Arik Herman could not really keep quiet in the lap of his Schaffhausen clock-maker grandfather. Later, he has decided to clutch a magnifier, as well, but instead of cogwheels, he has been ogling precious stones with it. By now his company, Caprice Hungary has become one of the leader diamond traders in Europe.
Written by: Zsolt Bau.A
Although, the life of the grandfather hasn’t weltered with clockwork precision.
The watchmaker has escaped to the Soviet Union with his family from the Nazism, where he has conducted a factory, dealing with the production of watches for combat-cars. For a joke at the prejudice of Lenin, he has been deported to a Siberian work-camp. He was thought to be dead by his family – he has thought the same of them, when decades later, thanks to the blind luck, they have met again in Romania. The Tel-Aviv born Arik at the age of 10 has only experienced that unexpectedly a grandfather has appeared, who tried to blandish to his grandchildren with Romanian footballs. The balls were holey.
Arik has later studied engineering in Tel-Aviv, but he hasn’t been working even a day in his profession, as soon he has found the real subject of his interest. He has realized that diamonds, these miniature masterpieces of nature, as he conceived it, are „talking to him”.
„My father was working in the construction industry, he has only opened the family’s two jewel shops to let my grandfather, who in the meantime has moved back to Tel Aviv, also deal with something. When exactly on the day of my 18th birthday he had a heart surgery, the whole family was with him in the hospital, so I remained alone with the operation of the two shops” – as he recalls the beginnings. He has not immediately banged at the diamond business, but only after the university studies, 27 years ago.
No second chance
From Haifa it takes a whole night to arrive at Cyprus by ferry boat. Most tourist party through the whole way, but the young Arik Herman, who intended to put his first business across, was reading on board instead. „Looking back, it was totally crazy what I have done – he says. – If the passengers knew that I have diamonds in my pocket, worth half a million dollars, they would have simply thrown me into the sea.” Maybe the luck of beginners have also played a role in coming safe to port, later on he could afford himself to travel by plane.
But from where does someone have the value of half a million dollars diamonds in his pocket? He does not find it on the street for sure. „One of my friends entrusted the diamonds to me to merchandize them. Our profession is based on nothing else, but trust – explains Herman. - No contract, no bullshit. When you are given a stone, it does not matter if its value is hundred thousand or one and a half million dollars, they confide in you and you have no second chance. One wrong step is enough to exclude you from the whole industry. You must be reliable, and you exactly have to know who to trust. If you work with diamonds, this is the pledge of success.”
Although trustfulness is essential, professionalism is also necessary. The young Arik Herman intended to learn about diamonds everything possible. He trained himself in Tel Aviv and Antwerp to become a diamond expert, before he has become a merchandiser of a company in New York. The 21 billion dollar diamond market of the USA is about the half of the world’s total trade, so making a career on this market is challenging and an enormous opportunity at the same time. Wholesale dealers sell the stones in packages – in many cases hundred to hundred and fifty pieces at a time -, not one by one and they agree the price on the whole package.
“It’s highly important to appraise the value of the stones right, as one tiny mistake, for instance if the lightning conditions are not appropriate and the clarity or the color of the stone is allocated wrong, can influence the price of the diamond with 30-40 percent” – explains Arik Herman. In this period of his life he was on the road all the time, he travelled through the USA and Canada and has transacted several businesses. It also has to be taken to notice that the weight of a one carat diamond is around 0,22 grams, its value varies between 25-35 thousand dollars, depending on its clarity, so the chance of deception is grand.
It's a steep learning curve when you're thrown into a joblike this. „Once I have been to Las Vegas on a business trip. I have entered a jewelry shop that was a pawn-office, as well. I have packed out the stones to be sold when the owner invited me for a coffee in his back office. There was a huge chest standing in the office, similar to what I have only seen in the Pirates of The Caribbean film before. When he has opened it, it was overfull with jewelry and precious stones and he held jewelry in his hand of about 10 million dollar value. I have never ever tried to sell diamonds in Las Vegas.”
„DiCaprio acts ingeniously in it” – he says when I ask him about the Bloody Diamond film – if adventure and films were brought on. According to his opinion, the film is dealing with a real problem, but concerning more to the situation of 10-15 years before, rather than these days. Just like in all branches of industry, cheaters and rule breakers appear here, as well, and although 97-98 percent of the diamonds were conflict free diamonds, the „bloody diamonds” meant a huge problem. Thanks to the Kimberley Process, accepted by all UN member countries, the diamond market has become the most controlled trading platform in the world besides making sure that the diamonds originate from conflict free sources.
99,8 percent of the world’s mined stones are from countries that has joined the agreement. „There is no other industry exists, that is not controlled by state governments, but straight by the UN itself – says Arik Herman. – On the market of tobacco or alcohol, smuggling or illegal production means more serious problem, than on the diamond market.”
14 years ago I came to Hungary by accident – recalling the start the founder of Caprice. – In the course of my career I got to the point when I wanted to have my own business. Near the Place Vendome in Paris I have found an appropriate parlor, but the negotiations were cloddy. This time a friend of mine told me that there would be a great opportunity in Hungary.” For the first time he has jumped over to Budapest only for a weekend, but he liked the ambiance of the city and the business has turned out good.
For everybody’s consternation, he tried to find diamond polishers in newspaper advertisements, but even this anomalous attempt has become successful, as several Hungarian experts working in Antwerp have applied for the job. With its 2000 square meters center in Szentendre – developed with several million dollars investment from a raunchy storage house without piped water -, Caprice has become one of the greatest diamond companies of Europe.
“Our point of vantage comes from the fact that thanks to my connections and my reputation achieved throughout 27 years, we can buy diamonds from first hand” – Arik Herman lets me in on the details. While most jewelry producers purchase diamonds through long chain of merchandizers, Caprice has the same suppliers like the greatest ones have.
“We get stones from the same source like Tiffany of Cartier does and as we do not have such upkeep costs like these leading luxury brands have, we offer the same diamond to our clients on half price or even cheaper – he says.
It’s needless to be worried about the Caprice empire, although their balance for the last year (2014) shows losses. In the records from the previous years we find profits and losses. The 100 percent owner of the ltd. is the Nicosian Mugler Investments, about the ownership structure I ask the managing director in vain. “I have business partners from Israel, the Hungarian Caprice is only one of our several concerns.” – this is the most Arik Herman lets me know. After a few moments he adds: “I have never been making a boast of my wealth. I have been driving a Fiat Punto long years even after in each vitrines of our salon in Szentendre were jewels on the value of more Puntos.”
Although Caprice is tied to Szentendre, the management’s opinion is that they have outgrown the town, the prestige of the company requires the presence in the Downtown of Budapest. The center in Szentendre will be soon closed and they move into the diamond palace in Dorottya street, Dorottya Diamond Palace. As this step needs huge investment, the owners needed a business partner in the project.
“I have discussed with 3 potential partners and instead of professional investors I have made a deal with Andy Vajna, who is considered to be an outsider in the diamond business. Our good relation originates from the cooperation between Caprice and Miss Universe”- says Arik Herman. In the newly found company, Dorottya Diamond Palace Kft., Beauty Enterprises Hungary – registered by TĂmea Vajna – has 49 percent ownership. Herman noted that they have invested the same amount into the several million dollar project with Andy Vajna, but as he is the represents the professional side, he has the majority of the ownership besides the strategical decisions.
“Our cooperation is confined strictly to business, I do not care about his political background or about what stories are published of him in the tabloid journals. The only standpoint of my decision was that I completely trust in him.” When I ask him if he took the trouble over this step to write a normal contract on this issue, a wide smile appears on his face. “For me it was enough that we agreed in word. But the lawyers also have to live from something.”
Forbes, September 2015