De Beers losing its grip on reality?

Recent De Beers’ March Sight resulted in 30-40% refusal, leading to the company changing its sales contract terms while it puts on an unperturbed face despite losing a grip on reality.

Recently conducted De Beers ‘Sight’ resulted in an estimated 30-40% refusal of allocated goods across the entire boxes range. Though there were expectations that prices will marginally reduce, it remained flat but De Beers Sightholders commented that diamond assortments in many Sight boxes were weaker. This comes as a new epiphany for De Beers that led them to change its sales contract terms.

 

 

 

Till now, De Beers sold 10% of its rough diamonds through ‘Auction Sales’ and kept 90% reserved for its Sightholders. But for 2015-18 Global Sightholder Sales (GSS) contract, De Beers is also including its ‘accredited buyers’ – companies that qualify as Sightholders but don’t have that status due to non-qualification for a long-term contract, in its future sights. What remained the prerogative of Sightholders (90% of De Beers roughs) will now be partially offered to De Beers’ accredited buyers as well through what the company calls ‘ex plan’.

De Beers
[Image Courtesy: Francois Lenoir, Reuters]

 

At one point De Beers Sightholders used to vie amongst themselves to lay their hands on the best Sight boxes, which has now turned into a scenario where the company is struggling to extricate its Sight sales and has to involve other prospects by amending its contract terms – an indicator of a downward trend.

 

Despite this, in a recent interview, De Beers CEO Philippe Mellier seems to put on an unperturbed face suggesting that all is hunky dory with the company and the industry, when in reality there are numerous problems including falling rough supply, threat from luxury goods and even simulants etc. looming large.

The disappointing diamond and jewelry retail scenario from US holiday season, Chinese New Year, Valentine’s Day, Hong Kong Trade show and Baselworld show has created a gloomy mood across the industry pipeline and even among the De Beers’ Sightholders, who are now adjusting their inventory levels to adopt a Just-in-time policy.

Though De Beers may have recorded a highly profitable period, by choosing to ignore the industry condition, plethora of problems and a crisis in making, De Beers is losing a grip on reality under a faulty assumption that the market externalities will not impact its business in the long term.

As rightly conveyed by an article, the Diamond Industry needs a strong leadership to address the multiple issues and take it to a growth trajectory. But it doesn’t seem that De Beers, a self-proclaimed industry leader, is up to that challenge and its daydreaming demeanor remains an enigma.

 

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