De Beers re-doubled its marketing efforts by increasing its spend by 20 percent from last year’s budget, Gareth Mostyn, De Beers’ Executive Head, Strategy and Corporate Affairs has said.
When sharing the company’s 2017 interim financial results on Thursday, Mostyn indicated that the diamond producing company spends an overall of $100 million in marketing every year but at the end of 2015, the year that besieged the diamond industry with its volatility, De Beers pumped an additional $20 million into the marketing budget.
De Beers expects to spend around $140 million this year in marketing which adds $40 million to the typical yearly spend of $100 million. Re-doubling the marketing activity could be an indication that it may be a while until De Beers returns to its normal spending if at all it does. Following the turbulence in 2015 De Beers described the volatility as the new normal which might also mean that going forward the company may have to set a new marketing budget to continue countering the whirlwind.
Responding to the question of whether the recently adopted aggressive marketing is the new normal Mostyn said that the diamond dream is dependent on marketing and as something that has been done for the last 70 years it is rather the norm than is the new normal. “What’s changed is the pace of change in consumer attitudes,” he said, adding that consumers don’t sit still. He recognised the emergence of new trends and pointed specifically to the age cohort of millennials who interact with diamonds differently from the way their parents did. Customers today are exposed to various other luxury goods, he added. De Beers as a result has had to change the way that it markets the diamonds and also make such efforts much stronger, said Mostyn. “There’s so many more choices now, we need to excite people,” he said, making the point that De Beers has taken on more flexible marketing that responds to what different consumers want.
In terms of production De Beers set a target in the range of 31-33 million carats for 2017 to which for the six months ended June 30, 2017 the production volume was recorded at 16, 142 carats. Mostyn said that Debswana made up 69 percent of De Beers production. The production volume shows that Debswana produced 11, 124 million carats out of the total 16, 142 million carats by De Beers in the first half of the year. Based on the projected production to meet the target the second half of the year would need to produce 16, 109 which Mostyn expressed confidence that is possible. The 2017 production target is the same as was in 2014 which is the year before the diamond industry was exposed to instability. In 2015 De Beers reduced its production in response to the trading conditions and recorded 28.7 million carats. In 2016 rough diamond production decreased by five percent to 27.3 million carats. De Beers expects that this year’s production will exceed that of last year. Specific to Debswana its production output was recorded at 20.5 million carats compared to 20.4 million carats in 2015. At the current 11, 124 million carats for this year Debswana would need to produce over 9.4 million carats to exceed last year’s volume. Mostyn admitted that growth in recent years has been disappointing especially after getting used to previous high growth levels.
De Beers’ profitability has been dragging recently but Mostyn said on Thursday that for the first half of the year it increased by 3 percent. He added that global demand for diamond jewellery increased slightly with the US remaining the main driver of growth and an improving trend observed in China and India.