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Home > Israeli Diamond Industry > History > 2000s

2000s

2000-2010: A New Millennium

By Shira Ami

The first decade of the new millennium can be characterized by a number of terms, each of which represents a significant change – often, a structural one: the privatization of De Beers; the preferred supplier program; vertical integration; working in a multi-brand environment; online marketing; empowerment for local populations; tenders and public auctions; conflict diamonds; synthetic diamonds; enhanced diamonds; Basel II; the prevention of money laundering – only a partial list, but complete enough to sum up the entire decade.

Rough Diamonds
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De Beers Rough Diamonds

De Beers – De Beers marked the arrival of the new millennium with a series of changes intended to increase diamond consumption and profitability, the most notable of which was the preferred supplier strategy. De Beers attempted to meet the industry's ethical challenges though writing a code of business entitled Diamond Best Practice Principles. De Beers' Diamond Trading Company (DTC), seeking to stabilize relations with sightholders, used the Best Practice Principles as the basis for a contract for business relations. The European Commission demanded that De Beers and Alrosa sever their ties within five years, during which Alrosa would gradually reduce its rough diamond supply to De Beers. This move had a major impact on changing the rough distribution map. Another important change in the company's activity was its privatization in May 2001. After losing its total control of the rough market, De Beers announced that it no longer intended – among other things – to take sole responsibility for generic diamond advertising and that it would ask customers and other rough producers to invest in diamond publicity. Moreover, privatization signaled the end of De Beers' "free" services and a transition to charging customers for every service the company provided.

Branding – Like many other changes and processes in the diamond industry, De Beers led the branding revolution. As part of its strategic change, De Beers decided to brand its diamonds to allow it to compete with other diamond producers who were marketing their diamonds outside De Beers but not taking part in promoting diamond sales. As a first step into a multi-brand sector and a way of shortening the diamonds' trip from the mine to the jewelry store, De Beers launched De Beers LV in cooperation with the Louis Vuitton Moet Hennessey (LVMH) luxury brand group. Diamantaires quickly understood that if De Beers was coming out with diamond brands, others could launch diamond brands as well. Differentiating and branding, the new trend said, gave diamonds an added value and could cause the customer to prefer a certain diamond jewelry store over its neighbor. Israel became a factory for many dozens of diamond brands, special polishing, merchandizing, registered diamonds, niche diamonds, and much more.

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 Diamond Sorting

Rough Supply – Rough supply in the first decade of the new millennium was marked by tenders and auctions, which have became one of the main problems for the diamond industry today, along with speculation in rough and polished diamond prices, memo sales and producers and wholesalers shouldering the burden of financing. Another issue that characterized rough supply in the first decade of the millennium was the need for diamond producers and diamond manufacturers to consider the demand by diamond producing nations' governments that the industry benefit the local population. As a result, sightholders were forced to move their manufacturing locations not only to countries with cheap labor, as they did at the end of the 1990s, but also to diamond producing nations.

Conflict Diamonds - The conflict diamonds issue arose in 1998, when the UN decided to enforce sanctions against buying illegal diamonds from Angola. In 2000, the world's diamond community moved toward an accelerated process dedicated to preventing trade in conflict diamonds – diamonds mined in area controlled by rebel forces in certain African nations. The amount of time and money the diamond trade spent solving the problem of conflict diamonds was considerable and the results in terms of public awareness of these efforts was impressive.

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 Worried over finances?

Financial Crisis – The first decade of the new millennium ended with an economic crash that began in the United States and threatened the entire world. Diamantaires exhibiting at a trade show in Hong Kong in March 2009 had already gotten over the shock and understood that there was a new world of prices and demand that they had to try to get used to. Then the freeze in diamond demand ended and new demand began to be seen. The start of 2010 found us cautiously optimistic in light of renewed demand, mainly in Eastern markets. How will things turn out? More will doubtlessly be written in the future, in the summary of the millennium's second decade.

By: Shira Ami
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