Interview with Alrosa, one of the world’s largest rough diamond producers, about their new distribution channel for fancy color diamonds
Investment banks serving as a link in the diamond trade-chain between a diamond wholesale source and private clients is not a new practice. However, connecting a mining company directly to private clients has never been done before. Alrosa recently forged a groundbreaking partnership with an investment bank to develop a new platform to benefit its high net worth clients. This is why Alrosa has completely stopped selling its fancy color rough stones, opting instead to polish all of its own intake. Over the past few years, they have apparently been actively polishing their own fancy color rough stones in Moscow, preparing them as a consumer-ready final product before offering them to wholesale clients.
We spoke with Alrosa about their ‘Alrosa Diamond Exclusive’ program, and about their initiative of selling diamonds directly to investment banks private clients. We discussed their partnership with VTB Bank, one of the leading universal investment banks of Russia, which was founded to advance Russia’s integration into the global economy.
Here’s what we learned:
- What is the benefit for Alrosa to manufacture and sell Fancy Color Diamonds to VTB versus wholesale tenders?
Three years ago, Alrosa developed a special program called, ‘Alrosa Diamond Exclusive’ which sells very rare and valuable diamonds cut by Alrosa to private clients. Diamonds become part of this program before they are made available to professional tenders. A diamond is sold in a tender only when a private buyer cannot be found. The greatest appeal of Alrosa Diamond Exclusive is its diamond collection, continuously replenished by new and rare pieces.
To promote this proposition, we at Alrosa entered into cooperation with the private banking arms of some of the largest Russian banks (VTB, Sber, Gazprombank, Raiffeisenbank, Alfabank, and Rosbank). Since our Russian experience demonstrated great interest in Alrosa diamonds by high net worth individuals, we plan to extend the program to the international market.
- Who selects the diamonds for the banks and determines their price?
We use our own data to analyze our clients’ preferences and select diamonds for a collection. Interestingly, we dealt with finished diamonds in the past, whereas now, a decision is often made at the planning stage, even at the point of the selection of raw diamonds.
Regarding the pricing of our diamonds, we base it on various sources, including our internal professional tenders and the results of major external auctions accessible to individuals.
- What are the geological parameters of the stones sold to banks?
At Alrosa Diamond Exclusive, we select large, colorless diamonds starting from three carats and going up in terms of color and quality. With regard to Fancy Colored Diamonds, we select the largest and clearest among fancy yellow and fancy intense yellow. Fancy vivid yellow diamonds, as well as different shades of pink and other very rare colors can be selected for the program, even in smaller sizes.
- What else can you add about this business opportunity?
It is important to mention that Alrosa Diamond Exclusive offers diamonds not only for jewelry production (in which we actively support clients with the option of individual production), but also for investment purposes. We sustain secondary liquidity for diamonds purchased from us by providing access to our professional tenders.
VTB clients are the first to have benefitted from this opportunity. A VTB client was the first to profit from purchasing a set of diamonds from us and then reselling them in our tender, benefitting from recent price increases.