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By Suzanne Vranica

When DeBeers sneezes, the rest of the industry gets a cold.

Earlier this summer, the diamond-mining giant hinted that it may one day market its own line of diamond jewelry. Now, only a few months later, two little-known gem companies have launched their first national ad campaigns in a bid to create their own prestige brands.

Leo Schachter Diamonds and Steinmetz Diamond Group are sightholders-companies that cut and polish raw stones, then sell them to dealers or retailers. In the past, these middlemen have left diamond promotions to retailers such as Tiffany's, designers such as David Yurman, and DeBeers, whose $170 million global ad budget makes it the world's largest single promoter of diamonds.

But this summer, DeBeers suggested the industry needed to raise its marketing spending if it wanted to match the growth of other luxury-goods segments. DeBeers also said the industry needed more competing brands to stimulate growth.

Now some of the industry's oldest firms have responded by trying to create their own public personalities. For example, Leo Schachter, a family-run business that buys diamonds, polishes and cuts them into precious stones, and then sells them to dealers and retailers, is advertising for the first time in its 48-year history.

The company is spending as much as $5 million on an ad campaign created by Lieber Levett Koenig Farese Babcock, a New York ad and consulting firm, that features print, radio, Internet and in-store ads. The work, which is intended to generate consumer sales for the coming holiday season, will debut in October editions of such publications as People and Sports Illustrated. "We want consumers to come into a retailer and ask for our specific product," says Elliott Tannenbaum, chairman of Leo Schachter.

The company is also banking on a patented diamond-cutting technology that enables it to make gems with 66-facets that it now markets as the "Leo." Diamonds are traditionally cut with 58-facets. Leo Schachter has also teamed up with GemEx Systems, based in Mequon, Wis., to develop a new method of measuring a diamond's brilliance. It will offer consumers a "return of light" ratings, which is a scale that gives consumers a standard benchmark to compare stones.

The Steinmetz Diamond Group, a 60-year-old closely held company that also cuts and polishes diamonds, is also jumping into the branding arena. It has teamed up with Alan Lipton a 20-year veteran of the diamond industry who has specialized in selling diamonds to such mass merchants as Wal-Mart and Sam's Wholesale Clubs. The two partners-with the help of other investors-have launched Diamond.com, a Web site that sells fine jewelry and gems directly to consumers.

Beny Steinmetz, 44 and the site's chairman, says more rough-diamond dealers and polishers in his position will look for alternative means of distribution. "Selling on the Internet and creating Diamond.com as a brand is one of those ways," he says.

Diamond.com will spend $15 million to $20 million in the U.S. on its marketing blitz, and about $3 million to $5 million in Europe and Japan. The print ads, which will run in magazines such as Architectural Digest, Fast Company, Harper's Bazaar and Town & Country, feature fashion model Laetitia Casta. One print ad, dubbed "Spider Web," features a diamond draped Ms. Casta sprawled on a spider's web of diamonds. The campaign was created by Messner Vetere Berger McNamee Schmetterer, a unit of Havas Advertising's Euro RSCG Worldwide. The tagline: "The largest selection of certified diamonds in the universe."

Caption under picture of ad:
Leo Schachter is advertising for the first time in its 48-year history and banking on a patented diamond-cutting technology that enables it to make gems with 66 facets, dubbed the "Leo."