In the lap of luxury.(diamond industry)

For LVMH, every venture is about creating an image. Consumers must believe that there's added value in having a handbag with an intertwined "LV" stamped all over. Likewise, they must consider diamond jewelry sold under the De Beers name as more desirable than diamond jewelry sold by other fine retailers.

In January 2001, two giants at opposite ends of the luxury goods sector, De Beers, and LVMH announced a joint venture to take advantage of their respective strengths. Their plan was to set up a retail business, with "a small number of stores" in the fashion capitals of the world.

At the news conference where the announcement was made, De Beers managing director Gary Ralfe said, "We look forward to the day we will see a De Beers store on Bond Street in London, Place Vendome in Paris, the Ginza in Tokyo and Fifth Avenue in New York."

But with De Beers still officially a persona non grata in the United States, and with the European Union still not satisfied that this new enterprise meets its own standards of fair competition, the chain of stores that is envisioned to sell De Beers brand name diamond jewelry is still on the drawing board.

When, and assuming that it does receive the official green light, the new entity will be headed up by CEO Alain Lorenzo. It is foreseen that LVMH management will dominate the group--certainly a wise decision since LVMH is all about marketing while up to now, De Beers has been all about controlling the diamond stockpile and the sale of rough.

Ralfe sees the new venture as carving out a new market rather than taking business from existing retailers, but the reality is that customers--or at the very least, the customers' customers--are going to become competitors, and the De Beers group, combined with the LVMH group, wields a mighty big stick. LVMH chairman Bernard Arnault, the man who is synonymous with the push to acquire brands and more brands, says, "This …