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Nov 25

Invisible But Brilliant Branding – Diamonds Are Forever But Monopolies Don’t Last

Powerful, emotional and consistent branding helped to create the De Beers diamond monopoly. When it was threatened in the 1990s by conflict diamonds and producers such as Russia distributing diamonds outside the De Beers-controlled channel, De Beers again turned to branding to save the day. They repositioned themselves in a market they no longer control and are now more profitable with a 40% market share than when they had an 80% market share in the 1990s. Let me bring you into the picture.

De Beers engages in exploration for diamonds, diamond mining, diamond trading and industrial diamond manufacture. Mining takes place in Botswana and Namibia (through its joint-venture partnerships with the respective governments), as well as South Africa and Canada, in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep-sea. The Diamond Trading Company, the rough-diamond sales and distribution arm of the De Beers Group, sorted, valued and sold about 80% of the world’s rough diamonds by value until the early 1990s.

These diamonds were then sold to the Diamond Trading Company Sightholders whose representatives travelled to London several times a year for the sale or Sight as it was called. Today Sightholders (now numbering only 79) are required to comply with the De Beers’ best practice principles, which set out various objective standards of conduct in three main areas: business, social and environmental responsibilities. (I designed brandmarks for two of the Sightholders at the turn of the century and no mention was made of these noble standards; Mr $ and his rare appearances were the only standard I was reminded about.)

Get the picture? De Beers is big – very, very big! It is well known for its monopolistic practices throughout the previous century, when the company used its dominant position to manipulate the international diamond market by persuading independent producers to join its single-channel monopoly and then flooding the market with diamonds similar to those of producers who refused to join.

The company purchased and stockpiled the diamonds produced by other manufacturers in order to control prices through supply. Ernest Oppenheimer stated: “Commonsense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production.” Now all that was left for the monopoly to become fully fledged was to increase consumer demand.

A diamond is a girl’s best friend

Consider this: a diamond – the rarest and hardest natural mineral known – is worth no more that half its retail value. There is no hard-and-fast rule for the pricing of polished diamonds, but professionals in the polished-diamond industry use a worldwide market price list, the Rapaport, based on the four Cs, which are carat, cut, colour and clarity, as a general guideline for evaluating polished diamond prices. And a jeweller usually adds a 100% mark-up to the Rapaport quoted price. Apart from industrial applications, diamonds have no other value except when polished for their perceived beauty, which we all know is in the eye of the beholder. This brings us to another aspect: the power of emotion.

In 1999, I experienced this first-hand while prospecting for diamonds (just like the diamond diggers did at the turn of the century) along the Orange River, a stone’s throw away from where the first diamond was found in South Africa. There are no words to describe the feeling when you find your first diamond: a flash of brilliant white light coming from among grey-black gravel on the sorting table after days of backbreaking labour, processing tons of gravel. Your heart starts racing and you are overcome by absolute joy and feelings of elation! God chose you to find this diamond and you feel so blessed and special. Although it was only 0,13 of one point of one carat and called “ice-white”, it might as well have been a 100-carat flawless blue-white.

I was once told by a diamond diver in Port Nolloth on the remote Diamond Coast of the South African West Coast: “Men arrive in planes and luxury cars looking for diamonds and leave looking for a lift home, left only with a pair of jeans and the shirt on their backs.” Wise words which sum up the power that prospecting for diamonds holds for men.

But what is in it for the men buying diamonds for the ladies? After all, it costs them a lot of money for an adornment they never wear themselves and mostly do not own; in the words of Marilyn Monroe’s song, “diamonds are a girl’s best friend”. What has made diamonds one of the best-known and most sought-after gemstones since ancient times?

The diamond’s – from the ancient Greek (adamas) meaning “invincible” – ability to prismatically break up white light into its component colours, giving the diamond its characteristic fire, is what makes diamonds so desirable as jewellery. Let’s face it, a diamond ring on a woman’s finger overtly advertises her (and the purchaser’s) wealth. The honour of wearing a one-in-a-million, one-carat blue-white diamond confers a special status previously only reserved for royalty. Thanks to some brilliant branding by De Beers, the purchase of diamond jewellery has become a socially acceptable way of buying a woman’s affection. Actress Zsa Zsa Gabor, who was married nine times, famously remarked: “I never hated a man enough to give him back his diamonds.”

The De Beers diamond advertising and marketing campaign (acknowledged as one of the most successful and innovative in history) launched in the mid-20th century leveraged emotion to its fullest by promoting diamonds as a symbol of love and commitment with the essence aptly expressed in the now famous slogan “A Diamond is Forever”. The 1971 James Bond film Diamonds are Forever, no doubt, further promoted the De Beers monopoly. Noteworthy about this campaign, which lasted decades, is that it was the diamond itself rather than the De Beers brand that was advertised and promoted. In other words, the company promoted the category as the brand. This would start to change in 2004, but more about that later.

“Say you’d marry her all over again with a diamond anniversary ring”, “A one carat diamond is one in a million” and “Is two months’ salary too much to spend for something that lasts forever?” are great and famous headlines used in De Beers’ marketing that created the one-carat diamond as the minimum size to own and part of the reason why there is a substantial price increase once a good diamond reaches one carat.

In 2000, “A Diamond is Forever” was named by AdAge magazine – the authoritative international magazine for marketing and media news – as the best advertising slogan of the twentieth century. This was followed by other successful campaigns, including the “trilogy” ring (representing the past, present and future of a relationship), the “eternity ring” (a symbol of continuing affection and appreciation) and the “right-hand ring” (bought and worn by women as a symbol of independence).

De Beers also opened new markets, even in countries where no diamond tradition had previously existed, with its “promoting diamonds as a symbol of love and commitment” strategy. Today, a diamond engagement ring is customary in the Far East, contrary to the fashion 50 years ago.

By successfully increasing consumer demand for diamonds with one of the most effective marketing strategies ever, and by controlling diamond prices through supply, De Beers created a monopoly and one of the richest families in the world. The current clan, with leader Nicky Oppenheimer, is worth US$5,7-billion, placing them in position 62 on the Forbes 400 list of richest people in early February 2009.

However, in the late 1990s, a number of factors contributed to the need for the De Beers monopoly to reinvent itself. Conflict diamonds, also known as “blood diamonds” (mined by using slave labour and believed to fund dictators, revolutionary entities and rebel groups, especially in Africa), entered the market. In addition, producers from Russia, Canada and Australia chose to start distributing diamonds outside the De Beers channel, thus effectively ending the monopoly. Consumer behaviour had changed, diamond jewellery markets had fallen in comparison to markets for other luxury goods, and the diamond industry controlled by the De Beers monopoly was slow to respond.

De Beers, as the leader in the industry, was widely believed to be a prominent dealer in conflict diamonds in the 1990s and was forced to stop buying any diamonds from other sources in order to guarantee specifically the conflict-free status of their diamonds. It was fast losing control of its monopolistic distribution channel and had to do something quickly and effectively to protect its market share.

In 2000, the United Nations General Assembly adopted a resolution supporting the creation of an international certification scheme for rough diamonds. The Kimberley Process Certification Scheme (KPCS) was adopted by all the parties concerned and came into effect in 2003. Every year since then the General Assembly has renewed its support for the KPCS – most recently in December 2006.

The KPCS originated from a meeting of Southern African diamond-producing states in Kimberley, Northern Cape, South Africa in May 2000 and culminated in a ministerial meeting held in September in South Africa’s capital, Pretoria.

For a country to be a participant in the KPCS, it must ensure that:

1) any diamond originating from the country does not finance a rebel group or other entity seeking to overthrow a UN-recognised government;

2) every diamond exported is accompanied by a Kimberley Process certificate; and

3) no diamond is imported from, or exported to, a non-member of the scheme.

This simple plan is a brief description of the steps taken to ensure that a chain of countries is formed, which deal exclusively with non-conflict diamonds. No doubt, De Beers had a hand in all this. Note where that crucial meeting was held (De Beers has an office there and owns most of the diamond mines in Kimberley) and which company or shall I say shrinking monopoly had the most to lose?

Today, 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 its own Diamond Best Practice Principles and the Kimberley Process Certification Scheme. This bit of international law is just another disguise for the distribution channel that De Beers managed to regain control over, and no doubt still manipulates. It is also a smart piece of spin-doctoring which eliminated various sources of excess supply.

Brilliant branding and repositioning in a market you no longer control

In 2001, De Beers entered the retail market with the independently managed De Beers diamond jewellery company. Called De Beers Diamond Jewellers Ltd, the company sells diamond jewellery. The first store on Old Bond Street in London was followed by a further 19 in choice locations worldwide.

In 2004, De Beers started a separately managed division called Forevermark with its main mission to build and develop the Forevermark diamond brand. According to De Beers, this division is also responsible for driving diamond demand in key markets and maintaining consumer confidence in diamonds. The Forevermark brand was first launched mainly in the Far East, presumably to test the market, and, in late 2008, De Beers confirmed their commitment to making the Forevermark brand available to the rest of the world.

De Beers claims that Forevermark diamonds are rarer than rare, with less than one percent of the world’s diamonds eligible to become a Forevermark diamond. These diamonds are specially selected according to the four Cs and from sources committed to the highest standards in compliance with the Kimberley Process. They are carefully crafted by a select group of Forevermark Diamantaires. But how do we know that? After all, seeing is believing. Now here comes the clever bit. These diamonds, exclusively available from select jewellers, come with an invisible (to the naked eye) Forevermark brand symbol and a unique identification number inscribed on the table facet, 1/20th of a micron deep, using patented technology. The brandmark can only be seen using a special Forevermark viewer in authorised Forevermark jewellers.

With De Beers now controlling only 40% of the market and effectively no longer a monopoly, note how this factor forced them to shift and narrow their focus from promoting the category (that of diamonds) as the brand to their brand of diamonds: Forevermark. Also note how they have cleverly managed to reposition themselves and create a niche in a market where they were gradually losing a share.

Not only will Arm (Brad) Pitt feel morally justified when buying Brangelina a big, fat Forevermark diamond for her next birthday, but will also be assured it is an investment and the most beautifully crafted rarest of the rare stone. Who wants to be so unpatriotic as to buy a diamond from those Russian thugs anyway? Brilliant, don’t you think?

De Beers was forced to change its monopolistic business model from a supply-controlled industry to one driven by demand. With rough diamond sales of US$5,9-billion in 2007 alone, the company is now more profitable with a 40% market share than when it had an 80% market share in the 1990s. This is proof that monopolies are not forever, they don’t last and are in the long run bad for business and, in the case of De Beers, for the environment too.

A flawed brand?

Now they just have to rehabilitate the 80 kilometres (about 240 square kilometres) of South Africa’s western coastline – situated in the north-western corner of South Africa’s rugged Northern Cape – that they raped with their highly damaging strip-mining practices over the past 80 years and I may consider buying a Forevermark diamond. Do a Google flypast and see for yourself. A massive dragline, which hoists up to 70 tons of sand with each scoop and costs several million dollars, is mainly responsible for the damage. Unfortunately, this dragline does not return the overburden after the diamond-rich gravel has been removed, because this would result in the disappearance of Mr $ and that is forbidden, according to the gospel of Oppenheimer. Yes, you got it, the De Beers brand is flawed after all!

This ecological disaster (little or no rehabilitation has been done since mining started 80 years ago) has been conveniently hidden from the public eye because this section of coast is a restricted area. Access control to it is strictly enforced by law. In South Africa, the possession of rough diamonds is illegal and could cost you years of jail time. When I visited the then newly branded Diamond Coast in 2001, their idea of rehabilitation was a few miserable indigenous trees on a dune and an embarrassed guide pointing at a nursery conveniently invisible somewhere behind some dunes.

Here are a few quotes from a website by De Beers and the Oppenheimer family:

“The route is a partnership project between the renowned mining house and the Oppenheimer family in a bid to maximise the potential of their properties for conservation purposes – and in so doing give back to the people of South Africa.”

“De Beers and the Oppenheimer family have a long respected legacy of walking the talk when it comes to environmental and conservation concern.”

“These natural areas have been diligently managed over many decades and are now very important reservoirs of biodiversity.”

“The reality is that De Beers and Oppenheimers were committed to conservation and social upliftment and practised offset of diamond mining impact before the term of offset became current in the conservation world.”

“Experience the positive environmental legacy of diamond mining.”

What utter bull and a poor attempt at window dressing for the world-renowned gardens of Brenthurst and the Diamond Route, with no mention of rehabilitating the Diamond Coast. Brenthurst Estate is the traditional home of the Oppenheimer family, and boasts completely organically sustained gardens filled with indigenous and endemic plants, the envy of gardening enthusiasts worldwide. I wonder if Mrs Oppenheimer or her coterie of ladies from high society have ever visited the Diamond Coast and seen the devastation that her gardens (of Babylon) have caused to the environment.

The next time you feel like succumbing to the eternity of a Forevermark diamond, please contemplate the invisible flaws that De Beers does not tell you about: the resultant long-term environmental damage, not only along the South African coast but also in Namibia, Botswana and Canada. In my opinion, the respective governments should force the De Beers company to commit itself to a rehabilitation schedule equal in scope to its mining activities, with heavy penalties and possible nationalisation if time lines are not met. Even if this unrealistic dream does come true (and I buy a Forevermark diamond), it will take almost a century to complete.

Alexander Greyling is the Author of Face your brand! The visual language of branding explained and is one of South Africa’s top branding experts. In his eBook he provides indispensable facts and logic for creating a successful visual brandmark through his seven essential elements of a successful brandmark.

With more than 30 years of rich experience, Greyling is a free-spirited maverick having never worked for a boss that runs his own strategic brand and design consultancy. He began his career in the 1970s designing brandmarks and corporate brand identities to pay for his college tuition. By dealing with upstarts, mom-and-pop businesses, illiterate markets in the apartheid era and, later, sophisticated national and international brands, he gained invaluable experience and insight covering a unique and broad range of branding challenges.

This easy-to-read book is aimed at a diverse spectrum of established and emerging entrepreneurs. For the budget-conscious small entrepreneur who cannot afford a designer, but wants to have the right foundation, this book offers amazing value for money. The price of this book is less than half-an-hour of a professional designer’s time. For the time-pressed chief executive, president or managing director, it provides the knowledge to navigate the controversial field of visual branding.

This is essential reading for brand managers and marketers who are dissatisfied with the ineffective, but expensive, creation of brandmarks. These often are executed by under-qualified “experts” at advertising agencies and design studios, or as a freebie by the boss’ daughter, an equally inept art student. For creative directors, art directors, DTP operators, students and business branding influencers such as accountants and lawyers this book is vital reading.

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