Peel beets. Shred using the coarse side of a box grater, or the shredding disk of a food processor.
Put beets in a sauce pan. Add water to just reach the top of the beets. Simmer until beets are tender and liquid is almost all gone (should take 20 - 25 minutes). Add salt, pepper, vinegar and sugar. Cook 2-3 minutes to dissolve sugar. Add sour cream. Allow mixture to warm-up, but do not boil as sour cream will break.
Taste and adjust seasonings. May serve hot, at room temperature, or slightly chilled. Keeps for 2-3 days in the refrigerator