Diddy-owned drinks company sues Diageo alleging racial discrimination

A drinks company owned by Sean Combs, known as Diddy, has sued Diageo for alleged racial discrimination, arguing the global conglomerate has not adequately invested in brands associated with the rapper.

In court documents filed in New York state court in Manhattan, the musician’s company Combs Wines and Spirits said: “Diageo has treated Mr Combs and his brands worse than others because he is black.”

The DeLeón tequila brand co-owned by the two groups, and Diageo’s Cîroc vodka brand in which it collaborates with Combs, have been “typecast” and treated as “black brands” that should be targeted to “urban” consumers, according to the legal suit.

Diageo characterised the groups’ differences as a “business dispute” adding that “we are saddened that Mr Combs has chosen to recast this matter as anything other than that”.

It said it categorically denied the allegations, would “vigorously defend itself” and had a “steadfast commitment to diversity”.

But Combs Wines and Spirits said its drinks brands had been “starved” of production, distribution and sales resources at the expense of others, such as Casamigos tequila. Hollywood actor George Clooney sold that brand to Diageo in 2017 for up to $1bn.

The legal documents added that Diageo executive Stephen Rust told Combs, formerly known as P Diddy and Puff Daddy, in late 2019 that “if he were Martha Stewart his brands would be more widespread”.

The US rapper turned business mogul bought DeLeón tequila together with Diageo in 2014. This followed the success of the groups’ joint marketing and profit-sharing deal for Diageo’s fast-growing Cîroc vodka, for which Combs is creative director.

Combs’ company said that Don Julio, a tequila brand wholly owned by Diageo, is distributed in 36 per cent of US outlets while Casamigos is in 34 per cent. DeLeón is only present in 3 per cent of US outlets.

Combs Wines said it had been left with “no option” but to seek legal recourse to secure the “same treatment [Diageo] gives other, successful tequila brands”.

Celebrity-endorsed spirits have proliferated in recent years and Diageo, the world’s largest spirit-maker, has rushed to take ownership of such brands.

In 2014 the group partnered with footballer David Beckham to launch Haig Club, a scotch whisky. It also bought a gin brand co-owned by actor Ryan Reynolds in a 2020 deal worth $610mn.

In 2022, tequila was the fastest-growing spirit in the US, with Americans spending more than $13.3bn on agave spirits — a category that also includes mezcal — a bigger total than expenditure on US-made whiskies. In 2023, such drinks are set to overtake vodka as America’s best-selling spirit, according to research group IWSR.

Tequila has been a profit driver for Diageo, accounting for more than half of the group’s growth since 2018, adjusting for currency fluctuations, according to RBC Capital Markets.