Posted by Sara Zucker on December 8, 2009 10:34 AM
Add De Beers to the list of brands on the decline.
Though De Beers once claimed 90% of the world's diamond production, diamond industry sales have dropped by as much as a third over the past year, and analysts predict that its production will fall by around 50% after a collapse in sales in 2009.
The dealer recently closed all four of its mines in Botswana because of credit issues with independent diamond factory businesses that buy rough diamonds and cut, polish, and sell them to the retail trade. In the past year, almost one-quarter of its workforce has been cut and payroll numbers have decreased from about 20,500 to just under 16,000.
A spokesman for the Antwerp World Diamond Centre says: "A diamond is a luxury product, and that's what people tend to skip from their list. With the recession easing, we're hopeful the festive season could prove a turning point."
Even a rebounding economy may not be enough to save De Beers. Since Russia, Canada, and Australia have entered the diamond market, the De Beers brand has been knocked off its glittering pedestal and reclaiming its former status will be difficult.
De Beers must refinance more than $1.5B of debt by March 10, 2009, and opportunistic lenders are threatening the brand with staggering interest rates. Mining group Anglo American, the diamond entrepreneur Oppenheimer family, and the government of Botswana have all agreed to a $1B rights issue, but it is uncertain if that amount will be enough to save De Beers or simply prolong its inevitable demise.
Ultimately, consumers will decide if De Beers' diamonds are really "forever."