Inetrview at JNA website
Demand for diamonds in the Asian market has grown rapidly. A survey conducted by Russian diamond miner ALROSA found that the Chinese consumers surveyed are more eager to purchase diamond jewelry than American consumers. This is undoubtedly ALROSA’s plan to further develop the Chinese market. Good opportunity. Director of sales and executive director of ALROSA Evgeny Agureev was interviewed by Jewellery News Asia to explain the group’s sales strategy, promotion plans in the Chinese market and insights into the current status of the diamond market.
What do you think of the current development of the global diamond market?
- I think the performance of the global diamond market is constantly improving. In 2017, ALROSA and other world’s major diamond miners increased their output. The Group’s output last year totaled a record of 39.6 million carats. Encouragingly, demand is growing too. We see positive trends on the Chinese market, there is a good demand for polished diamonds and jewellery from the mass segment. Of course, it positively influences the whole pipeline, because it increases the demand for polished diamonds and rough diamonds.
The United States, the world’s largest diamond jewellery consumption market, was driven by factors such as falling unemployment and rising average wages. Diamond jewelry sales in the fourth quarter of the last year also performed well.
Of course, there are also some negative factors in the market, such as fraud and corruption in the Indian banking system. The seriousness and scope of its involvement remain to be investigated, which will certainly have an impact on India’s jewellery and diamond industry. But at the same time, this is also an opportunity to thoroughly change some of the bad habits of the local banking system, which is conducive to the long-term healthy development of the industry.
Alrosa's sales plan for 2018?
- Generally speaking, we have rather ambitious plans for 2018. The volume of ALROSA production will be slightly lower than in 2017, about 36.6 million carats. But we will manage our inventories more effectively and expect to provide the market with about 40 million carats.
In January of this year, we have just signed a three-year sales agreement with 56 companies that sell gem-quality diamonds and 11 companies that require industrial-grade diamonds. These companies include large companies in different fields in the industry, including diamond cutting, jewellery and so on. There are six companies from China, including the largest jewelry retailer, Chow Tai Fook Jewellery Group. The long-term sales cooperation agreement is the cornerstone of ALROSA's sales policy. About 70% of our diamonds are sold through this channel, and only 30% are sold through auctions or spot contracts.
We are actively deploying around the world. ALROSA currently has offices in Hong Kong, Russia's Vladivostok, Israel, Belgium and the United Arab Emirates, and the India office is also officially operating in the short-term. We plan to reopen the US sales point later. The main purpose of these offices is to communicate with local industry and industry organizations and establish closer relations with them.
Not less important direction of our work is marketing. The first is generic marketing. In 2015, ALROSA became one of the founders of DPA, which today includes 7 largest diamond companies in the world. DPA conducts programs of generic marketing in the United States and India, this year will also begin a large-scale campaign in China. In addition to the large-scale promotion plan for the diamond industry, ALROSA will also strengthen its own marketing initiatives and jump out of the image of diamond miners in the past in order to meet consumers’ concerns about the stories behind the diamonds and social responsibility. In fact, ALROSA's annual social and public welfare projects amount to up to 180 million U.S. dollars.
The diamond jewelry market in China is developing rapidly. What plans does Alrosa have for the Chinese market?
- Last year, we conducted an interesting study in the United States and China with the help of the GFK company. About 4000 people aged between 25 and 55 were interviewed. The results were extremely interesting. 86% of the Chinese consumers surveyed said they plan to purchase at least one diamond jewelry in the next year. Only 59% of U.S. consumers surveyed said they would consider purchasing diamond jewellery.
Of course, we are interested in further cooperation with local companies. As I mentioned earlier, in the three-year sales contract, there are six companies from China. But this year we also have some candidates for inclusion in the list of long-term clients, including large jewelry retailers. We hope to establish more trusting relationships with the Chinese customers.
Over the past three years, ALROSA’s trade with Chinese companies through long-term sales contracts has grown by 18%. In 2017, the total amount of diamonds purchased by Chinese companies from ALROSA reached US$170 million, and it is expected that the total amount this year will further increase. In fact, in the past, these companies also purchased ALROSA's diamonds through intermediary wholesalers. They know our product well, but have not yet got used to work directly. In the future, we hope to expand more direct cooperation and provide Chinese enterprises with rough and polished diamonds. Furthermore, we understand that it takes time to establish a relationship of mutual trust. Through more interaction and communication in the future, we hope to enhance our mutual trade relations.
In 2018, we will hold seven auctions of rough diamonds in Hong Kong. Another seven auctions will be held in Vladivostok, Russia. The city is close to China's borders, facilitating buyers from neighboring Asian countries.
Of course, we look forward to strengthening our cooperation with jewelry retailers in the Mainland, including jointly launching some marketing activities. According to our understanding, due to the similar geographical location, mainland consumers are also interested in Russia’s culture and history, and Yakutia, the main operation region of ALROSA, has the local rich cultural features which can be interesting to the Chinese consumer.
What is your opinion of one of the hottest topics in the diamond industry, synthetic diamonds?
- I think that both synthetic and natural diamond markets can coexist. The discussion on synthetic diamonds in the market mainly involves two aspects. One is when sellers publicly disclose that the diamond is artificially synthesized. There is no doubt that the scale and technology of this market are constantly improving. But after all, natural diamonds represent an enduring true love that artificial diamonds cannot replace.
As for the other aspect, and the industry’s real problem, it is synthetic diamonds that are mixed with natural diamonds for sale. This is no longer a question of the demand for synthetic diamonds. It is deceiving consumers and will affect their confidence in diamond consumption.
The diamond industry must as soon as possible establish related regulations and develop instruments that can identify synthetic diamonds. At present, many large diamond companies have developed tools to identify other workers' diamonds and are trying to expect legislation to solve the problems.