When De Beers Convinced the World Diamonds Were Scarce

In 1888, Cecil Rhodes merged the major South African diamond mines into De Beers Consolidated Mines, then engineered a distribution cartel that would last over a century. The model was simple: control the supply channel between mine and retailer. De Beers bought rough diamonds from producers worldwide — including Soviet Russia starting in the 1960s — and sold them through its Central Selling Organisation in London at prices it set. By the 1980s, De Beers controlled roughly 85 percent of the global rough-diamond supply.

The demand side required different engineering. In 1947, N.W. Ayer, a Philadelphia ad agency, coined the slogan "A Diamond Is Forever" for De Beers. The brief was specific: convince consumers that diamonds should never be resold, making them gifts that lock up supply permanently. It worked. The De Beers campaign also invented the engagement-ring norm in Japan — in 1966, fewer than 5 percent of Japanese brides received a diamond ring; by 1981, that figure was 60 percent.

The cartel's underpinning was stockpiling. When new mines came online or demand softened, De Beers warehoused diamonds rather than let prices fall. At one point in the 1980s, the stockpile was estimated at $6 billion. The model started cracking in the 1990s, when new finds in Canada and Australia bypassed the Central Selling Organisation, and in 2000, when De Beers finally conceded it could no longer sustain single-channel control. It transformed into a branded luxury retailer instead.