As though in emulation of diamonds themselves, the conference “Diamonds in the 1990s” at the VicenzaOro I fair in Italy was filled with hard words and fiery rhetoric.

            With a panel of eight including Francesco Roberto, the contentious president of Federpietre, and CSO Director Jeremy Richdale, the hottest topic was the future of the European market. Roberto lashed out at De Beers for the diamond cartel’s heavy promotional drive in Asia and their seeming disregard for Europe.

            For diamond dealers and jewelry retailers in the Far East, times have never been more dynamic. Diamond sales are soaring. Of the top six diamond-consuming countries, four in Asia including Japan, Thailand, Taiwan and Korea. With the rapid rise in diamond production and consumption in Asia, De Beers has begun courting the Asian market—to the chagrin of De Beers’ former European darlings.

            Although it was an Italian who first broached the issue, Richdale said that of the major European markets only Italy’s promotional  budget has not been slashed. Other EC countries have seen advertising spending plunge.

            “There are powerful forces in London who advocate that advertising should be doubled,” Richdale responded. But accountants and financiers who keep an eye on cash-flow have said “enough” to the expenditure in many countries in Europe.

            For more than 30 years De Beers has spent heavily on advertising in Europe. However, in the last year, promotional funds from Europe have been siphoned for use in the flourishing Far East.

            “Unfortunately the return on the investment [in Europe] over the 30 years has been disappointing,” Richdale said. “The growth of sales has not measured up.” He cited specifically Germany and the UK.

            In contrast, the countries of East and South East Asia have experienced phenomenal growth over the past few years. Thirty years ago in Japan only six percent of the brides wore diamond wedding rings. Now, more than 70 percent of the new brides are given such rings.

            In addition to the four diamond consumption leaders in Asia, de Beers is pushing their promotional dollar in China, Indonesia, Singapore and Malaysia, countries with large, relatively untapped markets and rising prosperity.

            “De Beers does not ignore Europe,” Richdale said. But he cannot deny there has been a significant movement of funds eastward.

            According to Richdale, there are phases when publicizing and advertising are effective. In the United States in the 1940s and 1950s , it was necessary to advertise to a wide audience that “diamonds are forever,” the executive said. In the 1990s, “Europe has moved to a new phase—postindustrial, post-advertising.” With so many products, like travel packages, computers and home furnishings, vying for consumer attention, returns on diamonds advertising are diminishing.

            With the wave of money flowing to Asia unlikely to lessen, Richdale suggests that European jewelers take a more independent and aggressive approach.

            “Each retailer has his own special market, geographic and demographic,” He said. “He or she is the best person to bring clients into his shop.”

Russians—the wild card

            In theory, as representative of both diamond producers and cutting centers, De Beers works to monitor demand and control the supply of goods so as not to flood the market. The buying arm purchases 85 percent of their clients’ production and doles out the goods tem times a year. Russian producers, however, are dissatisfied with the current situation and have sought ways to exceed De Beers’ rigid quotas by going outside the cartel’s marketing channel.

            Richdale says with the Russians “not playing by the rules of the game” it makes it difficult for them to study market needs and gauge the quantity of Russian production.

            “What motivates the Russians to sell diamonds is completely different from our agenda,” said Richdale. “Russians sell when they need cash or for their own personal reasons.”

            When asked what the diamond cartel will do in 1995 if the Russians continue to sell outside the single channel network, Richdale replied: “This is the key question for ’95 as far as we are concerned.

            “Obviously we are working with all of our resources to come to some understanding, to come to some balance,” said the CSO director. “There have been discussions at the highest level with the Russian government on this since mid-1994. These discussions are continuing and will continue.”

            There are basically two factions in Russia—the miners and the politicians.

            On the one hand, the miners “know the rules and understand the reasons for them,” Richdale said. “The problem comes when one tries to have a sensible discussion with the political side.”

            One of the complications when dealing with the Russian government is the lack of continuity. Richdale said the ministry responsible for negotiating with De Beers did not have a head for all of 1994.

            On the need to control the buyers of the surreptitious Russian goods who are wreaking havoc in the diamond market, Richdale replied: “You can’t compel them to do something against their own interests,” even though it may be damaging to the stability of the trade. –PATRICIA WIDENER