P Diddy Calls Out Diageo

Jun 19, 2023

It's no fun to be dumped, even if you are a billionaire superstar. Sean "Diddy" Combs filed a lawsuit this week accusing the world's largest spirits company, Diageo, of losing interest in him once it started a relationship with George Clooney.

Combs' claims stem from a Tequila brand he co-owns, DeLeón, which he says Diageo mishandled once it spent $1 billion to buy the Casamigos Tequila brand from Clooney and his business partners. Combs' lawsuit calls Casamigos and Don Julio, another Tequila brand Diageo bought after his, "new shiny toys."

"Diageo ... has proven unwilling to treat its Black partners equally – even when explicitly required by contract to do so," the lawsuit says.

Diageo did not respond by press time to a request for comment.

The lawsuit comes three months after fellow music superstar Jay-Z ended a similar dispute with Bacardi by selling his controlling stake in D'Usse Cognac for $750 million.

Combs' lawsuit, partially redacted because it has not yet been fully reviewed by the clerk of the Supreme Court of New York, makes a number of specific claims of racism by Diageo. Combs claims that in October 2019, a Diageo executive told him that "if he were Martha Stewart, his brands would be more widespread."

While the core of Combs' claims are about marketing and distribution, he also complains about production. For example, the lawsuit says, "On one occasion, after being told by Diageo that it couldn't find a lower-priced vendor for a critical component of the DeLeón bottle, Combs Wines was able to locate one on its own. The kicker: that vendor had a years-long relationship with Diageo, so should have been included by Diageo in any half-diligent search."

Combs started his career as a music producer and created his own label, Bad Boy Entertainment. He produced hit records by The Notorious B.I.G. and Mary J. Blige. In 1997, Combs released his first work as a rapper, using the name Puff Daddy. His debut album "No Way Out" reached No. 1 on the Billboard charts and won the first of his three Grammies, for Best Rap Album.

He started a clothing line, Sean John, in 1998. He has also started or invested in companies that do film production and make sports drinks. Forbes estimated his net worth last year at $1 billion.

His involvement with Diageo started in 2007. The lawsuit says Diageo contacted Combs to help it market Ciroc vodka. At the time, the relationship between Black consumers and large booze companies had been roiled by a 2006 quote in The Economist by Frederic Rouzaud, managing director of the company that makes Cristal Champagne. When the reporter asked if Cristal was compromised by "the association with the bling lifestyle," Rouzaud said, "We can't forbid people from buying it."

Combs claims that his marketing efforts pushed Ciroc from 75,000 cases to 2.6 million cases by 2014. Because Ciroc was a success, Combs and Diageo formed a joint venture in September 2013 to purchase DeLeón Tequila.

But Combs claims Diageo "was only interested in the PR benefits of partnering with a Black businessman." A year later, Diageo bought Don Julio Tequila and three years later it bought Casamigos.

Combs claims Diageo pushed DeLeón only in urban areas, but even there put up little effort, with stocks running out in large markets in California, Texas, Florida and Washington DC. He says Diageo discontinued popular 375 ml bottles. He also says Diageo redesigned the bottle in a "slapdash" way. "The sticker on the new bottles was prone to bubbling, making the product look cheap," the lawsuit says.

Combs also claims he went to Mexico in 2021 to visit Diageo's agave plants and learned "none were allocated for DeLeón."

The lawsuit claims that Diageo built Don Julio sales from 100,000 cases to 2.2 million cases in four years, and that it grew Casamigos from 500,000 cases to 2.7 million cases in six years. But it claims that DeLeón is only available in 3.3 percent of all potential retail outlets, compared to 34.4 percent for Don Julio and 36 percent for Casamigos.

"Casamigos can be found in affluent neighborhoods (like the Westside of Los Angeles or Chicago's Gold Coast), while DeLeón – when it can be found at all – is assigned to what Diageo likely believes are less desirable locations," the lawsuit claims.

In addition to damages and fees, the lawsuit asks for "injunctive relief," which if granted could mean an interesting court order to start marketing DeLeón. We'd like to be there when the justices do a comparative Tequila taste test. As with all lawsuits, though, the most likely result is an out-of-court settlement.

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