Fu­ture shines bright in China

Di­a­mond gi­ant De Beers is tar­get­ing China as the most promis­ing mar­ket for its glis­ten­ing stones, its CEO Bruce Cleaver tells So­phie He.

China Daily (USA) - - HONG KONG - Con­tact the writer at so­phiehe@chi­nadai­lyhk.com

An ex­pand­ing mid­dle­class and an in­creas­ing num­ber of women buy­ing di­a­mond jew­elry is fu­el­ing China’s in­sa­tiable ap­petite for the precious stone, ac­cord­ing to di­a­mond pro­ducer De Beers Group’s CEO Bruce Cleaver.

De Beers, part of min­ing com­pany An­glo Amer­i­can, set up shop in 1888 and is the world’s lead­ing di­a­mond com­pany with ex­per­tise in the ex­plo­ration, min­ing and mar­ket­ing of di­a­monds.

In its first-half re­sults for 2016, An­glo Amer­i­can’s un­der­ly­ing EBIT (earn­ings be­fore in­ter­est and taxes) was $585 mil­lion — up 2 per­cent from the same pe­riod a year ago.

“We had to­tal sales of about $3.2 bil­lion — it was a good hal­fyear,” Cleaver tells China Daily.

How­ever, rough di­a­mond pro­duc­tion at De Beers fell 15 per­cent to 13.3 mil­lion carats in the first half of the year, com­pared to 15.6 mil­lion carats.

China is now the world’s sec­ond-largest mar­ket for di­a­mond sales, ac­count­ing for 14 per­cent of the to­tal share be­hind the United States (45 per­cent). India is the third-largest mar­ket, ac­cord­ing to Cleaver.

This sig­ni­fies the im­por­tance of the Chi­nese mar­ket to De Beers, he said, with the de­mand for pol­ished di­a­monds in China ex­pe­ri­enc­ing huge growth in the past eight years. But this has slowed down more re­cently, with growth around 3 per­cent in 2015, Cleaver said.

“But we are very pos­i­tive about the fu­ture of Chi­nese di­a­mond and jew­elry con­sump­tion. We think that as the mid­dle-class con­tin­ues to grow and as peo­ple con­tinue to ur­ban­ize, di­a­monds are a very as­pi­ra­tional pur­chase, we would expect to see con­tin­ued health growth in China in the medium to longterm down the road.”

The com­pany sells rough di­a­monds largely to re­tail­ers, man­u­fac­tures and traders. It also has Chi­nese cus­tomers who are di­rect clients of the com­pany.

“We cut and pol­ish the di­a­monds and sell them into the Chi­nese mar­ket, while other re­tail­ers, man­u­fac­tures and traders will sell to the whole world and 14 per­cent of it will then be sold to the Chi­nese mar­ket.”

De Beers works closely with ma­jor Hong Kong jew­elry re­tail­ers in­clud­ing Chow Tai Fook, Chow Sang Sang, Luk Fook and more, Cleaver said.

The pro­ducer has iden­tifi China as the coun­try with the high­est growth po­ten­tial, which is why it has em­barked on a strat­egy to tar­get the Chi­nese di­a­mond and jew­elry busi­ness.

“We are very fo­cused in China, and the spe­cific strat­egy is about grow­ing in Chi­nese mar­ket.”

The com­pany spends about $120 mil­lion each year on mar­ket­ing around the world, with a sig­nif­i­cant por­tion com­mit­ted to China. Cleaver said it will re­launch its slo­gan “A Di­a­mond Is For­ever” in De­cem­ber in China in time for the New Year and the Spring Fes­ti­val.

Chi­nese con­sumers dis­play dif­fer­ent pat­terns of buy­ing di­a­monds com­pared to Western con­sumers, Cleaver says. Chi­nese buy­ers are at­tracted to larger di­a­monds be­tween 0.3 and 0.7 carats, which is more than the global av­er­age. This com­pares to India, where buy­ers are in­ter­ested in smaller di­a­monds.

Com­pared with the US mar­ket, Chi­nese con­sumers choose to buy di­a­monds for dif­fer­ent oc­ca­sions, pre­fer­ring to pur­chase them for a wed­ding in­stead of an en­gage­ment like in the US.

“We are start­ing to see a trend of self-pur­chasers start­ing in China, as women have be­came more eco­nom­i­cal­lyem­pow­ered, so we think that’s an­other growth op­por­tu­nity,” Cleaver says.

An­other strat­egy De Beers will em­ploy is tar­get­ing the “mil­len­nial” gen­er­a­tion (aged 16 to 35), ac­cord­ing to its Di­a­mond In­sight Re­port 2016 re­leased on Sept 15. It found mil­len­ni­als spent more than $25 bil­lion on di­a­mond jew­elry in 2015 in the four largest con­sumer mar­kets (the US, China, India and Ja­pan), more than any other age bracket.

Al­though, De Beers is more fo­cused on the rough di­a­mond busi­ness, it also has two brands in the re­tail mar­ket. Forever­mark is sold through re­tail­ers and now runs more than 450 stores in China.

The sec­ond is the high-end brand De Beers Di­a­mond Jewellers, with 35 stores glob­ally and six on the Chi­nese main­land.

“A con­sid­er­able pro­por­tion of our clients are from the main­land — about 55 per­cent — al­though they don’t only buy in China,” Cleaver says.

He says the com­pany is un­likely to change the foot­print of De Beers Di­a­mond Jewellers, but the roll­out of Forever­mark prod­ucts in more re­tail­ers will con­tinue.

“As we expect to see more growth (from Forever­mark), I think you can cer­tainly expect to see us ad­ver­tise sig­nif­i­cantly in China, and hope­fully you can see us con­tinue to grow. We are very pos­i­tive about our abil­ity to grow in China.”

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