The diamond industry is witnessing a pattern. While De Beers is cutting its diamond output and major suppliers are reducing the supply and lowering prices, what with all the uncertainty in India and China and a weak demand from the U.S., it is apparent that the industry is looking at an alternative option to make profits. Over the last two years, we’ve been surprised by moves taken by some of the biggest entities in the natural diamond industry. The giveaway though was when De Beers decided to launch Lightbox Jewelry – you had to know that this was just the beginning. Lightbox which was only sold online and at occasional pop-ups is now available at Bloomingdale’s department stores and Reeds Jewelers on a trial basis to understand the market and whether or not there is demand for lab-grown diamonds from the consumers. People who have been peeved and worried about the rising popularity of lab grown diamonds are themselves seeing a huge market potential in this product. The pattern of looking at “grown” diamonds, as most players in this space like to call it, not as a disruptor but a variant that has a promising future cannot be ignored. Just this month, diamond tycoon Dilip Mehta from emeritus of Rosy Blue Alliance, an Indian Belgian company, announced his family’s foray into the labgrown business. While a handful of them have “come out” so to speak about their lab-grown entities, a lot of them are staying under the radar for fear of getting an unsavoury reputation.
In October, at Bharat Diamond Week, Anoop Mehta, President of Bharat Diamond Bourse (BDB), suggested that the bourse might allow lab grown diamonds in the premises, considering the steep increase in demand and enquiries from the members of the bourse. A Natural Diamond Monitoring Committee has been formed to frame a few guidelines, which will take 2-3 months to be enforced. In April this year, Guangzhou Diamond Exchange signed a strategic agreement with the major lab-grown diamond players in China to market lab-grown diamonds in light of China’s volatile market and to make the supply of lab-grown diamonds more consistent. Right around the same time, GIA upgraded its lab-grown diamonds report to suit the guidelines laid out by the FTC regarding the nomenclature and terminology of labgrown diamond. The authorities of the natural diamond industry embracing reality and becoming more inclusive are not something we can ignore.
Retailers in the U.S., one of the biggest consumers of lab-grown diamonds today, are product as consumers are lab-grown diamonds. J.C. Penny, Macy’s and more recently Signet are now selling lab-grown diamonds at their stores – Signet has been selling lab-grown diamonds as bridal and fashion jewellery at Kay, Zales and James Allen. Signet owned e-tailer James Allen introduced labgrown diamond jewellery as part of its inventory to test waters – stakeholders in the diamond industry wanting a piece of both the markets has been fairly evident.
Virtual Diamond Boutique (VDB), the sourcing and trading app for the jewellery industry included lab-grown products category on its platform this year. “This may be viewed as a controversial move by some in the jewellery industry. But we didn’t do it to be controversial. We made the decision to offer lab-grown because so many retailers are offering this product category to an increasingly interested consumer. And we want to help our customer base make thoughtful, informed decisions about the products they offer. That’s what the VDB platform does best – it informs and facilitates a higher quality sourcing process,” said Tanya Nisguretsky, President of VDB at the time of the announcement.
Surat, Not Just a Diamond Hub
Almost 72 per cent of the world’s share of lab grown diamonds is manufactured in Surat, between 2014 and 2016 alone, 50 companies in Surat set up labs and began their trial sessions. Today, exports of lab-grown diamonds have grown by 100 per cent to Rs 1400 Cr (Fig: GJEPC April-September 2019). There are around 150 units producing labgrown diamonds in pockets of Surat like Mahidhapura, Katagram and Varachha. The question then arises, who these players are? The fact that diamantaires in Surat already have the wherewithal to produce lab-grown diamonds is obvious – the accessibility of the seed to manufacture lab-grown diamonds is easy and data published in a report by the Government of Gujarat reveals that Rs 338 million was spent on import of CVD reactors by Indian manufacturers between April to November 2015. The parent company of Surat based Unique Lab Grown Diamond was vested in real estate and diamond machinery. “Real estate took a big hit after demonitisation and we soon saw a good opportunity in lab-grown diamonds,” says Manish Patel, Director, Unique Lab Grown Diamond. Last year, the company submitted an intense pinkishorange 5.01 ct lab grown diamond to GIA’s New York facility for testing. In its report GIA said this kind of intense pink-orange colour is hard to come by even in natural diamonds, particularly in large sizes. Unique exports lab grown SURAT diamonds from 0.3 ct up to 5 ct to U.S., South East Asia, Australia, Canada, Dubai and many other countries.
Is India Ready for ‘Grown’?
When you visit Fiona Diamonds’ website, a Mumbai based lab-grown diamond and moissanite jewellery retailer, a chatbot offers you help. The product categories are clear and there is a section that educates the consumer about lab-grown diamonds as well. A selection of rings, earrings, pendants, bangles, bracelets as well as loose lab grown diamonds are on offer on the website and their stores in Bandra and Opera House as well in Delhi, Bangalore and Hyderabad. An engineer who was intrigued by lab-grown diamonds and diamond testing equipment, Parag Agarwal, CEO of Fiona Diamonds knew that lab-grown diamonds would have huge market potential 15 years ago. “Right now it is all about awareness. Once the consumer is aware about the product, conversion is not a problem. There should be a need to purchase this product and that is very important. If you don’t want to buy a diamond in the first place, then you don’t want to buy a lab-grown diamond either,” quips Parag. People are quite sentimental about what jewellery they buy in India but this is drastically changing after demonitisation. The perceived value of a diamond is high but the resale value is very low. “I see an absolute potential for lab grown diamonds especially in countries like China and India where the millennial population is huge,” says Kalyani.
The awareness about lab-grown diamonds is relatively less and it still forms only 3 per cent of the natural diamond industry. The supply as compared to natural diamonds is still low but there is scope for growth. “Lab grown diamonds will have a market in India in the near future for sure. Whether the consumer will buy it with the same intention as natural, I am not sure. But the customer will by lab-grown diamond a 100 per cent,” says Ankit Mehta, Director, H.Dipak. Known for its princess cut diamond phenomenon and unrounds, H.Dipak recently announced its alliance with ALTR Created Diamonds. “A lot of the big diamond companies are looking to get into the lab-grown diamond space. With the disruptive technology that can recreate something that is created in Mother Nature – we need to understand what the implication of that technology in the consumer world is going to be,” adds Ankit. H.Dipak has been working with ALT R for natural diamonds for a long time now and the strategic alliance comes from the sheer interest in ALT R’s model and how the lab-grown diamonds are being manufactured. “We thought it was a strategic fit – we are still in the process of putting the fine lines. It is more like we have made a strategic tie up to understand how the business works,” adds Ankit. The market in India is fairly conservative and for years, jewellery and diamonds have held an emotional value in the minds of the consumers but this perception might gradually change. “The next generation is really not going to be particular about the origin of a diamond and pay 10 times the price. Look at the pearl industry – who is even asking for a Basra pearl anymore? Cultured pearls are as good as natural pearls today,” adds Parag. There is a definite target audience for lab-grown diamonds in India, those who don’t have large pockets to spend on natural diamonds – the lab-grown diamond industry players like Fiona are targeting these people. “The magic in lab-grown diamonds lies in the fact that the process of unearthing something a billion years old through mining can now be created with technology. It can bring to the consumer a lot of value by giving them bigger size and better clarity diamond. There will be a customer who will buy into that story and there will be someone who believes in buying something that has been mined,” says Ankit.
What is working for lab-grown diamonds the world over is its affordability factor. After De Beers launched Lightbox at $200 for a 1/4ct stone to $800 for 1ct, the price of lab-grown diamonds came crashing down, making it even more affordable. In fact, there was talk about how the entire move by De Beers was to disrupt the lab-grown industry and to make a clear distinction between what is real and what isn’t. “The 4Cs play a huge role in pricing in lab grown diamonds too. A 5ct VVS clarity F colour lab-grown diamond may cost you about Rs 35 lakhs, but the same in a natural diamond may cost you anywhere around 2 crores,” says Parag whose brand sells half a carat labgrown diamond pendant set in 18k yellow gold with additional lab grown diamonds amounting to almost 1 ct for Rs 52,380. Jewellery has always been looked at emotionally but price also matters – everybody has a budget and if someone gets to wear a diamond for half the price then there is definitely scope in that. “The wholesale price of F colour VS1 clarity of 1 carat diamond costs $6640 and the in a lab grown diamond will cost you $2040. Those who can afford natural diamonds will continue buying natural diamonds. Those who can’t will look to buy its lab-grown counterpart,” adds Manish. Since De Beers entered the market, the gap between lab-grown and natural is as wide as 40 per cent and goes up to 70 per cent in the case of larger stones.
No Question of ‘Replacement’ Should the natural diamond industry fear its lab-grown counterpart? The answer is absolutely and unequivocally ‘no’. “I don’t think lab-grown diamonds are affecting the natural diamond industry in anyway. It all boils down to affordability at the end of the day,” says Manish. Natural Diamonds are always going to hold their value. However, a lot of diamond mines are closing down and it is especially becoming difficult to procure stones in smaller sizes. “People often feel that lab grown diamonds are going to take over, but that’s not the case. May be the percentage of labgrown diamond buyers may increase, but we can’t be sure. Even if it happens, it might take a good 10-15 years,” said Kalyani. The constant tugof- war between both the players though understandable, can be receded, if both the products are looked at as different categories. Consumers who will buy lab-grown diamonds will do so with the intention of buying something that is affordable. “I am not saying that it will or won’t threaten the natural diamond industry - it is still important to understand what the product is and how it is going to be perceived because there is going to be a market. For any big player in the industry be it a big miner or a mid size manufacturer, they have to look at lab-grown diamond some way or the other,” adds Ankit. The term “lab-grown” has a “one that shall not be named” status amidst the industry today. The product is looked at as an encroacher that is steadily stealing natural diamond industry’s market share. The mindset to look at it as just another product is nonexistent as far as the midstream players are concerned. “On the contrary, the natural diamond industry is only going to get bigger and both industries will coexist. We have to readjust ourselves to the new reality but that said, it is still a different product and has a different perception in the minds of the consumer. In fact, lab grown diamonds will boost the demand for natural diamonds, as it will make diamonds accessible to people who have never bought diamonds and I think they will aspire to have a natural diamond after they’ve purchased a labgrown diamond at some point,” adds Ankit.
Grabbing the ‘Diamond’ Opportunity
While a majority of the Indian trade looks at the lab-grown diamond industry in negative light, the fact that there is a lot to be explored and gained out of this new territory is indisputable Around 10 per cent of Surat’s manufacturing units produce lab-grown diamonds. We already have the skill and infrastructure; looking at lab-grown diamonds as a value addition to the contribution made by the industry towards the economy is a progressive step. Both the industries can coexist for sure and even though the lab-grown industry is growing at a rapid speed, catching up with the natural diamond trade is a long shot as the same constitutes about 2-3 per cent of the entire industry, which though not negligible is relatively low. Today, the lab-grown diamond market is expected to grow at an annual rate of 22 per cent to as much as $14.9 billion by 2035. If India can be an early bird who gets a large share in this, then the obvious question arises – what is stopping us? “If we are not conservative as an industry and we do not look at lab grown as a threat and we want the diamond industry to grow, then we can think of ways to make both these categories work. We have to position them correctly. We can make the industry grow to a size that is going to be big and with lab-grown diamonds, we have an opportunity to expand the industry’s size tremendously. Both will grow and the exports in India will gain. If we are conservative and fight among ourselves then there will be a China or an America who is willing to take a share of the lab grown market. The faster we embrace it, the better it is for us,” says Ankit. World over mines are closing down. The rough prices are becoming dearer while the polished prices are dropping. Though the struggle the industry is facing may very well be temporary, its impact is real. If the industry can step out of its comfort zone, lab-grown diamonds could may be give the industry breather. The smart players are viewing this as a golden ticket, they are just not telling you that they are.
Follow DiamondWorld on Instagram: @diamondworldnet
Follow DiamondWorld on Twitter: @diamondworldnet
Follow DiamondWorld on Facebook: @diamondworldnet
