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1990: Diamond Branding Has Become a Hot Issue among Diamond Dealers

February 1999

A special DRB report – February 1999

In a lively conference at the JA/NY jewelry show entitled The De Beers Branded Diamond, moderated by Whitney Sielaff, Editor-in-Chief, National Jeweler, the issue of diamond branding was raised and discussed by some of the major players in the industry.

Setting the Stage for Branding

The DRB spoke with Robin Walker, of the De Beers CSO, London, who stated that, while in the neighborhood of 20,000 stones will be marked Millennium, a definite decision regarding De Beers branding has not yet been made and will not be made until this coming Fall though the Millennium brand, which uses the same technology as the proposed De Beers overall brand, is already in preparation for sales. However, even from J. Walter Thompson Co., De Beers advertising agency in the U.S., no actual numbers are forthcoming. Indeed, JWT’s Sheryl Silberg told DRB recently, “All our advertising will be only for the generic diamond and the Millennium diamond campaign is only another way of saying that a diamond is forever.” JWT says it will not advertise the specific De Beers Millennium diamond product in the U.S. However, in press releases, JWT notes that, “Consumers in the United States and beyond will have the once-in-a-lifetime opportunity to purchase limited edition millennium hallmarked diamonds.” Is this advertising?

It must be noted that the diamond industry has very little actual information on the “branding issue.” Indeed, this is a subject on which everyone has an opinion, but few facts are floating about. What we do know: De Beers is engaged in a market test program for branding with Boodle & Dunthorne, a small, upscale jeweler in Manchester, Chester and Liverpool, England. One hears that the test is going well, but again, “They were rather jealously guarding any kind of hard information. They‘re waiting for the results.” said Eli Haas, President of the Diamond Dealers Club of New York.

At the JA/NY conference, Sielaff said, “It’s been interesting to watch the evolution of the advertising. ‘A diamond is forever’ is, of course, the tag line of every ad. But they added on recently, ‘De Beers, the diamond experts since 1888.’” It is also interesting to note that Richard Lennox has been appointed the Head of the American De Beers team for JWT. Since January of last year, Mr. Lennox has been a key player in the development of De Beers advertising and marketing strategies: the Millennium diamond and the De Beers brand are the two largest issues in which he has had a hand.

The Rationale

The De Beers sightholders’ who receive the sight boxes explanations as to why the Millennium hallmark (brand) is a necessary move make sense. Product protection from technologically engineered or adulterated stones came high on the list. Leon Cohen, one of the eight sightholders participating in the Millennium campaign, voiced support of the De Beers brand specific to security, “People want assurances that their products are good and are going to remain good…A lot of the things that you have here are safety measures that also add value.”

But the clearest rationale was that of adding value simply by adding a strong logo. “The power of name recognition is nothing new,” said Sheldon David, also a Millennium sightholder. Cohen said, “We’re competing against the rest of the world for the money that the consumer spends. Let them spend it with us because we’re going to give them something better and more secure and more wonderful…diamonds must compete.”

Questions from the Industry

However, there are some serious issues at stake for the diamond retailer. Two other sightholders have already confirmed for DRB that the sight boxes will contain colors down to L and clarity down to SI1 and even SI2. So, with the promised superior quality of the Millennium stones come the darker stones that De Beers has been prevented from selling in Asia where the cleaner, darker stones normally bring a high price. It is well known, however, that these darker stones have traditionally been much less marketable in the U.S. and are, frankly, of a limited value to American retailers.

The Millennium diamonds are already a fact but those diamonds chosen as “beautiful” enough – either for the Millennium project or, if the project is carried through, for the De Beers brand – will be chosen by De Beers. Those criteria for beauty have not yet been announced and may never be stated as such and, more to the point for retailers, there is no guarantee that those criteria will remain the same from year to year. Haas asked, “If they brand 1% of the world’s production and advertise it as a big advantage because of that, how are you going to answer your retail consumer who comes into your shop and says, I’ve been reading all of this stuff about fake diamonds…and the retailer has maybe 99% of his inventory in non-branded diamonds.” Beautiful or not, the non-branded diamonds remain without brands.

Also expressed by Haas were some of the reservations of the wholesale side of the industry. “There will be a disenfranchisement of firms who do not have access to branding, ditto for the retail establishments who don’t have the relationships with those who have branded diamonds” When the specter of exclusivity is raised in such a manner, i.e. if the public gets into its collective head that the only diamond one should buy is the one with the De Beers brand, the danger to the small retailer and a large portion of the wholesale industry would seem to be limitless.

A retailer from the audience asked, “Within the whole industry there’s an extreme amount of fear of the De Beers-brand diamond and I was wondering if, through the diamond bourses, the diamond clubs, there is going to be any organized campaign, like surveys, to send to De Beers? Most of the people I’ve spoken to are afraid of it and they‘re against it.” Responded Haas, “I think it would be extraordinarily foolhardy and shortsighted to wait until they give us a formal announcement.”

Questions from the Consumer

It must be noted that the consumer was not represented at this conference in any way and with the advent of a branding system – as another assurance, as a safety measure, as an added value – that consumer’s question must become, “why?” Why, if I’ve bought a diamond from a reputable jeweler and already have a GIA Diamond Grading report, an AGS certificate, a Sarin computer analysis, why do I need to send my diamond to London for yet another assurance? Will this proposed system merely serve to confuse the consumer? Will the public be willing to pay a premium for a brand that can only be seen using a special microscope? Unlike a Tiffany ring, branded on the shank in such a way as to be read with the naked eye, the De Beers brand will only be visible to those select jewelers who will purchase the technology with which to view it and only visible to the consumer at point of purchase. While other brand-name products carry the logo in as large a format as can be managed, De Beers brand will require 400x magnification, opposed to the 10x currently standard in the industry and the purchase of the equipment to see at this magnification to the tune of about $5,000.

Other Issues

To clarify the system: the eight sightholders selected will receive boxes from De Beers containing rough diamonds, including the designated Millennium diamonds. The sightholder cuts the diamond and sends it back to De Beers, which stamps it Millennium and sends it back to the cutter. While De Beers has ongoing anti-trust problems with the U.S. legal system, further legal questions may arise around the subject of a diamond brand as has been noted by Leon Templsman, President of Lazare Kaplan, Inc. at a teleconference. The technology to brand the diamonds is proprietary as is the technology to view the brand.

On another legal front, Dror Yehuda, of Dia-Science was asked a hypothetical question: would he fracture-fill a branded diamond, i.e. one that was designated as beautiful enough to be branded by De Beers but was an “improvable.” His answer was, “Yes, if the owner brings to me a diamond he wants filled, then I will fill it. It’s not my diamond, I do the work for the owner.”

This question seemed to spark the most heated segment of the discussion, but the DRB asks, how would Yehuda, or any other fracture-filler or diamond technician know that the diamond was a branded De Beers stone? Without having bought the proper instrument, the brand is invisible both to the human eye and to the standard 10x magnification. While this may sound legally tricky it is not at all. The owner of a diamond can burn it for all anyone else can do about it; the diamond belongs to the owner. However, when it comes to the next owner – a customer perhaps, one not in the industry – branding, like any other “assurance”, the name of a trusted jeweler, a certificate of any kind, is no guarantee that no changes will be made. If some one wants to sell a diamond fraudulently or without full disclosure, they will and no amount of branding or certifying will stop them and it won‘t be the fault of the technology or those who use it at the owner’s request.

DBeers = Data Base?

Another concern expressed on behalf of the retail side was the proposed collection of information from each customer purchasing a branded diamond. This was most clearly stated by Haas, “De Beers is intending for each retail consumer to fill out a registration card and send it to London…I am very, very concerned that ten years from now De Beers will have every one of your customers that’s ever bought a branded diamond…in a database.” This would afford De Beers with detailed information on the retail diamond market, something they do not engage in presently. As asked by Sielaff, “Is De Beers going into the polished business?” with this potential database of branded-diamond customers. Said Sheldon David, “De Beers, through one of their subsidiaries, has been selling polished to various retailers and wholesalers, it’s a common practice and knowledge for years.”

It is interesting to note that, when De Beers began selling polished goods to retailers and wholesalers this, too, began as a market test. Of course, De Beers has every right to enter the polished business and to sell to the individual as well, should they desire to do so, just not in the U.S.

A parallel situation that might be used as an illustration of what can happen is the current downfall of the U.S. travel agent, now that the airlines themselves are selling for less than the travel agent can. The fear expressed is that the diamond cutter, wholesaler and retailer will one day be cut out of the selling loop by De Beers even as the travel agent is slowly being phased out by the airlines.

In the Winter issue of In-Sight Magazine, Nicky Oppenheimer stated,”…De Beers is now free to focus its full operating attention on its core role – the mining and marketing of diamonds – and acting as the custodian of the world diamond industry.” (italics DRB). De Beers is put in a difficult position by the issue: with responsibility to their own business and to the industry at large, one wonders, in this instance, for whom they are acting as custodian? The producers, the wholesalers, the retailers, the public that already owns diamonds…or the stockholders of De Beers?

De Beers has been saying since 1888 that A Diamond is Forever. Is it now saying that some diamonds are more forever than others? In conclusion, the branding issue is being debated with a minimum of information which is, in itself, a serious problem. It may well be that De Beers could eliminate all of these fears in a moment. If so, it certainly should, if only to maintain the equilibrium of the industry in its role of “custodian.” Rather than much ado about nothing, this appears to be an issue of great, industry-altering importance. The consensus in the industry seems to be that De Beers is intelligent enough to modify its plans in such a way that would not hurt 99 out of 100 diamond cutters and merchants, but this, of course, is not the end of the story. As the issue develops in the industry, the DRB will be there to bring you all the many sides of the story.

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