Art & Commerce: Debra Goldman's Consumer Republic

De Beers has stockpiled a fortune in brand equity It seems the violins of Karl Jenkins' irresistible Vivaldi-meets-Montavani "A Diamond Is Forever" score will sing for De Beers no more. The tagline, coined by N.W. Ayer in 1939 and the enduring punch line of J. Walter Thompson's "Shadows" campaign, is itself a deathless gem, forever associated with the colossus that controls around 65 percent of the diamond trade. Until now. The next round of "A diamond is forever" ads will be signed by the prosaic Diamond Trading Co., De Beers' London-based selling arm. It is a prudent time to step back from playing spokesperson for the diamond business as a whole. In the past few years, organizations from the U.N. to private watchdog groups have been scrutinizing the diamond's role in financing armed conflict in countries such as Sierra Leone and the Congo. Diamonds that end up on the fingers of dewy brides have bought weapons for Angolan rebels who cut off the hands of children and fatten the Swiss bank accounts of the Russian mafia. Then there is the matter of child labor practices that make Nike look like Samuel Gompers. In the era of the socially responsible corporation, these are formidable disadvantages in the battle for wallet share against "competitive luxuries," as an old Ayer brief put it. To calm the queasy consumer, the company announced that all marketing of De Beers diamonds--make that Diamond Trading Co. diamonds--will soon come with a "forever mark," a logo that serves as a guarantee: Its diamonds are conflict-free. Some diamond experts, however, insist it isn't possible to determine with certainty every stone's country of origin. (De Beers said much the same thing until recently.) Yet that isn't the point. A diamond isn't forever either; apply enough heat to it and it burns like coal. But if the consumer believes it, it is as good as true. De Beers is a unique case in the corporate annals--and not just because it plays by cartel rules, controlling price by controlling supply. On one hand, De Beers participates in the oldest economy: It digs wealth out of the earth as man did at the dawn of civilization. Yet it's also a pioneer in our modern "aura economy," the marketplace of emotions and identity. Back in the days when industry titans thought they were selling material things rather than immaterial experiences, De Beers was transforming trillions of bits of pressurized carbon into something symbolically charged. Of De Beers' two inventions--the symbolic meaning of diamonds and their scarcity--the former has longer legs. Diamonds have not been rare since deposits were first found in southern Africa in the 1870s, and subsequent discoveries in Siberia, Australia and Canada have made them even less so. For almost 20 years, industry observers have been predicting the unraveling of the cartel in the face of mounting supply and rogue Russians flooding the market. In fact, the cartel has prospered. But controlling supply is clearly a game of diminishing returns. De Beers executives realized that after 60 years of advertising, their name offers a better return than their $3.2 billion diamond stockpile, which it plans to reduce by one-quarter. Although in official statements De Beers has been cagey about its plans to brand its better diamonds, everyone in the jewelry industry considers it a fait accompli. The company has already experimented with a branded line of diamonds sold through a single three-store London chain. Each features a microscopic marque and registration number, truly tying a diamond and its buyer forever. For 2000, De Beers offered the branded millennium series of stones. No one will be surprised to learn that thus far, the branded stones command an impressive price premium over their nonbranded equivalents. Still, there are constraints on the De Beers name, not the least of which is a standing federal indictment against the company for industrial diamond price fixing, which precludes it from doing business directly in the U.S. Nor can De Beers afford to antagonize wholesalers--it needs to sell its lesser quality, nonbrandable stones to someone. Many are hostile to the branding efforts, worrying that their non-De Beers inventory will be reduced to commodities. And they should be. Almost 40 percent of the world's diamonds are sold through interests other than De Beers--and the average consumer hasn't heard of any of them. Brand equity will surely win out. The De Beers name, if not forever, can look forward to a long life.

Brand Marketing

Art & Commerce: Debra Goldman's Consumer Republic

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