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Market NewsCommentDiamonds, Ketchup and Brands

Diamonds, Ketchup and Brands

By Charles Wyndham.

The assertion that diamonds are not a commodity has always amused me as one of those wonderful pieces of self interested delusion that make pink elephants so plausible.

My mirth has often been increased by the schizophrenic argument that all diamonds should be branded.

The mirth is increased by this argument because branding is by definition to commoditise, but so oddly it is the jewellery that is being commoditised not the diamonds that are already the commodity, which fact offends so many people.

The remarkably contorted logic has been taken a step further by the DTC’s propagation of the Forevermark, not as a criticism of the mark but as a statement about the generic impact.

To ‘Forevermark’ every diamond will be to commoditise as much as (or presumably more) than any GIA, or other lab’s, certificate or any other third party description that it is created to define the product.

Our problem is not that there is branding but that there might already be too much branding.

I do not buy into the concept that all branding is beneficial by definition, or that everything should be branded.

Equally, I am not against branding, and I do not pretend to judge what should or should not be branded.

There is no doubt that branding can be highly lucrative when done properly, for which there is no better example than the Tiffany brand.

But branding carries risks beyond the simple costs of success or failure in initially trying to create it.

The risks of which were brought home to me when reading, in the International Herald Tribune a Reuters article, about tomato ketchup.

I should be more precise, it was about Heinz tomato ketchup.

The point being made was that Heinz amongst others has been mitigating rising commodity prices by cutting costs and passing on some of the rises directly to the consumer, where “generally (they found) little resistance as shoppers continued to eat brand name foods… while cutting back in other areas…But the pricing power is not unlimited…While the round of price increases that went into place a few weeks ago might not cause a major change, the next might.”

A curious phenomenon of the current market is the weakness of cheap rough and polished. The American market in this area that it has traditionally dominated, has not slowed it has stopped.

Traditionally in market down turns it is cheaper goods that have been one of the main beneficiaries as the consumer has traded down.

This has not happened in diamonds….. yet (?).

One possibility is that the proliferation in brands may have delayed this process.

Another more worrying scenario is that swathes of consumers have stopped buying rather than contemplated trading down.

Time presumably will let us know which of these or some other reasons have resulted in the current market behaviour.

It could be argued that brands provide the potential for additional mark ups on the basis of the confidence or cache they provide the consumer.

Where there is less money this cache may become less of a driving force.

This is where the internet could also come to undermine the traditional brands.

I agree with Bob Gannicott of Harry Winston that the full impact of the internet has yet to be felt, that is even when one has digested the full impact of the impressive Blue Nile figures.

Here there is a clear brand, a premium brand in its own way, but based on removing much of what had become the accepted mark up for the traditional brand as in the ‘mom and pop’ store by providing a completely different cache which might be described as ‘ I am not that dumb’.

Be it diamonds or ketchup, maybe brands are not all that they are cracked up to be, or at the very least do not protect against another brand, and actually become more vulnerable because of their visibility?

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