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Market Research Group

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Sultan Nikolaev
Sultan Nikolaev

Diamond Cartel

Luxury jewelry is exquisite, dazzling and all-encompassing. It inspires and enriches us with a visual flare that allows us to express who we are and differentiate ourselves from the pack. This became especially apparent for Hakeem Ismael during the COVID-19 pandemic. He quickly realized that while there are many urban and trendy fashionistas seeking luxurious options, there aren't any retailers fulfilling their needs. He formed The Diamond Cartel to serve this very market offering high quality products, using recycled gold and diamonds, and also bringing an innovative and futuristic twist to the jewelry and luxury watch market.

Diamond Cartel

Our innovative e-commerce jewelry brand combines a more efficient and sufficient service with a variety of high-quality gold and diamond jewelry, as well as luxury watches, at an affordable and competitive price.

My Cz was just purchased to replace the older cz in a replica of an actual diamond piece I own. Over the years the old cz had become scratched as I had not taken care of it. The new one looks amazing, so much sparkle and fire again. I considered getting a moissanite, but am happy w the cz....looks spectacular.

De Beers is the largest subsidiary by assets and second largest profit center of Anglo American, headquartered in London and listed on the London stock exchange [1]. The De Beers mining consortium extracts, polishes and sells diamonds and other precious stones to major gemstone traders and jewelry houses worldwide. Its profit streams include margins generated above and beyond mining operating costs and sales of rough gemstones to traders (upstream), as well as markups generated in direct-to-consumer sales of finished jewelry (downstream).

The business model resides on the premise that diamonds, despite little intrinsic value, are desirable due to their scarcity. This model, in effect since the last 19th century, had benefited from De Beers acting as the de facto supplier of diamonds on the global market. By the 1990s, however, De Beers only controlled about 50% of the global supply of diamonds [2], following the exploitation of kimberlite (or diamond ore) mines outside of Africa. This led to the company needing to adapt its operating model in order to remain a market leader on the global stage.

1) Does De Beers play in the industrial diamonds industry at all? Just curious whether this would be a way for them to drive volume, though certain elements of quality are less valued and sizes are often much smaller in industrials vs. jewelry, so not sure if it would be high enough margin.

2) How have they thought about the entrance of lab grown diamond competition? I believe the size these can grow to is still relatively limited and thus they are primarily used in industrial applications, however an improvement in technology could pose a real threat. In addition, no one buying lab grown jewelry needs to worry about ethical mining of their diamond, providing peace of mind. Will be interesting to see how this competition progresses!

Up until the mid-1800s, diamonds were a rarity and could be seen only on the hand of a monarch. But the diamond rush that began in South Africa in the second half of the 19th century flooded the market with diamonds, which, as any good businessman knows, kills demand.

Rhodes, sensing he had ventured into an untapped market, bought up diamond fields, including one owned by two brothers named "de Beer." In 1880, he bought the claims of fellow entrepreneur and rival Barney Barnato to create the De Beers Mining Company.

The tendency in diamond mining is to combine with smaller groups to form larger ones. Individuals needing common infrastructure form diggers committees, and small claim holders wanting more land merge into large claimholders. Thus, it only took a few years for De Beers to become the owner of virtually all South African diamond mines.

Diamond claim holders and distributors joined up with De Beers because their interests were the same: create a scarcity of diamonds and high prices will follow. And while other commodities have seen price fluctuations over the years, diamonds prices have climbed since the Great Depression.

Oppenheimer, a rival diamond producer with his own production company (Anglo American Corporation, which will reappear later in the story) essentially bought his way onto the board of directors over the years. By 1927, he was chairman of the board.

The structure of the business remained the same for much of the 20th century: A De Beers subsidiary would buy the diamonds. De Beers would determine the amount of diamonds they wanted to sell, and at what price, for the whole year. Each producer would then get a cut of the total output, and buyers would take their diamonds to be resold in places like Antwerp and New York.

Henry, son of Ernest, traveled to New York in 1938 to meet with advertising agency N. W. Ayer. The United States was seen as the next big market for diamonds, and a very effective game plan was formed to sell diamonds to Americans: convince them that diamonds equated love.

Through advertising, men were convinced that the size of the diamond in an engagement ring showed how much they loved their fiancée. Movie stars were shown wearing diamonds in the relatively new motion pictures. And the most effective piece of advertising came in 1947, with the creation of the tag line "A diamond is forever." This later become the company's official motto.

Japan never had a tradition of romantic marriage, making diamonds a tough sell for brides. And even by 1959, no imported diamonds were allowed into the country by the postwar government. But by using slick advertising, playing up diamonds as a symbol of the modern West, or a way to break from traditional Japanese norm, De Beers was able to build a billion-dollar-a-year industry.

Diamonds from Botswana were considered valuable enough to give the government of the country a 15 percent share in De Beers in 1969. All rough-diamond mining and distributing is done by Debswana, making it the biggest non-government employer in the country. The deal is still in place today, and there's even talk of increasing Botswana's share to 25 percent.

Numerous "revolts" against the De Beers cartel had occurred in places like Zaire and Israel over the years, which were mostly quashed by De Beers releasing stockpiles of diamonds similar to that county's product, driving down demand.

These problems, along with issues of flat prices, forced De Beers to switch up the company's strategy. In the last decade De Beers has moved away from rough-diamond supplying and controlling the entire industry, instead focusing on promoting its own brand of diamonds and retail stores.

Step #1: Take a relatively common mineral of compressed carbon, artificially restrict the supply and distribution of that mineral by means of a powerful cartel, and charge consumers an artificially high price, way above the true market price.

A prequel to Ashley and JaQuavis' New York Times best-selling Cartel series, this story follows the rise of notorious gangster Carter Diamond, taking listeners through his days on the mean streets of Michigan to his becoming the biggest drug lord Miami has ever seen. Before the cartel was ever created, he stood alone.

The 10 leading Jewish merchants in London, fearing that the market would be flooded with South African diamonds, quickly formed a syndicate to buy up all of the production from these new mines. A number of the merchants in this syndicate had also acquired large stock holdings in the De Beers monopoly itself. One of the merchants who took the lead in arranging the deal with Cecil Rhodes was Dunkelsbuhler who brought into his London company a 16-year-old apprentice, Ernest Oppenheimer, from Friedberg, Germany that would later continue the Jewish control of the diamond market.

The constant increase in the price of diamonds is usually attributed to the monopolistic behaviors of the infamous De Beers Group. But the details of the monopoly are concealed from public knowledge, because they involve not only private institutions but also various governments around the world, including the United Nations.

DeBeers has persuaded the world's diamond miners to market virtually all their diamonds through DeBeer's Central Selling Organization (CSO), which then grades, distributes, and sells all the rough diamonds to cutters and dealers further down on the road toward the consumer.

The [South African] government long ago nationalized all diamond mines, and anyone who finds a diamond mine on his property discovers that the mine immediately becomes government property. The South African government then licenses mine operators who lease the mines from the government and, it so happened, that lo and behold!, the only licensees turned out to be either DeBeers itself or other firms who were willing to play ball with the DeBeers cartel.

Eventually, the Soviet Union also made a deal with the cartel by giving a major percentage of the annual supply to De Beers. And yet this was not complete control over the global supply, because the rest of the diamond-producing nations (such as Angola and Botswana) were not part of it. Rothbard describes why Angola was not able to participate in the CSO:

First, even though the Angolan civil war is over, the results have left the government powerless to control most of the country. Secondly, the end of the war has given independent wildcatters access to the Cuango River in northern Angola, a territory rich in diamonds. And thirdly, the African-drought has dried up the Cuango along with other rivers, leaving the rich alluvial diamond deposits in the beds and on the banks of the Cuango accessible to the eager prospectors.

So with certain major players absent from the CSO, everyone predicted the demise of the cartel due to increased competition. But events took a turn for the worse. De Beers and other quasi-public companies returned stronger than ever with even more control over the diamond-supply market. 041b061a72


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