Diamond dynasty's sparkling success

FOR Tiffany & Co, one yellow diamond has shaped its fortune. This year the company celebrates its 175th birthday.

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AS investments go, Charles Lewis Tiffany's purchase of a 287.42 carat yellow diamond in 1878 proved a good one.

The stone was discovered in the Kimberley diamond mine in South Africa in 1877 and was purchased for $18,000 by Tiffany the following year. The rough stone was then cut into a cushionshaped brilliant diamond weighing 128.54 carats and with 82 facets. The cut stone is just over an inch wide and seven-eighths of an inch from top to bottom. It's small by property standards but positively enormous in the diamond world. In 1972, the unset stone was offered for sale for just 24 hours for $5 million. There were no buyers. Today, although the diamond has pride of place in the company's Fifth Avenue, New York flagship store, it is considered priceless and technically not for sale.

Of course, Tiffany & Co is a publicly listed retailer and everything, theoretically at least, ought to be available for a price. A diamond that rare and large would certainly find a buyer somewhere in the world, one with very deep pockets. All of which raises the question, why not sell it? The answer is a complex one and it's something that would surely be the envy of every other seller of fine jewellery. The Tiffany Diamond is by no means the world's largest diamond. That honour belongs to the Golden Jubilee Diamond, a 545.67ct yellow-brown diamond in a "fire rose cushion cut" that is owned by the King of Thailand. Nor is it the oldest, the most visited or the most infamous diamond in the world. Where the Tiffany Diamond shines, however, is in its quality. It is a bright yellow and, thanks to its cut, is said to appear to glow as if lit by an inner flame. It has appeared in the Tiffany store windows on Fifth Avenue only once - in 1955, in a display by renowned window dresser Gene Moore - and was said to be easily visible from across the street. It has only ever been worn on two occasions: once in 1957 by Mrs Sheldon Whitehouse, set in a necklace of white diamonds, at the Tiffany Feather Ball; and then in 1961 in Jean Schlumberger's ribbon rosette necklace, when it was worn by Audrey Hepburn for publicity photographs for the film Breakfast at Tiffany's.

Today the Tiffany Diamond is displayed on the ground floor of the Fifth Avenue store (although right now it is touring the world in honour of Tiffany & Co's 175th anniversary celebrations) and a constant stream of visitors makes its way each day to the display case that houses it. What the Tiffany Diamond does for Tiffany & Co - apart from attracting customers to the flagship store, thereby making it the single most important retail space in terms of sales out of the company's 247 stores - is create the mother of all halo effects.

"I think in their own way everyone who sees it wants to buy the Tiffany Diamond," says Jon King, executive vice president responsible for the design and merchandising of Tiffany & Co jewellery collections. "The great thing about jewellery is that it gives our clients a way to dream, to look at pieces that are very important and then to participate in the dream in their own way. They look at the biggest, the brightest and the most important diamond and then come back to reality and think how can I participate in that? How can I express that dream in something that is achievable for me?"

According to King, that happens in two ways. "In the case of yellow diamonds, they come into the store and visit the Tiffany Diamond and then say I, too, want to have a yellow diamond," he says. "Or it has an indirect effect and can inspire a different purchase, such as a sterling silver bracelet because it's from Tiffany and in a way it is part of the Tiffany Diamond story."

Charles Lewis Tiffany's acquisition of the Tiffany Diamond established the company's diamond heritage and its reputation for excellence. To part with it now, no matter what the price, would somewhat diminish the mystique of its other products. In the diamond world, yellow diamonds are extremely rare, which is what makes one the size of the Tiffany Diamond such an out-of-reach object. Fewer than 0.1 per cent of all diamonds are yellow, the yellow colour a result of nitrogen deep within the Earth's mantle where the diamonds were formed an estimated 400 million years ago, before being brought closer to the surface through volcanic eruptions. And of the 0.1 per cent that are classed as yellow, more than 93 per cent are either so pale as to be barely yellow at all or so dark they are actually brown. While diamonds are generally valued by size and shape, the primary price driver for fancy yellow diamonds is colour: the deeper the yellow, the more valuable.

(Only one in every 10,000 diamonds possesses natural colour and is referred to as a fancy colour diamond.) A vivid yellow may be worth two or three times the value of a similarly perfect white or colourless diamond.

In 2009 Tiffany & Co signed an agreement with Gem Diamonds, the owners of the Ellendale mine in Western Australia, for the exclusive rights to all fancy yellow rough diamond for the full economic life of that mine.

Ellendale is the world's leading yellow diamond mine and it produces about 50 per cent of the world's supply of fancy yellow diamonds each year. As an indication of their value, in comparison to other diamonds, 13 per cent of the total carats produced from the Ellendale mine are fancy yellow yet they accounted for 80 per cent of Ellendale's total revenue in 2011 and were sold under the off-take agreement with Tiffany & Co.

For Tiffany & Co's 175th anniversary the company produced a special collection featuring coloured gemstones, the use of which is synonymous with the brand, such as kunzite (lilac), morganite (pink), tanzanite (blue), tsavorite (green) as well as yellow diamonds.

"We really started thinking about this anniversary when we first gained access to the collection of yellow diamonds from the mine in Western Australia," says King. "It was a rare opportunity for us to gain access to a mine that had diamonds of a colour saturation that we would require. In the past two years it has become more intense as we have started to collect stones of important sizes in these legacy gemstones."

While the pieces in the anniversary collection are completely new designs, King says they are "inspired by the archives. It is so often the case at Tiffany but I think, in this case, it's because the collection really began with the individual stones. To inspire the design we began with the process of asking, what does this stone want to be, based on its size and its dimensions. Does it want to be a ring, does it want to be necklace and so forth."

When it comes to the Tiffany Diamond, it would seem that what it really wants to be is a necklace. For the company's anniversary, it was reset into a necklace of more than 120 carats of white diamonds that was more than a year in the making. The design of the necklace, however, was somewhat quicker. "We decided early on that we should reset the Tiffany Diamond for our anniversary [since 1995, it has been displayed in Jean Schlumberger's "bird on a rock" setting] but we were really struggling with how we should do that," says King. "So we put it out there with our designers because we knew it would take some time to come up with the right design. But it's the kind of thing that each designer at Tiffany has, over the years, been thinking about - what they would do if they had the opportunity to create a design for the Tiffany Diamond. So within minutes every designer had pulled out something from their bottom drawer and we had a competition going. Because of the size of the stone it really commands a larger mounting and setting and we thought it would be fun to bring together the old and the new in this setting, so the Tiffany Diamond from 1878 is mixed with Lucida diamonds, the first of the proprietary cuts that we launched in 1999."

In August, Tiffany & Co cut its profit guidance for the second quarter in a row but said in a press release that it expects sales growth to pick up by the end of the year, given the seasonality of its business. That was enough to send the company's share price up 7.2 per cent. While times are still tough for upmarket retailers in the US, which is where 50 per cent of Tiffany's sales occur, in a city such as New York there is always a buyer for one-of-a-kind jewellery items. The Tiffany flagship store accounts for 8 per cent of worldwide sales and is the origin of many of its biggest single item sales. To cater for a customer who might drop a few million dollars in a single purchase the company embarked on a new sales concept, the Tiffany Salon. On the mezzanine level of the store, is a by-appointment-only selling space, designed by architect Robert A M Stern to resemble a luxurious Manhattan apartment. It has plenty of natural light - apparently the best way to inspect diamonds - and views of Fifth Avenue.

The vestibule to the salon is where the newest items to come out of the jewellery workshop are first displayed.

On the day WISH visited there was an elaborate diamond necklace priced at $US7 million and, according to the sales associate who showed us around, a simple diamond line necklace for $US1 million. An appointment here lasts for approximately three hours and the concept has proved so popular that it is booked for the remainder of this year.

"The salon is a respite in the middle of Manhattan when things are so hectic outside, which is why I think it's been so successful," says King. "The four floors of the Tiffany flagship can be quite overwhelming and we recognised more than ever that it was important to provide a very different experience for some of our clients, one that could be very discrete and private. While they appreciate the excitement of the main floor they really want to sit quietly and learn about the pieces or to meet with the designers or gemstone experts."

The other big moment for Tiffany this year was to be Baz Luhrmann's remake of The Great Gatsby, initially due to be released in cinemas at Christmas. It would have been the ultimate final touch to a year of events and milestones but a six-month delay for a company that has been in business for 175 years and that sells products that are literally millions of years in the making is but a blink of an eye. For the jewellery pieces that feature in the movie, Luhrmann and Catherine Martin, the film's production designer, went for real items rather than costume pieces and they naturally approached the jewellery company that best typified New York in the Jazz Age. According to King, the collaboration with Luhrmann and Martin was an unusual one in its scope and not something the company has done before on such a large scale.

"Working with Catherine Martin was an amazing experience because she really is an expert in period design, so every detail of the collection was authentic [to the period] and there really was no room to adjust for contemporary style," says King. "Catherine was looking for design elements that were precise and very specific to the period." About 30 pieces of fine jewellery were made for the film by the Tiffany & Co workshop, which is located above the Fifth Avenue store and makes all the company's one-of-a-kind items.

"Having worked so closely on these pieces, I know they will be in high demand," says King. "We want to keep the collection intact for a period because we know that people will want to see it. We have various exhibitions planned that will travel around the world. Some of the pieces are just unique, such as an amazing headpiece worn by Daisy in the film [played by Carey Mulligan] that has a vertical featherlike motif in diamonds and is set in platinum. It was inspired by native American designs from the Tiffany archives.

Pieces like that are beyond a typical jewellery wardrobe and I imagine they will be very interesting to brides and might even represent a new trend in the bridal area."

The scale of the collaboration, the diamonds involved in production and the number of hours that went into manufacturing the pieces means that Luhrmann's The Great Gatsby is the most significant involvement with a Hollywood film the 175-year-old jeweller has had since Breakfast at Tiffany's, the movie that made the Fifth Avenue store a household name.