Various high-quality diamonds. Image Credits: fnal.gov/pub/
DeBeers is a consortium established at the turn of the 20th century, created to control diamond production in South Africa. Throughout the century, it took control of the world diamond market, establishing its name as synonymous to the precious stone
A Brief History of DeBeers
For many years, diamonds were a scarce commodity, found almost exclusively in the large river deposits of Brazil and India. This all changed when a single diamond was found in South Africa by a child on the banks of the Vaal River. This began a ‘diamond rush’ in South Africa, where extremely large and easy-to-access diamond reserves were exploited.
DeBeers was founded in 1888 by Cecil Rhodes, a prominent businessman and politician, who also founded the state of Rhodesia. Rhodes arrived in South Africa in 1870, and gradually gained control of a number of important diamond mines, eventually forming DeBeers Consolidated Mines Ltd. One such mine was the ‘Big Hole’ at Kimberley, thought to be one of the largest holes ever dug by hand.
Nearly all of the world’s production of diamonds came from mines owned by Rhodes at the time, so DeBeers was placed in a good position to control the production and sale of diamonds worldwide. The business model for DeBeers was incredibly simple: as it produced the majority of diamonds, it would only ever release a small number at a time to the market to satisfy demand, thus stabilizing diamond prices. When other mines began to produce diamonds, DeBeers simply bought all good quality stones for their own distribution.
When the demand for diamonds was low, such as during the Great Depression, DeBeers amassed huge stockpiles of the precious stones and cut production levels.
Influence of DeBeers
DeBeers closely controlled the diamond market throughout the 20th century using various tactics, including convincing companies to produce similar quantities for the market, flooding the market to eliminate competition, and stockpiling diamonds to keep up diamond prices. Many companies also coordinated their supply with DeBeers in order to keep the market value high. Meanwhile, some would credit DeBeers with keeping the market steady and away from drastic fluctuation.
Since the 1970s, DeBeers has held less control over the diamond market, and hence, prices have been more changeable. Despite this, the diamond demand across the world continues to grow.
Some critiques perceived that DeBeers’ overriding influence on the diamond market was on the wane, as new producers from Russia, Canada, and Australia began to sell diamonds independently; entertaining the possibility of an open diamond market. DeBeers, however, still managed to construct long-lasting relationships with new Russian and Canadian producers, emphasizing that they are likely to maintain its prime position in the diamond market.
DeBeers and Synthetic Diamonds
A significant issue that could loosen the grip of DeBeers on the world diamond market is the rise in the production of synthetic diamonds. Synthetic diamonds are gem-quality diamonds created in a laboratory environment, usually by ‘high-pressure, high-temperature’ (HPHT), or chemical vapor deposition (CVD) techniques. In recent years, these diamonds are finding a wide range of applications in a variety of industries.
The improving quality of these unnatural diamonds, coupled with the shrinking costs of making them, threaten the diamond mining industry; however, DeBeers is moving alongside these developments, and is heavily invested in attempts to create good quality, artificial stones.
Synthetic diamonds can be readily used in a wide range of applications, such as drill bits. Image Credits: sandia.gov
DeBeers and Blood Diamonds
DeBeers also worked closely with the United Nations in order to stem the flow of ‘blood diamonds’ on the international market. Blood diamonds, or conflict diamonds, are illegally-traded stones that are often used to fund local, national, or international conflicts.
During the civil war in Sierra Leone, which ended in 2002, 4% of the world’s diamonds were utilized in the conflict. As shown by the violent uprising throughout Sierra Leone at the time, conflict diamonds can cause wild fluctuations in the diamond market and cast a shadow over the diamond industry in general, alongside causing significant human rights violations.
DeBeers Marketing Techniques
DeBeers has had a significant influence on the market value of diamonds since its formation, partly by way of clever advertising. If diamonds were valued on a purely industrial basis, then most would only be worth between $2 and $30, as they are of relatively small industrial significance and are rather abundant.
It is through clever marketing schemes that DeBeers managed to keep the perceived value of diamonds high. For example, DeBeers managed to associate diamonds as the ultimate symbol of love in the west, with almost all engagement and wedding rings containing diamonds in some respect. DeBeers coined the famous phrase ‘a diamond is forever’, and continued to find ways of selling diamonds for special occasions. In the 1980s, for example, the company began to promote anniversary rings as a way of selling more diamonds in the consumer market.
A standout success for the company came between 1967 and 1977 when, through intensive marketing, DeBeers was able to increase from 5% to over 60% the number of Japanese brides receiving diamonds. Through effective marketing campaigns, DeBeers achieved this despite the fact that, traditionally, diamonds are not highly-coveted in Japanese society.
A high-quality diamond, ready for a wedding ring. Image Credits: home.fnal.gov
Sources and Further Reading
This article was updated on the 25th March, 2019.