NEW YORK — Tiffany & Co. alerted investors to two unusual concerns that could imperil its sales in the future: the association of diamonds with brutal wars in Africa and the debasement of the gems in the minds of consumers.
Among the boilerplate risks the company enumerated in its annual report, which investors found in their mail last week, Tiffany’s warned that efforts by nongovernmental organizations to increase public awareness about “conflict” diamonds could “encourage legislative response [and] affect consumer demand for diamonds.”
Conflict diamonds refer to the illicit trade of rough stones, the proceeds from which are used to support armed conflict in countries such as Angola, Sierra Leone and Liberia. They are also thought to help fund international terrorism.
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Tiffany said it has taken an aggressive approach to exclude conflict diamonds from entering its supply chain. To the company’s credit, Global Witness, a leading nongovernmental organization monitoring the conflict diamond trade, said that of 30 major diamond retailers and wholesalers, only Tiffany “stood out because it described how it has strengthened its sourcing and auditing policies to help ensure that it is not dealing in conflict diamonds.”
Moreover, Tiffany inked a deal in 2002 to buy at least $50 million in diamonds from the Diavik mine in Canada in order to gain more control over its sourcing.
Tiffany’s other great concern is that the increasingly fierce competition for engagement jewelry sales has created a perception in consumer’s minds that diamonds are a commodity, rather than a luxury purchase.
“The rise of the Internet and increased use of diamond condition reports issued by independent gemological associations have given rise to the mistaken impression amongst certain consumers that diamonds are commodity items and that significant quality differences do not exist,” Tiffany’s said.
The company said that it competes by stressing quality, “while some competitors offer inferior diamonds claiming they are comparable, but at lesser prices.”
Wal-Mart, for example, sells a 1-carat diamond solitaire engagement ring in a platinum setting for $3,288, whereas a “Tiffany-quality” 1-carat diamond engagement ring is priced at $8,800 to $32,000, according the company’s Web site.
— Dan Burrows