DeBeers are probably the most well known diamond miners and producers on the planet and they probably influence the price of diamonds more than any other company.
The DeBeers group of companies is based in Johannesburg in South Africa and has been synonymous with Diamonds for over a century.
History of DeBeers
It was founded by Cecil John Rhodes and Charles Dunell Rudd in 1888. In the 20th Century the Oppenheimer family became the major shareholders and with Sir Earnest Oppenheimer and his Son Harry and grandson Nicky all being Chairmen of the company at one time or another.
DeBeers, these days, is a collection of companies. They are, collectively responsible for around 40% of the worlds diamond production by value.
De Beers is active in every category of diamond production from the mining of diamonds right through to sales to retail and online with the DeBeers chain of outlets.
According to Wikipedia, "De Beers Mining takes place in Botswana, Namibia, South Africa and Tanzania. Mining in Botswana takes place through the mining company Debswana, a 50-50 joint venture with the government of Botswana. In Namibia it takes place through Namdeb,a 50-50 joint venture with the government of Namibia. Mining in South Africa mining takes place through De Beers Consolidated Mines (DBCM), a partnership with the broad based black economic empowerment partner, Ponahalo Investments. In Tanzania it occurs through a partnership with the government of Tanzania, 75% owned by De Beers, 25% by government. In 2007, De Beers is expected to open its first mine in Canada (called "Snap Lake", located in Canada's North West Territories)."
DeBeers Sales and Marketing
DeBeers has it's own sales and marketing arm. This is a company called the Diamond Trading Company (the DTC). DeBeers sells almost half of the worlds rough diamonds through this marketing arm.
This is almost half of the world rough diamond (rough diamond are those from the mine and before they are polished for sale to jewelry manufacturers and diamond dealers around the world).
However this include diamonds produced by the Russian company, Alrosa, which DeBeers has an agreement. That agreement is due to expire at the end of 2009, unless of course it is renewed. If it is not then Alrosa will become a direct competitor to DeBeers.
The rough diamonds sold by DeBeers through their arm, DTC, are purchased by the world's leading diamantaires known as Sightholders. Sightholders buy tailored assortments or "parcels" of rough diamonds from a blended "mix" of diamonds from the various mines. These clients are chosen following assessment against a set of objective selection criteria according to their ability to add value to diamonds as well as their audited adherence to the DTC's Diamond Best Practice Principles, which cover business ethics, the Kimberley Process Certification Scheme and the industry's System of Warranties, labour standards, health and safety as well as environment. De Beers have actively promoted diamonds as being symbolic of eternity and love, and therefore the ideal jewel for an engagement or wedding ring. Their famously successful advertising campaigns have included such measures as, showing diamonds as wedding gifts in popular romance films, publishing stories in magazines and newspapers which would emphasize the romantic value of diamonds and associate them with celebrities, employing fashion designers and other trendsetters to promote the trend on radio and, later, television and even enlisting the British Royal Family to directly promote diamonds.
The slogan "A Diamond is Forever," invented by N. W. Ayer, is one of the most successful slogans in marketing history. Its purpose is to ensure women are dissuaded from selling the diamonds they have received and thereby preventing a secondary market. The result of this is that retailers sell diamonds at a high price without any competition from a secondary market, and it also allows De Beers to maintain control of the diamond trade at wholesale level.
The company has enjoyed a near monopoly on the diamond industry for many years until discoveries of diamond deposits outside of DeBeers control reduced their world share to around 60%.
Its recharging itself. India’s largest storage battery maker Exide Industries Ltd sees a big boom in business with the impressive growth reported by the auto sector which is growing at 15-20 per cent a year. Seizing marketshare from other automotive battery makers in the last couple of years has only made business better for Exide. While the growth in vehicle production is ushering in good fortunes for the company on one hand, poor infrastructure is dogging it on the other.
automotive batteries driven by a strong growth in the 2-wheeler category. With a majority of two-wheelers under its fold, the company is currently manufacturing 4.42 lakh motorcycle batteries in two shifts at two of its plants located at Pune and Haryana.
However adds Exide Industries Ltd chairman and CEO Mr SB Ganguly, “What is most disappointing is the industrial sector-that means infrastructure sector. There is no improvement in telecommunications, or the railways or the power sector. That is basically because the government expenditure has been restricted. Institutional sales depend on government spending. Once government spending starts these will improve. Otherwise, telecoms, railways and power sector are all dependent on that.”
The company is also taking rapid strides in rationalising its product portfolio which means rationalising battery types and launching new ones. In 2002, the company launched three types of batteries - the ATB or all-terrain battery, the Max, the convex - basically at the three segments.
As a corporate policy, the company is welcoming the VAT regime and according to Mr Ganguly, it is simply because it is a one-point tax and not multilocational tax. He feels that the government must tax the unorganised sector, which does not pay any tax and which is, perhaps, the only way by which revenues can be generated. The unorganised sector is very large in the country - it has 70 per cent of the market for automotive batteries.
OEM marketshare has been Exide’s forte and it continues to be so. Initially, the company had given leeway to some other battery manufacturers because they cut prices but, according to the company none of them could match Exide’s supply chain management. the company says that it has multilocation plants, and we can give just-in-time. Like, in Chennai, for Ashok Leyland it has a plant in Hosur, Tamil Nadu. There are also facilities in Maharashtra, north, south, east and west. So the OEMs go back to the company for large quantities.
In the next five years, Exide assumes a lot of change happening at the marketplace. The change in composition of batteries, for one. The company sees a shift towards 36 volt type. Then is also lithium ion coming. LiIon will be smaller, with very high energy density, but it will be very expensive. That is the problem because of which they cannot be introduced immediately. They will cost at least 10 times as much as the traditional lead-acid battery. They will be much smaller, so take up less space in the auto, be very light and will last for a lifetime. In tropical countries like India they may fail earlier, but elsewhere they will do very well. Its Japanese partners Shin Kobe and Hitachi are already doing trials. The company believes that there will be a lot of demand for batteries, whether it is for cars, trains, boats or houses.
The company is also, of late, making a shift from pure industrial sector to households and FMCG. The company has made a beginning with inverters and according to its own admissions, its inverter sales in north India is far exceeding supply.
Exide’s partner Hitachi plays a big role in helping the company come out with world class products. According to the company, the multinational companies demand batteries as specified by their parents. So the products that Exide make also has to be approved by the parent company. “We work with them from the drawing board stage. Whether it is the Mitsubishi Lancer or Honda, or Hyundai or GM, the battery that they buy from us is a universal product. They don’t change accessories,” he says.
“Apart from tractors whose numbers are declining, all other vehicles have shown a positive growth this year. Sales of commercial vehicles have been impressive and the market is set to grow by leaps and bounds once the expansion of highways or the Golden Quadrilateral project picks up momentum,” says Mr Sudhir Chand, director-automotive, Exide Industries Ltd.
The ushering in of the Golden Quadrilateral project will bring in a sea change in the market structure for automotive batteries, feels Mr Chand. Both Heavy Commercial Vehicles (HCVs) and Light Commercial Vehicles (LCVs) will see a spurt and the entire market is set to be structured on a tonnage basis. “Instead of going from point to point as we do now, there will be a hub and spoke kind of distribution. That is what we anticipate and that is what the commercial vehicles manufacturers anticipate. We see a pretty optimistic trend in business in the next 2-3 years,” says Mr Chand.
The company is one of the first among storage battery makers to enter the maintenance-free market with the “X-press” brand in the commercial vehicles segment and a trial run of this product is on at the moment. Anticipating the spurt in business that the Golden Quadrilateral will bring about, Exide has also undertaken a new project called ’Project Highway.’ In this project, the company is actually fitting a battery on a vehicle as against the usual practice of putting the battery to a dealer who enjoys the liberty of selling the battery anywhere.
Exide personnel fit the battery and keep track of the vehicle number and its owner. The company had started this project in 2002 and going by its own admissions, it has reported an impressive growth in sales due to this one exercise alone. Among the more recent initiatives, it has launched “Eternity” for the premium car-owners which comes with a life-long warranty. Exide’s USP for selling Eternity is based on the concept of insurance and the life-long warranty is based on the assumption that a car stays with its owner for about nine years on an average, during which the battery will require a replacement once (which will be taken care of by the company at no extra cost to the owner). Eternity has been positioned as an upmarket storage battery aimed at the Hyundai Santro, Honda City (petrol), Tata Indica (petrol) and all versions of Maruti. Exide is planning to add Opel Corsa and Mitsubishi Lancer to the list soon.
Exide is also strengthening its Batmobile service which is currently available in 11 cities across India. “We had reported 1.00.000 calls in these cities last year and are hoping to extend this service to other B1 cities and towns provided the infrastructure in those places are good,” says Mr Chand. The 7 am to midnight Batmobile service has a team of dedicated service mechanics and engineers who attend stranded motorists suffering a motor breakdown. The company sees the expensive proposition as a means of enhancing brand equity among its customers.
However, Exide’s plans of setting up joint ventures have taken a beating of late. Most of its proposed ventures have either not matured or Exide had pulled out of them as they had turned unviable. Sometime back, Exide had evinced an interest in setting up a manufacturing facility in collaboration with the Nitol Group in Bangladesh for an estimated cost of Rs 10 crore but has now backed out of the project as the company top brass felt that the situation is not conducive for investment there. The company has also withdrawn from another proposed joint venture with an Austrian firm Jungfer as it has recently been acquired by an US-based firm.
Exide’s mega plan, of course, was to set up a reclamation plant in India with the largest Malaysian smelting firm - Malaysian Reclamation Industry. The project would have required an investment of Rs 75 crore with a capacity of 10,000 tonne per annum and Exide had planned to hold a minority stake (26 per cent) in the company. But the project seems to be moving slowly. What future it will take is yet to be seen. “The viability of a project depends on the feedstock (scrap batteries) that goes in. Unless these scrap batteries come at a cheaper price and as long as there are unofficial smelters in the unorganised sector, who pay a heavy price to procure these scrap batteries since they sell off all components separately, there is little logic in setting up the joint venture unit.
So far as we are concerned, our scrap prices are based on the amount of lead that is there in the scrap and we don’t put premiums to that. Again, all the re-cyclers deal in cash and we wouldn’t like to do it ourselves. In the international market for scraps, prices range from Rs 6-7 a Kg but in India it is abnormally high at Rs 18-20 a Kg,” explains Mr Chand. Clearly, even as it sees new opportunities, it is trying to smoothen some of the problems along the way.