Rapaport International Diamond Conference 2005 Highlights

Introduction

The Third Annual Rapaport International Diamond Conference held on September 19, 2005, featured speakers who were government officials, diamond industry representatives, financial executives and marketing experts addressing almost 400 participants. All net proceeds from the IDC were donated to the Jewelers for Children Charity.

The Diamond Pipeline - Making Sense of the Numbers

Saul Singer, Director of Research for the Rapaport Group, describes the changing structure and dynamics of the diamond industry, citing DeBeers’ “Supplier of Choice” program as a main cause. With more than 80 percent of worldwide rough production controlled by five major players, rough prices are expected to remain robust into the medium-term. For polished diamonds, high-end sales are accelerating, even while low-to-middle grades are experiencing much slower growth. Emerging markets, especially India and China, are increasing their share of global retail sales, while retail sales in the United States remain strong. Profit margins for producers continue to tighten.

The Financial Health of the Diamond & Jewelry Industry

Loet Kniphorst, Global Head of ABN-AMRO Bank N.V., also cites “Supplier of Choice” as a key factor in the industry’s changing environment, as well as changes in rough supply, Internet sales and a changing regulatory environment. He notes that diamond industry debt continues to rise, totaling some $10.2 billion at the end of the first quarter of 2005. He urges the diamond industry to analyze cost/benefit ratios, strengthen its capital base, take advantage of the financial markets and have a clear strategy to reach current and prospective customers.

The Roaring Tiger and the Flying Dragon

Rajiv P. Mehta, CEO of Dimexon Diamonds and Director of Eurostar Diamonds, discusses two major emerging markets – India and China. India has strong domestic demand, a booming industrial sector and increasingly high disposable incomes in its billion-plus population. Its economy grew at a rate of 6.4 percent in 2004, its jewelry market is roughly $10 billion and its diamond jewelry market is $2 billion. India’s diamond market shows the growth of new retail channels and strong demand for branded jewelry. China, the world’s largest country, grew at a rate of 9.5 percent in 2004 and its jewelry market is in fourth place globally, currently $10 billion and expected to grow to more than $21 billion by 2010. Both nations will provide the global diamond industry with many opportunities for profitable growth.

“A lifetime Concept - Joie de Vivre”

Shmuel Pluczenik, CEO of the Pluczenik Group, describes how in recent years the diamond industry lost sight of its customers and consumer needs and is now having to re-emphasize how to best meet these demands. He cites IBM as a company that had similarly lost sight of its customers in the 1970s and 1980s, and re-learned how to be customer-centric instead of simply product-oriented. Today’s wide variety of consumer goods and lifestyles have forced the diamond industry to re-emphasize the “magic and emotion” represented by a purchase of diamonds as an ultimate symbol of love. Pluczenik’s alliance with ESCADA Fine Jewelry does this by emphasizing the lifestyle concept of joie de vivre to add value to its diamond jewelry.

ESCADA Fine Jewelry 2005 Collection

Robert May, brand manager for ESCADA Fine Jewelry, tells how its 2005 Collection demonstrates joie de vivre in its specialized lines by showing how “Diamond Jewelry is The Ultimate Kick!”

State of the Diamond Industry

Martin Rapaport, Chairman of the Rapaport Group and Host of IDC 2005, says the diamond industry is undergoing fundamental, unprecedented changes that are creating complex interactions throughout the entire diamond distribution system. He cites factors such as shortages of rough diamonds, excessive rough demand, a volatile external economic environment, and rapidly escalating prices, and the growth of new markets in China and India that have added hundreds of millions of new customers. Other factors include an increasing supply of synthetic diamonds, and more stringent government regulations on the industry. Describing the harmful effects of “conflict diamonds” in western Africa, Rapaport urges the diamond industry to establish legitimate diamond markets there by working with governments, businesses and Non-Governmental Organizations: “We are not just responsible for how we buy diamonds. We are responsible for how others buy diamonds.” Finally, he advocates branding of diamonds to add value to the product, thereby adding to consumer choices.

Synthetic Diamond: Friend of Foe?

William Boyajian, President of the Gemological Institute of America discusses synthetic diamonds and their entry into the market industry. Synthetic diamonds are produced by using tremendous heat and pressure, and have the same physical, optical and chemical properties as natural diamonds – they are not fakes or imitations. Introduced in the 1930s, they attained industrial quality in the mid-1950s and gem qualities in the 1970s, and can be identified via standard gemological means by studying their physical and chemical properties. Currently it is very expensive and difficult to grow colorless synthetic diamonds, but colored stones can readily be produced. Boyajian feels that extensive production of synthetic diamonds will evolve more slowly than many people think. He wants GIA to remain independent, objective, knowledgeable about identification challenges and inform the industry and consumers about the facts concerning synthetic diamonds, feeling they will continue to evolve as part of the gem and jewelry industry.

Diamonds as a Commodity - Is it inevitable?

Mark Moeller, President & CEO of R.F. Moeller Jeweller of Minnesota, emphatically believes that the future is bright for the independent jeweler; buying a diamond is an experience, not a transaction; price is way down the value chain; branding makes a difference to the customer; and “If you buy your diamond from cheapdiamonds.com, you’re in trouble!” He emphatically doesn’t believe that diamonds are a commodity; the Internet is a serious threat; putting a name on a diamond doesn’t make it a brand; people who bottle water are not smarter than people in the diamond business; and (in jest) that just because one’s name is Rapaport it doesn’t mean one understands the retail jewelry business!