Global Jewellery industry has the potential to grow to USD 280 billion by 2015 States a report released by the

Gem & Jewellery Export Promotion Council and KPMG

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Global jewellery sales will grow at 4.6 per cent year-on-year to touch USD 185 billion in 2010 and USD 230 billion in 2015. India and China together will emerge as a market equivalent to U.S. market by 2015. With collective action, the industry has the potential to grow to USD 280 billion by 2015 at a CAGR of 6.7%. India 's share of the diamond processing industry pie will drop from 57 per cent today to around 49 per cent (in value terms) by 2015. China will emerge as a strong player with 21.3 per cent of the diamond processing share by 2015.

Mumbai, 11th December 06: The Gems and Jewellery Export Promotion Council (GJEPC) of India released a report by KPMG “The Global Gems and Jewellery: Vision 2015: Transforming for Growth” on 11 th December 2006 amongst much fanfare. The findings of the report were revealed in presence of Industry stalwarts and luminaries. The study gives insight on the current size and scale of the value chain, identifying trends that will have an impact on the future, predicting the likely state of the industry by 2015, recommending initiatives, and developing a roadmap for various players given the expected changes in the environment. Various socio-economic and political forces are driving the pace of change in the gems and jewellery industry. The report indicates that in the future, the global jewellery industry will see sluggish growth of Global jewellery sales and also an emergence of new markets. Commenting on the findings of the Report, Mr. Sanjay Kothari, Chairman, The Gem & Jewellery Export Promotion Council , said, “On this occasion, I congratulate and thank KPMG and all those dignataries for their immense contribution in building this report. The report has thrown lot of challenges and time has come when every individual player in this Industry will have to work efficiently and professionally for taking this industry to the next level. I urge the entire Industry and trade organizations world wide such as World Federation of Diamond Bourses, International Diamond Manufacturers Association, Jewelers of America etc to play a pivotal role as facilitators and work in synergy for betterment of this Industry.” Global jewellery sales is expected to grow at 4.6 per cent year-on-year to touch USD 185 billion in 2010 and USD 230 billion in 2015. Palladium is expected to establish itself as an alternative metal for jewellery fabrication, while gold and diamond jewellery will continue to dominate the market together, accounting for about 82 per cent. Diamond jewellery will be the slowest growing segment at a CAGR of 3.3 per cent. Growth in the industry will be slow as compared to that expected in other luxury goods categories such as watches, perfumes, etc. For example,

luxury apparel, a USD 100 billion market today, is expected to grow at 10-15 per cent over the next seven years. Mr. Neelesh Hundekari, Director, Advisory Services, KPMG India, further added, “Transformation is necessary for growth. The industry has the potential to successfully compete against the luxury goods industry and preserve its traditional domination of the consumer's discretionary spend. The industry needs to defend jewellery as a category and explore newer markets, while professionalizing family businesses”. To realize its potential by 2015, the industry would have to focus on the growing demand for jewellery as a category and strengthen industry-level and enterprise level capabilities. These programmes need to be initiated within the next 12-18months for its benefits to be realized over the next 10 years. Way forward: To date, the industry has survived due to the intrinsic attraction of its product, the sporadic marketing push by some incumbents, and the entrepreneurial skills of individuals. However, the threat posed by luxury goods, changing consumer habits, industry's opaque and transactional mode of operation, and various socioeconomic and political forces are fast changing the environment the industry operates in. It is evident that the survival of the industry (and of individual players) is dependent on their successful reinvention of the category, substantial infusion of capital and talent, and adaptability to change. About GJPEC: The Gem & Jewellery Export Promotion Council is an all India apex body representing 6500 gem & Jewellery traders from India . Set up in 1966, it operates under the supervision of the Ministry of Commerce and Industry, Government of India and elected representatives of the industry. The Council is a non-profit organization involved in promoting the exports of the Gem & Jewellery sector and also towards service to the nation. About KPMG: KPMG is the global network of professional services firms of KPMG International. KPMG member firms provide audit, tax and advisory services through industry focussed, talented professionals who deliver value for the benefit of their clients and communities. The member firms of KPMG International in India were established in September 1993. As members of the cohesive business unit that serves the Middle East and South Asia (KPMG's MESA business unit), they respond to a client service environment by leveraging the resources of a globally aligned organisation and providing detailed knowledge of local laws, regulations, markets and competition. KPMG has offices in India in Mumbai, Delhi , Bangalore , Chennai, Hyderabad , Kolkata and Pune and services over 2,000 international and national clients. The firms in India have access to more than 900 Indian and expatriate professionals, many of whom are internationally trained.

For further information contact: Harmindar Singh Ph: 2204 7079/84 E-mail: harmindar@integralpr.com Manan Mehta Ph: 4354 1840 E-mail: manan@gjepcindia.com Poonam Ghare Ph: 4354 1808 E-mail: poonam@gjepcindia.com

Findings of the report: The size of the global gems and jewellery industry is estimated at 146 billion U.S. dollars (USD) at retail prices in 2005. The industry has grown at an average Compounded Annual Growth Rate (CAGR) of 5.2 per cent since 2000. Sales of jewellery are concentrated in eight key world markets, which corner more than three fourth of world sales. The U.S. is the world's largest market for jewellery and accounted for an estimated 31 per cent of world jewellery sales in 2005. India and China are the emerging centres of jewellery consumption and have steadily increased their share of the pie to 8.3 per cent and 8.9 per cent, respectively (2005). Value addition at the two ends of the value chain is the highest, with intermediate segments adding relatively lower value (29 per cent in diamond cutting and polishing and 32 per cent in jewellery manufacturing). The structure of the diamond-processing industry will change considerably and India 's share of the processing pie will drop from 57 per cent today to around 49 per cent (in value terms) by 2015. China will emerge as a strong player with 21.3 per cent of the diamond processing share. By 2015, around nine per cent of the world's diamonds, in volume terms, will be processed locally by mining countries, with Angola, Namibia, and Botswana emerging as profitable CPD centres in Africa. Fragmentation of supply sources and slow diamond jewellery growth will make the rough diamond industry more demand sensitive. The rough diamond industry has seen trends such as increased fragmentation of rough diamond supply, emergence of new mines, local beneficiation movement in mining countries and a bull-run in precious metal prices. Jewellery fabrication has been affected by a ccelerating fashion cycles, relative factor costs between manufacturing and consuming nations, and volatile metal prices have fuelled a drive towards moving fabrication to low cost countries. The eight key scenarios that are likely to impact the industry are:

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Mining countries encourage local beneficiation and capture a share of the polishing industry. Supply sources get fragmented and rough supply increases. Consolidation occurs across the jewellery value chain. Existing centres of the industry lose out in favour of new ones. Substitutes such as synthetic diamonds and non-precious metals capture a share of the precious jewellery market. Demand for plain gold jewellery declines. Large emerging retail markets such as China and India organise and consolidate. Jewellery loses out to competing luxury goods.

The industry has the potential to grow beyond USD 230 billion. The study estimates the range of impact to be around USD 50 billion, taking the industry size to USD 280 billion by 2015. In such a situation, the industry would be growing at a CAGR of 6.7 per cent, an increment of 2.1 per cent over the realistic case. At this rate, the industry would be growing faster than the Gross Domestic Product (GDP) per capita and would be claiming a share of the market from other luxury goods. Diamond and plain gold jewellery (product segments) and India and China (markets) will contribute the bulk of this incremental growth. This additional growth will also have a salutary impact on other parameters of industry health – inventory levels (will decrease from 19 per cent to 7.5 per cent), value addition will increase in the intermediate stages of the value chain (for example, in polishing from 29 per cent to 34 per cent). Action Programmes for the Industry:
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Develop demand for jewellery as a category Promote jewellery as a category instead of distinct metals and stones: Identify new product and consumer segments

Manage the portfolio of markets:
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Re-establish value proposition in developed markets Maximise potential of emerging markets Identify markets of the future

Strengthen industry-level capabilities Enhance image of the industry in the eyes of governments, regulators and consumers:
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Publish information Promote transparency in business Professionalize and transform family-owned businesses Attract talent from luxury goods industries Reduce the cost of financing Players to select strategic position and enhance individual capabilities

Compete on one of the four strategic positions:
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Big brother (presence across the value chain) Volume player (large scale operations in a single segment) Specialist (possession of skills) Straddler (presence in adjacent segments)

Critical capabilities for segments:
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Mining Sourcing and processing Jewellery fabrication

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