De Beers proved to be the most successful cartel arrangement in the annals of modern commerce. While other commodities, such as gold, silver, copper, rubber, and grains, fluctuated wildly in response to economic conditions, diamonds have continued, with few exceptions, to advance upward in price every year since the Depression. Indeed, the cartel seemed so superbly in control of prices — and unassailable — that, in the late 1970s, even speculators began buying diamonds as a guard against the vagaries of inflation and recession.
In September of 1938, Harry Oppenheimer, son of the founder of De Beers and then twenty-nine, traveled from Johannesburg to New York City, to meet with Gerold M. Lauck, the president of N. W. Ayer, a leading advertising agency in the United States. Lauck and N. W. Ayer had been recommended to Oppenheimer by the Morgan Bank, which had helped his father consolidate the De Beers financial empire. His bankers were concerned about the price of diamonds, which had declined worldwide.
In Europe, where diamond prices had collapsed during the Depression, there seemed little possibility of restoring public confidence in diamonds. In Germany, Austria, Italy, and Spain, the notion of giving a diamond ring to commemorate an engagement had never taken hold. In England and France, diamonds were still presumed to be jewels for aristocrats rather than the masses. Furthermore, Europe was on the verge of war, and there seemed little possibility of expanding diamond sales. This left the United States as the only real market for De Beers’s diamonds. In fact, in 1938 some three-quarters of all the cartel’s diamonds were sold for engagement rings in the United States. Most of these stones, however, were smaller and of poorer quality than those bought in Europe and had an average price of $80 apiece. Oppenheimer and the bankers believed that an advertising campaign could persuade Americans to buy more expensive diamonds.
In their subsequent investigation of the American diamond market, the staff of N. W. Ayer found that since the end of World War I, in 1919, the total amount of diamonds sold in America, measured in carats, had declined by 50 percent; at the same time, the quality of the diamonds, measured in dollar value, had declined by nearly 100 percent. An Ayer memo concluded that the depressed state of the market for diamonds was “the result of the economy, changes in social attitudes and the promotion of competitive luxuries.”
Although it could do little about the state of the economy, N. W. Ayer suggested that through a well-orchestrated advertising and public-relations campaign it could have a significant impact on the “social attitudes of the public at large and thereby channel American spending toward larger and more expensive diamonds instead of “competitive luxuries.” Specifically, the Ayer study stressed the need to strengthen the association in the public’s mind of diamonds with romance. Since “young men buy over 90% of all engagement rings” it would be crucial to inculcate in them the idea that diamonds were a gift of love: the larger and finer the diamond, the greater the expression of love. Similarly, young women had to be encouraged to view diamonds as an integral part of any romantic courtship.
In addition to putting these plans into action, N. W. Ayer placed a series of lush four-color advertisements in magazines that were presumed to mold elite opinion, featuring reproductions of famous paintings by such artists as Picasso, Derain, Dali, and Dufy. The advertisements were intended to convey the idea that diamonds, like paintings, were unique works of art.
By 1941, The advertising agency reported to its client that it had already achieved impressive results in its campaign. The sale of diamonds had increased by 55 percent in the United States since 1938, reversing the previous downward trend in retail sales. N. W. Ayer noted also that its campaign had required “the conception of a new form of advertising which has been widely imitated ever since. There was no direct sale to be made. There was no brand name to be impressed on the public mind. There was simply an idea — the eternal emotional value surrounding the diamond.” It further claimed that “a new type of art was devised … and a new color, diamond blue, was created and used in these campaigns… ”
In 1951, N. W. Ayer found some resistance to its million-dollar publicity blitz. It noted in its annual strategy review:
The millions of brides and brides-to-be are subjected to at least two important pressures that work against the diamond engagement ring. Among the more prosperous, there is the sophisticated urge to be different as a means of being smart…. the lower-income groups would like to show more for the money than they can find in the diamond they can afford…
To remedy these problems, the advertising agency argued, “It is essential that these pressures be met by the constant publicity to show that only the diamond is everywhere accepted and recognized as the symbol of betrothal.”
N. W. Ayer was always searching for new ways to influence American public opinion. Not only did it organize a service to “release to the women’s pages the engagement ring” but it set about exploiting the relatively new medium of television by arranging for actresses and other celebrities to wear diamonds when they appeared before the camera. It also established a “Diamond Information Center” that placed a stamp of quasi-authority on the flood of “historical” data and “news” it released. “We work hard to keep ourselves known throughout the publishing world as the source of information on diamonds,” N. W. Ayer commented in a memorandum to De Beers, and added: “Because we have done it successfully, we have opportunities to help with articles originated by others.”
Toward the end of the 1950s, N. W. Ayer reported to De Beers that twenty years of advertisements and publicity had had a pronounced effect on the American psyche. “Since 1939 an entirely new generation of young people has grown to marriageable age,” it said. “To this new generation, a diamond ring is considered a necessity to engagements by virtually everyone.” The message had been so successfully impressed on the minds of this generation that those who could not afford to buy a diamond at the time of their marriage would “defer the purchase” rather than forgo it.
The campaign to internationalize the diamond invention began in earnest in the mid-1960s. The prime targets were Japan, Germany, and Brazil. Since N. W. Ayer was primarily an American advertising agency, De Beers brought in the J. Walter Thompson agency, which had especially strong advertising subsidiaries in the target countries, to place most of its international advertising. Within ten years, De Beers succeeded beyond even its most optimistic expectations, creating a billion-dollar-a-year diamond market in Japan, where matrimonial custom had survived feudal revolutions, world wars, industrialization, and even the American occupation.
J. Walter Thompson began its campaign by suggesting that diamonds were a visible sign of modern Western values. It created a series of color advertisements in Japanese magazines showing beautiful women displaying their diamond rings. All the women had Western facial features and wore European clothes. Moreover, the women in most of the advertisements were involved in some activity — such as bicycling, camping, yachting, ocean swimming, or mountain climbing — that defied Japanese traditions. In the background, there usually stood a Japanese man, also attired in fashionable European clothes. In addition, almost all of the automobiles, sporting equipment, and other artifacts in the picture were conspicuous foreign imports. The message was clear: diamonds represent a sharp break with the Oriental past and a sign of entry into modern life.
In America, which remained the most important market for most of De Beer’s diamonds, N. W. Ayer recognized the need to create a new demand for diamonds among long-married couples. “Candies come, flowers come, furs come,” but such ephemeral gifts fail to satisfy a woman’s psychological craving for “a renewal of the romance,” N. W. Ayer said in a report. An advertising campaign could instill the idea that the gift of a second diamond, in the later years of marriage, would be accepted as a sign of “ever-growing love.” In 1962, N. W. Ayer asked for authorization to “begin the long-term process of setting the diamond aside as the only appropriate gift for those later-in-life occasions where sentiment is to be expressed.” De Beers immediately approved the campaign.
The diamond market had to be further restructured in the mid-1960s to accommodate a surfeit of minute diamonds, which De Beers undertook to market for the Soviets. They had discovered diamond mines in Siberia, after intensive exploration, in the late 1950s: De Beers and its allies no longer controlled the diamond supply, and realized that open competition with the Soviets would inevitably lead, as Harry Oppenheimer gingerly put it, to “price fluctuations,” which would weaken the carefully cultivated confidence of the public in the value of diamonds. Oppenheimer, assuming that neither party could afford to risk the destruction of the diamond invention, offered the Soviets a straightforward deal—”a single channel” for controlling the world supply of diamonds. In accepting this arrangement, the Soviets became partners in the cartel and co-protectors of the diamond invention.
DeBeers devised the “eternity ring,” made up of as many as twenty-five tiny Soviet diamonds, which could be sold to an entirely new market of older married women. The advertising campaign was based on the theme of recaptured love. Again, sentiments were born out of necessity: older American women received a ring of miniature diamonds because of the needs of a South African corporation to accommodate the Soviet Union.
The shortage of small diamonds proved temporary. As Soviet diamonds continued to flow into London at an ever-increasing rate, De Beers’s strategists came to the conclusion that this production could not be entirely absorbed by “eternity rings” or other new concepts in jewelry and began looking for markets for miniature diamonds outside the United States. Even though De Beers had met with enormous success in creating an instant diamond “tradition” in Japan, it was unable to create a similar tradition in Brazil, Germany, Austria, or Italy. By paying the high cost involved in absorbing this flood of Soviet diamonds each year, De Beers prevented — at least temporarily — the Soviet Union from taking any precipitous actions that might cause diamonds to start glutting the market. N. W. Ayer argued that “small stone jewelry advertising” could not be totally abandoned: “Serious trade relationship problems would ensue if, after fifteen years of stressing ‘affordable’ small stone jewelry, we were to drop all of these programs.”
Women are in unanimous agreement that they want to be surprised with gifts…. They want, of course, to be surprised for the thrill of it. However, a deeper, more important reason lies behind this desire…. “freedom from guilt.” Some of the women pointed out that if their husbands enlisted their help in purchasing a gift (like diamond jewelry), their practical nature would come to the fore and they would be compelled to object to the purchase.
Women were not totally surprised by diamond gifts: some 84 percent of the men in the study “knew somehow” that the women wanted diamond jewelry. The study suggested a two-step “gift-process continuum”: first, “the man ‘learns’ diamonds are o.k.” for the woman; then, “at some later point in time, he makes the diamond purchase decision” to surprise the woman.