De Beers Responds to Crunch by Reducing Production, Doubling Advertising

In a presentation to Diamond Trading Company (DTC) Sightholders Monday, De Beers Managing Director Gareth Penny said the company will reduce diamond production to reduce market supply of rough diamonds, double its marketing budget for the holiday season but will not reduce its prices.

Penny and DTC Managing Director Varda Shine said that the DTC and the Sightholders are leaders and must show leadership. Penny said the company believes in its product and that it is priced right, emphasizing that DTC rough diamond prices followed the price of polished.

He urged Sightholders to not run and sell goods below market prices, suggesting it is better to hold on to the goods if they can’t be sold at the right price.

While production will be slowed down, the company will use this time for maintenance work at the diamond mines. This slowdown may continue into the first quarter of 2009.

Shine presented a seven point action plan for the DTC and Sightholders. They included changes in box composition, scheduling of box delivery, smaller supplies in Sights 9 and 10 and the doubling of fourth quarter marketing spend to promote consumer sales.

Another point in Shine’s presentation was consistent purchasing performance, understood to be the return of a policy where if a client does not purchase a certain requested box, it will not be made available to that Sightholder in the future.

The new season marketing initiative includes a campaign to encourage consumers to make one big purchase with a long lasting value, instead of several small purchases of limited value.

The DTC declined to elaborate about the marketing plans until all of the Sightholders have had a chance to see them first, only willing to say about the initiative that in uncertain times people gravitate toward quality and fewer, better things. “Our investment during the Christmas marketing period reflects what our research tells us – diamonds remain the number one item that consumers want to give and receive in the world’s major markets,” a DTC source told IDEX Online.

Details about the Christmas marketing campaign will be unveiled to the trade on November 6 in New York.

Meanwhile at the Sight, it is not clear yet if box composition has been improved. Sightholders are hesitant, reportedly closely examining the goods before deciding if to buy them or not.

Initial response to the presentation was positive. One of the listeners said De Beers “stepped up to the plate,” taking a responsible stand.