Diageo’s Cîroc problem shows why celebrity tie-ups carry risk as well as reward

It’s been one of the biggest stories of the entertainment world this year: controversial rapper Sean ‘Diddy’ Combs is currently facing his first Christmas in jail as he waits to be charged with hundreds of allegations, including sex trafficking and racketeering.

There has been much fallout surrounding the charges, with celebrities who attended his infamous “white parties” quick to distance themselves from the music mogul. 

As the serious nature of the allegations became clear, brands also started to step away from Combs, with US retail giant Macy’s dropping Comb’s Sean John jeans brand. 

Diageo had already cut ties with Diddy as the frontman for Cîroc vodka and DeLeón tequila after a 15-year partnership, but the association in consumers’ minds may be harder to break. It is now said to be mulling the sale of Cîroc, having seen the brand’s reputation tarnished over the past 12 months.

The spirits giant has reached out to potential suitors to gauge interest in a buyout of Cîroc, according to Bloomberg. Discussions are said to be at an early stage, it reported, citing people familiar with the situation.

The firm remained tight-lipped on talk of any sale, telling The Grocer it “does not comment on market rumours”.

But a sale would make sense from both a reputational and strategic perspective.

Vodka boom subsides

Firstly, vodka’s boom has long since subsided, replaced by trendier tipples such as cognac and tequila. It remains the largest spirits category in the US, but sales by volume fell 3.8% in the year to July, according to IWSR. In the UK, higher prices mean sales of the spirit have crept up by 0.9%, but volumes are down some 4.7% [NIQ 52 w/e 10 August 2024].

And Cîroc’s performance is far from stellar. Sales were down 28% in North America in the year to June, according to Diageo’s annual report. It has fared better in the UK, bringing in an additional £470k on volumes up 9.7% [NIQ 52 w/e 21 April 2024], but remains small fry compared to the likes of Absolut and Diageo stablemate Smirnoff.

A bigger factor driving Diageo towards a sale, however, is likely to be the reputational damage suffered by Cîroc as a result of its association to Combs.

Diageo’s history with Diddy

Diageo formed a formidable partnership with the hip-hop artist back in 2007, with Combs acting as the face of the brand and helping sales increase 40-fold over a seven-year period.

Diageo deepened its ties to Combs in 2014, partnering on the DeLeón tequila brand in a 50-50 venture.

However, the relationship went sour last year, with Combs suing Diageo and accusing it of neglecting his DeLeón tequila brand due to his race in June. A settlement was reached in January of this year, and the pair no longer have a business relationship. Diageo now owns DeLeón and Cîroc outright.

Unfortunately for the Johnnie Walker maker, such were the success of the partnerships, both brands are likely to remain intrinsically linked to the rapper in the eyes of shoppers.

And with Combs now denied bail as he waits to face his allegations, that’s a problem which may drive the supplier to cut its losses altogether.

The risk and reward of celebrity tie-ups

The sticky situation Diageo finds itself in reflects the challenges suppliers can face after getting into bed with celebrities in order to boost the appeal of their brands.

On the one hand, a successful celebrity tie-up can bring in new shoppers and help sales skyrocket. Consumers, especially Gen Z, often associate the positive attributes of a celebrity with the product they endorse, which can boost trust in the brand.

But when a celebrity’s reputation suffers, so does that of the brand. Just ask Proximo Spirits, which paid a reported $600m (£430m) to acquire a majority stake in Conor McGregor’s Proper No Twelve Irish Whiskey, only to see the MMA fighter found guilty in a civil rape case last month.

Proximo has moved quickly to drop McGregor as the face of the brand, but several retailers in the UK and Ireland have removed Proper from their shelves, including Tesco and SuperValu owner Musgrave.

Despite having already severed its official ties with Combs, Diageo will fear similar repercussions if the rapper is found guilty.

In that case, it may view an offload as the best option to protect investments it has made in the Cîroc brand – which itself may benefit from a fresh start.