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Sep 30, 2015
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As China sparkle fades, De Beers sees glint in bridal, gift diamonds

By
Reuters
Published
Sep 30, 2015

Famed diamond supplier De Beers expects the value of its sales of the polished jewel in China may rise this year by just over a tenth of 2011's surge, as the economy that has long bolstered global luxury goods heads for its weakest growth in 25 years.

The world's largest diamond producer by value expects 2015 China polished diamond sales to rise 3-5 percent in U.S. dollar terms, Stephen Lussier, head of its Forevermark brand, said in a recent interview. They grew 5 percent last year, down from 29 percent four years ago and 33 percent in 2010.

De Beers


De Beers, owned by miner Anglo American Plc, joins firms from Italy's Prada SpA to France's LVMH in having to acclimatise to a more subdued Chinese economy. For Lussier, one strategy is to home in on high-demand niches.

"The bridal business and the gifting business, particularly amongst younger consumers in China, is really today the main growth area," said the executive, in Hong Kong for a jewellery and gem fair to launch De Beers' annual industry report.

Lussier played down the prospect of a large impact from China's economic slowdown on De Beers. "There is some impact from the economy, but it's not dramatic," he said.

Forevermark was able to leverage "Chinese Valentine's Day" promotions to drive August like-for-like same-store sales in China to a record. China's Valentine's Day, which varies according to the Lunar calendar, fell on Aug. 20 this year versus Aug. 2 in 2014.

With consumers aged 18 to 29 the main drivers of the bridal and gifting sectors, China sales of the Forevermark diamond brand are on track to exceed last year's record of about $280 million in retail sales, Lussier said.

But soft economic data, wild swings in the country's stock market, a government clampdown on splurge spending by officials and pro-democracy protests in Hong Kong have all heightened concern over potential weakening of luxury sales in greater China.

Adding to jitters, China devalued its yuan in mid-August by nearly 2 percent. The global diamond trade - worth about $80 billion - is conducted in U.S. dollars, meaning that a stronger dollar, or weaker yuan, also makes diamonds more expensive for Chinese buyers.

While demand growth has slowed in China itself, mainland buyers are turning to overseas destinations such as Vancouver, Seoul and Tokyo, fuelling hopes they may continue to outspend peers from other Asian countries.

Surveyed by MasterCard in May and June - before recent economic jitters - Chinese shoppers aged 18-29 said they expected to spend an average of $4,362 on luxury goods in the next year, nearly double the average of $2,584 across Asia Pacific.



 

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