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The unusual story of De Beers Company controlling diamond prices

The unusual story of De Beers Company controlling diamond prices

How Cecil Rhodes created a new business model

It was an English man, Cecil Rhodes, who travelled to South Africa (SA) to make business as he heard of the diamond rush taking place there.

He started by renting water pumps to the miners. But soon enough, Cecil Rhodes, who was a wealthy businessman, easily recognised the opportunity and started buying diamond fields, many of them.

Including the field owned by two brothers named de Beer, which is where the idea came from, when he decided to create the De Beers Mining Company.

Truth is, it was a common tendency in diamond mining to combine efforts and share infrastructures; especially when most claim holders were small. That is how Cecil Rhodes, over a short period of time, managed to own virtually all South African diamond mines, thus creating a monopoly on all production and distribution of diamonds in South Africa.

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Diamond Pricing & the role of De Beers

Cecil Rhodes was a pioneer, by the time he died in 1902, De Beers owned 95% of the worlds production. But the man behind the empire as we know it, was Ernest Oppenheimer and later, his heirs.

In order to control diamond prices and inventory, De Beers created distribution channels, through “The Diamond Syndicate”, where both claim holders and distributors joined up because they believed they had to create scarcity so that high diamond prices would follow.

Through Oppenheimer, De Beers also established special contracts with the buyers and suppliers, prohibiting them from dealing diamonds outside of De Beers. De Beers would purchase the diamonds through a subsidiary and determine the amount of diamonds it wanted available on the market and their price, for the whole year. This is how it worked for several decades.

De Beers is also the company who created the concept of marketing diamonds and their most famous campaign was "A diamond is forever”, which actually became their official motto.

The aim of the Oppenheimer family was to sell their diamonds in America. Through this campaign and the association of diamonds & love, they managed by the late 1940’s to drastically increase the sales of diamonds and engagement rings.

When new sources were found, such as in the former Soviet Union or in Botswana, De Beers formed alliances or went on trying to purchase all of the inventory available in order to funnel the diamonds through a “single channel”.

But recently, countries with large productions refused to cooperate with this channel system, forcing De Beers to shift strategy. They were not allowed to control diamond prices any longer.

It is today, focusing on promoting its own brand of diamonds and its retail sales.

Should you have queries on diamonds and diamond prices or simply wish to purchase a lovely piece of jewellery do not hesitate to contact us at BAUNAT. We are located at the heart of the Diamond district in Antwerp and offer a wide range of beautiful diamonds and jewellery.

Written by: CHLOÉ POUPON-DUMONTET Diamond Jewellery Advisor

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