This Times story goes into the shiny new threat to the diamond market. London based De Beers, the world’s largest diamond business, has finally admitted there could be a potential threat from the U.S. Late last fall Boston-based Apollo Diamond filed a patent for a nearly flawless — at least to the naked eye — synthetic diamond.
I’m fascinated by this interplay of business on the global market. Add on to it that the port of Antwerp — second largest Belgium city and major port — is where 8 out of 10 mined diamonds are handled. If the synthetic diamond takes off, this could have a great economic effect.
I think there are a lot of factors into play about identity here also — the tradition of diamonds, what could happen to the African diamond mines and miners, (where De Beers has about a $4 billion stockpile), and how a manufactured little U.S. gem could usurp all of it. This is something I’d like to pursue for my story.
De Beers plans war on synthetic gems
By John O’Donnell
http://business.timesonline.co.uk/article/0,,9065-995202,00.html
February 08, 2004
De Beers plans war on synthetic gems
By John O’Donnell
Oppenheimer aims to open diamond stores worldwide and launch a marketing blitz
TWICE a week an armour- plated van picks up an anonymous consignment from Heathrow airport’s cargo terminal. Its driver makes his way to the fringe of Hatton Garden, London’s jewellery district, to an imposing grey building where tall black gates open, admitting the truck to an underground complex.
It is here, in the offices of De Beers, that jewellers sort through the delivery of African gems, and where Nicky Oppenheimer, patriarch of the dynasty that controls the world’s biggest diamond mines, manages his empire.
Diamonds and their emotional value have not altered in the century since Oppenheimer’s grandfather Ernest, a German emigrant, left his homeland for South Africa and eventually won control of De Beers.
Today the family still owns 40% and has a further stake of less than 5% through a separate company. Anglo-American, the mining group, has owned 45% of the firm since it was taken private two years ago. “It hasn’t changed much,” said Oppenheimer. “Whether to mark success in the East or love in the western world, a diamond has always been the ultimate gift.”
Although the product is unaltered, the marketplace has changed. Last week De Beers announced a 7% rise in annual sales to £3 billion. But the company, once a cartel that controlled 80% of diamond supply, has seen its power dwindle in the face of competition from Australia and Canada.
Today Oppenheimer is chairman of a business that controls just over half of the world supply and one that is threatened by synthetic diamonds so sophisticated that it is impossible for the naked eye to distinguish them.
In the company’s South African home, De Beers faces the forced sale of 15% of its mining business to black workers. The sensitivities of “conflict diamonds” — sold to raise money for war — pursue the company. The British government is investigating De Beers’s alleged links with parties that bought diamonds in war-torn Congo. And Oppenheimer, who travels to work by helicopter, is unable to visit America because of an indictment, following claims that his company fixed industrial diamond prices.
Despite this, the 58-year-old king of diamonds is optimistic. “What you have seen in the 10 years to 2000 is diamonds losing out to other luxury goods,” said the Oxford- educated baron. “Now they are regaining ground.”
He credits this revival partly to an industry advertising push initiated by De Beers that aims to treble total marketing expenditure to more than $1.5 billion.
De Beers has pressured its site holders — those who buy its diamonds — to increase their contribution to the marketing budget following the introduction of its so-called “supplier of choice”, which cut the number of dealers to which the company sells. And it is recruiting retailers such as Tiffany to cover further marketing spend.
The company’s move to improve its product’s branding has been helped by a venture with the French company LVMH to open diamond stores worldwide, including a flagship site on London’s Bond Street.
Oppenheimer pledged further investment. “If you look at the new De Beers store in London, it is a step change in what jewellery stores look like. Traditionally, the bravest thing you could do was to go in the door of a jewellery store — that has to change. People have to market jewellery in a modern way.”
The brand offensive will also target one of the biggest problems faced by the industry. “Synthetic diamonds are a threat we have been aware of for some time,” said Oppenheimer. “It is much closer now than it has been before.”
De Beers’ marketing drive hopes to beat competition from the synthetic rocks with a simple message: real men give real diamonds. “Diamonds are created by nature over millions of years of volcanic activity,” said Oppenheimer. “They come from the bowels of the earth — not a laboratory.”
The company is restructuring its South African mining business ahead of the forced sale of the 15% stake. This division contributes about a quarter of the company’s diamond haul. “It has always been our attitude and something my grandfather said, ‘We operate to make money but also to make a real contribution to the country where we operate’.”
Oppenheimer defended his company’s handling of the controversial diamond buying by De Beers clients in the Congo. In a UN report being followed up by the Department of Trade and Industry, De Beers was criticised for links with a group of diamond traders who bought gems in the war-torn country. The sellers used the proceeds to fund conflict. De Beers said that after the report it had warned its buyers to stop the trade.
“We are co-operating with the DTI,” said Oppenheimer. “I am certain that De Beers’s name will be cleared. When you produce something like diamonds you have to be extremely careful that your product is untainted. That’s a matter of concern for us every day.”
With the rising demand for diamonds, he has cause for optimism. Prices are going up following the depletion of gem stockpiles. De Beers sold many of its diamonds after it was taken private to pay off debt raised to buy the company. It believes that high demand and stock shortages will lead to annual price rises of about 5%.
Taking advantage of this favourable outlook will most likely be the responsibility of his 31-year-old son Jonathan. Oppenheimer said he “certainly hoped” his son would take his place on his retirement, which he has already started planning.
With diamonds more popular than ever, it appears that human vanity — as Oppenheimer’s grandfather explained the emotional appeal of gems — is as strong today as it was a century ago. “A really beautiful diamond doesn’t do you any good,” said Oppenheimer. “But it fills a niche in the human psyche. It’s a symbol of something emotional and it has a very exciting future.”
This is a perfect "global" story with three continents involved. It could work within our class topic, but you might want to look for something more specific.
THe idea of looking into business through the identity lens is attractive.