How Jay-Z and Diddy used their fame to make millions in the spirit industry

Zack O'Malley Greenburg, author of "3 Kings: Diddy, Dr. Dre, Jay-Z, and Hip-Hop's Multibillion-Dollar Rise," discusses how hip hop moguls, Jay-Z and Diddy, leveraged their fame to create two million-dollar brands. Jay-Z launched Armand de Brignac and Diddy has a deal with Diageo's Ciroc vodka.

Video Transcript

ZACK O'MALLEY GREENBURG: Just goes to show how you can leverage your fame beyond just the music. About a decade ago, "The Economist" interviewed the director of the company that makes Cristal champagnes, one of the most expensive champagnes in the world, favored by Russian czars over history. He was asked, what did he think about all these rappers drinking Cristal champagne? He basically said, well, we can't forbid people from buying it. Not exactly a ringing endorsement of a new customer base.

He thought that rappers didn't read "The Economist," but he was wrong. Jay-Z heard about his comments. He removed it from his 40/40 Club, but more importantly, he started issuing this sort of directive to his fans not to drink it either.

And instead of rapping about Cristal, he put his money where his mouth was. He ended up investing in, and eventually taking over, French champagne brand called Armand De Brignac, a.k.a. Ace of Spades. You see this in his videos, the gold bottles. He raps about it all the time. And this has now become one of his most valuable assets in his entire portfolio.

Diddy does not have his own champagne, however, he has something just as, or perhaps even more valuable, which is his deal with Diageo's Ciroc vodka. He started out with them in the late 2000s, and at that point Ciroc was just a middling vodka brand being chilled by no-name former NFL players. So they decided to take a chance on Diddy. And they didn't really have anything to lose, because Ciroc wasn't doing very well. It was about the 50th ranked vodka in the world.

And so Diddy came on and he applied his typical marketing panache, and his shock and awe salesmanship. This is around the time that Barack Obama was running for president. He started calling himself Ciroc Obama, giving that free product placement. Within only a few years, Ciroc was number two in the premium vodka category to only Grey Goose, doing about two million cases a year.

There's a really fascinating connection between Diddy and Jay-Z in the spirits world. Between the two of them, I mean, you think same job description, hip hop mogul-- two very different guys, two very different approaches. But, born a month apart, in the same city, both named Sean, and they both use the same cheap grape as a base of two of their most important products. That's the Trebbiano grape, which is considered by wine officials to be sort of a nothing grape-- its a filler, it's table wine.

Jay-Z has a cognac called D'usse, which is a joint venture with Bacardi. Of course, if you're making cognac it doesn't really matter, because there are grapes that you have to include in order to be officially called cognac. As far as did Diddy's Ciroc vodka goes, using grapes is rather unorthodox. Vodka is typically made out of potatoes, or grains, or something like that. So that was kind of his first philosophy with Ciroc is to center on the sexiness of the grape.

DIDDY: One and a half ounces of Ciroc vodka. You can only make it with Ciroc vodka. Other vodkas don't work.

ZACK O'MALLEY GREENBURG: One thing that gets kind of lost in all of the promotion of Ciroc and such is that Trebbiano is actually a very cheap grape and not some super fancy thing. At the end of the day, Jay-Z and Diddy are both excellent, savvy businessmen. Of course they're not going to get the most expensive grape, because in order to do well on a product, you have to have a low cost, and you have to have a high price. They've grasped that better than anybody, and the success that they've had with Ciroc and D'usse certainly go to prove that as well.