I recently read an article written by James Allan, which argued that listing De Beers is the only way for Anglo American.
I will not spill ink summarising his reasons for coming to that conclusion nor do I want to make this the focus of this piece.
What caught my attention was his assertion that De Beers implemented a “wrong strategy” when it launched its ‘Lightbox’ lab-grown diamond brand in 2018.
He posits: “When someone starts eating your lunch you shouldn’t encourage them as De Beers did when it started making and marketing ‘Lightbox’ lab-grown diamonds (LGDs) in 2018 – a development that stunned the industry. Instead, you should double up on your differentiation.”
James was not done as he posed rhetorical questions.
“Where, then, were the campaigns to promote natural versus lab-grown? How about showing the younger generation that producing a natural diamond is more environmentally friendly than a lab-grown diamond and that natural diamonds benefit communities and countries like Botswana?” he asked.
While these sound like legitimate questions at face value the reality is that they are too simplistic.
I found the argument too pedestrian as it lacks critical thinking.
Before I state why I came to this conclusion, I should give a disclaimer that I hold no brief for De Beers and my desire is just to promote debate around this matter raised by Allan.
‘Lightbox’ is not a wrong strategy
I submit that the launch of ‘Lightbox’ was not a poor strategy in as much as it shocked the industry at the time.
I was one of the people who found the move bizarre at the time but De Beers knew it was the best response to the burgeoning LGD market.
All the move did was to prop up the synthetic diamonds but slowed the erosion of natural diamond prices.
Not premium
‘Lightbox’ priced its lab-grown diamonds at $800 per carat way below several competitors, which made it hard for other LGD brands to justify higher prices or to position themselves as premium.
The reduction in LGD prices led to lower margins in the sector, while at the same time allowing the diamond giant to control the narrative around the man-made diamonds.
The reality is that De Beers’ objective was to crash the LGD market to the smithereens as it is impossible, but simply to segment it away from natural stones, ensuring they did not mutilate the group’s core business.
There is a generational shift as younger consumers prefer cheaper lab-grown stones for engagements.
This explains why De Beers intentionally avoided marketing ‘Lightbox’ stones for engagements, instead positioning them as inexpensive, disposable fashion jewellery.
By doing so it buttressed the idea that natural diamonds were synonymous with luxury and permanence, while LGDs meant casual and temporary.
The current challenges in the natural diamond market, which include weak prices, oversupply, subdued demand, and growing LGD adoption, might appear as if ‘Lightbox’ failed to shield De Beers' core business.
However, it served as a strategic bulwark and a way to control the narrative around LGDs not to stop the natural diamond market’s waning.
So in a nutshell, ‘Lightbox’ gave De Beers a foothold in LGDs while trying to manage the decline of natural stones and protect its luxury brands as well as profit from the shift.
De Beers is now expending its energy and resources marketing natural diamonds while keeping ‘Lightbox’ as a budget option.
Mathew Nyaungwa, Editor-In-Chief, Rough & Polished
Produced and published as part of the project "Best practices have a voice"
