De Beers Cuts Lightbox Engagement Ring Business: What Lies Ahead for Lab-Grown Diamonds?

On Wednesday, September 13th, De Beers, a British company both a jewelry brand and diamond supplier, announced the discontinuation of its engagement ring product line under its "game-changer" subsidiary, Lightbox. Engagement rings (both engagement and wedding rings) have consistently been a key market segment for all diamond brands, high-end jewelry houses, and jewelers, and Lightbox has been the most important subsidiary incubation project of De Beers in the past few years, indicating De Beers has gleaned lessons on how to navigate the rising trend of lab-grown diamonds in the past few years and is now reevaluating its current and future business strategy.

 

However, this news prompts observers to consider the commercial prospects of lab-grown diamonds.

 

Established by De Beers in 2018, Lightbox's primary goal was to seize the initiative as the market started to pay attention to lab-grown diamonds, leading the category's development. It even set a strict pricing model for these lab-grown diamonds, regardless of their size or color, at a standard rate of $800 per carat. Obviously, this pricing strategy, which defied market economic consensus, was ambitious but fraught with hidden risks.

 

 

One significant threat came from one of the world's largest diamond consumers—China. Global market data reveals that China's capacity for producing lab-grown diamonds for jewelry accounts for approximately 50% of the total global lab-grown diamond production capacity, with 80% of that output originating from Henan Province. In 2021 alone, lab-grown diamond production in Zhecheng County, Henan Province, came close to half of the global production, rapidly lowering the price per carat to around 5,000 Chinese yuan. Following China, the United States and India have also become important participants in the global lab-grown diamond supply chain.

 

Apparently, De Beers was unable to establish a dominant pricing position by launching Lightbox due to its inability to monopolize lab-grown diamond production and trade, thus failing to realize its ambition to shape the underlying logic of the lab-grown diamond industry. This fundamental instability implies that the diamond giant needs to make strategic adjustments promptly.

 

Even when a crisis lurks, Lightbox continues to make efforts. Just in June, Lightbox announced that its lab-grown gemstone production process had achieved carbon neutrality, with 100% of the energy consumed coming from renewable power, by the wind.

 

Lightbox also introduced a limited collection, featuring simple gold rings and halo-style settings with lab-grown tiny diamonds. The center diamonds ranged from one to two carats, with a maximum retail price of $5,000, averaging around $2,500. From a design and pricing perspective, this series appeared to be striving to achieve "sustainability" and "accessible" engagement rings. However, market feedback did not meet expectations.

 

In a subsequent statement, De Beers assessed that this series provided deeper insights and "indicated that lab-grown diamond production for engagement rings is not sustainably viable in a commercial context". According to De Beers' own description, retailers would need to "double lab-grown diamond carat sales every two years to maintain absolute gross margin parity", a goal that is challenging to achieve in the current socio-economic and consumer mindset landscape.

 

 

In fact, as early as last year, executives from luxury houses expressed skepticism about the commercial prospects of lab-grown diamonds.

 

Cyrille Vigneron, CEO of Cartier, stated in a media interview, "Lab-grown diamonds will raise a series of issues. First, many consumers are not ready to accept lab-grown diamonds. Second, the transparency of the lab-grown diamond production chain has not been fully realized, so we are not currently considering it. For us, consumer perception also affects the brand's symbolic value, which may ultimately have a significantly negative impact on the overall value of diamonds."

 

Nicolas Bos, CEO of Van Cleef & Arpels, stated, "Don't market lab-grown diamonds solely based on an ecological narrative, as there are still many issues behind the lab-grown diamond production. It's just one part of technological advancement, but it's not a replacement for natural diamonds. We can use lab-grown diamonds, but not to oppose traditional diamonds and gemstones; they should exist in completely different realms." However, he also pointed out, "While lab-grown diamonds may not find a place in the products of high-end jewelry houses, they can still offer new creative opportunities for brands in the future, rather than just being an environmentally friendly alternative for some."

 

Michael Burke, Chairman and CEO of Louis Vuitton at the time, explicitly stated last year that the brand was not yet ready to separate from natural diamonds. Despite LVMH Group's investment in a lab-grown diamond company the previous year, he believed that lab-grown diamonds still had many issues. However, this did not deter the group from exploring in this field, "because we need to know what is happening, and we need to stay in sync with all the trends that represent the future. And in some ways, the carbon footprint of lab-grown diamonds is not necessarily lower than that of responsibly mined natural stones, so we must be very cautious about lab-grown diamonds."

 

 

In terms of the sustainability of lab-grown diamonds, the carbon emissions and footprint generated in its production process are not actually lower than those of natural diamonds. While lab-grown diamonds eliminate the humanitarian issues that may exist in the mining of natural diamonds, producing a lab-grown diamond still requires a significant amount of energy and involves different producers, resulting in a longer carbon footprint than natural diamonds.

 

Furthermore, lab-grown diamonds could impact the economy of many countries in Africa. Such as in Botswana, where diamond exports are a cornerstone of the economy, leading to local employment issues. After all, the diamond mining industry has largely helped local populations earn income and improve their quality of life. From this perspective, the mining of natural diamonds can bring significant employment opportunities, contributing positively to social stability and economic growth.

 

Therefore, from a sustainability perspective, lab-grown diamonds do not necessarily surpass natural diamonds in terms of environmental friendliness. Additionally, most brands have established transparent supply chains, and organizations such as RJC and the Natural Diamond Association have invested considerable resources in addressing supply chain issues, using supply chain information to identify sources of mined diamonds that do not meet ethical and humanitarian standards. Thus, unethical practices in the natural diamond industry have largely been eliminated at the mining end.

 

In summary, an environmentally sustainable narrative alone is insufficient to support the growth of the lab-grown diamond business. Meanwhile, in the economic environment, as of July 12th, the price of rough diamonds had fallen by 25% from its peak last year, and lab-grown diamond prices had also continued to drop significantly in recent months. However, the decline in rough diamond prices may not quickly translate into lower retail prices for jewelry products, and it may not necessarily stimulate consumer purchases directly.

 

 

From a consumer psychology perspective, although advocates of lab-grown gemstones continue to propagate their advantages in terms of the environment, society, and cost-effectiveness, the connection between “diamonds” and “eternity”, a message championed by natural gemstone businesses and organizations for decades, remains deeply ingrained in the minds of people. Moreover, in the marketing narrative of natural gemstones, their positive impact on local communities in mining areas has become a new selling point, significantly undermining the "ethical advantage" of lab-grown diamonds.

 

De Beers' own consumer survey conducted in China and the United States also indicated that, in many cases, consumers still prefer natural gemstones to lab-grown products, especially for special occasions.

 

Furthermore, the value of natural diamonds cannot yet be replaced by lab-grown diamonds. Indeed, some middle-class consumers may find it easier to afford diamond jewelry due to the lower prices of lab-grown diamonds. However, high-net-worth individuals do not share this view. In their opinion, lab-grown diamonds are not rare, carry no value, even not worth thinking about.

 

Boston Consulting Group pointed out in its 2020 report "Understanding the Global Price-Sensitive Consumer" that lower prices are not the primary factor driving luxury goods consumption today. Consumers still seek the scarcity and extravagance of luxury goods. Brands need to understand that people desire diamond jewelry because it's rare. Scalable production and lower prices for lab-grown diamonds have never been the traits that luxury goods should possess.

 

Another point that cannot be ignored is that the consumers who are willing to embrace lab-grown diamonds in the thoughts of sustainability are primarily from Generation Z, a group that also happens to be the most persistent in avoiding marriage. This poses a challenge for lab-grown diamond engagement rings, as the main target audience may not have a strong demand for those products.

 

In conclusion, De Beers' decision to halt its engagement ring collection of Lightbox is a wise strategy to cut losses in a timely manner and explore new opportunities. According to the company, Lightbox will continue to focus on its original offerings in fashion jewelry and stones, and the company still maintains that these represent "the industry's most promising opportunities for the future".

 

Actions by Parisian jewelry brand Fred may endorse De Beers' optimistic expectations. This week, Fred launched its first high-end jewelry set featuring lab-grown blue diamonds certified by the GIA. However, within accessible luxury area, Danish jewelry giant Pandora recently introduced three new collections and a promotional campaign, intensifying its efforts to promote lab-grown diamond products.

 

 

These two brand actions provide an interesting case study for the industry: Who will excel in the lab-grown diamond business? High-end jewelry brands or fashion jewelry brands?

 

Back to De Beers, while announcing changes to Lightbox, the company also revealed that it will focus on the Chinese and American markets during the holiday season at the end of this year and plans to invest $20 million in media promotion. By then, people will see brand statements such as "A Diamond Is Forever" and "Seize the Day" have once again become the focus of marketing narratives that brands vigorously reinterpret.

 

After years of battling for the "sustainability pioneers", De Beers has ultimately returned to its roots. So, who will be next?