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==End of diamond monopoly==
==End of diamond monopoly==
Often referred to as a [[monopoly|monopolist]] De Beers has been criticised for its practices throughout the 20th century, whereby it controlled the price of diamonds by regulating [[Supply and demand|supply]].<ref name="Lopus"/><ref name="Kretchmer">{{cite web|url=http://pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf|title=De Beers and Beyond:The History of the International Diamond Cartel|publisher=[[New York University]]|author=Tobias Kretschmer|date=2003-10-15|accessdate=2008-11-25}}</ref> However the transformation of the company, from the late nineties to present, is starting to become more widely known.<ref name="DiamondsAreForever">{{cite news|url=http://www.nytimes.com/2008/08/09/business/worldbusiness/09nocera.html?ref=business|title=Diamonds are Forever in Botswana|date=2008-08-08|author=Joe Nocera|publisher=[[New York Times]]}}</ref>
Often referred to as a [[monopoly|monopolist]] De Beers has been criticised for its practices throughout the 20th century, whereby it controlled the price of diamonds by regulating [[Supply and demand|supply]].<ref name="Lopus"/><ref name="Kretchmer">{{cite web|url=http://pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf|title=De Beers and Beyond:The History of the International Diamond Cartel|publisher=[[New York University]]|author=Tobias Kretschmer|date=2003-10-15|accessdate=2008-11-25}}</ref> This was achieved through a single channel marketing structure, known as the '''Central Selling Organisation''' (CSO), that was favoured by the diamond industry and producer countries for creating price stability and for effectively regulating the international diamond market. However the transformation of the company, from the late nineties to present, is starting to become more widely known.<ref name="DiamondsAreForever">{{cite news|url=http://www.nytimes.com/2008/08/09/business/worldbusiness/09nocera.html?ref=business|title=Diamonds are Forever in Botswana|date=2008-08-08|author=Joe Nocera|publisher=[[New York Times]]}}</ref>


The monopoly was enforced through a single channel marketing structure, known as the '''Central Selling Organisation''' (CSO), that was favoured by players in the diamond industry and producer countries who shared a common goal of achieving high prices and the notion of scarcity.<ref name="Kretchmer"/> However a range of factors contributed to the need for change in the De Beers model. In the 1990s, it became increasingly evident that De Beers’ industry custodianship and supply-controlled model was no longer viable. De Beers was also unable to conduct business in several jurisdictions where it had interests or a corporate presence due to their dominance in the diamond industry. In addition, more producers from varied locations such as [[Russia]], [[Canada]], and [[Australia]] chose to start distributing diamonds outside of the De Beers-controlled CSO, thereby effectively ending the monopoly.<ref>[pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf]</ref><ref name="Lopus">{{cite book|url=http://books.google.com/books?id=sI65nv9KAfgC|title=Capstone|author=Jane S. Lopus|publisher=National Council on Economic Education|accessdate=2008-11-25|pages=p61|isbn=1561835161|year=2003}}</ref> Also, diamond jewellery markets had fallen in comparison to other luxury goods. The behaviour of consumers had changed and the diamond industry had been slow to respond to market dynamics.{{fact}} To address this, on behalf of its own interests and that of the industry as a whole, De Beers conducted a strategic review with [[Bain & Company]], consequently changing its business model from a supply-controlled industry to that which was driven by demand. De Beers also implemented their Supplier of Choice sales strategy.{{clarify}}
However a range of factors contributed to the need for change in the De Beers model. In the 1990s, it became increasingly evident that De Beers’ industry custodianship and supply-controlled model was no longer viable. De Beers was also unable to conduct business in several jurisdictions where it had interests or a corporate presence due to their dominance in the diamond industry. In addition, more producers from varied locations such as [[Russia]], [[Canada]], and [[Australia]] chose to start distributing diamonds outside of the De Beers-controlled CSO, thereby effectively ending the monopoly.<ref>[pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf]</ref><ref name="Lopus">{{cite book|url=http://books.google.com/books?id=sI65nv9KAfgC|title=Capstone|author=Jane S. Lopus|publisher=National Council on Economic Education|accessdate=2008-11-25|pages=p61|isbn=1561835161|year=2003}}</ref> Also, diamond jewellery markets had fallen in comparison to other luxury goods. The behaviour of consumers had changed and the diamond industry had been slow to respond to market dynamics.{{fact}} To address this, on behalf of its own interests and that of the industry as a whole, De Beers conducted a strategic review with [[Bain & Company]], consequently changing its business model from a supply-controlled industry to that which was driven by demand. De Beers also implemented their Supplier of Choice sales strategy.{{clarify}}


The diamond industry of today is markedly different to that of a decade ago, and is a complex and constantly evolving geo-political phenomenon. Current major players in the diamond industry are the [[Africa]]n producer countries, i.e. the Government of the Republic of [[Botswana]], the Government of the Republic of [[Namibia]], De Beers, [[Rio Tinto]], [[BHP Billiton]], [[Lev Leviev]], [[Harry Winston]], and [[Alrosa]].<ref>[http://www.mine2mistress.com/index.shtml From Mine to Mistress - Corporate Strategies and Government Policies in the International Diamond Industry - by Chaim Even-Zohar<!-- Bot generated title -->]</ref> As as a result of company transformation, De Beers is now more profitable than when it maintained a greater market share.<ref name="DiamondsAreForever"/>
The diamond industry of today is markedly different to that of a decade ago, and is a complex and constantly evolving geo-political phenomenon. Current major players in the diamond industry are the [[Africa]]n producer countries, i.e. the Government of the Republic of [[Botswana]], the Government of the Republic of [[Namibia]], De Beers, [[Rio Tinto]], [[BHP Billiton]], [[Lev Leviev]], [[Harry Winston]], and [[Alrosa]].<ref>[http://www.mine2mistress.com/index.shtml From Mine to Mistress - Corporate Strategies and Government Policies in the International Diamond Industry - by Chaim Even-Zohar<!-- Bot generated title -->]</ref> As as a result of company transformation, De Beers is now more profitable than when it maintained a greater market share.<ref name="DiamondsAreForever"/>

Revision as of 12:05, 25 November 2008

De Beers
Company typePrivately held company
IndustryExploration, mining and trading of diamonds
Founded1888
FounderCecil Rhodes
Headquarters
South Africa Johannesburg
,
South Africa
Area served
Worldwide
Key people
Nicky Oppenheimer, Chairman

Gareth Penny, Managing Director
ProductsDiamonds
ServicesDiamond marketing and promotion. Community development.
RevenueIncrease US $6.5 billion (2005)
Increase US $554 million (2005)
Number of employees
approximately 20,000
Websitewww.debeersgroup.com

De Beers and the various companies within the De Beers Family of Companies engage in exploration for diamonds, diamond mining, diamond trading and industrial diamond manufacture.

De Beers is active in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea.[1] Mining takes place in Botswana, Namibia, South Africa and Canada.

Company history

Cecil Rhodes

Cecil Rhodes , the founder of De Beers, got his start by renting water pumps to miners during diamond rush that started in 1867 at Kimberley, South Africa. He invested the profits of this operation into buying up claims of small mining operators, with his operations soon expanding into a separate mining company.[2] De Beers Consolidated Mines was formed in 1888 by the merger of the companies of Barney Barnato and Cecil Rhodes, by which time the company was the sole owner of all diamond mining operations in the country.[3][4][2] Concurrently, Rhodes started to control distribution channels through strategic partnerships with London diamond merchants.[2]

Activities

Mining in Botswana takes place through the mining company Debswana,[5]a 50-50 joint venture with the Government of the Republic of Botswana. In Namibia it takes place through Namdeb,[6] a 50-50 joint venture with the Government of the Republic of Namibia. Mining in South Africa takes place through De Beers Consolidated Mines (DBCM),[7] 74% owned by DeBeers and 26% by a broad based black economic empowerment partner, Ponahalo Investments. In 2007 De Beers began production at the Snap Lake Mine in Northwest Territories, Canada;[8] this is the first De Beers mine outside of Africa. In July 2008 De Beers opened the Victor Mine in Ontario, Canada.[9]

Trading of rough diamonds takes place through the Diamond Trading Company through wholly-owned and joint venture operations in South Africa (DTCSA), Botswana (DTCB), Namibia (NDTC) and the United Kingdom (DTC). The various DTCs sort, value and sell approximately 40% of the world’s rough diamonds by value.

The Family of Companies employs about 20,000 people around the world on five continents, with 17,000 employees in Africa. Over 7000 people are employed in Botswana, over 7100 in South Africa, 3800 in Namibia, 700 in Canada and over 800 in Group Exploration.[10]

Business structure

De Beers Investments is the privately held, ownership company of De Beers Societe Anonyme (DBSA), and is registered in Luxembourg. It is made up of three shareholdings: Anglo American plc has a 45% shareholding, Central Holdings (the Oppenheimer family) has a 40% shareholding, and the Government of the Republic of Botswana owns 15% directly. De Beers Societe Anonyme (DBSA) is the management company of the De Beers group.[11]

The Family of Companies

The De Beers Family of Companies is involved in most parts of the diamond value chain. Companies are as follows:

  • De Beers Canada - mining
  • De Beers Consolidated Mines - mining
  • De Beers Diamond Jewellers - retail
  • Debswana - mining
  • Diamdel - trading
  • Diamond Trading Company - trading
  • Diamond Trading Company Botswana - trading
  • Diamond Trading Company South Africa - trading
  • Element Six - Advanced Materials / industrial diamonds
  • Forevermark - retail
  • Namdeb - mining
  • Namibia Diamond Trading Company - trading
  • Williamson Diamonds[11] - mining

De Beers Diamond Jewellers

De Beers retail store on Rodeo Drive in Beverly Hills, California

In 2001, De Beers entered into a retail joint venture with French luxury goods company Louis Vuitton Moet Hennessy[12] (LVMH) to establish an independently managed De Beers diamond jewellery company.

The joint venture, called De Beers Diamond Jewellers Ltd sells diamond jewellery. The first De Beers store opened on Old Bond Street in London and there are now De Beers retail stores in the following locations:

Marketing

Over the last century, De Beers has been highly successful in increasing consumer demand for diamonds. One of the most effective marketing strategies has been the marketing of diamonds as a symbol of love and commitment.

A young copywriter, Frances Gerety coined the famous advertising line "A Diamond is Forever" in 1947, allegedly while she was dreaming.

In the year 2000, Advertising Age magazine named "A Diamond Is Forever" the best advertising slogan of the twentieth century.[13]

Other successful campaigns include the "eternity ring" (as a symbol of continuing affection and appreciation), the "trilogy" ring (representing the past, present and future of a relationship) and the "right hand ring" (bought and worn by women as a symbol of independence).

De Beers is also known for its television advertisements featuring silhouettes of people wearing diamonds, to the music of Palladio by Karl Jenkins.

Forevermark

De Beers has introduced Forevermark diamonds to markets in China, Hong Kong, India and Japan. "Forevermark diamonds are natural, untreated, responsibly sourced, and cut and polished by a specially selected diamantaire."[14] Forevermark diamonds have an icon and identification number inscribed on the table facet of the diamond. The inscription is 1/500 of the depth of a human hair and applied using De Beers technology developed in Maidenhead, United Kingdom, and Antwerp, Belgium.[14]

The Diamond Trading Company

The Diamond Trading Company, the rough diamond sales and distribution arm of the De Beers Group, sorts, values and sells approximately 40% of the world’s rough diamonds by value. Currently the DTC has a combination of wholly-owned and joint venture operations in South Africa (DTCSA), Botswana (DTCB), Namibia (NDTC) and the United Kingdom (DTC).

Diamonds sold by the DTC are sourced primarily from De Beers’ own mining operations in South Africa and Canada, and through its joint venuture partnerships with the governments of Botswana, and Namibia.

Technicians in London, Kimberley, Windhoek and Gaborone sort these diamonds into approximately 12,000 different categories based on size, shape, quality and colour, for DTC Sightholders.[15]There are 79 Sightholder companies who buy the rough diamonds from the DTC and its partner offices. Sightholders travel to London, Kimberley, Gaborone and Windhoek ten times a year for their Sight. DTC Sales in 2007 were $5.9bn.

The Diamond Trading Company develops diamond technology and operates a research and development facility based in the United Kingdom, to support the consistency of DTC rough diamond assortments for Sightholders and downstream industries in the DTC’s producer partner countries.

Sightholders are required to comply with the De Beers’s Best Practice Principles, which set out various objective standards of conduct within three main areas: business, social, and environmental responsibilities. The Best Practice Principles ensure that the De Beers Family of Companies, Sightholders and applicable third parties operate to an ethical, legal, professional, social and environmental standard, including being committed to the Kimberley Process.[16]

End of diamond monopoly

Often referred to as a monopolist De Beers has been criticised for its practices throughout the 20th century, whereby it controlled the price of diamonds by regulating supply.[17][2] This was achieved through a single channel marketing structure, known as the Central Selling Organisation (CSO), that was favoured by the diamond industry and producer countries for creating price stability and for effectively regulating the international diamond market. However the transformation of the company, from the late nineties to present, is starting to become more widely known.[18]

However a range of factors contributed to the need for change in the De Beers model. In the 1990s, it became increasingly evident that De Beers’ industry custodianship and supply-controlled model was no longer viable. De Beers was also unable to conduct business in several jurisdictions where it had interests or a corporate presence due to their dominance in the diamond industry. In addition, more producers from varied locations such as Russia, Canada, and Australia chose to start distributing diamonds outside of the De Beers-controlled CSO, thereby effectively ending the monopoly.[19][17] Also, diamond jewellery markets had fallen in comparison to other luxury goods. The behaviour of consumers had changed and the diamond industry had been slow to respond to market dynamics.[citation needed] To address this, on behalf of its own interests and that of the industry as a whole, De Beers conducted a strategic review with Bain & Company, consequently changing its business model from a supply-controlled industry to that which was driven by demand. De Beers also implemented their Supplier of Choice sales strategy.[clarification needed]

The diamond industry of today is markedly different to that of a decade ago, and is a complex and constantly evolving geo-political phenomenon. Current major players in the diamond industry are the African producer countries, i.e. the Government of the Republic of Botswana, the Government of the Republic of Namibia, De Beers, Rio Tinto, BHP Billiton, Lev Leviev, Harry Winston, and Alrosa.[20] As as a result of company transformation, De Beers is now more profitable than when it maintained a greater market share.[18]

Conflict Diamonds and the Kimberley Process

De Beers policy in the 1990s, which applied to all of Africa, was only to buy those diamonds that were legitimately traded and that it believed were not used to fund rebel groups, although as a leader in the industry they came under scrutiny and were widely believed[who?] to be a prominent dealer of conflict diamonds. In 1999, in line with a zero-tolerance policy, De Beers stopped all outside buying of diamonds in order to guarantee categorically the conflict-free status of De Beers diamonds.[21][22]

In December 2000, the United Nations General Assembly adopted a landmark resolution[23] supporting the creation of an international certification scheme for rough diamonds. By November 2002, negotiations between governments, the international diamond industry and civil society organisations resulted in the creation of the Kimberley Process Certification Scheme (KPCS). The KPCS sets out the requirements for controlling rough diamond production and trade. The KPCS became effective in 2003.

De Beers states that 100% of the diamonds it now sells are conflict-free and that all De Beers diamonds are purchased in compliance with national law, the Kimberley Process Certification Scheme[24] and its own Diamond Best Practice Principles.[16]

Gem diamonds - From 2001 onwards several lawsuits were filed against De Beers in US State and Federal courts. These alleged that De Beers unlawfully monopolised the supply of diamonds and conspired to fix, raise and control diamond prices. Additionally there were allegations of misleading advertising. Whilst De Beers denied all allegations that it violated the law, in November 2005, De Beers announced that an agreement had been reached to settle civil class action suits filed against the company in the United States, and in March 2006, three other civil class action suits were added to the November agreement. In April 2008, De Beers confirmed that Judge Chesler of the US Federal District Court in New Jersey had entered an order approving the Settlement, resulting in a Settlement arrangement totaling $295 million USD. De Beers does not admit liability. As part of the Settlement, persons who purchased gem diamonds within the past ten years may be eligible for compensation.[25]

Industrial diamonds - In 2004 De Beers pleaded guilty and paid a $10 million fine to the United States Department of Justice to settle a 1994 charge that De Beers had conspired with General Electric to fix the price of industrial diamonds.[26][27]

European Competition Commission - In February 2006, De Beers entered into legally binding commitments with the European Commission to cease purchasing rough diamonds from Alrosa as of 2009.[28] In January 2007, the European Commission announced it had rejected all outstanding complaints against the Diamond Trading Company's Supplier of Choice sales strategy.[29]

Sustainability

De Beers publishes an annual "Report to Stakeholders" which is coordinated by Maplecroft Consultants in the United Kingdom. The Report covers De Beers approach, economics, ethics, employees, communities, environment, and a range of case studies, initiatives and related web sites. The first report was published in 2006.[30] It was reviewed by Ethical Corporation magazine as "transparent but not entirely reader friendly."[31] The latest "Report to Society" which covers information and data from 2007 can be found on the company web site.

See also

  • The popular band, the Arctic Monkeys, played "Diamonds are Forever" at Glastonbury in 2007.
  • Crime journalist Kris Hollington has written a book, Diamond Geezers, about the spectacular attempted theft of the De Beers Millennium Collection from the Millennium Dome which took place in November 2000.
  • The 1971 James Bond film Diamonds Are Forever directly cites De Beers.
  • Comedian Ron White (of Blue Collar Comedy Tour fame) has mentioned the De Beers slogans in his stand-up routines, claiming that they should just "go ahead and say it: Diamonds...that'll shut her up."
  • In Soldier of Fortune, episode 4, season 12 of the television show Law & Order, De Beers is the basis for the fictional Gerard Diamond Company.
  • The 2003 comedy How To Lose A Guy In 10 Days depicts the fictitious diamond mogul couple, the "DeLauers". This is a play on the name De Beers.
  • In the film Blood Diamond, De Beers is represented by the fictional corporation, Van De Kaap.
  • In the 2007 film Flawless, De Beers is represented by the fictional corporation, London Diamond.
  • In the 2007 comedy Knocked Up Seth Rogen's character, Ben Stone, proposes to Katherine Heigl's character, Alison Scott, with an empty box. He says he doesn't have the ring yet but one day he will give her the ring she deserves. He has already chosen it and it's at De Beers.
  • The webcomic Questionable Content, in strip number 774, has sarcastically accused De Beers of "subverting humanity's genetic drive to reproduce so we'll buy more jewelry."
  • The 2004 video game Grand Theft Auto: San Andreas features a commercial on one of its radio stations advertising the fictional company "De Koch Fine Jewels," a play on De Beers.
  • The animated television sitcom Family Guy features a fictional commercial in the vein of the De Beers commercials with the slogan, "Diamonds: She'll pretty much have to."

References

  1. ^ Exploration and mining - The De Beers Group
  2. ^ a b c d Tobias Kretschmer (2003-10-15). "De Beers and Beyond:The History of the International Diamond Cartel" (PDF). New York University. Retrieved 2008-11-25.
  3. ^ Martin Meredith, Diamonds Gold and War, (New York: Public Affairs, 2007):108
  4. ^ John Hays Hammond (1974). The Autobiography of John Hays Hammond. Ayer Publishing. pp. p205. ISBN 0405059132. {{cite book}}: |pages= has extra text (help)
  5. ^ Debswana - The De Beers Group
  6. ^ Namdeb - The De Beers Group
  7. ^ De Beers Consolidated Mines - The De Beers Group
  8. ^ Mining: Snap Lake Mine: De Beers Canada
  9. ^ De Beers Canada - The De Beers Group
  10. ^ Reports - The De Beers Group
  11. ^ a b The Family of Companies - The De Beers Group
  12. ^ LVMH - Louis Vuitton Moet Hennessy
  13. ^ 'A Diamond Is Forever': How Four Words Changed an Industry
  14. ^ a b Forevermark - The De Beers Group
  15. ^ [ http://www.debeersgroup.com/en/Sales-and-distribution/Sights-and-Sightholders/]
  16. ^ a b Best Practice Principles - The De Beers Group
  17. ^ a b Jane S. Lopus (2003). Capstone. National Council on Economic Education. pp. p61. ISBN 1561835161. Retrieved 2008-11-25. {{cite book}}: |pages= has extra text (help)
  18. ^ a b Joe Nocera (2008-08-08). "Diamonds are Forever in Botswana". New York Times.
  19. ^ [pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf]
  20. ^ From Mine to Mistress - Corporate Strategies and Government Policies in the International Diamond Industry - by Chaim Even-Zohar
  21. ^ De Beers Group De Beers Report to Stakeholders 2005/6 - Ethics, "Conflict and Instability" De Beers Group, accessed online February 11, 2007
  22. ^ FAQs - The De Beers Group
  23. ^ "Kimberley Process Certification Scheme". United Nations. 2004-05-18. Retrieved 2008-11-25.
  24. ^ Kimberley Process
  25. ^ DeBeers Settlement
  26. ^ De Beers pleads guilty in price fixing case - World business - MSNBC.com
  27. ^ DeBeers Pleads to Price-Fixing (washingtonpost.com)
  28. ^ Alrosa Purchasing Commitments - The De Beers Group
  29. ^ [http://www.diamonds.net/news/NewsItem.aspx?ArticleID=16719 Diamonds.net News - European Commission Clears DTC of Outstanding Complaints ]
  30. ^ De Beers Report to Stakeholders
  31. ^ Ethical Corporation: Report Reviews - De Beers Report to Stakeholders 2005/06 – Lacking real sparkle
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