De Beers raises ad spend, predicts dip in global diamond output
De Beers is ramping up advertising spending for the final quarter of 2019 to stimulate the demand for its products.
The world’s largest source of rough diamonds by value and an 85%-held subsidiary of Anglo American has cut production in the interim period to end-June and for the full year because of a weak and difficult cutting and polishing market.
With Rio Tinto’s Argyle mine in Australia due to close in 2020, removing about 14-million carats, or 10%, of global diamond supply from the market, there is a widely held expectation that it will lead to a correction in the market, De Beers CEO Bruce Cleaver said.
However, due to the expected, much-needed correction, the demand side for diamond jewellery should be boosted. That is why De Beers has increased its advertising and marketing expenditure to $170m in 2019. Ten years ago spending was $110m.
Part of the budget will go towards marketing initiatives run by the Diamond Producers Association, a group representing eight diamond mining companies, which would have a budget upward of $200m in 2019, Cleaver said.
“The worst thing you can do at a time like this is to cut marketing. You have to keep driving demand. All rough diamonds are turned into jewellery. You’ll lose voice if you slow advertising,” he said in an interview. “The last thing we’ll cut at De Beers is marketing.”
The most important action diamond miners could take now is to stimulate demand particularly in the runup to the end of 2019 when the US market, the biggest for diamond jewellery, is active, he said.
“If you help demand, you’ll help sales of polished diamonds and then excess stocks in the mid-stream will flow throw and we’ll be in a much healthier position,” he said, pointing to slow demand in India, home to the world’s largest cutter and polishing industry.
De Beers has also slowed production in the first half of 2019, letting it fall by 11% to 15.6-million carats, and lowering full-year output to the bottom end of its 31-million to 33-million carat target to avoid oversupplying the market.
The global diamond supply has peaked at more than 140-million carats and over the next five to 10 years there will be a reduction in the supply of rough diamonds, Cleaver said.