Powerful, emotional and consistent branding helped to create the De Beers diamond monopoly. When it was threatened in the 1990s by conflict diamonds and producers such as Russia distributing diamonds outside the De Beers-controlled channel, De Beers again turned to branding to save the day. They repositioned themselves in a market they no longer control and are now more profitable with a 40% market share than when they had an 80% market share in the 1990s. Let me bring you into the picture.
De Beers engages in exploration for diamonds, diamond mining, diamond trading and industrial diamond manufacture. Mining takes place in Botswana and Namibia (through its joint-venture partnerships with the respective governments), as well as South Africa and Canada, in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep-sea. The Diamond Trading Company, the rough-diamond sales and distribution arm of the De Beers Group, sorted, valued and sold about 80% of the world’s rough diamonds by value until the early 1990s.
These diamonds were then sold to the Diamond Trading Company Sightholders whose representatives travelled to London several times a year for the sale or Sight as it was called. Today Sightholders (now numbering only 79) are required to comply with the De Beers’ best practice principles, which set out various objective standards of conduct in three main areas: business, social and environmental responsibilities. (I designed brandmarks for two of the Sightholders at the turn of the century and no mention was made of these noble standards; Mr $ and his rare appearances were the only standard I was reminded about.)
Get the picture? De Beers is big – very, very big! It is well known for its monopolistic practices throughout the previous century, when the company used its dominant position to manipulate the international diamond market by persuading independent producers to join its single-channel monopoly and then flooding the market with diamonds similar to those of producers who refused to join.
The company purchased and stockpiled the diamonds produced by other manufacturers in order to control prices through supply. Ernest Oppenheimer stated: “Commonsense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production.” Now all that was left for the monopoly to become fully fledged was to increase consumer demand.
A diamond is a girl’s best friend
Consider this: a diamond – the rarest and hardest natural mineral known – is worth no more that half its retail value. There is no hard-and-fast rule for the pricing of polished diamonds, but professionals in the polished-diamond industry use a worldwide market price list, the Rapaport, based on the four Cs, which are carat, cut, colour and clarity, as a general guideline for evaluating polished diamond prices. And a jeweller usually adds a 100% mark-up to the Rapaport quoted price. Apart from industrial applications, diamonds have no other value except when polished for their perceived beauty, which we all know is in the eye of the beholder. This brings us to another aspect: the power of emotion.
In 1999, I experienced this first-hand while prospecting for diamonds (just like the diamond diggers did at the turn of the century) along the Orange River, a stone’s throw away from where the first diamond was found in South Africa. There are no words to describe the feeling when you find your first diamond: a flash of brilliant white light coming from among grey-black gravel on the sorting table after days of backbreaking labour, processing tons of gravel. Your heart starts racing and you are overcome by absolute joy and feelings of elation! God chose you to find this diamond and you feel so blessed and special. Although it was only 0,13 of one point of one carat and called “ice-white”, it might as well have been a 100-carat flawless blue-white.
I was once told by a diamond diver in Port Nolloth on the remote Diamond Coast of the South African West Coast: “Men arrive in planes and luxury cars looking for diamonds and leave looking for a lift home, left only with a pair of jeans and the shirt on their backs.” Wise words which sum up the power that prospecting for diamonds holds for men.
But what is in it for the men buying diamonds for the ladies? After all, it costs them a lot of money for an adornment they never wear themselves and mostly do not own; in the words of Marilyn Monroe’s song, “diamonds are a girl’s best friend”. What has made diamonds one of the best-known and most sought-after gemstones since ancient times?
The diamond’s – from the ancient Greek (adamas) meaning “invincible” – ability to prismatically break up white light into its component colours, giving the diamond its characteristic fire, is what makes diamonds so desirable as jewellery. Let’s face it, a diamond ring on a woman’s finger overtly advertises her (and the purchaser’s) wealth. The honour of wearing a one-in-a-million, one-carat blue-white diamond confers a special status previously only reserved for royalty. Thanks to some brilliant branding by De Beers, the purchase of diamond jewellery has become a socially acceptable way of buying a woman’s affection. Actress Zsa Zsa Gabor, who was married nine times, famously remarked: “I never hated a man enough to give him back his diamonds.”
The De Beers diamond advertising and marketing campaign (acknowledged as one of the most successful and innovative in history) launched in the mid-20th century leveraged emotion to its fullest by promoting diamonds as a symbol of love and commitment with the essence aptly expressed in the now famous slogan “A Diamond is Forever”. The 1971 James Bond film Diamonds are Forever, no doubt, further promoted the De Beers monopoly. Noteworthy about this campaign, which lasted decades, is that it was the diamond itself rather than the De Beers brand that was advertised and promoted. In other words, the company promoted the category as the brand. This would start to change in 2004, but more about that later.
“Say you’d marry her all over again with a diamond anniversary ring”, “A one carat diamond is one in a million” and “Is two months’ salary too much to spend for something that lasts forever?” are great and famous headlines used in De Beers’ marketing that created the one-carat diamond as the minimum size to own and part of the reason why there is a substantial price increase once a good diamond reaches one carat.
In 2000, “A Diamond is Forever” was named by AdAge magazine – the authoritative international magazine for marketing and media news – as the best advertising slogan of the twentieth century. This was followed by other successful campaigns, including the “trilogy” ring (representing the past, present and future of a relationship), the “eternity ring” (a symbol of continuing affection and appreciation) and the “right-hand ring” (bought and worn by women as a symbol of independence).
De Beers also opened new markets, even in countries where no diamond tradition had previously existed, with its “promoting diamonds as a symbol of love and commitment” strategy. Today, a diamond engagement ring is customary in the Far East, contrary to the fashion 50 years ago.
By successfully increasing consumer demand for diamonds with one of the most effective marketing strategies ever, and by controlling diamond prices through supply, De Beers created a monopoly and one of the richest families in the world. The current clan, with leader Nicky Oppenheimer, is worth US$5,7-billion, placing them in position 62 on the Forbes 400 list of richest people in early February 2009.
However, in the late 1990s, a number of factors contributed to the need for the De Beers monopoly to reinvent itself. Conflict diamonds, also known as “blood diamonds” (mined by using slave labour and believed to fund dictators, revolutionary entities and rebel groups, especially in Africa), entered the market. In addition, producers from Russia, Canada and Australia chose to start distributing diamonds outside the De Beers channel, thus effectively ending the monopoly. Consumer behaviour had changed, diamond jewellery markets had fallen in comparison to markets for other luxury goods, and the diamond industry controlled by the De Beers monopoly was slow to respond.
De Beers, as the leader in the industry, was widely believed to be a prominent dealer in conflict diamonds in the 1990s and was forced to stop buying any diamonds from other sources in order to guarantee specifically the conflict-free status of their diamonds. It was fast losing control of its monopolistic distribution channel and had to do something quickly and effectively to protect its market share.
In 2000, the United Nations General Assembly adopted a resolution supporting the creation of an international certification scheme for rough diamonds. The Kimberley Process Certification Scheme (KPCS) was adopted by all the parties concerned and came into effect in 2003. Every year since then the General Assembly has renewed its support for the KPCS – most recently in December 2006.
The KPCS originated from a meeting of Southern African diamond-producing states in Kimberley, Northern Cape, South Africa in May 2000 and culminated in a ministerial meeting held in September in South Africa’s capital, Pretoria.
For a country to be a participant in the KPCS, it must ensure that:
1) any diamond originating from the country does not finance a rebel group or other entity seeking to overthrow a UN-recognised government;
2) every diamond exported is accompanied by a Kimberley Process certificate; and
3) no diamond is imported from, or exported to, a non-member of the scheme.
This simple plan is a brief description of the steps taken to ensure that a chain of countries is formed, which deal exclusively with non-conflict diamonds. No doubt, De Beers had a hand in all this. Note where that crucial meeting was held (De Beers has an office there and owns most of the diamond mines in Kimberley) and which company or shall I say shrinking monopoly had the most to lose?