Light­box: Un­der The Spot­light By Neil Ven­tura

Solitaire - - CONTENTS - Neil Ven­tura

Light­box Jew­elry will bring some­thing en­tirely new to the lab­o­ra­tory-grown di­a­mond sec­tor—not only will it in­tro­duce a fash­ion jew­ellery brand with lab­o­ra­tory-grown di­a­monds, it will also have a heavy fo­cus on coloured stones in its de­signs, as is very com­mon in fash­ion jew­ellery.

Fol­low­ing the pub­li­ca­tion of Soli­taire’s Au­gust cover story, ‘De Beers: Fire in the Hole’ by Chaim Even-Zo­har with Pranay Narvekar, De Beers Group sought to clar­ify its po­si­tion on the Light­box is­sue. NEIL VEN­TURA, ex­ec­u­tive vice pres­i­dent of strat­egy and in­no­va­tion, De Beers Group, states the com­pany’s po­si­tion on the new lab­o­ra­tory-grown di­a­mond brand, what it means for the nat­u­ral di­a­mond in­dus­try, and what it means for the fu­ture of its busi­ness.

Since an­nounc­ing the launch of Light­box Jew­elry at the end of May, there has un­der­stand­ably been a lot of in­ter­est and dis­cus­sion across the di­a­mond in­dus­try about this new busi­ness, where it sits in the broader jew­ellery sec­tor and what it could mean for both lab­o­ra­tory-grown di­a­monds and nat­u­ral di­a­monds. We’ve seen a fair amount of spec­u­la­tion from a num­ber of dif­fer­ent view­points about Light­box and the im­pact it may have, so we felt it was worth­while to take a closer look at three of the key ques­tions that have re­peat­edly come up fol­low­ing the an­nounce­ment of Light­box Jew­elry: 1. What will it mean for the fu­ture of the lab­o­ra­tory-grown di­a­mond sec­tor? 2. What will it mean for the fu­ture of the nat­u­ral di­a­mond sec­tor? 3. What will it mean for the

fu­ture of De Beers Group? I’d like to touch on each of these in turn and give you a view, di­rect from the source, on how we at De Beers Group see the fu­ture of Light­box.

What will it mean for the fu­ture of the lab­o­ra­tory-grown di­a­mond sec­tor?

Light­box Jew­elry will bring some­thing en­tirely new to the lab­o­ra­tory-grown di­a­mond sec­tor—not only will it in­tro­duce a fash­ion jew­ellery brand with lab­o­ra­tory-grown di­a­monds, it

will also have a heavy fo­cus on coloured stones in its de­signs, as is very com­mon in fash­ion jew­ellery. But the key dif­fer­ence with Light­box com­pared with other lab­o­ra­tory-grown di­a­mond of­fer­ings will be its straight­for­ward, lin­ear price po­si­tion­ing.

Re­tail­ing on our e-com­merce plat­form at $200 for a quar­ter carat, $400 for a half carat and $800 for a one carat, the price po­si­tion­ing for Light­box lab­o­ra­tory-grown di­a­monds will re­flect their cost of pro­duc­tion, rather than be­ing po­si­tioned at a dis­count to nat­u­ral di­a­monds. We be­lieve this is key for con­sumers, as the value of lab­o­ra­tory-grown di­a­monds – prod­ucts that are mass-pro­duced by a tech­no­log­i­cal process – has no con­nec­tion to the value of nat­u­ral di­a­monds, which are val­ued based on their rar­ity and the fact that there is a fi­nite and di­min­ish­ing sup­ply. As every­one in the di­a­mond trade knows, a one-carat nat­u­ral di­a­mond has a higher pri­ceper-carat than an equiv­a­lent half-carat nat­u­ral di­a­mond, as it is more rare and there­fore more valu­able. With lab­o­ra­tory-grown di­a­monds, this isn’t the case: pro­duc­ing a one-carat stone in­stead of a half-carat sim­ply re­quires the stone to be left in the re­ac­tor for longer. It costs around twice as much to syn­the­sise a one-carat stone as it does a half­carat stone, so we have priced them ac­cord­ingly.

Light­box’s of­fer­ing of fun, ac­ces­si­bly-priced fash­ion jew­ellery is an im­por­tant evo­lu­tion for the lab­o­ra­to­ry­grown di­a­mond space, but it would per­haps be wrong to see it as a fun­da­men­tal change to the sec­tor’s de­vel­op­ment, as ev­ery­thing in­di­cates that this was al­ways the likely tra­jec­tory for lab­o­ra­tory-grown di­a­monds. It’s what con­sumers have told us what they want from lab­o­ra­to­ry­grown di­a­monds when asked open ques­tions about how they saw such prod­ucts in our ex­ten­sive re­search, and in fact it re­flects ex­actly what we’ve seen in the jew­ellery in­dus­try be­fore.

If we look back at the ex­am­ple of syn­thetic emer­alds, we saw a very sim­i­lar sit­u­a­tion. Ini­tially there was great ex­cite­ment about the abil­ity to syn­the­sise emer­alds in a lab­o­ra­tory that had the same phys­i­cal, op­ti­cal and chem­i­cal prop­er­ties as nat­u­ral emer­alds. The lab­o­ra­tory-grown prod­ucts quickly be­came avail­able in more jew­ellery prod­ucts, but as with any tech­nol­ogy-based prod­uct, it wasn’t long be­fore more play­ers en­tered the mar­ket, and with the greater sup­ply came a rapid drop in the price of the lab­o­ra­tory-grown prod­ucts. Nowadays, lab­o­ra­to­ry­grown emer­alds sell for just a frac­tion of the price of nat­u­ral emer­alds, and gem­mol­o­gists use ver­i­fi­ca­tion equip­ment to test the ori­gin of in­di­vid­ual stones. The same sit­u­a­tion has also been seen with syn­thetic sap­phires and ru­bies, so the his­tor­i­cal pat­tern of de­mand, sup­ply and price po­si­tion­ing for such prod­ucts is clear.

Im­por­tantly, the an­nounce­ment of Light­box is the culmination of re­search car­ried out by De Beers Group over an ex­tended pe­riod to un­der­stand peo­ple’s at­ti­tudes and feel­ings about lab­o­ra­to­ry­grown di­a­monds. We spoke with thou­sands of peo­ple and one of

If we look back at the ex­am­ple of syn­thetic emer­alds, we saw a very sim­i­lar sit­u­a­tion. Ini­tially there was great ex­cite­ment about the abil­ity to syn­the­sise emer­alds in a lab­o­ra­tory that had the same phys­i­cal, op­ti­cal and chem­i­cal prop­er­ties as nat­u­ral emer­alds.

the key themes that con­tin­u­ally came through was that peo­ple saw a place for lab­o­ra­tory-grown di­a­monds in the jew­ellery sec­tor, but they felt that place was in the fash­ion cat­e­gory at a sig­nif­i­cantly lower price than had pre­vi­ously been of­fered, re­flec­tive of prod­ucts that are mass pro­duced by tech­nol­ogy.

The re­search also found there is wide­spread con­fu­sion among con­sumers about lab­o­ra­to­ry­grown di­a­monds – they don’t re­ally un­der­stand what they are, how they are cre­ated or

what their value propo­si­tion is. Clearly, it ben­e­fits no one if con­sumers strug­gle to make in­formed choices about what they buy.

So, one of the key ar­eas of fo­cus for Light­box will be to help ad­dress this con­fu­sion. Light­box has a very clear and straight­for­ward ap­proach to its mar­ket­ing, and does not pre­tend to be any­thing it is not. It is be­ing mar­keted as a dis­tinctly man-made, lab­o­ra­tory-grown di­a­mond prod­uct. It does not seek to po­si­tion its prod­ucts as fi­nite in the way that nat­u­ral di­a­monds are, and will there­fore not of­fer grad­ing re­ports. It is be­ing priced in a lin­ear way, in line with cost of pro­duc­tion. And it will not make er­ro­neous claims about be­ing ethically su­pe­rior to nat­u­ral di­a­monds. The en­tire brand propo­si­tion of Light­box is about trans­parency – from the price po­si­tion­ing, to the mes­sag­ing, to the mar­ket­ing and even the prod­uct pack­ag­ing (which will fea­ture a clear win­dow that en­ables the con­sumer to see the prod­uct they are buy­ing in the box). Our view is sim­ple, but is often lost in the de­bate sur­round­ing the in­tro­duc­tion of Light­box – the more trans­par­ent we can be with con­sumers, and the more em­pow­ered they are to make in­formed pur­chas­ing de­ci­sions, the bet­ter it is for every­one; both the nat­u­ral and lab­o­ra­tory-grown di­a­mond in­dus­tries.

While there have been some claims that con­sumers sim­ply won’t care in the fu­ture whether di­a­monds are nat­u­ral or lab­o­ra­tory-grown, it would be

very in­ter­est­ing to un­der­stand what ev­i­dence this view is based on. All our re­search and pre­vi­ous ex­am­ples with other gem­stones point to a dif­fer­ent con­sumer re­sponse, where they see a clear dif­fer­ence and prod­ucts are po­si­tioned ac­cord­ingly.

The launch of Light­box is part of an evo­lu­tion in the lab­o­ra­to­ry­grown di­a­mond sec­tor, and will help to meet the con­sumer de­sire for more light-hearted and less expensive lab­o­ra­to­ry­grown jew­ellery, which is in line with what pre­vi­ous ex­pe­ri­ence in­di­cates would have hap­pened over time any­way.

What will it mean for the fu­ture of the nat­u­ral di­a­mond sec­tor?

By help­ing to ad­dress con­sumer con­fu­sion about lab­o­ra­tory-grown di­a­monds, Light­box will also help re­in­force the spe­cial sym­bol­ism of nat­u­ral di­a­monds. It’s a mis­un­der­stand­ing of con­sumer need-states to think that phys­i­cal, chem­i­cal and op­ti­cal prop­er­ties alone are what make peo­ple value nat­u­ral di­a­monds as be­ing the ideal sym­bols to rep­re­sent life’s im­por­tant mile­stones. There are other prod­ucts that are pretty and that sparkle, but they aren’t val­ued in the same way.

When con­sumers are asked what it is that makes nat­u­ral di­a­monds so spe­cial and valu­able in their minds, they high­light the fact that they are fi­nite, unique, bil­lions of years old and from the Earth – it’s these at­tributes that make them in­her­ently pre­cious, and it’s the in­her­ent pre­cious­ness that makes them wor­thy of rep­re­sent­ing our most im­por­tant oc­ca­sions and emo­tions. As Light­box helps to bring greater clar­ity to con­sumers about lab­o­ra­to­ry­grown di­a­monds, the con­trast­ing at­tributes of nat­u­ral di­a­monds will be brought into sharper re­lief, and their role as sym­bols rep­re­sent­ing our most im­por­tant mo­ments and com­mit­ments will be re­in­forced.

How­ever, there have also been ques­tions posed as to whether Light­box will neg­a­tively in­flu­ence de­mand for lower-value di­a­mond jew­ellery. In con­sid­er­ing this ques­tion, it’s im­por­tant to look at the vol­umes, the prod­uct of­fer­ing and the mar­ket­ing ap­proach for Light­box.

First, it should be noted that Light­box vol­umes are not sig­nif­i­cant com­pared with nat­u­ral di­a­mond pro­duc­tion. Light­box Jew­elry aims to pro­duce around 100,000 un­pol­ished carats in 2019, ris­ing to around 500,000 un­pol­ished carats in 2021 when the new pro­duc­tion fa­cil­ity in Ore­gon is fully op­er­a­tional. By way of com­par­i­son, De Beers Group’s an­nual nat­u­ral rough di­a­mond pro­duc­tion is around 34 mil­lion carats, and an­nual global nat­u­ral rough di­a­mond pro­duc­tion is around 160 mil­lion carats. An­nual global pro­duc­tion of nat­u­ral rough di­a­monds that pro­duce melee (sub 10 point) pol­ished is in the re­gion of 100 mil­lion carats (of which melee of I qual­ity and lower ac­counts for the vast ma­jor­ity of melee vol­ume at ap­prox. ⅔ of to­tal vol­ume).

Sec­ond, Light­box will not sell loose pol­ished ma­te­rial, but only fin­ished jew­ellery. Light­box Jew­elry will fo­cus on sim­ple colour-based de­signs, with a max­i­mum in­di­vid­ual stone size of one carat. These de­signs will be more di­rectly com­pet­i­tive with other non-di­a­mond jew­ellery such as moissan­ite, semi­precious stones, low-end ru­bies, emer­alds or tan­zan­ite jew­ellery. By com­par­i­son, di­a­mond melee jew­ellery is a very dif­fer­ent look­ing prod­uct when com­pared with Light­box Jew­elry, and vis­ual ap­pear­ance is a key driver of prod­uct choice in this price range. In ad­di­tion, small melee di­a­monds are used in jew­ellery across all price points, not just in the lowend cat­e­gory.

Third, Light­box Jew­elry will be clearly and trans­par­ently mar­keted as a dis­tinct, man-made prod­uct and, to en­sure con­sumers are not con­fused, it will not use the De Beers brand name in its ad­ver­tis­ing. It will be mar­keted as fun, fash­ion jew­ellery rather than any­thing more tra­di­tion­ally emo­tion­ally sig­nif­i­cant, as this is what con­sumers tell us they want

By com­par­i­son, di­a­mond melee jew­ellery is a very dif­fer­ent look­ing prod­uct when com­pared with Light­box Jew­elry, and vis­ual ap­pear­ance is a key driver of prod­uct choice in this price range. In ad­di­tion, small melee di­a­monds are used in jew­ellery across all price points, not just in the low-end cat­e­gory.

from these prod­ucts. Light­box Jew­elry will be po­si­tioned to­wards im­pulse self-pur­chase, and new, in­cre­men­tal oc­ca­sions (where di­a­monds can mean too much).

With all this in mind, Light­box is fo­cused on pro­vid­ing a new and dif­fer­en­ti­ated pur­chase op­por­tu­nity. Con­sumers have told us they do not see lab­o­ra­tory-grown di­a­monds as the same as nat­u­ral di­a­monds, and we cer­tainly won’t be sell­ing them as such. As pre­vi­ously noted, Light­box will not of­fer grad­ing re­ports be­cause di­rectly com­par­ing the spec­i­fi­ca­tions of lab­o­ra­tory-grown di­a­monds to those of nat­u­ral di­a­monds en­cour­ages fur­ther con­fu­sion, lead­ing peo­ple to think that it’s a like-for-like com­par­i­son. We will be clear that these are two dif­fer­ent prod­uct cat­e­gories, and that us­ing the lan­guage of the nat­u­ral di­a­mond in­dus­try, and its method for as­sess­ing rar­ity, is mean­ing­less for lab­o­ra­tory-grown ma­te­rial that is pro­duced to a par­tic­u­lar recipe.

Ul­ti­mately, Light­box is not a sub­sti­tute for nat­u­ral di­a­monds; it is an al­ter­na­tive to high-priced lab­o­ra­tory-grown di­a­monds that have a po­si­tion­ing that is out of step with con­sumers’ ex­pec­ta­tions.

What will it mean for the fu­ture of De Beers Group?

One the­ory that has been aired is that Light­box marks a strate­gic change of di­rec­tion for De Beers Group and that we see our fu­ture as be­ing cen­tred on lab­o­ra­tory-grown di­a­monds. While con­spir­acy the­o­ries make for en­ter­tain­ing read­ing, the truth is much more sim­ple: De Beers Group has al­ways been a nat­u­ral di­a­mond com­pany, and it will re­main a nat­u­ral di­a­mond com­pany, with the pat­tern of our ac­tiv­i­ties and in­vest­ments pro­vid­ing clear ev­i­dence of this.

Nar­ra­tives that have sug­gested De Beers Group will stop in­vest­ing in its nat­u­ral di­a­mond fu­ture in favour of lab­o­ra­to­ry­grown di­a­monds seem to have glossed over the raft of ev­i­dence to the con­trary. Not long after we an­nounced Light­box, we also an­nounced that we have reached agree­ment to ac­quire the out­stand­ing shares of Pere­grine Di­a­monds – owner of an ad­vanced stage di­a­mond ex­plo­ration prop­erty in Canada – for a sum al­most as much as our in­vest­ment in the new Light­box fa­cil­ity in the US. But even more tellingly, we are also in the mid­dle of a multi­bil­lion dol­lar pro­duc­tion ca­pac­ity ex­pan­sion pro­gramme at our ex­ist­ing mines to sus­tain our nat­u­ral di­a­mond pro­duc­tion vol­umes well into the fu­ture.

In South Africa, we have the $2 bil­lion project to take Vene­tia mine un­der­ground – this is our big­gest ever in­vest­ment in the re­gion, and the high­est value min­ing project cur­rently un­der­way in the coun­try. In Canada, aside from the afore­men­tioned Pere­grine bid, we re­cently opened Gah­cho Kue mine – the largest new di­a­mond mine in more than a decade. In Namibia, where we have the world’s lead­ing off­shore di­a­mond min­ing busi­ness, we launched the world’s most so­phis­ti­cated di­a­mond sam­pling and ex­plo­ration ves­sel last year, and are now work­ing on plans for a new min­ing ves­sel. And in Botswana, we are in the process of un­der­tak­ing the fea­si­bil­ity work on the lat­est cuts for Jwa­neng and Orapa mines – two of the largest di­a­mond de­posits in the world. We are also pi­lot­ing an ini­tia­tive to help for­malise the ar­ti­sanal sec­tor, help­ing to open up pro­duc­tion from lo­ca­tions that have seen their share of global sup­ply fall sub­stan­tially in the last decade or so, and tri­alling new meth­ods for in­creas­ing the sup­ply of third party rough di­a­monds through our Auc­tion Sales chan­nel.

Over­all, we are set to spend more than $10 bil­lion over the next five to seven years on our nat­u­ral di­a­mond busi­ness to main­tain ex­ist­ing pro­duc­tion, ex­plore for new sup­ply, de­velop new ca­pac­ity, and bring di­a­monds to mar­ket. While we are se­ri­ous about our in­vest­ment in Light­box, it will be dwarfed by the much larger in­vest­ments we will be mak­ing in our core busi­ness.

This is be­cause we have great con­fi­dence in the fu­ture of di­a­monds.

With huge un­tapped de­mand po­ten­tial in some of the world’s largest economies, with global de­mand for di­a­mond jew­ellery at record high lev­els, and with young con­sumers buy­ing di­a­monds in even greater amounts than their par­ents, we have much to look for­ward to.

So what­ever spec­u­la­tion you might read about De Beers Group’s strat­egy, the truth is that al­though we be­lieve that Light­box will be at the heart of the lab­o­ra­tory-grown sec­tor’s fu­ture, nat­u­ral di­a­monds will con­tinue to be our core busi­ness – just as they have been for more than 130 years.

A safety rep work­ing in the min­ing sec­tion of Vene­tia di­a­mond mine. Pho­to­graph by Philip Mostert © De Beers

A nat­u­ral di­a­mond at De Beers’ di­a­mond sort­ing of­fice. Pho­to­graph by Elaine Banis­ter © An­glo Amer­i­can

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