Worldwide diamond consumption to surge by more than 60 percent by end of decade

FOR IMMEDIATE RELEASE

WORLDWIDE DIAMOND CONSUMPTION TO SURGE BY MORE THAN 60 PERCENT BY END OF DECADE

Combined Consumption in China and India to Reach 36 Percent of Global Total by 2020, Surpassing United States in Diamond Consumption

Moscow—December 13, 2012—A surge in rough diamond consumption by the growing middle classes in China and India will push global consumption to $26.1 billion in value, from its 2011 level of $15.6 billion—reflecting an annual compound growth rate of approximately six percent per year; this according to the 2012 Global Diamond Industry Report, released today by Bain & Company, the global business consulting firm. The annual bellwether diamond industry report, conducted in collaboration with the Antwerp World Diamond Centre (AWDC) finds that global demand will outpace supply, signaling solid pricing prospects and a strong positive outlook for the industry overall.

“The fundamental forces point to a bright outlook for the diamond market,” said Yury Spektorov, Bain & Company partner and co-author of the report. “However the global market is becoming increasingly diverse, so successful players will need to understand the changing forces in global wealth distribution, customs and consumer tastes.”

The report includes a far-reaching survey of more than 5,000 consumers in eight countries (Editor’s Note: refer to survey methodology at end of release for a complete description), and a detailed examination and findings from three core diamond markets, the United States, China and India. The report finds:

In the United States:

  • The U.S. is far and away the world’s largest diamond market. Its $27 billion in revenues are more than three times the revenues of No. 2 market China or No. 3 market India—and twice those of the U.S. mobile phone market
  • Women continue to crave diamonds, but popularity of diamond engagement rings among younger consumers is marginally slowing down. It is unclear whether this is a temporary phenomenon or a long-term trend, but younger women show a growing preference for other luxury goods, especially consumer electronics
  • The 2008–2009 financial crisis hit the U.S. market hard, as diamond jewelry sales fell 18% from 2008 to 2009. The market has rebounded somewhat, but 2012 revenues are only slightly above those of 2000
  • Retail trends play an important role in reflecting and shaping the consumer demand. The specialty retail sector has consolidated in recent years, with the disappearance of more than 5,000 specialty stores. Despite the change, the sector remains very viable, and Internet outlets and discounters are playing an increasingly prominent role

In China:

  • China has grown rapidly into the world’s second-largest market for diamonds, with annual sales approaching $9 billion
  • Rising wealth, popular fascination with Western culture and the fast-expanding middle class have powered the market’s growth, with a boost from lower taxes and tariffs
  • Approximately 90 percent of affluent households (those with annual incomes of $15,000 or more) own at least one piece of diamond jewelry, and most own multiple diamonds
  • Market penetration among lower-income Chinese, who make up half the country’s 1.34 billion population, is much lower, representing a large growth opportunity for diamond retailers. Some 20 percent of households making less than $15,000 per year own at least one diamond
  • Diamonds have strong emotional and spiritual resonance for Chinese women, who associate them with eternity and high status. The custom of giving diamond engagement rings is catching on quickly in China
  • Chinese women like highly visible diamond jewelry, preferring rings, necklaces and pendants to earrings.  Stones of one carat or more are popular, and even mass- and premium mass-market stores in large cities often have several large stones on display
  • Retail expansion plays a key role in promoting diamond availability in all regions, established and emerging, in China
  • The retail scene is highly fragmented, with independent and local chain stores dominating the mass- and premium-mass segments, which account for 95 percent of annual sales
  • Foreign prestige retailers such as Tiffany, Cartier and Bulgari dominate the high end of the market. Most foreign players spend 5 percent or more of annual China sales on advertising to build brand awareness and identity
  • Diamond retailers are expanding at breathtaking speed. Retailers are focusing on Tier-2 and Tier-3 cities where personal incomes are growing quickly and consumption patterns mirror those of larger cities, where diamonds are wildly popular

In India:

  • Home to the world’s first diamond mines and the center of the cutting and polishing industry, India is the third-largest global diamond market, with annual revenues approaching $8.5 billion, and growing rapidly
  • Diamonds are the country’s second fastest-growing discretionary purchase, trailing only mobile phones
  • Many Indians have adopted Western holidays such as Christmas and Valentine’s Day, and diamonds are the most desired gift on such occasions. Diamond engagement rings are also a well-established custom
  • About 90 percent of India’s affluent women own diamonds, with most receiving their first diamond to celebrate a wedding, engagement, birthday or anniversary
  • Rings and earrings are the most widely owned jewelry types. Many women, even in lower-income strata, also have necklaces, pendants and bracelets in their repertoires
  • Women have well-developed tastes in diamonds, valuing a stone’s clarity ahead of its cut, size and color. They favor different designs for different occasions, opting for evergreen looks for everyday wear and trendy styles for lighthearted occasions such as birthdays and Valentine’s Day
  • Traditional solitaires, usually set in a yellow gold band, are by far the preferred design for weddings and engagements
  • There are an astonishing 300,000 jewelry stores in India, seven times more than in the U.S. and six times more than in China. Independents dominate the retail space, but large national chains are making inroads
  • Gitanjali, Cygnus and Diti are the biggest chain-store players and are claiming a growing share of the mass and premium-mass segments. The prestige market is dominated by Tanishq, whose compelling advertising has made its brand synonymous with diamonds in India
  • Retailing is in the midst of an expansion drive, focused on Tier-2 and Tier-3 cities such as Nagpur and Vadodara, where incomes are rising and consumers are clamoring for luxury goods

In addition to providing deep dives of the markets in the U.S., China and India, the report also includes a contrast in behaviors and attitudes between the more than 5,000 consumers surveyed by Bain across eight countries:

  • In both emerging and developed markets, diamond jewelry is at or near the top of most women’s lists of preferred presents. In China, India and Russia, diamonds are far and away women’s favorite gift
  • The popularity and penetration of diamond jewelry is high in the U.S., U.K. and Italy, where diamonds make up about half the jewelry market. Penetration and popularity are moderate in most of continental Europe
  • And in China, India and Russia, diamonds have been embraced by the affluent but have scarcely penetrated lower economic groups
  • Chinese women, unlike Indian women, associate diamonds with eternity.  For American and Indian women, diamonds carry a strong monetary association as well as a positive emotional charge.  Across all markets, diamond rings symbolize engagement, marriage and love
  • Nonetheless, adoption of the diamond engagement ring tradition is uneven. In the U.S. and U.K. about 80 to 85 percent of engagements are formalized with a diamond, but in Germany the percentage is only 40 percent
  • Engagement rings are becoming increasingly popular in continental Europe as well as China, India and Russia
  • Most women receive diamonds as a gift. Women in China and India are closely involved in choosing their jewelry, whereas American and Russian women prefer to be surprised
  • The availability of quality certificates is the top determinant of store choice for shoppers in China, India and Russia. In the U.S. and other developed markets where trust in retailers and consumer protections are stronger, service quality is the leading criterion for store choice
  • Luxury retailers Cartier and Tiffany are top-of-mind diamond destinations for consumers in most countries except for India, where Tanishq and Nakshatra are the best-known consumer brands

“Many elements of the global diamond consumer experience remain universal,” said Ari Epstein, Chief Executive Officer of the AWDC. “But the rise of the middle class consumer in the developing markets is having profound impacts on supply and distribution models in the diamond industry.”

Editor’s Note: For a copy of the “2012 Global Diamond Industry Report” or to schedule an interview with Yury Spektorov, please contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102. To schedule an interview with Ari Epstein, please contact Kim van Weynsberghe of the AWDC at +32 (3) 222 05 00 or kim.van.weynsberghe@awdc.eu.

# # #

About Bain & Company, Inc.

Bain & Company, a leading global business consulting firm, serves clients on issues of strategy, operations, technology, organization and mergers and acquisitions. The firm was founded in 1973 on the principle that Bain consultants must measure their success by their clients' financial results. Bain clients have outperformed the stock market 4 to 1. With 51 offices in 33 countries, Bain has worked with over 4,900 major multinational, private equity and other corporations across every economic sector. For more information visit: www.bain.com. Follow us on Twitter @BainAlerts.

About the Survey Methodology

From July through September 2012, Bain surveyed 13,000 women, 15 years old and older, across the globe, with 5,200 who own at least one piece of diamond jewelry. Respondents resided in China, India, the United States, France, Germany, Italy, the United Kingdom, and Russia.  The sampling model sorted respondents by several attributes, including age, marital status, geography and income. In addition, Bain surveyed 1,000 men in the U.S. who married in the last 10 years to test the diamond engagement ring trend.  The purpose for the survey was aimed at gaining insight into several specific topics, including:

  • Ownership levels and purchase patterns of diamond jewelry
  • Consumer perceptions and preferences regarding diamonds and diamond jewelry
  • Evolution of the diamond engagement ring custom
  • Consumer awareness of the “four Cs” of diamonds (carat, clarity, color and cut); importance of the four Cs in purchase decisions
  • Investment potential
  • Perception of synthetic diamonds and consumers’ willingness to buy them
  • Awareness of and willingness to pay extra for quality certificates or branded diamonds