Diamond Producers Association CEO Lieberherr Talks "Real is Rare" in Run-Up To Launch

Rough Market
05/09/2016 10:16

Jean-Marc Lieberherr is CEO of the Diamond Producers Association, formed in May 2015 by seven of the world’s leading diamond companies to maintain and enhance consumer demand for, and confidence in diamonds. Lieberherr joined Rio Tinto’s diamond business in 2005, "a life-changing move", he tells us. With the official launch of DPA's "Real is Rare. Real is a Diamond." campaign to take place in early October, Lieberherr lays out his vision of the DPA and responds to some questions on key issues in the diamond industry.

The need for collective marketing efforts in the diamond sector has long been acknowledged, and the aborted launch of the International Diamond Board in 2009 was widely regarded as a missed opportunity. When considering the creation of the DPA, the seven founding members recognized that strong diamond industry fundamentals were essential to the long-term success of their businesses, and that they collectively needed to take the lead to strengthen the sector.

The first priority the DPA targeted was to invest in generating strong desire for diamonds among the younger generation, like the "A Diamond is Forever" campaign drove demand after its launch in the 1940s. The decision to focus initially on US millennials came down to economics: the US is by far the largest diamond jewelry market and the 18-34 age group is the largest generation. Within a few years it will also have the greatest purchasing power, so any long-term marketing strategy must take millennials into consideration. Moreover, it has been demonstrated that the earlier the first diamond purchase/gift takes place, the longer and more intense the love story with diamonds will be.

I need here to rectify a few myths about millennials and their attitude towards diamonds.   

Research conducted by De Beers in 2015 and released this year confirms that diamond jewelry purchase frequency among US millennials is as high as it has ever been. In fact, 38% of millennial women acquire diamond jewelry at least once every two years, compared to 25% among the general population of adult women. Furthermore, US millennials are increasingly purchasing diamond jewelry for themselves, with the share of self-purchase (excluding bridal acquisitions) growing from 25% of total purchases in 2013 to 31% in 2015.

So, you will say, why bother?  Because DPA research also highlights present and future hurdles to US millennials buying diamond jewelry. One clear hurdle is cost. Diamonds are expensive, and young people in the US often start their lives with heavy university loans to repay. A second hurdle is a perception that diamond gifting is part and parcel of prescribed social conventions, (such as formal engagement and marriage rituals), which do not resonate personally with millennials to the same extent as with prior generations.

In other words, diamonds somewhat lack emotional relevance for this generation that likes to define its own rules and create its own rituals. It is easy to imagine how, in the medium to long run, lack of emotional relevance may translate into reduced purchase, including in a bridal context, especially as the economic argument kicks in. Therefore, generating strong emotional relevance for diamonds among the younger generations is precisely the objective of the new marketing platform developed by the DPA. 

“Real is Rare” is built on the key, research-generated insight that millennials crave authentic, genuine, sincere connections and relationships but live in an Internet-dominated world that makes them harder and harder to find. And in fact, the more they live in this dematerialized, virtual world, the more they aspire to what is real. But in this world, what is real is rare; you don’t find it too often.  Just like a diamond. “Real is Rare, Real is a Diamond”. Our aim is to establish diamonds as a metaphor for these real, precious connections and relationships they chose to make, which we can do because precisely there is nothing as genuine and authentically rare as a diamond.   

When presented with this concept, millennials found it extremely relevant, and we are now planning our first “Real is Rare” campaign in the US. The campaign will kick off around the first week of October 2016 in the form of TV commercials aired mostly through digital media and video channels for better targeting and cost-effectiveness. We will complement this with a rigorous PR and digital strategy to ensure strong comprehension and adhesion to our message among the target audience.  

This will be a journey. It will require time, consistency and investment, as embedded perceptions cannot be changed overnight. The DPA members realize they must ramp up their marketing investment to have the required impact. They are also keen for the DPA to partner with other key industry stakeholders to discuss how limited industry resources can be channeled towards a few impactful initiatives rather than diluted across many misaligned programs.

We must also recognize that creating an emotional imperative to buy diamonds among younger generations is not enough, and that our objective as an industry must be to work together to transform the whole 'millennial diamond experience'. This includes revisiting how we communicate about diamonds and jewelry, what we design and sell, how we sell it, where we sell it, down to the in-store experience. This is how sports apparel and electronics brands approach it, and these are some of our competitors for share of wallet.

An important dialogue has been initiated with several industry leading groups and organizations to understand and decide how we can work together most effectively: leveraging experience, talent and energy from across the industry with the primary objective being to strengthen our sector, our diamond ecosystem, for the benefit of all industry participants.

This dialogue is essential and weighed heavily on our decision to base the DPA’s CEO office in Antwerp, the epicenter of the diamond trade, with easy access to all key markets and diamond centers. We look forward to working closely with the Antwerp diamond community to shape a bright future for our industry. It is all a matter of will and focus.

With "Real is Rare", you emphasize the rarity of diamonds. Some argue that with estimated 2016 diamond production at 137 million carats (27,400 kg), they are in fact not so rare, or not rare enough. How does the Diamond Producers Association define 'rare'?

The reality and perception of the rarity of diamonds, combined with the emotional appeal of owning a uniquely beautiful miracle of nature that stands for timeless love is what has driven the demand for and value of diamonds for many centuries. As industry insiders who deal with diamonds every day, it is easy to lose sight of what an unlikely occurrence diamonds are. 

Consider this: diamonds were formed several billion years ago in the Earth’s mantle some 90 to 120 miles (150-200 km) underground, a process taking millions of years. Volcanic eruptions eventually transported them toward the Earth’s surface (at the speed of sound) in kimberlite, a rare type of magma. The last eruption is believed to have taken place 25 million years ago.

Only a small fraction of kimberlite ‘pipes’ contain diamonds, and only a fraction of these contain sufficient diamonds to make them viable to mine, so finding a potential diamond mine is like finding a needle in a haystack – and is a very expensive process. Furthermore, only around 30 percent of diamonds mined worldwide are gem-quality. In fact, all the gem quality diamonds ever polished would not fill a London bus.

Diamond production likely peaked a decade ago; on average in the last five years, production has been some 28% below its 2005 peak. Current mines are aging and no significant discoveries have been made for almost 20 years. Over the next 10 years, while a few new mines will come on stream, about 14 of the 53 currently active mines will close, so effectively going forward the supply of diamonds will not match demand, even if there can be temporary imbalances in the other direction. This means diamonds will become increasingly rare as time goes by, and in the medium term, with demand growing from emerging markets, together with effective industry marketing, they will no doubt become increasingly valuable.

What about “real”? What is so real about diamonds? Synthetic diamond producers could argue their products are also ‘real’.

When we refer to ‘Real’ in “Real is Rare”, we refer to the authenticity, the sincerity and genuineness of a relationship, a moment, a connection; not to whether it exists or not. So how does ‘Real’ in turn apply to a diamond? I would argue that there is nothing more genuine and authentic than a diamond. They have been sitting unaltered, untouched for billions of years, before life even appeared on Earth. They are pure products of nature. All man does is reveal their natural beauty and sparkle through polishing. How often do you get to touch, let alone wear something that is older than life on Earth, that indeed probably carries many keys to understanding the birth of life itself? How much more real can you get than that? 

In technical terms, even the US Federal Trade Commission guidelines stipulate that “It is unfair or deceptive to use the word ‘‘real,’’ ‘‘genuine,’’ ‘‘natural,’’ ‘‘precious,’’ ‘‘semi-precious,’’ or similar terms to describe any industry product that is manufactured or produced artificially”. A real diamond is a natural diamond. 

Finally, a key finding of DPA’s latest qualitative consumer research is that US millennials related most to the naturalness and authenticity of a diamond as that which gives it gravitas and authority. One consumer summarized it very simply: “Diamonds are my favorite. They’re from the earth and very rare”. We just need to go back to the very essence of what diamonds truly are: real and rare.  

What is your view about the future of the synthetic diamond sector?

When you think about it, the only robust and credible selling point of synthetic diamonds is price.  In our most recent DPA consumer attitude tracker, over 50% of respondents who said they would consider buying lab-grown diamonds mentioned price as their key consideration. Any other consideration only got marginal response rates. So the future of the synthetic diamond category will be a function of the producers’ ability to bring their cost down further to fit the needs of the price point driven fashion/costume jewelry market. We have to be clear that we do not compete in the same market.

The less people know about mining and diamond production practices, the greater the chance they will have an outdated and negative assumption about the industry and buy into criticisms leveled by manufacturers of synthetic diamonds. Does the DPA plan to promote greater openness and education about the industry in order to dispel these assumptions?

Yes, the industry as a whole should challenge the synthetic producers’ tactics of denigrating the diamonds industry and community to promote their own commercial interests and that of their few shareholders. It is short-sighted and bound to fail as a tactic, but it can damage us all in the meantime. A key objective of the DPA is therefore to promote the real advances our members and sector have made and to set the record straight on questions pertaining to sustainable practices and transparency in the industry. The reality is that great progress has been made by the industry and it now has an impressive record in best practices and sustainability.

Our members work closely with the communities in which they operate, seeking to shape an enduring, positive legacy. They have an unrelenting focus on the health, safety, human rights, training and development of their employees, and they seek to protect the often remote environments in which they work through careful water, energy and waste management programs, through wildlife monitoring and biodiversity studies and through mine closure programs which are developed from the very early stages of planning a mine.
 
The DPA will indeed be working hard to promote greater awareness and openness about the industry and about how diamonds contribute positively to society. Once we have launched our Real is Rare campaign you will see considerable focus on this. We also have an ongoing commitment to continue to drive best practices in the industry.  Where greater transparency is needed, and where problems that need to be resolved through active collaboration with all stakeholders involved remain, the DPA will play its role in making this happen.

In the meantime, I would like to highlight that DPA members represent collectively about 75% of world diamond production and that they all already meet very strict CSR criteria when it comes to safety, employment, community and environmental matters.