Bain & Co Re­port Analy­ses Di­a­mond Value Chain

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The An­twerp World Di­a­mond Cen­tre (AWDC) and Bain & Com­pany re­leased the third an­nual re­port on the global di­a­mond in­dus­try: ‘Jour­ney through the value chain’. The re­port fo­cuses on the di­a­mond value chain and traces di­a­monds’ route to mar­ket, of­fer­ing for the first time a de­tailed view of chan­nels and ap­proaches for rough and pol­ished di­a­mond sales.

The re­port fore­sees a bal­anced mar­ket in the next four years, with a grow­ing gap be­tween sup­ply and de­mand in the long term. It pre­dicted con­tin­u­ing con­sol­i­da­tion in the mid­dle mar­ket. “The mid­dle mar­ket has tra­di­tion­ally gar­nered the low­est mar­gins along the di­a­mond value chain, with some com­pa­nies earn­ing as lit­tle as 1-2%. The mar­gins of mid­dle-mar­ket play­ers are likely to re­main sta­ble. The name of the game for them will be to lock in ac­cess to pri­mary sources of rough di­a­monds, make their cut­ting and pol­ish­ing op­er­a­tions cost-com­pet­i­tive and se­cure fi­nanc­ing for their op­er­a­tions. Fur­ther con­sol­i­da­tion and in­te­gra­tion is ex­pected in the mid­dle of the value chain in or­der to max­imise mar­gins through scale and scope.”

In ad­di­tion, the study cau­tioned man­u­fac­tur­ers about a wor­ry­ing new trend, that of re­tail­ers look­ing at op­tions out­side their cur­rent sup­ply chain to meet their needs. “A num­ber of pre­mium re­tail­ers have al­ready in­te­grated back­wards along the value chain by in­vest­ing in min­ing as­sets, cut­ting and pol­ish­ing op­er­a­tions and in se­cur­ing ac­cess to pri­mary rough sup­ply. This trend is ex­pected to con­tinue. Such con­sol­i­da­tion, in turn, will create ad­di­tional pres­sure on the mid­dle mar­ket as re­tail­ers start com­pet­ing with their cur­rent sup­pli­ers for ac­cess to rough di­a­monds,” it stated.

Fol­low­ing the suc­cess of the first two stud­ies, Bain & Com­pany and AWDC re­newed their col­lab­o­ra­tion and pre­pared a new re­port for 2013.

AWDC CEO Ari Ep­stein said: “With ‘Lift­ing the Veil of Mys­tery’, AWDC and Bain & Com­pany were able to pro­vide un­prece­dented in­sight in the com­plex dy­nam­ics of our in­dus­try. The re­sult­ing doc­u­ment is widely ac­knowl­edged as an in­valu­able tool in un­der­stand­ing how the global di­a­mond in­dus­try works. The se­cond re­port, ‘Por­trait of Growth’, pro­vided an in-depth anal­y­sis of the un­der­ly­ing pro­cesses of con­sumer de­mand and pref­er­ences. This third re­port is an­other valu­able ad­di­tion to un­der­stand­ing how our busi­ness works and which chal­lenges lay ahead.”

Stephane Fischler, pres­i­dent of AWDC, added: “Given An­twerp’s re­spon­si­bil­i­ties as the his­tor­i­cal and in­ter­na­tional lead­ing trade cen­tre, it is only fit­ting that AWDC again takes the lead in spon­sor­ing this lat­est re­port. Over the course of hun­dreds of years, An­twerp has cre­ated a ro­bust di­a­mond clus­ter that in­cludes a mul­ti­tude of spe­cialised play­ers, in­clud­ing pro­duc­ers, sighthold­ers, high-end cut­ters and pol­ish­ers, and spe­cialised fi­nan­cial and ed­u­ca­tional in­sti­tu­tions. The dy­nam­ics of com­pe­ti­tion and co­op­er­a­tion en­sure that the city re­mains at the heart of the in­ter­na­tional di­a­mond trade. These re­ports are a tes­ti­mony to the long-term com­mit­ment and in­tel­lec­tual stew­ard­ship of An­twerp as the world’s di­a­mond cap­i­tal.”

In ad­di­tion to the fo­cus on the di­a­mond value chain, the re­port com­pares 2012 re­sults with those of pre­vi­ous years, high­light­ing the im­pact of con­tin­u­ing eco­nomic un­cer­tainty on the di­a­mond mar­ket.

Fur­ther­more, the re­port re­views a sig­nif­i­cant new trend in di­a­mond pro­duc­tion: a stream of merger and ac­qui­si­tion ac­tiv­ity among the top pro­duc­ers of rough di­a­monds. Other new el­e­ments in this re­port are in-depth analy­ses of di­a­mond sales mod­els and ap­proaches. Fi­nally, the re­port sum­marises key chal­lenges and pro­vides an out­look for the di­a­mond in­dus­try through 2023.

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