De Beers hopes P2bn marketing campaign will lift slump
Mbongeni Mguni | Friday November 8, 2019 18:00
The budget, announced this week, is the highest the diamond giant has ever spent in any year in the last decade. While De Beers states the budget as being for the entire year, the lion’s share of the marketing spend is typically focused on the last quarter of the year, targeting the US Thanksgiving, Christmas, the Chinese New Year and India’s wedding season.
The three countries are the major markets for polished diamonds and jewellery and those holidays are the peak period for sales.
De Beers has thus far had a difficult year, with year-to-date sales of $3.21 billion compared to $5.39 billion by the same time in 2018. The trouble stems from 2017, when high levels of smaller stones were taken up by the diamond cutting and polishing firms, raising inventories and reducing their appetite for new sales.
The firms have also faced difficulties accessing finance from banks to take up their allotments at De Beers’ auctions. In response, the group has allowed its buyers to re-schedule their allotted uptake, while also reportedly cutting prices at its ongoing auction in Gaborone. This week, De Beers group CEO, Bruce Cleaver told BusinessWeek the aggressive marketing was also a strategy to clear the glut in the market and drive demand for rough stones.
He said in the US alone, Christmas jewellery sales were expected to account for at least 30% of forecast 2019 global demand.
“We must all remember that a key part of the future in the diamond world is driving demand,” Cleaver said, on the sidelines of the Diamond Conference.
“It’s all very well for producers to push efficiencies, but we actually have to sell the diamonds.
“We are thus very, very focused on marketing and we will spend in 2019, the largest amount in the last 10 years, which shows that even in a difficult market we don’t reduce the marketing budget.
“In fact when there’s a downturn, there’s support to increase the budget.”
Last year, De Beers spent $166 million marketing, but the glut of small stones in the market’s midstream meant slow retail uptake and pressure on producers. De Beers is hoping a combination of cutting production and aggressive marketing will rebalance the market.
Cleaver cautioned that there was no guarantee the increased marketing spend would have the desired results for the group.
“Marketing is a tricky business to work out an exact return,” he said.
“It’s very hard to track, especially in a single year an absolute dollar return on the dollar spend.
“It’s a long term programme and fundamentally, we as the diamond industry are very dependent on global economic growth and the most important thing for us is how the economies in the US, China and India are going towards Christmas.”
He however added: “I can say that if we didn’t spend, the season would be considerably worse”.
All eyes in the industry are on the results of the auction De Beers is wrapping up this week in Gaborone, for signs of recovery in demand for rough diamonds. The diamond giant is due to release the auction results next week.