In recent years, the international diamond giant De Beers has been in deep trouble, beset by a number of negative factors, and has piled up the largest diamond stockpile since the 2008 financial crisis.
In terms of the market environment, the continued decline in market demand in major countries has been like a hammer blow; the emergence of laboratory-grown diamonds has intensified competition; and the impact of the new crown epidemic has caused the number of marriages to plummet, sharply reducing the demand for diamonds in the wedding market. Under this triple whammy, the world's largest diamond producer De Beers inventory value soared all the way up to about 2 billion U.S. dollars.
De Beers chief executive Al Cook bluntly: “This year's raw diamond sales are really not optimistic.”
In retrospect, De Beers was once the dominant player in the diamond industry, controlling 80% of the world's diamond production in the 1980s.
In the 1980s, De Beers controlled 80% of the world's diamond production, and even today it still accounts for about 40% of the world's supply of natural diamonds, making it a significant player in the industry.
In the face of successive declines in sales, De Beers pulled out all the stops. On the one hand, it has had to resort to price cuts in an attempt to attract consumers; on the other hand, it has tried to control the supply of diamonds in an attempt to stabilize market prices. The company has drastically cut production from its mines by around 20% compared to last year's levels, and had no choice but to cut prices at its latest auction this month.
In the rough diamond market, De Beers' influence cannot be underestimated. The company organizes 10 elaborate sales events each year, and with its deep industry knowledge and market control, buyers often have no choice but to accept the prices and quantities offered by De Beers. According to sources, even with the price cuts, the company's prices are still higher than those prevailing on the secondary market.
At this time when the diamond market is in a deep quagmire, De Beers' parent company Anglo American had the idea of spinning it off as an independent company. This year, Anglo American rejected a $49 billion takeover bid from BHP Billiton and made a commitment to sell De Beers. However, Anglo American chief executive Duncan Wanblad, Anglo American's group chief executive, warned of the complexities of disposing of De Beers, either through a sale or an initial public offering (IPO), given the current weakness in the diamond market.
In a bid to rally sales, De Beers relaunched a marketing campaign in October focusing on “natural diamonds”
In October, De Beers launched a marketing campaign focusing on “natural diamonds,” with a creative and tactical approach similar to that of the company's infamous advertising campaigns of the second half of the 20th century.
Cook, who has been at the helm of De Beers since February 2023, said the company will increase its investment in advertising and retail in conjunction with a possible demerger of De Beers, with an ambitious plan to rapidly expand its global store network from the current 40 to 100 stores.
Cook confidently declared: “The relaunch of this massive category marketing campaign ...... is, in my eyes, very much a sign of what the independent De Beers will look like. In my view, now is the perfect time to push hard on marketing and fully support brand building and retail expansion, even as we cut back on spending on capital and mining.”
Cook is also adamant that a “gradual recovery” in global diamond demand is expected to dawn next year. He noted, “We have observed the first signs of recovery in US retail in October and November.” This is based on credit card data showing an upward trend in jewelry and watch purchases.
Independent industry analyst Paul Zimnisky, meanwhile, predicts that De Beers' raw diamond sales are still expected to fall by around 20% in the current year, following a sharp 30% drop in sales in 2023. However, it is encouraging to see that the market is expected to recover by 2025.
Post time: Jan-02-2025