The share of Belarusian companies on the domestic jewelry market is still insignificant – just a third of the total supply
The capacity of the Belarusian jewelry market is obviously huge. This industry is experiencing a robust growth. The number of producers and vendors is increasing, so is the sales volume. In 2012 alone some 533,600 pieces of gold jewelry and gemstone jewelry worth Br888.8 billion were sold, as well as 668,300 pieces of silver jewelry worth Br179.4 billion. Yet, Belarusians often have to buy foreign-made jewelry to satisfy their thirst for “timeless values”. At the same time Belarusian products sell extremely well abroad: diamonds cut in Gomel are used to make jewelry for the famous jewelry companies Cartier and Tiffany. Belarusian specialists were involved in the creation of the finest and most complicated piece of jewelry of modern times – a replica of the Great Imperial Crown of Russia. In order to revive the Belarusian jewelry market and boost exports of domestic jewelry products, a decision was made to bring together state-run jewelry manufacturers. The holding company “KRISTALLHOLDING” was registered in September 2012 to consolidate the assets of three leading jewelry companies – JSC “Gomel MA “Kristall”, JSC “Beluvelirtorg” and CJSC “Belgran”.
CJSC “Belgran” specializes in the production of diamonds and jewelry, while JSC “Beluvelirtorg” boasts a broad network of sales outlets. The merger of the three companies has optimized the existing production and sales chain and strengthened the market positions of each of the companies.
JSC “Gomel MA “Kristall” became the managing company of the holding company “KRISTALLHOLDING”. In December 2012 the joint stock company marked the 40th anniversary since the first Belarusian diamond debuted on the market. Being part of the export-oriented diamond-processing industry of the USSR (the Soviet Union had seven diamond-processing companies), Gomel-based Kristall together with Smolensk-based Kristall, another industry leader, contributed to the global recognition of the Russian gem-cutting expertise.
Today JSC “Gomel MA “Kristall” is the leading producer of diamonds, jewelry and diamond tools in Bela- rus. Its brands are recognizable in Belarus and abroad. The products of JSC “Gomel MA “Kristall” are exported to the advanced global diamond and jewelry markets, including Belgium, Israel, the United States, China, India and Russia. Besides, the company is a longstanding partner of the National Bank of the Republic of Belarus and helps form its reserves of precious stones. The Gomel-based company was granted an exclusive right to make state awards (orders and medals) upon the order of the Belarus President Administration.
Ahead of Time
The growth strategy of the holding company “KRISTALL-HOLDING” up to 2018 envisages ambitious goals in manufacturing, sales and upgrade.
The priority targets for the next five years include intensive production growth, increase in sales, product expansion, improvement of product quality and competitiveness.
To this end, by the year 2018 jewelry production will be increased 2.2 times compared to 2011. The company will intensify cooperation with foreign partners in a bid to diversify the product lineup. Under production cooperation agreements Kristall is planning to process up to 100kg of gold and 100kg of silver per year, said Ruslan Sorokovoy, Director General of JSC “Gomel MA “Kristall” managing company of the holding company “KRISTALLHOLDING”.
By means of ramping up diamond processing operations (the production of diamonds is to increase at least 1.4 times by 2018) JSC “Gomel MA “Kristall” will strengthen the competitive edge in the middle and premium market segments and maintain the market lead in the most prestigious jewelry segment.
In addition, by 2018 there are plans to boost the production of diamond tools 1.5 times as compared to 2011. This line of business will be strengthened through the use of new technology and diversification of products.
The economic performance of the jewelry holding company does not give reason to doubt that the targets will be met. In H1 2013 the output reached Br183.9 billion in comparable prices, beating the January-June target by 1.5%. “During this period the holding company “KRISTALL-HOLDING” marketed 328 new kinds of jewelry. In general, the H1 2013 output made up 70,000 pieces of jewelry weighing 270kg.
“We offer a large selection of jewelry, all in all over 10,000 titles from classics to avant-garde, to luxury. We also offer a wide range of certified diamonds of different price ranges,” said Ruslan Sorokovoy.
In addition, Kristall produces custom-made jewelry on orders of individual and corporate clients and regularly offers new exclusive collections of jewelry.
Fighting for Customers
The growth in the output of products, no matter how attractive they are, says nothing about the efficiency of the production. It is important that every single item finds its buyer. Kristall believes that it is not only the increase in output but also strong sales that attest to the efficiency of the sale and marketing policies. Kristall expects that the competitive advantages of the joint retail chain, coordinated pricing and advertising policy, effi-
cient logistics will lead to stronger sales. On this front Kristall plans to open new stores, hold large-scale promotional activities, expand the product range, and increase the production of the items popular on the market.
“We aim at the maximum satisfaction of consumer demand and the fastest turnover of the working capital,” said Ruslan Sorokovoy. “It is projected that the share of domestic jewelry in the holding company “KRISTALL-HOLDING” distribution network will account for 60% in 2017,” he added.
It should be noted that the 2015 target regarding the share of domestic jewelry in the retail network of the holding company was 55% and it was already met in H1 2013 (55.4%). In general, there are plans to increase the share of Kristall’s retail network on the domestic jewelry market from 28% in 2011 up to 35% in 2018, and to bolster the combined share of the holding company on the Belarusian market, taking into account the sales of Kristal products in other retail networks, up to 40%.
In 2012 the holding company accounted for 33% of the total jewelry sales on the domestic market. Today Kristall chain has 55 outlets. In H1 2013 the company’s retail sales beat the forecasts by 13.6% to make up Br148.8 billion. Operating profit for the period reached Br152.4 billion, up 2.8 times compared with the same months last year, Ruslan Sorokovoy noted.
Along with the domestic market, export sales are among strategic priorities for the holding company “KRISTALL-HOLDING”. The company’s main efforts are focused on expanding the export and optimizing the distribution channels by increasing sales of jewelry with a higher added value as compared to diamonds. Import-substitution projects are underway to reduce the amount of imported products. The company constantly designs new high-quality jewelry products in close cooperation with foreign partners. The company also works closely with CIS jewelry producers (Russia, Ukraine, and Armenia) to start complementary counterdeliveries.
It is expected that the aggregate export of the holding company will make up $22.6 million in 2015 and $30 million in 2017, an increase of 2.2 and 2.9 times on 2010 respectively. The focus will be made on building up the exports of jewelry. Thus, JSC “Gomel MA “Kristall” is set to increase its gem sales abroad 4.4 times by 2018. Exports of diamonds as well as of diamond tools will go up 1.5 times.
In H1 2013 the exports of Gomelmade diamonds increased by 10.6% compared to the same period of 2012. Earnings increased 1.5 times. The company sold its products to Israel, Belgium, Russia, Armenia, the U.S., Lithuania, Kazakhstan, Ukraine, Turkmenistan and Estonia.
Advancement to the U.S. market was an important step for the Gomel-based jewelry producer. The U.S. market is the most prestigious and economically attractive for diamond manufacturers. The United States consumes almost half of the global diamond output. In H1 2013 JSC “Gomel MA “Kristall” shipped a pilot batch of diamonds worth of $300,000 to the U.S. after signing a contract with AV Jewellery of NY, Ltd. In July 2013 the holding company “KRISTALL-HOLDING” and AV Jewellery of NY, Ltd. inked another contract worth about $500,000.
Another priority export destination for the Belarusian diamond manufacturers is a rapidly growing jewelry market of Russia. Belarus supplies jewels to Almaz Holding Company which is among Russia’s top three jewelry manufacturers, OAO Russkiye Samotsvety (St. Petersburg), Kristall Smolensk, and EPL Diamond (Yakutia).
The Belarusian jewelers not only sell polished diamonds to Russian partners, but also successfully implement joint projects with them. For example, in 2012 as part of the cooperation project with Smolensk Diamonds Jewellery Group, JSC “Gomel MA “Kristall” manufactured 2,400 parts from white gold alloy to make the replica of the Great Imperial Crown which was made by Kristall Smolensk (a leading manufacturer of polished diamonds both in Russia and Europe and a reliable business partner of the Belarusian company) on the occasion of its 50th anniversary and the 250th anniversary of the Great Imperial Crown of Russia. The Great Imperial Crown is the main symbol of power of Russian monarchs and the major Crown Jewel. It was used for the coronation of all Russian Emperors starting from Catherine II since 1762. The replica of the Great Imperial Crown was made with the participation of the Gomel jewelers. It is one of the most expensive and unique works of the global jewelry art. The crown is displayed in Russia’s biggest museums and exhibition halls.
“In order to boost export we put systemic efforts into working with potential customers from various regions of the world,” Ruslan Sorokovoy said.
JSC “Gomel MA “Kristall” is a member of the biggest specialized Internet portal IDEX which gives access to a regularly updated database of orders to purchase polished diamonds in all regions of the world. The company can also use the portal to sell its own products. Apart from that, it is possible to advertise products with the leading international specialized magazine Rapaport (the U.S.).
The jewelry holding company would fail to fulfill all strategic goals without systemic overhaul of its manufacturing and marketing facilities. JSC “Gomel MA “Kristall” is set to implement an ambitious investment project in 2013-2015. The project provides for a number of measures to improve existing technologies and introduce new ones, as well as to build facilities, revamp or modernize production facilities.
“Regular retooling and upgrade of production facilities, the use of advanced equipment and laser technologies make it possible to produce high-quality jewelry which complies with all international standards. Application of state-ofthe-art technologies and modernization of equipment help the company to maintain strong sales domestically and internationally,” Ruslan Sorokovoy said.