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De Beers Strategy To Increase Diamonds Demand Is Facing Problems In United States

2001:De Beers Strategy "Supplier Of Choice" And Investigation Of European Commission

June 2001

Once authorities get involved, it seems they can’t stop. We now have news that European Commission is not only investigating De Beers’ retail venture with LVMH, they are investigating the company’s new "Supplier of Choice" strategy, according to articles in JCK and the Financial Times.

"Supplier of Choice" is De Beers’ new strategy to increase demand in the market by encouraging sightholders to go down market.

The Commission has "serious concerns" about the new venture, and has sent all of De Beers’ clients "urgent and confidential" questionnaires asking what effect the new policy will have on diamond prices and demand for DTC stones.

The inquiry into Supplier of Choice could take up to six months. De Beers is set to launch "Supplier of Choice" in a few weeks. Some are speculating it may have to be postponed. Still, we think that De Beers has enough clout that these problems will eventually be worked out.

The problem may be that De Beers has tried to do too much, too fast. They have undergone a complete makeover in one year. Dramatic moves attract attention, and as you can see, it’s not always the kind of attention you want. See our article in the last issue, "What Nicky Oppenheimer Can Learn From Bill Gates," for more on this point.

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