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Diageo Is Said to Weigh Ciroc Vodka Sale After Diddy Tie-Up Ends

Cîroc Vodka (Angela Weiss/Photographer: Angela Weiss/Getty)

(Bloomberg) -- British spirits group Diageo Plc is exploring a sale of Cîroc Vodka, a brand once backed by music mogul Sean “Diddy” Combs, according to people familiar with the matter.

The company has reached out to potential suitors including beverage companies and buyout firms to gauge their interest, the people said, asking not to be identified because discussions are private. Considerations are early stage and may not lead to a transaction.

Diageo is studying a sale of Cîroc following the settlement in January of a lawsuit with Combs where he accused the spirits company of racism in its alleged neglect of Cîroc Vodka and another liquor brand called DeLeón Tequila. He later withdrew his allegations and business relations were ended.

The music mogul has been accused of sexual abuse several times over the years. In September, he was arrested by federal agents in New York on charges of racketeering and sex trafficking. 

A representative for Diageo declined to comment. The company has previously said that its “disciplined and strategic portfolio management will continue to be an integral part of our capital allocation strategy.” It has been divesting assets, agreeing in July to sell Pampero rum and Safari flavored liqueur. 

Diageo, the owner of Johnnie Walker whisky, has struggled alongside other drinks companies over the past year due to a slowdown in Chinese demand for high-end spirits. The problem has been compounded by weakness across much of the Americas for Diageo. 

That’s created challenges for Chief Executive Officer Debra Crew since she took over last year. Crew replaced Ivan Menezes, who had championed the company’s “premiumization” strategy. The company’s net sales in the latest fiscal year through June fell 1.4%, and shares of Diageo have declined about 12% in London trading this year.

Cîroc’s legacy connection to Combs as well as declining revenue may turn off some potential suitors, the people said. Net sales of Cîroc fell 28% in North America for the fiscal year ending end of June, according to Diageo’s annual report. However, the brand’s strong presence in nightclubs could attract certain bidders who see turnaround potential, they said. 

Diageo also owns other vodka brands including Smirnoff and Ketel One.

--With assistance from Sabah Meddings.

©2024 Bloomberg L.P.