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St. Petersburg Initiative Becoming a Reality

07 october 2009

Compared with the countless gatherings where people in the diamond business get together simply to assess the scope of “the catastrophe” - either the one that has just happened or the one to come - something serious and of great potential consequence has finally emerged from recent industry meetings, says. The creation of the International Diamond Board (IDB) in July 2009, along with its designation as the industry’s advertising arm, is a sign that the whole industry is maturing. Crisis almost always stimulates growth and maturity, even in an industry with a history as long as the diamond industry has, and that is exactly what has happened.

How many times has the industry heard the top sightholders saying, “It’s time for all the players in the industry to work together”? Those words have usually been dismissed as insincere, rhetorical speech. But the truth is that diamantaires, trying to emerge from the current economic crisis, will have to work together. Not only will the producers and the retailers have to share profit margins and risks with the manufacturers, but the whole industry will have to find ways of producing generic advertising if it wants to ever prosper again. That’s where the IDB finds its place in the puzzle.

The IDB’s primary objective and purpose will be to promote consumer demand for diamonds worldwide through effective category marketing. As part of that effort, the board will design and implement a communications and public relations program to reinforce and sustain consumer confidence in diamonds and to increase diamond’s share of the luxury goods market. In effect, the IDB will step into the vacancy created by De Beers pullback from its long - and highly successful - generic diamond campaign, something it could well afford to do when it was the dominant market player and that it says it is no longer interested in doing with its current 40 percent market share.

The concept of the IDB as a new, industry wide organization was born at a June 2008 meeting in St. Petersburg, Russia, that was initiated by ALROSA and attracted fewer than 20 participants. But, make no mistake, those participants were some of the most important players in the industry, including De Beers, Rio Tinto, BHP Billiton, ALROSA and Harry Winston. By the time the IDB met for a second time, in London in early 2009, there already were three times more participants than at the Russian meeting.

The St. Petersburg participants, in fact, formed the IDB steering committee, known as SteerCom. SteerCom has since completed the first part of its mission by creating the IDB and then followed up by commissioning international business consultants McKinsey & Co. to assess the viability of its planned generic advertising initiative. With plans to incorporate in England as soon as technically possible, the IDB will give the global diamond industry its own promotional body for the first time and serve a role similar to that performed by the World Gold Council (WGC) and the Platinum Guild International (PGI) for their respective industries.

The IDB is the direct and logical consequence of the revolution in the diamond industry that has occurred since 2000. Gareth Penny, managing director of De Beers, has repeated time and again, most notably at the January 2009 sight - which was financially almost insignificant - that, with its current share of only 40 percent of global diamond production, there is a limit to what De Beers can do to promote the diamond industry as a whole. No longer the industry paymaster, De Beers has made it clear that it will spend its resources on promoting its own Forevermark diamond brand and its own jewelry retail outlets. If there is to be generic diamond advertising going forward, De Beers has long made it clear it would have to be the fruit of a collective effort.

In its infancy, the IDB will have to address very urgent matters, among which the most urgent is gaining the support of all sections of the diamond pipeline, from mining to retail. The search for a high-profile chief executive officer (CEO) will also have to be completed very quickly since the stakeholders are interested in getting the first advertising campaign put together quite rapidly. Fortunately, the De Beers generic advertising model that has been so successful in the past can serve as a guideline.

Indeed, what is missing at this stage is not so much to figure out how to advertise as to determine who will contribute - and in what share - to the estimated $200 million yearly expenses for the campaign. Included are research expenses for identifying and testing approaches to increase the share of diamond jewelry within the luxury goods category.

Still, there appears to be general consensus among industry members that they are obliged and willing to support the effort. “Nothing is being pushed on the people in the industry,” said Dilip Mehta of Rosy Blue. “They understand their responsibility and the need for financial contributions is more or less clear. Everybody recognizes the kind of effort he will have to make but nobody wants to write checks for a project that is not clearly defined. The way the money will be spent and the degree of efficiency of the IDB organization will be crucial.”

Expressing his opinions recently in the Antwerp World Diamond Centre (AWDC) online magazine, Freddy Hanard, AWDC’s CEO, stressed that “Over the past few months, IDB steering committee members did consult with us on key issues. While AWDC was not a decision maker, we did have an opportunity to give input, and we would welcome further opportunities in the future, perhaps through a formalized process… IDB will not represent the interests of any one company or small group of companies, but rather the interests of the entire industry. Within that framework, we not only have nothing to fear from its agenda, but we have a vested interest in its success.”

Philip Claes, AWDC spokesperson, elaborated on how he foresees the future of the IDB. “Things are starting to happen now. The structure is being set up. What matters is that a maximum number of industry people and industry organizations join the IDB in one way or another. As the representative body of Antwerp’s world diamond center, it’s imperative for us to be able to give our input, as it also is for other diamond centers and for such organizations as the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA).”

There is no doubt that it is equally vital for IDB to gather the input of everyone in the trade, as the new organization represents nothing less than the ultimate win-win bet for the diamond industry. In this game, either diamond industry members all win together or nobody wins at all and they keep on losing together, not in competition with one another, but in comparison to the other luxury product industries.