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De Beers spends P1.9 billion in marketing during 2019

Publishing Date : 25 November, 2019

Author : ALFRED MASOKOLA

Following a tough year for the diamond industry, emanating from economic uncertainties generated by unstable geopolitical climate arising from Washington –Beijing tension the multi billion industries is said to be showing slight signs of improvement.


Diamond companies are expected to pump in millions of dollars in the last quarter of the year to the first two months of 2020 in rigorous marketing to push jewelry sales figures and further spark confidence in industry players across the value chain especially bankers who had shrunk their financing dispatch to traders.  Recently leading diamond mining giant De Beers Group announced that its marketing spend in the entire 2019 will be totaling to $180 million (around P1.9 billion) during the course of the year 2019.


This was revealed by De Beers Group Chief Executive Officer Bruce Cleaver on the sidelines of the Diamond Conference held in Gaborone recently. Bruce said the $180 million dispatch is De Beers largest marketing spend in 10 years. “This illustrates how difficult the market was in 2019 , and contrary to what many may think ,when the global demand  is subdued we may cut down any expenditure for  cost containment but not the marketing spend ,that is actually when  you have to increase  the marketing budget,” he said.


The De Beers Boss explained that on top of the traditional way of doing things in television the company will further expand its reach in the digital space. “Technological advancements and digital platforms which are the order of the day especially for millennials present great opportunities for us to reach our end consumer clientele,” he said.


Bruce Cleaver revealed that the larger part of the marketing budget is spent during the second half of the year with much concentrated expenditure in the last quarter of the year, spilling over to the first months of 2020. “We have to respond to trends in the market, and we usually spend large part of that amount in the last quarter of the year, this is because the main selling season is during the festive season in the US.”


The CEO explained that 30 percent of De Beers’s diamond jewelry sales in the US take place around Christmas and Thanks giving as well as increased demand for Chinese new-year celebrations. “Marketing is a tricky undertaking, it requires and needs long term programs, it is difficult to track its effectiveness if its rolled out under a short term, with us at De Beers we are much more concerned with big three places where our diamonds sell, India, China and US, so we have very sophisticated tools around the digital space and technological provisions to track market response. Last year, De Beers spent $166 million marketing.”


NATURAL DIAMOND AUTHENTICATION CAMPAIGN


Last week De Beers also announced its new partnership with Circa, buyers of pre-owned jewelry and watches, aimed at authenticating pre-owned diamonds. De Beers diamond detection technology will be adopted and implemented by Circa to provide confidence to those selling their jewelry.


“One of our core missions at De Beers Group is to develop and deploy ground-breaking, low-cost testing services designed to strengthen consumer confidence in diamonds,” said Jonathan Kendall, president of De Beers Group Industry Services. On top of providing Circa with the ability to authenticate pre-owned diamonds, the two companies will also host a series of educational consumer events in Asia, Europe and the U.S as well as, helping owners understand how to authenticate natural diamonds in their jewelry.


Information from De Beers explained that the collaboration will entail offering advanced diamond appreciation classes to Circa clients. “By partnering with De Beers Group and using its cutting-edge diamond detection equipment, our buyers are able to assure sellers that their diamonds are natural. We’ll also be able to clearly identify and avoid buying any diamonds which are not natural at the time they are submitted,” said Oren Schneider, chief executive officer of Circa.


De Beers has been putting its weight behind technology in the diamond industry. In May 2018, the company launched a pilot program, GemFair, an app that tracks a diamond’s journey across all stages, from sourcing to consumer in the name of traceability. That same year in September, De Beers launched its own lab-grown diamond company, Lightbox. The company has been working on entering wholesale with full expansion planned for 2020.Over than a decade ago; De Beers launched Forevermark, a brand of ethically sourced, numbered diamond


2019 TOUGH FINANCIAL YEAR

During 2019, the diamond industry didn’t have it easy, trade wars sparked uncertainty, depressing manufacturing inventories and slowing down the polished diamonds market uptake. These fostered a heightened sense of caution among the banks that finance the trade, as well as diamond brokers and consumers of luxury goods. An in-depth analysis by Paul Zimnisky, a New York based independent diamond industry analyst and consultant published recently alludes that these industry conditions are a “crisis.”


In some segments of the industry, anecdotes of “no business” have surfaced as well as “no demand” for certain categories of diamonds. A representative for a leading trade group of manufacturers in India has recently said the current “recession” is “worse than the one witnessed in 2008-2009” during the global financial crisis. De Beers' rough diamond sales in dollars are down 17% year-to-date through June compared to the same period last year. Russian diamonds outfit ALROSA’s sales are down 33%.


According to the Zimnisky Global Rough Diamond Price Index, a proxy for the like-for-like change of the global product mix, rough diamonds are down 2.3% year-to-date as of July 20 and are currently sitting at a 52-week low.  In March this year the US diamond and jewelry industry hinted fear of the possibility of higher tariffs on goods from China as the trade war between China and United States of America escalates. The Trump administration had proposed a levy of up to 25% on products from China worth a total of $300 billion, the US Trade Representative (USTR) announced in May this year.


 Raw materials and accessories used in the jewelry trade are among the 3,805 items on the list of goods noted to be possibly affected. Both natural and lab-grown diamonds in various forms, as well as precious and semi-precious stones, made the list. Others include metals used in jewelry creation, such as gold and silver, as well as certain finished jewelry items.


De Beers has thus far had a difficult year, with year-to-date sales of $3.21 billion compared to $5.39 billion by the same time in 2018. The trouble stems from 2017, when high levels of smaller stones were taken up by the diamond cutting and polishing firms, raising inventories and reducing their appetite for new sales.

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