D. Swarovski Turns To Gemstones

What could truly excite the unflappable disposition of jewelry manufacturers? How about the introduction of a new product: mass-produced, calibrated natural gems that are strictly matched by size and color.

D. Swarovski & Co. of Wattens, Austria, created a ripple of excitement in the gem and jewelry community this year by introducing just such a product. Of course, calibrated gems have been around for a long time – in a loose sense of the term. What is different with Swarovski’s product is the degree of uniformity and tolerance throughout the size range. The company offers natural amethyst, citrine, peridot, iolite and garnet in sizes ranging from a Lilliputian 1mm to the more usual 3mm in a variety of shapes.

Famous for a century for its high-quality faceted glass, Swarovski introduced the new product, along with a substantial promotional and advertising program, at the Tucson gem and mineral shows in February. But its work with natural gems is not unprecedented. The company gave natural gems a try in the 1960s. That effort fizzled when the company got involved with the cubic zirconia craze in 1967. What revived Swarovski’s interest in natural colored stones?

Gemstone revival: The interest has been there for some time for Helmut Swarovski, chief executive officer. “Back in 1981, I thought, OK, CZ is nice, but what else can we do?” he recalls. “The most important thing in my mind was natural gems.”

Looking through a large window in his Wattens office, Swarovski points to a large lantern in a courtyard. “That is the electric lantern that [company founder] Daniel Swarovski put up in the late 1890s to show customers, clients and competition that his company had electrical power and, therefore, the machines to cut mass quantities of crystal.”

The core of the business is still the faceting of “crystal” – actually a secret recipe for Strass glass. The company provides about 80% of the world demand for faceted pieces of this material for use in costume jewelry. But in its 100 years, the company has always kept an eye on other possibilities. Thus it produces a wide variety of products, including grinding wheels, fine optics and collectible glass figures (see “Out of the Way and Far Away”).

The current CEO sees the company as a pyramid. Cut Strass glass is the base, CZ the next layer, then synthetic gems, then natural colored gems. “The top layer is yet to come,” says Swarovski. “Perhaps diamonds will be the top if we can find a product in which we can excel and have something special to offer.”

Something special: For now, the “something special” is natural colored gems. The decision to proceed with colored gems followed a detailed analysis over several years, says Klaus Hammer, vice president of the Swarogem Division, which oversees the company’s work with synthetic gems, cubic zirconia, some opaque gems such as marcasite and now the calibrated natural gems. “We found that not only is it economically feasible,” he says, “but it could also help define the future for Swarovski.

During the analysis, Stephen Kahler (now product manager) and gem consultant Yianni Melas traveled the world to gain an understanding of the market and the gem business. They also looked for gem sources and possible products.”

When cutting experiments began, Swarovski learned that colored gems wouldn’t be as simple to handle as glass, CZ or synthetics. Natural gems – and especially pleochroic stones – had to be oriented properly, inclusions had to be avoided and the proper optical characteristics had to be studied. Then the cutting machines had to be adjusted accordingly.

Nevertheless, the Swarogem Division embraced the “new” products, set up a sorting and grading department with about 50 employees and developed an advertising campaign (under the leadership of Gerhard Mittermayr, advertising manager).

Setting the standard: “We have brought something to the market the world has not seen before except in synthetics,” says Kahler. “We have a strict definition for the term calibrated.” At Swarovski, calibrated doesn’t mean dropping gems through sieves as producers in other countries do to determine approximate size range. “We mean the stone always has an exact, uniform proportional height, table size and girdle thickness.”

In addition, he says, the girdles are always polished for a brighter appearance and all stones are checked for color uniformity and absence of polishing marks and the proper alignment of all facet junctions. “The proportions for our stones are studied and are such that maximum refraction and reflection are achieved,” he says. Details of the actual process are proprietary.

Kahler says a few customers have complained about color groupings. “We explain that we cannot do the super-natural – sometimes, due to human error, there may be a very, very slight discrepancy in color,” he says. “But we define our standards very highly – and one must not forget this is a natural product and is not always totally uniform.”

When matching problems occur, the company guarantees exchange or replacement. An elaborate bar-coding system on the packaging can trace a gemstone back to the day and machine that cut it, the person who bought the rough and what mine and country it came from. “Swarovski-cut stones are easily recognizable,” says Kahler. “There is virtually no chance that stones could be switched. We only ask our customers to keep track of the package the gems came in.”

Swarovski also has had a few complaints about prices. “They seem higher to manufacturers until they realize they won’t have to do any extra sorting,” says Jack Malinowski, Swarogem’s U.S. representative. “When they get a package from us, the gems are lined up and ready to go right into the jewelry. There is a huge expense savings in not wasting time.”

Kahler adds that Swarovski is not as concerned with yield as some other manufacturers. “We will not sacrifice the proper proportions for a gemstone because we have a standard to maintain,” he says.

In addition, inclusions are avoided so the gems remain eye-clean. This results in a stockpile of second-class gemstones that Swarovski is still pondering how to market. Says Hammer: “We want to get the market used to first-class gems first. But we do have second-class stones that are also wonderfully cut and unique, and we are sure there is a market for them.”

Success & the future: The goal is not to flood the market, says Kahler. “We want to bring credit to stones that designers have often ignored,” he says. “We want to raise the standards and bring value to a material that is beautiful, natural and unique.”

Adds Hammer: “Manufacturers in Italy, Hong Kong and the United States are setting our gems in high-karat gold jewelry, often with diamonds. We’re telling jewelers and retailers that here is a product they don’t have to sell for a mere $60-$100. We’re saying, put this in a nice set, maybe add a few diamonds and sell it for $600-$1,000!”

So far the best-sellers are pink and raspberry rhodolites, especially in small (2.0mm to 2.5mm) square and princess cuts. “These are sizes in which hand-cutters simply can not compete in quantity,” says Kahler.

Meanwhile, the success of the natural gem project has spelled the beginning of new projects. “Ruby and sapphire are high on our agenda,” says Hammer. “We are actively seeking sources and acquiring rough. Within the next few months we will come up with an assortment – mostly small sizes – probably in rounds only 1.5mm-2.5mm.” Emeralds are not a priority right now because the rough is difficult and emerald tends to be political, he adds.

While Swarovski may not be a player in the calibrated emerald market yet, the company is gaining attention with the natural gems it does offer. In the overall company picture, says Hammer, Swarogem is one of the smallest divisions. “But it’s the one with the greatest potential for growth,” he says. This is a new direction for a company celebrating its 100th year, he says, but it’s backed by experience in cutting, in planning and executing, and in setting and meeting standards.

OUT OF THE WAY AND FAR AWAY

Nestled in the Tirolean Alps in Austria lies the secluded, sleepy little village of Wattens. Daniel Swarovski – entrepreneur, tinkerer and visionary – first saw the idyllic spot in 1895. Aside from the dramatic vistas of alpine meadows and rushing crystalline waters, Swarovski envisioned immediate advantages for establishing a glass-cutting business here.

First, it was far from the prying eyes of competitors back in his hometown of Georgenthal, Bohemia, then the world’s largest glass- and bead-cutting center.

Second, Swarovski had just been to the International Electricity Exhibition in Vienna, where he witnessed the genius of Edison, Schuckert and Siemens. Smitten by the possibilities, Swarovski realized that Wattens had running water – the Wattenbach – and thus the hydroelectric power he would need to run the massive glass-cutting machinery of his dreams.

Clearly, Swarovski was out to break the mold. By 1900, he did so. Mass production of faceted glass had become the business of Wattens. “Pierres tailles du Tirol” were the buzz words in Parisian fashion centers where the cut glass (“crystal,” as it became known) was sewn or otherwise applied to clothing and fashion accessories.

Myriad other products soon followed, including loose faceted glass for use in costume jewelry and Strass glass components for chandeliers. In fact, Strass glass chandeliers have turned up in some pretty prestigious places, including New York’s Metropolitan Opera and many world-renowned hotels.

The Nazis forced the company to develop some new products, including high-quality optics for use in binoculars and spotting scopes. Swarovski still makes precision optical instruments through its Habicht division. Another division, Tyrolit, makes precision grinding wheels.

All told, Swarovski owns dozens of manufacturing, sales and service companies with annual sales of about $134 million and is fully owned by descendants of the founder.

BEHIND THE SCENES

Swarovski shops the world for its new natural colored stone-cutting venture. Some buyers visit African countries, India, Madagascar, Myanmar, Thailand and Vietnam while others concentrate on Australia, Brazil, elsewhere in South America and the U.S.

“Forming relationships with miners has been very important,” says Klaus Hammer, vice president of Swarovski’s Swarogem Division. “We generally have very good working relationships with many of the producers.”

Consultant Yianni Melas has been a key in forming these relationships. A gemologist, Melas was instrumental in the exploratory years of the new venture, helping Swarovski decide which gems to buy, where to buy them and which contacts to follow up.

Melas continues as a consultant to the company- a job that keeps him busy. At his office, secretaries confirm that telephones ring regularly at all hours and faxes fly with information on new contacts, sources and gem materials. Recently, Melas has spent much time in Africa looking for new sources of ruby, tourmaline, amethyst and aquamarine (all of which are part of Swarovski’s new venture or soon will be) and in Myanmar for ruby.

Melas says his job is always exciting, but not always easy. He has to be ready at a moment’s notice to visit the world’s remotest areas, some of them inhospitable and rife with malaria, wild animals and roving bandits. In fact, he once barricaded himself in a hotel room in a remote region of India as a group of armed bandits tried to find and rob him. He escaped unscathed via a rooftop, but since then has taken his dog Siam Ruby – an intimidating Blue Thai Ridgeback – on some of the more exotic journeys.