Considerable re-stocking was done based on confident expectation of excellent diamond jewellery sales, especially in America at the turn of the century and thanks to De Beers' increased marketing activity. Forty per cent of all diamond jewellery purchases in America - which consumes 45 per cent of all diamonds sold - are made between Thanksgiving and Christmas and it was during this time that record sales were achieved.

Has any decision been taken on the study done by Baines on the functioning of De Beers? Is any restructuring in the offing?
Regarding this study undertaken by De Beers with the support of Bain & Co., certain steps have already been taken particularly concerning improved efficiencies from mining through to research. De Beers also intends to transform itself into the world's preferred purchaser and supplier of rough diamonds aiming at satisfying 100 per cent of its clients needs, instead of 60 per cent as in the past. Thirdly, De Beers is investigating ways to unleash the power of its brand. We are in the implementation stage of the review and will be disclose more about this in the near future.

Will De Beers continue its role as market regulator through the CSO? If not, what role do you see the CSO fulfil in the future?
As has been its role in the past, De Beers will continue to maintain stability in the roughs market. We hope to create additional demand to prevent our stockpile from growing. But we have no intention of selling down the stockpile in an uncontrolled way. De Beers still accounts for a close 50 per cent by value of the world's gem supply from its own mines and the CSO accounts for two-thirds of the world's rough diamond distribution.

In a report during 1996, De Beers had revised its estimates about consumption in the US markets upwards by around 20 per cent, stating that the lower end market (cheap and small goods) was much bigger than anticipated. Now, if cheap and small goods were to be in short supply, would the jewellery market contract?
Our research clearly states that availability of small cheaper diamonds has resulted in demand that is in part incremental and part substitution for the larger and more expensive diamonds. It is self-evident then that if supply were restricted then some of incremental demand would fall. However, it is quite difficult to quantify this without looking at the exact definitions by stone sizes/costs and the degree of supply reduction.

How will you raise markets, such as the US, hooked on to cheaper and affordable goods, to better quality goods? What steps have you taken?
Much efforts have been made in the past through De Beers' promotional activities towards making the US buy better quality goods. We concentrate on educating the American consumers in the 4Cs and create an environment whereby the people get motivated to trade up. Our highly visible advertising campaigns are also in this direction. We are currently running advertisements with the two months' salary guideline with the express intention of pushing the average price up. The single solitaire campaign was very successful. It resulted in good sales.

How long will the CSO be able to feed the Indian industry with cheaper goods? In a worst case scenario where small roughs, India's speciality, disappear from the scene, will De Beers give enough of the better goods to keep the factories functioning?
De Beers has traditionally been a major supplier by value of Indian rough imports. Following termination of De Beers' contract with Argyle, the CSO no longer influences the availability of smalls to India. In the past few years, the Indian industry has been gradually increasing in size and quality has improved.

In case new consuming centres do not emerge quickly and Japan does not recover sufficiently, will USA be able to sustain its rate of consumption? Is the current turnaround in the diamond industry sustainable?
We have every reason to believe that increased sales in the USA in 1999 will be continued 2000 as well. The forecast of a slowing US economy has not materialised. In fact, there are signs that Japan is improving with a revival in consumer demand.

Is there an alternative to the cheaper roughs from Argyle? Where does De Beers see its mining costs going?
As part of its strategic review, De Beers is aiming to cut costs across the board. This will be in the area of mining even De Beers already has the lowest cost diamond mines. It will also concentrate on improving technical efficiency.

How do you react to the news that Argyle will increase production again from 2002 onwards? Will it necessitate changes in your policy?
As long as Argyle continues to market its diamonds in an orderly way in its bid to maintain stable diamond prices, there will be no special need to amend our policies. However, we will make every effort to maintain and increase our overall marketshare .

What has been your progress on the branding of diamonds? Do you envisage any hurdles in Europe on the lines of US Anti-Trust regulations ?
As Nicholas Oppenheimer recently told the Financial Times, the pilot scheme in the UK has so far been a technical and marketing success which boosted confidence of purchasers, but hinted that there existed potentials of legal problems and a strong chance that the European Commission castigating the scheme to be an abuse of De Beers' dominant position. However, Oppenheimer expressed confidence that such issues would be soon resolved.

Will the millennium effort continue till the end of 2000? What incremental sales do you envisage from this?
We do expect the millennium effect "which got off to a promising start" to continue throughout the year with our marketing efforts channelled accordingly. It is believed that incremental sales from this effort will be between 10-20 per cent. We have set ourselves the task of selling no less than our sales in 1999 and will try to create demand for our diamonds for at least the $5.25 billion which we sold in 1999.

You consider India, more than China, as an emerging market for studded jewellery (see Nicky Oppenheimer's interview with EIW in early February). However, even Indian diamantaires concede that India is a gold country and not likely to shift to diamonds easily. How do you plan to bring about a change?
Historically, diamonds have played an important role in India and there has been a tradition and culture of wearing diamond jewellery. The Indian diamond jewellery market is already bigger than that of China and is growing rapidly. India also has a dynamic and active diamond trade. Gold continues to be the preserve of the older generations but the young in India are shifting from only gold jewellery to diamonds.

Internet is making rapid inroads in jewellery sales in the US. Reports indicate that around 18 per cent of jewellery sold was via the Net. Will you utilise this medium for sale of CSO roughs as well?
Although there are signs that the Internet is fast becoming an increasingly important factor in retailing of consumer products including diamonds, we have no intention of selling rough diamonds via the Net except through our sightholders as in the past.

Will the Net make it easier for goods to hit the markets directly from Angola, Russia and other independent sources? In that scenario, how will you control the distribution channels?
It is difficult to comment on how the other producers will use the Internet. But we will continue with our policies outlined above.

What is it regarding the new relationship with a select few sightholders? Do you see any resistance from the existing sightholders?
De Beers is undertaking what we are calling a preferred supplier initiative which is to drive long-term growth in the retail markets and thereby increase the demand for the roughs even while maintaining stability in the diamond prices. This will involve long- term partnerships with the sightholders to achieve a stronger link between our CSO supply and their marketing initiatives. We have no strategy to favour or exclude any sightholder - the opportunity for all to participate will exist.

Have matters relating to diamond exports from South Africa been sorted out?
Yes.

Have you witnessed retail sales of jewellery at all centres including the US, Europe and Japan matching the record sale of roughs by the CSO as well as the record sales of polished by India? Even Israel and Antwerp are said to have had a very good year. Do you see any largescale inventory build up at any of the manufacturing centres or even the retail outlets?
We have specially witnessed a strong retail growth in the US creating new record. This trend is forecast to continue in 2000. Europe witnessed a more steadier satisfactory growth. Meanwhile, Japan has still to recover in the way we would want it to whilst South East Asia is still in the early days of consumer revival. However, all the major diamond centres have had a good year. We see no build-up of inventory either at the major centres or at the retail markets.

Our key indicator post-Christmas has been the reduced level of goods coming back to the centres. This has also resulted in Banks’ indebtedness falling.