No Lab Grown Elephant In The Room

There was no elephant in the room at Israel Diamond Week. Lab growns were very much front and center in the minds of almost everyone who appeared on stage.
They are, of course, no threat whatsoever to the natural diamond sector.
That'll be why everyone was talking about them.
Nobody is in the least bit concerned that they're a sixth of the price, and now account for almost a quarter of the US diamond market by value.
Different products, different markets - that's long been the standard line of defense for natural diamonds.

Bruce Cleaver, co-chairman of De Beers Group, was confident that a surge of interest in lab growns will have a positive knock-on effect on natural diamonds.
"It's clear to me that instead of cannibalizing demand for luxury watches, Apple Watch and digital watches, in fact, increased the size of the overall pie increased interest in a category," he said on the first day of the event at the Israel Diamond Exchange, in Ramat Gan. "And offered often consumers something different, something separate from an established luxury product."
Same story with diamonds, he said, with lab growns emerging as a distinct and separate category, with a "totally different value proposition from natural diamonds".
Lab growns simply don't offer the same emotional or value proposition as natural diamonds for the most important moments in people's lives, he said.
"Ask people: 'Would you like something that was created by a miracle of nature, in an act of God, that is real, that is rare and that is unique, as opposed to something that was made recently in a reactor in three weeks'."

Lab growns are however, capturing the hearts, minds and market share of the US (where half the world's retail diamonds are sold), according to industry analyst Edahn Golan.
Last month (February 2023) lab they accounted for 22.9 per cent, by value, of all diamonds sold, and 46.6 per cent by unit. The tipping point (over 50 per cent) by unit could come as soon as November, he said.
Many of today's consumers are setting a budget and buying the biggest and highest color/clarity stone they can, regardless of how it was produced.
"When somebody walks into a jewelry store in the United States, they're not saying I want a one carat diamond, they're saying my budget is $4,000," he said.
"People are buying pricier items. They're willing to spend more. They're getting more. Why should I buy a one carat natural diamond and for the same amount of money I can get a two-carat (lab grown)?"
Retailers make smaller margins on a one-carat lab grown, compared to a one-carat natural diamond, but that's not the comparison. What matters is the total spend.
"All of a sudden people are not buying the same but for less, now they're buying better for the same,"  said Golan.
Lab grown buyers are getting EFG / VS instead of GH / SI, retailers are selling lab grown inventory in six months rather than a year.

It's all about the story, said Eira Thomas, President and CEO of Lucara Diamond Corporation.
"I don't think we have to change the natural diamond story, I think we have to tell it better. We have to do a much better job explaining the inherent value of a natural diamond and what that means," she said.
"It's about the storytelling. This is a natural product, billions of years old. These are incredibly rare. And there has been an under-investment in diamond exploration. There's no new diamond mine sitting on the horizon that we know of that could have a significant impact on global diamond supplies of natural diamonds. So we have a great story. We just really have to do a much better job of getting that message out there.
"If you buy a Hermes bag today, or Louis Vuitton, those bags all increase in value, ultimately over time. And yet the average consumer walking into a diamond jewelry store will say, what's the cheapest I can get this for. We need to move out of that paradigm."

Last word on the matter to David Kellie, CEO of the Natural Diamond Council, and former SVP of marketing and advertising at Ralph Lauren.
He showed a polo shirt from his old employer, priced at $110, side by side with a very similar US Polo Association garment, at $22.
He drew the comparison with ads put out by dozens of cut-price lab grown retailers, highlighting one promoting a round two-carat F / VS1 for £2,544, compared to $4,900 for the same thing from a pricier rival, and $15,250 for a same-spec natural diamond.
"The difference in price between a natural diamond and lab grown diamond is all in the values and how we communicate that to the end consumer," he said.
"We are all in the natural diamond industry and it's to our advantage to build this brand with the values we all share and for us to share that with consumers."

Have a fabulous weekend.