Assessing business strategy of Alrosa diamonds

As one of leaders in diamond industry, Alrosa has to remain focused not only on the production of roughs within but on how to keep updated on the geoeconomics surrounding the diamond industry without. This blog sums up my assessment of Alrosa business strategy amid geoeconomics.

First and foremost Alrosa wishes to remain the lead producer and seller of roughs. It is feasible in the sense Alrosa owns & operates Siberian Mine that possesses almost $4 billion carat in diamond roughs. This mine alone provides annual output of 40 million carat of roughs. Here comes the geoeconomics risk. Any natural disaster surrounding the mine or in case of war with America a nuclear blast would probably destroy the mine along with the roughs therein.

Value addition is not part of Alrosa business strategy. Alrosa is overly satisfied with the extraction business model that is operated to bring high quality roughs intended mainly for exports. Alrosa sells about 42 million carats of rough netting US$ 4.4 Billion whereas her nearest competitor beats her in the value addition perspective. To illustrate De Beers earns more than US$ 6.1 Billion with much less quantum of roughs.

Rio Tinto, third in the pecking order of diamonds earns more than US$ 4 Billion using the business concept of ‘mines to market’ meaning that roughs sitting in their mines are extracted, cut & polished and set in jewellery to be on the display cases of the Jewellers worldwide. Preoccupied with being roughs exporter, Alrosa tends to neglect the diamantine aspect in her business strategy.

Of late, Alrosa presented a standalone jewellery collection in 2021 under the rubric ‘ALROSA Diamond Exclusive program’. Once again this business strategy concentrates on large diamonds processed into jewellery-ready diamonds with a dedication on the investment side of possessing diamonds rather than on   the day to day use of diamond jewellery.

A key ingredient in the geoeconomics of diamond industry is to market small carat diamonds either set in jewellery pieces or as ready to use items in any jewellery order placed by buyers. This way Alrosa could easily qualify as a member of the ‘diamond cartel’. De Beers and Rio Tinto have done this feat with great degree of success. If Alrosa falls behind then these two dominant sellers can sign into a Faustian Deal to shut out Alrosa firstly as seller of cut & polished diamonds and thereafter diminish sale of Alrosa roughs?

No business strategy in this world can succeed unless it outlines methods to outbid geoeconomics. Sadly, Alrosa has still not come around

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist