UpFront

De Beers Launches Big Holiday Promotion

If De Beers has its way, you’ll sell more diamond jewelry to men this holiday season than ever before. In a big fourth-quarter marketing plan announced this month, the company is targeting affluent American males as its best hope for increasing worldwide sales during the year’s all-important final quarter.

The U.S. promotional campaign, costing 55% more than last season’s, will take De Beers into territory it’s never trod before: outdoor advertising. Ads will appear on roadside billboards, bus-stop shelters, and commuter railroad and subway platforms. They’ll also pop up in consumer magazines and newspapers, including a few where readers may be surprised to see them: the Wall Street Journal, Cigar Aficionado, the Robb Report, Wired, Worth, and Barron’s.

“We chose media with high readership by affluent males,” says Andrea Halberstadt, director of the diamond marketing group at J. Walter Thompson, De Beers’ U.S. advertising agency. “And the ads, in their style and layout, encourage men to purchase diamonds now by carrying a subtext that such a purchase can bring joy or even make you a hero. They differ from our traditional ads geared toward women in that those show women wearing diamonds and try to stimulate desire. The new ads show only diamond jewelry.”

They’re also spare with words. The only text is a clever title. Some examples: “This Christmas there will be more than three wise men” and “Redo the kitchen next year.”

De Beers is concentrating its holiday advertising on the United States because its “strong economy and high consumer confidence present a great opportunity,” says Stephen Lussier, world director of De Beers’ consumer marketing division. “We’re not worried about the volatility on Wall Street because the underlying economy remains so strong. In fact, with all the stock liquidation going on, men will have more money in their pockets to spend on consumer goods.” – Larry Frederick

Buying Loose Diamonds Gets Easier

Two Florida diamond dealers have set up a global diamond-buying clearinghouse in Miami enabling jewelers to order loose stones for delivery within 48 hours. By eliminating middlemen and letting jewelers buy diamonds as part of a much larger group, prices will be kept low, the dealers say.

The cost of joining the new buyers’ and sellers’ group, called the Syndicated Diamond Club, will be $295 a year for retailers and $1,000 a year for suppliers. Retailers must have a Jewelers Board of Trade credit rating of 1.

“Jewelers often lose 70% to 80% of their diamond calls to competitors because they’re not holding a particular stone at the time the customer wants it,” says Tibor Stern, one of the club’s founders. “Members of our club will be able to conduct an online search for the stone, while the customer waits.”

Jewelers who lack Internet access can phone or fax their orders. The club will be open seven days a week.

Suppliers will fax or e-mail the asking price for each stone. Orders and payment will be made through the club. “Suppliers can rest assured their goods are being actively marketed,” Stern says. “They also don’t have to worry about bad debts, rubber checks, and late payments. The club assumes responsibility for full, prompt payment.”

Other club benefits include discounted insurance, preferential unsecured loans from a commercial bank, an appraisal service, and a Web site listing for members’ estate jewelry.

Stern is a former president of the Diamond Dealers Club of Florida (DDCF) and a current director of the Diamond Industry Steering Committee. Cofounder Derek Parsons is president of the DDCF and used to be the bourse’s chairman.

For more information, visit www.diamondclub.net. – Steve Benson

Winston Legal Battles Reach a Crucial Point

The legal battles between the Winston brothers over control and sale of Harry Winston Inc. reached a critical stage in September when a New York judge ordered the firm and its trustees to release highly sensitive financial documents. In addition, the confidential accounting of the firm’s assets from Credit Suisse First Boston prepared for prospective buyers of the company was due in late September, and the trial over the estate of Edna Winston – Harry’s wife – was set to resume Sept. 28 in Broward County Circuit Court (Fort Lauderdale).

Meanwhile, though, president Ronald Winston is moving full steam ahead on new marketing plans and a new salon opening in New York.

In the first action, Westchester County Surrogate Court Judge Albert Emanuelli ordered Ronald Winston, president of Harry Winston and Harry’s eldest son, and the trustees who run the firm, to turn over key financial records in the eight-year-old suit filed by the younger brother, Bruce. In his suit, Bruce charges that Ronald compromised the value of the company through mismanagement, using company assets to pursue questionable ventures, and neglecting business to engage in hobbies.

Many details of the judge’s 27-page order have been kept confidential, but Bruce Winston’s attorney, Edward Wohl of New York, says, “It allows Bruce access to information that he’s been trying to get for eight years.”

The three trustees holding the company stock – Ronald, former company vice president Gerald Schultz, and a representative of Bankers Trust – were appointed by Harry before his death in 1978.

Ronald wasn’t available for comment, but in previous statements he denied the charges in this and all other suits and said, “Bruce is being manipulated by others who want to take over the business.” Ronald has also appealed an earlier court ruling paving the way for the trustees to put the firm up for sale to the highest bidder.

The trustees appointed Credit Suisse last spring to take a full accounting of Harry Winston Inc.’s assets and shop the firm to prospective buyers. Ronald offered to buy Bruce’s half of the company on several occasions and used a provision of his father’s will to block any sale of the firm to outside interests. Bruce rejected the offers, ranging from $4.5 million to $28 million, and the two other trustees believe the business would realize much more money in open bidding than through a closed sale to Ronald.

In the Edna Winston estate battle, lawyers for Bruce Winston charge that Ronald, acting as executor, allegedly transferred $6 million into the business shortly before her death in 1986 and that he sold a diamond ring and ruby necklace belonging to Edna “for less than fair market value.” Bruce also objects to Ronald’s $432,000 executor’s fee and wants him to account for a diamond necklace valued at $500,000 to $1 million owned by his mother. Ronald, in earlier statements, denied all allegations, saying he acted fairly.

Jim Haag, Winston’s marketing manager, says the legal problems haven’t harmed the business, which he stresses “is better than ever, increasing 50% between 1994 and 1997.”

Despite Japan’s economic woes, business there has been so good that the company is opening another salon in Osaka.

“We’ve got a very strong brand name in luxury jewelry in Asia,” Haag explains.

In the United States, Winston’s new marketing strategy is to redo the company image, keeping the same ultra-luxury market but making the company more accessible. “We’ve added a doorman – more like a concierge – to our Fifth Avenue salon because many believed, including our own clients, that it was only open by appointment,” Haag says.

Winston is planning new ads in New York newspapers and special events. In addition, clients will receive a personal monthly letter from Ronald, explaining the firm’s upcoming special events. – Russell Shor

Worth a million? It’s a one-of-a-kind, heart-shaped 2.66-ct. fancy pink from Australia’s Argyle Diamonds, part of a rare pink tender shown last month in New York. The stone garnered the highest color grade possible in its category from both the Gemological Institute of America’s Gem Trade Lab (fancy vivid purplish-pink) and Antwerp’s HRD lab (fancy intense purplish red) and could be worth hundreds of thousands per carat. Silent bids were taken on the entire lot of 61 fancy pinks and two grays.

Unigem Downsizes

Unigem International, a Beverly Hills, Calif., diamond jewelry supplier whose business situation was the subject of industry rumors this summer, isn’t filing for bankruptcy, says president Richard Udko. “To do so, you have to owe money, and there’s no one in the industry” to whom the firm owes money, he says.

However, Udko adds, Unigem is “downsizing significantly” because “the economic climate isn’t consistently favorable for operations.” This summer the firm let go most of its nearly 50 employees.

At press time, Udko said he hadn’t yet “reached a conclusion on how this [downsizing] will affect” merchandising or other operational aspects. “We are addressing those issues now.”

Unigem was founded in 1923 and incorporated in California in 1969. Udko has been president since 1980. Most of the firm’s clients are U.S. retailers, though it also does some business overseas. One of its best-known lines is the “Diamond Award Collection.”

Rumors about Unigem’s stability surfaced this summer, when former employees began seeking work at other companies. – William George Shuster

Fred Meyer Acquires Littman Jewelers

Fred Meyer Inc., the fourth largest jewelry retailer in the United States, has agreed to buy 114-store Littman Jewelers and nine-store Barclays Jewelers from Elangy Corp. of Edison, N.J. The 123 stores are located mainly in the Mid-Atlantic region. Both chains will retain their names. Elangy Corp. itself wasn’t sold.

The acquisition establishes Fred Meyer, based in Portland, Ore., as a national jewelry retailer with operations in every major region of the country. It will have 381 stores in 26 states.

“We’re eager to combine our dynamic jewelry operation with Littman’s strong market positions across the East Coast,” says Ed Dayoob, president of Fred Meyer Jewelers Inc. He cites the synergy of the deal, noting that both firms “buy from the same vendors, offer similar broad selections, and have talented employees” committed to providing customer service and value.

Littman Jewelers, established in 1885, is the last of the family-owned jewelry chains with more than 100 stores. Elangy is headed by cochairmen Leonard Littman, with the company since 1960, and his brother Herbert Littman, who joined the firm in 1954. – William George Shuster

Chain Absorbs Only Diamonds

Gross Diamond Centers of Louisville, Ky., has agreed to buy Only Diamonds, a group of “super stores” specializing in diamond merchandise started in 1997 by veteran jewelry retailer Nathan Light (JCK, April 1998, p. 188). It’s one more step toward Gross’s goal of becoming a Midwestern regional group of jewelry stores.

LDC Group Ltd., the Akron, Ohio, parent firm of Only Diamonds, is the second big purchase this year by Gross. Earlier it bought the 18-store J.C. Keepsake group, including J.C. Keepsake Diamonds of Lakewood, Colo. There are 10 Gross Diamond Centers: eight in the Louisville, Ky., area and two in Indiana.

The freestanding Only Diamonds stores, located adjacent to major malls, are 4,000 to 4,500 sq. ft. in size, employ about 15 full-time staff people each, and feature customer-designed interiors and showcases.

Light says the deal to sell the LDC Group to Gross was completed in early August. The value of the transaction wasn’t released. The reason for the sale, he says, is that “we were just not successful in raising the capital we needed this summer. Our backers couldn’t provide any more.”

Only Diamonds will retain its name, but its headquarters will move to Louisville. It’s uncertain whether Light will stay with the stores. He says, though, that he wants to remain in retailing in some capacity. – William George Shuster

Alrosa and De Beers Renew Agreement

De Beers executives and officials of Russia’s diamond mining and marketing agency, Almazi-Rossii-Sakha (Alrosa), have announced their intent to renew the agreement that keeps most of the country’s diamonds moving through the Central Selling Organisation, De Beers’ marketing arm.

Alrosa president Vyacheslav Shtyrov says that the pact would stop leaks of unauthorized Russian rough into the market. Diamond industry leaders hailed the announcement as a confidence-builder during a period of great uncertainty.

The agreement, signed last year after three years of near chaos, provides for Alrosa to sell up to $1.1 billion worth of diamonds to De Beers’ CSO and permits sales of limited amounts of rough diamonds through other outlets. It also provides for a joint “observation council” to monitor the world diamond markets.

Both De Beers and Alrosa officials say the framework of the 1997 pact, which expires on Dec. 31, will remain intact and that both sides “have formed a working group to prepare the agreement document.”

Despite the uncertainty surrounding many previous Russian diamond agreements, most analysts viewed this announcement as a “done deal” because of the meltdown of the Russian economy and the oversupply of diamonds caused by Asian economic turmoil. Few anticipate a repeat of the 1995-96 crisis, when Russia sold huge amounts of diamonds into the market while Alrosa and the Russian government were negotiating a new De Beers contract. This caused serious oversupplies and uncertainty, eventually prompting De Beers to cut off all Russian buying at the end of 1996. – Russell Shor