Let's hear it for hipster beer

By Beth Kowitt, writer-reporter

NEW YORK (Fortune) -- At Lutz Tavern in Portland, Ore., the beer-drinking crowd goes through about 20 to 25 cases of Pabst Blue Ribbon beer on a Friday night. "It's our No. 1 seller, no questions asked, hands down," says Lilias Barisich, whose family has owned the bar since 1954.

Here -- where tin and neon PBR signs adorn the walls and the clientele includes students from nearby Reed College -- Pabst has been a top seller since Lutz introduced it in the 1990s for $1 a can. And these days, drinkers are even more likely to go for a PBR: Since the economy has put a limit on free-flowing bar tabs, Barisich says some drinkers are trading in what she calls "frou-frou" beers for $1.65 PBRs.

Pabst Blue Ribbon has made a comeback during the downturn, becoming the cheap beer of choice among hipsters.

And Lutz Tavern isn't the only place seeing a boost for the blue-ribbon brand. The beer is up almost 30% in dollar sales in the U.S. for the 52 weeks through October at retailers like supermarkets and drug stores, beating out the beer category's overall 1.1% increase, according to market-research firm Information Resources. Meanwhile, Budweiser and Corona Extra are down about 7% and 8%, respectively.

But the lagging economy isn't the only thing energizing PBR. The brand has also cultivated a reputation as a hipster, offbeat beer -- or what the president of the National Beer Wholesalers Association, Craig Purser, likes to call "retro chic" -- positioning itself as an alternative to big, mainstream brands.

"If you're a certain kind of beer drinker and can't bring yourself to drink Budweiser, there's your answer -- drink Pabst instead," says Maureen Ogle, author of "Ambitious Brew: The Story of American Beer."

Case in point: Ogle says when she's attended the Great American Beer Festival in Denver, the crowd boos every time Anheuser-Busch (BUD) wins an award, but Pabst always gets cheers.

While PBR's success stems from its niche, dive appeal, it isn't actually the cheapest of the cheap. PBR is at least $1 a case more than Busch Light and Keystone Light, says Benj Steinman of Beer Marketer's Insights. PBR drinkers may want to look down-market, but they're willing to spend a little bit extra to make sure no one mistakes them for the mainstream.

But as Ogle points out, while fans might like to think of the 165-year-old company as a boutique relic of the family-owned, all-American breweries of the past, it actually doesn't own its own brewery. All of its brewing is done at contract facilities (including some owned by MillerCoors), with Pabst brewmaster Bob Newman overseeing the recipes. Pabst Brewing Company's portfolio also includes beers like Colt 45 and Schlitz. Pabst declined to comment for this story.

And Pabst is not family-owned but instead held by a charitable trust, which recently put it up for sale. In 1985, Pabst was bought by Paul Kalmanovitz, who also snatched up other semi-defunct brands such as Lone Star and Olympia. When Kalmanovitz died in 1987, he left Pabst to a charitable trust in his name. But as charities aren't supposed to own for-profit companies, the IRS has given the foundation until 2010 to sell off the business.

With Pabst on the market, one potential offer has emerged with a gimmick as quirky as PBR itself. In what he says started out as a joke, Michael Migliozzi -- managing partner of advertising agency Forza Migliozzi -- is attempting to crowdsource the purchase of Pabst by creating buyabeercompany.com, a joint venture with ad agency the Ad Store.

Anyone over 21 can go to the site and pledge a minimum of $5 toward the reported $300 million sales price for Pabst. So far, would-be beer moguls have pledged more than $20 million in about a month. If the collective raises enough money, Migliozzi says contributors will get enough beer to match their pledges and ownership in the company.

Today, with PBR's underdog cachet and strong sales, it's clear why your average beer drinker might want a piece of the action. But PBR hasn't always been such a successful brand. When Neal Stewart started working for Pabst back in 2000 as a divisional marketing manager, he says the brand was down for almost a quarter of a century. At its low point in 2001, Pabst was moving less than 1 million barrels per year of PBR, an abysmal number for a brand that in the late 1970s moved about 20 million barrels.

But then PBR started to see a huge increase in Portland, and Stewart was sent there to figure out why.

"We found it was the hipster crowd, the music crowd," says Stewart, who became the PBR brand manager in 2002 before leaving the company four years later. "They liked it because it didn't have a lot of advertising behind it."

That image stuck: In 2002, the brand was up about 5%, and then turned into one of the fastest growing beers in the country.

"People don't like to be shouted at," says Jack Anderson, CEO of brand design firm Hornall Anderson, which works with beer companies. "It's more authentic and cooler if you discover it or you're told by a friend. "

PBR still does minimal marketing, which continues to be part of its allure. And what little marketing the company does do has a distinctly non-traditional feel: PBR fans have a chance to win beer for a year and a cash prize when they enter their Pabst-inspired art in the company's annual art contest.

And some of the work ends up displayed as murals or in other public forms, so the promotion both engages consumers and provides some free user-generated advertising -- without it actually being advertising at all.

However unconventional Pabst might strive to appear, if the number of drinkers who call PBR their "usual" keeps growing, the brand does risk alienating some fans who don't like to follow the crowd.

Pabst got close to that line when it started touting itself as the largest American brewer after Belgium-based InBev bought Anheuser-Busch in 2008. For drinkers who get a buzz from a beer that's edgy and on the fringe, publicizing PBR as a powerhouse could backfire.

But whatever damage a move like that could've had, Pabst has managed to keep its beer far from flat. And it does seem that this moment -- from the recession to the hipsters to the crowdsourcing -- belongs to PBR. To top of page

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