TAMPA — Cigar City Brewing, the independent brewery that helped put Tampa Bay on the map for craft beer, announced Monday that it has agreed to sell a controlling interest of the company to another craft brewery in Colorado.
Cigar City founder and CEO Joey Redner will remain an owner at the brewery and production will continue for now in Tampa Bay. But more importantly, the acquisition will allow Cigar City Brewing to grow.
The financial partner in the transaction is a Boston-based private equity firm, Fireman Capital.
The firm already backs craft breweries like Oskar Blues Brewery in Colorado, Perrin Brewing in Michigan and the Utah Brewers Cooperative outfit, which includes brands like Wasatch and Squatters. With Cigar City, this collective of five craft breweries from across the country will make United Craft Brews LLC., a holding company that will act as a investment fund.
The opportunity to partner with Oskar Blues sealed the deal, Redner said.
"The main reason for the transaction is that we have reached the end of our runway as a brewery. We are maxed out production wise," Redner told the Tampa Bay Times by email Monday. "I don't like to borrow money and the next phase was going to require massive capital. Oskar Blues has know-how and capacity, but more importantly they have a similar culture. It is no secret in craft beer circles that at Cigar City we have often looked to Oskar Blues as sort of older brothers. We have emulated and learned from them. So the opportunity to team up made sense."
Terms with Oskar and Fireman were not disclosed. The deal is expected to close within 90 days.
"Cigar City has great beer, a great following and great culture. We see them pushing the boundaries and doing creative things on the beer side and now we have a way to provide them with additional resources," said Chad Melis, marketing director at Oskar Blues Brewery. "Cigar City will continue to do what they've always been doing. You'd be an idiot to change that."
Redner, 43, said he's staying on and will have an ownership in the new entity. The sale also allows his father and business partner Joe Redner liquidity for his 44 percent stake in Cigar City, according to Brewbound, an industry publication.
Cigar City Brewing began in 2009, and has grown to produce nearly 60,000 barrels of beer as of 2015. Oskar Blues produced 192,000 barrels last year. A craft brewery is defined as producing less than 6 million barrels of beer a year by the Brewer's Association. For perspective, Anheuser-Busch brewed 125 million barrels.
Cigar City is credited with leading the charge for craft beer in Tampa Bay and around the state. Tampa Bay is now home to dozens of breweries. Redner said that the partnership will provide additional investment for Cigar City's infrastructure and growth in Florida.
"(The sale) means capacity, sales support, technical and operational know-how and capital for growth," Redner said. "It will mean that Cigar City Brewing will be able to get bigger and better and continue to be a part of the Tampa Bay craft beer brewing community."
It's not uncommon for fast-growing breweries to be acquired by capital investment firms as they look for new ways to grow, said Bart Watson, an economist with the Brewer's Association. Last month, Victory Brewing Company in Pennsylvania and Southern Tier Brewing Company in New York merged under Artisanal Brewing Ventures to pool resources. San Diego-based Ballast Point Brewing & Spirits was bought by Constellation Brands in November for nearly $1 billion.
"Most of the country's 4,000 craft breweries aren't the size or the scope of Cigar City Brewing," Watson said. "But this is becoming a new opportunity to grow, especially in the Southeast, which is still considered largely untapped for craft brewing. We'll continue to see more growth there."
Watson said he doesn't see it changing Cigar City's operation or impact in Florida in any way in the short term, at least.
"This is a group that is comprised of other small breweries. It would be very different if Cigar City was purchased by Anheuser-Busch," he said.
Redner said Cigar City was in discussions with Anheuser-Busch InBev and had signed a letter of intent with them late last year, according to Brewbound, but the deal fell a part.
Some Florida craft brewers are unsure how to feel about the deal.
"This has never happened before, so I don't really know what will happen next," said Mike Halker, president of the Florida Brewers Guild and owner of Due South Brewing in Boynton Beach. "It's definitely a trend in our industry right now. All I know is that I have no intention of selling my brewery."
Kent Bailey, founder of Coppertail Brewing Co. in Tampa, said Cigar City's success will help other breweries in the region.
"It will help spread Tampa's reputation for outstanding craft beer to more markets nationwide," Bailey said. "Ultimately that will help the Tampa craft beer scene by generating more beer tourism and by creating more demand for Tampa beer in other states. Florida beer can compete on the national playing field alongside beer from California, Colorado, or wherever."
Justine Griffin can be reached at [email protected] Follow @SunBizGriffin