Top diamond producer De Beers plans to double its advertising spend in the United States ahead of the Christmas season, its chief said on November 17, and is confident the sector will gain market share over other luxury and consumer goods.
"I believe consumers will disproportionately buy diamonds this year and we will, even in a smaller market, take a bigger market share," Gareth Penny told Reuters in an interview.
"Obviously it will be down on last year but I think that in terms of what people are expecting to sell it will be better and lead to a more positive mood in terms of the pull-through of the pipeline in the New Year," he said, adding diamonds should show resilience through 2009.
With a campaign featuring slogans "fewer better things", "here today, here tomorrow" and "here's to less", De Beers believes the idea of an enduring item that retains value will persuade consumers to buy diamonds despite the financial crisis and economic downturn.
The United States, which many economists believe to be on the brink of a recession, buys about 45 percent of the world's diamonds, with Christmas sales accounting for 40 percent of that. The global diamond jewellery market is estimated to be worth $70 billion.
According to a De Beers survey carried out at the end of October, diamond jewellery was the number one choice for Christmas for 25 percent of its US target market, twice as popular as the closest competitor, electronics, which was ahead last year. Some 80 percent of respondents planning to buy a diamond in the next 12 months said the current crisis would not affect their plans or their price tag.
Penny, speaking at an industry conference in world diamond hub Antwerp, said that its prices for unpolished or "rough" diamonds, which had risen around 16 percent by August, were still above year-ago levels, a year-on-year advantage he believed would be sustained by the end of 2008.
"There has not been a collapse of prices," he said. London-listed Gem Diamonds Plc, which specialises in large, high quality gems, said on Monday prices at its tenders in October and November fell 24 percent from the third quarter.
The financial and economic crisis has led De Beers, 45 percent owned by mining group Anglo-American Plc and with 40 percent of the global market, to cut the supply of rough diamonds.
Sergey Vybornov, the head of the world's second biggest producer, Russia's Alrosa, told the conference on Monday he would follow the De Beers move and Alrosa could cut supply by as much as 40 percent.
Vybornov later told Reuters the initial cut in supply would be for some $600 million worth of rough diamonds before the Christmas season. The industry in India, the key diamond polishing centre, has also decided to halt imports of rough diamonds for a month from November 25.
Penny said that the long-term outlook for diamonds was positive, given growing demand in developing countries and waning supply. Reserves suggest around 20 years of supply based on current production. De Beers itself had responded to the economic downturn by carrying out necessary maintenance, including waste stripping at its open caste mines, some of which had been put on hold in the previous boom.
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