Will 2009 be remembered as the year in which the various diamond industry stakeholders managed to do what their colleagues in the gold and platinum sectors achieved decades before? Will it be the year in which responsibility for promulgating the diamond dream to the general public shifts from De Beers to the newly-created pan-industry International Diamond Board?
After eight months of deliberations by a working group set up in 2008 in St. Petersburg, the International Diamond Board has been established for the generic promotion of diamonds, the Antwerp Facets portal writes in a dedicated article. The primary goal of the board will be to promote consumer demand for diamonds across the globe. It also aims to carry out a communications and public relations programme to boost consumer confidence.
Despite the establishment of the body, the International Diamond Board still needs to win support from all areas of the diamond pipeline if it is to be successful. The board will concentrate on building itself up over the next year, while also implementing its first public relations and communication programme. It is also searching for a high-profile chief executive officer.
The industry-wide initiative to build a generic marketing programme for diamonds began last year when it became clear that De Beers, the traditional paymaster for the global advertising of diamonds, had decided that its first priorities were its own brands and clientele. With its supply to the worldwide market amounting to around just 40 percent, compared with double that little more than a decade ago, De Beers decided that it was no longer prepared to underwrite exclusively the generic diamond marketing campaign, which was costing it $200 million on annual basis. However, it did run advertising campaigns in the United States in the final quarter of 2008 in an attempt to boost demand following the onset of the global financial crisis. Indeed, De Beers doubled its holiday advertising spend in the United States in the run-up to the vital Christmas sales season as it became clear that jewellery retailers were heading for one of the worst sales seasons ever.
De Beers Managing Director Gareth Penny appealed to sightholders to join the campaign to market diamonds. “There’s only so much De Beers can do,” he told them at the January sight, which was one of the smallest ever held. “The onus is on you, amongst the best diamantaires in the world, to seek out and exploit niche and emerging markets with innovative marketing programmes and products such as wedding and engagement rings, which will be buoyant throughout the economic cycle.”
Penny expanded upon that theme when he told participants at the company's Diamond Town Hall Meeting in Antwerp on June 3 that the company is changing its role in the diamond business. Penny candidly said that, since De Beers is now only responsible for 40 percent of global diamond output, it has to be realistic in its aims. Diamond industry players have to reduce their expectations of the company, he said. For the most part, De Beers is concentrating on the promotion of its Forevermark diamonds brand, while also expanding its network of jewellery stores.
Over the decade-long period during which De Beers saw its share of the rough diamond market more than halved, the company periodically noted that it would not be prepared to be the sole provider of generic diamond advertising ad infinitum. With other large natural resource corporations increasingly involved in the business, there should be a sharing of the burden, De Beers stressed. But, while on occasion they would admit that they were getting a free ride on De Beers’ coattails, the other companies were reluctant to pick up the challenge.
But it was only after De Beers spelled out its plans to shift its focus and money from generic advertising to company-specific advertising programmes that the other stakeholders in industry began to take notice. This was coupled with both anecdotal and statistical evidence that young consumers increasingly preferred spending discretionary income on luxury products other than diamond jewellery. If the youth do not buy into the diamond culture at a young age, analysts warned, they were less likely to do so as they matured.
It was the Russian company Alrosa that took the initiative. Keen to reinforce its leadership role in the industry, the Russian company convened a meeting in St. Petersburg in June 2008. In attendance were representatives of some of the world's leading diamond companies and organizations. The conclave brainstormed ways to advance the concept of an industry-wide generic advertising mechanism.
The discussion in St. Petersburg focused on building an industry body to run the generic marketing effort on behalf of the international industry, akin to the World Gold Council or the Platinum Guild. That meeting led to an agreement to commission international business consultants McKinsey & Co. to look into whether such a body was viable and what shape it could take. Although De Beers is no longer footing the bill for global promotion efforts, it was nonetheless one of five companies on the steering committee, called SteerCom, established to oversee the development of the campaign, along with Alrosa, Rio Tinto, BHP Billiton and Harry Winston.
The St. Petersburg forum concluded that an independently run organization was needed to run global generic marketing and also to liaise with other trade groups to co-ordinate positions on reputational issues – a vital element in maintaining consumer confidence. McKinsey was instructed to devise a sustainable funding mechanism for the proposed new institution. SteerCom requested funding from across the trade in order for all elements of the diamond pipeline to be represented in the new group.
SteerCom held its second meeting in London in February 2009 focusing on proposals regarding its operations, finance and administration. There was a much wider representation of the diamond industry with more than 60 people taking part in the London meeting compared with just 17 participants at the first meeting in St Petersburg.
The group discussed the opportunity of setting up a new diamond industry body to carry out category marketing and advocacy of major industry issues. “Participants in the London meeting focused on the results of research on the role similar organizations effectively play in other industries, the business case for category marketing and related governance and funding issues,” the group said in a statement. “It was agreed to form a working group including leading diamond producers, the existing industry organizations…and leading representatives from the diamond cutting and wholesale sector to further pursue the concept and to communicate on progress to the broader industry.”
With most recent announcement concerning the establishment of the International Diamond Board, the generic advertising effort appears to be underway. But the question remains: is this the time right for a pan-industry campaign given the fall in demand and low levels of optimism in the industry regarding sales for the rest of 2009? With uncertainty still running strong throughout the trade, will the diamond business wait for stronger signs of recovery before committing much-needed resources to generic marketing?
