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Industry
Making a Name
ALROSA is taking action to create a brand and get its name known to consumers.
By Anastasia Serdyukova
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ALROSA brown diamond sold at Sotheby’s.
Photo courtesy Sotheby’s.
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Although Russia’s largest diamond miner ALROSA is well known domestically and in the rough diamond industry, its name means little to most consumers buying diamonds at retail. A new worldwide marketing and branding campaign, which includes selling diamonds polished by the miner’s manufacturing subsidiary through top international auction houses such as Sotheby’s, is designed to change that.
“While De Beers is known worldwide, ALROSA doesn’t enjoy such popularity. We hope to make the company well known through Sotheby’s diverse clientele, including the private buyers” who are not part of the trade, said Alexander Malinin, director general of Brillianty ALROSA, the cutting and polishing subsidiary the miner established in 2000.
ALROSA signed a memorandum of cooperation with Sotheby’s in May 2013 for its diamonds to be sold through the auction house. So far, the company has taken part in one auction in February, at which it sold two diamonds, and a second one in September, at which it sold three pink diamonds and one brown diamond. It is planning to sell a 47-carat round diamond at auction either by the end of 2013 or early in 2014.
“There was spirited bidding for the items that were consigned by ALROSA. People appreciated not only the vibrant colors of the diamonds presented but also the exceptional cutting quality,” said Gary Schuler, director of Sotheby’s jewelry department.
In the first stage, ALROSA has launched two programs: one for large diamonds and the other for colored diamonds — each designed not only to increase profits, but also to market and brand the company’s diamonds.
Although ALROSA is the second-largest diamond miner in the world and has just completed its initial public offering (IPO), the company has solid reasons for wanting more name recognition. “The more people know about Russian diamonds, the more they will want to buy them, and this will mean more sales for ALROSA’s rough,” said Malinin, noting that the Russian cut, while it has a certain reputation in the industry for quality, needs wider exposure with the general public.
It is not a new idea. Kristall Smolensk, the country’s largest diamond manufacturer, has been working separately on promoting the Russian cut for a long time. Malinin doesn’t exclude cooperation with other Russian manufacturers on branding initiatives in the future, although there haven’t been any negotiations among them to this point.
The other reason for creating a promotional program is that the diamond market in general has long needed a marketing initiative. “There hasn’t been anything similar to De Beers ‘diamonds are forever’ campaign for a long while,” said Malinin. “In addition, the diamond market is facing threats, first and foremost from synthetic diamonds.”
Brillianty ALROSA was first established to serve as a price-tracking vehicle on the world market for ALROSA diamonds. The manufacturing subsidiary buys around 5 percent of ALROSA’s rough, and generated sales of $160.5 million in 2012. The company sells its large-size diamonds directly to clients or through approximately five annual auctions held in ALROSA’s offices in New York, Antwerp, Hong Kong and Ramat Gan.
Even though the company is the miner’s subsidiary, Malinin said it buys the same lots and on the same terms as other Russian manufacturers. But unlike other Russian companies, which sell off the rough that is not profitable for them to polish — usually rough smaller than .30 carats — Brillianty ALROSA polishes all the rough it buys to get a complete reading of market prices for all sizes.
The promotional and branding campaigns the manufacturer was assigned to develop are potentially very profitable. “The record prices have been on exclusive stones, either big stones in D or F color or fancy colors,” said Malinin. “Exclusive stones are less subject to fluctuations of the financial markets and their prices should continue to rise.” He added that selling them through auctions such as Sotheby’s provides good publicity for the company, in addition to achieving the highest prices.
Since the launch of the marketing effort, the company has polished six rough stones over 50 carats and five other large diamonds are being polished at the moment. The stones are carefully selected by a group of the company’s top employees. The cutting and polishing work on one stone takes over two months, with the best and the most experienced of Brillianty ALROSA’s 150 polishers assigned to the task. Malinin said that the quality of the cut is what makes a stone unique. Sergey Lutsishin, the company’s head engineer, proudly adds that the perfect polishing could not be achieved without a special technique the company uses to restore the perfectly smooth surface of its polishing disks using machines designed specifically for the company. ALROSA also has a 52-carat pear that will be offered for sale, as well as a number of diamonds larger than 20 carats.
The skill of the company’s cutters was established by a recent ruling by a special expert subcommittee of the country’s precious metals and gems repository that one of its stones, a 47-carat round diamond scheduled to be sold at Sotheby’s, was prohibited from being sold outside the country because it was considered “unique” by Russian standards. According to Russian legislation, large rough and polished stones have to be evaluated by the subcommittee to determine if they are “unique” or not. The purpose of the legislation is to keep especially significant diamonds within the country. The irony in this case was that the rough stone of over 100 carats had not been deemed unique by the commission but the polished one made out of it was ruled unique, testimony to the skill of the cutter.
Stones considered unique have to be offered first to the Russian Ministry of Finance and if it declines to buy it, to the Republic of Yakutia, where the diamonds are mined. In the recent case, it was only after those two parties confirmed they were not willing to buy the stone that the company asked for the government’s permission to sell it abroad. It took half a year to get the necessary paperwork signed by the prime minister before the diamond could be scheduled for auction by Sotheby’s.
Colored stones are another product of which the company is proud. The rough for these stones comes from the alluvial deposits of Almazy Anabara — which contain a large percentage of color diamonds, mostly fancy yellow — and Severalmaz, located in the northwest section of the country.
“Colored stones are commercially profitable, which means that the difference between the cost of polished and the cost of rough is very large,” said Malinin. “When a stone is certified, that certification gives it an approximate price, but when one buys rough, it is not always clear what the outcome will be.” The three pink diamonds — .30, .50 and 1.02 carats — that were sold at Sotheby’s in September for $230,000 came from the rough of Severalmaz. The mine has yet to reach its full production capacity, which is expected in late 2013. Malinin recalls that the rough out of which the three pinks were created was nothing special in the beginning, but when the rough cutting was done, unique colors were uncovered.
During 2013, Brillianty ALROSA bought approximately 60 color stones weighing over 100 carats in total from Severalmaz, which the miner had collected over several years. Malinin said that the company is currently negotiating with big jewelry firms to sell them a steady supply of colored stones, mostly small ones.
For the long term, the hope is that new marketing efforts will result in a well-known brand name and brand reputation for Russian diamonds. Malinin believes that the company has the components for creating a brand that would be widely recognized and appealing to the public. First of all, Russian diamonds are unique in their quality, secondly, they are not conflict diamonds and third, they are mined in an ecologically clean environment and cut to triple excellent quality standards. “De Beers has its Forevermark, we need to create something of our own,” concludes Malinin. Article from the Rapaport Magazine - December 2013. To subscribe click here.
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