Diageo Cuts Ties With Sean Combs After Dispute Over Vodka, Tequila Venture

Brian Steinberg
·3 min read
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Liquor giant Diageo PLC said it was severing ties with entrepreneur Sean Combs after the celebrity filed a suit alleging Diageo had not supported joint ventures involving Ciroc vodka and DeLeón tequila.

Combs sued Diageo in late May in New York Supreme Court in Manhattan, alleging that the company, which also distributes Johnnie Walker and Captain Morgan, among other liquor brands, had neglected the spirits under their joint control. He also alleged Diageo had undermined the business by marketing Ciroc and DeLeón as “urban,” rather than something for the general market.

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In a filing made Tuesday in the same jurisdiction, Diageo called for the suit to be dismissed and said it would no longer be working with Combs, who over the years has launched a clothing line and restaurants and has a stake in the Revolt TV cable network.

“We are saddened that Mr. Combs has chosen to recast a business dispute as anything other than that and chosen to damage a productive and valued partnership. 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. Mr. Combs has repeatedly undermined our partnerships and threatened to publicly defame Diageo if we did not meet his unreasonable financial demands,” Diageo said in a statement. “Diageo believes strongly in the CIRÔC and DeLeón brands and remains committed to their success, which is why we tried for years to salvage the broken relationship with Mr. Combs. We funded the purchase of DeLeón for the joint venture and proceeded to invest more than $100 million to grow the brand. Despite having made nearly a billion dollars over the course of our 15-year relationship, Mr. Combs contributed a total of $1,000 and refused to honor his commitments.”

The company added: “We have exhausted every reasonable remedy and see no other path forward.”

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“Diageo attempting to end its deals with Mr. Combs is like firing a whistleblower who calls out racism. It’s a cynical and transparent attempt to distract from multiple allegations of discrimination,” said John C. Hueston, the attorney for Sean Combs, in a statement. “Over the years, he has repeatedly raised concerns as senior executives uttered racially insensitive comments and made biased decisions based on that point of view. Diageo even acknowledged the problem by agreeing in his contract to treat DeLeon the same way it treated their other tequila brands. He brought the lawsuit to force them to live up to that contract, and instead they respond by trying to get rid of him. This lawsuit and Mr. Combs are not going away.”

Combs Wines and Spirits struck a joint venture with Diageo in 2007 for the marketing and promotion of Ciroc. In 2013, Diageo co-purchased DeLeon with Combs’ company.

Diageo owns more than 200 different liquor brands, including Don Julio tequila and Casamigos tequila, which it acquires from celebrity founder George Clooney and his partners in 2017.

In his lawsuit, Combs alleged that Diageo had not given Ciroc and DeLeón the same kind of marketing and promotion it had given other properties in its portfolio.

But Diageo argued Tuesday that Combs had failed to meet obligations to which he had previously agreed. “From its inception, the Combs Parties failed to fulfill their duty to fund the JV as an equal, fifty-percent owner with Diageo, investing a mere $1,000, while Diageo has invested over $100 million in funds,” Diageo said in its filing. “The Combs Parties’ failure to fund the JV created a contentious relationship, severely damaged the DeLeón brand at a critical juncture, and stalled its promise and potential for growth for several years.”

Diageo also alleged Combs was trying to pressure the company for money in the courts. The suit, Diageo said, is a “transparent attempt to pressure Diageo into an early settlement of a planned parallel arbitration proceeding. The complaint reveals a public relations-focused strategy aimed at disparaging Diageo, rather than any claim with legal or factual basis.”

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