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De Beers Postpones Supplier of Choice Due to EC Investigation

Summer 2001

De Beers announced that it is postponing the formal implementation of its new Supplier of Choice strategy until the dialogue currently underway with the European Commission has been completed. The strategy was supposed to be launched in June.

The European Commission announced last month it was investigating whether the new strategy violates its anti-trust laws. They have sent letters to the sightholders asking whether the strategy will increase demand for De Beers’ diamonds. The E.C. is also said to be investigating the De Beers’ retail venture with LVMH.

In related news, in a sign that the diamond market remains weak, De Beers’ Diamond Trading Company announced that sales for the first half of 2001 totaled $2.6 billion — 25.5% lower than the equivalent period in 2000. A statement said that Christmas sales of diamond jewelry were below expectations, and led to excess inventory of polished diamonds being held by the trade. Consequently, the U.S. trade did not restock.

The lower sales by DTC is a blessing in disguise for the industry as it will keep prices firm.

The DTC anticipates that the market should begin to show signs of improvement in the second half though much will depend on what happens in the U.S. De Beers anticipates retail sales worldwide will fall five to seven percent this year.

One note about these results: De Beers is now private, and by releasing these figures, it is showing that it is keeping its promise to remain somewhat transparent. This is good news, since De Beers stock price and sales results were always used as gauge of the industry. Now that De Beers’ shares have been de-listed, its sales results are one of the few ways we can measure how well the trade is doing. Obviously there is room for improvement.


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