The De Beers Story: Are Diamonds Forever?(De Beers Botswana Mining Company)(Statistical Data Included)

This redoubtable firm has achieved almost mythical proportions with its dominion over most of the world's diamond supply. But can it maintain such control in the face of new challenges to the industry?

The number one rated ad slogan of the twentieth century, according to Advertising Age (1999), was De Beers's memorable "A Diamond Is Forever." Conceived by N.W Ayer in 1948, this simple four-word proclamation has survived more than 50 years of social, cultural, and economic upheaval to remain a potent example of the power of persuasion. In the United States and around the world, the beneficiary of this effectual slogan and the controlling force behind the most successful and enduring cartel organization in history are one and the same: De Beers.

Since the late 1800s, De Beers has regulated both the industrial and gemstone diamond markets and effectively maintained an illusion of diamond scarcity. It has developed and nurtured the belief that diamonds are precious, invaluable symbols of romance. Every attitude consumers hold today about diamonds exists--at least in part--because of the persistent efforts of De Beers. Moveover, by monitoring the supply of diamonds throughout the world, De Beers has introduced and maintained an unprecedented degree of price stability for a surprisingly common mineral: compressed carbon. Such unique price stability lies within the cartel's tight control over the world's supply of diamonds. De Beers's operating strategy has been pure and simple: to restrict the number of diamonds released into the market in any given year and perpetuate the myth that they are scarce and should therefore command high prices.

To this end, De Beers functions much like any other cartel. What sets it apart, however, is its demonstrated ability to sustain the goal of price control, as well as its astounding degree of market control. In essence, De Beers controls both the supply side and the demand side of the diamond market, raising prices at its own discretion while convincing consumers to purchase and treasure the "rare" gemstones.

De Beers spends about $200 million a year to promote diamonds and diamond jewelry. Because the firm controls nearly 70 percent of the rough diamond market (the demand for which is derived from the demand for jewelry), it is the primary beneficiary of its marketing endeavors. Advertisements claiming "A Diamond Is Forever" are not only stimulating consumer demand, they are also subtly reinforcing the immortality of De Beers. One could claim that "De Beers Is Forever" as well.

CONTROL OF PRODUCTION AND PRICES

De Beers/Centenary controls a producer's cartel that operates as a quantity-fixing entity by setting production quotas for each member. During the early part of the past century, much of the diamond cartel's strength rested with De Beers's control of the South African mines. Today, the source of power no longer comes from rough diamond production alone but from a sophisticated network of production, marketing, sales, and promotion arrangements, all administered by De Beers.