De Beers

The De Beers Group is a Johannesburg-based diamond mining and trading corporation. They have historically held a near-total monopoly in the diamond trade, although recently other producers have developed new mines, such as in Russia and Canada, challenging their dominance. In 1994 De Beers was charged by the United States Justice Department with antitrust violations for conspiring to fix prices for industrial diamonds. On 14 July 2004 De Beers pleaded guilty to the charges and paid a $10 million fine. The plea has enabled De Beers to trade directly in the United States diamond market after years of acting through intermediaries. Using its monopoly, De Beers has created an artificial scarcity of diamonds, thus keeping prices high. The modern tradition of diamonds as a part of engagement in many cultures has been largely created by De Beers through an amazingly effective advertising campaign started in 1938. The "A Diamond is Forever" campaign not only convinced the public that the only suitable gift for engagement is a diamond, but also served to limit the market in used diamonds. ^*

De Beers distributes diamonds to favored customers (called sightholders) by selecting batches of diamonds themselves and offering them "as is". Now and in the past De Beers has sold diamonds mined from their own mines, most of which are in South Africa and Botswana. Currently, De Beers is involved in a joint venture that is developing a diamond prospect in Canada.

History

De Beers was founded on 13 March 1888 by Cecil John Rhodes along with Charles Dunell Rudd. In 1902 the De Beers Association Football Club was established when De Beers commenced construction of a dynamite factory near The Strand and Somerset West. The factory was located on the False Bay coast just west of the mouth of the Lourens River. In the 20th century the Oppenheimer family became the major shareholders. Sir Ernest Oppenheimer, his son Harry Oppenheimer and his grandson Nicky Oppenheimer have been chairmen of the company. Also see Alex Oppenheimer and Taylor Plant, both heirs and relatives.

The company's name comes from Johannes Nicholas de Beer and Diederik Arnoldus de Beer, two Afrikaner farmers on whose farm, called Vooruitzicht, near the confluence of the Orange River and the Vaal River, diamonds were discovered. The brothers were not able to protect the farm from the ensuing diamond rush, and sold it for £6300. Two diamond mines formed on the site, known as the "Big Hole" or Premier Mine. Although the brothers did not become the owners of the mines, one of the mines was named after them. Cecil Rhodes and Charles Rudd gained control of both the De Beers mine and the Kimberley, South Africa mine and merged them, forming De Beers Consolidated Mines Limited.

In the late 19th century, South Africa underwent rapid industrialisation during the "Mineral Revolution", creating an increasingly high demand for labourers to work in the colony's gold and diamond mines. In Kimberley, industrial labour was largely provided by Khoi and Xhosa seasonal migrants - young men who would travel to the diamond mines to work for wages in the summer, but this was unreliable and did not provide a static pool of workers. This, combined with the increasing paranoia that workers were stealing diamonds, led to De Beers introducing closed compounds for their workers. Mine workers signed fixed-term contracts with the company agreeing to remain on-site for the duration. Although white workers were allowed to live in the town, black workers were required to live on the compounds, where their wages were exchanged for accommodation, meals, and vast amounts of cheap sorghum beer provided by the company. Black workers were allowed into town on weekends, but this was curtailed in 1887 to prevent the entire labour force turning up on Monday mornings with hangovers. During the apartheid era, the company was granted state permission to use prisoners for prison labor. By the end of the 19th century, De Beers was using over 10,000 prison laborers daily. The majority of the prisoners were incarcerated because of strict apartheid laws, similar to the Pass Law which was enacted in 1952.^*

De Beers is currently building a retail location in the Beverly Hills section of Los Angeles. This is De Beers's second retail location in the U.S. The first one is located in New York City.

Marketing

De Beers has proactively promoted diamonds as being symbolic of eternity and love, and therefore the ideal jewel for an engagement or wedding ring. Their famously successful advertising campaigns have included measures such as:

showing diamonds as wedding gifts in popular romance films
publishing stories in magazines and newspapers which would emphasize the romantic value of diamonds and associate them with celebrities
employing fashion designers and other trendsetters to promote the trend on radio and, later, television
enlisting the British Royal Family to directly promote diamonds

This campaign was described by De Beers' PR agency N.W. Ayer & Son as "a new form of advertising which has been widely imitated ever since" with "no brand name to be impressed on the public mind. There was simply an idea—the eternal emotional value surrounding the diamond." Indeed, the campaign succeeded in reviving the American diamond market, which had been weakened by "competitive luxuries", and in opening new markets where none had existed before. In Japan, for example, diamonds were successfully promoted as a western symbol of status, which coincided with Japan's cultural opening after World War II. Japan is today the second largest market for retail diamonds.

The slogan "A Diamond is Forever," invented by N. W. Ayer, is one of the most successful slogans in marketing history. Its purpose is to prevent the creation of a secondary market by dissuading women from selling the diamonds they have received and by discouraging them from buying diamonds which other women have owned. The consequence of this is that retailers can sell diamonds at a high price without competition from a secondary market, and it allows De Beers to maintain control of the diamond trade at wholesale level.

Retail venture

In 2001, De Beers launched a joint venture with French luxury goods company LVMH in order to establish De Beers as a retail brand. The joint venture, called De Beers LV, has a license from De Beers SA to use the De Beers brand name in a retail environment. Before the venture was allowed to begin, the European Union competition commission launched an investigation into whether the venture would give De Beers too great a control over the rough diamond market. An initial one-month probe determined that a longer investigation was necessary. The commission eventually allowed the joint venture to go ahead in July 2001.

The venture has since opened ten retail stores across the globe.

List of locations

London
- Bond Street
- Royal Exchange

Tokyo

Osaka
- Shinsaibashi Daimaru
- Hankyu Umeda

New York City
- Fifth Avenue - The first United States venture. Opened on June 23, 2005.

Beverly Hills
- Rodeo Drive

Paris.
- Le Printemps

Dubai.
- Mall of the Emirates

Popular culture

The James Bond film Diamonds Are Forever directly cites De Beers.
In the Family Guy episode "Peter, Peter, Caviar Eater", the famous De Beers commercial is parodied. After the man gives the woman a ring, she goes down on him, presumably to perform oral sex. The end card says, "She'll pretty much have to."
In Clive Cussler's book Shock Wave, a private corporation tries to challenge De Beers by dumping a huge supply of diamonds onto the market at a low price.

External links

U.S. court case links

De Beers settles from BBC News (17 July 2004).
De Beers plans to settle from The Age(10 July 2004).
De Beers plans to settle (10 July 2004) from the Washington Times
The Times (London) 8 February 2004 article on recent developments.
Mail on Sunday (UK) 20 April 2004 article on history of USA indictment.

De Beers | Diamond mining companies | LVMH brands

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