De Beers Group has recently announced the launch of a new Company called Lightbox Jewellery that will begin marketing a new brand of laboratory-grown diamond (LGD) jewellery under the Lightbox name in September, offering consumers high-quality, fashion jewellery designs at lower prices than existing lab-grown diamond offerings.

Lightbox lab-grown diamonds will retail from US$200 for a quarter-carat stone to US$800 for a one-carat stone. The line will bring something new and innovative to the jewellery sector, featuring pink, blue and white lab-grown diamonds in a selection of accessibly-priced earring and necklace designs.

To support Lightbox, De Beers Group is investing a total of US$94 million over four years in a new Element Six production facility near Portland, Oregon, adding to Element Six’s existing UK-based facilities. Once fully operational, the plant will be capable of producing upwards of 500,000 rough carats of lab-grown diamonds a year.

The De Beers’ move comes at the risk of diluting demand for the globally controlled diamond market. However, the Company believes it has the tools and expertise to drive prices sufficiently low enough in the man-made diamond industry to both differentiate them from real diamonds and make a profit at the same time.

Industry leaders feel that this is a very smart move. By establishing a low-price alternative to the real thing, De Beers will be able to drive up the prices for its natural stones.

Man-made gems currently make up a small part of the diamond market, but its demand is increasing. Global diamond production was about 142 million carats last year, according to analyst Paul Zimnisky. That compares with lab production of less than 4.2 million carats, according to Bonas & Co. Analysts have estimated synthetic diamonds could account for 5% to 8% of the polished diamond market by weight, but less by value. The market of lab-grown diamonds was valued at USD 16.2 Billion in 2015. Moreover, by the end of 2023, the global market of lab-grown diamonds is expected to garner USD 27.6 Billion by registering a CAGR of 7.4% during the forecast period i.e. 2016-2023.

The threat to natural diamond producers has grown to the extent that in February this year former head of the Dubai Diamond Exchange (DDE), Mr. Peter Meeus warned in Cape Town that “lab-grown diamonds are now the single greatest existential threat to the industry.”

To assess the De Beers’ move and its impact on the natural diamond business, we asked following two questions to several industry leaders:

• De Beers is entering the lab grown diamond business. What is your assessment of this move?
• Is it the beginning of ‘disruption’ of the natural diamond business?

Here are their feedbacks>

Ernie Blom (President, WFDB):

“I believe this must be seen positively. De Beers’ move illustrates very clearly the difference between diamonds and synthetic diamonds which can be made relatively cheaply and quickly as opposed to nature which took millions of years to do so.

As has been said many times before, synthetic diamonds have their own niche in the market, as do diamonds. Synthetics must be ethically traded and sold, and in this respect, I believe it is critical that synthetic producers advertise their stones in an ethical manner, not at the expense of diamonds.

They typically claim that synthetics are produced in an environmentally friendly way and are not tainted as conflict diamonds. This ignores the enormous efforts of the diamond industry to stamp out conflict diamonds via the Kimberley Process, the corporate social responsibility and sustainability practices that producers and other members of the diamond pipeline have put in place, and the enormous amount of power that is needed and used by the synthetic makers to produce these stones to keep their factories working around the clock.

I believe that this move has been very carefully thought out by De Beers whose main business is clearly mined diamonds. The firm is creating a new market not substituting an old one.

As De Beers has said, and as the price points clearly show, these are not precious stones. They are meant to be light and colouful and aimed at changing fashions, rather than mined diamonds which retain their place as highly symbolic and bought for major lifetime milestone events. As Lightbox’s head of marketing, Sally Morrison, said, it is jewellery that, if you lost it at the beach you wouldn’t be quite so concerned as you would if it was a wedding ring set with a diamond.

The only “disruption” that I see is to the synthetic diamond market. Lightbox is clearly telling consumers exactly what lab-grown diamonds are worth. They are easy to make and repeat time after time; they are not stores of value like diamonds and don’t have any resale value.”

Alex Popov (Chairman of World Diamond Mark)

“This is a long thought over and prepared move that confirms that De Beers is thinking about the future. With margins of over 300% it is inconceivable that corporation would not use the opportunity to bring additional shareholder value.”

Reacting to the question whether it is the beginning of ‘disruption’ of the natural diamond business..

Alex says, “Yes. The diamond business from now on will be divided into bigger and whiter mined goods and smaller and cleaner laboratory grown. Eventually all brown “Indian” polished goods will disappear from the marketplace being replaced by clean LGD as DeBeers calls them.

Companies like Swarovski and Pandora will join DeBeers in producing non-expensive LGDs and the market eventually will be flooded with non sophisticated jewellery for 15-18 year olds.

Others will have to compete solely on design and branding merits.”

Ali Pastorini (President, Mujeres Brillantes and Owner, Del Lima Diamond Jewellery Brand):

“I think this move by De Beers to launch the Lightbox collection is very clever.

They have obviously anticipated a very strong trend in affordable diamond jewellery at a price point where people will be less concerned about whether the diamond comes from the earth.

For other hand we must be critical about ourselves as industry , because in a certain way De Beers will be designing a campaign which will bring diamonds back into people’s minds where with only $200 you can buy a ‘type’ of diamond jewellery. It will open the consumers’ mind to the fact that there are many different possibilities in the diamond world. This is something we as a sector have not been able to achieve, we like to admit or not.

The diamond jewellery campaigns, in general, make it so exclusive that only a certain percentage of the population feel included in the possibility of buying a diamond. Lightbox will be inclusive, making a ‘type’ of diamond jewellery accessible to the greater public.

I don´t see it as the beginning of “disruption”. I see it as a great lesson and opportunity to everybody, while we as sector were too busy resisting it and banning from the bourses , they (DB) took the first step to approach to the general public.

I see it as a positive stance , because it´s better De Beers who has the ethical , social responsibility and policy driven lead in the lab grown than be leading by some company or Organization that don’t have these concerns.

Other good discussion that it will bring to the table is: “If you want real diamonds they will cost more”, the point is we will finally be getting into that conversation with the public. The diamond conversation.

I do believe this will bring positive developments to our industry as a whole and will get people buying all kinds of diamonds again. Everybody wins!”

Mr. David Johnson (Head of Strategic Communications, De Beers Group)

“De Beers carries out a lot of research on issues that are relevant to the jewellery sector, and recently carried out research into consumer attitudes regarding synthetic diamond jewellery. This research highlighted that there is widespread confusion about laboratory-grown diamonds (LGDs) – what they are, what they are not, how they are formed, and how they are valued. Such confusion isn’t helpful to anyone. Lightbox Jewellery will therefore be marketed distinctly as man-made, and it will be priced and positioned in a way that’s different from natural diamonds, as that’s what consumers tell us they are looking for from these products.

De Beers is launching Lightbox Jewellery because it sees an opportunity to enter the market for lab-grown diamonds (LGDs) by offering a range of fun, fashion jewellery products for more casual occasions, and at an accessible and sustainable price – in line with what consumers think about LGDs – while also helping to clarify some of the confusion we’ve seen regarding LGDs in our consumer research. Addressing this confusion will be beneficial for the future of the natural diamond industry.

Diamonds and LGDs are two different product categories – this is what consumers repeatedly tell us in our research, and they feel that this should be reflected in the way the products are sold and the prices at which they are offered. The examples of synthetic rubies, emeralds and sapphires is instructive here as all of these sell at a fraction of the price of their natural counterparts and are sold differently in different product types.

However, our consumer research has showed that there is currently consumer confusion when it comes to synthetic diamonds, so Lightbox will help to address this by being very clear and transparent about its products, pricing and positioning – and we believe it will transform the LGD sector. As these are different products from diamonds, sold in a different way, Lightbox will be complementary and additive to the natural diamond sector, rather than disruptive to it. In addition, Lightbox’s ability to help address the existing consumer confusion will also benefit the natural diamond sector over the long term.”

Posted by Suresh Chotai