De Beers forays in the Lab-grown diamond market

De Beers - Lightbox
[Image courtesy - Racked]

BDI had predicted a couple of years back that diamond miners will eventually shift to Lab-grown diamond business. But we didn’t foresee it’ll start happening so soon. As the Lab-grown diamond market is scaling new heights fast, global diamond mining major De Beers announced its foray in the Lab-grown diamond segment.

 

Why De Beers is entering Lab-grown diamond business? It is a surprise move?

Several reasons including mined diamond reserves depleting fast, adverse effects of mining and new-age consumers’ preference for ethical, conflict-free and environment friendly products explain to some extent why diamond miners are considering to enter the Lab-grown diamond arena. A recent report by Morgan Stanley forecasted that the market share of Lab-grown diamonds in the global diamond industry is going to rise from 3% to 7% by 2020. This has also prompted several traders and jewellers to shift to Lab-grown diamonds in the recent past.

To many, De Beers’ entry in Lab-grown diamond business may seem as a surprise, considering it had publicly disassociated itself and vehemently opposed Lab-grown diamonds in the past. In reality venturing in Lab-grown diamonds was always the game plan of De Beers. All this time, Element Six (E6), a De Beers group company was silently making strides in manufacturing technology and development of Lab-grown diamonds, though positioning itself as manufacturer of Lab-grown diamonds for industrial purposes only.

Back in October 2016, Swarovski while entering the Lab-grown diamond market was in talks with Element Six to source diamonds from them. Though the talks fell through, it was an indication that De Beers was looking to enter the Lab-grown diamond jewelry market.

Paul Zimnisky, an independent diamond industry analyst said, “The big miners have held concerns about the growth of the synthetic diamond jewelry market for some time, particularly over the last decade, as the quality of stones has improved and manufacturing costs have started to fall.”

Entering an attractive and rapidly rising sector was not a surprise and hurried move but a well thought-out strategy by De Beers. It was just not obvious to most of the world.

 

If entering Lab-grown diamond segment was always the plan, why oppose it in the first place?

While this may be a question many will ponder over, there are several explanations for the same. More than a decade back, De Beers perhaps didn’t foresee the full scope of potential of Lab-grown diamonds. But at the same time, some players had already entered the segment and were making technological breakthroughs. Element Six, though fully functioning at that time, most probably had not made enough progress on the latest CVD technology then. De Beers had thus missed the bus and lost the first mover’s advantage.

While it was working on its tech, letting any other player make formidable headway in Lab-grown diamonds would mean a lost opportunity for De Beers. Besides, threat of losing share to Lab-grown diamonds, when it itself was not ready to enter, may result in mined diamonds’ category to suffer.

And instead of letting the market create and develop, De Beers in all its wisdom opposed Lab-grown diamonds for the moment, while quietly it was getting ready to enter itself. Whether, it was successful in being able to grow most desired colourless diamonds in larger carat sizes still remains a question.

Making all sort of allegations, influencing policies and running the rumor-mongering mill ensured not only Lab-grown diamond incumbents didn’t rise beyond a point but also discredited many of them so when the time is ripe and the tech ready, De Beers is well positioned to take full advantage and be at the top of Lab-grown diamond pyramid, monopolizing the entire value chain, like it always had in case of mined diamonds.

Still after announcing its foray in the segment, De Beers CEO Bruce Cleaver positions its Lab-grown diamond line as “They’re not to celebrate life’s greatest moments, but they’re for fun and fashion. We have always said we are a natural diamonds business. We remain a natural diamonds business.”

Such positioning is again not surprising. Clearly, De Beers wants to make an evolutionary and gradual shift towards Lab-grown diamonds. Besides, suddenly moving away from its positioning may prove to be cannibalizing for its mined diamond business, which has still some steam left at least for the next few years.

 

Lightbox – De Beers’ Lab-grown diamond line

De Beers recently announced the launch of a Lab-grown diamond brand, which will sell Lab-grown diamond jewelry at a lower price than that of competing ones from other players. Lightbox, the fashion jewelry label by De Beers will be selling Lab-grown diamonds of pastel pink, white and baby-blue stone set in studs and pendants. They aim to appeal mass-market and not position it as an engagement ring jewelry.

The stones will be priced nearly 75% less than the mined diamonds as opposed to the normal market rate of Lab-grown diamonds that is nearly 30 – 40% less. A quarter of a carat would be priced at USD 200 to USD 800 for one carat stone.

While De Beers says that it is only responding to consumer demands, it is in a way portraying that for it to survive in the global diamond industry, it had to start playing in the Lab-grown diamond business in some way or the other.

They are targeting segments of self-purchasing professionals and younger and older women who already have a jewellery collection, which other brands are not focusing on. On the other hand, De Beers doesn’t want to position Lab-grown diamonds as a rare or a luxurious stone and portray them as equal to mined diamonds, at least for now.

Though with the above statement De Beers wants to stay as a mined diamond supplier, but at the same time they plan to grow in their Lab-grown diamond jewelry brand too.

Steve Coe, General Manager of Lightbox Jewelry said, “We’ve learned from our research that there is a lot of confusion about lab-grown diamonds – what they are, how they differ from diamonds, and how they are valued. Lightbox will be clear with consumers about what lab-grown diamonds are and will offer straightforward pricing that is consistent with the true cost of production. We will introduce more designs and colors as the range evolves, and the technological efficiency of our proprietary production process means we will always offer Lightbox at accessible prices.”

 

De Beers is not the only miner entering Lab-grown diamond business

According to some 2016 media reports, ALROSA also was exploring opportunities to venture into Lab-grown diamond sector. ALROSA Vice President – Rinat Gizatulin, had mentioned in an interview that the company is studying the market, making plans and further steps, expected to be completed in a year.

Since then, though no development has been announced by ALROSA on the same, De Beers’ move into Lab-grown diamond may prompt the Russian state miner to also expedite its decision.

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