Diageo parts ways with Diddy following racial discrimination claim

Receive free Diageo PLC updates

We’ll send you a myFT Daily Digest email rounding up the latest Diageo PLC news every morning.

Diageo will end its business relationship with Sean Combs, known as Diddy, after the businessman and rapper alleged racial discrimination by the drinks group, which it “categorically denies”.

In the legal suit filed by Combs’s company last month the rapper claimed Diageo had “typecast” the co-owned DeLeón tequila brand, as well as Cîroc vodka on which he collaborated with the company, and treated them as “black brands” that should be targeted to “urban” consumers.

In its response filed in a New York court on Tuesday, the company said Combs had made “false and reckless allegations, including numerous defamatory and disparaging accusations of racism on the part of Diageo and certain of its senior executives”.

The company said in a statement Combs had “left us no choice but to move to dismiss his baseless complaint and end our business relationship”.

Combs had alleged Diageo executive Stephen Rust told him in late 2019 that “if he were Martha Stewart his brands would be more widespread”.

In the lawsuit he argued Diageo had not adequately invested in brands associated with the rapper compared with other marques the conglomerate owns, such as Casamigos tequila, formerly owned by the actor George Clooney.

This latest filing has intensified the war of words between the two parties, setting the scene for a protracted legal battle as Diageo seeks to break up its DeLeón joint venture, calling Combs an “unreliable and untrustworthy business partner”.

Diageo also alleged Combs, formerly known as P Diddy and Puff Daddy, had threatened the conglomerate with racism allegations to force the company “to accede to several outrageous and extra-contractual demands, including for supposed billions of dollars of damages”.

The company said in Tuesday’s filing Combs had failed to fulfil his duty as a 50 per cent owner, alleging he had only invested $1,000, while Diageo put in more than $100mn. The company said the rapper earned almost $1bn through their partnership.

This “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 this month announced the death of its outgoing chief executive Ivan Menezes. Debra Crew, who previously ran Diageo’s North America operations has now started in the role.

Diageo and Combs first partnered in 2007 when the drinks conglomerate hired him to promote and market its Cîroc vodka brand. The two sides entered a joint venture in 2013 to buy DeLeón tequila.

Combs alleged in his suit, filed in Manhattan in late May, that the two brands had been starved of production, distribution and sales resources as other celebrity-backed brands thrived.

Diageo’s Don Julio tequila is distributed in 36 per cent of US outlets while Casamigos is in 34 per cent, according to the filings in May. Combs’s lawsuit said DeLeón is present in 3 per cent.

In its response, Diageo said it had tried “for years” to salvage its partnership with Combs and that it remained committed to the success of the Cîroc and DeLeón brands.

The company described the allegations as “opportunistic attempts to garner press attention”.

In responding to Diageo’s decision, Combs’s lawyer said the company’s “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.”

They added: “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 . . . this lawsuit and Mr Combs are not going away.”