Diamond Industry Makeover Sends Fifth Avenue To Africa

Published on 27/10/09

Tiffany & Co.'s iconic blue boxes have long cradled some of the world's most expensive diamonds. Now, an increasing number contain stones cut by some of the industry's least-experienced hands.

In a windowless factory in this African village, Tiffany is teaching more than 80 workers to transform raw diamonds into gems for Tiffany engagement rings. As novices recently pressed pea-size stones against whirling blades, a visiting Tiffany executive spied a problem.

"You can see the polishing lines!" said Mark Hanna, an Antwerp, Belgium-based vice president of Tiffany's diamond unit. "Tiffany diamonds can't have polishing lines."

Tiffany's is an extreme example of an industry shift that started during the recent luxury boom. Like most other diamond retailers, Tiffany long bought the vast majority of its diamonds pre-cut and pre-polished from industry middlemen. But with global diamond-jewelry sales soaring earlier this decade, Tiffany and others worried they would soon be fighting over dwindling supplies.

So Tiffany began venturing into an end of the diamond business it spent much of its 172-year history avoiding -- sourcing, cutting and polishing its own diamonds. "We decided to move backward" in the supply chain, says Chief Executive Michael Kowalski.