project proposal setting up an authenticity centre for gold & mounted jewelry by tehmasp printer
TRANSCRIPT
Project Proposal
Setting up an Authenticity Centre
for Gold & Mounted Jewelry
By Tehmasp Printer
OBJECTIVES
Tap the entrepreneurial spirit of the Parsi Youth.
Establish a resource for the community to enter a sunrise service industry.
Help develop a Parsi business enterprise in one of the fastest growing segments in India namely - Jewelry industry.
Participate in initiatives aimed at promoting transparency – promoting hallmarking and encouraging consumer activism in matters related to quality, purity, certification etc.
STRENGTHS
Cash in on the trust placed on the Parsi community for its
integrity, honesty, dedication & commitment.
Professional expertise available in the Authenticity services
PRESENTATION FLOW
Part I
Market Potential Huge opportunity in providing an Authenticity service to the
jewelry industry.
Part II
Proposed Authenticity service to be provided: Assaying & Hallmarking of precious metals Identification & Certification of Gem Stones & Mounted
Jewelry mainly diamonds
MARKET UNDERSTANDING
Global Gems & Jewelry industry on the threshold of a large-scale transformation.
Last 5-6yrs the industry has seen more changes than ever before.
Next 10yrs likely to bring in more deeper and far reaching changes across the value chain.
Fascinating industry – traditional on one hand glamorous on the other.
KEY INDUSTRY SEGMENTS
Diamonds Diamond studded jewelry is the largest segment estimated @ USD 69billion
Gold Primary use is in jewelry fabrication which accounted for 67% of total gold demand (volume terms) in 2005.
Platinum often the metal of choice for high-end precious jewelry across the world. Its
showing an increasing trend in India too.
Colored gemstones
0
40
80
120
160
200
Others 5.4 5.3 5.6 5.9 6.5 7.3
Plain Platinum Jewelry 7.3 7.1 8.0 9.1 9.5 9.0
Plain Gold Jewelry 46.4 41.5 44.4 46.3 54.0 60.7
Diamond Jewelry 54 56.7 59.5 62.5 65.7 68.9
2000 2001 2002 2003 2004 2005
113 111 118 124136 146
5.2%
6.4%
4.4%
5.5%
5.0%
US
D B
illi
on
GLOBAL : GROWTH IN JEWELRY RETAIL SALES
CAGR(2000-2005)
World jewelry sales grew at a steady pace
CAGR : Compounded Annual Growth Rate Source : KPMG Analysis
0
2
4
6
8
10
12
14
7.49 7.16 6.4 7.4 9.9 12.2
2000 2001 2002 2003 2004 2005
10.20%
US
D B
illi
on
INDIA :GROWTH IN RETAIL SALES OF JEWELRY
CAGR(2000 – 2005)
India is one of the fastest growing market for Jewelry, growing at a rate of 10.20% per annum over the last 5years.
CAGR : Compounded Annual Growth Rate Source : KPMG Analysis
GLOBAL & INDIAN BREAKUP OF INDUSTRY - 2005
Global India
Plain gold jewelry
42%
Others5%
Diamond jewelry
47%
Plain Platinum jewelry
6%
Diamond jewelry
12%
Others5%
Plain gold jewelry
83%
Plain Platinum jewelry
0%
Source : KPMG Analysis
% Market Share of various jewelry segments
5 5 7
2005 2010 2015
4558
77
2005 2010 2015
U.S.
1221
37
2005 2010 2015
12 9 8
2005 2010 2015
13 1824
2005 2010 2015
1327
43
2005 2010 2015
35
49
66
2005 2010 2015
4 712
2005 2010 2015
7 7 6
2005 2010 2015
U.K. Turkey China
Japan
Italy
Middle EastIndia
RoW
CHANGES IN RETAIL JEWELRY SALES IN KEY MARKETS(USD billion)
2005
2010
2015
Source : KPMG Analysis
INDIAN JEWELRY MARKET – A SNAPSHOT
Indian consumer’s increasing penchant for diamond jewelry and the rekindling of her affair with gold jewelry meant that its share in the world market went up to 8% from a low of 5.5% in 2002
Fastest growing diamond jewelry market growing at the rate of 19% in 2005
Largest player in the polished diamond industry 57% of world produce
Large producer and exporter of various forms of jewelry. output in 2005 USD 12.17billion
India is also the emerging jewelry fabrication centre riding on a number of advantages such as cheap skilled labor, large domestic demand for jewelry & an added advantage of being the largest producer of
polished diamonds.
India’s share of world jewelry production output in value terms (2005)
RoW86%
India14%
INDIA: WORLD JEWELRY FABRICATION SHARE
Source : KPMG Analysis
√ Established Presence √ Emerging Centre / Markets
Mining Processing Fabrication Consumption
Diamond √ √ √Gold √ √Platinum √ √Others √ √ √
GEMS & JEWELRY VALUE CHAIN - INDIA’S PRESENCE
INDIAN RETAIL LANDSCAPE
Traditionally dominated by small scale local players is rapidly moving towards greater organization as retail channels
mature and obtain greater penetration across the country.
Retail organization will enhance the sales of jeweler in India. World jewelry sales will be positively impacted because of this change.
The increasing levels of consumer sophistication, both in terms of design & product demand as well as a general orientation towards gemstone certification jewellery hallmarking
Experimentation with new retail formats.
Increased emphasis on branding and marketing
Value addition in jewellery will increase due to penetration of brands
Growth of e-retail in India. Most online jewellery purchases fall in the 18-35year age group.
INDIAN RETAIL LANDSCAPE
CHANGING TRENDS IN THE INDIAN RETAIL MARKET
TRADITIONAL PRACTICE EMERGING TREND
Jewelry considered an investment, particularly gold jewelry Wearable’ jewelry as a fashion accessory and gifting.
Marriage and festival season are peak seasons. Wearability and gifting dimensions are distributing demand throughout the year.
22 karat jewelry Acceptance of jewelry of lower karatage, particularly in studded jewelry.
Dependence on the family jeweler in the locality. Growing interest in brands which personify quality and trust.
Traditional and ethnic designs. Demand for fashionable, lightweight and innovative designs.
Predominantly ‘gold-based’ jewelry (particularly yellow gold) Growing interest in white gold and newer precious metals such as platinum, diamond studded jewelry is also generating significant interest across the country.
Reliance on local jeweler’s reputation / trust in local jeweler’s stated karatage.
Introduction of objective means of quality measurements through certification and guarantees.
Jewelry largely sold on the basis of prevailing gold price per gram with additional mark-ups for making charges and profit margins.
Jewelry is being sold at a fixed price basis (maximum retail price) by branded players.
BRANDING – THE NEW MANTRA
Indian consumers are becoming ‘ brand conscious’ and are willing to pay significant premiums for purchasing branded products.
Large-scale marketing and branding campaigns by large diamond marketing companies and industry associations have created brands that in many ways kick started the branding trend in the country. Nakshatra Gold Expression Sangini
23 28.7 31
22.1
30.433.95.5
12.314.9
0
10
20
30
40
50
60
70
80
90
1996 2002 2005
Low Income Mass Affluents High Income Groups
US
D B
illi
on
A representation of rising income levels in India
Increasing disposable incomes and the rising number of affluent/high net worth individuals (HNIs) in the country have
opened up the market for high-end premium brands.
Source : KPMG Analysis
BRANDING AS AN EMERGING TREND
Industry has seen two distinct ‘branding’ waves
Company level in an effort to maximize margins and tap target markets
Industry level pushed by large upstream players for market expansion and
demand generation
BENEFITS OF BRANDING
Increasing awareness and interest in the minds of consumers towards ‘jewelry’ as a whole
Preventing commoditization branding guards against the erosion of the cardinal value proposition
of jewelry – its linkages with traditional values and emotional expression
Impact on consumer confidence branding fulfills the necessary function of demystifying the
process of purchasing jewellery including quality parameters to watch out for
Impact on retail margins given that the added value of brands in other luxury goods
categories (such as watches and perfumes) ranges between a whopping 70-90% the jewellery industry has a lot to catch up
INCREASING TRANSPARENCY
Vicious circle of low transparency – low growth.
Lack of transparency has constrained the industry from growing fast.
An aversion to transparency has meant that companies have missed out on access to relatively cheaper capital by not accessing equity markets.
BUILDING ENTERPRISE CAPABILITIES
Strategic & Business PlanningCapabilities
Strategic sourcing capabilities
Managing mergers acquisitions& alliances
Marketing capabilities
Rising capital
Managing financial & operationalRisks
Managing operational costs
Technology & Product innovation.
Managing Supply Chain
Adopting best practices
Defining robust organization modules
Sourcing & Managing Talent
Managing Processes
Grow the Jewelry Market
Grow theJewelry Market
Industry end
Promote jewelry as a Category
Growing the Jewelry market involves undertaking initiativesat a Consumer & Industry level
Consumer end
Identify new products& Consumer segments
Manage a portfolioof markets
Enhance image of the Industry
Enhance talentsupply
Reduce financing Cost
Professionalize and transform family owned businesses
1
2
3
4
5
6
7
CURRENT SCENARIO
Jewelry Authentication
Jewelry Authentication
Assaying & HallmarkingAssaying & Hallmarking Mobile Laboratory Mobile Laboratory Gemstones & Diamond Verification /Certification
Gemstones & Diamond Verification /Certification
GoldGoldPlatinumPlatinum SilverSilver
Own CoinageOwn
Coinage
Loose Stones
Loose Stones
Education to Trade
& Consumers
Education to Trade
& Consumers
MountedJewelry
MountedJewelry
Portable equipment for Hallmarking / Assaying / Diamond Grading
in mounted form at Jeweler’s end
Portable equipment for Hallmarking / Assaying / Diamond Grading
in mounted form at Jeweler’s end
DEFINING THE SERVICES
Assaying – Purity of the precious metal is ascertained.
Hallmarking – Marking of the tested metal.
OUR PROPOSAL
Merger of the two services that will meet the Authentication
needs of mounted jewelry Hallmarking of precious metals and Analysis of gem stones in jewelry mountings
Mobile Laboratory Grading & Hallmarking will be done at the jewelers end
whereby eliminating the logistics of to and fro transportation / security concerns
By & large jewellery industry indifferent to the adoption & establishment of formal or informal industry standards
However, a growing industry with more & more global business transactions, a need has arisen for establishing standards.
India which is one of the largest markets for precious jewelry, quality standards are conspicuous by their absence.
The Indian government has made hallmarking mandatory by 2008
Industry will see an increasing level of adoption of hallmarking in gold and certification in gemstones
INDUSTRY STANDARDS, CERTIFICATION & HALLMARKING
CURRENT STATUS
Diamonds Customers do not usually demand certification of small diamonds,
as it is not cost-efficient. Larger stones are increasingly being sold along with certificates of
authenticity. Consumers in US & Europe rely on certified diamonds and diamond
studded jewelry.
Jewelry Customers do not demand hallmarking for low end jewelry Customers in Europe & US are more ‘insistent’ on hallmarking of
jewelry than customers in India
WHY HALLMARKING AND ASSAYING SERVICE?
Precious metals used in jewelry and giftware are always used as an alloy mainly gold
The most experienced jeweler or chemist cannot tell how much precious metal is there in an alloy
High price of precious metals offers a huge opportunity for fraud
To protect the public & honest suppliers from those who are tempted to cheat them
Hallmarking is mandatory in various countries across the world like UK
India being the largest consumer of gold jewelry, the government of India has declared the hallmarking of precious metals to be mandatory from 2008 onwards
Hallmarking & Authenticity services can mint their own coins for public consumption.
CURRENT PLAYERS / COMPETITION
As per BIS figures
number there are
40 Hallmarking Centers
across the country
Place No. of Centers
Mumbai 5
New Delhi 5
Kolkata 3
Trichur 3
Chennai 4
Coimbatore 3
Surat 1
Rajkot 1
Vizag 1
Calilut 2
Cochin 5
Pune 1
Baroda 1
Ahmedabad 2
Hyderabad 1
Bangalore 1
Kanpur 1
INFRASTRUCTURE
Manpower & Training
Assaying and Lab training as well as manpower will be provided by the consultant
Place
Space required is ideally around 1000 sq.ft.
WORKINGS OF AN ASSAYING & HALLMARKING CENTRE
List & Cost of Equipments
Particulars Rate (INR) Nos. Amount (INR)
XRF Analyzer 1,900,000 2 3,800,000
Laser Maker-5markings per piece 1,900,000 1 1,900,000
Analytical Balance 3,00,000 3 9,00,000
Cupellation (Assaying) Furnace 1,00,000 2 2,00,000
Melting Furnace 1,00,000 1 1,00,000
Annealing Furnace 1,00,000 1 1,00,000
Scrubber for Flu Gases 1,00,000 1 1,00,000
Miscellaneous Consumables 3,00,000 1 3,00,000
Air Conditioners 25,000 4 1,00,000
Computers 2 50,000
CCTV 4 50,000
Biometric System/Metal Detector 50,000
One time BIS License Fees 1,00,000
Consultant/Turn Key Operator 2,50,000
Furnishing & Interiors 5,00,000
Total 85,00,000
BUSINESS PROJECTIONS
Business Model Revenue
(INR)
Investment
(INR)
Expenses
(INR)
Gross Profit
(INR)
Output per day
pcs.
Case I (Conservative Output)
Operating in 1Shift
21,600,000 7,000,000 12,060,000 2,540,000 800
Operating in
2 Shifts
43,200,000 7,000,000 20,340,000 15,860,000 1,600
Case II (Realistic Output)
Operating in 1Shift
32,400,000 7,000,000 12,060,000 13,340,000 1,200
Operating in
2 Shifts
64,800,000 7,000,000 20,340,000 37,460,000 2,400
Projected Income after 5 years
WHY CERTIFICATION & INFORMATIONOF GEM STONES?
Prices of gem stones are quality sensitive. 1carat diamond can cost anywhere from INR 0.1million –
0.6 million. while the size of the diamond is the same the quality is what
makes the difference.
The most experienced jeweler or manufacturer does not have the expertise to differentiate the quality of the gem stones.
Hence, the importance of an independent gemological laboratory for certifying and educating the various public in the value chain of the international standards of gem stones
WORKINGS OF A GEM STONE LABORATORY AND A TRAINING CENTRE
Gem stone Laboratory entails Grading and analysis of loose gem
stones & diamonds Grading and analysis of mounted
jewelry Training courses in gem stones and
jewelry
CERTIFICATION UNIT
Certification Unit involves certification of : loose stones (Gemstones & Diamonds) mounted Jewelry - Melle sizes identification of treatments to enhance gem stones & diamonds
To start with we shall offer only services for grading mounted jewelry
Costing of the services of the mounted Jewelry - Melle sizes This part of the service is not machinery intensive more important is the human resource and expertise rendered by them
COSTING OF CERTIFICATION UNIT
The main equipment for the identification processis the microscopeEach microscope costs USD 2,500 (INR 1,15,000)
10 Gemologists would require 10 microscopes costingUSD 25, 000 (INR 11,50,000)
5sets of mounted color master sets each costing USD 2,000 (INR 90,000) i.e.. USD 10,000 (INR 4,50,000)
Other Equipment USD 15,000 (INR 6,75,000)
Let’s help create A Unique One- Stop-Shop for all the
Authentication needs of theGems & Jewelry Industry