London DE

De Beers and Diamonds: Why These Stones Cost Just As Much As They Do

When the time comes that we treat ourselves to one of these beautiful diamonds, we must save up a few months wages in order to afford the right stone – but why do these gems cost as much as they do? Many people believe it’s due to their rarity, or the special symbol they hold to our population of everlasting love and harmony; however, neither of these are correct. The real reason diamonds are so expensive is down to a very good marketing campaign and control by one of the most successful cartels of all time.

(Split Shank Bespoke Diamond Engagement Ring, London DE)

Diamonds are one of the hardest naturally occurring substances found within our crust today and provide us with two functions; one of which is in our jewellery industry, and another within industrial uses. Although both functions each take 50% of all diamonds extracted, 95% of the total value of diamonds come from those stones which are extracted for luxury gemstones. The reason for this large percentage value is owed to De Beers for marketing the diamond as the perfect gemstone for all engagement rings and appealing to women everywhere that this stone is the only stone for them. Engagement rings account for the largest category of diamond jewellery to date, with 40% of all jewellery manufacturing incorporating polished diamonds in some fashion.

(De Beers logo, image courtesy of De Beers)

De Beers began as the first major monopoly of Diamonds in 1871, when it’s founder Cecil Rhodes forcefully bought the farm which Diederik and Johannes de Beer owned and made their diamond discovery. At the same time, many new mines were discovered and European financiers worried that the new diamond mines would increase supply, resulting in the gemstone becoming a semi-precious stone. Thus, in 1888, De Beers became a merged institution (cartel) which controlled production and distribution of diamonds and perpetuated the delusion that diamonds were of scarcity across the world. Growth of mining, trading, and marketing came down to Ernest Oppenheimer who bought major shares within the company and became chairman of De Beers, resulting in De Beers accounting for 90% of the worlds rough diamond production and distribution by 1902.

Unlike gold, silver, and other precious commodities, diamonds are not dependant on economic conditions and kept a gradual rise in price and demand over the years. The industry took benefit from the illusion the network effect created, which founded a façade that diamonds were very rare and beneficial in the market. In the 1970s, speculators brought the gem in hopes it would protect them against variable inflation and recession conditions.

(1940’s ‘a diamond is forever’ marketing campaign ad, image courtesy of Forevermark)

Although we now know that diamonds are not as rare as they may seem, the price of them is still extremely high – but why? Its all down to De Beers and their brilliant marketing techniques. Initially, diamonds were only bought by the world’s wealthiest and of high notoriety, however following the great depression of the 1930s De Beers has to look at new ways to maintain and create demand for diamonds which wasn’t affected by the economy. Due to Europe being under threat of war at this time, De Beers homed in on America and decided to flip its social views of the gemstone from a luxury connection to an emotional connection. This led to them revolving their marketing campaign around love, commitment, and marriage with the diamond, and producing the slogan of ‘A Diamond is Forever’. Not only did this provide an emotional connection with the gemstone, but it prevented people from reselling their diamond-bearing jewellery which would decrease the gems value.

Today there are four top diamond producers in the world: ALROSA, BHP Billiton, Rio Tinto and De Beers. Although Diamonds are no longer controlled by De Beers alone, De Beers created the persona around the Diamond and made it what it is today. Without their control on distribution and their strategy to connect the carbon-created rocks with love and eternity, they would be alongside the same wealth as other precious gemstones we see today.