Sean “Diddy” Combs’ signature album may be “No Way Out,” but Diageo apparently didn’t get the message.
Less than one month after the music mogul and entrepreneur filed a lawsuit against business partner Diageo, the global spirits company announced today it has severed ties with Combs.
The move marks the end of the two parties’ 15-year business relationship, which soured earlier this year when Combs filed the complaint on May 31 alleging that the brands he co-owns with the spirits group, Cîroc Vodka and DeLeon Tequila, were given worse treatment because he’s Black.
“Mr. Combs’ bad-faith actions have clearly breached his contracts and left us no choice but to move to dismiss his baseless complaint and end our business relationship,” read a statement from the company, which filed a motion to dismiss the case. “Mr. Combs has repeatedly undermined our partnerships and threatened to publicly defame Diageo if we did not meet his unreasonable financial demands.”
The statement also reaffirmed the company’s commitment to the CIRÔC and DeLeón brands, and alleged that – despite Combs having made “nearly a billion dollars” over the course of the relationship – the mogul “contributed a total of $1,000 and refused to honor his commitments.”
“We have exhausted every reasonable remedy and see no other path forward,” the company stated.
The original complaint was filed by Combs Wines and Spirits, a company owned by Combs, in New York State Supreme Court in Manhattan against Diageo’s North American business. Combs is seeking a court order asking Diageo to comply with their 2013 joint-venture agreement, in addition to written agreements between Combs and Diageo that the partners signed to resolve complaints by Combs, according to the filing. The filing states that Combs Wines and Spirits plans to seek “billions of dollars in damages due to Diageo’s neglect and breaches” in a separate lawsuit.
Among accusations of racial discrimination, Combs’ lawsuit also accused Diageo of putting more resources into the portfolio’s other tequilas, including George Clooney’s Casamigos, which Diageo acquired in 2017 for up to $1 billion.
“Rather than equal treatment, Diageo has treated Mr.Combs worse than others because he is Black,” read the filing. The complaint describes that the company allegedly typecasted DeLeón as a “Black brand” that should target “urban” consumers.
The response now filed by Diageo claims that Combs has “resorted to false and reckless allegations, including numerous defamatory and disparaging accusations” and that it was Combs’ failure to fund the DeLeon Tequila joint-venture which created “a contentious relationship, severely damaged the DeLeón brand at a critical juncture, and stalled its promise and potential for growth for several years.”
The motion also described Combs’ lawsuit as a public-relations focused strategy aimed at disparaging Diageo and a ”transparent attempt to pressure Diageo into an early settlement of a planned parallel arbitration proceeding.”
In 2007, Diageo and Combs formed a partnership to develop Diageo’s Cîroc, at the time a low-ranked vodka. After Combs took charge of the brand’s strategic marketing, Cîroc ascended to a top seller within a few years, growing from a 50,000-case-per-year vodka into nearly 2 million-per-year. It has since released several product variations, including ready-to-drink line CÎROC Vodka Spritz. In 2014 Combs formed a joint venture with Diageo and purchased DeLeón, a boutique high-end tequila brand that was distributed in 18 U.S. states at the time.
Since then Diageo has emerged as a major agave contender among spirit groups. After parting ways with Jose Cuervo in 2012, it has built its portfolio around other premium brands Don Julio and Casamigos. Casamigos is now the top-selling U.S. tequila brand, growing by more than 400,00 cases to nearly 2.4 million last year, which is 300,000 more than Don Julio, the number three brand, according to Nielsen data. DeLeón ranks 28th, representing 0.4% of tequila sales. In 2022, DeLeón was distributed in 3.3% of retail outlets, compared with 36% for Don Julio and 34.4% for Casamigos, according to the court filing.
Diageo has asked the judge to send Combs’ lawsuit to arbitration or dismiss the complaint entirely.