De Beers Stops Producing Lab-Grown Diamonds For Jewelry And Recommits To Natural Stones

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The recent JCK Las Vegas jewelry show was all abuzz as De Beer’s CEO Al Cook announced it was pivoting to manufacture lab-grown diamonds for industrial uses and focusing its jewelry marketing efforts behind natural, mined diamonds.

After testing the waters for six-years with Lightbox lab-grown diamond (LGD) jewelry and pondering its post-divestiture future as owner Anglo American spins it off, De Beers figures the economics of LGDs for jewelry don’t add up.

It has drawn a line in the sand to differentiate lab-grown diamonds from natural stones in the jewelry market and lean into emerging opportunities for LGDs in advanced technology and industrial applications.

Strategic Shift

“As the value of lab-grown diamonds continues to fall, their focus increasingly shifts to lower priced fashion jewellery rather than the meaningful pieces people buy to celebrate the key moments in life,” Cook shared with me.

“We see the main long- term opportunities for synthetic diamonds, as they are known in the tech space, being in a range of exciting technology applications due to the extreme physical properties that make them ideal for use in high value applications like 6G technology, semiconductors and quantum computing,” he continued.

The company’s Element Six subsidiary, which produced LGD stones for Lightbox using chemical vapor disposition (CVD) technology, will now focus on industrial uses of synthetic diamonds.

“As the cost of synthetic diamonds continue to come down, as we advance their design and construction, this opens up the opportunity to use them in ways that hadn’t been imagined previously,” he continued.

For example, Element Six has launched a research collaboration with Amazon Web Services to develop the use of LGD in quantum computing. It is also working with the Department of Defense on advanced military communication and electronics applications.

De Beers will centralize Element Six production from three facilities to its $94 million plant in Portland, Oregon. “This starts with concentrating all our resources in a single world-class CVD hub,” Cook said. He will also streamline other corporate operations to realize over $100 million in annual cost savings.

With LGD prices falling at unprecedented rates – down 34% wholesale and -25% at retail compound annual growth rate (CAGR) from January 2020 to April 2024 for a two-carat stone, according to Edahn Golan Tenoris data – De Beers has decided to cut bait in LGD for jewelry and keep focused on natural diamonds where prices are expected to rise 3% to 5% CAGR through 2032 as supply tightens.

De Beers sees this decision, along with others outlined in its Origins strategic plan, to lead EBITA growth to just under $1.5 billion by 2028, up from under $100 million in 2023.

Having decided the future of its LGD venture is for industrial applications, not jewelry, De Beers’ Lightbox jewelry brand is limbo. Over the short term it has enough stock to keep the business afloat for the “foreseeable future,” Cook shared with Rapaport.

In that interview, reporter Joshua Freedman got the impression that “discarding the line in not among De Beers’ considerations,” as Cook stressed Lightbox’s positioning as a carbon-neutral, made-in-America brand. “We intend to stick with that element of the brand,” Cook shared.

However, with National Jeweler, Cook expressed uncertainty. “I think it’s too early to say,” he shared and added, “At the moment, we’ve got a lot of stones available to Lightbox. Production will continue for a few months to ensure that they’ve got a stock of beautiful lab-grown diamond stones they can sell.”

After that, “We’ll see where the brand goes and we’ll see what happens,” he said.

No matter the ultimate decision on the Lightbox brand, it will have to look for new LGD supply since Element Six is off the table.

Spotlight On Natural Diamonds

Central to the Origins strategy is to put more distance between natural and lab-grown diamond stones. De Beers is turning its mighty marketing muscle to reestablish natural diamonds’ dominance in the jewelry market.

Its reboot of the iconic “Diamonds Are Forever” tagline updated for modern consumers marked the beginning, launched fourth quarter last year in the Seize the Day campaign. Over 22,000 retailers ran with the campaign’s digital, out-of-home and print assets that De Beers provided free of charge.

De Beers followed by announcing a collaboration with Signet Jewelers, the world’s largest diamond jewelry retailer, to drive natural diamond demand. A similar collaboration is in the works in China with Chow Tai Fook, owner of Hearts on Fire, among other brands.

Also in the plan is to scale up the luxury De Beers Jewellers retail brand, now with about 30 locations and a foothold in 16 markets worldwide. It will also refocus its Forevermark brand in the Indian market where diamond jewelry demand is growing.

To help jewelers make the difference between LGD and natural stones apparently clear, De Beers just introduced a retail-counter diamond verification device so that consumers can see inside the stones in real time. The device’s digital screen can also be used to play promotional and educational videos in support of the retail sales process.

And to keep its supply of natural diamonds flowing, even as natural resources are dwindling, De Beers is focusing upstream investments in South Africa’s Venetia and Botswana’s Jwaneng underground mines, and sees potential for additional expansion in Namibia and Canada. It also is investing in exploration activities in Angola.

Reclaiming Diamond Leadership

With De Beers’ future ownership hanging in the balance, Cook is exerting strong leadership to assure no matter whether it is acquired by a new owner or goes forward with an IPO, that the company’s strategic path to growth in natural diamonds is assured.

“We are reinventing every part of De Beers to grow value. Through delivery of our Origins strategy, De Beers will be streamlined, focused and a leader in diamond technology, provenance and luxury retail. We will recreate the magic of natural diamonds for modern consumers,” he said in a statement.

“The outlook for natural diamonds is compelling,” he added. Key to realizing that vision, is to position lab-grown diamonds as poser substitutes for the real thing. And De Beers alone has the power and influence to draw the red line between LGD and natural stones, if – a big if – consumers can be swayed.

Disrupt The Disrupter

Industry expert Edahn Golan tips his hat. “De Beers is the symbol of the diamond industry and has a lot going for it. It possesses a unique understanding of the diamond market and has operations in every aspect of it – from mining through diamond tech to retail. Its internal knowledge base is unparalleled, and its mining assets are some of the best and richest around.”

Yet lab-grown diamonds are relentlessly disrupting the jewelry industry. “LGD pricing is heading south fast, and this is undermining their perceived value,” Golan observed. “Currently, the key issue here is bridal, where nearly half of the diamond engagement rings sold in the U.S. last month were set with LGDs.”

With the price of LGDs dropping so fast, Golan foresees a time – and it may not be too far off – when brides will turn up their noses at an LGD engagement ring. “At what point will a bride-to-be question if her partner is just too cheap?” he asks.

And De Beers has the answer – give her or him a precious, unique natural diamond. Since perception is reality in the consumer market, De Beers is determined to shape that future reality and be there when the tide turns. “We will create value as brilliant as our diamonds,” Cook concludes.

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