LONDON — First the fanfare, then the fizzle. De Beers Group said Wednesday it had purchased its partner LVMH Moët Hennessy Louis Vuitton’s 50 percent stake in their much-touted jewelry joint venture De Beers Diamond Jewellers.
While observers would argue the investment was a minor one for the French luxury giant — and that it was high time for LVMH to dispose of its stake — the partnership clearly never worked.
Bruce Cleaver, chief executive officer of De Beers, said by having full ownership, De Beers will be able to grow its offer and achieve further integration of operations across the retail network, which includes 32 stores in key markets such as London, Paris and a new location in New York’s Madison Avenue.
The company has been expanding its business in China and, since 2015, showcasing designs from its high-jewelry collections during Paris’ Haute Couture week as an official member of the Fédération Française de la Couture du Prêt-à-Porter des Couturiers et des Créateurs de Mode.
Related Galleries
“By fully integrating the De Beers Diamond Jewellers brand and store network, it will enable us to deliver an even more differentiated diamond offering, alongside our fast-growing diamond brand, Forevermark,” said Cleaver.
De Beers Diamond Jewellers operates as a stand-alone retail business, while Forevermark diamonds are carried by third-party retailers.
Following the announcement, François Delage, ceo of De Beers Diamond Jewellers, talked about “a shared heritage and strong brand link” with De Beers Group. “By being fully part of the group, we will benefit even more from the unique diamond culture, established since 1888.”
While the jewelry retail brand continues to expand, the partnership between the two corporate behemoths was almost always unlikely to be a long-lasting one despite the bold and optimistic projections made for the business when it launched. Sources familiar with both parties said the LVMH and De Beers boards never gelled, and were worlds away from one another culturally.
“On one hand, you had the rough-and-tumble miners who are used to calling the shots in their industry. On the other, you had LVMH, which is all about doing things in a luxury way. De Beers didn’t understand how to market a luxury jewelry brand. Strategies were difficult to execute. The decision should not come as a surprise,” said a source familiar with the venture.
De Beers and LVMH unveiled their partnership in January 2001, setting ambitious goals to turn the De Beers name into the world’s leading prestige jewelry brand.
At the time, the South African mining group was looking to fuel demand for its rough diamonds. It was also wrestling with antitrust issues because of its role as the largest supplier of rough diamonds, and hoping to move into new areas of the business with an experienced retail partner.
Meanwhile, luxury titan Bernard Arnault wanted to expand LVMH’s watch and jewelry division and grab a bigger share of the diamond jewelry market, which, at the time was worth an estimated $60 billion.
“It is our strategy to build one of the largest [jewelry] companies in the world in 10 years. But even a fraction of a percent of $60 billion is quite a lot of money,” said Arnault during a press conference unveiling the venture.
At the time, LVMH’s watch and jewelry portfolio included Tag Heuer, Ebel, Chaumet, Zenith and Fred. Since then, it has expanded to include Bulgari, a big-name jewelry brand that made De Beers Diamond Jewellers look like a sideline business.
The venture was equally owned by the partners with an initial investment of $400 million made over the first five years, split equally. Opening De Beers freestanding stores and introducing high-jewelry collections by the brand were among the first steps taken. Arnault was also focused on building the brand’s image in order to transform De Beers into a consumer name.
Iman, alongside models Erin O’ Connor and Amy Wesson, were the first faces of the brand, and featured in a campaign shot by Nick Knight in the summer of 2002. The Somalian-born model, who also inspired the inaugural collection, was chosen by the brand for representing different facets of a woman’s life, from mother to wife to businesswoman.
The relationship between Iman and De Beers sparked controversy and the two parted ways after the model’s two-year contract expired. Iman became a target of criticism by the group NGO Survival International for appearing in the ads. Survival claimed that De Beers’ mining was forcing the relocation of the indigenous Bushmen of Botswana.
The business early on saw a revolving door of designers and ceo’s as strategies seemed to shift repeatedly. De Beers’ first store on Piccadilly in London was massive — too large for a store selling only diamond jewelry — while it also opened a two-floor store on Fifth Avenue in Manhattan, right near Cartier.
Meanwhile, the venture continued to change its design aesthetic, one moment emphasizing cutting-edge styles, another large stones and then another focusing on engagement rings, the core market for diamonds.
On Wednesday, analysts gave a thumbs-up to LVMH’s decision to sell its stake, saying it was a long time coming.
“LVMH has finally pulled the plug on their joint venture with De Beers. This originated at a time when LVMH did not have any branded jewelry of their own,” said Luca Solca, managing director at Exane BNP Paribas. “The situation is very different today, as they own one of the megabrands in this space: Bulgari. It seems appropriate, therefore, to turn the page on this, and relegate it to the ‘experiments that didn’t work’ pile.”
Julian Easthope, a luxury goods analyst at Barclays Capital, said the De Beers venture only represented a fragment of LVMH’s business, so the deal is of little consequence. “It was a joint venture between the two [parties], so not fully consolidated in the LVMH accounts, and it was a tiny part of one of [LVMH’s] smaller divisions, their watch and jewelry division. Therefore it makes sense for LVMH to tidy up their portfolio,” said Easthope.
In its 2016 annual report, De Beers’ parent Anglo-American said De Beers has a global leadership position in diamonds, producing around a third of the world’s rough diamonds, by value. It said De Beers “seeks to stimulate consumer demand for diamonds through its Forevermark brand and De Beers Diamond Jewellers,” a retail joint venture with LVMH.