A month ago, Diddy filed a fairly dramatic lawsuit against liquor conglomerate Diageo. The lawsuit was dramatic for a number of reasons. First and foremost, Diddy was not just suing some random company. He was suing the company that has been his partner for 15 years. A partner that has paid him an ABSOLUTE FORTUNE over the course of the 15-year partnership. Secondly, in his lawsuit Diddy claimed Diageo totally mismanaged one of the two brands they launched together, DeLeón Tequila, through a combination of fumbled distribution, neglect, a botched redesign and even racial discrimination. Diageo was, understandably, not happy with Diddy's lawsuit. And today the liquor giant officially cut all ties with rapper/entrepreneur, ending what has been a HIGHLY LUCRATIVE 15-year partnership for Diddy. How lucrative? Thanks to Diageo's filing, we now know the exact financial details…
If you would like a more detailed backstory on the lawsuit between Diddy and Diageo, please read this article:
The quick summary is that in 2007 Diageo invited Diddy to become a 50/50 partner in a vodka brand it had started a few years earlier called Ciroc. Ciroc quickly became a huge success thanks largely to Diddy appearing in endless commercials for the brand alongside his many A-list friends. In 2013 Diddy encouraged Diageo to buy a little-known tequila brand called DeLeon. Unfortunately, Diddy soon came to believe that Diageo was ignoring and even sabotaging DeLeon in favor of the Don Julio brand it already owned, and Casamigos, which it bought from George Clooney in 2017 for $1 billion. Today Casamigos is the is the #1 best selling Tequila in the US with annual sales of 2.2 million cases while DeLeon is floundering #28 with a fraction of the sales volume. Casamigos is arguably worth north of $10 billion today and DeLeon is arguably not worth very much at all. That's why Diddy is pissed. His lawsuit alleges that due to racism, neglect and other botched business practices, DeLeon was ruined while Casamigos was favored.
Today Diageo fought back. In a statement that accompanied a legal filing, on Tuesday afternoon Diageo said the following… and pay attention to the text I highlighted in red…
"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 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."
(Photo by Carlos Marino/FilmMagic)
Allow me to extrapolate.
Diageo just revealed that in the last 15 years, it has paid Diddy…
"nearly a billion dollars"!
As far as I understand, Diageo never acquired Diddy's 50% share in Ciroc. Assuming that is true, the "nearly" $1 billion he has earned from the company since 2007 is presumably almost entirely royalty payments on Ciroc sales. That's pretty unbelievable. Had the partnership not imploded and had Ciroc and/or DeLeon been acquired for billions, one could imagine a world where this partnership would have easily made Diddy a multi-billionaire as opposed to the mere $900 millionaire he is right now.
FYI, even at "just" a billion dollars, this partnership earned Diddy far more than he ever earned from his music career. Perhaps 10 times as much.
As the company explained in the same statement today, the crux of the issues related to DeLeon tequila has nothing to do with the accusations made by Diddy and is actually a result of a failure on his part to meet his contractual obligations. Specifically, the company complained that as a joint venture, both parties were obligated to contribute equal amounts to fund the brand. As we learned from the above statement, Diageo claims it has spent $100 million on DeLeon while Diddy has contributed just $1,000. Again, from today's statement:
"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. 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."
Responding to today's statement and filing, Diddy's lawyer released a statement of his own:
"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. 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."
