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De Beers

De Beers (Est. 1888) Perhaps the most famous sentence in jewelry marketing history is the one conceived by a young copywriter working for N. W. Ayer & Son, – Frances Gerety (1916–1999) – who coined the famous advertising slogan for De Beers: ‘A Diamond is Forever.’ The company has since successfully advertised diamonds to influence consumer demand. In 2000, Advertising Age Magazine named, ‘A Diamond is Forever,’ as the best advertising slogan of the 20th century.

Today, the international De Beers Corporation is involved in natural diamond mining, processing and sales. It was founded in 1888 in the Republic of South Africa by Cecil Rhodes, son of an English parish priest. The company’s creation was the culmination of the rush that occurred after the first diamond was discovered in South Africa, found by a local shepherd in 1866 in the Orange River valley.

When precious stone-hunters learned of the discovery, many went to the Republic. By 1872, diamond mines produced more than a million carats of diamonds per year and the market was flooded with the precious stones. As production continued to increase, diamonds became more available and were no longer seen as a luxury that could be afforded only by the wealthy and the nobility.

British businessman Cecil Rhodes’ venture was financed by the South African diamond magnate Alfred Beit and the London-based N M Rothschild & Sons bank.

The name ‘De Beers’ is derived from two Dutch settlers and brothers Diederik Arnoldus De Beer (1825–1878) and Johannes Nicolaas De Beer (1830–1883), who owned a South African farm named Vooruitzicht (Dutch for Outlook) near Zandfontein in the Boshof District of the Orange Free State. After they discovered diamonds on their land, the British government increased its demands on the brothers forcing them to sell their farm in 1871 to merchant Alfred Johnson Ebden (1820–1908) for £6,600. Vooruitzicht would become the site of the successful Big Hole and De Beers diamond mines. The De Beers name was given to one of the mines and subsequently became associated with the company.

Cecil Rhodes, founder of De Beers, got his start by renting water pumps to miners during the diamond rush that began in 1869. When the 83.5 carat diamond (the Star of South Africa) was found at Hopetown near the Orange River, he invested the profits of his operation into buying up claims of small mining operators and expanded his operation into a separate mining company. He secured funding from the Rothschild family to finance the expansion.

De Beers Consolidated Mines was formed in 1888 in a merger of two companies; one owned by Barney Barnato and the other by Rhodes. It soon became the sole owner of all diamond mining operations in South Africa.

In 1889, Rhodes negotiated a strategic agreement with the London-based Diamond Syndicate, which agreed to purchase a fixed quantity of diamonds at an agreed price, thereby regulating output and maintaining prices. The agreement proved successful: e.g. during the trade slump of 1891–1892, supply was simply curtailed to maintain price.

The company became the leader in the world’s diamond business and signed contracts with many English banks for exclusive rights to supply diamonds. By 1902 De Beers controlled 95% of the world’s diamond production.

The Second Boer War proved to be a challenging time for the company. One area, Kimberley, was besieged as soon as war broke out threatening the company’s valuable mines. Rhodes put pressure on the British government to divert military resources toward relieving the siege rather than more strategic war objectives. Despite being at odds with the military, Rhodes placed the full resources of his company at the disposal of British defenders and sympathizers. This included manufacturing shells, defenses, an armored train and a gun named Long Cecil in the company workshops.

In 1898, diamonds were discovered on farms near Pretoria, Transvaal. One of them led to the discovery of the Premier Mine. The Premier Mine was registered in 1902 and the Cullinan Diamond, the largest rough diamond ever discovered, was found there in 1905.

Its owner refused to join the De Beers cartel and the mine started selling to independent dealers, Bernhard and Ernest Oppenheimer, thus weakening De Beers hold on the market. At first, De Beers’ executives dismissed the threat from the Premier Mine and other finds in German South West Africa. However, it did not take long for production at these locations to equal all De Beers mines combined.

During World War I, the Premier Mine was absorbed into De Beers. When Rhodes died in 1902, De Beers controlled 90% of the world’s diamond production.

Ernest Oppenheimer took over the chairmanship of De Beers in 1929, after buying shares and being appointed to the board in 1926. Oppenheimer had always been concerned about the discovery of diamonds in 1908 in German South West Africa, because he feared that the increased supply would swamp the market and force prices down.

Ernest, an immigrant to Britain and later to South Africa who had founded the mining company Anglo American Plc with American financier J.P. Morgan, was elected to the board of De Beers in 1926. He built and consolidated the company’s global monopoly over the diamond industry until his death in 1957. During this time, he was involved in a number of controversies, including price fixing and trust behavior, and was accused of not releasing industrial diamonds for the U.S. war effort during World War II.

Before coming to De Beers, Ernest Oppenheimer was appointed local agent for the London Syndicate. He understood the core principle that underpinned De Beers’ success, stating in 1910 that “common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production”

In the 1930s, during the Great Depression, the worldwide demand for diamonds declined significantly forcing De Beers to close several mines. To increase sales the company hired the advertising agency N.W. Ayer and Son, which soon succeeded in getting the American public to associate diamonds with social status and romance. The hugely successful slogan “A diamond is forever” was coined in 1947. Later advertising campaigns successfully linked diamonds with the affluent, comfortable, and safe suburban lifestyle to which many Americans aspired in the 1950s.

Starting in the 1960s, De Beers attempted to increase consumer demand for diamonds by introducing jewelry tailored to special occasions, such as wedding anniversaries (the “eternity ring”) and rites of passage (the “sweet 16 pin”). The diamond “tennis bracelet,” introduced in the 1980s, capitalized on a fad that had begun after tennis star Chris Evert accidentally dropped her bracelet on the court during a tennis match. In 2001 De Beers began marketing the “right-hand ring” for single women, designed as a symbol of independence and self-sufficiency.

Throughout the 20th Century, De Beers used its dominant position to influence the international diamond market. The company used several methods. One was to convince independent producers to join its single channel monopoly. When that did not work, it flooded the market with diamonds similar to those of producers who refused to join in. It purchased and stockpiled diamonds produced by other manufacturers as well as surplus diamonds in order to control prices by limiting supply. Finally, it bought diamonds whenever prices fell considerably as it had during the Great Depression.

In 2000, the De Beers business model changed because of decisions made by producers in Canada and Australia to distribute diamonds outside the De Beers channel. Also affected by the rising awareness of blood diamonds, it forced De Beers to avoid the risk of bad publicity by limiting sales to its own mined products.

De Beers’ market share of rough diamonds fell from a high of 90% in the 1980s to 33% in 2013 because of a more fragmented diamond market that brought greater competition as well as more transparency and greater liquidity.

These issues along with flat prices forced De Beers to revise the company’s strategy. De Beers moved away from supplying and controlling the rough diamond industry to focusing on promoting its own brand of diamonds and retail stores.

In November 2011, the Oppenheimer family announced its intention to sell its 40% stake in De Beers to Anglo American Plc, thereby increasing Anglo American’s ownership of the company to 85% (the other 15% owned by the Government of the Republic of Botswana.) The transaction was worth £3.2 billion (US $5.1 billion) and ended the Oppenheimer dynasty’s 80-year ownership of De Beers.

Among the stones found and pieces created during the dynasty are a huge light yellow octahedral crystal that was found in the De Beers Mine in 1888. The gem weighed 428.50 old carats (old carats were the pre-1913 non-metric carat.) It measured 47.6 mm through its longest axis and 38.1 mm square. Excluding Victoria, aka the Great White or Jacob, the De Beers stone was the largest diamond found at the four mines at Kimberly during that period.

After its display in Paris, the Maharaja of Patiala bought the De Beers diamond. In 1928 Cartier of Paris set it as the centerpiece of a ceremonial necklace known as the Patiala Necklace, a candidate for one of the most spectacular pieces of jewelry ever created. Sometime during the 1930’s the De Beers diamond was acquired by its present owners who loaned it in 1973 for an exhibition in Israel.

After the end of the Raj, the art deco Patiala Necklace disappeared. In 1998, someone came upon the remnants of it in a second hand jewelry shop in London. All of the big stones were gone: seven stones ranging from 18 to 73 carats, set above a pendant, and the 234.69-carat De Beers Diamond, seventh largest in the world had disappeared.

Cartier acquired the remains of the necklace and spent four years restoring it. They tried recreating the original replacing the missing diamonds with a variety of natural stones such as white sapphires or white topazes, but with disappointing results so they went back to diamonds.

Of course, the original diamonds were not available including the De Beers Diamond itself. While the search for replacements continued, Cartier decided to use cubic zirconium to substitute for the seven diamonds and synthetic rubies to substitute for the original Burmese stones.

A replica of the De Beers Diamond was created and set in the necklace. The De Beers replica casts off a number of different colors. On May 6th, 1982, the De Beers diamond came up for auction at Sotheby’s in Geneva. It was generally thought that bidding could reach as much as $4.5 million. At the event the stone was bought when the top bid of $3.16 million remained below its undisclosed reserve.

In 2008, Forevermark became the second of the two diamond brands from The De Beers Group of Companies. According to the company website, “Each Forevermark diamond is inscribed with a promise: that it is beautiful, rare and responsibly sourced.”

Forevermark diamonds are inscribed with an icon and unique identification number, invisible to the naked eye and 1/20th of a micron deep. This inscription keeps Forevermark diamonds distinguishable from synthetic diamonds, which are otherwise similar to mined diamonds, and maintain their scarcity. The Forevermark website says that only a tiny percentage of diamonds qualify for the Forevermark brand.

In addition to its eminence in the world of diamonds, De Beers is also one of the biggest producers of high jewelry pieces. It has been producing luxe-class wrist watches since 2007. The prices for De Beers watches start at $5000. Only high quality expensive materials are used in the watches’ production: diamonds, white and yellow gold, and stainless steel.

The Talisman 8 watch collection was designed to complement the brand’s jewelry collections. The watch cases have unusual trapezoidal shapes. According to the watches’ creators, their pieces reveal the secrets of time through the magnetism of diamonds.

The Talisman 8 watches are produced in Switzerland using 18-carat gold and sapphire crystals. The watches are encrusted with uncut diamonds and baguette cut diamonds. The collection is represented by eight models with automatic, mechanical and quartz movements. The watches are available at official dealer showrooms.

One of the latest watch creations is the De Beers Talisman Ice Watch. The watch is made for diamond lovers. The case is constructed of 18-carat white gold and encrusted with 445 diamonds.

De Beers Diamond Jewellers (DBDJ) was established in 2001 as a 50:50 joint venture between The De Beers Group of Companies and LVMH, the French luxury goods company. The first De Beers boutique opened in 2002 on London’s Old Bond Street as the brand’s flagship store. Since then, stores have opened in various cities around the world.

In October 2011, the French luxury group LVMH Moet Hennessy Louis Vuitton SA acquired Bulgari SpA in an all-share deal for €4.3 billion ($6.01 billion.) The takeover doubled the size of LVMH’s watch and jewelry units which at the time included Tag Heuer timepieces and De Beer’s diamond necklaces.

In March 2017, De Beers confirmed that it had ended its joint venture with LVMH after more than 16 years, having bought back the 50 percent stake acquired by the French luxury conglomerate in 2001.

The joint venture had produced a more seamless integration of the luxury jeweler’s brand and store network and allowed it to deliver more discriminating diamond offerings. The move to end the joint venture marked the end of a partnership that, at the time, had intended to transform the way diamonds were sold to consumers. The idea was to position the brands’ output more as fashion accessories or casual purchases that customers bought for themselves rather than as an occasional or formal gift for others.

De Beers’ venture into retail with LVMH formed part of an effort to transform itself from a mining company into a luxury goods firm. Comprising 32 stores, De Beers’ retail network spanned 17 markets around the world including its business in China, as well as London, Paris and a the flagship store in New York.

“With its strong brand awareness, consummate diamond expertise and a commitment to responsibility, De Beers Diamond Jewellers is a trusted and industry-leading diamond jeweler,” said Bruce Cleaver, chief executive of De Beers Group. “More fully integrating the De Beers Diamond Jewelers brand and store network will enable us to deliver an even more differentiated diamond offering.”

The announcement came at a time when diamond suppliers were facing a challenging market, as the price of diamonds was falling. De Beers, which supplied 40 percent of the market, reported that the average price per carat in 2016 was $187, down from $207 in 2015.

The strength of the dollar, the tightening of anti-corruption laws in China, and the general slowdown of the hard-luxury market, diamonds in particular, hit luxury jewelers hard at a time of volatility in the wider luxury market.

On top of this, the retail market for luxury jewelry remained tough. For example, competitor Tiffany & Co has struggled to maintain its standing as an industry leader in both its mature markets like United States and emerging markets like China.

The International Institute of Diamond Grading & Research (IIDGR) was set up by De Beers in 2008, with the goal of providing a range of services and equipment in the field of diamond verification. It was based in London, Antwerp, and, in 2015, expanded to Surat, India. The IIDGR works only on diamonds that meet the requirements of the United Nations’ World Diamond Council Kimberley Process.

The International Institute of Diamond Valuation (IIDV) was launched by De Beers Group in March 2016. Operating in partnership with diamond jewelry retailers, it provides a reselling service for all diamonds, regardless of value.

In January 2018, Reuters reported that De Beers intended to launch the first industry-wide blockchain to track gems each time they changed hands starting from the moment they are dug from the ground. De Beers, the world’s biggest diamond producer by the value of its gems, has led industry efforts to verify the authenticity of diamonds and ensure they are not from conflict zones where gems could be used to finance violence. De Beers guarantees its stones are ethically sourced, a vital ingredient to maintaining consumer confidence. It sells technology across the industry to help prevent anyone trying to pass off synthetic stones as natural.

The firm says blockchain, the technology underpinning cryptocurrencies such as bitcoin, complements its existing methods. It offers a secure way to track diamonds and can provide a digital record proving they are conflict-free.

“It’s a huge public ledger as immutable as anything invented,” CEO Bruce Cleaver told Reuters in reference to blockchain. “It’s a much more un-hackable system than anything on a single server.”

The diamond blockchain, which De Beers says will be the first to span the entire value chain, would be open to everyone in the industry and would offer the potential for monitoring each stone.

“It has the ability to be very significant for the industry,” Cleaver said, adding it could reassure banks financing the industry and would make the mining supply chain more efficient and transparent.

Today, De Beers remains a major player in the diamond industry though not as dominant as it once was.

The copywriter behind “A Diamond Is Forever” passed away in 1999, and N.W. Ayer ceased operations three years later, but the invention, marketing, and popularity of the diamond lives on.

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