THE DIAMOND INSIGHT REPORT 2014
PHILIPPE MELLIER PRESENTATION
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Good afternoon everybody.
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I hadn’t realised before today that I was a film star! Finally, my five minutes of fame have arrived…
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Ladies and gentlemen, I hope the short film you have just seen gives you a good sense of what the
Insight Report is all about and why we believe it will be an important resource for all of us
interested in the world of diamonds.
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Of course, at De Beers we have been in business for over 125 years and this has enabled us to
develop deep insights about the diamond industry, its past performance and the complex and
changing environment we can expect to encounter in the years ahead.
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I am pleased to say that one of the key things this insight has shown us is that there is a very
strong base on which to build and there is much for the diamond industry to be proud of and to
look forward to.
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But it has also shown us that there is more that all of us can and must do to connect consumers
with the diamond dream even more strongly in the years ahead; that there are emerging trends
that we need to bear in mind if we are to maximise our potential; and that there are several
significant risks and challenges that the industry will need to address in the near future.
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In short, the future success of diamonds is in the industry’s own hands. But understanding the
risks and opportunities and investing in the right areas will be required if the industry is to
continue to compete strongly with other luxury categories.
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In looking at the findings of the 2014 Report, there are three high level insights that I believe tell
the story of where the diamond industry stands today and what needs to be considered for the
future.
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First, the industry has a product that continues to captivate and enthral consumers, and is doing
so in increasing numbers around the world in an expanding consumer market.
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The consumer ‘diamond dream’ is very much alive, with overall global demand for diamond
jewellery in 2013 stronger than ever before.
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We have seen a healthy recovery in the world’s major diamond jewellery market, the US, over the
last few years, continuing to build on the country’s long tradition of diamond desire.
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And this has been complemented by the stellar performance in China, which remains the major
engine for growth in the diamond industry.
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So, whether the diamond buying tradition has long been established, or whether it is an emerging
phenomenon, the special allure of diamonds continues to draw people to jewellery stores across
the world in record numbers.
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But this only tells half the story. Continued demand growth may be seen by some as a reason to
be complacent, but this would be a very short-sighted approach.
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The Insight Report makes it clear that the industry is undergoing fundamental changes and this
means that past performance cannot be seen as a guarantee of future success.
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What worked before in a different environment is unlikely to provide an effective template for a
thriving future in a changing world.
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So, second, it is imperative that the industry focuses on improving its understanding of global
diamond consumers.
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And this goes beyond just the millennial generation and their preferences.
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For example, has the industry fully grasped how cultural differences affect buying behaviours in
the Far East when compared with the US?
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Or what this means for how we market the diamond dream in the countries that are likely to
provide the oxygen for sustained growth?
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Does the industry fully appreciate the changes to how people are researching and carrying out
their purchases of diamonds?
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And does the industry fully understand the differences between consumers young and old, male
and female, eastern and western, and how best to get its message across to each of them?
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The Insight Report highlights that many of the old paradigms are no longer valid and all of those
involved in taking a diamond from underground to over the counter must recognise that although
a diamond is forever, the way that consumers interact with the industry are continuing to change.
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They are more diverse, they are researching their purchases in different ways and their buying
habits are changing faster than ever before.
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Without an appreciation of this new consumer landscape, the diamond industry will not deliver on
its full growth potential.
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Finally, the Insight Report tells us that there are also other potential risks and challenges on the
horizon that have the capacity to impact the potentially brilliant future of diamonds.
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For example, there is a consensus view from within the industry and without, that supply and
demand dynamics in the diamond industry will see consumer desire for diamond ownership
significantly outpace production forecasts over the medium term.
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Meanwhile, the risks associated with undisclosed synthetics must also be taken seriously. While
global production of gem synthetics remains miniscule when compared with the supply of natural
diamonds, it is likely that synthetic production rates will increase and costs decrease in the years
ahead.
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Both of these challenges could have a direct impact on retail sales of diamond jewellery.
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It appears clear that a programme of investment is the answer. Investment in production,
investment in technology and investment in marketing and the consumer experience.
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The opportunity for diamonds is probably greater now than at any point in the industry’s history;
but at the same time, the pace of change in the world is faster than ever before and there are
more sophisticated issues than experienced previously.
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At De Beers we intend to do all we can to capture the benefits of this rare period of opportunity.
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We will continue to invest in innovation and use our hard-earned insights to guide our decisions,
and we hope that the 2014 Diamond Insight Report will enable others to do likewise.
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Because, ladies and gentlemen, we will all be faced with a choice in the years ahead.
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If the diamond industry chooses to ignore the inevitable changes to its operating environment,
then we can expect to see a gradual erosion of the gains that our past investments have provided.
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But if we choose to invest, then we stand on the cusp of perhaps the greatest opportunity for
growth that the industry has seen in more than a generation.
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I will now hand over to Stephen Lussier, our Executive Vice President of Marketing, who will
provide a more in-depth perspective on the downstream elements of the Report, before handing
over to Bruce Cleaver, Executive Head of Strategy, who will take us through the mid- and upstream
sections.
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Thank you very much.