The real deal

Financial Mail - - FEATURES - Mod­er­a­tion Char­lotte Mathews math­ewsc@fm.co.za

“Au­then­tic­ity” is go­ing year.

Not that the mes­sage of love and hap­pi­ness in “A di­a­mond is for­ever” is go­ing to be aban­doned.

That slo­gan, which has served De Beers well for 66 years, is the in­tel­lec­tual prop­erty of its Forever­mark brand.

Mar­ket re­search un­der­taken by the re­cently formed seven-mem­ber Di­a­mond Pro­duc­ers As­so­ci­a­tion (DPA) shows that the mil­len­nium gen­er­a­tion val­ues brands and uses the words “real” and “au­then­tic” in talk­ing about re­la­tion­ships. So the DPA’s cam­paign, launched in June, will fo­cus on the slo­gan “Real is rare. Real is a di­a­mond”.

The for­ma­tion of the DPA shows global generic di­a­mond mar­ket­ing, which re­lied on De Beers for decades when it dom­i­nated the mar­ket, is now be­ing shared among a broader group of pro­duc­ers. In­di­vid­ual pro­duc­ers in­clud­ing De Beers will con­tinue to pro­mote their own brands.

Mar­ket re­search has also shown that con­sumers have con­fi­dence in brands. Bad public­ity in re­cent years about “blood di­a­monds” fi­nanc­ing armed con­flicts and the dif­fi­culty of telling syn­thet­ics from real di­a­monds makes it im­por­tant that buy­ers should know they are get­ting the real thing, eth­i­cally sourced.

Since launch­ing its Forever­mark brand in 2008, De Beers has show­cased some of its finest pieces ev­ery year on lead­ing ac­tresses at red-car­pet events. In the past year its di­a­monds have adorned Olivia Munn and Mar­got Rob­bie at the Os­cars, Kate Hud­son and Rachel McA­dams at the Golden Globes, Saoirse Ro­nan at the Screen Ac­tors Guild Awards and Adele at the Gram­mys.

De Beers head of me­dia re­la­tions Lynette Gould says the group will spend about US$110m on mar­ket­ing this year, in­clud­ing at Forever­mark, its con­tri­bu­tion to the DPA and at De Beers Di­a­mond Jew­ellers, the re­tail out­lets.

In China, De Beers to sell di­a­monds this has al­tered its mar­ket­ing strat­egy slightly to en­cour­age more di­a­mond gifts giv­ing than “self-pur­chas­ing”. From 2001 on­wards its tar­get mar­ket in Asia was women en­ter­ing the work­force, with a “never un­der­es­ti­mate a woman wear­ing a di­a­mond” cam­paign.

Rio Tinto re­cently an­nounced a new mar­ket­ing cam­paign in China for di­a­monds from its Ar­gyle mine in Aus­tralia. It said the mes­sage would be to in­spire con­fi­dence that each “Aus­tralian di­a­mond” bought was “nat­u­ral, au­then­tic and orig­i­nates from the Ar­gyle di­a­mond mine”.

“In­creas­ingly the value of a di­a­mond is tied to where and how the di­a­mond was mined, how it was cut and pol­ished and the process of bring­ing it to sale,” says Bruno Sané, Rio Tinto Di­a­monds GM mar­ket­ing. “This is a very rea­son­able ex­pec­ta­tion that is steadily re­shap­ing the di­a­mond in­dus­try for the bet­ter.”

The last De Beers Insight Re­port showed global spend­ing on di­a­mond jew­ellery advertising dropped to 23% of to­tal lux­ury goods advertising in 2014 from pre-2008 cri­sis lev­els of about 30%. Advertising spend by jew­ellers tends to dip when the mar­ket slows, which is coun­ter­pro­duc­tive.

The global di­a­mond sec­tor has been hit by dif­fi­cul­ties in the past few years. Jew­ellery re­tail de­mand in the US, the big­gest mar­ket, weak­ened af­ter 2008 but has re­cov­ered, while growth in China, which av­er­aged 18% be­tween 2009 and 2014, has slowed as the Chi­nese econ­omy has lost mo­men­tum.

At the same time as con­sumers have economised, the pipe­line be­tween min­ers and re­tail­ers, which in­cludes cut­ters, polishers and whole­salers, was squeezed by lack of fi­nance. Pro­duc­ers did not re­spond quickly enough with cut­backs and were blamed for weak­en­ing prices.

Re­cov­ery is still er­ratic. The Ra­pa­port di­a­mond in­dex, which tracks pol­ished di­a­mond prices, shows di­a­mond prices have been edg­ing down­wards be­tween April and July, af­ter a firmer start to the year. In the first seven months of 2016, the in­dex for one-carat di­a­monds was 4.7% lower than a year ago. Ra­pa­port says dealers are con­cerned about slug­gish pol­ished de­mand, ris­ing in­ven­tory lev­els and nar­row­ing profit mar­gins in the sea­son­ally weak sec­ond half of the year.

It adds that to en­sure long-term de­mand, the in­dus­try must sig­nif­i­cantly in­crease its mar­ket­ing ac­tiv­ity ahead of the fourthquar­ter hol­i­day sea­son.

Lu­cara Di­a­monds re­cently with­drew its 1,109 ct Lesedi La Rona di­a­mond from a Sotheby’s auc­tion be­cause it did not meet its re­serve price. But that fail­ure may have been less be­cause of mar­ket fac­tors and more to do with in­dus­try re­sis­tance to Lu­cara’s at­tempt to break out of tra­di­tional sell­ing chan­nels.

De Beers’ lat­est in­terim re­sults were mixed. It sold 17.2m ct in the six months to June at an av­er­age $177/ct com­pared with 13.3m ct sold in the same pe­riod last year at $206/ct. It said in the first half the US mar­ket showed growth and China was sta­ble. Ja­pan grew mod­estly in lo­cal cur­rency terms but sales in In­dia were af­fected by a jew­ellers’ strike.

Adele at the Gram­mys Wear­ing De Beers Mila ear­rings

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