De Beers "A Diamond Is Forever" Campaign

Topics: Diamond, De Beers, Blood diamond Pages: 6 (1410 words) Published: February 27, 2007
De Beers :
A Monopoly in the Diamond Industry
De Beers advertising slogan "A Diamond Is Forever" has been the center of its effort to establish the stone as the only appropriate gem to symbolize lifetime love and commitment. The more ad money spent, the more diamonds people buy. And when people buy diamonds, De Beers profits. It is the reason the company spends $180 million a year worldwide to advertise cut diamonds--a product it doesn't even sell. There are very few companies ... you may struggle to find even one, that has been the leader of its industry for its entire - Miner and buyer of 70-90% of the world's rough diamonds

- Buys rough diamonds directly from the diamond mine owners
- Cutters sell the cut diamonds to the dealers who in turn sell them to the jewelry stores. - And still De Beers spends $180m a year worldwide to advertise cut diamonds--a product it doesn't even sell!!! • Inefficiencies created by monopolies and Antitrust regulators in the U.S. - Other commodity prices (e.g. gold, silver, grains) fluctuate greatly in response to economic conditions 20th century, De Beers sold 85% to 90% of the diamonds worldwide

2. Rockefeller's Standard Oil and Gates' Microsoft may have briefly approached this kind of dominance, but the length and extent of De Beers' supremacy is unprecedented. Artificially keep diamond prices stable by matching its supply to world demand. De Beers acts like the theory of monopoly predicts:

- It is almost the sole seller of diamonds (sells almost 90% of world production). - Sells a commodity with no close substitutes (created this illusion by advertising) - It restricts output and it responds to changes in market demand. When demand contracts De Beers cut back on its sales and vice versa.

GOAL: S=D for diamonds at a high Price
Before the 19th century,
diamonds were exceptionally rare
-small quantities in India and Brazil
- no diamond mines were discovered
Now: Diamonds/Mines
Republic of South Africa
Sub-Saharan countries
Canada's NWT
But De Beers still manages to control the world Market and still manages to make us believe that diamonds are Rare!!!
Mid 1860s-1890s
1869: First diamond mines in the colonies of southern Africadrastically increased the number of stones available. 1870: Many diamond hunters bought mines.
Cecil Rhodes bought the rights to two mines on the farm of Nicolas and Diedrick DeBeer in the Cape Colony (now South Africa). Diamond hunters realized that their price depended on their scarcity. Had no other alternative than to merge their interests into a single entity - control the mines' production

- keep the scarcity illusion

De Beers Consolidated Mines Limited was established on 12th March 1888 with Rhodes as its founding chairman. .It is a South African company and granted an official listing on the Johannesburg Stock Exchange in August 1893. By 1890, De Beers controlled more than 95% of the world's diamond production (buying any new mine discovered) In Feb. 1890, Rhodes decided for a single channel of diamond distribution. - group of 10 Jewish merchants (called London Diamond Syndicate) - agree to be purchasing the entire production from all the De Beers mines and then resell them to cutters and wholesalers in Antwerp . One of these merchants, Ernest Oppenheimer

- started buying his own mines(Consolidated Diamond Mines)
- started competing with De Beers.
- took over De Beers
- Chairman in 1929
- Oppenheimer family still controls De Beers
His thinking was:
"The only way to increase the value of diamonds is to make them scarce, that is to reduce production" De Beers acts like the theory of monopoly predicts:
It restricts output and it responds to changes in market demand. In case of new diamond discoveries De Beers buys them so that the new supply does not enter the market. (avoid the shift of S right and lower price).

Example: Great Depression
1. Public stopped buying...
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