De Beers will abandon a controversial experiment to sell synthetic diamond jewelry, ending a six-year program that broke one of its oldest taboos.
Although the company has long held the technology to make synthetic gemstones, it has always refused to sell them as jewelry, fearing they would detract from the appeal of natural stones. Yet as artificial stones gained ground and began to directly compete with natural diamonds, De Beers launched its own jewelry brand in 2018.
The company launched Lightbox to sell synthetic diamonds at a deep discount to competing producers in an effort to drive down prices and create a clear divide in the minds of consumers. Now it is withdrawing that offer, as De Beers CEO Al Cook reorganizes a company that is about to be left adrift by its owner Anglo American Plc.
As part of a turnaround plan to head off an approach from BHP Group, Anglo last month announced plans to sell or part ways with De Beers, ending a nearly century-long relationship with the most famous name in the industry. As De Beers – which coined the slogan “Diamonds Are Forever” – prepares for the split, it will renew its focus on promoting natural stones.
“We know how to do it and we will come back,” CEO Cook said in an interview. “It all comes together under one big theme: differentiating natural diamonds from lab-grown diamonds. »
Prices of synthetic diamonds have now collapsed, although how much of this is down to De Beers and how much is an influx of new supply remains open to debate. This undermines the logic of the De Beers project, with wholesale prices of synthetic diamonds now lower than those of Lightbox, which were well below the prevailing price when it was introduced.
Yet even as synthetic diamond prices collapsed, they caused significant collateral damage. Natural stones used in cheaper 1-2 carat wedding rings have fallen under pressure from synthetics and have so far shown few signs of a lasting recovery.
De Beers will not immediately stop selling its Lightbox stones. She will use up her existing inventory – which will take about a year – and then make a decision on what to do with the business.
Industry players are still divided on the long-term impact of synthetics and whether much of the diamond industry’s current weakness is cyclical rather than structural, driven in part by synthetic alternatives.
Unlike imitation gemstones such as cubic zirconia, lab-grown diamonds have the same physical characteristics and chemical composition as mined stones. They are made from a carbon seed placed in a microwave chamber and superheated to form a luminous plasma ball. The process creates particles that can eventually crystallize into diamonds. The technology is so advanced that experts need a machine to distinguish between synthesized and mined gemstones.
De Beers will focus on so-called category marketing, in which it promotes diamond jewelry in general rather than just its own brand gemstones. It will also expand its retail presence through its own jewelry stores.
The company will also move into polishing its own stones, an industry dominated by mostly family-owned businesses in India and Belgium.
De Beers is targeting an annual core profit of $1.5 billion by 2028. Last year, the company made just $72 million, although its profits traditionally range between $500 million and $1 .5 billion dollars as the diamond industry goes from boom to bust.
This volatility has created frustration within Anglo, where years of erratic performance have eroded returns on more coveted commodities, such as copper.
