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Forevermark CEO Hails India's Growth As Diamond Consumer
Lussier Addresses World Diamond Mark Conference
Dec 11, 2014 2:34 AM
By De Beers Group of Companies
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Press Release: The following are the remarks made by Stephen Lussier, the CEO of Forevermark and executive vice president of marketing for the De Beers Group of Companies.
Honorable Minister of Home Affairs, Mr. Rajnath Singh, Honorable South African Minister of Mineral Resources, Mr. Ngoako Ramatlhodi, chairman of the GJEPC, Mr. Vipul Shah, president of the WFDB, Mr. Ernie Blom, president of the WDC, Mr. Edward Ascher, distinguished colleagues and guests, ladies and gentlemen.
Thank you for inviting me to India and giving me the opportunity to speak to you in the capital of the world’s most important diamond manufacturing center and an increasingly important consumer market.
As demonstrated by conferences like this one, India is a leading diamond country and its innovation and energy underpin the success of a global industry. More diamonds will find their ultimate beauty in India during their journey from mine to finger than in any other place on earth.
In an age of the disposable, India’s export endures. From New Delhi to New York to Hong Kong, diamonds that have been cut and polished in India carry Indian ingenuity, inspiration and craftsmanship with them wherever they go.
And more and more of those diamonds are staying closer to home as India’s status as a major consumer market for diamond jewelry grows. In De Beers’ most recent Consumer Diamond Purchasing Survey in India, reporting just last week, we looked at the purchasing behavior of 40,000 middle class consumers across all regions of India in tier one-to-four cities.
We’re still digesting the data, but the top-line results are very encouraging. In 2002, De Beers estimated that the acquisition rate of diamond jewelry among the Indian middle class was around 2 percent. The results of our new study show that the acquisition rate has jumped to 9 percent in 2014, nearly five times – representing exceptionally strong growth over the past decade.
And this trend is set to continue as Oxford Economics estimates we will see a compound annual growth rate of 12 percent in the number of middle class households in India over next 10 years.
The potential for the Indian diamond jewelry market serves as a microcosm, albeit with its own specific drivers and challenges, for what we found when we looked at the global market in our recently published Diamond Insight Report.
Overall, and most importantly, we found that diamonds continue to captivate consumers the world over. Over the long term, diamonds remain very attractive with the opportunity for growth in demand expected to outpace production.
When looking at the variety of possible scenarios that the diamond industry may encounter in the years ahead, recent research by McKinsey & Co. suggests real positive growth in even the most pessimistic scenario.
The McKinsey scenario that was deemed the most likely sees what they call the double cylinder effect of continued economic recovery in the U.S., and the ongoing escalation of demand in China and India, delivering strong and sustained growth in global consumer demand for diamonds.
However, if we strip away all the statistics and data, and ignore for a moment all of the growth forecasts, there is only one thing in our industry that truly matters – the consumers’ desire for diamonds. It is our single source of value and must guide everything we do.
Of course, it’s all too easy to think favorable supply and demand fundamentals guarantee a successful future. But we must recognize that consumers’ expectations and behaviors are changing, and those of us who stand still, will be those who are left behind.
We need to bear in mind that the world is changing very quickly and other industries are investing and progressing. In this increasingly competitive environment, if the diamond industry only maintains its current level of investment it will, in effect, go backwards.
To illustrate this point, diamonds’ share of advertising voice in the U.S. has almost halved since 2007. Over this period, fashion and electronics have both grown their share of advertising voice in the U.S. – in fact, electronics now represent more than three times the share of jewelry.
This has a clear and direct impact on consumer purchasing behavior. Looking at growth rates of luxury categories in the U.S., luxury electronic gadgets have seen a compound annual growth rate of nearly 14 percent between 2004 and 2013, while luxury jewelry has seen growth of just under 2 percent during the same period.
It is undeniable that if these trends continue, the diamond industry will see its share of consumer spend reduced and it will risk missing out on what could be one of the strongest periods of opportunity in living memory.
I guess this is why we are all here at this conference and looking at the options for maximizing demand for diamonds in the years ahead. De Beers fully appreciates the fundamental importance of consumer desire and the importance of marketing to maintaining and developing it. After all, through De Beers category marketing over decades the Diamond Dream was built in countries all over the world. I guess it is only natural to look for answers in the future by looking to the solutions, because they worked then. But tomorrow’s problems are different and new solutions are required. What’s different, I’ll give you three specifics:
1. While De Beers remains the world’s leading diamond producer by value, we no longer sell the majority of the world’s diamonds and need to seek marketing solutions that, while they help to maintain the dream, also help to drive demand for the diamonds we mine. This doesn’t mean there aren’t opportunities for collective effort but it’s not our priority.
2. The retailers need margin. Margin erosion in the retail sector is a significant risk to long term demand for diamonds. Retailers increasingly require a differentiated product upon which they can make a fair margin in order to fund the marketing, inventory, and retail environments necessary to compete against other luxury goods categories. Demand alone is not enough. It will need to be the type of demand that generates a fair retail margin. This requires new solutions for the future.
3. And lastly, the consumer is demanding a higher degree of confidence in purchasing. Confidence around the ethical nature of the product from mining to manufacturing and certainly the naturalness and thus true value of the product.
Fortunately, we have two powerful new tools to use which De Beers believes can provide the solutions.
One is branding and the other is the digital world.
Currently, diamonds are generally a non-branded category, despite an obvious increase in interest in branded products from consumers all over the world.
The claimed acquisition of branded engagement rings in the U.S. has risen sharply – from just 7 percent of consumers in 2002 to three and five times that level in 2011 and 2013, respectively.
Fashion brands with limited expertise in the sector, such as Dior and Chanel, are growing quickly. And in the U.S. market, there has also been an uplift in awareness of specialist diamond brands such as Hearts On Fire, Leo and Tacori.
Meanwhile in China, traditional branded jewelers such as Tiffany & Co. and Cartier have seen a jump in claimed brand-acquisitions of eight to nine times by young middle class consumers since 2008.
We have also seen this escalating demand for brands clearly in our own business – Forevermark the diamond brand from the De Beers Group, has experienced rapidly growing retailer and consumer interest since its launch, and in only six years is available in over 1,500 retailer stores with sales at retail value of some three-quarters of $1 billion a year.
Brands with a specific positioning and story help retailers address consumer needs for emotional engagement with the product, protect the offer against commoditization, and generate the margin necessary to re-invest in marketing the Diamond Dream, and building consumer desire.
Another conspicuous trend in the consumer space is the rapid increase in the use of digital media by those interested in buying diamond jewelry.
As is the case with many industries, online is becoming an increasingly important channel across the globe. Diamond consumers are going online in increasing numbers in all markets, for both research and purchasing
In the U.S., more than one-in-six diamond jewelry purchases were made online in 2013 – in value terms this represented about 13 percent of all acquisitions. But the fastest growing channels are those that have both bricks and clicks – not pure Internet players.
Meanwhile in China, around 50 percent of single women use the Internet in the diamond purchase process; for affluent Chinese consumers the figure is around six in 10. In short, online, including mobile, can be expected to grow in importance for diamond jewelry retailers everywhere, whether for research purposes before a purchase or as a sales channel in its own right.
For the diamond industry – where purchases tend to be relatively infrequent and in where it can be challenging to identify high-impact consumer touch points through which we can communicate – this represents a huge area of opportunity.
With so many consumers visiting websites when undertaking research and making purchases, online provides us with a rapidly growing medium through which we can engage consumers with the diamond dream.
Engagement in the diamond dream is only part of the job though. To engage a consumer one must first build trust, and that is why strengthening consumers’ confidence in diamonds is so important.
Diamonds are an emotional purchase and the importance of integrity cannot be underestimated. As such, it is vital that the industry continues to invest in making sure that people will always be 100 percent confident that the purchase they make is as described at the point of purchase. Strong, coherent and consistent massaging from across the industry plays a vital part in achieving this, and brands can do this better than anything else.
Differentiation will become increasingly important in this campaign to capture the imagination of the consumer, and brands will become the key to differentiation. We know that consumers are seeking them out, and they give retailers an opportunity to differentiate themselves from generic propositions.
That is why De Beers has invested so heavily in Forevermark. We spend a considerable amount of time at Forevermark understanding the consumer’s “needs set.” Our promise of diamonds that are beautiful, rare and responsibly sourced is driven by consumer insight and backed-up by a commitment to ensure our operations live up to our promise and we back this up with a multi-million dollar marketing budget.
While we focus in part on the specific brand messages we also recognize that our marketing investment must also reinforce the diamond dream for all diamonds. Communicating the love and emotion that diamonds symbolize is the De Beers way of supporting industry growth.
I hope you’ll agree as you watch this TV spot, which is currently running in major markets around the world, including India.
As we look for new ways to differentiate ourselves in an increasingly competitive market, India’s ability to not just keep pace, but to lead the change needed in our industry is a priority for De Beers and Forevermark. Which is why we recently invested nearly $10 million in a state-of-the art inscription and diamond grading operation in Surat, this has the current capacity to inscribe some 400,000 diamonds and will dramatically improve the service and turnaround time for our Indian based diamond manufacturing partners.
India must do its part to stay competitive as well. An effective bureaucracy focused on the timely acquisition of permits and licenses, and the reduction of regulatory obstacles, would create an environment that is easier to do business in and help to further unlock the Indian industry’s potential. We need the fast and flexible government support to maximize the benefit.
If the potential for the future wasn’t so bright, and if the competition wasn’t so effective, the challenges we face wouldn’t be so acute. I have full confidence that an Indian industry and government focused on both can lead diamonds into a period of unprecedented growth.
Thank you.
ABOUT THE DE BEERS GROUP OF COMPANIES
De Beers is a member of the Anglo American group. Established in 1888, De Beers is the world’s leading diamond company with unrivaled expertise in the exploration, mining and marketing of diamonds. Together with its joint venture partners, De Beers employs more than 20,000 people (directly and as contractors) across the diamond pipeline and is the world’s largest diamond producer by value, with mining operations in Botswana, Canada, Namibia and South Africa. As part of the company’s operating philosophy, the people of De Beers are committed to "Living up to Diamonds" by making a lasting contribution to the communities in which they live and work, and transforming natural resources into shared national wealth. For further information about De Beers visit www.debeersgroup.com
Rapaport News is not responsible for, and does not endorse, the content of any third-party press release. This is not a Rapaport Press Release. It has been provided as additional information for our clients.
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Tags:
consumer markets, De Beers, De Beers Group of Companies, Forevermark, India, world diamond mark
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