Our fragmented industry has started to restructure. Although our sector is gradually growing, our diamond pipeline is gradually shrinking. Vertical integration has begun, and mining companies are moving towards the sale of products and retail, and vice versa.
Perhaps it is not a mere coincidence that this trend is observed at the same time that De Beers is gradually losing its market share - from 80% of the rough market in the 1990s to 35% at present - and are losing their role in the As an industry leader.
Such a loss of leadership, for example, in promoting brand-name branding of diamonds to maintain consumer demand or in the management of diamond and diamond shipments, meant that thousands of diamond-diamond companies had to deal with their own destiny from the beginning of the 2000s.
I previously described the challenges facing the fragmented diamond and diamond industry, especially in the processing of raw materials and production, and also in sales - and the benefits of greater consolidation to help, for example, in promoting branding of diamonds throughout the industry, in strengthening financial The company's position and to ensure a better match between the prices of diamonds and diamonds.
We all need to study the question of how best to adapt - through mergers, vertical integration or other types of consolidation, to continue to provide added value to our industry.
Doing business in the usual way is unlikely to be a viable long-term option.
Vertical integration in our industry is proceeding slowly, but the examples that currently exist and taken from other sectors provide some interesting valuable information on how this option can be further considered in the future.
They have shown an invaluable role that will be played by all segments of the value chain, including the companies for processing raw materials and manufacturing products, thanks to their experience in polishing, which is one of the strengths. They also demonstrate the existing variety of integration options that we can consider, and the fact that the initiative can come from companies located in any part of the diamond pipeline.
Companies that sell diamonds are pushing up the diamond pipeline
Jewelry retailers are increasingly trying to get closer to the sources of rough diamonds in order to increase the security of the supply of precious stones and provide consumers with more transparency in the field of tracking. Various ways of moving up the value chain were studied.
Tiffany realized early on the benefits of moving up the value chain and from the beginning of the 2000s, with the help of its subsidiaries, opened diamond factories, provided sightholder status to key diamond producers and invested in the exploitation of the mines. Currently, about 2,500 - or 1 in 5 - of Tiffany employees work in the market of processing raw materials and manufacturing products, which helps to get about 50% of their diamonds.
If Tiffany went through this integration mostly independently, other retailers sought support from experienced and well-proven participants involved in the processing of raw materials and the manufacture of products. Both Chow Tai Fook and Signet Jewelers acquired a diamond company, and Graff established a joint venture with a diamond cutter.
Movement of companies involved in production, further along the diamond pipeline
Both diamond producers and diamond manufacturers have taken steps to approach consumers in order to obtain benefits. There are many examples that point to an approach involving cooperation with participants in the value chain and with companies that are not members of the diamond and diamond industry.
Branded diamonds "Forevermark" by De Beers are cut and polished by selected sightholders and other diamond manufacturers, and its retail network De Beers Diamond Jewelers is created as a joint venture with LVMH.
It is believed that Gem Diamonds holds some of the high quality gemstones it produces to produce diamonds itself or in partnership with other companies for processing raw materials and producing diamonds. Reportedly, the goal is to profit from this processing of diamonds and polished diamonds in the amount of up to 50% of the cost of production by 2017.
Diamond companies do not always show initiative in downward integration. Gitanjali Gems, an Indian jewelery manufacturer, has transformed into a global retailer, beginning in 2006, with the purchase of jewelry-based Samuels and Rogers based in the United States.
Vertical integration in other industries
Attempts by the diamond and diamond industry to create vertical integration resemble those in other sectors.
In the luxury market, many retailers climbed it to gain more control over the supply of materials that are essential to their sales volumes.
Examples include the share of LVMH in one of the world's leading cashmere companies; Investment companies Bulgari, Cartier and other luxury watch brands in the company-manufacturer of spare parts; As well as exclusive partnerships of companies Dior, Chanel, Hermes and other cosmetic manufacturers with companies growing plants.
In the oil industry, participants in the production of raw materials, such as Shell and BP, who initially engaged in prospecting for oil and its extraction, decided to purchase refineries and sales networks.
Companies for processing raw materials and manufacturing products - the middle part of the diamond pipeline - can play a key role in vertical integration
The experience gained in the diamond-diamond industry and in other sectors shows that companies for processing raw materials and production can play an integral role in vertical integration.
Companies involved in both mining and selling diamonds have realized the benefits of working with well-established mid-market diamond companies - processors and manufacturers, including taking advantage of their diamond know-how, their access to financing and their ability to work with broad Assortments of diamonds, which, for example, are likely to be wider than the specific requirements of an individual retailer.
And so, although I used to draw attention to strategic associations as an option for the fact that the processing and manufacturing companies can use to strengthen their position regarding the participants in the production of raw materials and retail, another approach to consideration is the integration with participants in other parts of the value chain .
It seems more meaningful, for example, for diamond producers to work with customers in the processing and manufacturing industries, like those that have integrated with jewelry retailers that can cope with larger volumes, are better funded and can have higher profits as a result of that That they are closer to their consumers.
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