De Beers is making the biggest change to the way it sells diamonds in more than a decade as it seeks to direct more gems to its most successful customers.
The world’s biggest diamond producer planned to jettison a process that allocated gems to buyers in proportion to their business plans. It would instead emphasise buyers’ track records in making purchases at previous sales events, the Anglo American unit said in e-mailed comments this week.
De Beers markets diamonds at 10 events each year it calls sights. The stones are sold at a price set by De Beers to customers it has until now chosen for their financial standing, business reputation and marketing ability, termed sightholders.
Once bought at the sights, rough diamonds are cut, polished or traded before being sold at exchanges to manufacturers who turn them into jewellery.
“The new system encourages supply to be redistributed toward stronger-performing companies,” said Anish Aggarwal, a partner at Antwerp-based industry consulting firm Gemdax. “The more a sightholder buys from De Beers today, the more it will receive in the future.”
As well as simplifying its sightholder application process, De Beers will change the criteria it demands from customers, increasing the focus on financial strength and transparency. Chief executive Philippe Mellier outlined the plans to customers at the first sale of the year and will give more details throughout the year. The new system starts next year.
“This is the biggest change in De Beers’ strategy since Supplier of Choice in 2000,” Aggarwal said.
“This new system shows a switch toward a strategy that is more tightly focused on driving direct shareholder returns.”
De Beers has been more aggressive in diamond pricing by cutting the discount between its selling prices and the secondary cash market since it broke with tradition in 2011 and appointed Mellier, a company outsider, as chief executive.
Varda Shine, the former chief executive of De Beers’ trading arm, said last year that the company wanted customers who added more value, rather then buyers who speculated on rising prices.
Rough-diamond prices gained 10 percent last year as the US economy recovered and Chinese consumers bought more of the stones.
Prices have more than doubled in the past five years, according to data compiled by WWW International Diamond Consultants.
Anglo American bought the Oppenheimer family’s 40 percent stake in De Beers in 2012, raising its holding to 85 percent. - Bloomberg