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U.S. Pioneers Bet On Canadian Arctic Diamonds
Jul 24, 2002 11:49 AM
By Eric Levy
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There are two American companies betting on the success of Canadian Arctic Diamonds. Beny Sofer & Sons, LLC, and M. Ben-Dor Diamonds, both located in New York City, are the first wholesalers in America to obtain contracts with Northwest Territory (NWT) manufacturers to sell government-certified diamonds.
Canadian diamonds have been available in retail stores throughout the U.S. for years, but they’re not Government of the Northwest Territories (GNWT) certified. Included among them are “Canadian Polar Bear” branded diamonds, produced by Canadian wholesaler/manufacturer Sirius Diamonds, which are pledged to be as natural as the government-certified diamonds. But Sofer and M. Ben-Dor are betting on the belief that customers will respond to a government program that guarantees the naturalness of the diamonds they purchase.
Official GNWT certificates are signed by the premier, Stephen Kakfwi, with a guarantee that every diamond is mined, cut and polished in the NWT. Dubbed “Canadian Arctic Diamonds,” these stones must also meett the high standard of cut and other requirements established by the government’s Monitoring and Certification Program.
NWT manufacturers who seek certification of their diamonds must allow GNWT inspectors into their factories to monitor and audit production. All certified diamonds are then gem-printed and registered in an international database.
The Politics Behind the Cert
The movement of GNWT certified stones into the United States comes at a time when the program is a subject of controversy in Canada. GNWT Deputy Premier Jim Antoine spoke at the World Diamond Congress in Vancouver on June 17 against the federal government’s guidelines that a diamond mined in Canada, but cut and polished outside the country, is still considered Canadian in origin. “To be truly Canadian, a polished diamond must be mined, cut and polished in Canada,” he said. “We will continue to pursue this issue with the government of Canada in order to get a resolution that supports a secondary diamond industry in Canada.”
Konrad Chmielewski, senior executive for the Canadian Competition Bureau, which is finalizing the federal definition of what makes a stone Canadian, says that a “protectionist stance is anticompetitive” and that the Bureau’s policy has “been made clear” to officials of the GNWT.
Martin Irving, director of the Diamond Project for the GNWT, says that the GNWT certification program was designed as “marketing support,” and provides proof of any claims concerning the origin of Canadian diamonds. The federal definition of what constitutes a Canadian diamond, he says, “is full of holes. The image of the Canadian diamond could be damaged by unknown diamonds coming into the country.”
Back in the States
Oren Sofer, vice president of Beny Sofer, and Larry Wadell, president of M. Ben-Dor, say they don’t see a backlash with the Canadian political issue. If anything, they see that it will help their sales — enabling the retailer to explain the difference between a government-certified stone and a Canadian-mined diamond that is cut and polished outside the country. Sofer says that some retailers carrying non-GNWT certed Canadian stones have switched to his product.
For now, few consumers in the U.S. even know that the made-in-Canada controversy exists. But there is a larger group of American consumers that are aware of the conflict diamond issue. It’s not a message, however, that Sofer and M. Ben-Dor want to promote. Sofer and Wadell agree that the nonconflict message is implied and doesn’t need to be forced onto the retailer or consumer. If a knowledgeable consumer asks a retailer about nonconflict diamonds, the Canadian stones are introduced. Otherwise, the stones’ other virtues — their beauty, guaranteed fine cut and natural, untreated state — become the main selling points.
So far, the pitch seems to be working. Consumers, say the two wholesalers, are coming in asking for the stones. “Demand is way over supply,” says Wadell. “I think this is the most exciting thing going on in the industry today.”
Despite some who say that the Canadian stones are no different than any other diamond, Wadell, who obtains his diamonds from the Canadian manufacturer Deton’Cho and has branded them with the name Tundra Diamonds, believes the stones are superior. “I think the top of the stone is brighter and even SIs are really gentle. And 99 percent of the stones have no fluorescence.”
Marketing the Stones
Sofer buys his diamonds from the NWT manufacturer Arslanian Cutting Works, whose parent company is based in Antwerp. Sofer’s father started his New York–based company, Beny Sofer, Inc., 30 years ago and continues to deal in diamonds mined elsewhere in the world. Right now, though, it’s the certified Canadian stones that are getting Oren Sofer most excited.
“We’re constantly looking to add value to the retailer,” says Sofer. “We’ve resisted branding for all these years. If we did do it, we wanted a cut that had a true advantage in the marketplace. We wanted something truly brandable, not just something we gave out with pamphlets and a fancy name.”
That’s when Sofer heard about the GNWT certification program and approached Arslanian a year ago. Sofer’s exclusive U.S. contract began at the start of this year. He dubbed his Canadian diamond “Canadia” and now has retailers across the country carrying the brand.
What attracted him to the GNWT certification program, Sofer says, is that it’s unprecedented. There is no other program in the world that is government guaranteed and follows the diamond from the mine to the consumer.
Like any branded product, certified Canadian diamonds don’t sell themselves. The consumers who request the stones have been bitten by the media and in turn are curious about the new offering. Wadell has a marketing program called Retailer of Choice. Once a retailer has been chosen to participate in his program, he’s instructed to contact his local media to write or broadcast a story about the stones’ origin and the GNWT certification program.
Wadell says that this approach has worked. “When consumers read these stories in their local papers, it creates excitement about our diamonds. They didn’t know there was an alternative to what they thought was out there.”
Sofer offers retailers a 10-point marketing program that includes displays, counter cards and brochures. He also expects retailers to get the message out locally, which he supports with a national advertising campaign.
Sofer and Wadell offer their Canadian diamonds at market price, despite the fact that they pay a premium for relatively costly labor in the NWT. “You turn people off if the price is too high,”says Sofer. “We prefer to sell more at a lower price. If a customer sees two types of diamonds at the same price and one has the Canadian government certification, we think they’ll choose ours.”
Retailers’ Canadian Connection
John Baghsarian, general manager of Earth Treasures, a fine jeweler in Eatontown, New Jersey, is one of Sofer’s clients, offering Canadia Diamonds for a few months now.
He’s been searching for a brand-name diamond for a while, he says, and chose Canadia for its natural, untreated appeal and the government certification guarantee. The nonconflict angle, he says, isn’t a focal point and is not directly aimed at the consumer. Advertising is heavy with billboards, yellow page and print ads, radio spots and a television commercial on its way. The reaction so far is “slow in coming,” he says, “but those people who have come in about Canadia are intrigued by the concept.”
On 47th Street in New York City, Peter Germano has been selling diamonds from Sirius for almost three years now. He was originally attracted to the idea of buying directly from a manufacturer and having an exclusive territory in New York City. Sales, he reports, “are not so bad,” considering that he passes the 5 to 10 percent premium on to customers. Not a single customer in all this time has come in asking about nonconflict diamonds, and he doesn’t push that angle on anyone who walks in.
The Source of Rough
BHP Billiton Ekati is the only operational diamond mine in Canada today. That’s where all three manufacturers will continue to get their rough until alternatives start opening up next year. In April 2003 the Diavik Diamonds Project becomes operational and there are a growing group of other companies with exploration projects throughout Canada. Among those companies is Ashton Mining of Canada, which has exploration projects in the NWT, Quebec, Alberta, Nunavut and Ontario. De Beers Canada Exploration has its Snap Lake Project in the NWT and other projects in Saskatchewan, Ontario, Nunavut and Quebec.
For now, though, Ekati is the only player. As for all mining companies in Canada, getting out the rough is no easy task. Most of the year the ground is frozen and lakes need to be drained to get to solid ground where the kimberlites are located. Operating in such an environment is costly to mining companies and is passed down the pipeline. “
Costs are a big challenge,” says Graham Nicolls, vice president of external affairs for BHP Billiton. “It’s a very high- cost area to operate in.” Yet such an environment, says Nicolls, also has its advantages in advertising to the U.S. consumer — a pristine environment with spectacular Arctic views. BHP Billiton is experimenting with its own branded diamond in Canada and has no specific plans to market directly to the United States.
The Diavik Diamonds Project, a joint venture between Aber Diamond Corporation (40 percent) and Diavik Diamond Mines (60 percent), a subsidiary of Rio Tinto, hasn’t started production yet, but its leadership has distribution plans in place once the first piece of rough is ready for finishing.
“We have a pretty good idea about where we are going,” says Pierre Leblanc, vice president of corporate affairs for Diavik Diamond Mines. Through its marketing agent, Rio Tinto Diamonds NV, diamonds will be sold at Antwerp through a group of “core customers.” Sales will begin during the summer of 2003. Manufacturers have not yet been selected.
Finishing Up the Stones
Arslanian Cutting Works’ director Hilary Jones has a couple of good buzz phrases for the diamonds her company manufactures from Ekati. The first is that the stones are the “fifth C”— the Canadian Arctic attraction — and the other is “Boy Scout” diamonds — nonconflict, government-inspected stones.
In addition to Arslanian’s relationship with Sofer and some U.S. retailers, the manufacturer has a strategic joint venture with Rosy Blue, which is providing marketing expertise at Arslanian’s Antwerp office.
Frans Van Looy, vice president and director of operations at Deton’Cho Diamonds, a manufacturer that also obtains rough from Ekati, is pretty blunt about the attraction of certified Canadian diamonds to the U.S. consumer. “Diamonds are diamonds,” he says. “They’re all the same. The fact that they’re conflict-free here in Canada is the only thing we’ve got. Otherwise, no one’s waiting for diamonds from us.”
In addition to its contract with Wardell, Van Looy says Deton’ Cho is considering the possibility of adding one more wholesaler in the future.
Getting With the Program
Meanwhile, Stephen Ben-Oliel, president of Sirius Diamonds, says that his company will also be joining the GNWT certification program in the fall. A dispute with the GNWT over the use of a similar-looking polar bear logo he says got in the way of joining the voluntary government program.
Ben-Oliel points out, however, that his company had been offering all the elements of the government program anyway, before the Arctic Diamond brand was introduced. With 400 U.S. retailers on board, Ben-Oliel says that his diamonds have been selling well despite the lack of a government certificate. “We’re pushing the envelope to come up with better diamonds,” he says. “We want to be known as the Rolex of diamonds.”
Once Sirius diamonds gain government certification, the U.S. market will be more competitive for newcomers Sofer and Wadell. But each has its own marketing strategy, coupled with distinctive brands and cuts that they believe will bring continued success. Sofer says he believes that the Canadian diamond story is “so positive” that there’s room enough in the U.S. for more competition. “With the government certificate showing there’s nothing to hide and the socially conscious atmosphere in the Northwest Territories, selling diamonds from this area is a marketer’s dream.”
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Tags:
BHP Billiton, Consumers, De Beers, De Beers Canada, Diavik, Government, Mining Companies, Production, Rio Tinto, United States
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