Diamonds are forever but buyers are NOT

in 2015; slumping demand from China, previously one of the world’s fastest growing markets, resulted in an oversupply of demands and a crunch in prices. De Beers, now 85pc owned by Anglo American, took the unusual step of holding back supply to support prices. It sold 39pc fewer diamonds last year, but could not escape a 58pc drop in earnings. Nonetheless De Beers remains the largest producer of diamonds by value, followed by Russian giant Alrosa; Rio Tinto, Dominion and Petra follow some way behind the big two.

There were silver linings to 2015’s performance. The US market, which accounts for roughly half of all diamond sales, grew at a healthy 5pc. It remains far ahead of China (17pc) and India (7pc) in terms of market share, but diamond producers are careful not to take this for granted. The rise of the millennial, defined as someone reaching adulthood around the year 2000, poses a significant challenge.

“In the UK and US, we are noticing that millennial consumers are less enthused about diamonds,” says Anusha Couttigane, analyst at Kantar Retail. If they buy jewellery, they are more likely to go for cheaper rocks, or coloured stones, she adds.

“Millennials haven’t been persuaded that a diamond is forever, so they maybe buy another item,” concurs Des Kilalea, analyst at RBC Capital Markets.

Young consumers are often depicted as disengaged, “digital natives”, who view the world through the ever-present filter of an iPhone screen. Perhaps more pertinently, they do not have a great deal of money, and their earning potential is poorer than previous generations – which is bad news for diamond producers.

Kate, a 30-year-old executive assistant, admits that, engagement rings aside, diamond jewellery does not hold great appeal.

“I’d feel pretty silly wearing something really elaborate to be honest. I would never buy any type of jewellery like this myself – I’d rather spend my money on something else.” Graphic designer Mike, 31, adds: “I feel they have their place in wedding rings, but I wouldn’t save up to buy them as a gift. And a small part of me would question where these diamonds came from, and their history.”

The industry is aware that such apathy could be deadly. Lussier points out that young people in the US are in fact active consumers of diamonds, but the industry would be “complacent” if it did not act to shore up its appeal to this group, and encourage repeat purchases beyond engagement rings.

For decades, De Beers bankrolled the marketing of diamonds by up to $150m a year. The collapse of its monopoly meant that diamond marketing fell into abeyance. Now the top seven producers in the world have formed the Diamond Producers’ Association (DPA). This summer it has unveiled a marketing campaign under the slogan “real is rare”.

“'A diamond is forever’ continues to influence consumers but it’s a De Beers proprietary asset. We want something crafted around the younger generation,” explains Jean-Marc Lieberherr, chief executive of the DPA. Research revealed that younger consumers value experiences over possessions, and enjoy a vast network of “shallow connections” through social media. They are less concerned about upholding rituals and they don’t like being told what to do.

The breakthrough for the DPA, Lieberherr explains, was the notion that young people are looking for a deeper connection – something “real” in an increasingly “digitised world”.

“Diamonds can be an ideal metaphor for what’s hard to find, hence rare,” he says. “You can’t get more real than a diamond; it’s been there for billions of years.”

The DPA’s hunch is that the very geology of diamonds can resonate with consumers. They are, indeed, rare – though they are by no means the rarest gemstone (painite, with only two examples ever found, holds that honour). Diamonds are carbon crystals formed in the Earth’s crust under intense heat millions of years ago. They are accessible only because they were forced upwards in great eruptions of magma. Today, these diamond-bearing “kimberlite pipes” are found – and mined – principally in Russia, Botswana (now home to De Beers), the Democratic Republic of Congo, Australia, Angola, South Africa and Canada.

“It’s fair to say the diamond sector has been under a lot of scrutiny,” says Lieberherr. “It’s totally warranted. We put out a product that has the promise of purity, and we need to live up to that promise.”

Leonardo DiCaprio, of all people, has done most to bring the ugly side of diamonds to light with his 2006 film Blood Diamonds, which depicted smuggling during the Sierra Leone civil war of the 1990s.

At the time of its release, the industry had already taken steps to address the problem, in collaboration with a group of governments, by setting up the Kimberley Process. This system, launched in 2000, is designed to stop rebel groups using diamonds to fund wars against legitimate governments – but it has attracted criticism.

Global Witness, one of the NGOs that helped draft the Kimberley Process, resigned in 2011 over concerns it did not tackle wider human rights abuses.

“We’d like to see the diamond industry acknowledge that it has a responsibility to respect human rights, directly and indirectly, throughout the supply chain,” says the NGO’s Alice Harle, who has called on companies to sign up to the OECD’s guidelines on human rights due diligence. “If a consumer walks into a shop now and asks the jeweller about how they can be assured of whether or not this diamond is associated with human rights abuses, I think a lot of companies might struggle to answer.”

Young people don’t just need to be convinced that diamonds are worth the money, they need to be reassured about their provenance.