DeBeers
...run the company. Large deposits of diamonds were discovered at the Kimberly Mine in South Africa and these mines became known as the kimberlites. The competition began soon after the discovery of these kimberlites. This eventually caused the prices of these once expensive gems to plummet from 500 dollars to ten cents a carat. Cecil Rhodes took advantage of this and proposed that if all the miners put all their shares together and formed one company, the competition would cease and the price of diamonds would once again soar and not fluctuate. Cecil Rhodes founded the DeBeers Mining Company and formed this cartel of diamond producers. Their first goal was to control the total production of these diamonds so that the market would not be inundated with too many diamonds. The purpose of this was to ensure the prices of diamonds would not drop. By the 1900’s, Rhodes set out to buy out all the surplus of diamonds. He succeeded at doing this and thus controlled approximately 90 percent of the world’s supply of uncut or rough diamonds. Rhodes created the most successful cartel of the 20th century known as DeBeers. DeBeers controlled most of the world’s diamonds and the supply and demand could be easily manipulated. DeBeers could make diamonds rarer simply by not putting them on the market. Nonetheless, rough times were ahead. The 1930’s hit and so did the Depression. European purchases of diamonds had collapsed due to people losing their wealth during this time. Diamond sales had also fallen in the United States. At this point, the Oppenheimer family, owners of the Anglo American Corporation, seized control of DeBeers. The timing was critical but fortunately for the DeBeers Company, the diamond had already been established as the perfect symbol for an engagement ring. Harry Oppenheimer, who became the director of DeBeers around, 1934 convinced his father to let him travel to America to find out about advertising diamonds because the United States was the main market for diamonds. Harry Oppenheimer went to one of the more reputable firms in New York, N.W Ayer. Ayer suggested to Harry that they conduct a survey to find out the real reason why people purchase diamonds. The results of the survey showed that the real reason people buy diamonds was love. To make a connection between the diamond engagement ring and romance, DeBeers hired the advertising firm of N. W. Ayer to put together a campaign that would solidify this connection between diamonds and romance. This was done through newspaper advertising and magazines stories that talked about the size and beauty of diamonds and how the rich and famous were associated with buying these precious stones as gifts for their wives. Lecturers were also sent around to high schools to talk to girls about diamond engagement rings. The public had to be convinced to buy more diamonds and they also had to be convinced not to sell their diamonds as this would once again lower their value. Ayer focused on romance in all of their campaigns as opposed to economics. Around 1947, a maiden lady copywriter at Ayer, Frances Gerety, created the most durable slogan in history: “A diamond is forever”, which meant that it was a sign of your eternal love and to sell the stone would be like selling your love. Within three years of creating this slogan, 80 percent of wedding engagements in America were made official with the gift of a diamond ring. “The true genius of DeBeers, said Matthew Hart, “lies in having created a connection, and sustaining in the popular imagination a connection between something that has no value at all. You can’t eat it, you can’t drive it home, you can’t make clothes out of it, you can’t build houses out of it, and creating a connection between that valueless item and something that is extremely valuable, which is human love. They created that connection – they made it up – and thay’ve sustained it.” (http:///americanradioworks.publicradio.org/features/diamonds/mystique2.html) DeBeers went one step further in trying to embed into the minds of the public how special diamonds were. They got directors and screenwriters to insert scenes into movies that captured the essence of romance and equated that essence with diamonds. DeBeers also persuaded jewelers to let top Hollywood stars borrow the diamonds for their public appearances so that women who saw these stars with beautiful diamond earrings or necklaces would want the same thing. Around the 1960’s, DeBeers was faced with yet another challenge. Russia began large-scale mining of diamonds. This proved to be a real threat to the monopoly that had been created thus far by DeBeers. DeBeers successfully persuaded the Russians to sell through the DeBeers cartel. The Russian product was generally smaller than what was out on the market so DeBeers’ next step was to try to create a demand for the high-quality but smaller Russian product. Through these efforts, the eternity ring came into existence. Ayer’s advertising firm had to create yet another campaign stating that even though the diamond band was perfect for an anniversary ring, the engagement ring should still be a solitaire. It is a fact that the diamond monopoly has been by far the most successful in the world. DeBeers has shown that it is ready to go against anyone who is willing to challenge their monopoly by flooding the market with whatever stone they were attempting to sell outside of the DeBeers channels. They have even shown that they will completely stop their supply of diamonds as they did to a group of Israeli diamond cutters who tried to build up a large inventory of diamonds around the 1970’s. However, DeBeers’ efforts in establishing probably the most successful monopoly in the world may be close to an end. With Australia and Russia steering clear of the DeBeers Central Selling Organization, DeBeers is no longer in complete control. What is also helping the Australians and Russians is the fact that DeBeers has paved the way for them as far as marketing the diamond as a valuable stone that is associated with romance and love. Australia and Russia have been able to ride on the marketing efforts of the DeBeers Company without spending a dollar. Consequently, the practice of etching security numbers and the DeBeers name on diamonds had been put into place so that they could start to create a brand name for themselves. This was spurred not only because of the Australian and Russian diamonds but also because of the creation of synthetic diamonds. GE had developed a process of creating synthetic diamonds that were actually harder and denser than natural diamonds by using carbon-13 instead of carbon-12 which makes up 99% of natural diamonds. Another pressure that DeBeers has had to face was the pressure of protecting its image. Around the 2000’s, controversy was emerging against the marketing of what were called conflict diamonds or blood diamonds. These were diamonds that originated from areas that were controlled by those who were opposed to elected and internationally recognized governments, expanding antitrust legislation in both the United States and Europe, and the rise of new diamond suppliers. This drew attention to DeBeers in such a way that could possibly associate DeBeers with human suffering in order to gain large supplies of diamonds. Blood or conflict diamonds have fueled wars in at least three African countries. Certain human rights groups forced DeBeers to distinguish between diamonds that were mined in peaceful countries that were controlled by legitimate governments and diamonds that were acquired at gunpoint by rebel forces in places such as the Congo, Sierra Leone and Angola. According to the United Nations Children’s Fund, these places were known to be the worst places on earth to be a child. The money that is made through the sale of these conflict diamonds is used to purchase guns and ammunition. These weapons are used in battles over control of the diamond mines. Prior to this event taking place, DeBeers purchased large supplies of their diamonds from Angola. DeBeers announced that it intended to embargo all conflict diamonds and provide a certificate of each stone’s origin with every sale. They embargoed t...