De Beers’ Best Diamond Grader: A Machine!

De Beers CEO Philippe Mellier and vice president of marketing Stephen Lussier generously took some time to speak with me at the Jan. 10 Forevermark event in New York City. The interview, as you will see, covered a lot of ground, including De Beers’ growing U.S. presence and whether it’s now competing with its own clients. (As a few folks mentioned to me, after years of seemingly treating the Forevermark as something akin to a separate division, executives are now being clear: De Beers = Forevermark. The same goes for its retail chain.)

But to me, the most interesting part was the talk about the new machines being used at the Forevermark grading lab in Antwerp that assess color and clarity. Unlike the synthetic melee detector the company’s also working on, these devices are proprietary and will not be offered to the industry. Of course, many such machines exist now, but De Beers/Forevermark seems to have taken the technology to a new level, as you will see below: 

You talked at your recent investor day about an automated grader for color and clarity. 

Lussier: We are currently working with proprietary color grading machines at the Forevermark grading facility in Antwerp. We don’t use them alone; we do still use humans. But the machine is currently our most reliable color grader.

One of the things we have learned is that even the best human will only be right 8 out of 10 times when color grading. The eyes can’t see things the whole day. That is why you need multiple opinions. So currently the machine is the most accurate color grader. 

We are also working at a machine for clarity grading. I don’t think these machines will replace humans but they do have an amazing ability to photograph at high speeds. 

As you’ve mentioned, De Beers is now doing business in the United States like a regular company, after 70 years of staying away. What will be the practical impact of that?

Mellier: We are meeting our clients. We are already here with the Forevermark and De Beers Diamond Jewellers but now we hope that De Beers will grow its presence in the U.S. We hope to be able to visit our customers in their factories, to help them, to communicate with them. To have [an American] headquarters, we don’t know if that is necessary. But we will be back. 

Lussier: To have Philippe and [vice president] Varda [Shine] here on a regular basis can only be positive for America.

You have said that you now plan to “produce to demand” as part of your new strategy. How will that work?

Mellier: With the success of the Forevermark and De Beers Diamond Jewellers, we have knowledge of total demand and we get quicker feedback. This will enable us to produce to demand.

This will evolve. There is no point in trying to sell a stone if there is no market for it. But what we eventually hope is to produce diamonds to match worldwide demand. But it will take some time.

But isn’t production governed by nature?

Mellier: We know potentially what is in the ground. So we can put some emphasis on one mine versus another. We are now able to produce with a great deal of precision. And we are able to develop tools that will give us the right type of precision. 

De Beers has also talked about making the company more “customer-focused.” How will that work, and how will it be different from what De Beers did in the past? 

Mellier: That will involve some internal things and is not something we want to talk about here. It is a new concept, to have a big mining company that is customer-driven.

You recently instituted a system where Diamdel bidders can apply to become sightholders. Is it possible that will replace the current sightholders selection process?

Mellier: We don’t intend it to. Right now the sightholders have long-term contracts. I think that is a good system to have partnerships with selected partners who get the maximum value out of the diamonds we sell to them. That system, that philosophy, is here to stay.

Anglo American, your majority owner, just got a new CEO. Will he become De Beers’ new chairman, like his predecessor? 

Mellier:  That is the decision of the board. I have already talked with him. I think he has the right kind of experience for the job. He has an understanding of Southern Africa. We are looking forward to working with him.

Does there have to be a De Beers chairman? 

Mellier:  Yes, there will be a chairman. But I am only the CEO. It’s not my decision.

Turning to the Forevermark, you talked a lot tonight about your new TV commercial. Is the Forevermark committed to TV advertising? 

Lussier: Being on television has definitely made a difference. If you asked me this a year ago, I would say that digital is the new future. But the feedback we get from our retail partners is that our investment on TV has caused a tipping point for the Forevermark brand.

Stephen, this week, you seemed to criticize a lot of the jewelry advertising we see on TV at the holidays. Can you expand on that? 

Lussier: When I look at a lot of retail advertising, I would ask: Do you think that the customer is emotionally involved? Are you actually producing the sort of images that truly engage people instead of just talking to them? You can’t do that in print, but you can do it on TV and the movies and you can do it in digital.

And that is what De Beers is known for. We don’t always get it right but we get it right way more than we get it wrong and we get it right more than most.

A lot of people have wondered about De Beers’ commitment to the Forevermark, given what was perceived as on-again off-again support for Everlon and other recent brands.

Lussier: We are committed to the Center of My Universe program. And I would say the Forevermark is off to a great start in the United States. In just a year and a half, we have accomplished a great deal. So I would say to readers, we are only looking for a limited number of retailers so this is the time to get onboard.

Another thing I’ve heard a lot is that, with the Forevermark and the retail chain, De Beers is competing with some of its clients. Is that a problem?

Lussier: It’s a big world, and there is room for many niches.

Mellier: It’s a big world, but there is only one De Beers.

JCK News Director