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‘Diddy’ duets with Diageo for tequila takeover

Wednesday, 8 Jan 2014 | 9:50 AM ET

One of the world's most successful media personalities, Sean "Diddy" Combs, has teamed up with one of the world's leading drinks businesses, Diageo, to take over the tequila brand DeLeón.

Sean 'Diddy' Combs
Scott Gries | Getty Images
Sean 'Diddy' Combs

Combs, who is an actor and entrepreneur, rapper and music producer, became the face of Diageo's vodka brand Ciroc in 2007, and the new venture, a 50/50 partnership between U.K. and U.S.-listed Diageo and Combs Wine & Spirits, hopes to build on the alliance.

According to Diageo, since they teamed up with Combs on the Ciroc brand, vodka sales have grown from 50,000 cases in 2007 to nearly 2 million today.

(Read more: Diddy to Buffett: 'I need some advice')

"The joint venture acquisition of DeLeón will allow the brand to benefit from Diageo's strong distribution network, supply chain, and marketing capability and Sean Combs' access to influencers and proven track record of marketing luxury lifestyle brands," Diageo said in a press release.

The Diddy-Diageo team bought DeLeón from U.S.-based Quench Enterprises, with the deal finalized on 23 December 2013. Diageo would not disclose how they were financing the deal or for how much the tequila brand was acquired.

Diageo said that it expects the deal to "accelerate" its share of the high-end ($40 plus) tequila market and help it become one of the key producers in the sector. DeLeón currently has five variants with retail prices ranging from $120 to over $1,000, and is sold in 18 U.S. states and Washington, D.C.

(Read more: Diageo to launch new bourbons, doesn't need Beam Inc.)

According to the Distilled Spirits Council of the United States, since 2002, U.S. imports of tequila have grown 72 percent, an average rate increase of 5.5 percent a year. In 2012, over 12 million 9-liter cases of the spirit were sold.

On top of that, it is the high-end brands that have seen the biggest increases: super premium tequila sales have grown by 430 percent since 2002.

"The joint venture with Combs Wine & Spirits and its purchase of DeLeón is Diageo's latest step towards returning to a leading position in tequila in North America," said Larry Schwartz, President, Diageo North America.

He continued: "Expanding our relationship with Sean Combs into tequila was a natural choice given Sean's ability to galvanise support for luxury brands, as we've seen with our work together on Ciroc."

(Read more: Indian regional court annuls United Spirits sale to Diageo)

It's not the first time an R&B artist has shown an interest in the Mexican spirit. Grammy-winning singer-songwriter Ne-Yo launched Malibu Red a few years back, a mix of coconut rum and tequila.

Commenting on the new venture,Sean Combs, 44, said, "DeLeón is an outstanding brand that appeals to those who love exceptional tequila in a distinctive bottle. Together with Diageo, we will take DeLeón to new heights."

—By CNBC's Kiran Moodley. Follow him on Twitter @kirancmoodley

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