New Allegations Highlight Diddy’s Brands Were Unfairly Treated by Diageo

The details of Sean “Diddy” Combs’ lawsuit against spirits brand Diageo have been made public, shedding light on allegations of mismanagement and unfair treatment of Combs’ Cîroc Vodka and DeLeon Tequila brands. Several claims have emerged in an unredacted version of the lawsuit, which was filed in May and recently made public.

One allegation suggests that Diageo presented Combs with a watermelon-flavored version of the tequila, despite his objections and attempts to educate the company about the racial history and connotations associated with watermelon. Additionally, it is claimed that Diageo planned to allocate all its agave, the main ingredient in tequila, to its other tequila brands, leaving none for DeLeon.

Sloppy paperwork reportedly resulted in a shipment of DeLeon being impounded by Mexican authorities, while erratic production led to repeated shortages of the brand, with at least ten instances of being out of stock in the past year alone.

The unredacted filing also included an email from Combs to Deborah Crew, the former President and current CEO of Diageo North America, expressing frustration with the company’s alleged discriminatory conduct.

“For years I have written to leaders at Diageo to explain that the problems regarding African American diversity and inclusion are bigger than the company has been willing to acknowledge,” Mr. Combs said in the email. “I know what the experience of working with Diageo has been like for me and my team, so I can imagine what African American employees and suppliers have experienced. While our relationship has been financially successful for all stakeholders, we have not made enough progress on including and empowering the African American community Diageo relies on for billions of dollars.”

The court ruling on June 30 allowed the majority of the redacted material to be revealed publicly, with only specific numerical information related to agave plants, shipments, and cases being kept under seal.

Diddy’s attorney, John Hueston, issued a new statement in response to the unredacted allegations, further highlighting the claims of mismanagement and unfair treatment of Combs’ brands by Diageo.

“These newly revealed allegations show the legitimacy and seriousness of Mr. Combs’ concerns about Diageo’s systemic mistreatment of the DeLeon brand,” said John Hueston, Combs’ attorney. “Rather than treat DeLeon equally, as required by contract, Diageo ignored Mr. Combs’ global appeal and inappropriately pigeon-holed his brands as ‘urban.’  The allegations reveal that Diageo’s approach has resulted in repeated mismanagement of production, insufficient distribution, and nonexistent sales support. Diageo has failed to take responsibility and instead has attempted to terminate its relationship with Mr. Combs merely because he spoke up. We look forward to vindicating these claims in Court and holding Diageo to its promises.”

Additional allegations include:

• Cîroc and DeLeon continued to be described as “urban brands” within the Diageo portfolio. An internal Diageo presentation described Ciroc as an “urban African American brand tied to one personality,” and an internal Diageo document characterized Mr. Combs and Ciroc as having “strong hip hop associations.”
• In advance of the launch of Ciroc’s watermelon flavor, Mr. Combs and his team explained that Diageo needed to be careful about “watermelon” with a brand that it consistently characterized as an “urban African American brand.” After Diageo’s assurances, Mr. Combs signed off on the watermelon flavor for Ciroc. He was adamant, however, that DeLeon should not launch any flavor until the public learned more about the brand. Yet Diageo showed up in person to Mr. Combs and his team with a developed watermelon-flavored DeLeon Tequila. They did this despite DeLeon not having flavored tequila, Mr. Combs’ consistent objection to adding flavors, and the efforts to educate Diageo about the racial history and connotations relating to watermelon.
• Amidst a growing shortage of agave, the key ingredient in tequila, Diageo allocated all of its existing supply to its other tequila brands, forcing DeLeon to scramble and acquire agave from the spot market at significantly higher costs. Diageo’s plan in 2021 was for none of the agave being grown over the next five to six years would be provided to DeLeon.
• In 2019, Diageo failed to provide the proper documentation to the Mexican government, so Mexican authorities impounded cases of a critical shipment of DeLeon at the border. 
• In 2020 Combs Wines was informed that DeLeon was on track to be out of stock during the busiest time of the year—a potential death knell for even established brands. Over the past year alone, DeLeon products have been out of stock and unavailable for purchase in certain markets 10 times. 
• Diageo senior sales executives have admitted that there have been no sales incentives for Ciroc or DeLeon since 2017. Senior salespeople at Diageo have admitted to long stretches where they made no attempt to sell DeLeon. 
• Diageo unilaterally discontinued the production of the popular 375 milliliter bottles, causing a sharp decline of DeLeon sales in key markets. And Diageo caused DeLeon to miss its initial brand targets by changing DeLeon’s distribution approach without Board review and alignment.
• Diageo’s unreliable and erratic pricing caused confusion and inconsistencies across key markets. Diageo first launched DeLeon at a relatively high price and sales lagged. After Diageo finally reduced the price, DeLeon enjoyed more than a year of increased sales growth. Yet Diageo then inexplicably raised DeLeon’s price (over Combs Wines’ objections), effectively killing the brand’s hard-won momentum. 
• Diageo reassigned 13 employees from the DeLeon bottling plant in Mexico to work on other Diageo products, without seeking the approval or even the input of Combs Wines or the DeLeon board of directors.

Previous entries in the Diddy and Diageo dispute are available here and here.