that Budweiser will never be able to relate to. They're not American, like us."
"This is an American company serving the American people," noted Daren.
Evan began to get worked up, saying: "If you knew that 25 percent of your proceeds from Red White & Blue Beer were going to support these charities, then shame on you for drinking Bud Light! What the hell are you drinking that for? To support some foreigners?"
The brothers went on to lay out the Metropoulos strategy—a series of grassroots campaigns targeting regional markets. Celebrities, musicians, and local festivals would figure prominently. Lone Star, their Texas label, might sponsor rodeo riders. Primo, a Hawaiian beer, might build relationships with big-wave surfers. These campaigns would be supported by their father's knack for winning over distributors, as well as new product and flavor launches to build out Pabst's portfolio of brands.
Not present that evening, but central to the plans, was their father, 64, a billionaire known as "Mr. Shelf Space" for his ability to boost the sales of supermarket brands. The senior Metropoulos started out with a feta cheese business in Vermont and has established a long record of turning around names like Bumble Bee Tuna, Perrier-Jouët, Chef Boyardee, Duncan Hines, Aunt Jemima, Vlasic Pickles, Swanson frozen dinners, and Ghirardelli Chocolate. He bought Pabst from the charitable trust of Paul Kalmanovitz, the company's late owner, acquiring a trove of musty American beer brands, among them Colt 45, Old Milwaukee, Primo, Rainier, Schaefer, Stroh's, Schlitz, Schmidt, Lone Star, National Bohemian, and the flagship, Pabst Blue Ribbon. The company, based in Woodbridge, Ill., has about 200 employees and more than 80 trademarks and 42 beer brands, fewer than half of which are active.


The beers are brewed through a contract with MillerCoors, according to Pabst's specifications, many at factories once owned by Pabst.
With the acquisition, Metropoulos has taken control of a murderer's row of brand names—if it were 1973. Of the 10 best-selling U.S. beers that year, Metropoulos now owns the brand names for the second, third, sixth, seventh, and eighth slots: Schlitz, Pabst Blue Ribbon, Schaefer, Stroh's, and Falstaff, respectively. None is in the top 10 now. Metropoulos sees that as a tremendous asset. "Americans are beginning to be drawn to nostalgia," he says. "They want brands that they remember being identified with their community and region."
In most of his previous deals, Metropoulos entered into partnerships with private equity firms and investment banks, and later sold out. With backing from the Texas-based buyout firm Hicks, Muse, Tate & Furst, Metropoulos bought International Home Foods in 1996 for $1.3 billion and sold it to ConAgra (CAG) for nearly $3 billion in 2000. Along with J.P. Morgan and J.D. Childs, he bought Pinnacle Foods in 2003 and sold it to the Blackstone Group (BX) for $2.2 billion in 2007.
Pabst, says Metropoulos, is different. It's the first purchase Metropoulos has made without outside capital or an exit strategy. With Evan and Daren at the company's helm beside their father, the Metropouloses see Pabst as a platform for possible future acquisitions, and the foundation of the family's legacy.
"This is a trophy property," says Evan. "This is like an antique, unrestored Duesenberg, which we'll own for the rest of our lives."
If it is like an old car, Pabst Blue Ribbon has performed the Chitty Chitty Bang Bang-like trick of restoring itself, and the challenge for the Metropoulos family may be to stay out of the way and let the miracle keep happening. Over the past eight years, Pabst Blue Ribbon has reversed decades of slowing sales. After bottoming in 2001, sales of Pabst began to rebound, flattening out briefly in 2005, and then rising again with an increase of more than 20 percent in 2009.
The PBR renaissance can in part be traced to the marketing practices of its former owner, Kalmanovitz, who did no marketing at all. He oversaw a hostile takeover of the company in 1985 and quickly cut the company's advertising budget, bled the company of cash, and focused on developing the brewer's real estate. This led to a generation of beer drinkers who hadn't heard from Pabst, and who liked that. If they had any impression of Pabst, it came through the remembered refrigerators of their fathers and uncles, or Dennis Hopper's character in Blue Velvet expressing his strong preference for the brand. But it didn't come from the kind of messages that companies like Budweiser and Miller spent three decades slapping on every leasable surface. When the children of the late 1970s and early '80s reached legal drinking age, Pabst Blue Ribbon was waiting for them, a beer that offered the same inoffensive pilsner flavor as the mass-market brews but at a lower price, and without any marketing baggage.
"It was serendipity," says Kevin Kotecki, Pabst's chief executive. "There were a few wise people here who recognized the trend and started to slowly capitalize on it." Pabst marketers gave the brand a few careful nudges—like sponsoring bike messenger events and inviting artists to produce Pabst-related works. Gradually, with the brand's image being crafted not by the company but by its consumers, the beer spread into the hands of the hipsters who flock to neighborhoods like Williamsburg in Brooklyn and Silver Lake in Los Angeles. Along with Chuck Taylor sneakers and fixed-gear bicycles, Pabst became one of a handful of badges for a subculture that prides itself on its contempt for convention.
The Metropoulos brothers marvel at the beer's heritage.
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