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References
Diamond People Published in 1990 by Norfolk House Publishers, the author is A.J. Wannenburgh and the photographer is Peter Johnson. To be able to describe the sights, sight week, and the role of the broker, I looked to my favorite book on the subject (pages 161-173). Published as a limited edition, in 1990, "Diamond People" is filled with wonderful photos and insight into the world of diamonds. My second reference for descriptions of the sights (1995/CSO reference) is my collection of "In-Sight" magazines. The current reference with the Gary Ralfe interview (August 2000) is from a Mazal u'Bracha magazine article "De Beers Fundamentally Transforms the Structure of the Diamond Industry" which can also be found at www.diamondintelligence.com.
Sights
Being a sightholder has always been considered a status symbol; reaching the pinnacle of one's professional career. Before the Supplier of Choice program, criteria for becoming a sightholder were fairly standard - well established, diamond expertise, substantial capital, manufacturing capabilities, and potential to finance work in progress for several months. For more about the Supplier of Choice, refer to
www.keyguide.net/Soc
Sightholders attend the sights in London, 10 times a year - every 5 weeks, not as a ritual but for any number of reasons including the chance to see the goods that they will be receiving the next week. Along with having contact with colleagues from around the world, it's also a chance for direct discussions with the DTC sales and marketing teams in London, and also with their brokers whose head offices are in London. Also the prices of large stones (10.80 carats plus) are negotiable.
Quite a lot has been written about sightholders in the past year with reference to the Strategic Review of De Beers and the new Supplier of Choice program. In an article on www.diamondintelligence.com, entitled "The Painful Process of Progress", from Sept. 18, 2000 a South African sightholder described it this way in a telephone conversation with Chaim Even-Zohar. "Every month the DTC collects some U$600 million from its 125 sightholders, nicely paid as cash upfront before any diamond leaves DTC premises. The DTC's commercial risk is zero."
Because it is a unique relationship between the client and the DTC,
there are usually no negotiations regarding the price of the box of rough diamonds (a sightholder may complain or argue but rarely rejects). And although he may not be completely satisfied with his allocation, he is usually "encouraged" to take the longer view. A sightholder once said that he couldn't base his whole business on an occasional parcel. "He will accept the goods (even though he may lose money and complain about the
margins) because he knows he will need the DTC in the future." The continuing relationship with the DTC has been seen as more important than one or two individual sights that may or may not be "disappointing".
There are sights for dealers and manufacturers.
Manufacturers, who usually specialize in polishing and cutting certain types of rough, get specialized allocations according to their monthly requests.
A sightholder used to receive specific goods related to the cutting centers in which he operated. In an interview in "Diamond People", Nicky Oppenheimer said, "We have an interest in supporting all the established cutting centers and try to supply each with the type of goods it needs, without favoring one center at the expense of the other."
However, in 2000, Chaim Even-Zohar asked Gary Ralfe, "In your policy statements you refer to the fact that the DTC has to spread its commercial risks in your dependence on cutting centers. Can you elaborate on that? Are you anywhere over or
under exposed at the moment with the need for corrective action." Gary Ralfe answered in this way with reference to the cutting centers. "What we are trying to come forward with is objective criteria for the allocation of our goods between our clients. After one has established the objective criteria, we ask our clients to remind themselves that there are other things that must be taken into account. The first obvious one is having the goods available, even if a number of clients are all eminently suitable for getting a collection box. You have to have the goods available. If we do have the goods available then the second consideration is that we would like to get a balance between the cutting centers. Sure it's good to spread our risk, other things being equal. But in a sense we've moved beyond this already, as we say to our clients, 'you take your goods where you want to take them'. We no longer say 'if you get your goods from Antwerp you have to cut them in Belgium, if you get Israeli goods you have to cut them in Israel'. A lot of Israelis took what they said were Israeli goods and were cutting them in the Far East, showing that they were no longer Israeli goods, but they were transiting through Israel. That is playing against the other things we mentioned, but is not a major consideration." Dealers receive large sights which they sort into parcels which are then sold on the market. In the same interview with Gary Ralfe on August 2, 2000, "De Beers Fundamentally Transforms the Structure of the Diamond Industry", Chaim Even-Zohar asked the following with reference to the dealers. "You have hinted about the important role of DTC dealers and the fact that the nature of dealing is changing, as well as the fact that some of them have downstream operations. These dealers are important to both the DTC and the market. Can you expand on how you see the role of DTC dealers and how should they develop?" To which Gary Ralfe answered, "The dealers are an important part of the diamond business, more importantly, they are a vital part of out clientele.
"When I look at our top 25 clients - I see they have developed in a way that is entirely good because they will cover all aspects of marketing. What I find interesting in their own development is how already, before we start 'Supplier of
Choice', they have developed large polished businesses. One of the important precursors in this has been the large Indian families - where perhaps dealing was done on a 'chum-chum' basis. Supplying the rough and taking back the polished. As a result they command very large polished operations as well. Now, that's clearly one way of development, which is something I would look at as being positive. But it doesn't necessarily exclude either.
"For instance, the traditional dealer who is supplying clients, who in turn have good non-sightholding clients to whom they are giving supplying and if they, in turn, have secure distribution channels - I don't exclude that as being something we would look at positive.
"Frankly, we don't have a bible on this. We know where we are going to, but we look forward in our interaction with our clients, for them to come forward with ideas. Our self-interest says we are looking for a systematic and certain distribution of our own goods. It is best served where we can be satisfied that our clients are able systematically and consistently place those goods. Sometimes there might be through three or four steps before they reach the retailer or consumer."
In the same article, Gary Ralfe was asked about supplier/client ratio. "Do you endeavor to become 100 percent supplier to the sightholders? If not, aren't you continuing the 'free ride' to other producers who will enjoy
the fruits of your added value and your clients' growth policies? How do you expect your policies to impact other producers?" Gary Ralfe answered, "I don't mind 'free rides' any longer, provided it's good for us. We claim to be the leader of this industry. Mostly the free ride has been on generic advertising, which we are going to continue. I believe that competition actually stimulates demand itself." Another question that is bothering sightholders is about how many there will be in the future and where the industry is heading. Even-Zohar asked, "Everybody avoids talking about the streamlining of the industry - the fact that in a few years there is likely to be about half of the number of sightholders. The current number is already significantly less than a few years ago. Others, such as BHP have less than 10 core clients, Argyle less than 15 core clients. Isn't it correct to say that the mathematics underscore that there will be substantially fewer sightholders?" To which, Gary Ralfe answered, "In our business, as in other businesses, there has been a move toward consolidation, both horizontally and vertically. I have no doubt that the dynamics will continue.
"In the last few years we have seen mergers among some of our clients - we've seen our own clients move downstream.
This fragmented industry is consolidating because it becomes financially desirable to consolidate. I see no reason for this trend not to continue."
Sight Dates - 2001 / 2
August 20 - 24, 2001
September 24 - 26, 2001
October 24 - November 1, 2001
December 3 - 5, 2001
January 14 -18, 2002
February 18 - 22, 2002
March 25 - 28, 2002
April 29 - May 2, 2002
June 5 - 7, 2002
August 19 - 23, 2002
September 23 - 26, 2002
October 28 - 31, 2002
December 2 - 4, 2002
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