Natural Diamond Always...
An interview with Jim Vimadalal, Director - Alrosa India
ALROSA is the largest diamond miner by volume worldwide: the company and its subsidiaries produce about 90% of all rough diamonds in Russia and more that 25% of rough diamonds globally. ALROSA’s key business areas include exploration, mining and sales of rough diamonds.
What would be your market strategy for Brand Alrosa to boost its growth rate? Have you set any target for it and if yes, how do you plan to achieve it? How would you define a ‘perfect brand’ and how far are you brand perfectly?
ALROSA is first of all a diamond mining company, and continues to follow this strategy. However, today we see that ESG agenda became an integral part of the global economy. And the pandemic has made this issue even more important. A luxury product today needs to tell a positive story about its contribution to society and environment. All stakeholders (from shareholders and investors to consumers and local communities) are actually interested in the same.
And the share of our clients who are interested in such facts, and even ready to pay premiums is continuously growing.
Retail clients demand from us as a rough diamond supplier to respect the ESG principles, while buyers today are focusing on environmentally friendly and ethical diamond origins when choosing their jewelry.
Today, major players are refocusing their businesses, increasing the operations efficiency, reducing greenhouse gas emissions, and switching to renewable energy sources. This is a different approach to business, which will accelerate the process of modernizing our economy to meet the global ESG challenges. Companies that do not pay enough attention to the ESG agenda will very soon find it difficult to compete for a leading position in the market.
Being an active participant of the global diamond trade, ALROSA has been working for several years to incorporate the best sustainability practices into it’s business model. We are traditionally involved in the development of industry self-regulation standards and actively promote initiatives aimed at supporting the UN SDGs on international platforms, especially those that provide for third-party verification against the set standards, like the Responsible Jewellery Council. ALROSA allocated 5% of its revenue to social investments and 3% to environmental expenses, being the industry leader by this indicator.
In general, our transformation to an ESG-oriented company opens up new opportunities for our business. We have accelerated our transition to building business models and industry standards based on the sustainability principles and setting tangible ESG goals as a part of improving ALROSA’s strategic priorities.
As an autonomous body, what is ALROSA doing to protect and safeguard the interest of the diamond industry of India? What are the challenges faced by the Indian G&J industry and what is your suggestion to cope with them?
ALROSA is constantly building on its collaboration with partners from India. In the extremely challenging conditions of 2020, ALROSA’s direct sales of rough diamonds to Indian customers exceeded 20%. Today we have 26 long-term clients of Indian origin. Two of them have affiliate companies in Russia. The number of spot and auction buyers with Indian roots is many times higher.
Our clients from India, including those trusted long-term customers forming ALROSA ALLIANCE, are satisfied with ALROSA services, the goods’ quality and the product mix, according to recent surveys. However, Indian clients mention that there is still a room for improvement in logistics procedures beyond the company’s scope. The main issues today are caused by counter-COVID restrictions that are in place in many countries, and on the back of this, fast and accurate state control procedures are more important than ever.
To this extent, we also see potential in digitalizing the KP certificates and the digital information exchange between Russia and India on KP related data to expedite the clearing procedures.
Thus, solving these two issues at the intergovernmental level would help accelerating delivery process. This, in turn, will help Indian polishers to increase operational flexibility, letting them to plan their production and purchases more precisely in these uncertain times. Additionally we welcome the efforts of the Indian authorities to work towards the removal of the existing trade barriers relating to the taxation regime for diamond sales in India. We hope that all this will help India’s diamond industry.
U.S. is the main focus of concern for the diamond and jewellery industry. When do you think the situation would improve?
Today we see a very strong demand for diamond jewellery from end consumers. According to our estimates, global consumer demand for jewelry has already recovered to 2019 levels by the end of 2020. A breakthrough growth (USA with above 30%, China with over 10% - all numbers against 2019 record levels) we see in 2021 results from a number of factors:
- Delayed spending on wedding / engagement jewelry worldwide – this effect will last until the end of 2022;
- Growth in wealth / disposable income of high net-worth individuals, including due to growth in stock market / housing prices;
- Growth in savings from shift into tangible vs experiential luxury spending, as well as working from home (lack of dining out, luxury travels, etc.);
- Structural factors like accelerated growth in China due to widened adoption of “diamond jewelry as a gift” concept including bridal jewelry, increase in the number of local stores (including branded shops), expansion of online shopping from brand.com platforms, favorable macro-economic situation and savings’ increase among wealthy individuals, expansion of the duty-free areas which attracts price sensitive consumers.
Some of these factors are expected to gradually level off and return to historical levels, and some of them will support the demand at higher levels. Though even in a conservative scenario, the consumer demand should be getting back to its long-term trend during 2022-2023, with the growth rate stabilizing at least at 2-3 % per annum.
Do you favour Virtual business platforms in getting more interactive in the present pandemic situation?
Diamond trade has always been based upon physical viewing of rough, personal meetings and negotiations. Two years ago, nobody would believe that an expert can successfully analyse and select diamonds without a personal presence. In 2020, both sellers and buyers had to learn how interacting remotely. Today we are successfully arranging high-tech remote viewings and competitive sales using "digital twins" along with traditional viewings, with procedures adjusted to meet counter-pandemic requirements. We offer a full-fledged ALROSA Video-Viewer service, with the help of which customers can view rough in video conferencing mode and interact in real time with an expert showing goods. It allows you to study in detail the goods from all angles, compare positions and receive all the data necessary for an informed selection, and in the conditions of continuing restrictions on international travel, our clients actively use it. Now this format is absolutely legitimate, and the possibility of using this option is spelled out in all documents.
Moreover, we see that people have learned not only to work remotely, but also to buy online, including diamonds. Online sales almost doubled last year - the share of online sales before the crisis was about 10-12%, by the end of 2020 it was about 20%. This is our new reality.
How do you see and rate the emergence of lab-grown / man-made diamonds in the context of real ones and their demand in the market? Do you ever see man-made diamonds surpassing natural ones in demand?
In the history of natural diamond jewelry, contenders for our unique niche crop up on a regular basis: moissanite, cubic zirconia, Swarovski crystals and now LGD. They are all very similar in appearance.
But what makes natural diamonds special is not their shine, nor their hardness or chemical composition – it’s mainly the fact that they are unique. This is what makes jewelry exclusive. Natural diamonds are valued not for their shine, which can be copied, or for their transparency, which can be synthesized; they are valued because they make each item unique, lend it an artistic value, which tends to grow in price over the years. It’s the same as with works of art: no matter how good they are, copies and imitations are still copies.
Diamonds occupy their own niche, like pictures by famous artists in the arts or like an exclusive vintage in the wine market. They have their own history and connoisseurs. Experts estimate that people buy approximately several billion pieces every year with a total value of $300-350 bn. The average price is around $100 per item. Diamond jewelry accounts for only 3-4 per cent of this sum. On the other hand, engagement rings with natural diamonds cost on average around $2,000. It is 20 times more expensive than the average item at the wider market, such as items containing Swarovski crystals, cubic zirconia etc. In other words, natural diamonds have their own audience, which only grows over time.
We do not see man-made diamonds surpassing natural diamonds in terms of demand, and it is clear that consumers in China and India, the industry’s fastest-growing markets, do not view lab-grown diamonds as a real substitute. Naturally occurring diamonds are one of the world’s most valuable objects, formed over billions of years under intense heat and pressure deep within the Earth’s crust. The emotional significance and allure of owning a real and authentic diamond cannot be understated.
- One quality you admire most about the Diamond industry: Resilience
- One draw-back of the industry you would like to improve: Professionalism
- Your strength: My flexibility to handle change
- Your weakness: I focus too much on the details
- Thoughts on Success: It’s the Fuel, gives confidence… success breeds more success.
- Thoughts on Failure: It’s a must to learn and keep your balance.
- Business at the cost of principles OR principles at the cost of business: Principles is priority No. 1
- Describe yourself in nut-shell: I am an ambitious and driven individual who isn't afraid to face a challenge. I'm passionate about my work and I know how to get the job done. I'm not comfortable with settling, and I'm always looking for an opportunity to do better and achieve greatness.
- Your source of inspiration: TRAVEL - The moment you leave your country is the moment you realize the world is a giant book and you’ve only seen the first page. When you travel, you expand your horizons, become open-minded, see different and unusual things, feel in a way you’ve never felt before, see amazing places and world’s phenomena, meet interesting people and learn about their cultures. If that doesn’t inspire you to the fullest, I don’t know what will.
- Your most important learning in the industry: The importance of building good Relationships.