Going Strong

International branded jewellery houses are playing progressively more important role in jewellery in Australia; gaining from their growing presence, well-built brand identity and loyalty from consumers. Both natural and treated colour diamonds are gaining popularity among consumers. This and much more, Kunjal Karaniya gives you an insight on the Australian market.

Australia is a chief producer of diamonds in the globe. Industry players export cheaper unsorted diamonds and a restricted number of rare colour diamonds. The yellow and pink diamonds from the Kimberley region in Western Australia are Australia's most notable colour diamonds, and the sale of these high-end stones contributes disproportionately to industry revenue. In addition to diamonds, the industry includes companies that mine opals, sapphires and other gemstones.

Industry revenue is estimated to fall at a compound annual rate of 4.0 per cent over the five years through 2015-16, to reach $380.1 million, found IBISWorld’s Diamond and Gemstone Mining market research report.

Diamond Source:

• According to the diamond fact sheet presented by the Australia Government, most of Australia's economic diamond resources are in the very large, low gem quality content Argyle deposit, in the Kimberley region of north-western Australia, accounting for about 90 per cent of Australia's diamond production. Relatively small resources of alluvial diamonds are worked nearby in Smoke Creek (Argyle Alluvials). A number of small diamond ‘pipes’ with much higher gem quality diamond content than Argyle is mined at Merlin in the Northern Territory.

• The Kimberley region was originally selected as likely to contain diamond deposits because of its similarity to the African diamond fields. The Argyle deposit contains a large proportion of the world's economic diamond resources. It has some of the highest diamond grades in the world and produces nearly twice the diamond output of any other country.

• Gem diamond production is probably comparable to many of the world's other mines but as only 5 per cent is of gem quality (40 per cent near gem, 55 per cent industrial) the total value of production is less than that of several other countries.

• Argyle sells 100 per cent of its product direct to the world market. The best Argyle rough diamonds, including the renowned pink diamonds, are cut and polished at the Argyle Diamonds facility in Perth, Western Australia.

Industry Analysis

• According to IBIS World, revenue across the Jewellery Manufacturing industry has trended upwards over the past five years, at an annualised 5.5 per cent. However, this annualised growth masks significant annual fluctuations in performance as a result of volatility in metal prices and export volumes. During this period, trends in industry performance have also stemmed from fluctuations in real household discretionary income, demand for jewellery across the retail trade market and variations in the value of the Australian dollar.

• Industry revenue is expected to rise by 2.0 per cent to $2.3 billion in 2015-16. Despite the solid annualised rise in revenue, industry operators have faced a challenging market over the past five years.

• The geographic spread of the industry is concentrated in New South Wales, Victoria and Queensland. In 2015-16, these are expected to account for 78.8 per cent of jewellery manufacturing operations in Australia.

• The distribution of establishments in the industry mirrors the population distribution. New South Wales has the largest concentration of jewellery manufacturers with an estimated 34.8 per cent of industry establishments in 2015-16, while Victoria is expected to have 25.3 per cent. This is highly correlated to the distribution of manufacturing businesses nationwide as Victoria and New South Wales are the largest employers of all workers in the overall manufacturing sector. New South Wales and Victoria have a higher number and concentration of jewellery retailers, wholesalers and exporters.

Trends

• As per a report by Euromonitor, trends in jewellery in Australia witnessed consumers drawn to more contemporary designs and styles. Rose gold jewellery and rose coloured jewellery experienced increased attention towards the end of the review period in both jewellery and watches, while both natural and treated colour diamonds became popular among consumers driven by advertising campaigns and the increasing use of these diamonds in collections by jewellery companies.

• The trend of bold, statement jewellery particularly within costume jewellery continued. However, dainty, delicate jewellery also made a comeback and consumers often layer or stack pieces to match outfits.

• Jewellery in Australia is a very uneven setting, with the majority of players bar one holding retail value share of 6 per cent or less. The two leading players, James Pascoe and Michael Hill Jeweller (Australia) have New Zealand-based global brand owners, while the remaining companies are a mix of local and international brands.

• International branded jewellery houses such as Pandora, Thomas Sabo and Swarovski are playing an increasingly significant role in jewellery in Australia, benefiting from their increasing presence, strong brand identity and loyalty from consumers.

Pandora Australia’s revenue continues to climb, with its latest results representing its 10th consecutive quarter of significant sales increases.

• According to a company financial statement, Pandora’s revenue increased 35.9 per cent – 45.1 per cent in local currency – to DKK208 million (AU$42 m) in the third quarter of 2015 compared to the corresponding period in 2014. Same-store sales also rose 44.5 per cent, marking the 10th quarter in a row for which the brand has recorded an increase of 20 per cent or higher.
“The performance of the Australia and New Zealand business was very strong through Q3,” Pandora Australia president Brien Winther stated. “We were particularly pleased to see our hard work in New Zealand showing some very positive results. Both our concept store and multi-branded

• Continued sell-through growth and the opening of 12 new concept stores in the past year were said to have driven the positive result. Brien Winther noted that the rings category performed particularly well – accounting for more than 20 per cent of Australia’s revenue – and that the company also had strong sales for its gift sets.

“We also saw an improvement in our necklace and pendants category,” he added. While the new Australian e-store launched on 29 September did not impact on revenue for the period, Winther said he was pleased with its performance to date. He added that the Christmas and Disney collections were also generating excitement.

According to the 'Precious Metals and Diamond Mining in Australia to 2020' report by Business Wire:

• Australia had the largest gold and diamond reserves in the world at the end of 2014 with 9,800 tonnes (t) or 17.8 per cent share of the global total and 250 million carats (Mct) or 34.2 per cent of global reserves respectively. Its silver reserves were 85,000t, the second largest globally with a 16 per cent share of the total.

• Australia is one of the world's major producers and exporter of precious metals. It was globally the second-largest gold producing nation with 9.7 million ounces in 2014. Significant gold and diamond reserves are found primarily in Western Australia, while silver reserves are located in Queensland and New South Wales. Silver production was 65.2 million ounces, the fourth-highest in the world while rough diamond production was 9.3Mct, the third-highest globally.

• The Australian mining industry is governed by the Minerals Council of Australia, the Department of Industry, Geo-Science Australia, the Bureau of Resources and Energy Economics and the Australian Nuclear Science and Technology Organization.