Monday, September 19, 2011

Where is Everlon?

Where is Everlon?

Here we are in the fall season 2011 and it occurs to me that just two years ago De Beers introduced its Everlon program of knot designs. Now, not a word about it, or at least that I can detect.  It falls right into the pattern of other so-called beacon programs that De Beers has run over the last number of years. 

In this case, as we saw, De Beers went much further, suing various companies for copyright infringement - suits they eventually had to drop, as the concept was old as the hills.  The industry, with Everlon just as with other programs in the past, simply came along for the ride, with De Beers and it's participating sight holders and retailers paying the fare. 

Now, once again, De Beers has developed a program, Forevermark, with some enhancements intended to make the "coming along for the ride" a lot more difficult.  The underlying motivation remains the same, build added value for the channel, thereby maximizing De Beers profits and pricing power.

The enhancements are, in a way, old hat.  Inscribe the table with logo and ID, much as was done with the long-defunct Millennium Diamond campaign; establish strong provenance and non-conflict credentials; and then tell that story.  De Beers tested and ran the concept in very fertile ground, the Asian market, and has now brought it to the US in supposedly refined condition.  While these are attributes that are not easily knocked off, long term success in converting those attributes into premium pricing remains a very tall order.  Perhaps we will write about successes or failures later on, though my guess is that this effort will go the way of other beacons.

But never mind.  It would be nice to see a successful campaign that benefits the industry, but the question is "why so extensive an effort?".  De Beers is, after all, a mining company that continues to expend marketing dollars at a scale way above its competitors, though not quite at the same level as when it was a monopoly.

All of this comes to mind in reading about the signing, after years of negotiations, of an agreement between De Beers and Botswana for the continuation of De Beers' marketing of Botswana diamonds, the single most important asset in De Beers' mining operations.  De Beers will be moving all sorting functions to Gaberone, among other concessions.  But it was a move that De Beers had to make, probably with few other options.  Botswana has steadily put De Beers into a tighter and tighter hold, as it works to take fuller control its own fate.  Botswana will now have a larger share of the mines' output to market on its own, for one thing.  This is a marriage of necessity, not love, as both sides hold essentially competing interests.

Both parties know that the days of glory are passing.  The mines will decline in output; the prospect of new, major mines is slim; and making the most of what is left is important.  De Beers is gambling that there will be a future in Botswana for running a first rate sorting and distribution center.  Botswana hopes to see the establishment of a well-trained cadre that will turn Gabarone into a world center for the industry.  We may have doubts, but they seem to have little choice but to take that path.

In the meantime, De Beers has been squeezed.  Probably 80% of profits now go to Botswana (in addition to being a 50-50 partner with De Beers on the mines, it is part owner of De Beers and taxes exports).  So De Beers now needs to find other ways to grow profits, and Forevermark, run by them and paid for by them and its sightholders and retailer associations, stands as an independent channel for generating additional profits.

In concept, that seems logical.  In practice, as I see it, the results will not justify the effort.

1 comment:

  1. This was so interesting, Ben, thanks. I think that there is another reason why De Beers has no choice but to remain tightly bound to Botswana: it is a huge source of non-conflict diamonds in Africa. And it's not an easy source to replicate, as events in Zimbabwe remind us. One of the key promises of Forevermark diamonds is their spotless origin--and Botswana embodies that. It's a selling point that Kimberley Process-certified diamonds cannot guarantee. May not matter to everyone, but in the features and benefits column, it's a nice check mark.