PBR Deal: A Beer Industry Insider Pours Forth
NEW YORK ( MainStreet) Last week we reported that Pabst Brewing Company owner C. Dean Metropoulos will be putting the veteran brewery up for sale . The news made headlines not just because of the potential price tag, possibly as high as $1 billion, but also because of the secrecy surrounding this deal. No one associated with Pabst or Metropoulos is willing to say anything on the record. Even the rumored price came courtesy of an anonymous source through Reuters.
Still, while everyone is talking about who will buy Pabst once it hits the market, it's also worth asking a follow up question: should someone even buy it? Although the brewery lists 23 different lines on its website, including such classics as Champale, McSorley's and Blatz, it's only really known for its eponymous Pabst Blue Ribbon, "PBR," the beer that rose to fame after a generation of hipsters discovered that nobody else was drinking it.
Can a $1 billion deal really survive on the back of a product that's known only for being unknown? Bill Covaleski, co-founder of Pennsylvania's Victory Brewing Company, isn't so sure.
"I think it does point to some real problems," Covaleski said, "because if you scratch beneath the veneer of what's attractive about this brand you end up with another macro brew that's really undifferentiated from anything else, and those aren't doing too well."
And PBR's lack of distinctiveness may be it's most damning feature.
"Really," he added, "what we're talking about with Pabst is just another Budweiser. It just doesn't have Budweiser's advertising behind it."
The "veneer," as Covaleski described it, is critical. Brand loyalty is important enough in the beer game at large since customers tend to lock in on a handful of favorites and stick to them over time, but Pabst's entire business has been rebuilt around the Blue Ribbon line. Between 2005 and 2010 alone, the PBR brand grew by 69%, bringing Pabst profits up with it .
The pivot to PBR has succeeded, but it's left virtually no room for error. As of now, the company's fortunes will rise and fall based on the sales of just one beer sold to a particularly fickle audience.
"That's another fascinating aspect to this Pabst model," Covaleski said. "Pabst isn't viewed as a brewery by most consumers; it's viewed as a brand. It's a beer."
It's one thing when you market your brewery based on a flagship brand with a rotating collection of smaller drinks. Covaleski explained that this is common practice for most breweries. His own Victory, he said, experimented with nearly 80 different recipes over the course of 2013 alone but made most of its sales off its seven core lines. However Pabst can't actually market its flagship beer. The entire point is that PBR was never marketed in the first place, and that's a problem.