The shining past of the diamond dynasty

A seemingly ordinary, simple business game, perhaps far-reaching. After a deal that is considered "left-handed right-handed", South Africa's Oppenheimer family may say goodbye to the diamond industry since the three generations. A diamond dynasty monopolized by the Oppenheimer family for a century may be divided up by "all the princes."

On New Year's Day 2011, a sudden change in equity was clouded between Anglo American, one of the world's largest mining companies, and De Beers, the world's largest diamond company. The former plans to obtain a controlling stake in the latter through a share purchase. Previously, Anglo American had owned a 40% stake in De Beers. The plan to further acquire is another 45% of the shares owned by the Oppenheimer family.

In fact, the Oppenheimer family is also a long-term investor in Anglo American. Anglo American itself was founded in South Africa in 1917 by the Oppenheimer family. However, not long ago the family sold its shares in Anglo American on a large scale, and its shareholding fell to less than 2% for the first time. Insiders pointed out that if the acquisition plan led by other large shareholders of Anglo American is implemented, the long-term relationship between the Oppenheimer family and Anglo American and De Beers will never return.

However, regardless of the outcome of the acquisition, whether or not the Oppenheimer family will be squeezed out of the diamond industry, after all, the Oppenheimer family once controlled 90% of the global rough diamond market. For nearly a century, the absolute influence of this once-diamond dynasty on the world diamond industry should not be forgotten by the world.

Diamonds make South Africa's richest man

Oppenheimer is a Jewish surname. In 1880, Ernest Oppenheimer, the founder of the Diamond Dynasty, was born into a family of cigar manufacturers in Germany. At the age of 16, he came to London with his brother and worked in a diamond sorting workshop of a Jewish diamond dealer, responsible for picking up flawed diamonds. Soon, the Jewish diamond dealers found that although there was no professional training, Ennest seemed to have a natural discernment of the pros and cons of diamonds. In the age of no jewelry identification machine, the value of such vision is self-evident.

At the age of 21, Enner, who was heavily equipped, was sent by Jewish diamond dealers to work in the office in Kimberley, South Africa. Kimberley is South Africa's famous "City of Diamonds". After more than 30 years of history, it has discovered a huge diamond mine, attracting a large number of "drillers" from all over the world.

In addition to diamonds, Ernest seems to have a natural affinity for business and politics. In Kimberley, Ennest was able to trade in the British and German colonies with his unique experience of German birth and British growth. Although this lucrative trade risk is great, for Ennest, the risk is hard to beat him. While making money, he also accumulated valuable political connections. In 1912, Ernest was elected as the mayor of Kimberley and re-elected for three consecutive terms, eventually entering the South African Parliament on behalf of Kimberley.

During the First World War, the diamond mine owned by the Germans, called the "forbidden zone", was occupied by the South African army and could not be started. Thus, Ernest established the South African Anglo American Company in 1917 (its initial capital of 1 million pounds, half from the United States, half from the United Kingdom, hence the name), using the company's stock to talk with the Germans about the acquisition. Since the Germans were unable to judge the war at the time, they did not know whether the South African army would retreat, so they sold the rich mine to Ernest at a very low price along with the risk of losing money. In this way, the Oppenheimer family owns its first diamond mine.

The war is coming to an end, and the Oppenheimer’s diamond business is beginning to show up, which has brought competition to another old diamond company in South Africa, the British Desirs of the British Cecil Rhodes. Troubled. At that time, De Beers had a history of more than 30 years. It was listed on the Johannesburg Stock Exchange in 1893. It was the most complete and powerful diamond mining and selling company in South Africa at that time.

Backed by the rich mine, Ernest began a price war with Rhodes. Over time, Rhodes gradually could not stand, because he was worried that his company's stock would become rubbish. In 1926, he took the initiative to find Ennest negotiations. In the end, South African Anglo American and De Beers merged in a way that swaps equity. This is the real purpose of Ernest: with De Beers, you can eliminate other weak diamond companies one by one.

By the end of the 20th century, Rhodes died, Ernest has become an irreplaceable amnesty for the entire African diamond industry. However, Ernest’s appetite does not stop there. In 1929, the global economic depression caused a sharp drop in demand for diamonds, and the Diamond Enterprise Alliance in London came to the brink of bankruptcy – a coalition that had been one of De Beers’ main competitors. Ennest seized the opportunity to integrate the two businesses at a very low cost through negotiations with members of the alliance.

In 1934, Ernest founded the prestigious Central Distribution Agency (CSO) in London, responsible for the sale of De Beers diamonds on the international market. Later, CSO became the world's largest diamond sales channel.

Ernest believes that "the only way to increase the value of diamonds is to make them scarce, that is, to reduce production." The birth of a monopoly diamond dynasty finally allowed it to practice this theory. Because Ernest decided to close all diamonds in his hands, during the period of 1930-33, the world's diamond production plummeted from 22 million carats per year to less than 14,000 carats, and diamond prices continued to rise.

Another benefit of the monopoly brought to Ernest is even more obvious: once other diamond companies emerge, De Beers releases a large reserve of diamonds, causing the price of diamonds to plummet, causing the other party to go bankrupt or surrender. This makes it almost impossible for any new entrant to compete with him.

Ernest's E. Oppenheimer father and son company, founded in 1935, controls all the business of the family. Most of these businesses are packaged in the Anglo American Group. This model lasted for many years until 1999, when Anglo American and the Minorco company based in Luxembourg merged to form Anglo American Group Co., Ltd. and listed in London.

In the early 1950s, Ernest became the richest man in South Africa.

Control 90% of rough diamond sales worldwide

Personal glory time is limited. In 1957, Ernest died. Harry Frederick Oppenheimer, 49, inherited his father's entire legacy - $180 million and a diamond dynasty that accounts for 80% of the world's diamond production.

Harry Middle School studied at the Thurs College of the oldest aristocratic secondary school in the UK and then graduated from the Christian College of Oxford. He likes to collect antique books, silent and low-key, rich in conservation. Like his father, Harry has a unique talent for politics. For many years after graduation, he has been a member of the South African Parliament until his father died, and he had to give up his political career because of the huge family business.

On the business side, Harry is also very talented. In the 1950s, he was sent by his father to New York to work with many prominent advertisers on Madison Avenue, known as the center of the US advertising industry. The “4C” standard in the diamond industry – cut, color, clarity, and carat – was created by them. In fact, the so-called "4C" standard familiar to modern people is not an ancient inheritance, it is only the result of modern marketing.

Later, together with professional advertising company JWT, De Beers created the classic phrase “Diamonds forever, a eternal rumor” – in 2000, this slogan was named the most successful advertisement in the 20th century. Copywriting.

In the era of Harry, Anglo American dominated South Africa's diamond, gold and platinum industries and the entire South African business world. With the strong cash flow generated by De Beers, Anglo American is able to acquire more minerals; and the gains from gold, platinum and other metal mining can be invested in other areas...

The Oppenheimer family's career reached its fullest in Harry's hands: Anglo-American Gold and Anglo Platinum became the world's largest producers of gold and platinum, respectively, and Miloco became one of the world's top ten copper producers; in the 1970s, Austria The output value of all companies under the Benheimer family accounts for 10% of South Africa's GDP, and exports account for 30% of South Africa's total exports... The Oppenheimer family has become South Africa's “China China”.

Prior to the 1980s, De Beers controlled 90% of the world's rough diamond sales. The CSO in London, which holds only 10 diamond appreciation sessions a year, has only 125 exhibitors who have long-term cooperation with De Beers. They are called "De Beers 125". The sightholders bought the rough from the hands of De Beers, then polished them to loose diamonds and sold them to jewelry retailers. Since the inception of CSO, De Beers has been implementing the “choice of the customer's supply strategy”: he chooses the customer, not the customer. Based on this premise, he gave the customer the rough diamond, the customer has no room for bargaining, can only indicate "yes" or "don't".

However, as a large number of diamond mines were discovered in Australia, Canada and Russia, South Africa's status as a diamond kingdom gradually faltered after the 1980s. De Beers’ market share was once squeezed to 45%. Forced to helpless, Harry took the initiative to break the "De Beers 125" limit, expanding the market from the original high-end customers to the middle class, and advertised like a daily consumer goods, adopting a variety of flexible marketing methods.

By the end of the 20th century, De Beers had successfully transformed into a market-oriented non-monopoly company, and its market share has also rebounded.

The Oppenheimer family has such a family training: "We hope that the best things will happen, and we will do the worst." It seems that Harry has realized the essence of this family training.

From monopoly to competition

If Harry's contribution to the family business is to expand the market by breaking the high-end barrier, then his son Niki Oppenheimer goes one step further and pushes the company to the modern business model.

In 1998, when the 52-year-old Nikki became the new head of the family, there was a media bluntly saying that he "had a brains that are not very useful, I am afraid it is difficult to shoulder this burden." But the facts quickly proved that the media was wrong.

Under Nikki's leadership, De Beers partnered with the well-known luxury goods group Louis Vuitton to start involved in the diamond retail industry. This move has made De Beers's industrial chain longer and has brought more profit to De Beers – diamond jewelry sales are more profitable than diamond mining.

In addition, Nikki has changed the CSO that has existed for decades to the domestic diamond commerce company (DTC) and launched a strategy called “Best Supplier”. At the core of this strategy is to provide more added value to the warehousing and downstream distributors and retailers, and then to attract these downstream companies to De Beers, to advance and retreat, and to enhance the impact on the entire industry. force. The "Best Supplier" strategy proved to be successful. In 2004, global diamond jewelry sales continued to grow by 8% compared to 2003, when diamond prices rose by 7%. The "Best Supplier" strategy case was also listed as one of the classic cases by Harvard Business School.

In the history of family development, the most important thing that Niki did was in 2000. This year, Nikki proposed that the Oppenheimer family and Anglo American will jointly invest $19.7 billion to acquire De Beers. For this acquisition, Niki has been brewing for a long time. Eliminating cross-shareholdings is the main motivation for restructuring. For more than 70 years, De Beers has been cross-shared with Anglo American, with the former having 35% of the latter and the latter having 32% of the former. This cross-shareholding is criticized by investors, and the capital market is therefore less valued for De Beers. "The value of De Beers has always been undervalued by investors," said Nikki. Since shareholders do not recognize the value of De Beers, there is no need for companies to continue to make profits for them.

In May 2001, the reorganization was completed. The Oppenheimer and Anglo American companies each hold a 45% stake in De Beers, and the remaining 10% are joint ventures between De Beers and the Botswana government. Bills Botswana company owns. This is the largest restructuring of the world diamond industry since World War II and the largest corporate acquisition in the history of South Africa's economy. Since then, De Beers has ended his 100-year history of trading on the Johannesburg Stock Exchange and became a private company.

Many people believe that De Beers will become more mysterious and arrogant after privatization. A diamond analyst pessimistically said that the outside world may no longer know how much the actual profit of the diamond industry is. However, at the end of July 2003, just two years after De Beers delisted, Nikki announced the company's mid-year performance statement for the year. This move is seen as a sign that De Beers is trying to prove that it is becoming increasingly transparent. “The world has changed,” Niki said. “When we started to change, we became more open and transparent, and the sky did not fall.”

Although he learned from the university, Nikki accepted the same aristocratic education as his father, but compared with the father of a gentleman, Niki looked a bit unruly. He never wears expensive diamond watches, but he often wears a plastic electronic watch; he likes to play cricket and buys a professional cricket team. When the media asks him why he buys a team, his answer It’s fascinating: “That’s the only way I can feel the competition now.”

In 2008, Forbes ranked the world's most prominent 14 wealth families, and the Oppenheimer family was among them. Today, Niki's only son, Jonathan Oppenheimer, is 41 years old and has three children. The fourth generation of the family has begun to get involved in the management of the family business. However, in the hands of the next generation of the third generation or the fourth generation, whether the Oppenheimer family can still equate with the diamond dynasty is not known.

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