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What is De Beers's role, and how has it changed?

De Beers Consolidated Mines Limited was established in 1888 by Cecil Rhodes, a British entrepreneur and mining enthusiast. In Cecil Rhodes's early years, he began by renting water pumps to miners before buying diamond fields from one of his Rivals, Barney Banato in the 1880s who claims to create De Beers mining company. He bought as many diamond mine claims as he could, establishing the company’s first monopoly in South Africa. This led to De Beers making many appearances all over the world, and its impact on the diamond industry grow. De Beers kept purchasing mine and diamonds from other firms. At one point, they had agreements with suppliers that allowed them to possess over 85 percent of the world’s diamonds. De Beers founded the Diamond Trading Co. as their distribution policy.

Image of Cecil Rhodes Image of Earnest Oppenheimer

Only licensed buyers or Sightholders (Sightholders is a small group of companies that buy raw diamonds from the De Beers group) were eligible to purchase in the non-negotiable Diamond trading Co. sales. They held pricing by holding on to diamonds during a decline in the market through flooding the market whilst there was a surge in demand. In 1902 Rhodes passed on and De Beers controlled 90% of the world’s rough diamond production. Ernest Oppenheimer made the company an empire. Ernest Oppenheimer was De Beers rival producers. He also owned a production company named Anglo American Corporation. He worked his way up to the board of director for years and by 1927 he became De Beers's chairperson. Under Oppenheimer's leadership, De Beers formed exclusive contracts with suppliers, buyers, and its central selling organization thus dealing with diamonds outside of De Beers were impossible.

The ‘De beers’ Diamond Cartel

A diamond cartel was a group of companies coming together to fix the price of the product so that all the cartel members get a fair share of the profit. The more diamonds displayed in the jewellery store, the lesser people would pay for them, therefore the cartel was there to fix the market price of the diamond. Since all the diamond suppliers were under De Beers control, they may decide on how many diamonds goes into the market and how much money consumers will pay for them. De Beers were intelligent enough to look at the source of these diamond mines in Africa. Since the mining operations were usually illegal, these miners in Africa would figure out that diamond trading was profitable, thus this caused De Beers to threaten them. This action was to prevent these miners from bypassing their diamond trades. The merchants have to go through De Beers cartel in order for them to purchase diamonds. The size and quality of the diamond was controlled by De Beers too, hence the merchants had to agree on any quality of the diamonds given to them. In the past, only 200 merchants could buy directly from them. De Beers also set up shops in London to trade raw diamonds for these merchants.

Image Courtesy: DeBeers Image Courtesy: DeBeers

The “diamond is forever” campaign in 1947

In 1947, De Beers created an effective marketing campaign. It was planned to sell diamonds to Americans by convincing them that diamond symbolizes Love. The “Diamond is forever” marketing campaign aims to convince people that the size of their diamond determines how much they love their fiancée. In other words, the bigger the size, the bigger their love. This convinced people in the United States. Because of this marketing strategy and advertisement, the percentage of brides receiving engagement rings increased significantly, causing the diamond prices in the United States to increase too. De Beers also made connections with influential people in the entertainment industry by setting up their office in Hollywood. They gave up their most valued diamonds to producers in exchange to get their diamonds to be featured on the film. Producers then would film an engagement ring using the De Beers's diamond on actresses, this subconsciously convinced consumers to believe that diamond is a symbol of love.

Image Courtesy: Mediavsreality Image Courtesy: TheEyeofjewelery Image Courtesy:

"A second diamond to celebrate Wedding anniversary.”

Their first campaign didn’t just stop there. Their marketing efforts didn't end with just the engagement ring. De Beers pushed for a second diamond ring as the engagement ring market seemed to decrease. It gave this diamond ring to symbolize love and devotion to one another. “Marry me sounds so much better than just Merry Christmas,” and “Of course there’s a return on your investment. We just can’t print it here.” these taglines were used for their second marketing strategy.

De Beers commercial

Image courtesy: Mediavsreality Image Courtesy: TheEyeofjewelery

Breakthrough in new International market by in countries like Japan, Brazil and Germany

De Beers were able to break through the Japanese market by convincing them to buy diamonds. Since there was never a tradition of romantic marriage in Japan, diamonds were difficult to sell to brides. Even after the war, the postwar government does not allowed any imported diamonds into the country. De Beers were able to create a billion-dollar industry by using clever advertisements, living up diamonds as a sign of the modern west to break away from conventional Japanese norms. By 1981, it was estimated about 60% of Japanese bride starts to wear diamonds, compared to just 5% in 1967.

Graph of share of brides receiving diamond engagement

rings in Japan

Image Courtesy: BusinessInsider

Strategy to stay afloat

In the 1950s the discovery of Siberia diamond mine in Russia imposed a threat to De Beers. However, De Beers came out with a strategy to buy the Siberia mine instead. This includes buying almost everything that the Siberia mine produces. In return, all the world’s diamond came from the single channel of Siberia mine. Although Siberia’s diamond was slightly smaller compared to the others, it’s still profitable for use such as ‘eternity ring’ and other small-scale jewellery. This created a fruitful Partnership between Russia and De Beers. However, Australia was more of a challenge for De Beers to funnel their mines because of their modern Democratic Society. However, with the help of giving public relation to helping the Australian diamond sell and buying of company stocks, De Beers successfully bought their mines. In no time, the Australian diamonds became the London supply for diamond. Since more diamond supply was in demand, then more labour force for cutters of a diamond was required. This leads to Child labour in India where labour was cheap.

Image Courtesy: BusinessInsider Image Courtesy:

‘Debswana’ a partnership between De beers and Botswana

Botswana is located in Southern Africa. Debswana is a mining company shared between De Beers and Botswana. About, 15% shares of De Beers and Debswana had been contributed to the African government as the diamonds were known for their high value. Debswana is the country’s largest non-government employer since it handles all rough diamond mining and distribution. The agreement is still in effect, and there were even plans to increase Botswana’s share to 25%.

Image Courtesy: NCDC

The fall of De beers due to the Lost control of supply chain.

At the beginning of the 21st century, the De Beers role has changed due to countries discovering their own diamond mine. Lab-grown Identical diamond also came into the market and since their appearance was identical to the natural diamonds, the demand for lab diamond increased. Countries like Russia, Canada and Australia refused to put up with De Beers cartel too. These factors contributed De Beers to lose its Supply chain. De Beers now promote their brand of diamonds in retail stores. Despite its downfall, in 2011 De beers continue to march on and opened up a few stores around the world in China, Hong Kong and Malaysia. One of them was in the mainland of China at the time square mall in Dalian.

Image Courtesy: Caps-Architect Image Courtesy: Caps-Architect



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