THE DIAMOND INSIGHT REPORT 2016 FORWARD-LOOKING STATEMENTS This report includes forward-looking statements. All statements other than statements of historical facts included in this report, including, without limitation, those regarding De Beers’ future expectations and/or future expectations in respect of the diamond industry, are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of diamond markets, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions made by De Beers in respect of the present and future business strategies and the wider environment of the diamond industry. Important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration and development capabilities, recovery rates and other operational capabilities, the availability of mining and processing equipment, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or safety, health, environmental or other types of regulation in the countries relevant to the diamond industry, conflicts over land and resource ownership rights and other such risk factors. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this report. De Beers expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in De Beers’ expectations with regard thereto or any change in the events, conditions or circumstances on which any such statement is based.
DISCLAIMER This report has been prepared by the De Beers Group of Companies (De Beers) and comprises the written materials concerning De Beers and the wider diamond industry. All references to ‘De Beers’ in this report refer to the De Beers Group of Companies, unless otherwise stated. This report has been compiled by De Beers and/or its affiliates from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy, completeness or correctness. All opinions and estimates contained in this report are judgements as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. This report should not be construed as business advice and the insights are not to be used as the basis for investment or business decisions of any kind without your own research and validation. This report is for information purposes only. The information contained in this report may be based on internal data, or data sourced from, or provided by, third parties or publicly available sources. As such, it may include the disclosures and/or views of those third parties, which may not necessarily correspond to the views held by De Beers. De Beers does not offer any representation or warranty as to the accuracy or completeness of this report and no reliance should be placed on the information disclosed for any purpose. Nothing in this report should be interpreted to mean that De Beers or the diamond industry (as the case may be) will necessarily perform in accordance with the analysis or data contained in this report. All written or oral forward-looking statements attributable to De Beers or persons acting on its behalf are qualified in their entirety by these cautionary statements. To the full extent permitted by law, neither De Beers nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 CONTENTS
OVERVIEW
FOREWORD 3
EXECUTIVE SUMMARY 4
THE FUTURE AT A GLANCE 6
2016 DIAMOND INDUSTRY OUTLOOK 8
DIAMOND INDUSTRY VALUE CHAIN 14
DOWNSTREAM 15 MIDSTREAM 22 UPSTREAM 26
IN FOCUS: MILLENNIALS AND THE FUTURE OF DIAMONDS 30
INTRODUCING THE MILLENNIALS 31 MILLENNIALS’ CONNECTION WITH DIAMONDS 34 THREE MAIN MILLENNIAL TRENDS 37
END NOTES 46 THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 2
MILLENNIALS SPENT NEARLY US$26 BILLION ON DIAMOND JEWELLERY IN THE FOUR MAIN MARKETS LAST YEAR, ACQUIRING MORE THAN ANY OTHER GENERATION. BRUCE CLEAVER OVERVIEW THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 3 FOREWORD
2014 was a record year for consumer Indeed, they spent nearly De Beers first published its diamond jewellery demand and US$26 billion on diamond also a strong year for rough jewellery in the four main markets Diamond Insight Report in diamond demand. last year, acquiring more than any other generation. 2014. In the two years since, 2015, however, saw a more contrasting much has changed, but the strong performance. While consumer And, perhaps most encouragingly, diamond industry fundamentals diamond demand remained Millennials are still 10 years away reasonably strong, rough diamond from their most affluent life stage, remain the same. demand fell. presenting a significant opportunity for the sector to capitalise fully on With the first half of 2016 showing a generation comprising more than signs of more stable conditions 220 million potential diamond returning, it is clear that volatility consumers in the four main markets. in the diamond sector is not a short-term phenomenon, but the This year’s Diamond Insight Report new normal. explores the diamond sector’s fundamentals and the factors that The sector has shown itself are influencing them. I hope that consistently to be resilient – in the it will help to provide clarity, face of financial crises, fluctuating direction and, of course, insight, demand and increased competition in an ever-changing world. from other luxury categories. But the pace of change is quickening and, as a sector, we cannot look to the past for solutions to tomorrow’s challenges. As our research with Millennials shows, tomorrow’s consumers are not the same as yesterday’s. However, they do share many of the same views as older generations. It is perhaps because of this that diamonds are BRUCE CLEAVER high on their wish list. CEO, DE BEERS GROUP THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 4 EXECUTIVE SUMMARY
2016 DIAMOND INDUSTRY In the two years that have passed since OUTLOOK the publication of De Beers’ inaugural The diamond industry has faced Diamond Insight Report, the world recent challenges, particularly has experienced continued economic in 2015. uncertainty and moderate levels of While global consumer demand slowed down, the midstream faced economic growth. Over this period, squeezed margins and working diamond jewellery demand has remained capital challenges – both of which impacted rough diamond purchases strong. Indeed, it has been higher over and sales. the past three years than any other Upstream, cost pressures increased three-year period. as a larger share of production came from ever deeper mines. Some of these trends are likely to continue over the next decade as volatility becomes the new normal as a result of fluctuating global growth. Nine fundamental trends are likely to shape the industry over this period and these are explored in section one. OVERVIEW THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 5
DIAMOND INDUSTRY IN FOCUS: MILLENNIALS AND In the top four diamond jewellery VALUE CHAIN THE FUTURE OF DIAMONDS markets of the US, China, India and Japan, which account for 73 per cent After five years of uninterrupted value Despite experiencing less favourable of global demand, the potential growth of global diamond jewellery economic conditions than preceding diamond buying Millennial market demand – and following a record level generations and progressing more is more than 220 million people, in 2014 – demand (in US dollars) fell slowly along the traditional life 39 per cent of the diamond buying slightly in 2015 to US$79 billion. This path, Millennials do express strong population in these four countries was due primarily to the stronger desire for diamonds when they reach in 2015. US dollar and slower growth in China financial and demographic maturity. As such a large cohort, Millennials and other emerging markets. In 2015, Millennials spent nearly are already driving global consumer While consumer demand for diamond US$26 billion on diamond jewellery demand, yet they also represent jewellery remained relatively robust in the largest four markets combined, a source of considerable future in 2015, the trading environment for representing 45 per cent of the total potential for the sector. rough diamonds was tougher, with retail value of new diamond jewellery In order to unlock this potential the midstream businesses experiencing acquired in these markets. industry needs to find appropriate a range of interconnected issues that Demand for diamond jewellery ways to engage Millennials’ inherent led to severe ‘inventory indigestion’. from Millennials in the US alone need for self-expression and However, a number of actions were rose from US$10 billion in 1999 interconnectivity. taken by the industry to address to US$16 billion in 2015. issues related to supply, demand and profitability, and this has seen a return to more normal trading conditions in 2016. 2016 sees three new diamond mines begin production, which are expected between them to add around seven million carats annually to global production once fully operational. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 6 THE FUTURE AT A GLANCE
The diamond industry is likely to continue to experience increased sales and price volatility. Organisations across the value chain will need to improve the way they forecast and plan to navigate this trend successfully.
Consumer demand growth will continue to be generated from Asia, particularly China and India, driven by higher household income over the next 10 years, and the US, the world’s largest market.
Millennials in all main markets are set to become the most important cohort for diamond jewellery purchases.
Continued innovation by retail in general, and competitive sectors in particular, will generate strong competition from other luxury and experiential categories; investment will be needed to safeguard and nurture the diamond dream and capture the opportunity presented by the growth potential in Asia, the US, and globally, by Millennials.
The midstream will continue to come under pressure periodically; financially robust and transparent diamantaires with scale, differentiated business models, and/or strong collaborations with downstream players are most likely to thrive. OVERVIEW THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 OVERVIEW 7
Beneficiation will continue to be a key driver in the geographic shift of the midstream to countries and regions where diamonds are mined.
The upstream will need continued focus on cost reduction and productivity improvements; innovation as well as strong, collaborative relationships with governments and other stakeholders will be increasingly important.
Diamond production will likely increase slightly in the short term and decline slowly after 2020, with large, economically viable new discoveries unlikely.
While consumer demand is currently negligible, the capacity to produce synthetics for gem applications will continue to expand and, over time, the cost and value of synthetic production will fall.
Across the value chain, innovation will remain critical – to strengthen the diamond dream and motivate sales, to develop new business models in the midstream, and to counter cost pressures in the upstream. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 8 2016 DIAMOND INDUSTRY OUTLOOK
The fundamental supply and demand trends of the diamond industry continue to be positive and, by acting to strengthen its competitive position, the diamond industry can anticipate a positive future. 1 2016 DIAMOND INDUSTRY OUTLOOK THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 9
In the two years that have passed A MORE VOLATILE FUTURE Volatility is here to stay as global since the publication of De Beers’ markets are likely to continue to 2014 Diamond Insight Report, new Since 2014, the world has experienced fluctuate, potentially increasing global and regional trends have moderate annual global growth at the diamond industry’s inherent 1 been identified. The main changes 2.5 per cent, although this has been volatility. Consumer preferences relate to macro-economic trends in uneven across markets and is, in some will continue to evolve, and emerging economies, especially in regions, characterised by political innovation by global luxury brands China and India, as well as volatility uncertainty. Ultimately, consumer and new online propositions will in world economic growth forecasts. demand for diamond jewellery has generate strong competition for remained strong; indeed, it has been the industry. The midstream will These developments will demand higher over the past three years than be required to continue its process that diamond industry participants in any other three-year period. of professionalisation, and the strengthen their competitive upstream will continue to face cost capabilities even more through better But there have also been industry challenges. Fig. 1 sets out nine of planning and more investment in challenges. While consumer demand the fundamental trends De Beers innovation and marketing. for diamonds is still growing in the US, growth has slowed in China believes will shape the industry and declined in India. Midstream in the next 10 years. players faced fresh pressure in 2015, when inventory indigestion led diamantaires to destock, impacting rough diamond sales. Furthermore, diamond producers face increasing cost pressures as production comes from ever deeper mines. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 10
FIG. 1: NINE FUNDAMENTAL INDUSTRY TRENDS 1 2 3 4
TREND ECONOMIC CONTINUED NEW CONSUMER RETAIL VOLATILITY GROWTH IN PREFERENCES INNOVATION DEMAND FROM EMERGING MARKETS
DESCRIPTION Global economic growth Positive consumer Consumer Continued innovation will continue to be demand growth demographics will by global luxury volatile, as businesses is likely to continue evolve, with retiring players – especially become more highly to come from Asian and elderly consumers in retail, leveraged, markets consumers, expected to generate omnichannel, become more particularly Chinese the majority of global attraction of interconnected, current and Indian, driven urban consumption international account imbalances by increasing growth by 2030, and travellers, increased widen, foreign household wealth with Millennials product offering exchange fluctuates over the next 10 years becoming the largest (eg customisation) and geopolitical but at lower levels than age cohort in the US. and more instability increases. previously assumed. Consumer preferences sophisticated The diamond industry Due to increasing can be expected to consumer is likely to experience international change, with an segmentation – increased volatility travel, national increased focus on will generate under any macro- demand may self-expression; as a strong competition economic scenario, not necessarily result, design and from other relative to recent years. be domestic. branded jewellery will luxury categories. continue to increase Retailers focused on in relevance. branded diamond Economic jewellery will be able empowerment will to differentiate drive self-purchases themselves from especially among generic propositions. women, and demand for lower entry-point diamonds will rise. Consumers will continue to become more knowledgeable and push for ethical products with known provenance. 1 2016 DIAMOND INDUSTRY OUTLOOK THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 11
5 6 7 8 9
INCREASING HIGHER MINING PREDICTABILITY PRESSURE FROM INCREASING PRESSURE ON THE COSTS OF ROUGH DIAMOND PRODUCING CAPACITY MIDSTREAM PRODUCTION FOR COUNTRIES TO TO PRODUCE THE NEXT 10 YEARS MAXIMISE VALUE SYNTHETIC DIAMONDS AT A LOWER COST
Financing challenges A larger share of Rough diamond Diamond producing While consumer are expected to persist, production is expected production is expected countries, in particular demand is currently driven by tighter lending to come from ever to remain predictable in southern Africa, negligible, the standards and less deeper mines, which are and relatively stable over will continue capacity to produce availability, placing complex and costly to the next 10 years with a to look to maximise synthetics for gem additional pressures operate; additional relatively sparse new the value of the applications is likely particularly on investment is required project pipeline. diamond assets. to continue to expand. midstream players by producers to drive It is expected there will An expected rise in Over time, the with outdated productivity. be increases in the short local beneficiation will production cost and and unprofitable Unit capital cost is term, given investments likely put increasing value of synthetics are business models. expected to continue in the last 10 years. pressure on midstream expected to reduce. Diamantaires will to rise. Large economically margins. need to operate under In addition, unit costs viable finds will increasingly rigorous of energy, labour and remain unlikely. professional standards, consumables are such as compliance expected to increase. with IFRS. Fluctuations in foreign There is expected to be exchange and energy increasing transparency prices will cause higher of the supply chain cost volatility. through digitalisation, leading to potential disintermediation of players without value-added services. Retailers/jewellers are likely to demand more value added from their midstream suppliers.
Source: De Beers THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 12
The diamond industry also faces a ——Consumer attitudes to diamonds: ——Supply of diamonds: Though number of uncertainties. First among Over the next decade, consumer rough diamond production them is the overall macro-economic demand could continue to levels are likely to vary marginally environment. The outlook for the broaden as diamond jewellery around a known trend in the industry and consumer demand is retailers innovate and invest to next decade, overall diamond intrinsically linked to the strength keep diamond jewellery relevant supply may continue to expand of the global economy. Fig. 2 refers for new consumer demographics; slightly due to technological to the macro-economic scenarios alternatively, new consumers breakthroughs in diamond published by McKinsey Global could move away from diamonds mining and in cutting and Institute2 in 2015. if the industry fails to invest polishing as well as a greater and innovate to keep diamonds supply of recycled diamonds. There are three additional relevant to them, and other uncertainties across the value chain experiential or luxury categories that are likely to have significant therefore become more relevant. implications for the industry: ——Evolution of the distribution channel: The next decade could bring increased corporatisation and consolidation to the midstream; alternatively, continued fragmentation and relative opacity could characterise the midstream.
FIG. 2: MACRO OUTLOOK: Uneven, volatile, but Rapid globally distributed high global growth: GROWTH growth underpinned by MCKINSEY’S (ABOVE 30-YEAR TREND) uncoordinated efforts broadening productivity GLOBAL ECONOMIC to resolve structural and increases: technology and SCENARIOS 2015–25 near-term demand information flows increase, challenges lead to uneven near-term demand success and difficulties challenges are overcome, in international and major economies economic policies. tackle structural challenges to growth.
POCKETS OF GROWTH SCENARIO SCENARIO GLOBAL SYNCHRONICITY 2 1 DIVERGENCE CONVERGENCE
ROLLING REGIONAL CRISES SCENARIO SCENARIO GLOBAL DECELERATION Near-term demand issues 4 3 Low but more stable prove too challenging, global growth: countries and long-term structural navigate near-term demand issues are left unresolved. challenges, but structural Financial flows become challenges linger. more volatile, with International linkages are more frequent and somewhat strengthened, powerful shocks. GROWTH leading to new (BELOW 30-YEAR TREND) opportunities for growth.
Source: “Shifting tides: Global economic scenarios for 2015–25.” McKinsey Global Institute. January 2016 update. 1 2016 DIAMOND INDUSTRY OUTLOOK THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 1 2016 DIAMOND INDUSTRY OUTLOOK 13
Overall, most sector observers THE IMPERATIVE OF and enhance the diamond dream remain positive on the fundamentals PARTNERSHIPS in established, developing and of the industry – recent analyst emerging markets and across all reports state that demand growth The diamond sector is used to consumer segments. for diamonds will continue to tackling challenges. In the past, the This will require investment and outstrip growth in carat production, industry has thrived due to its ability innovation across the value chain – predicting low single-digit nominal to create strong partnerships – today in new retail formats, value-adding demand growth in the medium term this characteristic remains more strategies in the midstream, (Fig. 3).3 At the same time, it is clear important than ever. technological innovation to ensure that the macro and competitive De Beers believes that consumer continuous supply and creative environment will continue to be demand will continue to be the partnership with producing countries challenging and volatile. key source of value – and retailers, and communities to ensure the manufacturers and producers benefits of diamonds reach everyone. must work together to preserve
FIG. 3: PERSPECTIVES FROM TWO INDUSTRY ANALYSTS ON THE VALUE CHAIN BANK OF AMERICA MERRILL LYNCH AND MORGAN STANLEY COMMENT ON VARIOUS ISSUES ACROSS THE DIAMOND INDUSTRY VALUE CHAIN
BANK OF DEMAND MIDSTREAM SUPPLY AMERICA MERRILL Polished diamond value (in nominal Small margins, liquidity, and Global supply of rough diamonds LYNCH US dollars) is expected to expand fragmented structure have put (in carats) is expected to expand at at a Compound Annual Growth Rate huge pressure on the industry: a CAGR of three per cent between (CAGR) of four per cent between 2016 and 2022, peaking in 2021: Credit will be increasingly 2016 and 2022, driven by: —— constrained in the industry, ——New exploration and finds can ——Positive US consumer confidence leading to liquidity issues. be expected to take place in indicators; however, high end ——Liquidity hole will remain, but ‘tougher’ postcodes, which involve retail under pressure. will lead to bankruptcies and political and physical difficulties. ——Five per cent per annum growth consolidation, benefiting the ——Improving technology however is in China due to campaign against industry long term. optimising cutting and polishing corruption and conspicuous so that greater yields are being consumption. realised year on year. ——Slow European recovery.
MORGAN DEMAND MIDSTREAM SUPPLY STANLEY Diamond jewellery sales are expected Pressure on midstream margins Global supply of rough diamonds to grow at a four per cent CAGR (in will be exacerbated by tightening (in carats) is expected to expand nominal US dollars) between 2016 financing and liquidation of polished at a CAGR of one per cent between and 2021, driven by: diamonds, as cutters and polishers try 2016 and 2021: to obtain any possible cash flow: ——US providing a solid core, ——Diamond supply growth will contributing 42 per cent of ——Recognition (of corporate loan reach a post-financial crisis high polished demand. defaults by jewellers) may further of 143 million carats, or only ——Weakening Chinese consumer curtail liquidity available to the 13 per cent below the pre 2009 sentiment on luxury goods midstream and reduce appetite crisis peak of 168 million carats. due to the economic slowdown for rough diamonds. ——This is driven by growth mainly in and recent volatility in the Canada (Gahcho Kué, Stornoway) stock market. and Russia (ALROSA and Grib reaching full capacity).
Source: “Global Diamonds Metals & Mining,” Bank of America Merrill Lynch, June 2016; “The PIPE – diamond intel,” Morgan Stanley, March 2016; “Why we’re less bullish than the street,” Morgan Stanley, April 2016. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 14 DIAMOND INDUSTRY VALUE CHAIN
There was a slowdown in global consumer demand in 2015, but a positive outlook remains, with clear growth opportunities in all main diamond jewellery geographic markets. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 15 DOWNSTREAM
2015 SNAPSHOT positive growth of three per cent in contributor to the slower growth in 2014. At constant exchange rates, diamond jewellery sales, but a change After five years of uninterrupted global demand for diamond jewellery in patterns of travel by Chinese growth in the value of diamond grew by some two per cent in 2015. consumers also played a role in the jewellery sales to consumers, and market’s performance. In India, The US – the world’s largest market following a record 2014, demand the market decline was driven by for diamonds – was the main driver of for diamond jewellery measured a more restricted consumer credit global diamond jewellery sales growth in US dollars declined marginally in environment and overall weakness in 2015. That was mostly due to the 2015 (Fig. 4). This was principally due in consumer spending. to unfavourable currency movements economy’s sustained recovery and the and economic slowdown in China strength of the US labour market. Other markets saw declines in the value of their diamond jewellery and other emerging markets. At the same time, and after years of sales, driven by unfavourable buoyant growth, 2015 saw consumer The value of diamond jewellery sold macro-economics and large demand for diamond jewellery slow to consumers in 2015 reached an devaluations of their currencies in China and decline in India. In estimated US$79 billion – down from against the US dollar. US$81 billion in 2014, or a two per China, the widely reported Chinese cent decline. This contrasted with economic slowdown was the main
FIG. 4: DIAMOND JEWELLERY VALUE: GLOBAL GROWTH BY MAIN GEOGRAPHY US$ BILLION (NOMINAL) AND GROWTH IN %
2009–2015 CAGR US$ LC REST OF WORLD -1% INDIA 3% 8% 4% CHINA 14% 12% GLOBAL TOTAL 2009–2015 CAGR GULF 5% 5% JAPAN -2% 1% 79 81 79 76 US 5% 74 71 64
Note: Gulf includes Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain Source: De Beers analysis based on proprietary retail and consumer research and on publicly available statistics 2009 2010 2011 2012 2013 2014 2015 THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 16
FIG. 5: POLISHED DIAMOND VALUE (POLISHED WHOLESALE PRICE): GLOBAL GROWTH BY MAIN GEOGRAPHY US$ BILLION (NOMINAL) AND GROWTH IN % 2009–2015 CAGR US$ LC REST OF WORLD 0% INDIA 3% 8% 5% CHINA 15% 13% GLOBAL TOTAL 2009–2015 CAGR GULF 4% 4% 25.2 JAPAN -2% 1% 24.5 24.7 US 7% 23.0 23.6
20.9
18.5
Note: Gulf includes Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain Source: De Beers analysis based on proprietary retail and consumer research and on publicly available statistics 2009 2010 2011 2012 2013 2014 2015
In terms of polished diamond content The last five years saw the gradual As approximately 45 per cent of in jewellery sold to consumers,4 global recovery of the US economy following global diamond jewellery sales take value fell by two per cent in 2015 to the 2008–09 global financial crisis, place in countries whose currencies US$24.7 billion. That compares with and this market returned to the are neither the US dollar, nor pegged growth of three per cent in 2014, at same share of the world’s polished to the US dollar, their share of US$25.2 billion (Fig. 5). The global demand that the country had last demand in US dollars varies year-on- figure masks some divergent trends seen in 2004. In 2015, sales of year depending on currency market within the main consumer polished diamonds to US consumers trends. The sharp appreciation of geographies: accounted for 45 per cent of global the US dollar against almost all other demand for polished diamonds, up currencies in 2015 helped countries In the US, polished diamond —— from 39 per cent in 2010 (Fig. 6). with US dollar-linked sales gain demand increased by five per relative market share. cent (seven per cent in 2014) and China has also gained relative share surpassed US$11 billion in value. of sales since 2008–09. Mainland ——Chinese consumers’ polished Chinese demand doubled its share demand increased one per cent in from seven per cent share in 2008 US dollar terms (five per cent in to 14 per cent in 2015. 2014) to reach US$3.4 billion. Changes in the share of polished ——All other markets posted diamond sales in 2015 were also declines in the value of polished affected by currency movements. diamonds. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 17
FIG. 6: SHARE OF POLISHED DIAMOND DEMAND BY VALUE (POLISHED WHOLESALE PRICES IN US$ TERMS): TOP FIVE GEOGRAPHIES AND REST OF WORLD % 2015 US
2010 22 US
REST OF 28 WORLD
39
REST OF 45 7 WORLD
INDIA 10
6 INDIA 10 8 14 JAPAN
CHINA GULF
8 4
CHINA JAPAN GULF
Note Gulf includes Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain Source: De Beers analysis based on proprietary retail and consumer research and on publicly available statistics
LOOKING AHEAD Macro-economic volatility has European countries are With geopolitical risks perceived contributed to subdued global expected to continue to see to be on the increase,5 in the growth in consumer demand for subdued consumer demand short term industry participants diamond jewellery in the first growth, given the weakness in will need to invest in resilience half of 2016. The gradual their macro trends. and potential growth areas adjustment of China’s economy to succeed. By contrast, the US economy has away from investment-led growth continued to post strong growth In the medium to long term, to consumer-driven growth in consumer spending and solid demand for diamonds is is still under way and volatility employment numbers. If the expected to grow in real terms, in Chinese demand can be strength of the US economy provided the industry as a whole expected in the short term. leads the US Federal Reserve continues to invest to strengthen India’s path to more sustainable Bank to increase interest rates, its competitiveness. public finances will also involve more volatility in the currency initial adjustments to consumer markets could be the result. spending. Japan and most THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 18
As the largest (and consistently FOCUS ON THE US growing) diamond consumer market in the world, the importance of the US to the diamond industry cannot CONSUMER – be overstated. A new, De Beers- commissioned survey of 18,000 US women aged 18–746 shows how A DYNAMIC MARKET dynamic this market has been in the last two years. WITH NEW SOURCES A number of clear trends point to areas of opportunity for retailers, brands and other participants OF OPPORTUNITY looking to capitalise on the strength of the American woman’s love of diamonds. The top five trends and areas of opportunity are: THE SINGLE WOMAN While single women’s acquisition levels increased slightly in 2015, 01 their average spend soared by some 20 per cent compared with 2013 as they acquired more diamond- only earrings and necklaces and larger diamonds. With the US marriage rate at historic lows7 and younger women delaying marriage,8 the rise in The bridal and married women gifting unmarried households9 has been categories remain the backbone of the US well documented. The singles’ demographic is thus expected diamond jewellery business, with 28 per cent to grow. The diamond jewellery and 37 per cent, respectively, of total demand industry must continue to engage with this segment, using a value in 2015. But there are new growth combination of relevant ideas for opportunities as more women are buying each age and income group to diamond jewellery for themselves and younger capitalise on its potential. consumers continue to show an increasing THE MARRIED WOMAN preference for brands. ‘HEAVY OWNER’ Married women’s diamond acquisition increased strongly in 2015 02 even though average prices remained flat. The married 35–54 age bracket increased its share of acquisition, as did those owning more than eight pieces of jewellery containing diamonds (‘heavy owners’). The married woman ‘heavy owner’ continues to be the pillar of the non-bridal segment – she is happy to receive diamonds as a gift and to self-purchase. New ideas and designs will inspire her to return to diamonds again and again. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 19
WOMEN’S SELF-PURCHASE Younger consumers’ preference In summary, the bridal and married for brands offers retailers the women gifting categories remain More women are buying diamond opportunity to create a virtuous the backbone of the US diamond jewellery for themselves and, in circle of higher margins and future jewellery business, accounting for 03 particular, women in households growth. The right branded offer 65 per cent of all sales (by value) of with incomes above US$75,000 helps retailers strengthen their women’s diamond jewellery in 2015 per annum and 25–39 year olds. proposition to the women who have (this was 70 per cent in 2013). New Diamond-only earrings and neckwear clear preferences when dreaming areas of growth are clearly emerging: were more popular for those buying about their diamond. The higher self-purchase and singles looking for for themselves. margins generated by brands then diamond-only, more design-driven As women in the US continue to help support investment in and responsibly sourced pieces, and make gains in the labour force10 innovation and marketing, which discovering brands and new channels the self-purchase trend offers one in turn will strengthen retailers’ in search of a more experiential of the clearest opportunities for proposition to consumers. acquisition process and an opportunity for self-expression. future growth. Having a selection While the appeal of diamonds of diamond jewellery which appeals remains strong across all segments This applies in particular to the to the woman looking to celebrate of the US female population, in next generation of diamond jewellery a personal milestone, or to buy particular as gifts, the 2015 research consumers, aka the Millennials. something special to reward herself, shows the desirability of a diamond In the midst of profound socio- should become as much a focus for self-purchase has slipped slightly economic changes in the US and for jewellers as bridal and other overall from seventh to eighth most worldwide, this edition of the relationship milestone-related desired purchase. Diamond Insight Report offers an jewellery. This may require a degree in-depth analysis of this consumer Another important way of keeping of customisation, or a fresh focus segment and suggests ways in which diamonds aligned to evolving on design. the industry can secure its future by consumer values is by providing understanding the aspirations of responsibly sourced products. DESIGN INNOVATION this new generation (see In Focus Responsible sourcing of diamonds section: Millennials and the Future Love and commitment continue to is of high importance to more than of Diamonds). be the most important motivations a fifth (21 per cent) of US diamond 04 for acquisition, but there has been a engagement ring acquirers in 2015. small increase in the proportion of The relevance of responsible sourcing people acquiring diamonds simply is higher among the US Millennial because they like a particular design. generation (aged 18–34), compared Combined with trends of single with older age cohorts – while only women acquisition, self-purchase two per cent of consumers over the and the younger woman’s desire age of 35 stay away from diamonds for self-expression, design appeal is because they do not trust that they expected to become more important have been responsibly sourced, that in attracting new and repeat proportion rises to seven per cent customers to the category. among Millennials. BRANDS While branded acquisition did not increase its share overall, this was not 05 the case for the younger age groups. Amongst 18–34 year olds, there was another rise in preference for branded diamond jewellery; within that age range, 25–34 year olds showed a particularly strong affinity for brands. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 20
A wave of consumer trends – DIAMOND JEWELLERY many enabled by new smartphone applications – is continuing to alter RETAIL the retail landscape: Online sales of luxury goods are still a small proportion of total sales A revolution is sweeping the world of retail and 01 (six per cent in 2014) but ‘research online, purchase offline’ was diamond jewellery retailers will need to evolve estimated at 60 per cent of sales for and adapt to compete effectively. international luxury brands. As such, the expectation is that this industry will fully integrate its online/offline experience by 2020, increasing its ability to reach consumer and achieve higher sales.11
The rise of social media has made consumers’ engagement with 02 retail brands a two-way interaction. Internet commentators vie for the attention of consumers with fast and interactive content in blogs or vlogs, at the expense of traditional media (eg The Sartorialist®, The Blonde Salad®) and many brands now use Instagram® accounts as shop windows (eg Barney’s® New York).
The growth of mobile commerce is expected to drive exponential sales 03 growth from mobile devices in the coming years. This is the next phase of development in the multi-channel sales trend.12
Consumers are increasingly valuing experiences over products alone. 04 As a result, vendors have started 2015 SNAPSHOT to incorporate ways to tell ‘brand stories’ and offer shoppers new The global retail sector is undergoing experiences from in-store cafés and fundamental change, driven by a bars to more personalisation and confluence of digital trends, changes customisation options. in consumer behaviour and new operating models. Traditional retailers are having to adapt and As with all retail, there is evidence evolve in the way they engage with in the diamond industry that US consumers, and jewellery retailers 05 consumers are increasingly turning are not immune to the effects of to non-traditional retail channels ® 13 this revolution. (eg Net-A-Porter ). E-commerce – and Amazon® in particular (Fig. 7) – has reshaped Consumer demand for branded many retail sectors by reinventing all diamond jewellery has been on aspects of the retail value proposition. 06 the increase for a number of The use of data to identify individual years, as consumers’ needs for consumer preferences, and predict individualisation and self-expression consumer behaviour, looks set to are better met by brands than continue to fuel the growth of generic products. For retailers, Amazon® and other e-retailers. brands provide an opportunity for differentiating their propositions. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 21
One example of a fast-growing, FIG. 7: AMAZON® RETAIL MODEL non-traditional channel is Net-A- Porter®, the online fashion retailer which launched its fine jewellery category14 in 2012. The company sells in 188 countries and caters to women purchasing jewellery for themselves.15 EXPERIENCE PRICE “It used to be that people only wore jewels to the opera or a gala dinner,” says Sophie Quy, fine jewellery buyer at Net-A-Porter. “It was taboo to buy for yourself, but today women are self-purchasing and wearing their CUSTOMER spoils all day, every day.” SERVICE RANGE Net-A-Porter stocks 44 different jewellery brands with price tags ranging from US$100 to upwards of US$50,000; it uses its shoppers’ CONVENIENCE data to provide its (mostly niche) brands with insights into customer preferences so they can strengthen their offering. From its launch Source: Eden McCallum in February 2012 to March 2016, Net-A-Porter’s fine jewellery category has grown by “some 350 per cent”.16 FIG.8: NUMBER OF US JEWELLERY STORES In summary, traditional jewellery 30,000 retailers are having to face not only the challenges posed by fundamental changes to the retail and consumer DECLINE landscape but also weaker growth FROM 2004 and changing habits in China, 25,000 TO 2015 India and other emerging markets. Alongside those changes, they -21% have also had to deal with the effects of volatile foreign currency markets. For independent 20,000 jewellers in developed markets, slow consolidation has continued (Fig. 8). The growth in new jewellery store openings in China and India 15,000 has slowed in line with weaker 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 demand growth, as reported in 2015’s Diamond Insight Report. Source: US Bureau of Labor Statistics (BLS)
LOOKING AHEAD Overall, jewellery retailers can take ——By interacting with customers minimise inventory imbalances full advantage of the latest directly or through social and improve profitability. consumer trends: media. The country-specific reports of ——By defining their consumer ——By informing would-be buyers the 2014 and 2015 Diamond Insight targets and de-commoditising about the positive impact of Reports (US, China, India), and their offer through more diamonds on communities and the review of the US market and branded and designed jewellery. countries where diamonds are the global Millennial consumer in mined and polished. ——By giving consumers access to this edition of the Diamond Insight a range of channels and brands, Retailers would also benefit from Report provide retailers and their and allowing them to tell their working more closely with their suppliers with a wealth of insights own unique story through their supply chain partners to improve to help them plan and focus on the diamond, via customisation and the way they forecast demand, and most promising areas of growth for personalisation. to plan together sales programmes the industry. that will maximise returns,
Source: [Lorem ipsum] THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 22
Sustained success is likely They also provided customers with to require ongoing efforts from greater supply flexibility, enabling MIDSTREAM midstream businesses to reduce them to defer purchases that had their risk profiles, to enhance been set out in buying plans without their use of technology, to any impact on future supply levels. strengthen their B2B brands Cutting centres also played a key and to develop their interactions role in rebalancing midstream with downstream customers. inventories by sharply reducing Following a challenging year their manufacturing output during in 2015, more normal trading 2015 SNAPSHOT this period. conditions have returned to the While consumer demand for Meanwhile, downward adjustments diamond industry’s midstream diamond jewellery remained to rough diamond prices, coupled relatively robust in 2015, the rough with reduced rough diamond in the first half of 2016 as a result diamond trading environment was production, helped with midstream of the actions taken to address tougher, making it a much more participants’ profitability issues. inventory indigestion. difficult year for the diamond On the demand side, De Beers industry’s midstream businesses. invested heavily in additional These traders, cutters, wholesalers, category marketing activities in polishers and jewellery manufacturers the US and China. It also launched saw a number of interconnected a new Forevermark campaign. issues lead to severe inventory Combined with the investments indigestion in the industry in diamond marketing from other pipeline (Fig. 9). major brands and retailers, these actions stimulated consumer In light of the challenges relating demand for diamond jewellery to supply, demand and profitability, strongly enough to trigger a number of responses helped to a significant increase in footfall normalise trading conditions. and sales over the all-important Upstream, the major diamond holiday selling season. producers responded to the reduced As a result of these actions, the first demand for new rough diamond half of 2016 has seen rough diamond supply by either reducing production demand improve, with midstream or selling less production. businesses replenishing inventories that were depleted by holiday season sales.
FIG.9: 2015 MIDSTREAM CHALLENGES
LOWER CONSUMER DEMAND GRADING LABS OVERCOME EXCESS POLISHED STOCK AT IN Q4 2014 LEADS TO SLOWER BACKLOG, RELEASING RETAIL, ESPECIALLY RETAILER RESTOCKING MORE POLISHED IN CHINA
WORKING CAPITAL AND LESS (AND MORE EXPENSIVE) HIGH MIDSTREAM POLISHED PROFITABILITY CHALLENGES BANK FINANCING AND ROUGH INVENTORIES, AMONG CUTTERS OF ROUGH SALES AND LESS MANUFACTURING AND POLISHERS
LEADS TO DISTRESSED FALLING POLISHED PRICES BANKRUPTCIES OF ROUGH SELLING IN MIDSTREAM, LEAD TO SLOWER AND POLISHED TRADERS RESULTING IN POLISHED RETAILER BUYING LEAD TO LACK PRICE DECLINE (AND VICE VERSA) OF CONFIDENCE 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 23
FIG. 10: KEY DEVELOPMENTS IN MIDSTREAM FINANCING ASSET SECURITISATIONS NOTES ISSUES TO THE BOND ISSUES In addition to some existing CAPITAL MARKETS A recently reissued bond placed by a programmes, new securitisation A notes issue to finance inventory financial institution for a midstream vehicles have been launched by has proven to be successful in raising business was fully subscribed. midstream businesses in 2016 with significant funding. Meanwhile, Increasingly, midstream players are receivables acting as the underlying working capital assets have also likely to draw their funding from assets for the securitisation. been successfully packaged into hybrid models, including elements commercial paper. of traditional bank finance as well PACKAGED FINANCE as participation in other more PROGRAMMES SYNDICATION DEALS progressive options. A leading insurance firm is A leading lender to the industry brokering its own packaged finance co-ordinated the issuing of LOAN GUARANTEES solutions for midstream players, a syndicated loan in 2015 for a The Overseas Private Investment placing an insurance ‘wrapper’ major midstream business, which Corporation (OPIC), the US around conventional midstream in turn attracted several new Government’s development finance assets (ie stock, receivables) and lenders into diamond financing. institution, signed a loan guarantee offering these as commercial paper that will help Botswana develop its to capital market investors. Another diamond manufacturing sector by financing entity is exploring a similar making further financing available to solution for rough purchase finance. businesses with cutting and polishing factories in the country.
LOOKING AHEAD
The events of 2015 crystallised with it a need for greater financial the way the midstream operates many of the risks and pressures robustness, as banks and suppliers (Fig. 10). If bank lending remains that midstream diamond businesses generally seek commercial restricted, then businesses that can can face. The issues of finance, relationships with the businesses that find alternative and competitively technology, reputation and present them with the lowest risk. priced sources of funding will gain differentiation look set to continue a strong competitive advantage. Improved financial robustness being of paramount importance would also position midstream A sharper focus on financial in shaping the future of midstream operators more strongly in an efficiency could also play a significant participants. environment where volatility is the role in shaping the future of the CHANGES IN THE FINANCING new normal. Those with stronger cutting centres. Over-generous credit LANDSCAPE balance sheets will be better able terms have often been the norm in to ride out periods of depressed the middle of the diamond value A host of new compliance pressures demand without the need to liquidate chain, but, in an environment where (from banks, regulators and inventories cheaply, and will have funding is under pressure and ‘cash rough diamond suppliers) require greater ability to capture is king’, businesses may see that the midstream diamond businesses to opportunities in a rising market. benefit of a more efficient cash adopt international standards of cycle can outweigh the perceived financial transparency to maintain The adoption of new forms of advantage of competing for custom their business activities. This brings financing also appears set to change on the basis of extended credit terms. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 24
FIG. 11: HOW TECHNOLOGY DEVELOPMENTS MAY BENEFIT MIDSTREAM BUSINESSES
AUTOMATED CUTTING AND This could become increasingly SYSTEMS THAT ENABLE BETTER SHAPING TECHNOLOGY important as the momentum for INTEGRATION BETWEEN cutting and polishing operations This has the potential to boost moving to producer countries SUPPLIERS’ AND RETAILERS’ efficiency and consistency in the appears set to continue in the INVENTORIES manufacturing process. coming years. De Beers’ recent These have the potential to deliver Sales Agreement with the It also provides an opportunity to significant benefits to midstream Government of the Republic of reduce the lag between the purchase players’ ability to forecast demand. Namibia, as well as its Enterprise of rough diamonds and the sale of Development Project for Diamond They could also enable more efficient the resultant polished stones. Beneficiators (in partnership with inventory management, thereby It will likely be especially useful for the South African government and reducing the risk of a repeat of the businesses with factories in diamond the South African diamond cutting indigestion seen in 2015. producing countries where there is industry), also highlights this trend. a focus on improving productivity.
FIG. 12: HOW MIDSTREAM BUSINESSES MAY ENHANCE THEIR BRAND TO DOWNSTREAM PARTICIPANTS
Strong brand propositions will be by a narrative that makes them retailers value their midstream especially important for midstream stand out for something other than suppliers’ support with store design, players when working with price (such as design innovation, explaining product stories and downstream operators to prevent traceability of product through industry insights. the commoditisation of diamonds the pipeline, or extraordinary These kinds of collaborative at retail. This has been a growing craftsmanship) will have a substantial approaches also offer midstream problem due to increased online advantage over those providing businesses the opportunity to price transparency, more focus on undifferentiated offerings. establish more sustainable supplier- grading reports and a dearth of Offering retailers support on customer relationships, which can compelling brand stories. co-brand building and global be challenging to achieve due to Midstream businesses that can offer category trends may also make midstream fragmentation and the retailers the opportunity to purchase midstream players more valuable to highly competitive landscape. products that are accompanied downstream partners. Many smaller
THE GROWING IMPORTANCE and analyse relevant data to gain risk of undisclosed synthetics is also OF TECHNOLOGY insight on customer needs, consumer likely to continue, so businesses that trends and business performance can demonstrate their brand’s focus The wide range of technological will be strongly placed. on product integrity stand to benefit. developments in the diamond sector means there is a great degree REPUTATION AND The development of strong B2B of potential for midstream firms DIFFERENTIATION: THE ROLE brand equity is also likely to be in this area: there could be increased important in other ways: a firm’s commercial opportunity, for OF THE B2B BRAND ability to differentiate its offering example, for businesses that focus With growing pressure from industry will be increasingly important in on new technology in areas such as stakeholders (including consumers, a fragmented, competitive part of automated cutting and shaping and banks, rough diamond suppliers and the value chain. Some midstream online inventory systems (Fig. 11). retailers), midstream participants will businesses are likely to have continued increasingly need to consider their success by selling to other midstream Technologies focusing on the reputations as a vital element of their players, and differentiating themselves detection of synthetic diamond B2B brand. on the basis of a technical offering material, and on 3D printing in the (such as product specialisation or diamond jewellery manufacturing Higher ethical and professional tailored assortment). Others will see process, are also likely to be standards (and the ability to provide more success by supporting the ability significant areas of interest. evidence of them) are becoming more of their retailer customers to tell Additionally, businesses that can of an expectation than a ‘nice-to-have’ compelling brand stories (Fig. 12). effectively use technology to gather extra. The increased attention on the 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 25
FIG 13: INDUSTRY ANALYST INTERVIEW
Kieron Hodgson, Commodity and Mining Analyst
Q WHAT IS YOUR VIEW ON THE Q WHAT IS YOUR VIEW ON THE ACTIONS THE INDUSTRY TOOK FUTURE OF INDUSTRY IN 2015 TO ADDRESS THE FINANCING? INVENTORY ISSUE? While ADB and Standard Chartered Our view on the actions taken by reducing their exposure to the the major producers last year was a diamond industry is undeniably rare example of industry participants concerning for many, it does clearly realising that something had to be point to one conclusion: returns done. At the time, inventory levels are not high enough for the risks were too high, with fear and taken. For lenders to increase their despondency dictating sentiment willingness to provide capital, at least and transactions. Looking back, the one of two outcomes will be required: actions were successful to a point; higher returns or lower risk. We however, as inventory levels creep therefore believe the industry will up again, should they reach the levels need to reduce its risk profile and, as before, would similar actions be while this can be done through a taken? We hope so. myriad of processes, most likely this would be delivered by increasing Q WHAT SHOULD MIDSTREAM financial transparency, reducing BUSINESSES FOCUS ON IN THE long term average inventory levels, NEAR FUTURE? continuing to close non-economic enterprises and decreasing overall Without wanting to dictate to those debt ratios, most probably through who are perfectly able to manage lower leverage ratios and higher their own businesses, we feel the equity contributions. risk to the availability of reasonable commercial lending facilities remains Q DO YOU THINK THERE HAS a major risk to growth. However, BEEN A FUNDAMENTAL within this argument, manageable CHANGE IN HOW INVENTORY leverage ratios and higher equity IS MANAGED ACROSS THE investments tend to reduce the risks VALUE CHAIN? inherent to cyclical businesses. We also feel that increased consolidation Inventory (and how it is managed) throughout the midstream may in is likely to be a key determinant turn strengthen the negotiating of the prosperity of the industry for hand when considering the relative the next generation. And, put simply, margins at the midstream level, the midstream cannot be relied versus those at the industry’s book- upon to warehouse the output from ends, producers and retail. producers and be there to satisfy the needs and wants of the retailers who are in turn ensuring their balance sheets are as efficient as possible. The possible outcome of a lower, more just-in-time approach to inventory is a significant increase in price volatility and possibly speculation on future category shortages. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 26
Rough diamond sales declined in 2015 with some producers reacting to weakened demand UPSTREAM by reducing production over 2014 levels. However, investments made in the past 10 years should see production increase in the short to medium term before stabilising.
FIG. 14: ROUGH DIAMOND SALES DE BEERS % VALUE BY PRODUCER17, 18, 19, 20 OTHER 9
13 31
INFORMAL SECTOR
3 PETRA US$13.7 BILLION (ESTIMATED) 5 RIO TINTO
5 ODC ALROSA DOMINION 8
25
SODIAM Source: Company Reports and De Beers’ estimates
ROUGH DIAMOND SALES Republic of Botswana) to Corporation, also with an Okavango Diamond Company, unchanged five per cent share and Global rough diamond sales to the Government’s diamond Petra Diamonds with three per cent cutting centres fell by some 30 per trading company. (the same as 2014) (Fig. 14). cent between 2014 and 2015, to an ALROSA was the second-largest estimated US$13.7 billion. De Beers MORE ROUGH DIAMONDS ARE remained the largest supplier of supplier of rough diamonds, with rough diamonds by value, albeit with 25 per cent market share by value BEING SOLD LOCALLY (compared with 26 per cent in 2014). a reduced share of sales of 31 per cent The trend toward more in-country Other major suppliers were SODIAM (from 35 per cent in 2014). This beneficiation continued during (which sells Angola’s total rough includes the approximately two per the past year, with the signing of diamond output) with an eight per cent of global rough diamond sales a milestone, 10-year agreement cent share (2014: seven per cent), made by Diamond Trading Company between the Government of the Rio Tinto, with a five per cent share Botswana (a joint venture between Republic of Namibia and De Beers (as in 2014), Dominion Diamond De Beers and the Government of the for the sorting, valuing and sales of production from Namdeb Holdings. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 27
This deal will see Namibia benefit Enterprise Development Project for from more rough diamonds being Diamond Beneficiators, which aims made available for domestic to help grow and transform the beneficiation, with US$430 million diamond cutting and polishing of rough diamonds being offered sector. The programme also sees annually to Namibia Diamond De Beers offer rough diamond Trading Company customers. All assortments to participants while they Namdeb Holdings’ special stones will are part of the development scheme. be made available for sale in Namibia. On completion, they may be able to apply to become Accredited Buyers In addition, 15 per cent of Namdeb of De Beers before ultimately being Holdings’ run-of-mine production able to apply for Sightholder status, will be made available for sale by an enabling them to compete with independent, government-owned leading diamond companies around sales company called Namib Desert the world. Diamonds Pty Ltd. Rough diamond producers have continued to support local beneficiation. In South Africa, for example, De Beers launched the
FIG. 15: ROUGH DIAMOND PRODUCTION BY PRODUCING COUNTRY
RUSSIA
DRC 19.4 142 141 BOTSWANA 17.5 AUSTRALIA CANADA
SOUTH AFRICA
ANGOLA
ALL OTHERS
2014 2015 2014 2015 VOLUME (MCts) VALUE (US$ BILLIONS)
Source: Company Reports and De Beers’ estimates. Production value is measured by reference to De Beers’ analysis THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 28
FIG. 16: ROUGH DIAMOND PRODUCTION BY PRODUCER
DE BEERS
ALROSA 19.4 142 141 RIO TINTO 17.5 DOMINION CATOCA
INFORMAL SECTOR
JUNIORS/ROW
2014 2015 2014 2015 VOLUME (MCts) VALUE (US$ BILLIONS)
Source: Company Reports and De Beers’ estimates. Production value is measured by reference to De Beers’ analysis
ROUGH DIAMOND PRODUCTION De Beers and ALROSA were again the two largest-producing groups De Beers estimates total global in both volume and value terms. rough diamond production was worth De Beers’ share of production volume US$17.5 billion in 2015, 10 per cent was 20 per cent in 2015 (down from lower than in 2014 (Fig. 15). However, 23 per cent in 2014), second to in carat terms, global rough diamond ALROSA, which had 27 per cent production declined by less than one (up from 26 per cent in 2014). per cent to 141 million carats. Rio Tinto was the third-biggest The largest-producing countries producer by volume, with a 12 per in volume terms were Russia with cent share (10 per cent in 2014) a 29 per cent share (which compares followed by Catoca with five per cent with 27 per cent in 2014); the (the same as in 2014); and Dominion Democratic Republic of Congo with Diamond Corporation with four per 17 per cent (19 per cent in 2014); cent, also unchanged from 2014. Botswana with 15 per cent (18 per cent in 2014); Australia with 10 per In value terms, De Beers remained cent (seven per cent in 2014), and the largest producer with a 32 per Canada with nine per cent cent share of value in 2015, compared (unchanged since 2014). with 34 per cent the previous year. ALROSA was the second-largest with Russia also remained the largest- 28 per cent, up from 25 per cent in producing country in value terms, 2014. Catoca was the third-biggest with a 29 per cent share of the total producer by value with a five per value produced in 2015 (slightly cent share (unchanged from 2014) above the 26 per cent it had in 2014). followed by Dominion Diamond Botswana was the second-largest Corporation, also with five per cent producer in terms of value, with (no change from 2014) and Rio Tinto 21 per cent (in 2014 it was 23 per with four per cent (also unchanged cent), followed by Canada, with from 2014) (Fig. 16). 10 per cent (12 per cent in 2014). Angola, with an unchanged nine per cent, and South Africa with seven per cent, also the same share as in 2014, completed the list of top- producing countries by value. 2 DIAMOND INDUSTRY VALUE CHAIN THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 2 DIAMOND INDUSTRY VALUE CHAIN 29
FIG. 17: GREENFIELD PROJECT PIPELINE (INDICATIVE – PER COMPANY REPORTS)
ESTIMATED AVG. DISCOVERER ESTIMATED ANNUAL AND YEAR OF FIRST PRODUCTION DEPOSIT NAME OWNER(S) DISCOVERY COUNTRY STATUS PRODUCTION (MCTS) GAHCHO KUÉ DE BEERS 51%/ INUKSHUK CAPITAL CANADA RAMP-UP 2016 4.5 MOUNTAIN CORP/MOUNTAIN PROVINCE 49% PROVINCE 1995 RENARD STORNOWAY ASHTON MINING/ CANADA RAMP-UP 2016 1.6 SOQUEM INC 2001 LIQHOBONG MAIN FIRESTONE BASUTOLAND LESOTHO CONSTRUCTION 2016 1.0 TREATMENT PLANT DIAMONDS LIMITED 1957 DALNAYA PIPE ALROSA ALROSA RUSSIA PRE-FEASIBILITY 2017+ 0.3 1955 STUDY VERKHNE-MUNSKOYE ALROSA ALROSA RUSSIA FEASIBILITY 2018 2.0 1956 STUDY ZARYA PIPE ALROSA ALROSA RUSSIA FEASIBILITY 2020+ 0.2 1973 STUDY STAR-ORION SOUTH SHORE GOLD INC. 82%/ URANERZ CANADA FEASIBILITY 2020+ 1.7 NEWMONT 1988 STUDY CANADA 18% BUNDER TBD RIO TINTO INDIA CURRENTLY 2020+ 2.0 2004 CLOSED CHIDLIAK PEREGRINE PEREGRINE CANADA PRE-FEASIBILITY 2020+ 1.2 DIAMONDS 2008 STUDY
Source: Company Reports and De Beers’ estimates of timing of first production
LOOKING AHEAD 2016 sees two new diamond increase in rough diamond Rio Tinto and Dominion producers commence production: production in the medium term. Diamond Corporation are Mountain Province Diamonds developing the A-21 pipe at Diavik, However, beyond the three new with the Gahcho Kué mine, in also in Canada, which is expected mines in 2016 (Gahcho Kué, partnership with De Beers, in the to begin producing in 2018 and Renard and Liqhobong Main Northwest Territories of Canada, extend production life at the Treatment Plant), the greenfield and Stornoway Diamonds with the mine to 2023. pipeline is limited (Fig. 17). Renard mine in Quebec, Canada. De Beers is also extending the Despite a sparse greenfield project De Beers announced the life of some of its major assets. pipeline, there are a number of commissioning of the Gahcho Kué The Cut-8 project at the Jwaneng brownfield expansion projects under plant in August 2016. The mine is mine in Botswana will begin construction, with production set to expected to produce an average producing diamonds in 2017, start in the medium term. Dominion of 4.5 million carats per year once while the development of the Diamond Corporation announced fully operational. Renard began Venetia underground project earlier this year that it will proceed production in the third quarter in South Africa is expected to with the development of the Sable of 2016; annual production is extend production life at that and Jay pipes at the Ekati mine in expected to average 1.6 million mine beyond 2040. Canada, extending the life of carats. These two projects are production at the mine until 2033. expected to contribute to an THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 30 IN FOCUS MILLENNIALS AND THE FUTURE OF DIAMONDS
Globally, Millennials are the largest consumer market for diamond jewellery – a generation which will soon reach its maximum earning potential. 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 31
A POPULOUS GENERATION ON ITS WAY TO REACHING ITS TOP-SPENDING CAPACITY
INTRODUCING THE MILLENNIALS FIG. 18: GENERATIONS DEFINED Everyone is talking about the Millennials because of the GENERATION AGE IN 2015 considerable size of this age cohort and the fact that this BORN MILLENNIALS generation is due to reach its 1981–2000 15–34 most affluent life stage in about 10 years’ time (Fig. 18). BORN GENERATION X This report is a unique in-depth 1965–1980 35–50 exploration of the Millennial generation, from a diamond-specific BORN BOOMERS perspective. It draws on original 1946–1964 51–69 research commissioned by De Beers in the top four diamond markets BORN SILENT in the world – US, China, India and 1928–1945 70–87 Japan – where more than 75,000 women were interviewed over the 1920 1940 1960 1980 2000 2015 past three years to find out more about their desire for diamonds, their diamond acquisition behaviour and the drivers behind it. This report compares Millennials’ relationship with diamonds with insights gained from consumers of the same age group in the 1990s, to build a long-term picture.21 THREE MYTHS ABOUT MILLENNIALS’ RELATIONSHIP In the top four diamond markets of the US, China, India and Japan, WITH DIAMONDS which account for 73 per cent of global diamond jewellery demand, MYTH REALITY the number of Millennials (men and women) approach one billion. Millennials are not Diamonds are high on the Millennials’ Of this number, more than interested in diamonds. wish list to receive as gifts. As the Millennial 220 million22 have the level of age cohort is a declining proportion affluence allowing them to be actual of the population and is yet to mature consumers of diamond jewellery. financially, it has a less obvious presence in the diamond sector. While Millennials in these four very different countries display Millennials in the US are US Millennial age group’s share of their own national and cultural less interested in diamonds diamond demand in volume and value characteristics, they also share than their parents and has remained stable since the late 1990s. values and contribute to the same grandparents. consumer trends across geographies. Millennials are very different Millennials share many of the same views This chapter examines Millennials’ from older generations when and attitudes to life, love, marriage and attitudes and aspirations and it comes to romance and family, and lifetime values as older considers how these translate the romantic significance generations, but these manifest themselves into desirability and demand for of diamonds. later in their lives, as they reach financial diamonds in the US, China, India maturity later. and Japan. THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 32
FIG. 19: SHARE OF 15–34 YEAR OLDS IN THE POPULATION IN THE MILLENNIALS AND THE SCALE OF TOP FOUR DIAMOND MARKETS 1990, VS.2015 OPPORTUNITY FOR DIAMONDS 1990 2015 The ageing population is a significant demographic trend – in all major 38 diamond markets, except India, the proportion of people aged over 34 in 34 34 the overall population has increased, 32 31 28 while the 15–34 age group has lost 27 share over time. 21 Across the top four diamond markets combined, Millennials made up 34 per cent of the total population in 2015, compared with 40 per cent back in 1990 (Fig. 19).
THE OVERALL NUMBER OF 15–34 PEOPLE AGED UNDER 34 IN THE POPULATION 80 87 439 421 298 450 35 26 (MILLIONS) JAPAN MAIN DIAMOND MARKETS IS USA GROWING BUT THEIR SHARE OF THE TOTAL POPULATION CHINA INDIA IS IN DECLINE – THIS RESULTS Source: Oxford Economics IN A MISLEADING PERCEPTION THAT THE MILLENNIAL GENERATION IS STAYING FIG. 20: SPLIT OF TOTAL VALUE OF DIAMOND JEWELLERY ACQUIRED AWAY FROM DIAMONDS BY MILLENNIALS IN THE TOP FOUR MARKETS, 2015 In 2015, the Millennial generation % VALUE IN US$ spent nearly US$26 billion on diamond jewellery in the US, China, USA Japan and India combined. This INDIA represents 45 per cent of the total retail value of new diamond jewellery 6 acquired in these four markets. JAPAN Millennials’ share of the total 6 diamond jewellery value was particularly high in China at 68 per cent; in India it was 47 per cent, in the US 41 per cent and it was the lowest in Japan at 29 per cent. This highlights that Millennials in these markets contributed a greater share of sales value than the share of population that they represent. 26 US$26 BILLION Millennials in the US alone account for over 60 per cent of this generation’s diamond 62 jewellery purchases in the top four markets (Fig. 20). The US Millennials’ disproportionate share of demand for diamond jewellery comes alongside claims from some industry analysts and media23 that this generation is ‘losing CHINA touch’ with jewellery and diamonds. So what’s the truth?
Source: De Beers-commissioned consumer research 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 33
Despite being better educated, proportions of Millennials find Millennials today are facing more themselves employed. Overall, DESPITE BEING BETTER employment and financial challenges their real income level is lower EDUCATED, MILLENNIALS than their parents’ generation – this than Generation X’s was in 1998. delays their journey through the As a result, US Millennials have TODAY ARE FACING MORE traditional life events of marriage, progressed more slowly along the EMPLOYMENT AND FINANCIAL home and children. traditional life path of college, job, CHALLENGES THAN THEIR marriage and children. In 2014 The belief that younger generations PARENTS’ GENERATION only 28 per cent of Millennials were are turning away from diamond married, a figure which is more than jewellery stems from the fact that, 40 per cent lower than it was for the despite being on average better- Baby Boomer generation (Fig. 21). educated than people of the same age were in previous decades, lower
FIG. 21: US MILLENNIALS’ SOCIO-ECONOMIC POSITION
BACHELOR’S DEGREE OR HIGHER WHEN AGED 18–33 IN EMPLOYMENT WHEN AGED 18–33 % OF GROUP % OF GROUP
MEN WOMEN MEN WOMEN
79 80 74 70 69 65
27 21 20 18 17 14
MILLENNIALS GENERATION X BOOMERS MILLENNIALS GENERATION X BOOMERS IN 2014 IN 1998 IN 1980 IN 2014 IN 1998 IN 1980
MARRIED WHEN AGED 18–33 MEDIAN HOUSEHOLD INCOME WHEN AGED 18–33 % OF GROUP 2013 US$
63,365 61,003 60,068
49
38 28
MILLENNIALS GENERATION X BOOMERS MILLENNIALS GENERATION X BOOMERS IN 2014 IN 1998 IN 1980 IN 2014 IN 1998 IN 1980
Source: Comparing Millennials to Other Generations, Pew Research Center THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 34
FIG. 22: US MARKET: SHARE OF 18–34 AGE GROUP PEOPLE AGED 18–34 HAVE IN DIAMOND JEWELLERY ACQUISITION MAINTAINED A RELATIVELY STABLE SHARE OF DIAMOND % JEWELLERY DEMAND SINCE THE PIECES VALUE LATE 1990S
43 42 41 While Millennials do not consume 40 40 39 traditional luxury products in the same way as their counterparts of 20 or 30 years ago, research shows that when they reach demographic and financial maturity, they display strong demand for diamonds, just as previous generations have done. In fact, US Millennials’ nominal demand for diamond jewellery rose from US$10 billion in 1999 to US$16 billion in 2015. Despite the overall population ageing and the financial challenges facing the young, 18–34 year olds have maintained a relatively stable share of volume and 1999 2007 2015 value of diamond jewellery demand since the late 1990s (Fig. 22). Source: De Beers-commissioned consumer research MILLENNIALS’ CONNECTION WITH DIAMONDS REMAINS STRONG: FIVE KEY INSIGHTS
1. MILLENNIALS PLACE DIAMONDS In Japan, diamonds are more India’s jewellery-buying and gifting IN THE TOP FOUR MOST DESIRED desirable as gifts to Millennials than tradition, gold has been and remains they are to the older generations. the favourite choice, due to its HIGH VALUE GIFTS Fine jewellery ranks as their top gift function as a liquid asset. Among The stability in share of demand preference and, when questioned socio-economic classes A/B for the 18–34 age group in the US further about their most-desired type (excluding the Elites) 55 per cent over the past couple of decades is of jewellery, 34 per cent of Millennials of Indian Millennials pick gold first, grounded in the undiminishing choose diamonds over any other with 23 per cent preferring diamonds desire this age group holds for type of jewellery, compared with (for older age groups this is 58 per diamonds as a gift. older generations who stated cent and 22 per cent respectively). a 30 per cent preference. Diamonds rank high on the list of It is notable though, that among all most-desired gifts, with only overseas Among Chinese Millennials, ages in the Elite segment, 75 per cent holidays, weekend getaways and diamond jewellery is the most of women place diamonds as their personal electronics being more desired fine jewellery item to own, first preference in fine jewellery, with valued. Foreign travel has always with 52 per cent placing it at number only six per cent preferring gold. held the greatest allure for US one, compared with 43 per cent for This is especially positive, given the consumers, with overseas trips ranked older generations. aspirational nature of diamonds in this market and the likelihood that first back in 2003. In the intervening Fine jewellery in India far outweighs the other affluent consumers will 13 years, short holidays and personal other luxury or experiential follow in the footsteps of the most electronics have become more categories in terms of desirability: affluent when their income levels rise. desirable for Millennials, who 63 per cent of Millennials wish to buy prioritise experiences over material it for themselves and 46 per cent hope goods, but still desire smart electronic to receive it as a gift. Traditionally in devices due to their need for interconnectedness. 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 35
FIG. 22: US MARKET: SHARE OF 18–34 AGE GROUP 2. MILLENNIALS GROW INTO THE FIG. 23: DIAMOND JEWELLERY OWNERSHIP IN DIAMOND JEWELLERY ACQUISITION DIAMOND CATEGORY % OF FEMALES WHO OWN ANY DIAMOND JEWELLERY % Introducing young people to diamonds early in their lives is MILLENNIALS OLDER GENERATIONS a strong driver of Millennial long-term engagement with the category. 76 Diamond jewellery ownership among Millennials is high in the US, with 66 62 per cent owning at least one piece 62 of diamond jewellery (Fig. 23). That figure jumps from 48 per cent of 18 – 24 year olds to 72 per cent of 25–34 year olds, comparing favourably with the 76 per cent seen among older consumers, and suggesting that 31 diamonds are maintaining relevance for the young who grow into the 20 category. On average, US Millennials 18 who own diamond jewellery own 10 11 5.3 pieces, while 15 per cent of them own eight pieces or more. De Beers’ US CHINA INDIA JAPAN analysis has shown that high levels of diamond ownership in later years Source: De Beers-commissioned consumer research highly correlates with early first acquisition of diamonds – so US Millennials are well positioned, as a fifth of America’s Millennial diamond- owners acquired their first piece before their sixteenth birthday. Among those older than 35, only 15 per cent acquired at this age. This points to a considerable opportunity for diamond gifting to Millennials by older generations. This is discussed further in this section. FIG. 24: DIAMOND JEWELLERY ACQUISITION Diamond ownership levels in the other main markets are lower than % OF FEMALES WHO ACQUIRE DIAMOND JEWELLERY in the US, but in India (10 per cent) IN A YEAR this is in line with ownership among the older generations, and in China MILLENNIALS OLDER GENERATIONS (20 per cent among all Millennials) it peaks among the 25–34 year olds (29 per cent). Japan is the only 18–24, 12% 25–34, 19% market where Millennial ownership is considerably lower (31 per cent) 16 than older consumers’ ownership (66 per cent).
3. MILLENNIALS ACQUIRE 12 18–24, 5% DIAMONDS MORE THAN THE 18–24, 7% 25–34, 12% OLDER GENERATIONS 18–24, 5% 25–34, 9% 25–34, 9% 9 9 The proportions of diamond 8 jewellery-buyers among Millennials, 7 with the exception of India, are significantly higher than among those aged older than 35, with the 4 4 25 – 34 age group most active of all (Fig. 24). This can be explained by the fact that a very high proportion of bridal acquisitions fall within the US CHINA INDIA JAPAN Millennial segment, as discussed in more detail later in this chapter. Source: De Beers-commissioned consumer research THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 36
4. SELF-PURCHASING OF FIG. 25: SELF-PURCHASING SHARE OF NON-BRIDAL MILLENNIAL DIAMOND JEWELLERY IS AN DIAMOND JEWELLERY ACQUISITIONS IMPORTANT AND GROWING ACQUISITION ROUTE AMONG % OF DIAMOND JEWELLERY PIECES ACQUIRED BY MILLENNIALS MILLENNIALS IN A YEAR While the Bridal category has provided stability in markets where 31 there is an established and growing diamond engagement ring tradition, non-bridal acquisition delivers the 23 greatest growth opportunity for 22 Millennials. Self-purchase of diamond jewellery among 18–34 year olds has increased to deliver a sizeable proportion of non-bridal diamond jewellery retail volumes in the US (Fig. 25) and India.24 Self-purchasing in the US has increased more among Millennials than older consumers recently, growing from a quarter of all US CHINA JAPAN non-bridal pieces acquired in 2013 to 31 per cent in 2015. Those same Source: De Beers-commissioned consumer research figures are 34 per cent and 37 per cent respectively for older consumers. 5. GIFTING FROM PARENTS AND GRANDPARENTS TO MILLENNIALS IS A POWERFUL OPPORTUNITY FOR THE DIAMOND INDUSTRY Another important acquisition FIG. 26: US MEANS OF NON-BRIDAL DIAMOND JEWELLERY route for Millennials is gifting from ACQUISITION, 2015 relatives other than partner or spouse. In the US, a diamond gift % OF DIAMOND JEWELLERY PIECES ACQUIRED IN A YEAR from parents and grandparents accounts for 15 per cent of non-bridal acquisitions by Millennials, but in the GIFT FROM OTHER youngest age group of 18–24 it is as GIFT FROM PARENTS/ high as 31 per cent (Fig. 26). GRANDPARENTS 10 7 6 GIFT FROM SPOUSE/ 4 PARTNER 15 31 53 SELF-PURCHASE 76 47
40
37 31
19
18–24 ALL OLDER MILLENNIALS GENERATIONS
Source: De Beers-commissioned consumer research 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 37
THE POSITION OF DIAMONDS WITHIN MILLENNIALS’ VALUE SYSTEM
The unique combination of in emerging economies, their It was in this context that the circumstances in which Millennials adolescence period was characterised Millennial generation formed came to adulthood has created by robust economic growth and its needs for: a different set of priorities and optimism for the future. Strong friendship networks and benchmarks for success than those —— By contrast, the late 2000s saw relationships. of previous generations. Millennials severe global recession set in, in advanced economies generally ——Self-expression and individuality. making consumers reconsider enjoyed a protected, even pampered High interconnectivity and their priorities and change their —— childhood, as the affluence of their technological proficiency. shopping behaviour. parents was at a peak in the late 1990s and early 2000s. Similarly,
MILLENNIAL TREND 1 FRIENDSHIPS, RELATIONSHIPS AND LOVE
FIG. 27: NUMBER OF FACEBOOK FRIENDS IN THE US (MEDIAN) MILLENNIALS LIVE IN LARGE FRIENDSHIP NETWORKS BUT VALUE DEEPER RELATIONSHIPS MILLENNIAL 250 AND MARRIAGE AS MUCH AS THE OLDER GENERATIONS GENERATION X 200
The Millennial generation has to pursue its goals in a complex, ever-changing world which requires YOUNGER BOOMER 98 tough choices. In this environment, the support of friendship networks and deeper relationships is vital. OLDER BOOMER/SILENT 50 Millennials have the largest networks of friends among all generations (Fig. 27), in part due to their Note: Based on Facebook users, n=960 in 2013; Younger Boomers aged 49–57’ proficiency in using social media Older Boomers aged 58–67 and desire to stay connected. Source: Pew Research Center’s Internet Project Survey, 2013 THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 38
It is not just quantity over quality, FIG. 28: ATTITUDES TO MARRIAGE AMONG MILLENNIALS IN however: for Millennials, deeper relationships are cherished as they INDIA AND CHINA provide an anchor in a challenging world. Marriage and raising children % WHO AGREE WITH THE STATEMENTS in a family are as important to INDIA CHINA Millennials as they are to older generations in the US.25 87 I'M PROUD OF MY NATIONAL In China and India, while Millennials TRADITIONS AND CUSTOMS 88 are not rushing down the aisle either, they still respect traditions and the 86 institution of marriage (Fig. 28). IT'S IMPORTANT I HOLD ON TO In India, while the number of MY FAMILY TRADITIONS 91 arranged marriages is declining slowly, 26 it was still as high as 92 per MARRIAGE SHOULD BE 83 cent of all marriages in 2013. A CELEBRATED; IT'S STILL AN 90 notable exception was in the most- IMPORTANT SOCIETAL INSTITUTION affluent social strata, the Elites, who reported only 50 per cent of arranged 73 I'M IN NO RUSH TO GET MARRIED marriages. In the future, it is likely that 77 an increasing proportion of the wider more affluent population will follow in the footsteps of the Elites and love Source: JWT Intelligence, Meet the BRIC Millennials, 2013 marriages will continue to grow. In Japan, about a third (32 per cent) FIG.29: JAPANESE MILLENNIALS AND MARRIAGE of young people under age 30 and not in education are married. MARITAL STATUS OF JAPANESE UNDER 30 AND NOT IN EDUCATION For men this proportion is only % 17 per cent, but this delayed MEN WOMEN romantic maturity is due mainly to lack of financial resources, 17 their reluctance to reduce their MARRIED disposable income or unwillingness 48 to lose free time27 (Fig. 29).
25 SINGLE WITH PARTNER 24
59 SINGLE WITHOUT A PARTNER 28
MAIN REASONS FOR NOT WANTING TO MARRY – JAPANESE MEN UNDER 30 AND NOT IN EDUCATION %
DON'T HAVE THE FINANCES 48
WILL HAVE LESS 46 DISPOSABLE INCOME
WILL HAVE LESS FREE TIME 46
HAVEN'T MET A SUITABLE PARTNER 46
WANT TO ENJOY INTERESTS 34 AND LEISURE TIME
Source: Macromill, Japan Survey of Young People’s Attitudes, Jan 2015 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 39
Most marriages in the main diamond FIG. 30: SHARE OF BRIDAL MARKET IN TOTAL MILLENNIAL DIAMOND markets occur within the age range JEWELLERY MARKET of the Millennial generation. % OF DIAMOND JEWELLERY PIECES AND VALUE MILLENNIALS ARE THE CORE GENERATION FOR BRIDAL PIECES VALUE DIAMOND JEWELLERY – THE SEGMENT MOST RESILIENT 64 TO ECONOMIC VOLATILITY 50 48 Bridal diamond jewellery – ie diamond engagement rings and 36 diamond wedding bands – still 30 31 comprise a large proportion of the diamond jewellery acquired by Millennials in the US, China and Japan (Fig. 30), delivering over US$11.5 billion in value, or just under half of the combined US, Chinese and Japanese Millennial diamond US CHINA JAPAN jewellery demand in value terms. Source: De Beers-commissioned consumer research It is a slightly different picture in FIG.29: JAPANESE MILLENNIALS AND MARRIAGE India. Rather than the American, Japanese and Chinese bride’s typical MARITAL STATUS OF JAPANESE UNDER 30 AND NOT IN EDUCATION solitaire engagement ring with a % sizeable diamond, in India a bride’s jewels mainly consist of large gold FIG. 31: US BRIDAL DIAMOND JEWELLERY ACQUISITIONS pieces with numerous small BY 18–34 YEAR OLDS diamonds. Since the Indian tradition sees most bridal jewellery gifts MILLIONS OF PIECES stemming from the bride and groom’s families, rather than between 3.0 the newly-weds themselves, the bridal 2.8 segment in India generates only four per cent of total diamond jewellery demand among Indian women in the highest socio-economic classes A/B. 2.1 One of the most striking characteristics of the bridal jewellery category, particularly in the US where the diamond engagement ring tradition is firmly established, is its ability to weather economic recessions better than other diamond jewellery categories. Thus, US Millennial bridal diamond jewellery has maintained growth since the late 1990s, irrespective of economic crises. That has, in part, been thanks to the 1999 2007 2015 increasing affluence of newly-weds, 28 as more marriages occur later in life Source: De Beers-commissioned consumer research when people are better established and have higher incomes (Fig. 31). THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 40
The diamond engagement ring diamonds are about fun and remains a cultural imperative in excitement. Later (aged 25–29) the US: 26 per cent of US Millennial they become increasingly focused brides claim to have dreamt about on gaining recognition and their future ring as many as four respect through their knowledge, and a half years before beginning achievements, wealth and status. a relationship. And a further At this stage, diamond jewellery 38 per cent start to think about as an expression of love symbolises their dream engagement ring after sharing and personal acceptance. beginning a relationship but before Finally, the oldest Millennials (aged contemplating a wedding. 30–34 years, and most-likely married and with family) desire security, Research into Chinese women’s dependability and order in their lives, mega-trends, values and relationship and diamonds become a symbol of with diamond jewellery,29 LOVE AS MOTIVATION FOR the safe harbour and harmony commissioned by De Beers, in the family (Fig. 32). DIAMOND ACQUISITION revealed that the love positioning GOES BEYOND THE BRIDAL of diamonds for young women has This variety of Millennial love needs, OCCASION AND THE POSITIONING to be tailored to their specific needs which are relevant in all markets, OF DIAMONDS SHOULD BE at each life stage. The youngest present rich opportunities for Millennials (19–24 years old) start jewellers to use different types and TAILORED ACCORDING TO by challenging and often rebelling designs of diamond jewellery, as well EACH LIFE-STAGE OF THE against the “old ways”; at this stage as different brand stories, for each MILLENNIAL COHORT they need the freedom to discover Millennial life stage to capture the their own paths, so love and diamond category’s potential fully.
FIG. 32: THE ROLE OF LOVE AT DIFFERENT MILLENNIAL LIFE STAGES
19–24 25–29 30–34 STUDENTS/IN FIRST JOB YOUNG SINGLES OR MARRIED FAMILY WOMEN
PERSONAL NEEDS
PEACE AND HARMONY LOVE IS ABOUT SUPPORT, SAFE HARBOUR AND HARMONY IN THE FAMILY RECOGNITION AND RESPECT LOVE IS ABOUT SHARING LIFE’S PRESSURES AND ACCEPTANCE OF EACH OTHER FREEDOM AND DISCOVERY LOVE IS ABOUT DISCOVERY, FUN AND EXCITEMENT
Source: De Beers-commissioned Lens into China, Exploratory research, 2011 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 41
MILLENNIAL TREND 2 SELF-EXPRESSION AND INDIVIDUALITY
Millennials in the emerging markets THE SYMBOLS OF SUCCESS FOR “MY STATUS IS THE INITIALS of India and China, who have come MILLENNIALS ARE NO LONGER AFTER MY NAME (FOR EXAMPLE of age in a more dynamic economic environment, generally aspire to FOCUSED ON CONSPICUOUS M.D., PHD). I DON’T NEED greater wealth and traditional status WEALTH, BUT ON EXPERIENCES STATUS SYMBOLS.” symbols. However, for them too, self-expression and achievement AND PRODUCTS THAT REFLECT “AT MY LAW OFFICE, THE STATUS THEIR INDIVIDUALITY are important life values: the SYMBOL WATCH ISN’T A ROLEX vast majority believe that the best THAT SAYS I SPENT A LOT OF measure of achievement is having Millennials in advanced economies, MONEY. IT IS AN IRONMAN an enjoyable job (84 per cent and such as the US and Japan, typically no 90 per cent agreement in India TRIATHLON WATCH THAT SAYS 30 longer strive for wealth and material and China, respectively). prosperity as markers of success the ‘I DO THIS. I AM A TRIATHLETE.’” The diamond sector may therefore way their parents did. Instead, they benefit from tying personal are driven by a desire for personal Source: Quotes from respondents in a focus achievement and self-expression achievement and self-expression. group conducted by Unity Marketing, to its symbolism more closely. Unity Marketing Trend Report: This could be achieved through In Japan, Millennial men live in the Marketing Jewelry to Millennials, 2014 shadows of their parents, whose level individualisation of designs, of affluence appears unattainable. branding and appropriate shopping “IF YOU COMPARE [ASIAN experiences to fit the occasions and EMERGING ECONOMIES,] MOST motivations for diamond acquisition. OF THOSE KIDS…KNOW IT’S GETTING BETTER, THEY KNOW THE MOST IMPORTANT THEY ARE PROBABLY GOING NON-BRIDAL MOTIVATION FOR TO [SURPASS] THEIR PARENTS’ DIAMOND ACQUISITION INCLUDES INCOME. NO-ONE IN JAPAN VARIOUS FORMS OF CELEBRATING FEELS THAT WAY.” THE INDIVIDUAL
Source: Anita Rani, Presenter on BBC This For Millennials who are not getting World, The Japanese men who prefer virtual girlfriends to sex, BBC Magazine, engaged or married, diamond October 2013 jewellery pieces are most frequently bought to celebrate or commemorate FIG. 33: MOTIVATION FOR MILLENNIALS’ NON-BRIDAL DIAMOND a personal milestone, as a treat, or ACQUISITIONS to cheer oneself up at a difficult time. Millennials are more likely to acquire % OF DIAMOND JEWELLERY PIECES ACQUIRED IN A YEAR: diamonds for these reasons than the older generations. The non-bridal US 2015, CHINA 2014, INDIA AND JAPAN 2013 acquisitions that celebrate the individual now outnumber love CELEBRATION OF LOVE DESIGN OTHER and relationship celebration in the THE INDIVIDUAL REASONS US, China and Japan (Fig. 33).
US 34 31 16 19
CHINA 49 43 7 1
INDIA 25 39 7 29
JAPAN 75 14 4 7
Source: De Beers-commissioned consumer research THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 42
FIG. 34: US ACQUISITION OF BRANDED DIAMOND JEWELLERY BRANDS’ CONSIDERABLE % OF ACQUIRERS OPTING FOR BRANDS POPULARITY GROWS FASTER AMONG MILLENNIALS THAN MILLENNIAL WOMEN ALL WOMEN AMONG OLDER GENERATIONS
18–24, 36% 18–24, 35% 25–34, 40% As in other luxury categories, 25–34, 38% brands are important for Millennials. 39 37 In the US, branded diamond jewellery acquisition among 33 33 Millennials is higher than among all female consumers (Fig. 34) – a trend that is particularly pronounced 25 24 among the older Millennials aged 25–34. It is a similar story in China, where a higher proportion of Millennials (33 per cent) buy brands than older consumers (for whom that figure is 29 per cent). In Japan, where brands have traditionally been strong, 61 per cent of diamond jewellery pieces acquired by Millennials are branded, compared with 48 per cent 2011 2013 2015 among the over 35s. This stronger desire from Millennials highlights Source: De Beers-commissioned consumer research a growing opportunity for the sale of branded diamond jewellery products in these markets. 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 43
Digital media is the essential channel MILLENNIAL TREND 3 through which young people share information and influence each other. In the US, 43 per cent of HIGH INTERCONNECTIVITY Milliennials contribute to web forums or user groups, 39 per cent write reviews or rate products they have bought and 38 per cent share links to products and services they like.31 DIGITAL MEDIA IS MILLENNIALS’ KEY CHANNEL FOR Affluent Millennials have an even COMMUNICATION, INFORMATION GATHERING AND stronger affinity to digital media32 with 60 per cent rating products SHOPPING AROUND AND THE CENTREPIECE OF and services on the Internet and OMNICHANNEL SHOPPING BEHAVIOUR uploading content online, and 29 per cent running their own websites or blogs. These levels of digital interaction are much higher than among the older age groups. When it comes to shopping, Millennials use online methods alongside visiting traditional brick-and-mortar stores. They will often compare prices online, search for product information and look for discount coupons and promotions online (Fig. 35). Omnichannel shopping experiences are now the norm for younger consumers. Retailers who are not equipped for this will lose out among this client base.
66 FIG. 35: LUXURY CONSUMERS’ USE OF DIGITAL MEDIA FOR SOCIAL INTERACTIONS AND SHOPPING % OF RESPONDENTS
MILLENNIALS OLDER GENERATIONS
60 60
46 45 44 43
29 29 24 25 22
12
RATE PRODUCTS UPLOAD CONTENT HAVE THEIR OWN CHECK PRICES LOOK AT LOOK FOR COUPONS AND SERVICES TO THE WEB WEBSITE/BLOG VIA MOBILE THE PRODUCT OR PROMOTIONS ON THE WEB WHEN IN STORE INFORMATION ONLINE WHEN IN STORE IN STORE COMMUNICATION ONLINE SHOPPING ONLINE
Source: Antonio Achile, Partner and Managing Director BCG, True-Luxury Global Consumer Insight, 2016 THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 44
Millennials use their personal use the Internet considerably more a quarter of acquisitions, but networks as well as online resources frequently to research quality, designs traditional channels play a and traditional offline media to and brands (Fig. 36). much more important role in the research diamond jewellery preparation for purchase (Fig. 37). Chinese Millennials also use the purchases. In the US, compared Internet for research in about with older consumers, Millennials
FIG. 36: US INFORMATION SOURCES USED IN PREPARATION FOR DIAMOND ACQUISITION % OF WOMEN ACQUIRING DIAMOND JEWELLERY AND RESEARCHING THE ACQUISITION
MILLENNIALS OLDER GENERATIONS 56 LOOK ONLINE TO PRE-SELECT DESIGNS YOU LIKED 52
36 LOOK ONLINE TO LEARN ABOUT DIAMOND PRICING AND VALUE 32
92 LOOK ONLINE TO FIND OUT MORE 35 LOOK ONLINE ABOUT DIAMOND CHARACTERISTICS/ 76 SPECIFICATIONS/4CS 25
VISIT JEWELLERY STORES TO LOOK AT 68 28 THE RANGE OF OPTIONS (BRANDS, DESIGN LOOK ONLINE TO FIND A JEWELLER STYLES, DESIGNERS, ETC.) 62 24
41 LOOK ONLINE TO FIND OUT MORE 25 ADVERTISEMENT ABOUT DIAMOND SOURCING OR 50 WHERE DIAMONDS COME FROM 15
LOOK IN MAGAZINES TO SEE 34 THE RANGE OF OPTIONS (BRANDS, DESIGN STYLES, DESIGNERS, ETC.) 22 SEE AN ADVERTISEMENT FOR A 32 PIECE OF DIAMOND JEWELLERY THAT CAUGHT YOUR ATTENTION 34 33 TALK TO FRIENDS AND FAMILY TO GET THEIR OPINION 26 SEE AN ADVERTISEMENT FOR 21 A BRAND THAT CAUGHT YOUR ATTENTION 26 LOOK FOR IDEAS OR OPINIONS ON SOCIAL 31 MEDIA (FACEBOOK, TWITTER, INSTAGRAM ETC.) 16
Source: De Beers-commissioned consumer research
Millennials’ high degree of In research, when asked about the sourcing of diamonds. These connectivity with peers and other features of diamond engagement observations point to the need for groups finds an expression in rings on which they are least willing coordinated actions across the heightened social concerns, such as to compromise, 36 per cent of single diamond industry to ensure full balancing inequalities around the US Millennials in 2015 selected visibility of diamond provenance, world and making the world a better responsible sourcing. This compared traceability and reassurance place through joint efforts of all of with 27 per cent among older single regarding origin, so that all society.33 In relation to diamonds, consumers. In the Downstream consumers are aware of the good these concerns take on the form of chapter of this report we discussed that diamonds do and can be raised awareness and preference for Millennials’ higher propensity to confident that their own diamond responsibly sourced diamonds. stay away from diamond acquisition has been responsibly sourced. for lack of trust in the responsible 3 IN FOCUS THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 3 IN FOCUS 45
FIG. 37: CHINA INFORMATION SOURCES USED IN PREPARATION FOR DIAMOND ACQUISITION % OF WOMEN ACQUIRING DIAMOND JEWELLERY AND RESEARCHING THE ACQUISITION
MILLENNIALS OLDER GENERATIONS
VISIT THE JEWELLERY SECTION 59 IN A LARGE DEPARTMENT STORE TO VIEW SELECTIONS 56
53 VISIT SPECIALTY JEWELLERY STORES SEARCH THE INTERNET TO LEARN 17 TO VIEW SELECTIONS MORE ABOUT THE FINE JEWELLERY 48 QUALITY AND PRICES 17
25 10 SEARCH THE INTERNET TO LEARN MORE ONLINE ABOUT THE FINE JEWELLERY BRANDS 27 9
14 6 SEEK ADVICE FROM MY LOOK ONLINE TO PRE-SELECT PREFERRED JEWELLER DESIGNS I LIKE 16 10
13 SEEK ADVICE FROM FRIENDS AND RELATIVES 15
6 LOOK IN MAGAZINES TO VIEW SELECTIONS 9
2 SEE CELEBRITY WEARING A SIMILAR PIECE 2
Source: De Beers-commissioned consumer research
CONCLUSION Millennial consumers are a large and There are powerful opportunities their offering for the various important cohort for the diamond among this generation to expand the occasions and differentiating their industry despite the strong headwinds non-bridal diamond acquisition. proposition through branding and they still experience in terms of financial Self-purchase, acquiring for celebration innovative designs. constraints in mature markets, the of the individual and familial gifting are While Millennials dream about overwhelming noise of competition for growing ways in which Millennials are diamonds, more needs to be done to their discretionary spend and a declining accessing the market. In order to unlock make diamond jewellery a top of mind share of population in many markets. this potential, diamond marketers need category and nurture a deeper emotional Millennials deliver volume and value to understand the specifics of the connection, so that diamonds become growth underpinned by stable bridal lifetime values and preferences of this more relevant day to day, and that consumption and potent desire for consumer cohort and find appropriate Millennials will, in turn, seed the love diamonds as gifts. ways to engage Millennials’ strong affair for future generations. inherent desire for diamonds by tailoring THE DE BEERS GROUP OF COMPANIES THE DIAMOND INSIGHT REPORT 2016 END NOTES 46
END NOTES
1 “GDP Growth (annual per cent).” The 16 Vanity Fair On Jewellery, August 2016, Millennial market for diamonds across World Bank. The World Bank Group, page 59. the US, Japan, India and China to 223 n.d. Web. 17 Okavango Diamond Company sales are million people. That considerable 2 “Shifting tides: Global economic accounted for in the De Beers market figure is the Millennial population scenarios for 2015–25.” McKinsey share estimate as sale from Diamond covered by De Beers-commissioned Global Institute. January 2016 update. Trading Company Botswana. research in this report. 3 “Global Diamonds Metals & Mining,” 18 SODIAM sales from Angola Ministry of 23 CNBC, Jeff Daniels, Blame Millennials: Bank of America Merrill Lynch, June Geology and Mining. Diamond jewelry business in a 2016; “The PIPE – diamond intel,” rough spot, http://www.cnbc. 19 Informal sector sales are De Beers com/2016/06/16/blame-millennials- Morgan Stanley, March 2016; “Why estimates. De Beers has lower we’re less bullish than the street,” diamond-jewelry-business-in-a-rough- confidence in estimates of informal spot.html Morgan Stanley, April 2016. production than other sources. 4 All growth figures for polished Informal sales values are measured 24 In India the survey focused on diamond content in diamond jewellery at De Beers’ Standard Selling Value. purchasers, as this best reflects the decision making process in this market are for new diamonds and exclude 20 Other sales are from company reports, recycled diamonds. (decision made by the woman, while including Gem Diamonds, Lucara finance often is provided by a man in 5 McKinsey Geostrategic risks on the Diamond Corp, Kimberley Diamonds, the family). Of all Millennial buyers rise report, June 2016. Lukoil, Rockwell Diamonds, 72 per cent bought for themselves, 6 The survey sample was 18,129 women Trans Hex and estimates for other compared to 57 per cent among the aged 18 to 74, representative of 114 smaller producers. older generations million women split by age, marital 21 The Millennial generation is defined 25 Pew Research Center, Millennials in status and income and included a as people born between 1981–2000, Adulthood, March 2014 ‘booster’ sample of bridal respondents, or aged 15–34 in 2015 (Fig. 1). This i.e. married and/or engaged in 2015. report uses the 15–34 range but, where 26 De Beers-commissioned India Consumer Survey 2014 7 Demographic Intelligence U.S. there are references to De Beers- Wedding Forecast 2015, cited in commissioned research, which focuses 27 Macromill, Japan Survey of Young http://www.chicagotribune.com/news/ on adult consumers, the Millennial People’s Attitudes, January 2015. ct-millennial-marriage-rate-20150517- range has been narrowed to 18–34 28 Currently the average age of first story.html year olds. When comparisons are made marriage in Japan is 29.7 (Statistics over time, the same age group at the 8 The average age of first marriage in Bureau, Ministry of Internal Affairs and respective moment in time has been Communications, Japan. “Statistical the United States in 2012 was 27 for analysed. The historical period of 1990 women and 29 for men, up from 23 Handbook of Japan 2014”, p. 18, Table to 2015 has been used to compare 2.8 “Mean Age of First Marriage”), for women and 26 for men in 1990 generational data, as it was deemed to and 20 and 22 in 1960. Source: http:// in the US it is 29 for men and 27 for be sufficiently long to reliably identify women (Lydia Anderson & Krista K. twentysomethingmarriage.org/i-do- intergenerational trends. but-later/ Payne, National Center for Family & 22 Overall, in the top four diamond Marriage Research, Bowling Green 9 For statistics on this population markets there were a total of 985 State University, Median age at first segment see: http://www.unmarried. million Millennials (men and women) marriage, 2014), in China it is 24.9 org/statistics/ in 2015. That’s a little over a third of (2010 Population Censorship, Table 10 https://www.whitehouse.gov/sites/ the total population, excluding babies 5–4, Chapter 5, Part 1) and in India default/files/docs/equal_pay_issue_ and the under 4s – and is a sizeable it is 24.1 (Average age at Marriage – brief_final.pdf market for consumer goods. In the US India, MedIndia, 2011). 11 Contactlab/Exane BNP Paribas report, and Japan, the size of the potential 29 De Beers commissioned Lens into Luxury Goods Digital Frontier: The market for diamonds includes the China, Exploratory research, 2011. New Luxury World of 2020. whole of the Millennial cohort, but in the emerging economies of India 30 JWT Intelligence, Meet the BRIC 12 http://www.statista.com and China it is restricted to certain Millennials, 2013. 13 http://blog.euromonitor.com/2014/09/ higher socio-economic groups. In 31 The Millennial Consumer Index from why-the-consumer-preference-for- India, for example, only the top two Bite Group and Redshift, 2013 things-local.html socio-economic segments A and B 32 Antonio Achile, BCG, True-Luxury 14 Fine Jewellery category is defined by and the more affluent ‘Elites’ societal Consumer Insight, 2016 Net-A-Porter as ‘anything bearing a segment are part of the diamond target population. In China, the definition 33 JWT Intelligence, Meet the BRIC gold hallmark’. Source: Vanity Fair On Millennials, 2013 Jewellery, August 2016, page 59. of the target population is limited to the most-developed 126 cities in Tiers 15 Vanity Fair On Jewellery, August 2016, 1–3. In total, this brings the potential page 59.
GLOSSARY Definitions for terms and abbreviations used within this report can be found on our website www.debeersgroup.com/glossary END NOTES
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