De Beers - The diamond company

by Ms Nandita Ray

A small company was started with the help of British financiers and some Anglo Americans in1888. Later C. Johnson along with C.Rudd took control of two mines operated by the DeBeers brothers.

De Beers - The diamond company

By: Ms Nandita Ray
Summary: A small company was started with the help of British financiers and some Anglo Americans in1888. Later C. Johnson along with C.Rudd took control of two mines operated by the DeBeers brothers.

The rock that holds the world a hostage is undoubtedly the diamond. Its power to make people smile can also make them cry. The company that brought the diamond to its zenith is De Beers. Cut, color, clarity and carat this is what a De Beers diamond stands for. Though its power and status is on the decline, no one can dispute its predominant place in the history of diamond mining and selling. De Beers Consolidated Mines Limited is the world's largest diamond merchant. It controls South African mines from where 12 million carats of diamonds are produced.

A small company was started with the help of British financiers and some Anglo Americans in1888. Later C. Johnson along with C.Rudd took control of two mines operated by the DeBeers brothers, and the Kimberley mine in S.Africa and merged them. And it was from these humble beginnings that De Beers Consolidated Mines, Ltd. began its long tenure to become the most powerful diamond cartel in the world. By 2001, De Beers South Africa took private control of the business. The Anglo Americans of S. A. took 45 %, while the Oppenheimer family took 40 % and the government of Botswana took 15% of the share holdings. How ever, the Israeli's have captured 20% of the market.

With is head quarters in South Africa, it was operating from London as 'Diamond Trading Company' in Europe as C.S.O. or 'Central Selling Organization', in Israel as 'The Syndicate'. The Company soon realized the potential of the business and felt threatened by the other countries that were trying to enter the market. De Beers, therefore felt the need to protect its interest and monopoly. It realized that, diamonds are really not priceless and that scarcity of these gems would make it valuable. It did not want it to become a semi precious stone and lose it value. It wanted not only to control its production but also its flow into the international market.

In order to retain its hold over this extremely profiting business, De Beers embarked on a concerted effort to hard sell the diamond as an asset worth possessing. In 1938, Henry Oppenheimer hired N.W.Ayer, an advertisement agency to promote and boost the image of these 'pieces of carbon' as a life long investment. Depression and war had brought the sale of diamonds down. Europe was in no position to buy and America which was the largest buyer also started faltering. Sales plummeted by 80%.

Ayer began his well orchestrated campaign with a catch phrase 'A diamond is for ever'. Using the media to its fullest extent an ad blitz was launched. Royalty, power, wealth, love, eternity, beauty and a host of images were drawn up for the public. Fashion designers, playwrights, actors, and even ordinary people were shown talking about or wearing a diamond. This proved to be highly successful. Sales in America rose by 55%.

Relentlessly Ayer kept up the pressure of keeping diamond as the focus of public interest. It came up with the idea that a diamond is of emotional value, the perfect engagement ring or a surprise love gift. A diamond information centre was set up. In mid 60's they took Japan under their purview. They succeeded in changing the culture of their engagement process. Earlier on there was no engagement process in Japan. But with a well planned strategy, it managed to persuade the Japanese that diamond was a sign of western values and expressed modernity. The sale in Japan rose from 5% to 27%. De Beers was soon threatened by the influx of a minute diamonds from the Soviet mines. In order to keep a handle over price fluctuation they entered a secret deal with the Soviet Union making them a part of the diamond cartel.

They started marketing these inferior diamonds in America and came up with the idea of Eternity Ring, which had a cluster of 25 small diamonds. In the same breath they started talking about cut, carat and color of diamonds and that a small clear diamond was an equally good bet. And in this way De Beers made Diamond a priceless piece of gem to possess. And it remains so even today.

DTC sorts and values about 67% of the world's coarse diamond annually. These diamonds are then sold to buyers called 'sight holders'. They are the world's leading 'diamond handlers,' who are fastidiously chosen for their skill in selling and marketing diamonds. It also has a research wing which has developed expertise in diamond technology. It has embarked on a strategy called 'supplier of choice', which aims at increasing diamond sales. It has launched the 'Forever Mark', its symbol of integrity, promising to adopt and keep the highest standards of professional and ethical values.

De Beers is forever improving its services and has developed a CD rom which will help consumers screen and detect the authentic diamonds by using the view and save verification. The consumer should not end up buying a synthetic or a treated diamond. De Beers has started branding its diamonds so that the buyer can be assured of the diamonds value. The other motive is also to repair its lost credibility due to the issue regarding 'conflict diamonds' or 'blood diamonds. The sale of diamonds from Angola which was supposed to fund the rebels and the on going war created furor amongst the 'Human rights' group. De Beers was linked to buying and selling such diamonds. The company has actively supported the United Nations in its willingness to support the resolution that mandates Diamond Trading nations to issue the certificates stating that the diamonds sold by them are "conflict" free.

Losing its position as the numero uno has not been easy for De Beers. For 85 years it has ruled the Diamond trade. In 1994 it also faced the stigma of being slapped by a suit of anti trust violations by the American government. De Beers pleaded guilty to the charges of fixing the prices of Industrial diamonds and paid 10 million dollars in fine. As a result it cannot directly do business with the largest diamond market America. In 2001 a French Luxury Goods Company and De Beers launched a joint venture-DBLV, in order to establish De Beers as a retail brand. This will enable De Beers to sell its diamonds in America through DBLV.

De Beers has been controlled by the Oppenheimer family since 1929. Founded by Ernest Oppenheimer, De Beers has had a long run as the monarch of the diamond trade. Fortune magazine points out, 'Gates' Microsoft' has enjoyed this kind of dominance but DeBeers length is unprecedented'.