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Sales up slightly for De Beers in '08

'Big idea' for value campaign to be unveiled next week

By Michelle Graff
February 20, 2009

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A drop in demand for rough diamonds in the second half of the year hurt De Beers' sales in 2008.

London--Sales for De Beers SA increased 1 percent in 2008, with the global economic crisis hitting the company hard in the fourth quarter.

According to results released by the London-based diamond giant on Friday, total sales in 2008 equaled $6.89 billion, up from $6.84 billion in 2007.

The company, in conjunction with its joint venture partners, produced 48.1 million carats of rough diamonds, down from 51.1 million carats in 2007, a 5.9 percent decline.

The decline in rough-diamond production came despite the fact that for the first time in its history, De Beers opened three new mines in one year: the Victor and Snap Lake mines in Canada and the Voorspoed Mine in South Africa.

In addition in 2008, De Beers completed sales of the Cullinan Diamond Mine in South Africa and the Williamson Diamond Mine in Tanzania.

Moving ahead into what promises to be a challenging 2009, Bloomberg reports that De Beers plans to borrow $500 million from Anglo American Plc and other shareholders to withstand any fallout from the drop in diamond demand.

In 2008, De Beers said it enjoyed a prosperous first half of the year, with rough-diamond prices rising as much as 16 percent.

"Over the first nine months (of 2008), the Diamond Trading Co. (DTC) achieved record sales of natural rough diamonds as buoyant demand translated into increased prices," the release states.

However, this came to a grinding halt in the fall when the global economic crisis began to take hold.

As De Beers Managing Director Gareth Penny notes in an online video message accompanying the results, "The speed of the economic crisis that began to sweep the globe in September 2008 presented challenges to all parts of the diamond pipeline."

These challenges were especially pronounced in the world's diamond-cutting centers, where the severe liquidity squeeze brought production to a near standstill.

Looking to the year ahead, Penny said De Beers plans to continue cost-cutting measures and plans for lower production levels and "smaller, focused sights," with De Beers working with partners to help maintain confidence while exploring "other sales opportunities."

Earlier in the year, the DTC revealed that selling rough diamonds to non-sightholder companies was one of the options it was exploring in trying to combat the drop in diamond demand.

Penny also mentioned in his video message that De Beers' efforts to drive consumer demand for diamonds worldwide would continue in 2009, efforts that include pushing the company's branded Forevermark stone, the ongoing operation of De Beers retail stores and a continued investment in the generic marketing campaign targeting U.S. consumers--who consume about half of the world's diamonds--that emphasizes the investment value of the stones.

Penny's big idea

In a speech given on Jan. 20 at De Beers' annual sightholder cocktail party in London, Penny mentioned a "big idea" to be revealed later in the year, a concept intended to serve as a catalyst for diamonds sales, much like the three-stone ring beacon program did in the past.

De Beers spokeswoman Lynette Gould later told National Jeweler that the "big idea" is not another beacon program but instead involves the value marketing campaign.

De Beers doubled its marketing budget to support the value campaign, which revolves around the idea that diamonds are a solid investment of value in rickety economic times.

Launched in the United States only just before Christmas, the campaign included the re-release of De Beers' "Hands" commercial.

Details on the idea will be revealed at De Beers' upcoming sight, which is slated to begin on Feb. 23 in London.
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