The Debeers Story - Are Diamonds Forever?

8/18/2019 The Debeers Story - Are Diamonds Forever?

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The De Beers Story: Are

Diamonds Forever?

Donna J . Bergenstock and J ames PA.Maskulka

m he number one rated ad slogan of the

twentieth century, according to

Adue? -

ing A&e

(1999), was De Beers’s memo-

rable “A Diamond Is Forever.” Conceived by N.W

Ayer in 1948, this simple four-word proclamation

has survived more than 50 years of social, cul-

tural, and economic upheaval to remain a potent

example of the power of persuasion, In the

United States and around the world, the benefi-

ciary of this effectual slogan and the controlling

force behind the most successful and enduring

cartel organization in history are one and the

same: De Beers.

Since the late 18OOs, De Beers has regulated

both the industrial and gemstone diamond mar-

kets and effectively maintained an illusion of

diamond scarcity. It has developed and nurtured

the belief that diamonds are precious, invaluable

symbols of romance. Every attitude consumers

hold today about diamonds exists-at least in

part-because of the persistent efforts of De

Beers. Moveover, by monitoring the supply of

diamonds throughout the world, De Beers has

introduced and maintained an unprecedented

degree of price stability for a surprisingly com-

mon mineral: compressed carbon. Such unique

price stability lies within the cartel’s tight control

over the world’s supply of diamonds. De Beers’s

operating strategy has been pure and simple: to

restrict the number of diamonds released into the

market in any given year and perpetuate the

myth that they are scarce and should therefore

command high prices.

To this end, De Beers functions much like

any other cartel. What sets it apart, however, is its

demonstrated ability to sustain the goal of price

control, as well as its astounding degree of mar-

ket control. In essence, De Beers controls both

the supply side and the demand side of the dia-

mond market, raising prices at its own discretion

while convincing consumers to purchase and

treasure the “rare” gemstones.

De Beers spends

about 200 million a

year to promote dia-

monds and diamond

jewelry. Because the

firm controls nearly

70 percent of the

rough diamond mar-

ket (the demand for

which is derived from

the dentand for jew-

elry), it is the primary

beneficiary of its mar-

keting endeavors.

Advertisements claim-

ing “A Diamond Is

Forever” are not only

stimulating consumer

demand, they are also

subtly reinforcing the

immortality of De Beers. One could claim that

“De Beers Is Forever” as well.

CONTROL OF PRODUCTION AND PRICES

D

e Beers/Centenary controls a producer’s

cartel that operates as a quanti~-axing

entity by setting production quotas for

each member. During the early part of the past

century, much of the diamond cartel’s strength

rested with De Beers’s control of the South Afri-

can mines. Toddy, the source of power no longer

comes from rough diamond production alone but

from a sophisticated network of production, mar-

keting, sales, and promotion arrangements, all

administered by De Beers,

It is interesting to note that diamond prices

have little or no relation to the cost of extraction

(production). The same mining process or effort

is just as likely to unearth gem-quality stones as

cheaper industrial stones. Moreover, there is actu-

ally no world shortage of rough diamonds.

37


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Table 1

Markups on Gemstones in

1985

Stuge q istrihutiorl

Cost of mining

MUrkUp

Averuge Value of 0.5

Carat Gem ( /carat)

$ 60

Mine s les

Dealers of rough gems

Cutting units

Wholesale dealers

Retail

Source Ariozk% (1985)

67%

100

200/i, $120

100% $240

15%

$276

100%

$552

Price Control Through Administration

of a Producer’s Cartel

An industry needs uniform prices to maintain its

stability and facilitate channel administration and

loyalty. To achieve this marketing objective, De

Beers’s founders knew that the cartel would need

to control every step within the distribution chan-

nel and convince all members-miners, cutters,

polishers, wholesalers-that a stable, smoothly

functioning, single-channel system was in every-

one’s best interest.

Table 1

shows average or “normal” price

markups on gemstones along the channel of dis-

tribution. A diamond that may cost 60 o mine

can end up costing a consumer 552 at a local

jewelry store. Business cycles and individual

commercial practices may positively or negatively

influence these figures. Gemstone quality (the

four Cs: a combination of carat weight, clarity,

color, and cut), which also plays a significant role

in pricing, is not specifically considered; note that

“average” values are cited.

Diamond output from De Beers’s self-owned

and self-operated mines constitutes only 43 per-

cent of the total world value of rough diamonds.

Because it is not the sole producer of rough

stones in the world, De Beers has had to join

forces with other major diamond-producing orga-

nizations, forming the international diamond

cartel that controls nearly three-quarters of the

world market.

In a purely competitive market, each pro-

ducer would seek out buyers for its output, re-

sulting in extreme price competition, a devalua-

tion of diamonds, and a shattering of the illusion

of scarcity. Rather than allow this scenario to take

place, De Beers constructed an elaborate distribu-

tion scheme whereby all cartel producers are

contracted to sell the majority of their entire out-

put to a single marketing entity: the De Beers-

controlled Central Selling Organization (CSO)

(see

Figure 1).

De Beers successfully convinced

the producers that diamond supply must be regu-

lated in order to maintain favorably high prices

Business Horizons / May-June 2001

and profits. Moreover, De Beers and the CSO

determine what these prices should be, thereby

controlling the

profits

realized by member pro-

ducers. Because of U.S. antitrust laws concerning

cartel arrangements that serve to monopolize a

particular industry, De Beers and the CSO are

prohibited from operating in the United States.

They can, however, sell to U.S. manufacturers

and wholesalers from their London headquarters.

The total rough diamond supply controlled

by the CSO comes from three sources: De Reers/

Centenary-owned mines; outside suppliers con-

tracted to the CSO (cartel members); and open

market purchases via buying offices in Africa.

Antwerp, and Tel Aviv (rough output purchases

from countries that have not signed an agreement

with De Beers).

De Beers also effects control over the supply

of diamonds released onto the world market by

adhering to a principle established by Cecil

Rhodes nearly a century ago: The number of

diamonds brought to market in any given year

should be approximately equal to the number of

wedding engagements occurring in that year,

equating supply with demand. To do this, De

Beers uses a stockpiling strategy also referred to

as a buffer stock. This stockpile consists of mil-

lions of carats of rough diamonds-valued at 4

billion in 1999. In times of slack demand, the

company increases its stockpile (withholding

diamonds from consumers) to uphold prices.

Should these stones be released onto the market

prematurely, the entire pricing strategy main-

tained by the CSO would collapse.

Supply Control Through

Single-Channel Distribution

As the organizing body of the international dia-

mond producers cartel, De Beers controls not

only 40 to 45 percent of the world’s rough dia-

mond production, but also the CSO, which deter-

mines prices. Along with the insistence on being

the sole purchaser and price setter of rough

stones, De Beers functions as the sole diamond

distributor. In any given year, 65 to 70 percent of

the world’s diamonds pass through the CSO to

cutters and brokers.

Diamond sales, known in the trade as

“sights,”

are held ten times a year in London, in

Lucerne, Switzerland, and in Kimberley, South

Africa. The sales are limited to approximately 160

privileged “sightholders,” primarily owners of

diamond-cutting factories in New York, Tel Aviv,

Bombay, and Antwerp, who then sell to the rest

of the diamond trade (shown in Figure 1). The

sight dates for each year are formally announced

during December of the previous year. About a

month or so before each sight date, the sight-

holders convey their diamond needs or prefer-


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Figure 1

Rough Diamond Distribution

Diamond Sources

Central Selling Organization CSO)

De Beers/

Diamond Diamond Diamond

Centenary-

+ Producers --) Purchasing --) Trading

owned mines 43q,)* Association

and Trading

Company

(DPA)

Company

(DTC)

(PURTRA) f

Cutting and

Polishing Centers

New

York

& London e Manufacturers’ B Retailers

Antwerp

Wholesalers

Tel Aviv

Bombay

Cartel Members

(other producers) \ Diamond

32w *

Corporation

/

Outside/

(DICORP)

Open market

(25%1*

*

World value of rough diamondproduction

Sources: Ariovich

(198_5);

De Reers

199~5

nnual Report.

ences, such as quantity and quality, to the CSO,

which then attempts to match the requests with

its own needs. At the appointed time, each sight-

holder is escorted individually into a room and

given a plain brown shoebox filled with nonde-

script envelopes containing rough diamonds. At

this point no bargaining or negotiating is permit-

ted; each sightholder simply leaves with his allot-

ment of rough diamonds.

Dominance of the CSO: Sight Rules

The economic success of all cartels depends

highly on strict adherence to their rules, written

or unwritten. Perhaps no cartel in history has

been able to extend its influence as broadly or

for so long as the diamond cartel has. De Beers

exercises control over the cartel through several

unwritten yet strictly administered rules of sight-

holder behavior. Clients who follow the rules are

rewarded with consistent upgrades in the quality

and quantity of rough stones in their boxes, while

those who circumvent them find progressively

worse allocations and risk not being invited back

to future sights. An excerpt of the CSO’s rules for

sightholders is listed below (Epstein 1982):

1. They may not question their quantity/

quality allocation or the authority of the CSO

executive in charge of making the allocation,

2. They may not question the price of their

box.

3. They must take the entire box, regardless

of its contents, or take nothing at all. Of the thou-

sands of diamond classifications, only one-third

to one-half are of gem quality and profitable to

the trade. Because diamond mines yield a variety

of colors, shapes, sizes, and clarities, all types of

stones must be passed through the marketing

The Ik Heers Story Are Xamonds Forever?

pipeline to enable producers to realize sustain-

able profits. Allowing sightholders to pick only

the best or most profitable stones would leave

De Beers with thousands of unwanted diamonds.

The CSO overcomes this potential problem by

allocating a wide range of rough stones to sight-

holders.

4. They may not resell uncut diamonds from

their box without special permission from the

CSO. This rule enables the CSO to maintain mo-

nopoly control of the international diamond sup-

ply, and prevents a third party from stockpiling

rough stones with the intent to jeopardize future

diamond price stability.

5. They must give De Beers whatever infor-

mation it needs to equate demand with supply

accurately in the market. This includes the num-

ber of uncut diamonds in the process of being

cut, in inventory, and previously sold, as well as

estimates of future sales in each category.

6. They may not sell their diamonds to trade

members that undercut prices at the retail level.

Provided the above rules are adhered to, the

CSO can regulate down to the carat what types

and quantities of stones will be permitted to en-

ter the market, thereby fine-tuning both diamond

supply and price levels,

DIAMOND DEMAND: IMAGE MANAGEMENT

AND PRICE MAINTENANCE

A

s

pstein notes, “Control of the world’s

diamond supply is a necessary but not

a sufficient condition for upholding and

stabilizing the price of diamonds.” When diamond

supplies were rather limited, producers simply

mined, cut, and polished the gems and offered

them in traditional forms to select audiences at

39


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exclusive prices. With the discovery of vast sup-

plies of diamonds in South Africa and later in

Siberia, De Beers, on behalf of the international

diamond industry, successfully began to manage

consumer perceptions of the physical product to

create a new image for diamonds. De Beers’s

ongoing challenge, says Spar (1994), has always

been to sell diamonds to the masses without the

gems being perceived as a mass-market item.

The Psychology of the Demand

for Diamonds

Regardless of supply controls via stockpiling,

production quotas, and sight allocations, dia-

mond prices could not remain artificially high if

consumer tastes or fashions changed, or if in-

comes suddenly plunged, as during the Great

Depression. Usher (1989) notes that advertising

\\

De Bee rs s p rom o tio na l

go a l wa s to c rea te a ong -

term sustainable impression

in the p ub lic ’ s m ind tha t

d ia m ond s a re m p o rt an t

e ve n ne c e ssa ry ”

effects include

enhancing a psy-

chic quality of the

advertised goods

and persuading

people to act

against their true

interests. Although

De Beers cannot

influence eco-

nomic conditions,

it can influence the

consuming public

to purchase diamond jewelry rather than other

luxury goods. The company has quite success-

fully promoted the aesthetic, emotional, social,

and cultural aspects of diamonds, thus preventing

price devaluations despite the existence of excess

supply conditions.

Over the past 60-plus years, De Beers has

designed one of the most unique and successful

marketing strategies in history, using a carefully

orchestrated marketing program in which all

elements send a consistent, integrated message

of romance, love, tradition, elegance, and value

creation. In 1999, “The Advertising Century,” a

special supplement to Advertising Age, ranked

the campaign as sixth best from a list of the top

100 ad campaigns of the century.

In the late 193Os, De Beers and its then ad-

vertising agency N.W. Ayer (replaced by J. Walter

Thompson in 1996>, undertook a campaign of

subtle psychological conditioning to convince the

American public to buy diamonds. Until very

recently, brand names, price quotes, store loca-

tions, and product comparisons were distinctly

absent from all messages. Instead, a mental con-

nection was made for consumers linking dia-

monds with romance and love. Men were en-

couraged to view the gems as palpable symbols

of love and devotion, while women were per-

suaded that a diamond ring was an engagement

necessity. The size and quality of the diamond

were even supposed to signify the degree of love

a couple shared. De Beers’s promotional goal

was to create a long-term. sustainable impression

in the public’s mind that diamonds are important,

even necessary. N.W. Ayer even invented a his-

torical background for the giving of diamonds as

engagement symbols. It established the origin of

the tradition several centuries prior to its actual

beginnings in the late nineteenth century, thereby

inculcating the belief that, era after era, great

romances were always consummated with a gift

of diamonds.

Hence, De Beers has successfully promoted

the intangible aspects of a physical product-

“intangibilizing a tangible,” as Levitt (1981) puts

it, with desire, emotion, status, love. and ro-

mance. The slogan “A Diamond Is Forever,” the

focal point of De Beers’ advertising campaigns,

was meant to convey the idea of eternal romantic

love as well as the notion that, once received. a

diamond should not be resold, thus keeping the

secondhand diamond market-and price line

erosion-to a minimum.

N.W. Ayer also focused on the conspicuous

consumption value of diamonds, holding them

up as symbols of economic status and lifetime

success. To encourage demand, the agency effec-

tively used Maslow’s (1954) needs hierarchy to

connect diamonds with various levels of psycho-

logical need. Their rationale was that purchasing

and owning diamonds satisfies the complex hu-

man needs of love, social belonging, self-esteem,

and self-actualization. Consumers were persuaded

to subconsciously value diamonds far more than

their actual market worth.

De Beers’s promotional campaigns have been

nothing less than brilliant-and triumphant. Its

earliest ads were elegant and sophisticated, char-

acteristics that endure to this day. The company

was also a pioneer in product placements. Dur-

ing Hollywood’s “Golden Age” and beyond, many

famous stars were filmed on screen and off wear-

ing notable pieces of jewelry provided by De

Beers. Perhaps the crowning achievetnent of its

product placement initiative was the 1953 film

Gentlemen Prefer Blondes, in which Marilyn Mon-

roe sings “Diamonds Are a Girl’s Best Friend”-+

memorable phrase that has been repeated count-

less times since the movie’s premiere.

Throughout the last five decades, De Beers’s

and N.W. Ayer’s vision has gradually been XII-

ized. Diamonds have become an integral part of

romance, courtship, and marriage rituals world-

wide. So ingrained in the public’s mind is the

notion of presenting a diamond at these special

occasions that couples who cannot afford one

early in their romance choose to defer the pur-

chase until later rather than forgo it completely.


5/8

Despite the incredible success enjoyed by De

Beers, the company currently faces two daunting

challenges---maintaining its status as the premier

brand label for diamonds in an era of expanding

supply, and stimulating primary consumer de-

mand for the gems. Its specific challenge today is

to unlock people’s desire to spend more of their

disposable income on diamonds, ideally by in-

creasing marketing expenditures to levels consis-

tent with that of other luxury goods firms. It is

hoped that this will increase primary demand for

diamonds to an annual growth rate of 5-6 percent

per annum, improving both share price and re-

turn on capital.

DE BEERS’S FUTURE:

DIFFfEBENTIATING

PRODUCTS THROUGH DIAMOND BRANDING

early March 1998, De Beers announced the

development of a diamond branding tech-

nique whereby high-quality diamonds sold

by the CSO would be branded with a “De Beers”

mark and serial number. Prior to a full-scale

launch, the branding strategy underwent a nine-

month pilot program in the U.K. with a few hun-

dred stones. According to Stephen C. Lussier, who

heads De

Beers’s

consumer marketing division.

the branding initiative originated in the firm’s

“gem defensive research” against synthetic, frac-

ture-filled, color-enhanced, and otherwise artifi-

cially treated stones (Even-Zohar 1998).

The decision by De Beers to formally brand

diamonds marketed through the CSO is a risky

yet crucial step in maintaining control of the dia-

mond market. In an era when brands reign su-

preme, it may be difficult to foresee any prob-

lems with a we&designed branding program. But

De Beers is both a unique company and a unique

brand. By launching such a corporate strategy; it

may incur the following business risks:

1. De Beers has spent the last 50 years build-

ing prima y demand for generic diamonds. With

the proposed branding strategy, it is shifting its

focus to building selective demand for the De

Beers brand. Despite its near universal recogni-

tion as “the diamond company,” claims of unique-

ness may be difficult to substantiate.

2. The association of De Beers and diamonds

is fairly well established within the consuming

public, but mainly on a superficial level. Consum-

ers recognize the name “De Beers” but do not

know much at all about the company or its meth-

ods of operation. As De Reers increases its pres-

ence in the retail arena, it is likely to draw more

attention from the U.S. Justice Department re-

garding antitrust activities.

3. For various reasons, branding will give De

Beers a competitive advantage, to the detriment

of other channel members, so there will likely be

widespread trade resistance. Competitors fear that

any unbranded stones sold by the trade may be

unable to compete with De Beers’s branded ones.

Why Brand Diamonds?

If De Beers is to maintain its branding strategy

successfully: consumers must be convinced that

meaningful differences exist between a De Beers

diamond and the generic or other branded gems

that are increasingly available. Through the cen-

turies, diamonds have been perceived as pseudo-

commodity goods, differentiable only by intrinsic

quality characteristics and not by production

efforts. By placing a brand on its diamonds, De

Beers is taking its well-known corporate identity

and transferring to its product all psychological,

financial, and emotional associations the consum-

ing public has with it. In so doing, it will attempt

to continue to charge premium prices for what it

claims are superior diamonds.

The importance of branding in the diamond

industry has recently been underscored as the

industry confronts the challenge of “blood dia-

monds”-diamonds mined in Angola, Sierra

Leone, and other West African states whose sales

are used to purchase weapons and finance rebel

activities. All diamond producers today are facing

the specter of a broad-based consumer boycott

similar to one that crippled the

fur industry a decade ago. One

article (“Wdshed Out of Africa”

2000) refers to a photograph in

the ;%w )‘o& Post of a horribly

maimed child in Sierra Leone,

suggesting that this is the con-

sequence of diamond buying.

What is at issue here is public

opinion. As the fur industry has

regretfully discovered, once

public opinion is no longer

controlled by the corporation

or industry, it is very difficult to

redirect the negative effects.

Thus the role gf diamond

I

branding in the future may be akin to an appella-

tion of origin rather than an assurance of quality.

Branding diamonds will also allow De Beers

to allocate its multimillion-dollar yearly marketing

budget more efficiently. From the early days of

the diamond cartel, De Beers and the CSO have

successfully maintained diamond prices by regu-

lating supply and creating demancl for the benefit

of nil diamond producers, cartel members and

nonmembers alike. Although they sell 70 percent

of the world’s diamonds, their highly effective

advertising campaign benefits 100 percent of the

world’s producers-which means that approxi-

mately 30 percent of all diamond producers are

“free riders.” Given the recent upheaval in the

diamond industry, caused primarily by rough

The De Beers Story: Are

Diamonds

Foreves?

41


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diamonds leaked onto the market by Russia and

Angola, De Beers’s management has concluded

that it is necessary for its very survival to “protect

its own.” Branding is a way to leverage the firm’s

marketing skills and advertising investment for

the sole benefit of its producing members and

sightholders and to the exclusion of all non-CSO

members and non-CSO marketed goods.

In De Beers’s 1997 annual report, Chairman

Nicholas Oppenheimer emphasized that the 200

million spent yearly to promote diamonds world-

wide is “a service, which we undertake primarily

on behalf of our core producers and clients.” He

also noted that the newly implemented branding

concept “will give additional comfort to our cli-

ents and be a guarantee of quality and trust to

the consumer.” As Even-Zohar reports, De Beers’s

managing director Gary Ralfe warned the dia-

mond trade in early 1998 that:

in the future De Beers will be driven to

seeking to ensure that what money it

feels it can afford to spend on the pro-

motion of diamond jewelry is focused

towards those diamonds which come out

of its own mines and those of its partners

in Africa or pass through the CSO, rather

than giving a free ride in its promotion to

those diamonds which remain outside

the CSO system.

From an economic perspective, diamond

branding will enable De Beers and the CSO to

evolve (eventually) from a dominant player in an

oligopoly market structure selling a commodity

product to a company offering a unique product

in a competitive marketplace. Firms wishing to

maintain their dominance in a dynamic market

must be concerned with product demand. Dia-

monds will still be available from non-cartel

members, but they won’t carry the “De Beers”

brand name and guarantee. Thus, by virtue of its

commanding market share, De Beers will be able

to operate as a quasi-monopoly, albeit not a per-

fect monopoly. As such, it will be able to strictly

regulate the supply of its branded stones. While

the market may have access to nearly limitless

quantities of generic or unbranded diamonds, De

Beers can withhold its brand name diamonds to

maintain the illusion of scarcity.

Another benefit of diamond branding is the

judicious use of the well-known De Beers name

and its associated equity at the corporate level.

As George F.H. Burne, Managing Director of De

Beers Canada, explains, “We spend 200 million

a year promoting diamonds basically for other

people. Our name is quite well known and we

wondered how we could use it better” (Voss

1998). The name “De Beers” has been synony-

mous with diamonds since the 193Os, and its use

in promotions has, up to this point, been subtle

but pervasive. De Beers’s corporate image as a

diamond mining entity is well established, yet

this is all most consumers know about the com-

pany. Branding diamonds with the corporate

name will push De Beers from the background

to the forefront and acquaint consumers with this

marketing powerhouse.

A further goal is to take advantage of the

equity or added value attributable to branded

products. Most brand marketing consultants

would concur that a brand generates and main-

tains consumer-based equity with strong, favor-

able, and unique brand associations, in that or-

der. Uniqueness is irrelevant if the association is

unfavorable, and a favorable impression is mean-

ingless if the association is weak. De Beers does

have a very strong association between the cor-

porate name and diamonds that currently seems

to be favorable. However, for consumers to con-

tinue to view De Beers favorably, the company

may need to reach an agreement regarding its

“monopoly” status with the U.S. Justice Depart-

ment and build its reputation as a seller of clean,

rather than blood, diamonds by continuing to

issue certificates of origin.

De Beers’s immediate marketing challenge

lies in establishing unique brand associations. As

the company recently announced, it must distin-

guish its diamonds from generic ones and per-

suade consumers to pay more for its brand name.

If the branding strategy is executed properly,

consumers will buy a De Beers diamond and

agree to pay premium prices to own it.

In the end, the main impetus for De Beers’s

decision to undertake branding appears to be

one of control-specifically: control of its market-

ing dollars to minimize the “free rider” phenom-

enon; control of the supply of branded stones

offered to the market; and control of consumer

perceptions of its corporate identity and product

quality. Interestingly, such a goal fits perfectly

with the cartel’s historical methods of operation.

even though controlling the supply of rough

stones is no longer a feasible option.

Implementing and Monitoring

the Branding Initiative

The U.K. pilot project-De Beers’s terminology

for the test market-commenced in August 1998

and lasted for about nine months. The branding

project was a spin-off from earlier research into

ways to protect consumers from synthetic stones

deceptively represented as genuine diamonds.

Beyond this defensive tactic, the strategic goals of

the branding initiative were to (1) increase con-

sumer confidence in diamond quality and origin,

(2) test the strength of the De Beers name, and

(3) see if the name carried any value or equity.



7/8

Boodle & Dunthorne, an upscale jeweler in

the IJ.K., was the exclusive retailer of “The De

Beers Diamond Nlarque” during the test market.

A few hundred branded stones, sized l/3 carat

and larger, were offered to consumers at stores in

Chester, Manchester, and Liverpool. The branding

process involves inscribing individual security or

registration numbers and the De Beers name on

the diamond table (the large, flat surface that is

always visible, even when set in jewelry). The

microscopic inscriptions are invisible both to the

naked eye and a jeweler’s loupe and can only be

viewed with the aid of a powerful microscope or

with the special reader device developed and

patented by De Beers. They can be removed by

polishing.

It is important to note that the branding pro-

cess was not limited to diamonds cut by De

Beers or extracted from De Beers-owned mines.

Any fine quality diamond distributed through the

CSO was eligible to be branded, but only sight-

holders were allowed to submit diamonds for

branding. According to Stephen Lussier, the brand

does not signify that the diamond is owned by De

Beers. Rather, it is a guarantee of quality and

authenticity backed by De Beers and its reputa-

tion of integrity,

much like the Good Housekeep-

ing Seal of Approval.

Subsequent to the pilot project, all qualifying

and branding will be done by De Beers’s re-

search laboratory in London. Sightholders will

send cut and polished stones to London where

they will be inscribed and then sent back. Fees

for the inexpensive inscription process along

with those for handling, shipping, and adminis-

trative support have not yet been determined but

may be included in the price of sight boxes dis-

cussed earlier.

In his chairman’s statement in the 1998 an-

nual company report, Oppenheimer remarked

that results from the test market were encourag-

ing and supported the belief that the De Beers

name and reputation enhances the value of dia-

mond jewelry.

oday. heightened global competition is

effecting change in afl industries. Even

the vaunted diamond cartel has been

forced to respond to market forces. De Beers is

facing its greatest challenge ever as the cost of

maintaining the illusion of scarcity exceeds its

financial reserves, and public sentiment toward

the diamond industry turns unfavorable with

claims of “blood diamonds.” De Beers’s recently

announced marketing strategy is clearly more

market-responsive, leaving De Beers with much

less control over the supply of diamonds anci

distribution channels than at any point during its

100-year history. De Beers is still fully confident

of its future as a major participant in the diamond

industry, but only time will tell if its diamonds

truly are forever. Cl

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James M

Maskulka

is an assoc iate professor of

marketing at Lehigh University in Bethle-

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The Debeers Story - Are Diamonds Forever?