Rising Silver Prices Force Popular Jewelry Manufacturer Pandora to Switch to Platinum
Pandora, a company known for its "affordable luxury" concept, is forced to change the production technology of its famous bracelets and charms, using platinum plating instead of pure silver. As writes The New York Times, this move is an attempt to protect the business not only from abnormal raw material prices but also from the pressure of high customs duties and a general decline in consumer demand.
Pandora — the world's largest jewelry brand by production volume — annually purchases more than 300 tons of silver, but is now forced to change its strategy due to abnormal price growth. Over the past year, silver has doubled in price, reaching $80 per ounce, which has been a much more painful blow to the company's business model than the rise in gold prices.
To maintain its "affordable luxury" status, the brand announced in early February the launch of a platinum-plated product line, which should reduce dependence on expensive sterling silver.
The choice in favor of platinum is due to its stability: although this metal costs about $2,100 per ounce, it has risen by only 3% since the beginning of the year. This is incomparable to the double-digit percentage growth of silver over the same period.
Therefore, within a year, Pandora plans to transfer at least half of its silver products to the new technology. This step will allow the company to "level out a significant part" of raw material costs by using platinum plating on cheaper metal alloys.
Berta de Pablos-Barbier, the CEO of Pandora, who took over the company at the beginning of the year, admits that excessive reliance on one type of raw material has become a serious financial risk. According to her, previous fluctuations in silver prices too strongly affected profitability, so diversification of materials is necessary for the stability of the business in the future.
As the NYT notes, this reorganization is taking place against the backdrop of weak consumer sentiment, especially in the USA, where sales significantly slowed down at the end of last year. Last year, the company's revenue amounted to $5.1 billion, increasing by only 2% in comparable prices, while overall profit actually remained unchanged. Moreover, the forecast for the current year projects almost zero sales growth, which forces management to seek ways to optimize costs.
An additional challenge has been the customs policy of Donald Trump's administration, as Pandora manufactures its jewelry in Thailand, and the American market is key for it. The introduction of 20-percent duties on imports from Thailand and Vietnam, where the company is preparing new production facilities, has created new financial barriers and made investors more cautious about the brand's shares.
Despite all challenges, Pandora's management reassures customers: the quality of the products will even improve, as platinum plating is more resistant to corrosion and does not tarnish over time. This will allow wearing jewelry even during seaside vacations, while the company's main goal remains unchanged — to keep prices at the affordable level consumers are accustomed to.
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