Kellogg's will not renew Michael Phelps' endorsement deal when the Olympic swimmer's contract with the company expires at the end of the month, an inside source confirmed to CNBC.
"We originally built the relationship with Michael, as well as the other Olympic athletes, to support our association with the U.S. Olympic team," a Kellogg spokeswoman said in a statement first obtained by Ad Age.
"Michael's most recent behavior is not consistent with the image of Kellogg. His contract expires at the end of February and we have made a decision not to extend his contract."
In late September, after Phelps won eight golds in Beijing, Phelps was featured on the boxes of both the brand's Corn Flakes and Frosted Flakes.
Cereal deals are usually not worth more than $250,000, but it is believed that Phelps' deal tops that number.
As part of the deal, Kellogg's also pledged $250,000 to the Michael Phelps Foundation.
The Kellogg's deal is believed to be the first of Phelps' deals that expires.
Some were curious as to the company's intentions when, after the photo of Phelps holding the bong surfaced, officials with the company were not issuing a comment.
Phelps isn't necessarily getting dumped. A source with knowledge of negotiations between Kellogg's and Phelps' team told CNBC that the deal always ended in February and that there was no intention to renew.
Kellogg's also didn't have any option to continue the deal unless a new contract was forged. Odds weren't good anyway, the source says, after Kellogg's ended its sponsorship with the United States Olympic Committee in December. That means they couldn't use the famous rings on future boxes anyway.
Other companies that Phelps has deals with have stood by Phelps' apology.
His deal with Speedo expires at the end of the year.
USA Swimming has issued Michael Phelps a three-month suspension, which he has accepted. In a statement, USA Swimming said it had reprimanded Michael Phelps under its Code of Conduct by withdrawing financial support and the eligibility to compete for a period of three months effective today, February 5.
"This is not a situation where any anti-doping rule was violated, but we decided to send a strong message to Michael because he disappointed so many people, particularly the hundreds of thousands of USA Swimming member kids who look up to him as a role model and a hero. Michael has voluntarily accepted this reprimand and has committed to earn back our trust."
On Thursday night, Phelps' management team from Octagon, issued this response.
"Michael accepts these decisions and understands their point of view. He feels bad he let anyone down. He's also encouraged by the thousands of comments he's received from his fans and the support from his many sponsors. He intends to work hard to regain everyone's trust."
Questions? Comments? SportsBiz@cnbc.com