De Beers Selling Synthetic Diamonds Is No Surprise – They’re A Marketing Organisation

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We all have this idea that De Beers is synonymous with diamonds. This has the merit of having been true for most of the 20th century. We’ve also got this idea that they’re synonymous with diamond mining, this has the demerit of not being true. What they’ve always been is the marketing arm of the diamond industry. True, this meant control over much diamond mining, but that’s a rather different matter. They were a marketing cartel, not a mining one. So, as technology changes it’s not all that much of a surprise to find them moving into synthetic diamonds.

The world’s largest diamond miner is doing the unthinkable: Selling stones produced in a laboratory.

Well, no, it’s not so unthinkable if we concentrate upon what they’ve really been doing.

Now, the 85% Anglo American-held subsidiary is immersing itself in the laboratory grown diamond business, directly challenging others producing manmade diamonds with cheaper products via a company it has set up called Lightbox Jewelry.

It’s been possible to make decent industrial diamonds for decades artificially, gemstone quality ones is more recent.

For years, De Beers has called the synthetic diamond business one of the major risks to the company.

So, as the potential of technology changes, change the company then.

De Beers, which created the famous “a diamond is forever” slogan and once had a near-monopoly on global diamond production, said it was launching the new range of synthetic diamonds to meet demand for “affordable fashion jewellery that may not be forever but is perfect for right now”.

So, to trot through the history. Diamonds were once very rare and very valuable. Then mining techniques changed and we started finding more of them than extant markets at the time could absorb without reducing prices. De Beers was the structure through which this was beaten. The varied mines extant at the time banded together in order to market those diamonds. The idea that a young man should spend two week’s wages (or was it two month’s?) on a diamond for his engagement ring was theirs.

This marketing though increases the value of all diamonds. So they faced the free rider problem. People who owned mines that were not contributing to the marketing efforts still benefited from them. Thus a series of agreements to maintaining some control over the number of diamonds that come to market. Agreements with mines (including the Soviets) to market stones. A willingness to stockpile if production ran ahead of marketing efforts. A determined effort to part non-cartel members from the diamond cutting and polishing trade – if you wanted to have regular access to De Beers produced stock then you had to be very careful not to be found out buying non-De Beers diamond stock.

It’s one of the reasons why stories about stealing vast quantities of uncut diamonds never really worked – De Beers was the only possible buyer in volume.

So, yes, De Beers was a cartel and they did control the price of diamonds by limiting the volumes that hit the market. But they were always a marketing cartel, production limitations were always a reach back down the industry to support that, not the reason itself.

So, now technology destroys that ability. It’s just too easy to make decent synthetics. Thus, as a good marketing organisation De Beers is marketing synthetics.

If we think of De Beers as diamond miners then the move into synthetics looks most odd. If we think of them correctly as diamond marketeers then it all makes sense. Production technology has changed so why not?

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Rhoda Klapp
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Rhoda Klapp

Remember the fuss about blood diamonds? That was De Beers, their definition of a blood diamond being one THEY weren’t making money out of.

Southerner
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Affordable fashion jewellery that may not be forever… it’ll certainly outlast the humans it’s associated with and quite possibly outlive humans too. A lot of older stones have little worth owing to an outdated cut. In my turnaround/startup consulting business that’s the first question I get the owners to ask themselves: what business am I really in? If you’re selling takeout pizza then you’re really in the takeout pizza business, but project managers are really in the labour broking business. Another client laminates and encapsulates printed material and his main customers are quick service restaurants so he’s really in the… Read more »

Southerner
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Affordable fashion jewellery that may not be forever… it’ll certainly outlast the humans it’s associated with and quite possibly outlive humans too. A lot of older stones have little worth owing to an outdated cut. In my turnaround/startup consulting business that’s the first question I get the owners to ask themselves: what business am I really in? If you’re selling takeout pizza then you’re really in the takeout pizza business, but project managers are really in the labour broking business. Another client laminates and encapsulates printed material and his main customers are quick service restaurants so he’s really in the… Read more »

bloke in spain
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bloke in spain

Your mention of the Soviets brought a smile. A jeweller mate had himself a nice little number in the 70s. Flying to Switzerland, spend the day cutting up jewellery – separate the stones from the metal – fly back. The pieces were from Russia. Presumably the Russians doing an end run around their agreements with De Beers?

GR8M8S
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GR8M8S

I believe the going rate here in Oz for an engagement ring is 3 months salary. Not that the girls are grasping of course, this is just pure inflation evidently.

And what to make of De Beers, a South African company, collaborating with the Russian anti-Christ during the apartheid years? Verwoerd must have been livid but no doubt Oppenheimer told him to piss off!

GR8M8S
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GR8M8S

I believe the going rate here in Oz for an engagement ring is 3 months salary. Not that the girls are grasping of course, this is just pure inflation evidently.

And what to make of De Beers, a South African company, collaborating with the Russian anti-Christ during the apartheid years? Verwoerd must have been livid but no doubt Oppenheimer told him to piss off!