On September 13, De Beers, the UK-based company known both as a jewelry brand and a diamond supplier, announced that it would discontinue the engagement ring product line of its Lightbox brand. This decision is significant, as engagement rings are a crucial segment for diamond brands and high-end jewelers. Lightbox has been De Beers' key initiative in recent years to tap into the growing lab-grown diamond market, and the decision reflects a reevaluation of its strategies and business plans concerning non-natural diamonds.
Lightbox was launched by De Beers in 2018 to lead the market amid rising interest in lab-grown diamonds. It introduced a strict pricing policy, selling all diamonds—regardless of size or color—at a flat rate of $800 per carat. While this aggressive pricing approach was an attempt to establish a strong foothold, it ultimately came with hidden risks.
One major challenge came from China, a major diamond consumer. According to global market data, China accounts for approximately 50% of global production of gem-quality lab-grown diamonds, with 80% of that production coming from Henan province. In 2021 alone, Henan's Zhecheng County produced nearly half of the global output of lab-grown diamonds, leading to a rapid decrease in prices to around 5,000 RMB per carat. After China, the United States and India are also becoming key players in the lab-grown diamond supply chain.
De Beers' ambition to establish a pricing structure for lab-grown diamonds through Lightbox faced difficulties, as the company could not achieve the same monopolistic pricing power that it had in natural diamond mining and trading. As a result, the company needed to make strategic adjustments.
Despite these challenges, Lightbox continued its efforts. In June, it announced that its lab-grown gemstone production process had achieved full carbon neutrality, with 100% of the energy used coming from renewable wind power. The brand also launched a limited collection that included simple gold rings and pavé rings with lab-grown diamonds weighing between one and two carats, priced between $2,500 and $5,000. Despite the sustainable and accessible approach, market feedback was less than ideal.
De Beers commented in a statement that the limited series provided valuable insights, indicating that the commercial prospects for lab-grown diamonds as engagement rings lacked long-term viability. According to the company, retailers would need to double the carat sales volume of lab-grown diamonds every two years just to maintain gross profit margins. Given the current socio-economic environment and consumer preferences, this target was difficult to achieve.
Luxury industry executives have also expressed skepticism about the commercial potential of lab-grown diamonds. Cyrille Vigneron, CEO of Cartier, mentioned in an interview that lab-grown diamonds raise several issues. He noted that many consumers were not ready to embrace lab-grown diamonds, and that the transparency of the lab-grown diamond supply chain remained incomplete. He also highlighted concerns that lab-grown diamonds could negatively impact the perceived value of natural diamonds, which are tied to brand symbolism.
Nicolas Bos, CEO of Van Cleef & Arpels, pointed out that marketing lab-grown diamonds purely through an environmental narrative is insufficient. "Lab-grown diamonds are part of technological progress, but they are not a substitute for natural diamonds," Bos said. He suggested that lab-grown diamonds could provide creative opportunities for brands in the future, rather than being marketed as an eco-friendly alternative to traditional gemstones.
Michael Burke, then-Chairman and CEO of Louis Vuitton, explicitly stated that the brand was not yet ready to abandon natural diamonds, even though LVMH, Louis Vuitton's parent company, had invested in a lab-grown diamond company. Burke argued that lab-grown diamonds still posed many challenges and their carbon footprint, in some cases, was not lower than that of responsibly mined natural diamonds.
In terms of sustainability, lab-grown diamonds may not always be as environmentally friendly as natural diamonds. While lab-grown diamonds do not involve unethical practices associated with mining, their production is energy-intensive and requires cross-border cooperation, leading to a larger carbon footprint than natural diamonds. Additionally, the rise of lab-grown diamonds could impact economies in African countries like Botswana, where diamond mining is a crucial economic pillar, providing stable employment and improving living standards in mining communities.
The narrative of sustainability alone does not provide a solid commercial foundation for lab-grown diamonds. In the economic environment as of July 12, 2024, rough diamond prices had fallen by 25% from their peak last year, and lab-grown diamond prices had also declined significantly in recent months. However, this drop in rough diamond prices has not yet been reflected in jewelry retail prices, nor has it necessarily stimulated consumer purchasing.
Despite advocates of lab-grown gemstones promoting their environmental, social, and cost benefits, the emotional connection between diamonds and eternal love—cultivated by natural diamond businesses for decades—remains strong among consumers. Moreover, natural diamond companies have begun highlighting the positive impact of diamond mining on local communities, which diminishes the moral advantage of lab-grown diamonds. De Beers' own surveys in China and the United States show that consumers still rate natural gemstones higher than lab-grown ones, especially for significant life events such as engagements.
The value symbolism of natural diamonds remains unmatched by lab-grown diamonds. While mid-income consumers may find lab-grown diamonds an affordable way to fulfill their "diamond dream," high-net-worth individuals do not view lab-grown diamonds favorably. To them, the ability to mass-produce lab-grown diamonds means they lack the scarcity and exclusivity that are intrinsic to luxury goods.
A report by the Boston Consulting Group titled "Understanding the Global Price-Sensitive Consumer" noted that a lower price is not the primary driver of luxury consumption. Consumers still seek the rarity and exclusivity of luxury items, which lab-grown diamonds, with their mass production and low cost, do not embody.
Another challenge for lab-grown diamond engagement rings is that their core target audience—eco-conscious Gen Z—also represents a significant portion of people choosing not to marry, further complicating market demand.
As De Beers repositions itself, the company also announced plans to invest $20 million in media campaigns targeting the U.S. and Chinese markets for the upcoming holiday season. The iconic slogans "A Diamond Is Forever" and "Seize the Day" will be revisited, emphasizing the enduring value of natural diamonds.
After navigating the world of sustainability for several years, De Beers ultimately returned to its original focus. The question now is: who will be next to follow suit?