1. Leave root and 1-inch stem on beets; scrub with a brush. Place in a medium saucepan; cover with water. Bring to a boil. Cover, reduce heat, and simmer 45 minutes or until tender. Drain and rinse with cold water; drain. Cool slightly. Trim off beet roots; rub off skins. Thinly slice beets; place in a large bowl.
2. Combine vinegar and sugar in a small saucepan. Bring to a boil; cook 5 minutes. Remove from heat; stir in salt, peppercorns, and bay leaves. Pour vinegar mixture over beets; cover and chill. Discard bay leaves.