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Ping!

So synthetic diamonds have suddenly become more cultured as De Beers launches its own “Lightbox Jewellery” brand, or light bulb flash.

Apart from anything else, the timing for announcing a tsunami, is quite exquisite before the all-important Las Vegas Fair.

A new factory is being built in America to grow or churn out about half a million carats of bonbons to create trinkets between $200 and $600.

The old business model, of whom De Beers used to claim custodianship until it became inconvenient, as I recently wrote simply is not working as natural diamonds, the supposedly ultimate luxury, lag in performance behind other ‘lesser’ luxury products, other commodities and even the US CPI.

Cultured diamonds, I have always argued, should not be treated as a pariah, but as a way to grow the jewellery market.

De Beers has been at the forefront of trying to undermine what it conveniently termed “synthetic” diamonds and which they now, politely, term as LGD (Laboratory Grown Diamonds), remembering of course that synthetic / cultured / LGD are as the recent New York Times article points out “chemically identical to mined diamonds.”

Yet, the Diamond Producers Association (DPA) whose chairman is no other than De Beers’ Stephen Lussier, dreamt up that now rather inconvenient slogan ‘Rare is Real’.

So De Beers has sneaked around and come out with its new product very aggressively priced to presumably try and knock everyone one else out of the market, something they have been known to meddle about in before.

Whatever my amusement at this delightful volte face by De Beers, I certainly do not view it as ‘necessarily’ negative to the industry.

Not negative as long as the other end of the equation is also tackled, or should I say volte faced, namely getting the commodity value of diamonds into the price of natural. 

The idea of tons and tons of junk diamonds, which used to be crushed for industrial purposes, but then moved to ‘near gem’ to ‘gem’ and now get paraded as images of internal love, disappearing from view and going back to whence they came, should be welcomed by one and all. 

Returning natural to something truly special must be in the interests of the industry, though that does not mean that there will be equal winners. 

If the price of natural diamonds continues to flounder behind its ‘peers’ at the same time as this new aggressive product takes hold, which I am pretty sure it will; the effects could be more than painful.

However much De Beers wants to grab the lead in LGD, I am pretty sure others will be rushing to tag along. It is going to be much more than half a million carats of these little treasures pouring into the market.

Reassurances that this move by De Beers has only come after exhaustive consumer research does not provide me with any particular comfort.

I recall Gareth Penny stating in 2000 with his usual ebullience all must be well with the Supplier of Choice strategy at its launch because it had been scrutinized by 17 sets of lawyers.

However, it was not long before De Beers were embroiled in protracted and difficult discussions with the EU Anti Competition Authority.

Be that as it may, how long will it be for the watch industry to catch onto LGD’s?

By definition the knock-on effects must reduce the price of swathes of natural rough diamonds, which must impact on the economics of many mines, and so on.

However clever the marketing what reassurance, given the present structure of the natural business, is there that these LGD don’t cannibalise the engagement ring market and generally exert a downward pressure in pricing?

One of the key problems with the natural market has been the loss of generic advertising, which De Beers used to spend $200 million a year on, and now seemingly going to be remedied by advertising its new, low priced, non-natural sparkling product.

Maybe some sightholders are having a ‘ping’ moment as well, if only that the private communication to each sightholder by De Beers apparently came after publication of an interesting article in the New York Times all about Lightboxes?

I won’t mention the banks…..

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