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De Beers chief seeks to transform diamond mining company into leading jewelry group
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The boss of De Beers is looking to transform the diamond miner into a leading luxury jewelery retailer as it recovers from its worst year in more than two decades following a sharp downturn in the industry.
Although Of Beers sells diamond jewelry in retail stores worldwide through its boutiques, chief executive Al Cook is planning to double the number of stores to enter the territory of lucrative luxury brands Tiffany and Cartier.
This is part of its plan to create a retail mining operation to take advantage of its dominance in the gemstone market, while owner Anglo American prepares the group for a sale or listing after Failed £39bn takeover of BHP.
“If you look at the future of diamonds, it goes far beyond mining,” Cook told the Financial Times. “I am very excited about the idea that we can actually implement our entire strategy to create the largest jewelry house in the world. [house]which would not be a natural part of a mining company.”
De Beers suffered a big drop in diamond sales last year as high interest rates and inflation crushed profits, while competition from lab grown synthetic gemstones met the demand for those exploited by the group.
The company estimates that $4.5 billion in sales of cheaper, lab-grown diamonds last year deprived mined diamonds of $7 billion in U.S. sales, reducing its core profits to $72 million in 2023 – its worst year since leaving the Johannesburg Stock Exchange in 2001.
This prompted Cook last week to reveal his “Origins” review of the strategy to ward off the laboratory-grown threat and gain share in India, which this year is expected to become the second largest diamond market in the world.
He hopes to expand beyond mining, with an initial goal of having 100 De Beers jewelry stores worldwide by the end of the decade, from 40 currently, while developing new product lines.
De Beers will subcontract manufacturers to transform a minority of its rough stones into polished diamonds for sale in its own brand stores and other independent retail channels. This is a change from the current setup, where it sells rough diamonds to a select group of customers and buys them back as polished stones.
Cook is targeting $1.5 billion in annual core earnings by 2028.
De Beers is one of four divisions that Anglo, which owns 85 percent of the group and the remainder is owned by the Botswana government, will sell or dismember as the UK mining company seeks to renew itself after BHP’s offers.
While De Beers’ touted buyers include Gulf sovereign wealth funds, Chinese investors, billionaire individuals and luxury homes, selling the 136-year-old mining company could prove challenging given a decade of slow growth.
Anglo chief executive Duncan Wanblad warned the market situation would make divestment difficult before 2025, while Richemont denied it was considering buying the group.
Among Cook’s most radical plans is to sell his cut diamonds for the first time, except exceptionally rare or large stones, in a change to his exclusive “sightholder” sales system, in which only 69 buyers can purchase his diamonds at 10 events. of sales each year. .
This would represent a move away from De Beers selling its rough diamonds to these sightholders, who then sell cut and polished diamonds to jewelry manufacturers.
Cook warned that polished stone sales would be “relatively small” at first and that its return to significant profitability would predominantly come from cost cuts and increases in rough diamond prices.
A company presentation showed that 7% of its core profits in 2028 would come from retail activities, which include its boutique jewelry stores De Beers and the Forevermark brand, its largely Asian-focused diamond subsidiary in China, Hong Kong, India, Japan and in the US.
“Expanding De Beers Jewelers makes sense as branded jewelry is the fastest growing category in the industry,” said Paul Zimnisky, independent diamond analyst.
“I can only hope that the company has enough capital and support to execute these initiatives, given the precarious state of the company with current parent company Anglo American.”
In addition to facing difficulties with previous attempts to enter jewelry retail, its success could also put it in competition with customers such as Van Cleef & Arpels and Hong Kong jewelry group Chow Tai Fook, who buy its stones, highlighting the strategy risks.
Another change in De Beers’ strategy is reducing sales of lab-grown diamonds for jewelry and focusing on selling them for technology applications, such as materials for next-generation 6G semiconductors.