That is why Diddy is suing Diageo over its vodka and tequila manufacturers

Diddy attends The After hosted by Diddy & Doja Cat powered by Ciroc Premium Vodka and DeLeon Tequila at Club Love on May 1, 2023 in New York City.

Shareif Ziyadat | Getty Images

Sean “Diddy” Combs is suing multinational liquor giant Diageo over alleged racial discrimination in its dealings with its vodka and tequila brands, which Combs says the company calls “black brands.”

In a lawsuit filed Wednesday in New York’s Manhattan Supreme Court, Combs’ attorneys accuse Diageo of neglecting its Ciroc Vodka and DeLeon Tequila brands and marginalizing their appeal by marketing them as “urban” brands.

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The rapper and entrepreneur — formerly known by the stage names Puffy Daddy and P. Diddy — claimed Diageo also “sabotaged” its DeLeon-branded tequila with substandard packaging that “made the product look cheap” while selling other celebrity brands like actor George, Clooney’s Casamigos Tequila showed more attention and resources.

Diageo acquired Clooney’s Casamigos in 2017 for $1 billion. It is the top-selling U.S. tequila brand, accounting for 12.6% of tequila sales in U.S. retail stores, according to data from Nielsen and consulting firm Bump Williams.

Combs Wines and Spirits entered into an equal partnership with Diageo in 2007 to market and promote Ciroc. Following the success of the partnership, Diageo co-purchased tequila brand DeLeon with Combs’ company in 2013.

Diageo — a multibillion-dollar, publicly traded spirits company based in London, England — owns more than 200 brands, including tequila brand Don Julio.

According to court documents, Don Julio was distributed in 36% of retail stores in 2022, compared to 34.4% at Casamigos and just 3.3% at Combs’ DeLeon.

Combs claims its brands have been “starved” of manufacturing, distribution and sales resources. And according to the lawsuit, Diageo executive Stephen Rust told Combs in 2019 that race was one of the reasons the company restricted distribution of the DeLeon and Ciroc. If Combs Wines and Spirits were owned by Martha Stewart, its brands would be distributed more widely, Rust allegedly said, according to the lawsuit.

In a statement to CNBC, Diageo described the matter as a “business dispute”.

“We take our unwavering commitment to diversity within our company and the communities we serve very seriously. We categorically reject the allegations made and will vigorously defend ourselves in the appropriate forum,” a Diageo spokesman said in the statement.

The company said it has had a “productive and mutually beneficial relationship” with Combs for 15 years and has made “significant investments that have resulted in financial success for all involved.”

“We are disappointed that our efforts to resolve this business dispute amicably have been ignored and that Mr Combs has chosen to damage a productive and valued partnership. While we respect Mr. Combs as an artist and entrepreneur, his allegations are unfounded and we are confident that the facts will show that he was treated fairly,” the company said in its statement.

Combs’ lawyers are seeking a court order of “equal treatment” which they say Diageo “contractually promised” as part of the partnership.

They are also seeking “billions of dollars in damages for Diageo’s failures and violations” in separate lawsuits.

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