GETPlugged: Diddy Explains New Diageo Joint Venture, DeLeón Tequila


Diddy Did It, Again: Hip-hop’s richest man is teaming up with Diageo on tequila.

Leave it to Sean “Diddy” Combs to join forces with the world’s largest spirits producer, transform a 50,000-case-per-year vodka into the nearly 2 million-per-year Ciroc, grow a personal fortune exceeding half a billion dollars, then ink a new beverage deal—and declare that, in many ways, it’s even more significant than the first one.

That’s exactly what Diddy did today after announcing he has formed a joint venture with Diageo and purchased DeLeón, a boutique tequila brand currently distributed in 18 U.S. states and in Washington, D.C.

“With Ciroc, we tested the waters—or, I would say, we dated,” Diddy tells FORBES. “Now, with this joint venture, we took this step and we got married. I think it’s organic, I think we work together so well, we have a proven track record, and I wouldn’t want to do it with anybody else.”

Read full article after the jumpThe feeling, it seems, is mutual. Diageo North America President Larry Schwartz recalls Diddy telling him about how he’d encounter DeLeón at high-end locales, and how impressed he was by the tequila’s taste and packaging.

“When Sean shared his passion with DeLeón with me, I got really passionate, and then a whole lot of people at Diageo got really passionate about it,” says Schwartz. “And given Sean’s track record, we reallygot passionate about it.”

Though Diddy’s most successful collaboration with Diageo thus far has been Ciroc vodka, he’ll be approaching DeLeón quite differently. For starters, whereas his Ciroc deal earns him a share of profits—and a share of the proceeds of any potential sale of the brand—the DeLeón deal is more of a traditional joint venture.

Both sides invested cash to make the purchase, and Diddy, via his newly-formed Combs Wine & Spirits, will be an equal partner with Diageo in equity terms. Neither side would reveal how much they paid for DeLeón (when asked if it was a multi-million dollar purchase, Schwartz said, “I’ll leave that to your imagination”).

Regardless, Diddy and Diageo clearly have lofty hopes for their latest collaboration. The latter has been looking for a new tequila brand after parting ways with Jose Cuervo, the massively popular beverage Diageo distributed until June 2012. Last year, chief executive Paul Walsh said his company would like to make an “organic play” in the category, and DeLeón appears to be a manifestation of that strategy.

Diddy also envisions a different sort of marketing campaign for DeLeón than he has employed in his prior work with Diageo. There will be no Ciroc-and-awe advertising here (the mogul, not one to shy from changing monikers, briefly dubbed himself Ciroc Obama). Rather, the goal is something a little more understated.

“We’re taking our time, and we’ll work together, and we’re going to come up with a marketing plan,” says Diddy. “But it’s going to be very surgical, it’s going to be savvy, and it’s going to be totally different from Ciroc. We’re not just putting it on the assembly line.”

Part of the reason for this is the nature of what he sees as a new niche for a beverage better known as a margarita ingredient than a spirit worthy of consuming on its own. Diddy believes DeLeón will come to be known as “one of the first sipping tequilas.”

It’ll be priced as such, too. DeLeón currently has five variants; suggested retail prices range from $120 to more than $1,000 per bottle. That puts it at a price point much higher than most of the offerings from other premium tequila brands including Don Julio and Patrón.

In committing to the new venture, Diddy brings his unique marketing skills, his web of connections to entertainment industry tastemakers, his cash—and, just maybe, a willingness to seal the deal in the most permanent way possible.

“Me and Larry said we’re going to get tattoos,” he chuckles.

Given the extent of his involvement with his last Diageo beverage deal, he might not be joking.

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