DE BEERS PRESENTATION
“A Diamond is forever.. but power may be not”
D E B EE R S C A S E S T UD Y
A Cash Cow Industry
An estimated US$13 billion worth of rough
diamonds are extracted every year
Extracted diamonds can be used for
industrial purposes or in the luxury sector
(gemstones)
Diamond jewellery is worth more than US$72
billion per year (very high profitability)
The biggest slice of the cake
A giant’s first steps
Founded in 1888 in South Africa by Cecil
Rhodes, De Beers quickly obtained a dominant position in the world diamond market.
In just a few years, DeBeers became the leading company of an international cartel, mostly thanks to Ernest Oppenheimer and its heirs.
“Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production” E. Oppenheimer
The Diamond “Trilogy” for success
There are 3 main pillars for the maintenance of
DeBeer
dominant position over time:
Control of supply through diamond stockpiles
DeBeers sales and distribution arm:
CSO/DTC
Marketing and advertisement
The Lion and the Gazelle
In the 80s Zaire (DROC) counted for 3% of
world production of industrial diamonds and was member of the De Beers' cartel
The country asked for a lower a handling fee, requests were refused and in 1981 Zaire left the CSO
Two months later the market was flooded by diamonds and the price fell dramatically.
Hit by the shortage of foreign currency Zaire asked to be admitted again in the cartel.
Of course De Beers imposed worse conditions
There is no formal proof that it was De Beers, but only De Beers had the power to act in this way. Financial Hurricane from Israel
In 1970s, Hyperinflation in Israel and Merchants wanted to hoard up
diamonds for selling them later.
PDVic < PDViD
To stop dealers from breaking away from its cartel, DeBeers:
- Created temporary surcharge.
- Cut Israeli dealers’ quota by 20%.
- Dismissed them from the CSO
As a result, Israeli dealers again conceded
D E B EE R S C A S E S T UD Y
A Cash Cow Industry
An estimated US$13 billion worth of rough
diamonds are extracted every year
Extracted diamonds can be used for
industrial purposes or in the luxury sector
(gemstones)
Diamond jewellery is worth more than US$72
billion per year (very high profitability)
The biggest slice of the cake
A giant’s first steps
Founded in 1888 in South Africa by Cecil
Rhodes, De Beers quickly obtained a dominant position in the world diamond market.
In just a few years, DeBeers became the leading company of an international cartel, mostly thanks to Ernest Oppenheimer and its heirs.
“Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production” E. Oppenheimer
The Diamond “Trilogy” for success
There are 3 main pillars for the maintenance of
DeBeer
dominant position over time:
Control of supply through diamond stockpiles
DeBeers sales and distribution arm:
CSO/DTC
Marketing and advertisement
The Lion and the Gazelle
In the 80s Zaire (DROC) counted for 3% of
world production of industrial diamonds and was member of the De Beers' cartel
The country asked for a lower a handling fee, requests were refused and in 1981 Zaire left the CSO
Two months later the market was flooded by diamonds and the price fell dramatically.
Hit by the shortage of foreign currency Zaire asked to be admitted again in the cartel.
Of course De Beers imposed worse conditions
There is no formal proof that it was De Beers, but only De Beers had the power to act in this way. Financial Hurricane from Israel
In 1970s, Hyperinflation in Israel and Merchants wanted to hoard up
diamonds for selling them later.
PDVic < PDViD
To stop dealers from breaking away from its cartel, DeBeers:
- Created temporary surcharge.
- Cut Israeli dealers’ quota by 20%.
- Dismissed them from the CSO
As a result, Israeli dealers again conceded