IDEX Online: How do you see the future of LLD in the coming five years? What is LLD’s Mission Statement for this time?

 

Lev Leviev: We are growing at a rate of two digits annually. If today the company represents 10% of total diamond exports (in Israel) then our target is to gradually increase our share in an orderly manner, that is, become the dominant force in the diamond industry.

 

IDEX: How is the Company positioning itself both in the rough and polished markets? What added value does LLD offer its clients?

 

LL: Our marketing system never was to get to the end customer because of the shrinking profitability of the industry over the years, which caused the disappearance of the middlemen from the market, shifting the focus to the end customer who is, as you know, very selective and more focused on the quality of the goods it prefers and has better long term payment capabilities then the middlemen.

 

As a result, upwards pressure is applied on the whole system, on the manufacturer that buys a [DTC] Box without being able to select items and pays cash within 30 days, which caused an increase in bank indebtedness in the hundreds of millions in the past year.

 

We prefer to find independent sources of rough that will allow us to better serve the middlemen and give them a better chance to succeed in the competitive market that they’ve been in for a long time.

 

IDEX: In 2002, rough supplies grew by 10%, while polished demand increased by a lesser 4%. Polished overhang in the major cutting centers increased by $400 million – banking indebtedness also rose during the year by $800 million to $6.9 billion and rough prices have risen. Why has this happened and what should be done to remedy the situation?

 

LL: When you get to the final stage of a sale, when you buy a Box of rough it naturally includes in it a large number of items, while the final customer needs a stone or at best an item, so there is a situation of demand for that particular item while the rest of the goods remain in the manufacturers safe without a practical price because there is no demand for it.

 

In a monopolistic world, where Sightholders do not receive unique items but rather a number of Sightholders in the same region receive the same articles, unhealthy competition is created on the clients attention and as a result an unreasonable stock of polished remains.

 

IDEX: How do you expect the prices of polished to behave in the coming 12 months?

 

LL: It does not look like there will be changes in the cheaper goods, like the Indian goods, etc., but some changes for the better in the nicer goods, G+ and SI+, where it seems that they will be stronger due to the shortage in rough in articles of this type against increased demand following the end of the war.

 

IDEX: Branding is the buzz throughout the industry. Most major players are implementing branding initiatives. What is your opinion about the branding of diamonds? How do you see branding in the industry; does it mean the brand of a cut, a brand on the girdle, pure marketing...?

 

LL: In my opinion branding is healthy and good. When you ask a kid what does he want to do when he grows up, usually he says he will manage the world. When we try to define ‘manage’ we won’t get an answer. As to branding, I don’t think that in the industry there is a deep understanding of how branding is defined in a way that translates in the creation of new cuts.

 

When the end customer, the target of the branding, walks into a store to buy a diamond for the happiest day in his life, for the person he loves, he’s being perplexed by dozens of new cuts, instead of focused on the existing orthodox shapes and given a wider explanation on the quality of the stone.  

 

On the other hand, developing a brand with existing jewelry chains, strategic partnerships, etc, can definitely help.

 

IDEX: How do you foresee the future and role of online communications and trading for the industry? And what impact is the role of the Internet having on the diamond industry?

 

LL: Buying a diamond for a person you love embodies the human feeling and the connection between the storeowner, the setter, the jeweler, the designer, etc, with the client is very important. Today we are at the point where all luxury items require the buyer’s “touch”, especially with diamonds.

 

There is some limited success with cheap jewelry, but in the main segment of diamonds, meaning the local industry, purchasing commercial quantities through the Internet is not expected in the short term.

 

IDEX: What is your opinion about the DTC’s Supplier of Choice initiative? How do you think it will affect the industry?

 

LL: I think that Sightholders that will continue to work with De Beers will keep working and all the small manufacturers won’t be able to survive because they won’t have a source of rough.

 

IDEX: In your opinion, what is the future of Russia’s production, in regard to the marketing contract with the DTC versus open market sales? Russia has several options open to it at the moment; to sell to the DTC, to sell on the open market or increase supply to Russia’s domestic manufacturing industry, which do you think would be the most effective and viable route to take?

 

LL: Russia is developing very nicely the local production, which is growing and becoming more efficient, they are applying today what they learned from the West. I think that more rough from the Russian mining operations will enter local production and a part of local exports will diminish.

 

IDEX: You were recently awarded Israel’s Outstanding Diamond Exporter Award for 2002. How do you foresee the future for Israel’s diamond industry? What do you think the country’s diamond trade must do in order to survive?

 

LL: First I would like to congratulate the [Israel Diamond Exchange] management for the blessed initiative and thank them for awarding LLD. As you know, we received the outstanding exporter award to the USA from US Ambassador Dan Kertzer last year, and from the Japanese embassy the year before. Receiving awards is nice and fine, but the production in Israel worries me.

 

Small goods production is moving to China and India. But the production in Israel of 1 carat and up in rough will not shrink, it might even grow, since it is still worth while to manufacture those goods in Israel because of the vast knowledge and the maximal yield of the stone of these sizes in the local industry, we can still compete with this advantage despite the very high labor cost.