A while back, I wrote about the International Diamond Board, and reported how some in Alrosa were not so interested in a new generic marketing effort, but have talked about something that would almost be a “new cartel,” Rob Bates of JCKOnline writes on www.jckonline.com. To me this casts aside the best part of the old single channel system (its promotional smarts) while embracing the worst (its quasi-legal nature.)
But in the interest of fairness and equal time, in his latest (subscription only) DIB, Chaim Even-Zohar seems to have talked extensively to Alrosa officials and has the following insights into their thinking, which he kindly gave me permission to excerpt:
De Beers, Rio Tinto and BHP Billiton want an organizational structure with laws, bylaws, a CEO, etc. while the Russians feel the actual need of the industry has to be studied and defined. Just because De Beers is dropping generic advertising doesn’t mean that others have to pick it up. …
[The Russians] want to figure out how to optimize their margins out of their diamond resources. When looking ahead, the Russians see an expanding role for governments in the diamond sectors. They think that if there is something like a worldwide promotional body, governments and the producer countries should be directly involved or provide the stewardship. But it goes beyond that. The Russians don’t have the preoccupation that De Beers has with anti-trust concerns, monopolies, etc.; they believe in a regulated market.
Alrosa doesn’t see “anything wrong” with having a government stockpile its rough diamonds when there is lower demand, as long as, ultimately, the highest price for the goods can be secured. The financial return Alrosa received from stockpiling during the crisis has been estimated as being in the one or two digits in terms of the money involved, which is not something it would have ever received out of generic advertising.
.. [W]ithin a few years we may see an African/Russian/Chinese coalition controlling not only the lion’s share of world production, but also a willingness to take the necessary action to regulate the supplies to increase prices …
