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BusinessFeature

Racing for a diamond in the rough

Last January, luxury group LVMH announced its purchase of the Sewelô diamond, at 1758 carats the second-largest rough diamond ever found, surpassed only by the 3106 carats of the Cullinan. Wonder why? You’re not the only one.

Bettina Bush Mignanego

By Bettina Bush Mignanego10 juin 2020

The second largest rough diamond ever discovered (DR)

Since then, there has been much speculation as to the why behind the purchase. According to Jeffrey Post, an expert with the prestigious Smithsonian Institution, anyone who buys a diamond of this kind immediately acquires credibility. But the luxury giant Louis Vuitton hardly needed such affirmation, based on its numbers. For The New York Times, the Sewelo sends a clear message about LVMH's intentions in jewelry: to not just compete, but to be the leader of the pack. The group’s interest in precious stones started with Bulgari and was recently reinforced with the acquisition of Tiffany for $16.2 billion. Even if today, discussions are continuing between the two companies (conditions could be reviewed, as the LVMH Board of Directors met on June 2 to review the impact of the pandemic on Tiffany's results), over the long term, it’s a sector that is growing steadily, and one in which in comparison to the fashion world house brands are relatively rare. This leaves a lot of leeway to stimulate desire and creativity, two essential drivers in luxury. This is only the beginning of a long story for the Sewelo. It now sits in Antwerp, where it will wait for several months before being cut into multiple stones of various sizes.

The size of the diamond will enable production of Made-to-Order Louis Vuitton Cut diamonds (DR)

The exceptional diamond, the collectors' Grail

The world of jewelry is different from that of fashion… In jewelry there are clear factors that define the value of an object with precision – and that value has to remain unaltered over time. That depends on materials and manufacturing, and it is so much less influenced by trends

Daniela Mascetti, Sotheby's Jewelry Europe Chairman

What awaits inside the dark hulk remains something of a mystery: it might be a perfect diamond of up to 891 carats or perhaps several stones in the 100 to 300 carat range. Michael Burke, Louis Vuitton President and CEO, has announced that the diamond will not be cut until it has a buyer. For now this is all we know – no word on the amount paid, but rumor has it the price was around $60 million (notwithstanding some sources whispering that it was actually $100 million). 

That figure, whatever is was, was dictated by the desire to acquire something that strikes the imagination, something truly unrepeatable, because in jewelry it is rarity that makes the difference, says Daniela Mascetti, Sotheby's Jewelry Europe Chairman. “We see it clearly in auctions”, she adds. “ It’s the unique piece, the special one, possibly with some history or a great name behind it, perhaps coming from aristocracy… these are the pieces that are becoming increasingly sought after and coveted.” When asked why LVMH has decided to invest in such an important diamond as the Sewelo, Daniela Mascetti replies, “I don't think there are any particular designs or strategies behind this move. It is just part of the organic growth of a group that started out with big fashion brands and then moved on to jewelry. This purchase signals their interest in having something truly unique. The world of jewelry is different from that of fashion… In jewelry there are clear factors that define the value of an object with precision – and that value has to remain unaltered over time. That depends on materials and manufacturing, and it is so much less influenced by trends. If you consider things like gold, pearls, diamonds, they all possess an intrinsic value that is definitely much lower in fashion. And then, think of the advantages of jewelry: easy to transport, for example, which in times of great crisis and uncertainty is an aspect not to be underestimated.”

The diamond, a symbol of power

The motivation behind big moves like buying the Sewelo, as Marcel Pruwner said, is the desire to gain credibility and authority with investors and competitors. Let’s not forget that jewelry has always been a symbol of power

Titti Curzio, Director of the jewelry department of the Cambi Auction House

In short, it would seem that the jewelry world offers opportunities that other sectors do not, and LVMH obviously does not want to miss out on them. Titti Curzio, Director of the jewelry department of the Cambi Auction House, says it was a move dictated by considerations about the group’s image. “Marcel Pruwner, president of a large financial company that has always invested in diamonds, put it well -- to him, the motivation behind big moves like buying the Sewelo is the desire to gain credibility and authority with investors and competitors. Let’s not forget that jewelry has always been a symbol of power.” Could this mean LVMH has more jewelry investments in the pipeline? “The Group has been shopping around,” Curzio replies. “They’ve picked up several luxury brands, from jewelry to fashion, from wine to beauty - diversifying its business. And these operations have a clear marketing vision; they are intended to attract new clients. But they’re all brands that make serial runs of luxury products, even the jewelers like Tiffany and Bulgari. Now, luxury is all well and good, but rarity is a different animal altogether. In great jewelry, production follows a completely different rationale. A unique object is unique in the true sense of the term, it is born and built around a single gem, and it is designed and made for a single person. This is true rarity; nothing more need be said. Luxury, on the other hand, is a marketing concept. So with the Sewelo, the LVMH group has made a very significant move: they have managed to combine the concept of luxury with rarity.”

A slowdown already evident in 2019

Pietro Ripa, a private banker with Fideuram, looks at the purchase from an economic point of view and reaches the same conclusion. “I believe it’s a great marketing move, even when you consider that, in fact, the prestige of a jewel lies in many factors, like workmanship and history; it must become a true icon, which is not a given, so we have to wait and see if the Sewelo will eventually ascend to this legendary dimension. Only time will tell.” Ripa had already been seeing international auctions for collectibles in the luxury world, from art to jewelry, starting to slow down as early as last year, well before the catastrophic effect of the Coronavirus in recent weeks. “After excellent sales for a fantastic three years, 2019 marked a change of pace; suddenly, nothing truly exceptional was coming our way.” He adds, “These days, the luxury segment, except for the auctions that did not take place at all, has literally collapsed. This of course is a function of the economy as a whole, but it is truly unprecedented. If a solution to the crisis is found soon, perhaps by the summer if the effects of Coronavirus can be contained, I would think that the global turnover of luxury will end up shrinking by about one third. But if it takes longer, then the numbers will be much bigger… Let's not forget that the world of luxury rests on a feeling of confidence in the future,” he concludes.

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