Thursday, September 28, 2006

Warner Bro's new film 'Blood Diamond' could impact sales this Christmas.

Warner Brother’s new film “Blood Diamond” is set to release nationwide this December, in the heart of the Christmas rush for most diamond and jewelry vendors. The trailer to the movie was released a few weeks ago, and is already starting to cause a stir in the diamond industry. Terrorist groups were funding their bloody wars against legitimate governments in Sierra Leone, Angola, and Democratic Republic of Congo by selling “conflict” diamonds on the open market to fund their weapons of war. The movie depicts the ugly side of the diamond trade from the late 1980’s into the late 1990’s, until 2002 when the Kimberley Process Certification was adopted by fifty two nations. Since the adoption of the Kimberley Process Certification Process, the diamond trade has seen a decrease of conflict diamonds on the market from 4% to less than 1% today.

Today more than 80% of the world’s rough diamonds are cut or polished in India, which has become a hub for the diamond trade. At the center of India’s dominance in the production of rough to polish diamonds is Surat, nestled just to the east of Mumbai, about an 8 hour trip by train. Surat has long been known as a garment center of the world producing more than 40% of the world’s total man made fabric, but recently has also become diamond capital of the world. Surat a port city is the second largest city in Gujarat, with a population of 3.6 million people.

Surat’s gem and jewelry industry nets Rs 45,000 crore annually. Many traders fear that the movie could have a negative impact on the market, as conflict diamonds are not as prevalent in the market today due to the Kimberley Process Certification Process, and many feel that the movie should carry this disclaimer. Traders are still recovering from losses during the massive floods in August 2006 that put the city under water and halted the diamond industry for a few weeks. Surat’s diamond trade is launching their Christmas pitch this year with much apprehension due to the release of the “Blood Diamond” film this winter.

Surat's diamond and gems industry comprises 6,000 small and big diamond cutting and polishing units, which employ around 700,000 people. Most businessmen know that the world trade is worried. Carson Glover, spokesperson of the World Diamond Council, told ET in an e-mail, "We view this as an opportunity to tell a story we're proud of, namely that well over 99 percent of all diamonds sold are conflict free."

"We expect that the movie should carry a disclaimer that conflict diamonds are a thing of the past," said Mr. Bakul Mehta of the World Diamond Council. As per the Kimberley Process Certification System, countries importing rough diamonds will only accept gem imports which are certified not to have come from the rebel-held areas. The Leonardo DiCaprio starring film has already got the global diamond trade worried ahead of its Christmas release. Top brands like Tiffany and De Beers, among others, have admitted Blood Diamond could be a "tough movie."

"If the West decides not to buy diamonds for any reason, there will be a global slump in the trade and Surat will also face the brunt of it. We have seen similar trends after an energy crisis followed the hurricanes in the United States last year," said Nanu Vanani, secretary of the Surat-based Gujarat Heera Bourse.

The Edward Zwick produced film is based upon a story about a South Africa mercenary, Danny Archer (played by DiCaprio) who is jailed for smuggling in Sierra Leone, ravaged in a civil war that killed 50,000 people in the 1990s. The big controversy revolves around the central subject matter of 'conflict diamonds,' which were blamed on funding dictators who wage wars throughout the continent, and which profited from illicit trading to fund drug cartels and terrorist cells.

The international diamond industry employs well over two million people around the world; a good majority of these are in third world and developing countries. The measures agreed upon by the industry within the Kimberley Process are designed to protect the interests of all countries dealing with diamonds, from producing, processing and consuming nations. The WDC has reinvigorated its education campaign to raise awareness of the positive impact the diamond industry has on many parts of the world, including India, as well as Africa. The Kimberley Process has also played a large role internationally to help eliminate “conflict” diamonds from being used as a way to fund terrorism.

Overall we will have to watch how the movie does affect the industry, being that it is set to release two weeks before Christmas which is the busiest time of year for most retailers. The Christmas shopping season is set to kicks off after Halloween from a brick and mortar perspective, but on the internet you can get shoppers up to the last two days before Christmas. The effect will be different for brick and mortar and ecommerce sites, but hopefully the lower price savings offered on the internet will help outshine the negative side of the diamond trade that is not as prevalent today as it was a few decades ago.

Thanks again to the Warner Brothers, World Diamond Council, The city of Surat, The state of Gujarat, American Diamonds Forever and the Kimberley Process Certification.

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