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Shmuel Schnitzer: Outlook Bright for Israel
Mar 9, 1999 11:47 AM
By Martin Rapaport
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By Martin Rapaport
Shmuel Schnitzer, recently elected president of the Israel Diamond Exchange, is a principal of
M. Schnitzer & Co. one of Israel’s leading diamond companies and a De Beers sightholder.
Martin Rapaport: How is the diamond business?
Shmuel Schnitzer: I think that we are starting 1999 with a better feeling than we had in previous years. There are several reasons why our lives are a little easier today.
Over the past 2 to 3 months we have felt a significant difference in the Far East situation. Southeast Asia is slowly recovering from its recession. Buyers from Hong Kong and other parts of the Far East are coming to Israel. This is a very good sign. According to the latest statistics, exports from Israel to Hong Kong were up 40 to 50 percent compared to the previous year.
Though the Japanese economy has not recovered, we see improvements in its diamond industry for two reasons. First, the yen is very favorable. Second, diamond stocks in Japan are very low and there are not enough goods on the market. They have to come to Israel to buy goods. While we see improvements in the Far East, we are also enjoying the continuing strength of the American market which is doing well.
As far as the rough supply goes, after many years of negotiations with De Beers, we finally see signs of changes in the assortment this year. On the one hand, there are smaller allocations which create shortages of rough in the market. On the other hand, there is some improvement in the assortments. I think this will result in a more favorable situation as far as manufacturing is concerned.
All of these elements together allow us to take a more optimistic view as we look ahead in 1999.
MR: What are you planning to do for the Israeli market now that you have been elected president of the Israel Diamond Exchange?
SS: I can confidently say that our market has now stabilized. We have reached a point where there is no more decline in the sales volume or number of manufacturers and employees. The goods we are now working with are items that Israel is very competitive in.
If there is enough rough allocated to Israel in the right way and if the market continues and improves — I think that manufacturers will have a better year this year.
The bourse and the Israel Diamond Institute are planning programs to promote the marketing of Israeli goods and both will take part in international trade and jewelry shows.
We are also organizing a Buyer’s Week in Tel Aviv this September. It will be similar in concept to what we had last year, but on a larger scale. The Buyers Week may include special promotions such as a free stay in Israel and low-cost flights to encourage qualified buyers to make their way to Tel Aviv. Customers from all over the world will be invited. During this week, we will have polished auctions similar to the successful one we had last year. And we are negotiating for a rough tender.
MR: What kind of goods is Israel competitive in? Does Israel compete favorably against the Indians?
SS: Israel is very competitive in melee and larger sizes (0.10- through three-caraters) which represent 95 percent of our production. We have both cheap and better goods in a full range of qualities. There is a huge volume of goods manufactured in Israel and a large supply from which to choose.
Five-, six- and seven-pointers are difficult for us. Because of the labor cost there is little manufacturing of these sizes being done in Israel, but we know that some Israeli manufacturers manufacture these sizes outside of Israel.
MR: What are the best items to buy in Israel?
SS: In the 1/5-carat and larger sizes, in rounds and fancies, Israel is the most important sector. Israel is strong in cheap goods and in the excellent makes. Israel is like a supermarket. You have everything here.
MR: Where will the buyers during Buyers Week be coming from?
SS: If we compare our target markets from last year to this year we see a change. Last year the Far East was in a recession period so we did not place an emphasis on inviting those customers. Fortunately, we see a change this year in the Far East — not a huge change — but a significant one. That is why we will focus not only on the Americans but also on the Far East. European buyers will also be encouraged to attend. We are open to buyers worldwide.
MR: What is the relationship between Israel and Europe?
SS: Europe is a very important market, especially after the currency change to the Euro, and it is a huge buying force. We feel the time has come for the Europeans to show an interest in the Israeli industry.
MR: What type of buyers are you trying to attract to Israel’s buyer’s week — chain stores, independents, small retailers…?
SS: We are aiming at the medium to smaller buyers. The big buyers have established relationships already. Naturally, we would be very happy to have the big houses as well, but they are already familiar with our industry. We are more concerned with bringing the medium and smaller buyers and convincing them that it is worthwhile buying in Israel. We are going to prove it to them.
MR: What amount should a buyer have in mind to spend?
SS: Tens of thousands of dollars. It is definitely worthwhile to come and spend fifty thousand dollars.
MR: Do you see the market getting smaller as everyone’s supplier’s supplier is selling the customer’s customer?
SS: It is the kind of situation where the world is getting smaller — the world of the Internet, computers and information. One of the changes in the diamond world is the change in marketing. Today some buyers come here as they had traditionally. Others sit back and wait for the supply to come to them.
Not all of us here in Israel like having to go to America to sell. Many of us were hurt because not everyone can afford to take small amounts of goods and travel to America. Travelling is expensive. For them it was better when the Americans and others came here to buy. The bourse is not happy, but we are living in a different world — it’s a new reality and we must adapt to this new system.
MR: The American customer you are trying to attract to Buyer’s Week will say ‘why should I come to Israel when the Israelis are coming to me?’ What advantage do you offer buyers coming here?
SS: The variety of goods that a buyer can see in Israel is much larger. In addition, during the year a buyer can either go to the offices, or to the bourse floor, where he can only buy from members of the club. During Buyer’s Week we may allow manufacturers who are not members of the club to show goods to customers on the bourse floor. Today’s market competition is so tough and margins are so narrow that everyone needs exposure.
MR: Will the prices really be better?
SS: When buying from the source, prices are always better.
MR: What do you think about branding?
SS: We were in London recently with the delegation from the WFDB and IDMA. We met with Mr. Oppenheimer and the directors of De Beers (Gary Ralfe, Nigel Wisden) and we explained our concerns. We were given specific explanations. They all promised us that there has been no final decision yet.
There is the millenium operation that is taking place now — but only for the year 2000. We were not talking about that branding. We were referring to general branding in the future. We are not positive that this is the right thing to do and we are having continuous negotiations with De Beers.
MR: What are the concerns?
SS: We have to look at the interests of the whole industry, sightholders and non-sightholders. Most in the industry are non-sightholders and they are very concerned that branding will create two grades of diamonds. First-class diamonds branded by De Beers and second-class diamonds that are not branded.
This difference between De Beers branded diamonds and others may lead to a very big problem for those who do not have allocations from De Beers. At least that is how some foresee it now. We do not want to wait to see the actual results and then cry afterwards. Should De Beers go ahead with its branding program it must be in a way that no one in the industry gets hurt.
MR: What is it like being Moshe Schnitzer’s son?
SS: My father had a long career and I think that his contribution to the diamond industry in Israel is indisputable. I have to look towards the future of the industry and do my utmost to make things go the right way, to encourage the business, and to leave it to the people to see the results.
MR: What do you do for fun?
SS: I deal with diamonds. I like diamonds and I love what I do. My relaxation is to sort diamonds, look at the new production out of the factory, price it, and sell it. After 26 years in the trade I still like it. If youcan do what you like, you are lucky.
I also like music, sports, and travelling to many parts of the world.
MR: What advice do you have for young people going into the diamond business?
SS: Come in and join the business. My son is completing his army service in one-and -a-half years and I do not have to encourage him because he himself wants to join the diamond business. It is a great future for the younger generation. It is more interesting and promising than other businesses.
MR: Is there anything you wish to add?
SS: In the last year we have come to De Beers with many complaints, mainly about the shortage of goods and the lack of profitability.
There are times we criticize and there are times we have to give thanks. At this time De Beers deserves our thanks for two reasons. First, its allocations policy. I think that the rough shortage in the last six-to-twelve months has helped the situation. We are now in a position where there is a shortage of rough, and a strengthening in polished and the general market. I think a lot of it has to do with the CSO allocation policy.
Second, the changes in the assortment give us some breathing space. These are positive changes. I thank De Beers and hope that this policy will continue through 1999 so that it justifies my optimistic opinion of the year.
MR: Are you saying that profitability has returned?
SS: It is too early to say that profitability is returning although the general feeling is more positive. We must continue a cautious policy because the situation is still fragile — we do not want to hurt the situation by doing something that is not well calculated. If all the elements come together, we think there is a good chance that profitability will return to the business. We have had a good beginning and hopefully we will have a good year.
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Tags:
Auctions, De Beers, Economy, Hong Kong, Israel, Israel Diamond Exchange, Israel Diamond Institute, Japan, Jewelry, Manufacturing, Production, Sightholders
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