Bumpy Start for De Beers's Retail

Diamond Venture
By Alan Cowell

 Nov. 21, 2002

 More than 110 years after it mined its first rough diamonds, De Beers, the
dominant force in the world diamond trade, is turning its hand for the first time to
selling the finished product, diamond jewelry, to the public.

But De Beers's $400 million foray into retailing, a joint venture with the luxury goods
maker LVMH Moët Hennessy Louis Vuitton called De Beers LV, is getting off to an
awkward start.

Alain Lorenzo, the chief executive of De Beers LV, said today that the opening of the
flagship store on Old Bond Street, just down the block from Cartier and Tiffany's in
central London, had to be postponed for 10 days. The problem, embarrassingly enough
for the world's rough-diamond giant, is too few diamonds: the store had not yet received
enough diamond-studded jewelry items from suppliers to fill its showcases and display
window.

Even before that, preparations for the ribbon-cutting were dogged by an advocacy
group's protest campaign linking diamond mining to the uprooting of native Bushmen
in Botswana, where De Beers has a joint venture with the government to exploit the
world's most productive diamond deposits. Anglo American is the biggest shareholder in
De Beers.

So audacious have activists from the Survival International group become that they
managed to cover a huge billboard showing the model Iman wearing a De Beers
diamond with one depicting a woman from the Bushman group. Mocking De Beers's
marketing tag line, ''A diamond is forever,'' the replacement poster read, ''The Bushmen
aren't forever.''

For all that, the company will still hold an opening party for the store on Thursday
evening, with fashion models and celebrities like Sophie Dahl expected to attend. A
spokeswoman for De Beers LV, Joan Parker, said that one guest at the party will be
Shirley Bassey, who sang the title song for the 1971 James Bond movie ''Diamonds Are
Forever.'' Iman, who has become the face of De Beers's move into retailing, will not be
there, Ms. Parker said. Her absence will be ''for family reasons'' and not because of any
break with the company over the Bushman issue, as one newspaper here reported, Ms.
Parker said.

The issue has become so fraught that De Beers this week threatened Survival
International with a lawsuit for continuing to insist publicly that evictions of Bushmen
were linked to diamond mining, a connection denied by the Botswana government, by
European legislators, by other British and Botswanan advocacy groups, by De Beers and
by De Beers LV, the retail joint venture.

''No way does diamond mining require the removal of people,'' said Andrew Bone, a
spokesman for De Beers, which has prospected for diamonds in the Central Kalahari
Game Reserve, the vast desert at the center of the controversy, and which still holds
licenses to explore there.

Stephen Corry, the director of Survival, is unpersuaded. ''I can give De Beers this
diamantine guarantee,'' he said. ''The campaign will not end until the Bushman's land
has been returned to them, for without it they are doomed.''
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A messy argument about treatment of indigenous people is probably the last thing De
Beers needed, with the global diamond business facing a global economic slowdown and
only just emerging from another controversy, over so-called conflict diamonds -- rough
stones mined in war-torn regions and sold illicitly to finance rebellions and civil wars.

De Beers LV would rather draw attention to the exclusivity of its product offerings --
once it has them in stock, that is. Reporters invited to the London store today for
preopening interviews saw many empty display cases. That was not the plan back in
July, when the company said the store would be ready to open a day or two after the
inaugural party Thursday evening.

''We were probably a bit optimistic,'' Mr. Lorenzo said.

When the doors do open -- the plan now is for a Dec. 3 debut, 10 days late but still in
time for the main holiday shopping rush -- the store will offer diamond items ranging
from $750 trinkets to, theoretically at least, the 203-carat De Beers Millennium Star,
which was the object of a failed November 2000 robbery at the Millennium Dome in
London. Mr. Lorenzo said the stone was worth ''several dozens of millions of dollars''
and is not kept at the store.

The London store is meant to be the forerunner of a chain that would include a New
York store on the corner of Fifth Avenue and 55th Street, which the company hopes to
open in 2004. The United States accounts for half the world's $60 billion in sales of cut
and polished diamonds, but it is also problematic for the parent company, De Beers,
because of a variety of antitrust investigations that preclude it from openly doing
business there.

For this reason, De Beers, which is based in South Africa, has sought to draw a
distinction between itself and the retail venture, De Beers LV. Though De Beers's
managing director, Gary Ralfe, is also chairman of De Beers LV, ''De Beers management
has no executive role in this company,'' Mr. Lorenzo said in an interview.
De Beers itself sells only rough diamonds, and controls two-thirds of the $8 billion
market in uncut stones. But it does not do business directly with its own retail joint
venture. Instead, Andrew Coxon, the chief diamond buyer and one of a number of De
Beers executives who have moved over to the retail joint venture, has been scouring
wholesale diamond markets, particularly in Russia and Canada, to find the kinds of cut
stones that suit his purpose. They must, he said in an interview, be of high quality and
be certified as coming from sources untainted by conflict. To get such stones, he said, De
Beers LV must ''stand in line behind Tiffany and Cartier'' to buy from independent
traders or from some of the 120 ''sight holders,'' the diamond dealers who are authorized
to buy rough stones from De Beers for cutting, polishing and trading.

Mr. Coxon said that the retail venture's diamonds will be branded, with the name De
Beers indelibly imprinted in minute characters on each stone of more than one-quarter
carat. The logo will be visible only under 200-times magnification.

De Beers decided to become a retailer, he said, because the company realized that ''other
luxury products were outperforming diamond jewelry,'' and because it wanted to
reinvigorate the fragmented retail trade and increase global demand for diamonds. No
one said anything about Bushmen until the project was well under way.