The lab-grown diamond report: All that glitters

Three years on from the ‘watershed’ year of 2018, when natural diamond juggernaut De Beers introduced Lightbox Jewelry, the lab-created diamond category has gone from strength to strength.

“Over the past few years, lab-grown diamonds have monumentally changed the diamond jewellery landscape, forever,” says Craig Miller, a second generation diamantaire and CEO of JC Jewels – one of the first diamond suppliers in Australia to embrace the lab-created category.

“From the consumer's point of view, De Beers entering the lab-grown space accelerated acceptance, engagement, and validation. From there, consumer demand and engagement pushed retailers to engage, and now we watch as lab-grown diamonds become mainstream,” Miller observes.

Miriam Neubauer, director Grown Diamonds, confirms that consumer awareness of lab-created diamonds has significantly improved.

“Two years ago, consumers did not know the difference between diamond simulants, such as cubic zirconia, and lab-grown diamonds; however, today they are a lot more educated and researched and understand that they are optically, physically and chemically identical – with the only difference being their origin,” she tells Jeweller.

This is reflected not only in Australia, but globally. Phil Edwards, managing director of Duraflex Group Australia, which distributes the Swarovski Created Diamonds range, says, “The fact that a global brand such as Swarovski has launched their own Created Diamonds collection speaks highly to the significance and importance of this category.

“We strongly feel that consumer demand for more affordable and sustainable product, without compromising on actual diamond quality, is a market trend that will continue to grow and will have a positive impact on the trajectory of this category.”   

Meanwhile, Catherine Martin, head of communications at US-headquartered Diamond Foundry, notes “a massive increase in consumer interest and demand for lab-grown diamonds; virtually overnight people have come to accept this new category of product.”

Indeed, a study conducted by marketing firm The MVEye – formerly MVI Marketing – in 2020 found that 80 per cent of consumers surveyed were aware of lab-made diamonds, compared with less than 10 per cent in 2012.

Martin observes that new demand is coming from previously untouched categories, such as the high-end watch market; meanwhile, major vertically-integrated retailers such as Pandora have launched dedicated lab-created collections to capitalise on consumers' desire for the product.

Meanwhile, lab-created diamond production reached between 6–7 million carats last year, according to The Global Diamond Industry 2020–21: Brilliant Under Pressure, a report authored by business strategy and research consultancy Bain & Co.

That figure is still dwarfed by the natural diamond category; Bain & Co. estimated 111 million carats of natural diamonds were produced in 2020, largely as a result of the COVID-19 pandemic; between 2010–2018, global production averaged approximately 130 million carats, with a peak of 152 million in 2017.

However, production capacity continues to rise, with the Brilliant Under Pressure report noting a “double-digit” increase in 2020 compared with 2019, and a 15-20 per cent increase between 2018 and 2019.

This growth is largely driven by expanded production in China, where the majority – approximately 50 to 60 per cent – of the world’s lab-created diamonds are manufactured, using the high-pressure, high-temperature (HPHT) method; however, the US and India are “emerging as major production centres” using chemical vapour deposition (CVD) techniques.

Diamond Foundry, which uses a proprietary CVD mechanism in order to produce its lab-created diamonds, recently announced plans for a new €740 million solar-powered production facility in Spain.

The factory will have an estimated capacity of 10 million carats, a proportion of which will be used for jewellery.

Diamond Foundry is also planning an expansion of its hydro-powered US factory, while its jewellery retailer, Vrai, has recently opened stores in Shanghai and Los Angeles, with “more to come,” says Martin.

Meanwhile, Element Six – De Beers’ lab-created diamond manufacturing division, which supplies Lightbox Jewelry – opened a $US94 million new factory in the US state of Oregon in October 2020.

The new facility will support Lightbox’s recent introduction of white, pink and blue lab-created diamonds up to including 2 carat sizes, and the Finest range of VVS D–F Excellent cut lab-created diamonds, priced at $US1,500 per carat – which it noted was “well below” current prices.

The Finest product line is the result of a new proprietary engineering process developed by Element Six, combining existing CVD technology with a further refinement process that enhances colour in stones.

Speaking to Jeweller, Steve Coe, CEO Lightbox Jewelry, said, “For now, our focus is on growing and expanding the Lightbox business. Our new state-of-the-art manufacturing facility in Portland, Oregon came on line at the end of last year and gives us the capacity to dramatically scale up our distribution to consumers in the coming months.

“This includes both growing our own e-commerce platform lightboxjewelry.com and also substantially expanding the list of retail partners that we supply. You can expect to see a lot more of Lightbox in the months and years ahead.”

He added, “We have seen a noticeable trend toward larger sizes and higher qualities and we are leading the way here.”
Yet while the lab-created category appears to be on a positive trajectory, challenges persist.

Knowledge and numbers
While consumer awareness and demand for lab-created diamonds has come a long way in recent years, many believe the most pressing challenge is still education, with several contributors observing that the market is rife with “misinformation”.

“We find many consumers remain relatively unaware of what a lab-grown diamond is and there is clearly still a requirement to provide education and information to consumers,” says Coe.

“While it is the same material with the same optical and physical properties as a natural diamond, the great value proposition for Lightbox lab-grown diamonds is that they offer consumers exceptional quality at a very accessible price point, allowing the consumer to make informed purchase decisions.”

Miller shares similar insights, pointing to a definite “lack of consumer education”.

“If you search lab-grown diamonds on Google – which is where the customer journey begins for many – there is limited information and education online, and much of what is found can be misleading, partially derived from a disconnect with the mined sector and the lab-grown side,” he explains.

According to a 2021 survey of more than 1,000 consumers aged 25–60, conducted by US jewellery industry organisation The Plumb Club, 79 per cent of consumers said that they were aware of lab-grown diamonds and their use in fine jewellery – yet 41 per cent did not know how they differed from natural stones.

This indicates further resources should be allocated toward educating consumers.

Miller also believes retailers are “lacking much-needed education within the Australian and New Zealand market, where lab-grown diamonds are fast growing in popularity.”

Neubauer says some jewellers remain “not open-minded” and “refuse to sell lab-grown diamonds to their consumers”.

Others across the industry have noted misconceptions about the differences between HPHT and CVD, and the types of post-growth treatments applied to the stones.

Edwards says the “ongoing education process is absolutely key, in addition to increasing the availability of the product across Australia.”

“Historically, the main challenge was regarding the misconception or rather limited awareness of the quality of lab-grown diamonds and not enough price differential to natural diamonds,” he explains.

“However, there’s currently a definite shift as consumers are becoming more educated about the lab-creation process and the identical properties of diamonds and lab-grown diamonds, whilst the price has reduced and now plateaued."

Notably, price has been a sticking point for the lab-created diamond category since its inception.

Speaking to US jewellery industry publication JCK Online recently, diamond industry analyst Edahn Golan commented, “We see continued demand and a continued decrease in prices. What we’re seeing is the sort of “ills” we’re suffering from in the natural diamond industry.

"A lot of goods are supplied on memo, there’s stiff competition between wholesalers, and, in addition to that, we’re seeing the elements that are typical of a technologically driven item: For example, the cost of production is going down.”

According to Bain & Co.’s analysis, the retail price of a 1-carat, G colour, VS-clarity lab-created diamond fell to only 35 per cent of an equivalent mined diamond in 2020; in 2019 and 2018 this figure was 50 per cent, and in 2017 it was 65 per cent.

Other types of diamond boasted even greater disparities, with the price-difference between equivalent lab-created and natural fancy colour diamonds as great as 1,000 per cent.

And despite the decline in both production costs and retail prices, wholesale prices of lab-created diamonds remained stable throughout 2020, resulting in a contraction in the margins of traders and jewellery manufacturers.

Still, diamond industry analyst Paul Zimnisky wrote in 2020, "When analysing the wholesale and retail prices of unbranded man-made and natural diamonds, it appears that the retail gross margin of man-made diamonds in popular carat-sizes is as much as 1.8 times that of natural diamonds."

Golan told JCK Online, “[Retailers are] doing everything to protect their margin.

“So, if producers raise prices on a certain item, then they’ll raise prices to consumers. On the other hand, if wholesalers are reducing prices, then retailers are more flexible on pricing, too. So consumers are enjoying it.”

Brett Bolton, director Biron Laboratory Grown Diamonds, explains, “The price falling is great for the fashion side of the market, but concerning for some if using them for engagement rings or as a 2-carat option to a natural diamond.”

However, lower prices are not necessarily a negative, with numerous advantages and sales strategies that retailers can employ.

Bolton says, “When selling these stones, retailers have to focus on the benefit of the price and the fact that they will not scratch or change colour over time – not that they are ‘a cheaper diamond’.”

Bolton notes that price pressures have also sparked innovation in the lab-created category, leading to “more experimental colours, shapes and also growth techniques”.

Says Diamond Foundry’s Martin, “We are in constant pursuit of creating a better diamond – ever larger and ever higher quality. We have not yet cracked the D colour level for larger diamonds; it is still incredibly hard to achieve the highest quality levels of diamond using the most advanced technology.”

New horizons, new opportunities
The affordability of lab-created diamonds has made them accessible to new consumers – a trend most evident in the fancy colour diamond space where extremely rare and precious pinks and blues are beyond the financial means of most consumers.

“We believe there is a great opportunity in coloured lab-grown diamonds and offer our stones in beautiful pink and blue hues,” says Coe.

“Coloured natural diamonds are hugely expensive and effectively out of financial reach for the vast majority of consumers. Lightbox coloured lab-grown diamonds offer consumers the opportunity to own these spectacular stones at an accessible price point for the very first time.”

Many in the diamond industry consider the natural home of lab-created stones to be in fashion jewellery, gifting, and self-purchase – Bolton calls fashion jewellery a driver of “massive growth” – with engagement, bridal, and luxury reserved for natural diamonds.

Observes Lightbox Jewelry’s Coe, “It is now clear that the great quality of lab-grown diamonds and the far more accessible price point opens up the opportunity for more frequent gifting and self-purchase.

"That’s where we see the really exciting opportunity for lab-grown diamonds to develop a genuinely additive jewellery business which takes share from other luxury/fashion products – such as accessories and handbags.

He adds, “We are seeing the category expand as other brands recognise this opportunity in the fashion space.”

Pandora Jewelry – the world’s largest jewellery company by volume – introduced its first range centred on lab-created diamonds, Pandora Brilliance, earlier this year.

The decision to simultaneously publicise the phasing out of natural diamond jewellery – which made up a tiny fraction of its overall production – was calculated to take advantage of growing consumer sentiment for sustainable and ethical products.

Alexander Lacik, CEO Pandora, said at the time, “I’m proud to announce the introduction of Pandora Brilliance. It’s a new collection of beautifully designed jewellery featuring lab-created diamonds. They are as much a symbol of innovation and progress as they are of enduring beauty and stand as a testament to our ongoing and ambitious sustainability agenda.”

The company commissioned corporate governance firm Sphera to provide an independent third-party assessment of the CVD lab-created diamond production process, from raw materials to synthesis, cutting and polishing, and transportation.

The Sphera report found that electricity consumption during synthesis was responsible for “more than 90 per cent” of total CO2 emissions “in most scenarios”; the emissions per carat could range from 612kg for a lab-created diamond produced in India, to 17kg for one produced in Europe using 100 per cent renewable energy.

A 2019 report commissioned by the Diamond Producers Association – now the Natural Diamond Council – estimated that natural diamonds produce 160kg CO2 per carat.

Pandora said it expects the lab-created diamonds in the Brilliance range to be manufactured using 100 per cent renewable energy by 2022.

Of course, the ecological credentials of the entire lab-created sector are far more difficult to objectively quantify, varying greatly across different manufacturers.

Still, many lab-created diamond producers remain committed to achieving transparent and sustainable supply chains.

Says Diamond Foundry’s Martin, “There is a lot more demand than supply. Meeting this demand, and doing so sustainably, continues to drive us.

"Sustainability and respecting the Earth’s resources are core attributes of our business, and we have focused our growth on sites with 100 per cent renewable power.”

Another US-based producer, WD Lab Grown Diamonds, was the first manufacturer to be certified by SCS Global Services – an international standards development business specialising in sustainability and quality performance – under its Certification Standard for Sustainable Diamonds.

This grants WD Lab Grown Diamonds third-party authorisation to use the claim of 'Certified Sustainable'
and 'Certified Climate Neutral' for their products.

Miller believes this is positive for the industry as a whole, having "introduced new levels of transparency".

From a consumer perspective, Neubauer observes that lab-created diamonds are considered to be a “great alternative for those on a budget, for those who are eco-conscious and those who are ethically conscious”.

Recent consumer research conducted by The MVEye – formerly MVI Marketing – found that consumers “consistently identify the sustainable, eco-friendly message of lab-grown diamonds to be front-of-mind”, while the most compelling purchasing trigger is the “ability to trade up in diamond size and quality for the same price as a smaller mined diamond”.

Competition or complementary?
When lab-created diamonds first entered the jewellery category, debate raged over the impact they would have on the natural category.
“In the beginning, it felt like it was a competition between the two,” Neubauer observes.“People were afraid that lab-grown diamond sales would overtake natural diamond sales. However, it has become more clear that both natural and lab-grown diamonds can be marketed side-by-side, targeting different demographics,” she says.

Adds Bolton, “When lab-grown diamonds were first introduced to the market, we had many jewellers and competitors say, ‘We will never stock them.’

“Today, we have found that almost everyone accepts there is a place in the market for these stones – and for more than half a place in the store as well!”

Edwards notes that the perception of the lab-grown category versus natural diamonds – and the willingness to stock them – “depends on the individual retail store and what message they wish to convey to their customers.”

“Now that pricing has stabilised and the education around quality is more established, this relationship can be more
easily defined and separated within the individual retail stores,” he adds.

Still, skirmishes have occurred throughout this year, largely focused on advertising terminology and ethical claims.
In February, the Natural Diamond Council (NDC) referred Diamond Foundry and its jewellery brand, Vrai, to US advertising
watchdog the National Advertising Division (NAD), challenging descriptions and nomenclature used in digital marketing.

“NAD determined that Diamond Foundry must, consistent with the Federal Trade Commission (FTC) Jewelry Guides, make an effective disclosure that its diamonds are man-made. NAD further found that, consistent with the FTC Jewelry Guides and the FTC Dot Com Disclosure publication, the advertiser should distinguish its [lab-grown diamonds] from mined diamonds,” a NAD statement read.

The following month, NAD acted upon a complaint by Diamond Foundry against the NDC over claims that natural mined diamonds produce “three times less carbon emissions” than lab-created diamonds.

NAD found that the NDC’s evidence for this claim was “not sufficiently reliable” and “concerned that such claims conveyed a broader implied message about the overall environmental benefits of mined diamonds versus man-made diamonds”, recommending it remove the claim alongside online advertising that referred to the “scarcity of mined diamonds [and] the resale value of mined diamonds versus man-made diamonds”.

The body also determined that the NDC’s use of the term “real” to describe mined diamonds could, in context, incorrectly imply that lab-created diamonds had different chemical or physical properties to mined diamonds, and that consumers “may incorrectly conflate [lab-created diamonds], such as Diamond Foundry’s, with imitation diamonds like moissanite and cubic zirconia”.

In May, organisations including the NDC, CIBJO, the World Diamond Council (WDC), the Responsible Jewellery Council (RJC), and the International Diamond Manufacturers Association publicly called for Pandora Jewelry to retract elements of its statement announcing its decision to stop stocking natural diamonds.

While calling the Pandora Brilliance range a “positive expansion of the jewellery industry”, the organisations explained, “The misleading narrative created by the Pandora announcement implying the natural diamond industry is both less ethical and the impetus behind Pandora’s move to lab-grown diamonds, particularly given the inconsequential amount of diamonds Pandora features in its collections, can have unintended but substantial consequences on communities in developing nations.”

According to research commissioned by the NDC – then known as the Diamond Producers Association – in 2019, diamond mining was found to create social benefits that the lab- created sector did not, including an estimated $US16 billion annually to communities, largely in developing nations, through direct employment, purchase of goods and services, and funding of social programs.

Still, Diamond Foundry’s Martin says diamond mining companies are in a “difficult situation” as mining “necessarily depletes natural resources; it is by definition not sustainable”.

“Recently, there have been important rulings in North America to increase clarity in the marketing of mined diamonds. Most importantly, there is a push to ensure transparency in the market, broad consumer choice, and awareness of where a diamond is from and the environmental impact,” she explains.

Meanwhile, the RJC has recently announced that it will develop a best-practice standard specifically for 'lab-grown materials' (LGMs), beyond its existing Code of Practices.

Iris Van der Veken, executive director of the RJC, said, “Setting a standard for LGMs is an important strategic initiative by RJC, underlining our commitment to ensure that all jewellery is responsibly sourced, manufactured and marketed. It is all about consumer confidence.

“This standard will provide a clear, robust framework not only for manufacturers and retailers, but also for reassuring customers that the manufacturers and sellers of LGMs follow rigorous processes that ensure the credibility and transparency of their operations.”

Observes Miller, “Every industry faces their challenges, and the mined space is being challenged by lab-grown.
"Both mined and lab-grown need to push their strengths and see what appeals to each customer. Ongoing negative engagement between the two sides will only push consumers to spend their money in other industries.”

Adds Edwards, “Reduced pricing, increased consumer demand and acceptance – with overall more general market awareness – highlights that lab-grown diamonds are fast becoming a core and essential category within the trade.”

It is clear that, while still small, the lab-created diamond category has potential, and offers jewellery retailers opportunities to appeal to new customers – without encroaching on existing diamond sales.