Ian
Harebottle is looking for the next Marilyn Monroe. The chief executive
officer of London-based Gemfields, the world's largest producer of
emeralds, says he's seeking "an A-lister" who can do for the green gems
what Monroe did for diamonds when she sang Diamonds Are a Girl's Best
Friend in Gentlemen Prefer Blondes. Monroe's performance in the 1953
flick added extra sparkle to diamond sales.
Diamonds
still dominate the $21 billion precious stone market, accounting for 90
percent of all sales, according to BMO Capital Markets. But for the
first time in decades they have a little competition from the colored
also-rans in the gem trade. Rarer than diamonds yet cheaper, emeralds,
rubies, and sapphires are gaining favor just as sales for diamonds are
beginning to show weakness. Polished diamond prices have fallen for five
straight quarters as jewelry buyers in Asia and Europe become more
cautious about luxury shopping, according to PolishedPrices.com. Uncut
diamond prices are heading for their first annual decline since 2008,
according to WWW International Diamond Consultants.
Colored
gems' rising popularity is starting to worry the diamond industry.
"During the past three years these other gemstone categories have taken
away yet another half percent from our market share," Moti Ganz,
president of the International Diamond Manufacturers Association, said
in a speech at the World Diamond Congress on Oct. 15. As a result,
colored stones are becoming more valuable. Prices for high-quality
emeralds have soared more than tenfold in the past three years,
according to Gemfields company filings. Cut rubies have risen in value
63 percent since 2005 and sapphires by 45 percent, according to Gemval,
an online gem appraisal site.
The
reason for the shift in tastes is multifaceted. Colored stones are
still less expensive, a plus for star-struck lovers on a budget during
hard times. A 0.9-carat round diamond that's internally flawless and of
rare white color costs about $7,000, according to online retailer Blue
Nile. A round emerald with "excellent clarity" of the same size costs
about half as much, according to online vendor AfricaGems.
Some
of the interest in colored stones is "celebrity driven," says Caitlin
Mociun, a Brooklyn-based jewelry designer. "One reason might be Kate
Middleton having a sapphire engagement ring, or even Beyoncé having a
black diamond engagement ring. Those things, especially for a mass
market, can definitely drive a trend." Hollywood personality Jessica
Simpson's engagement ring sported two diamonds, but the ruby in its
center got all the press and sparked numerous knockoffs. Halle Berry's
ring featured a 4-carat emerald that several celebrity magazines
breathlessly announced came from "closed-down mines in Muzo, Colombia."
At a gem trade show in Hong Kong last year, Russell Shor, an analyst
with the Gem Institute of America, immediately noticed the new interest
in colored stones. "People were all of a sudden really hot to buy
emeralds," he says.
That
may not be an accident. Harebottle, whose company produces about 20
percent of the world's emeralds, is increasing Gemfields' marketing
budget, trying to exploit fissures in the diamond industry that until
recent years was controlled by De Beers. Until the 1940s, the
colored-stone market was about equal in size to the diamond industry.
Then, in 1947, De Beers coined the slogan "A Diamond Is Forever," later
voted the best of the 20th century by Advertising Age. De Beers funded
most of the marketing for the diamond industry through its generic
marketing, similar to the dairy industry's "Got Milk?" campaign. That
changed in 2004 when De Beers's monopoly ended after it pleaded guilty
to price fixing in the U.S., concluding a 10-year legal battle. The
diamond industry became chaotic and the amount spent on marketing
plummeted, with De Beers cutting its ad budget in half, according to
Stephen Lussier, the company's executive director in London. The
industry tried to reorganize in 2008 at a meeting in St. Petersburg,
Russia, that led to the creation of the International Diamond Board. But
members, including Russian state monopoly OAO Alrosa and mining giant
Rio Tinto, failed to come to an agreement over how to fill the
advertising void left by De Beers. "Not all people were willing to do
their part," says Lussier. "De Beers can do its part, but it alone is
not enough."
Anish
Aggarwal, a partner at consulting firm Gemdax, says the diamond
industry has had "four to five years without any real category
marketing, and there are some markets that are suffering, such as
Japan." He adds that there's "a danger of losing some of the cultural
imperative."
Even
if Gemfields does find a modern Marilyn Monroe, it's doubtful the
company will ever be able to match De Beers's old business model, in
which a single firm mines, markets, and largely controls wholesale
prices. Still, Harebottle has learned from the former monopoly's
experience. The colored-stone industry has traditionally been highly
fragmented, divided up among many small, family-owned outfits. By
bringing corporate heft to it, Harebottle hopes to boost supplies and
raise prices at the same time. He aims to increase Gemfields' share of
the global emerald market to about 30 percent by expanding production at
its African emerald and ruby mines. The company already owns 75 percent
of the Kagem emerald mine in Zambia, the world's largest, and controls
75 percent of the Montepuez ruby field in Mozambique.
De
Beers still spends hundreds of millions of dollars a year on
advertising, according to Lussier. But if Gemfields can demonstrate
"clear industry leadership, they will have a chance" to capitalize on
the diminished marketing power of diamonds, says Aggarwal of Gemdax.
Harebottle
plans to boost his marketing budget to at least $4 million next year,
up from just $150,000 in 2009. Next year's budget will likely contain
money for a celebrity endorser. Gemfields currently pays for about 70
percent of global emerald advertising, says Harebottle, but he doesn't
mind bearing the marketing cost for the entire colored-gems industry:
"The fact that people free carry, I don't mind-so long as it benefits
us."
The
bottom line Gemfields, the No. 1 emerald producer, is adding corporate
heft to the colored-stone market, boosting its ad budget to $4 million.
Marilyn Monroe made diamonds sexy and chic
Jessica Simpson's 5-carat ruby ring sparked knockoffs
Liz Taylor's diamond necklace cost more than $1 million
Halle Berry's 4-carat emerald came from a mine in Colombia
Audrey Hepburn as diamond-obsessed Holly Golightly
Kate's diamond and sapphire ring belonged to Diana
~~~~~~~~
By Thomas Biesheuvel
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