Seven years ago De Beers unveiled what is now called Supplier of Choice 1, and its executives heralded the birth of a new diamond industry. They talked about how a handful of brands would dominate each market. At a 2003 conference in Antwerp, Belgium, Diamond Trading Company executive Stephen Lussier said the industry had “begun a marketing revolution—and that revolution is irreversible.”

Not so fast. Many believe that De Beers’ new strategy, Supplier of Choice 2, won’t emphasize branding and marketing as much as its predecessor.

Officially, the DTC denies there has been a change. “Marketing is absolutely intrinsic to SoC,” managing director VardaShine tells JCK. However, the definition seems to have broadened. “By marketing I don’t just mean the ability to produce beautiful advertisements,” Shine explains. “I mean the whole management philosophy of structuring your business to stand out from the crowd by understanding your customers’ needs and then meeting them profitably. Under that broad definition of marketing, upstream companies can have great marketing propositions.”

Shine argues that’s how it’s always been, but many sense a switch in emphasis. The buzzwords of SoC 1 were “adding value” and being “demand driven.” In SoC 2, the DTC talks about letting diamond companies run “their own business” and overall “excellence.”

“When they started this whole process, it was all about increasing your marketing spend,” says Mark Boston of De Beers diamond broker H. Goldie. “Now they are saying it is more important that everyone have their own model. It goes a long way toward rectifying the old system, where people were pushed into areas they often weren’t comfortable with.”

“I wouldn’t call it a backflip, but it is a revision,” says Prakash Lakhi of sightholder Vishinda. “The DTC realizes that not everyone can go downstream. Some can go downstream, but some are good just flipping the diamonds. But branding is not for all companies.”

And, indeed, the list of widely known and successful diamond brands is a small one. De Beers’ retail chain has not set the world on fire, and some attempts to hook up with established names (like Vera Wang) have been disappointing.

“You look at these big brand directories—how many of them are really brands in the minds of consumers?” Lakhi says. “As far as really successful brands in the jewelry industry, you can probably count them on one hand.”

Analysts cite a number of reasons branding didn’t fulfill expectations:

Branding was not necessarily appropriate for the jewelry industry. For one, jewelry is small—as Elizabeth Chatelain, president of MVI Marketing, says, “You can’t put a label on a ring.”

“You walk around in a Chanel suit, people can tell,” agrees industry consultant Ben Janowski. “But show me a Chanel ring, I wouldn’t know it.”

It’s also easily copied. “We could take a Tiffany Lucida ring and go into a local jeweler, and it would be easily knocked off,” Janowski says. “You wouldn’t have the exact same Lucida cut, but you could have a similar kind of cushion. Try doing that with an iPod. The furniture business has a similar problem.”

Finally, in the jewelry industry, the retailer traditionally is the brand. There are many good companies that sell to Tiffany. Yet consumers seem to care only about the Tiffany name.

Branding was not necessarily appropriate for sightholders. In a 2001 article in JCK (“To Market, To Market,” JCK, February 2001, p. 148), one sightholder said that, after hearing of the DTC’s new direction, his comrades were “in a state of panic and confusion. For most of them, this is a new concept. It’s not right for all of them. They are going to make a lot of mistakes and waste a lot of money if they are not careful.”

That’s exactly what happened. Marketing is not an exact science; even veteran marketers fail at it. By one estimate at that 2003 conference, nine out of 10 new brands fail. So it’s not surprising that companies with no experience in marketing, working under pressure in an industry with a short history of successful brands, had problems.

“You forced a bunch of companies that have no connection with the consumer to start thinking about branding,” says Chatelain. “It was beyond their comprehension.”

It was too expensive. “A real branding campaign in the U.S. costs $30 million,” says Chatelain. “How many companies in this industry can afford that? There really isn’t the markup to fund an advertising campaign.”

“Today even the big brand companies go out and buy brands,” Janowski adds. “They don’t create new ones. It’s too difficult and expensive.”

The one exception to this, Boston notes, is in India and China, where marketing expenses are comparatively low and some DTC-driven brands have been helpful in expanding the market.

It was too much, too soon. The first SoC criteria not only stressed marketing but also wanted sightholders to “sell efficiently”—meaning increasing direct contact with retailers and consumers. But dealing with retailers is itself a skill, and it can be costly. Many sightholders hoping to open new retail accounts offered generous deals, which their competitors had to match, and that caused problems in a sector already notorious for low margins.

In the end, brand building requires years of patience and money, and sightholders ran out of both. DTC’s new tack in some ways acknowledges reality: Many sightholders have already cut their marketing budgets. “A lot of the brands have died out,” Lakhi says. “People spent money on misguided efforts without any results.”

And with sightholders having a tough time lately—two have affiliated companies in Chapter 11, and the DTC recently mailed a letter warning clients to pay their debts—they are likely to cut back marketing even further.

As De Beers will tell you, marketing is still—and likely will remain—a criterion for being a sightholder. But today sightholders hoping to stay on the magic list have a new way to curry favor: building factories in Africa, to meet government calls for “beneficiation.” Just as there were a flood of new marketing initiatives in 2001, today there is an equally impressive list of sightholder-owned factories opening in Africa.

But there is a difference. “Marketing” and “branding” were ideas De Beers put on its sightholders. “Beneficiation” is an idea being put on De Beers.