Former transportation executive Philippe Mellier became CEO of De Beers last July, the first outsider to head the industry in its history. Here, in an exclusive interview with JCK following the release of the De Beers’ 2011 financial results, he discusses how he sees the industry and offers some hints about the company’s future:
You are still relatively new to the job, and to the diamond business. What are your impressions as an outsider?
After seven months I have seen all the mines and met all the customers. I think I am starting to understand the diamond industry pretty well. It is an industry with a lot of potential. It is an industry that is quite vibrant. It is a luxury industry, at a time when the luxury business is doing quite well. The supply-demand equation is very much in our favor. As retail demand is growing much faster than supply, there is a lot of opportunity for price increases.
De Beers has a ton of potential. We have the best people mining diamonds all over the world. We have the potential to effectively grow our presence in all segments of the diamond business. We are doing well in mining. And as we go downstream we are having pretty good success.
You have been quoted as saying as De Beers needs to regain its “leadership” role.
I think that’s true. De Beers created this industry and has lost a little bit of its leadership of the industry. I think this industry needs a little bit more leadership to move ahead. It is driven very much in the short term. It should be more stable, more strategic. When you invest millions in mines, you need to be driven by more than just the short term.
I am not saying we need to rule this industry, nothing like that. But we need a little bit more guidance about where we need to go, in order to help the industry as a whole.
What will that mean in practice?
We could be a little bit more vocal. We could communicate a little bit more clearly, instead of having rumors spread around the business. We could talk more about what the big trends are, the retail trends, the consumer trends.
What will be the impact of Anglo American becoming a bigger shareholder in De Beers?
Anglo American is not an unknown shareholder. We know them very well. They were the biggest shareholders since before the privatization. I worked with them before my arrival. In buying the Oppenheimer’s stake, they want to let the company grow.
We will have more integration with exploration and mining and certain economies of scale. The integration is going nicely. We will have a new world but it will be a simpler world because we will have two shareholders instead of three.
Anglo usually doesn’t get involved with downstream initiatives, like De Beers has done with the Forevermark and De Beers Diamond Jewellers. Does Anglo plan to continue that?
If you listen to [Anglo CEO] Cynthia Carroll, she is very keen on what we are doing. She is clearly pushing us to go downstream. Part of the price [Anglo paid] was for the [De Beers] name. They want to use that name to its fullest potential downstream. She understands we are different from the rest of Anglo.
What is your opinion of selling diamonds by tenders?
Diamdel is auctioning about 10 to 11 percent of production. It is very interesting for two reasons. Anybody can take part in an auction so the population we are talking to in the diamond world is larger. It gives us a much better understanding. The auctions also reflect the market quicker. It can help us discover pricing niches and potential in terms of goods.
Do you see the amount of goods being sold by tender increasing?
For the time being, no. We have revealed the 70 sightholders for the next contract period, and we have computed the volume for the next three years based on the current allocations. But it will be a much more dynamic process and if you a repeat customer of Diamdel, you could potentially gain the status of a sightholder. So the relationship between the two systems will be much more dynamic.
The Diamond Trading Company is moving to Botswana by the end of 2013. Do you see much staff turnover?
It is a little too early to tell. We are very pleased with how many of the current staff is willing to [move] down there. The economic situation in Europe is not so good and many see an opportunity in going down to Botswana. We will not see any change in terms of leadership. We will just be located somewhere else. Many sightholders already have factories in Botswana to cut and polish. It will not be a big change for the diamond world.
What do you see in terms of prices this year?
Prices grew very well in 2011, by 29 percent, which is unbelievable. I don’t think we see the same type of growth this year. But we will see growth in retail demand. We still have uncertainties that are linked to the economic problems in Europe. I hope that by the second half of the year we can put this crisis behind us and we can again see growth.
De Beers seems to be wrapping up the big anti-trust court case. Will that have any impact on how it does business in the U.S.?
We had a good result at the end of December. I really hope that as soon as possible we can do business in the U.S. in the normal way. We have De Beers stores in the U.S., we have launched Forevermark in the U.S., so we have made good inroads there. We would like to be able to do business in the normal way and grow the business.
Any message for JCK’s U.S. retail readers?
We had an exceptional year in the U.S. The market was really strong, it is still the leading market for diamond jewelry, and it performed better than we expected. We are counting on the U.S. market in 2012.