De Beers! Stick to What You Know!
Al Cook has been the C.E.O. of De Beers for less than a year and a half. He came to De Beers from Equinor, one of the largest suppliers of energy to Europe. Prior to that, Al had a stellar, 20-year, career with British Petroleum. He had never been involved with rough or polished diamonds before assuming the reins at De Beers.
Mining diamonds is very different from mining most other commodities. It is a specialty and luxury business that does not fit easily into typical mining classifications. It’s complicated and this is the reason that Anglo American is dumping De Beers.
It appears, to this observer, that Al Cook is beginning his career with De Beers by retreading the same path as his predecessors; specifically, getting involved in downstream diamond concerns that have little or nothing to do with mining.
De Beers is a diamond mining company. Their strength lies in mining and distributing rough diamonds. In the past, when they have strayed from this core strength, they have lost money, and damaged generic diamond sales. Some recent failures include Light Box, ForeverMark, DeBeers Jewellers, De Beers Institute of Diamonds, and Supplier of Choice.
I wonder, what makes De Beers executives so overconfident that they feel comfortable throwing money at projects about which they have little to no experience? How is it possible that they feel that they know enough to compete with their downstream partners with established brands, specialized training and generations of experience?
I find it very frustrating watching De Beers new leadership continuing with the same old delusions. Has their education taught them anything about concentrating on their core business strengths; about supporting and not competing with their clients? Cook envisions De Beers as a mining company, a cutting company, and a high-end jeweller, opening over one hundred branded retail jewellery outlets by the end of this decade.
Rob Bates, on the other hand, sees a different vision for De Beers. He thinks that it is certainly possible “to imagine a revamped De Beers that is mostly a miner. It could outsource marketing to the Natural Diamond Council (like platinum miners do with the Platinum Guild), and sell off its noncore businesses, such as De Beers Jewellers and Element Six. It might even sell off its Canadian holdings to Burgundy, and reposition itself as an African company, with mostly African ownership. It could even license its name and see what others could do with it”.
Meanwhile, De Beers is hurting. Rough sales are down 20% from this time last year, which was not a banner year. They are holding too much inventory in the midst of a global decline in natural diamond sales and prices.
De Beers worth lies in mining, in supporting their partners in the cutting industry, as well as supporting the retail sector. Diverging from these core interests has, in the past, and will, in the future, bring nothing but problems.
Peter Smith, an industry consultant, believes that when making long-term business plans, it is best not to panic, and abandon core principles. He very wisely states that “short term pain is so concerning for business, that some companies, highjack their long-term prospects to avoid experiencing it”.
I personally hope that De Beers and its’ new management will not fall victim to this type of folly.
And that’s the Regal Imports News for July and I thank you very much for watching.
Mel Moss
