Jaipur-based KGK Group is one of the few conglomerates that cover the entire
spectrum of mining, sourcing, processing and distributing diamonds, coloured stones
and jewellery for over a century. With a global presence across 17 countries, the
12,000-staff strong group has operations and offices in Asia, Australia, North and
South America, Europe and Africa.
Last September, KGK opened a high-tech diamond-cutting and polishing factory in
Vladivostok, launched by Vladimir Putin, President of the Russian Federation.
SANJAY KOTHARI, vice-chairman, KGK Group, in an exclusive email interview talks
about the reasons for setting up a factory in Russia and shares his views on the
challenges of retaining, training and aligning the work-force in an efficient and
effective manner in the diamond industry.
What were the reasons behind opening a diamond-cutting factory in Russia? Are there any cost advantages vis-a-vis India? Was setting up a factory there a prerequisite to getting access to Russian rough diamonds (similar to beneficiation requirements in African nations)?
We are looking at expanding our export markets in the Asia-Pacific region, both by selling rough through Eurasian Diamond Centre and by roping in new clients in China and Hong Kong, and in the future, in Japan, Singapore and South Korea and other parts of the globe. We expect our Vladivostok branch to reach a sales target of at least $70 million by the end of 2017.
Free port residents will receive ample benefits. These are not just tax benefits, but also a simplified visa regime, the implementation of a free customs zone, and simplified border control procedures.
The Russian deputy prime minister gave KGK a certificate of a residence of the Free Port of Vladivostok, which helped us set up a state-of-the-art diamond-cutting factory in Vladivostok.
What according to you are the major challenges that the diamond cutting industry is facing?
High prices of rough and high costs of operating are some of the major hurdles for the diamond cutting and polishing industry. While global consumer demand slowed down, the midstream faced squeezed margins and working capital challenges – both of which impacted rough diamond purchases and sales.
According to me, consumer demand growth will continue to be generated from Asia, particularly China and India, driven by higher household income over the next 10 years, and the US, the world’s largest market.
Despite experiencing less favourable economic conditions than preceding generations and progressing more slowly along the traditional life path, millennials do express a strong desire for diamonds when they reach financial and demographic maturity.
How can one bridge the gap between skilled labour demand and availability?
Diamond cutting is no longer labelled as a blue-collar job. Today, the polishers are referred to as diamond engineers. The diamond industry is well established and has a strong value chain of key players. It supports economic development and employment in many countries and often, its supply chain spans multiple geographies. Moreover, as an industry it has seen rapid growth in the past two decades with a rising demand and diamonds are globally acknowledged as the most treasured precious stones.
In pursuit of superior products KGK continually explores and applies new innovation to the diamond production process which helps employees to work in the state-of-the-art facilities. We believe that cutting and polishing diamonds is a labour of love. The human touch will remain an integral part of the manufacturing process, no matter how automated the systems get.
The main factors for an industrial revolution or any particular industry’s growth are willing and excited investors, businessmen and entrepreneurs, availability of resources, and a huge flow of hardworking people. The determination and passion of the entrepreneurs and workforce combined can change the game.
Share some details of your participation in the coloured gemstone mining sector. Do you own any stake in diamond mines in Africa, Russia or elsewhere?
KGK is a leading supplier of rough coloured gemstones such as emerald, ruby and sapphire, with a market share of 20%.
The gems and jewellery sector is witnessing changes in consumer preferences due to adoption of Western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewellers like KGK are successfully able to fulfil their changing demands better than the local unorganised players.
What is the future growth strategy for your retail arm Entice?
The retail industry is as dynamic as it is fast growing. Consequential changes are under way, both in consumer behaviour as well as in the industry itself. Jewellery players can’t simply do business as usual and expect to thrive.
We identified three types of consumers driving the growth of branded jewellery:
- New money consumers who wear branded jewellery to show off their newly acquired wealth
- Emerging-market consumers, for whom established brands inspire trust and the sense of an upgraded lifestyle
- Young consumers who turn to brands as a means of self-expression and selfrealisation
Every jewellery company should seek to strengthen and differentiate its brands through unique, distinctive designs. Most consumers prefer to buy expensive items from stores, which are perceived as more reliable and which provide the opportunity to touch and feel the merchandise—a crucial factor in a high-involvement category driven by sensory experience. Entice is the right choice to grab the same.
Is KGK’s diversification into real estate an indication of its waning interest in the gem and jewellery sector?
More than a century ago, KGK’s foundation was laid on the gemstone business further expanding into diamonds and jewellery so there is not even a minutest possibility of its interest getting waned in the same.
Since 2010, the KGK Group has diversified into large-scale realty development and it is a progressive extension with an understanding that, like jewellery, many people regard property as an important investment. We therefore apply the same guiding principles that enable us to achieve success in the jewellery sector to our real estate projects.
KGK develops world-class properties across the spectrum, including residential, commercial, hotel, industrial, entertainment and education. For each of the projects, we aim to create enduring quality and complete customer satisfaction.