Rapaport Magazine

Japan Market Report

O.E. Cut Finds Success

By Kazuko Ito
RAPAPORT... "The O.E. Cut is breaking out — this time in a big way,” said Nozomi Kawabuchi, managing director of Hohoemi Brains Co., Ltd. The breakthrough has been a long time coming for the company, which launched the cut eight years ago.

O.E. stands for “Over Excellent,” meaning that the cut is designed to be better than “Excellent,” the grade gemological labs bestow on extremely well-made diamonds. The cut was developed using a mathematical formula to maximize the stone’s scintillation, brilliance and dispersion of light. The company claims that O.E. Cut diamonds look shinier and whiter than more traditional cuts.

The O.E. Cut has had a difficult time penetrating the market because it does not fall into conventional 4Cs cut-grade criteria and dealers are more comfortable with more traditional grades. “We don’t handle them. It’s got to be ‘triple excellent’ — a stone whose cut, polish and overall cut grade are all graded excellent — or ‘Hearts & Arrows,’” said a market player who requested anonymity. Such is the general view of the market even today.

A big break for the cut came in March 2006 when Hohoemi Brains began supplying O.E. Cut diamond pendants to ANA, All Nippon Airways, Japan’s Number 2 air carrier. Many airlines sell gift items to their passengers and ANA requires its new gift items to sell a certain volume to be kept in the gift line. In their year-long tryout, the pendants sold more than double the required volume. “To our happy surprise, after seeing this success, JAL, Japan Airlines, the nation’s Number 1 carrier, showed an interest in selling pendants on its flights, too,” said Kawabuchi. JAL started selling its pendants in September 2007.

A Cut For Robots
Another marketing success for O.E. was the use of the diamonds in the design of robot pendants, which were featured in a drama program created for cell phones. On that project, Hohoemi collaborated with Kadokawa Mobile, NTT Docomo and Kadokawa The Television in launching the drama program to celebrate Kadokawa’s 25th anniversary. The title of the drama is “Kimagure Robot,” which means capricious robot in English. The robot pendant was designed by Tadanobu Asano, who played the leading role in the drama; he is also appearing in the role of Genghis Khan in the newly released movie, “Mongol.”

“At the moment, the number of media that can deliver such programs and the number of cell phones that can receive such programs are limited,” said Yojiro Koyama of Kadokawa The Television. “Not many leading actors design robot pendants, either,” he added.

O.E. Cut diamonds are embedded in the robots. “When product merchandisers want to use diamonds on their products, O.E. Cuts are the best because they are flat. The culets do not intrude like regular brilliants, and they do not need light traveling through the pavilion to the table to look pretty,” said Kawabuchi. Taking advantage of this property of O.E. Cut, SoftBank has commissioned Kansai Yamamoto to design an exclusive version of cell phones using the O.E. Cut.

Black Diamond Campaign
When Suntory, which markets Pepsi-Cola in Japan, launched its PepsiNEX marketing campaign, the focus was “black.” That’s because PepsiNEX, which is sold only in Japan, is a darker cola with zero calories. The campaign, launched this year, was named “Black Diamond Campaign.” Tokyu Agency, the country’s fourth-largest ad agency, called on Hohoemi, along with 20 other world-class product marketers, including Sony, Canon and Hitachi, to supply the prizes for the campaign. On each of the prizes, black diamonds were embedded with a little sticker that said “O.E. Diamonds.” The idea, explained Kawabuchi, “was something like the ‘Intel Inside’ stickers consumers find when they buy personal computers.”

“The campaign was twofold,” explained Takaaki Sodeyama of Tokyu Agency. “The first was for applicants to answer quizzes, with prizes awarded to the contest winners. And the second was for consumers to collect points from PepsiNEX packages that could be used to buy everything from digital cameras and rice cookers to traveling cases and bathrobes. There was a wide range of prizes so that consumers were sure to find something they liked.” Included in the prizes were a diamond tiara from Hohoemi valued at almost $300,000 and a cash prize of approximately $100,000 packed in a duralumin case.

“The campaign ranked as one of the most successful of this type in history,” said Sodeyama. Asked why they chose the O.E. over other diamonds for the promotion, Sodeyama answered, “They looked prettier.”

“In the current economic environment, between the diamond 4Cs and the price list, no one is making money,” said Kawabuchi. “Our products do not fall into the 4Cs. Yes, O.E. Cuts are a little more expensive compared to regular round brilliants in carat terms, but O.E. Cuts are flatter and look bigger face-up.” The company said some of the Grand Maisons of Europe are now inquiring about the cut. “We are working on the details but, in the meantime, we enjoy collaborating with other media. Had we done any of these promotions by ourselves, the publicity would have cost many times over.”

The Marketplace
• The market is stagnant.
• The prices of quarters have gone up and are matching thirds.
• 4/4-grainers of good make are very strong.
• Diamonds larger than 3 carats have gone up so much in price that dealers are unable to replenish their inventory.
• High-color melees remain strong.

Article from the Rapaport Magazine - July 2008. To subscribe click here.

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