Luxury Market Report Q1 2009

Demand for Gold and Diamonds in India falls dramatically; Dubai's luxury property market collapses; shock and horror in Cannes as L'Oreal cancels ad campaign during the film festival.

The size of India’s gems and jewelry market segment will shrink by 3.9 percent to $22.3 billion in 2009, compared with the $23.43 billion recorded in 2008 states a report released by the Associated Chambers of Commerce and Industry of India this month. The sector is expected to face considerable challenges in 2009, owing to the decline in demand for gold and diamonds in the domestic market, as well as the global economic conditions. A decline in exports of gems and jewelry to $20.06 billion in 2009, compared with a $21.20 billion total in 2008 is also predicted.

Sajjan Jindal, president of ASSOCHAM, reiterated the challenge that the industry faces within the luxury goods market. “Spending by higher-income consumers is particularly weak,” he said, “which has resulted in demand for gold and diamond jewelry shifting to other luxury items.”

Gold imports by India plummeted by 97% in the first three months of 2009 to 1.8 tons, compared with 61 tons in the first quarter of 2008. Considering this is the Ndian wedding "season," the figures are somewhat shocking, and this report may even be somewhat optimistic unless some thing changes in the near future. The contribution of gems and jewelry to total imports by the U.S. from India declined to 21.7 % in 2008 from 25.73% in 2007.

The Gems and Jewellery Export Promotion Council (GJEPC), in its continuing attempt to develop alternative markets to offset the depressed U.S. market, has launched a  “Brand India” campaign in the Middle East. The campaign, which is expected to cost as much as $50 million, is scheduled to launch in late 2009 in Saudi Arabia, the United Arab Emirates (UAE), Iran and Kuwait. Campaign activities would include events with Bollywood celebrities, print and television advertisements and trade meetings in the targeted countries. Unfortunately, the UAE is facing it's own challenges – a recent report by Markaz, a well respected financial analyst, suggested that the real estate prices in the UAE are far from finished falling, and that the luxury property in Dubai may never recover. Those of you thinking of investing in property in Dubai, may want to hold off until some sort of bottom is in sight.

In Cannes, L'Oreal have cancelled their usual ad campaign outside the Hotel Martinez. Under normal circumstances no hotel in Cannes will accept anything less than 12 day bookings which covers the entire festival. What I am hearing is three quarters of hotels in Cannes have changed this policy, prices are at or below last year's and nary a boat has been booked for charter.

This year's Cannes flm festival looks like being considerably more cost-conscious than previous years. Louis Vuitton have scaled back and will no longer sponsor the AmFar AIDS chartity fundraiser, the French government have withdrawn their symbolic E 72,000 subsidy and I gather Vainty Fair have actually canceled their usual party.

If anything this looks to be more a case of "seen to be scaling back" rather than actual financial hardship.