IDMA Warns That Diamond Manufacturing is at Stake

Press Release: In his speech at the opening session of  the 35th World Diamond Congress, Moti Ganz, the president of the International Diamond Manufacturers Association (IDMA),  calls upon producers to provide stronger backing and vouch for consistent and continuous rough supplies. 

Dignitaries, colleagues, friends, good morning.

During the past four years, I have spoken time and again about the damage the tenders are causing, but without tangible results, because everybody preferred to keep their eye on the profit margins.

I have also spoken continuously about the need for generic advertising, and while everybody professed their support, nothing was done.    

Therefore, I really want to say to you again what I have said in the past: The rough producers' profit margins of today, are the producers' losses of tomorrow.

How did we end up in this dire situation?

First, we wanted to become more effective by streamlining the supply pipeline. We argued that by doing to, we would be preserving our profitability.

Twenty years ago there were about seven stations diamonds - rough and polished - passed through between the rough producers and the retailers. Yet since then, every few years, we have taken more control of the supply pipeline by eliminating - each time - another middleman.

Then, we conquered the secondary rough trading market, as well as the wholesale polished diamond market, the trade in the regional polished markets, and ultimately also in the major consumer markets!

We consequently have become jewelers, and now find ourselves financing the diamond supply pipeline from both ends - both on the rough diamond end, as well as on the retailers' end!

However, this streamlining has in no way improved our profitability! On the contrary, our profitability has been reduced to a point that is close to zero, while at the same time the profit margins of both the rough producers and the retailers have continuously increased.

Also, for the sake of profitability, we have cut out so many of the pipeline's - former - participants, that if we do not take action right here and now, we will be cutting ourselves out of the supply line as well!

So, up to now, we have been conducting a fight among ourselves. Each diamond manufacturer has been trying to conquer more territory, with the purpose to do better and to improve his bottom line. He tried to become more effective, to streamline his own operations, just to sell better and improve his business' chances of survival.  

But now, it is obvious that the struggle we have been part of is no longer one between one diamantaire and another, but between the diamantaire, the colored gemstone dealer, the pearl trader, and even the synthetic diamond trader. Our struggle is now how much space we get in the jewelry retail display cases and on the retailers' shelves.

Colored gemstone dealers and sellers of synthetic diamonds can offer their merchandise to retailers at better prices and at better terms. During the past three years, these other gemstone categories have taken away yet another half percent from our market share, of our display space, of our sales in the jewelry retail shops. So even if this keeps going at the same pace, we'll lose, within the next two decades, more than twenty percent of our market share among consumers.

And it is crystal clear that the pace will not be static, but dynamic. The more alternatives that are offered to the consumers, the higher the pace of market share loss of diamond jewelry will be! And let's face the reality; the retailers have good reasons to want and prefer these other gemstone categories, because they are guaranteed to make a profit with these goods.       

The retailers are also fed up with us constantly complaining and whining that we need to increase our prices while synthetic diamond dealers gladly will give them goods on memo and can also promise them significantly larger profit margins.

While at the start, they'll have the synthetic diamonds displayed in a discreet corner of their shops, but very quickly, these stones will be moved to center stage, as they will be proving to be very good for the retailers' bottom line. Look how well cultured pearls are doing.

A rough diamond has no value by itself. The producer has no use for it. A diamond becomes only valuable - and tradeable - when it is polished. The rough is only perceived as valuable by - indeed - the manufacturer. Only I, the manufacturer, only I know what it is that I hold in my hand and what I can achieve with this piece of rough.  

If I, the manufacturer, am to want to buy the rough diamonds that you, the producers want to sell, I have to get them on a regular basis, in continuous and consistent assortments. Only then, I'll be able to commit myself to the chains and stores I work with! Only then, I can commit myself to what they call their 'programs.'   Only then, I can promise to you, the producers, that the rough that you produce is worth something in the eyes of those who buy the polished - in the downstream pipeline, down to the end-consumer.

We cannot continue to buy rough at a loss.

The rough producers and the manufacturers are all in the same boat. We all want to run a stable, regular business. The producers want to have assurance that someone is going to buy the rough diamonds they extract from the earth.

The producers are also committed to the governments and the people of the countries where they operate their mines in. The producers also have targets to meet because if they do not met their sales targets, they'll have no reason to stay in the diamond mining business.

Therefore, the producers will need to find ways to encourage and support the diamond manufacturers. They need to give the manufacturers stronger backing, by vouching for rough supplies that will in turn enable the manufacturers to commit to their clients with consistent and continuous supplies of polished.       

This is my message to you, as I am about to conclude my term and service as IDMA president. On this occasion, I'd like to thank my colleagues at IDMA, the IDMA board and in particular my colleagues and friends Stephane Fischler and Ronnie VanderLinden.

And let me close my address by thanking - once again - Anoop Mehta and Vasant Mehta and all our Indian friends for their hospitality.

I hope and wish that the status of the diamond manufacturer will be restored that stability and prosperity will return, and that we will all enjoy the fruits of our labor and success.