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Penn Brewery founder hopes to become rescuer
Sunday, November 29, 2009

History shows that rescues of Pittsburgh breweries haven't been overwhelmingly successful enterprises. Just ask the creditors who sponsored the parade of white knights pledging to restore Iron City to its rightful place in the pantheon of malted beverages. The rightful place, after all the well-intentioned, wishful thinking was misspent, ended up being Latrobe. Which elected officials and public servants who loaned their names and taxpayer money to those crusades could have seen that coming?

The legacy of less filling, less taste results is no reason not to wish Tom Pastorius all the luck in the world as he hops to the task of resuscitating Pennsylvania Brewing at the ground zero of Pittsburgh beer-making history.

Mr. Pastorius, along with his wife, launched the microbrewer in 1986 in the former Eberhardt & Ober brewery at the foot of Troy Hill. Last week, he teamed up with other investors to repurchase controlling interest in the venture from Birchmere Capital. The Pine private equity firm, whose partners include former Pittsburgh Brewing and G. Heileman Brewing executive Jack Isherwood, purchased a majority stake in Mr. Pastorius' company in 2003. Terms for that transaction and the one that transpired last week after months of negotiating were not disclosed.

But it is apparent the beer lover's paradise Mr. Pastorius and Birchmere envisioned six years ago has not come to pass.

"Entrepreneurship can only take you so far, and then it takes more capital," Mr. Pastorius told the Post-Gazette in 2003. "We've sort of maxed out on sweat equity here, and now we're looking for bigger and better things."

To be sure, Pennsylvania Brewing under Birchmere and Mr. Pastorius, had capital, industry know-how and an abundance of experience. The gold and bronze medals Penn Brewing's Kaiser Pils and Oktoberfest won at the 2008 Great American Beer Festival attest to their beer-making bloodlines. On that basis, they easily drank the last few stewards of Iron City and IC Light under the table.

Yet, somehow those credentials and Birchmere's capital were not enough.

What played out over the past 12 months was painful to watch for Western Pennsylvanians eager to support a local beer. Penn Brewing stopped making its own beer, outsourcing production to the Lion Brewery in Wilkes-Barre. Discriminating drinkers argued that something was lost in the translation.

The brewery's lease at the Vinial Street plant expired in February. Negotiations with E&O Partners, the property's owner, were lengthy and complicated by disputes over the amount of rent, water bills and maintenance issues. The Microbrewers Fest and Oktoberfest, two big annual events, were cancelled. So was production of St. Nikolas Bock, a brew that targeted the frayed nerves of holiday shoppers.

With the brewery literally falling down around them, it came down to Birchmere wanting to sell and Mr. Pastorius' investment group being willing to provide consideration greater than what other, more risk averse, rescuers were willing to offer. (The Giant Eagle unit that purchased the Latrobe bottling plant formerly operated by Le-Nature's reportedly was interested in acquiring Penn Brewing's brands. Dick Roberts, a spokesman for the supermarket chain, said last week that Giant Eagle looks at a lot of opportunities, but had nothing involving Penn Brewing at this time.)

The new ownership arrangements were announced after the city's Urban Redevelopment Authority approved lending Mr. Pastorius' group $300,000. An equal amount could come from the Northside Leadership Conference, a coalition of North Side community groups that has offered to purchase the property from E&O Partners. Until it can comply with the undisclosed terms of that transaction, Penn Brewing will operate under a five-year lease the landlord has agreed to.

"It's going to be a rough few months while we repair the damage that was done to the brands and replace the bottling equipment that was sold," Mr. Pastorius said in a statement. "We ask for the patience and support of our many loyal fans."

He pledged that the brewery's eight brands and some new ones "will be brewed to the original recipe and same exacting standards as prior to the close of the North Side brewery earlier this year."

While the overall U.S. market is flat, business is frothier for craft brewers such as Penn Brewing. The Brewers Association, an industry trade group, reports that first half sales rose 9 percent in dollar terms after climbing 10 percent last year.

The proliferating market has attracted entrepreneurs who, like Mr. Pastorius, are trying to put their passion on profitable footing. Most of them, Mr. Pastorius included, are competent craftsmen eager to provide honest beers that appeal to something other than the lowest common denominator, a market monopolized by the big, national brands. But small marketing budgets aren't the only handicap burdening small brewers.

None of them are too big to fail, as was demonstrated across the river at Iron City as well as on Vinial Street.

That said, here's hoping the second coming of Penn Brewing succeeds.

Len Boselovic can be reached at lboselovic@post-gazette.com or 412-263-1941.
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First published on November 29, 2009 at 12:00 am