Antwerp Diamond Conference Opening Address
November 10, 03Governor Paulus, Ladies and Gentlemen.
I salute the Hoge Raad voor Diamant for having got us all together today for this conference on marketing and branding. Marketing and branding are the key drivers for growth in the diamond jewelry business and there is nothing more important to which we could be putting our collective minds over the next two days.
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Carl, I thank you for your warm words of welcome as well. I am indeed honored to be called upon to give this keynote address and ladies and gentlemen, what I plan to do over the next few minutes is really to take you through three chapters. Firstly, the transformation of our own company, Diamond Trading Company, away from our old business model towards a new business model which is based upon the promotion of diamonds and diamond jewelry, namely marketing. Secondly, to talk about the extraordinary brand image of our product; and thirdly, to address some of the important issues of brand equity which is no doubt what you were talking about earlier, Peter, when you referred to 'certain controversial issues' that surround our industry.
So, if I start with our own journey, ladies and gentlemen. It is now about five years since Nicky Oppenheimer became chairman and I became managing director of De Beers. We then instituted a strategic review into our affairs based upon the growing conviction that I had had over the previous four or five years, as managing director of Diamond Trading Company, that our industry as a whole, and our company in particular, were under-performing; that we were, in the words of financial commentators, 'ex-growth', or in decline as an industry. Indeed, research then confirmed that, if we looked back over the 1990s, diamond jewelry had significantly under-performed global GDP. Our growth rate compound over those ten years was something like 50% of GDP growth. But worse, we noticed that, in fact, other luxury goods had outperformed GDP. So we asked ourselves the question why it was that diamonds, the greatest of all luxury products, were under-performing those other luxury goods. In due course we came up with what we thought were the convincing explanations for these circumstances; namely that diamonds were relatively under-marketed and certainly under-branded. When we looked at other luxury products we saw the vast differential: how much more effort was put into the marketing and the branding of those products so as to make them appealing to the consumer. In addition to that, the industry tended to operate inefficiently, there was the trend towards the commoditisation and discounting of diamonds and diamond jewelry, rather than emphasizing their unique value and meaning and there were also, of course, the possible issues of consumer confidence in diamonds. All these factors, combined with the lack of marketing and branding, were responsible for our industry's relative under-performance.
And hence, ladies and gentlemen, our bold decision that we, at DTC, needed to change our business emphasis from a model which was largely supply-driven to one which focuses much more on meeting and generating demand. With the benefit of hindsight now we recognize that the old business model, much though it might have reflected common industry practice and might have been praised and lauded at the time, was, in fact, doing nothing to inspire imagination, innovation and the entrepreneurial flair of the industry and importantly, it was doing nothing to encourage marketing and branding within our industry. Marketing and branding are all about competing for the attention and the wallet of the consumer.
Supplier of Choice embraces competition. The competitive landscape for rough diamonds has changed markedly over recent years and DTC is no longer the source for every single rough diamond that might be available in the world. But we do not see this as a negative and we recognize that our efforts to generate demand for diamonds benefits everyone in the industry. We, and our Sightholders and their downstream partners, are focused on growing consumer demand for diamond jewelry. We have, for a long time, played a very important role in marketing in bringing to the attention of the women of the world the desirability of diamonds, but there was never a proper connect between our marketing activities and our commercial activities. Now there is, and the fruits of our extensive market research into consumer expectations and desires are bringing to bear great new concepts like Three Stone Diamond jewelry, the promotion of efficient channels, additional quality ad-spend on diamond jewelry and the encouragement to develop emerging and existing brands. I say here in passing, ladies and gentlemen, that I am proud to mention one new brand in particular, and that is the new De Beers retail brand itself, now available in the retail markets.
The suite of initiatives contained in Supplier of Choice has led us to integrate our commercial activities (that is our core activities of the mining and marketing of rough gem diamonds) together with our marketing expertise and experience. In our own globalization and integration we are, after all, doing no more than mirroring exactly the same trends that are prevalent throughout the world today.
The road that we have taken as a company has presented us with a great number of commercial, legal and political obstacles and we are justly proud of the way that we have risen to meet these challenges. As we continue to evolve to meet demand and industry changes, we look forward to an exciting future which we believe presents many opportunities for the diamond industry as a whole.
Diamond Trading Company regrets that the implementation of Supplier of Choice might have caused disappointment anywhere in our industry, but we believe in the fairness and commercial sense of this strategy and strongly believe that it can deliver benefits not just to De Beers but also to the whole industry. I think, as we look back over the last year or two we all of us can take pleasure and pride in the changes that have happened. The results for Q4 2001 just after 9/11, in the aftermath of which we thought we were going to have a really appalling time on the consumer markets, was in fact a time of remarkable growth for our industry, particularly in America. Last year, in 2002, we achieved our own internal KPI of outperforming GDP growth and this year we have, within Diamond Trading Company and its partners, a project called Project Rudolph and we are determined, once again, to drive our product with compelling marketing so that we can again outperform against GDP this year.
Over the next two days, ladies and gentlemen, you will see, no doubt, a persuasive kaleidoscope of the various initiatives which are being taken in our industry in order to differentiate diamonds. They are based on one key driver and that is understanding the consumer's needs. For some time now we in DTC have recognized that the final arbiter in our business is indeed the consumer but instead merely of parroting those words we are focused on persuading the consumer to make the right judgment of our business. And that means, ladies and gentlemen, not sitting back passively when times are difficult saying that we have to contend with a difficult micro-economic environment, it is about seizing the opportunity ourselves and commanding the consumer's attention for diamonds instead of other competing luxury products; that is what branding and marketing is all about.
What a product we all have, ladies and gentlemen, to market and to brand. At DTC, we believe in the importance of differentiating our unique, natural, diamonds from simulants, treatments and synthetics. Our product is the real thing. For at least 2,000 years, before they became Marilyn Monroe's best friend, diamonds had excited the ancients. The ancients called them "tears of the Gods", "splinters of stars"; they were the very stuff of myths and legends and if we turn to a cooler head - the great political commentator of ancient Rome, Pliny, who, in the first century of the Christian era, wrote "Diamonds have nourished men's fantasies and are synonymous with power not even human but from non-human forces. They are gifts of the Gods". So, as we know, before time began, deep within the earth under unimaginable heat and pressure, they burst upon the surface of the earth in volcanic lava. Only a few survived that arduous journey and they are incredibly difficult to find. They are truly rare treasures. Women around the world desire them, not just because they sparkle, but because they are literally 'miracles of nature'.
We believe that it is only because diamonds are so inherently special that they can symbolize our most special emotion, love. They are literally 'a piece of eternity'. Take the physical attributes of diamonds - their hardness, their rarity, their purity, their beauty, their sparkle and their naturalness and add the emotional values that have been built up over the centuries and are deeply routed in the human psyche: the tradition and history of diamonds, their prestige and status, adorning kings and queens through the centuries, their almost supernatural mystique as the gifts of the Gods and, finally and potently, the very symbol of love, romance and commitment. These physical attributes marry with the emotional values into the 'diamond dream' which the consumer has in her mind, the concept of eternity so well summed up in the slogan 'A diamond is forever'. And even as synthetics join other simulants in the consumer market, we believe we can be confident in the eternity of the natural diamond's image, of its profound appeal as the real thing, nature's greatest treasure.
But that does not mean that we should take things for granted, ladies and gentlemen. DTC believes that the image of diamonds must be cherished and the image of the "diamond dream" preserved against unscrupulous practices having the effect of tarnishing the precious image of diamonds and the reputation of the industry too - such as, for example whenever synthetics are falsely claimed to be the real thing and customers and consumers are duped.
It is the integrity, and the assurance of integrity, that is so important in our industry. I can think of no other industry where they could be nearly so important. They cannot be as important in oriental carpets or running shoes. Why? Because diamonds are the very image of that most profound of human sentiments, love, and that is the reason why none of us can afford to have diamonds tarnished by anything which might be debasing. The consumer expects the diamond industry to be exemplary in its consumer offering in terms of legal compliance, in terms of fiscal rectitude, in terms of ethical accountability and in terms of the integrity with which it offers its product to the consumer. We look to respond to these expectations and ensure them in our own Best Practice Principles. Rio Tinto's Business Excellence Model also seeks to achieve the same goals.
This conference is timeous inasmuch as it follows the Kimberley Process meeting which took place in my own country, South Africa, last week. I think as an industry we can take some pride in how, over the last few years, we have fought this unlawful trade in conflict diamonds and together with governments, NGOs, and industry associations including the World Diamond Council, we have made a common cause against illegal trade in conflict diamonds.
I think it represents a remarkable achievement for our industry and I salute the HRD's own important role in this.
I think that the Patriot Act in the USA deserves exactly the same respect and compliance from our industry. Indeed, what I think we are looking for is a pan-industry approach to the issue of ethics and ethical accountability. It is not just the mines of De Beers and Rio Tinto and Alrosa and BHP-Billiton, but it is also the mines in Sierra Leone and elsewhere in Africa and in the world that need to follow standards, proper practice and ethics. And it is not just in 47th Street and in the Kempen, but in Gujarat and elsewhere that we need to be following proper business practices and ethics and similarly for the whole of the retail industry. Thereby, we shall be giving to the consumer the assurance and transparency of integrity in our own dealings, in not trading in conflict diamonds and in the full, unambiguous disclosure of the nature of treated diamonds and of all synthetics and other simulants and providing confidence in the certificates awarded by the world's grading labs.
Ladies and gentlemen - I wish you over the next two days a great deal of passion and wisdom as you debate the issues facing the diamond industry and I thank you for your attention.