Idée fixe 2.1: The Lab-Grown Industry

Part one: Lab-Grown Diamonds

Mar 25, 2020

Thank you for being here, when really you could be a hundred other places. If you are new to Idée Fixe, welcome. 🤗

This is my two-part guide to the lab-grown-industry, and this is part one: Lab-Grown Diamonds. 💎I’m hoping this brings you a little distraction from all the COVID-19 coverage happening right now.

This is an industry that has either been top of mind or at the very least at the back of my mind for over a decade now. And one that I find fascinating. And this is exactly why I started Idée Fixe in the first place; to share trends, themes and ideas like this one.

🖐Heads up it’s 2,600 words and will take you approximately 18 minutes to read. ☕️So grab your beverage of choice and settle in.

Share Idée Fixe by Toni Cowan-Brown

Nearly ten years ago, I wrote a dissertation on ‘What role, if any, does ethics play in the EU’s trade policy?’ and one of the case studies I used to make my case was conflict diamonds and the creation of the Kimberley Process Scheme. This is when my interest in the lab-grown diamond industry started, which has led me to question but mostly be fascinated by this industry. This fascination peaked when it came time to chose my engagement ring - and yes I did opt for a lab-grown diamond.

It’s not just 💍lab-grown diamonds, we are also witnessing the rise of 🍔lab-grown meat, and the impossible meat industry, as well as the rise of 🥛lab-grown dairy products to name just a few.

Part One: Lab-Grown Diamonds

What you will learn from this segment:

Is there such a thing as the lab-grown industry?
What is ‘ethical consumerism’?
The diamond industry & the Kimberley Process
The lobbying and marketing behind this industry
Lab-Grown diamonds and a new kind of customer

A look at the lab-grown industry as a whole.

I had intended to write a piece about the lab-grown industry as a whole, but it so happens that there isn’t really an overlap between what happens in the lab-grown diamond space and the lab-grown meat industry, for example.

What I have noticed though is growing conversations about how these lab-grown products fit into their existing industry/verticals. Are they a subset for this existing industry or are they creating a whole new product category with a different customer in mind?

The reasoning behind why we are seeing an increase in the number of lab-grown products and raw materials is twofold: 1) as a society we need to find environmentally friendly solutions for many activities and services and 2) today’s consumers increasingly demand environmental and social responsibility from industries. And with that, we are seeing a rise in what we call “ethical consumerism”.

According to the Encyclopedia Brittanica, ethical consumerism is a “form of political activism based on the premise that purchasers in markets consume not only goods but also, implicitly, the process used to produce them.”

However, it’s actually not that simple. We are seeing a disconnect between what people say and what they actually do. Consumers say they want to buy diamonds that are conflict-free, for example, but very few are actually doing the necessary research to ensure this is the case and/or they are not actually boycotting the brands that aren’t quite matching their expectations.

More than just a trend

The lab-grown diamond market is a growing market across the globe. But it’s certainly not new. Lab-grown diamonds have been around for 60 years, but the technology has gotten increasingly better in the past decade. As with most things, the technology has become exponentially better and far more affordable than it ever was which has lowered the barrier to entry, and increased competition between lab-grown diamonds and mined diamonds.

“Today, it costs $300 to $500 per carat to produce a CVD lab-grown diamond, compared with $4,000 per carat in 2008, according to a report commissioned by the Antwerp World Diamond Centre (AWDC).” - BBC Future Planet

Lab-grown products go far beyond jewelry and diamonds

Although gemstones may be the most glamorous facet of the lab diamond industry, they actually only account for 10% of the revenue. There is far more money to be made selling industrial diamonds used for cutting & grinding, but also used in quantum computing.

Other products are also being created in labs such as leather and silk in the garment space. Part two of this guide will look into the food industry, and what products are currently being created in labs such as meat, cheese, milk, and even palm oil.

Mined-diamonds; a Troubled Past.

On the one hand, the diamond industry is in trouble according to the latest Global Diamond Report 2019 from Bain & Company. Across the industry, (the mined-diamond industry that is) sales are falling, with expected declines between 10% and 25%. And 2020 was expected to be a rough year for the industry, and that was even before COVID-19 hit us. The mined-diamond industry is also facing increasing disruption from the lab-grown industry.

The Bain report identifies the three greatest disruptors in the mined-diamond market: Online sales (1), lab-grown diamonds (2), and consumers’ growing demand for environmental and social responsibility (3). The later two go very much hand-in-hand.

On the other hand, the lab-grown market is a growing market across the globe. According to Market Watch, “the market of lab-grown diamonds was valued at $16.2 Billion in 2015. Moreover, by the end of 2023, the global market of lab-grown diamonds is expected to garner $27.6 Billion.”

💎The diamond industry & the Kimberley Process

Rough diamonds, like other natural resources (timber, water, etc.) “have been targets or instruments of warfare in the past and will remain so in the future”. Indeed, “warring parties need money and they will get it wherever they can find it”, and what better than using those natural resources at their disposal.

Conflict or blood diamonds

Conflict diamonds are to be understood as “diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decision of the Security Council”.

However, unlike timber and other natural resources, the problem with conflict diamonds derives in large part from the properties of the diamonds themselves. Not only are they a concentrated source of wealth, but their small size and value make them a perfect bargaining tool to use in “illegal transactions, money laundering, and arms purchases”.

There is something very disturbing about the idea that something so precious has fuelled some of the world’s worst wars - such as those in Angola, Sierra Leone, Liberia and the Democratic Republic of Congo. This unease led to a consensus that there was a need to be certain of the origins of diamonds, in order to be sure that they had not fuelled atrocities.

That era of diamond mining was “so devastatingly ugly Isis will start looking like good guys,” says Alexander Weindling,CEO and Co-Founder at Great Heights Inc. “It was dreadful. It was criminal. It was unforgivable.”

In order for warring parties to exploit natural resources, they need to access external markets. The challenge is to find a way of curbing the access of conflict diamonds onto the international trade market and specifically preventing imports into these markets, with a view to preventing conflict. The diamond industry has for the past two decades worked to get rid of any conflict diamonds through a certification scheme that has, for the most part, helped get rid of unethical trading - namely the Kimberley Process Scheme.

The Kimberley Process Scheme

In 2003 the Kimberley Process Scheme (KPS) was launched as an “international response to the conflict resource issue”. The overall aim of the KPS is to establish some control over rough diamonds turned conflict diamonds which will, in turn, cut off any further funding from resulting from the diamonds. This will render the rebels without money, arms and thus power which should gradually lead to peace in diamond producing regions and support efforts at development.

The scheme requires that all rough diamonds being imported and exported into and from the EU be accompanied by a certificate of origin guaranteeing that they are of conflict-free origin. Some EU member states, however, have traditionally enjoyed a major interest in the diamond industry. Indeed, both the UK (with De Beers headquarters in London - we will come back to them shortly) and Belgium (with more than 80% of the world’s diamonds either passing through Antwerp or being controlled by Antwerp dealers), gain significantly from the diamond trade.

In addition, there are now new pressures over the toll mining diamonds is taking on the planet, and a new generation of diamond buyers are focused on the environment and climate change and want to hold industries to account.

💰The lobby and marketing behind this industry

Before we talk about this new generation of diamond buyers and the lab-grown diamond industry, it’s important to understand the central role of one of the key players in this industry - namely De Beers - and its marketing prowess over the past decades.

“A Diamond is forever”

De Beers, famous for minting the phrase “A Diamond is Forever” (written by Frances Gerety) back in 1948 which has “kept the industry humming till very recently” says Pamela N. Danziger, is one of the biggest names associated with diamonds.

The company forever “changed culture when it convinced us that “a diamond is forever”, and that a diamond ring is a quintessential part of getting engaged.” De Beers more or less dreamt up this idea of a diamond engagement ring as the essential display of one’s love to one another.

Most recently, as part of the DPA, De Beers helped fund the “Real is Rare” campaign which launched in 2016. A campaign focused on exclusivity, rarity, and uniqueness, all aspects that, in their opinion, cannot be delivered by lab-grown diamonds.

“Natural diamonds obtain their value from their uniqueness and rarity as billion-year-old precious gems.” says Kristina Buckley Kayel, DPA’s Managing Director for North America in a statement to Forbes.

Over the years, when faced with an existential threat, the mined diamond industry has seemingly been able to advertise its way out of trouble. However, the usual rebranding effort doesn’t appear to be working for mined diamonds especially as we start to see the rise in popularity of the lab-grown diamond industry.

Lab-grown diamonds.

Lab-grown diamonds have undoubtedly been the biggest disruptors to this $82billion diamond industry. Although, you will often hear Alisa Moussaieff, dubbed Queen of Diamonds, say that the lab-grown diamonds may well affect the lower part of the market but will never affect what she calls the ‘real gems’. She foresees no disruptions for these gems that are purchased, according to her, for investment purposes.

2018 was a landmark year for the lab-grown diamond industry. And since then, the industry has continued its unmistakable upward trajectory “demonstrated by increased acceptance among diamond dealers, jewelry manufacturers, retailers and most importantly, consumers.”

After decades of research and development, scientists can now precisely replicate the earth’s natural process of a diamond. Meaning that they can only be distinguished using specialized equipment.

So what is a lab-grown diamond?

“A lab-grown diamond is a diamond: chemically, physically and optically identical to a mined diamond.” - BBC Future

Lab-grown diamonds are just what they sound like. They are diamonds that are grown inside a laboratory using pure carbon in a process that simulates what happens in nature. This process mimics the natural growing process of a diamond, in a modern-day controlled environment to produce crystallized carbon (otherwise known as a diamond).

The process is sped up dramatically - it takes about two weeks to grow diamonds in a lab. Some argue it takes just an as small amount of time in the earth but they then sit there for billions of years until they are discovered.

Both the machines and processes used to make man-made diamonds have become more refined in recent years and so has the end product. It’s incredible to think that we can now grow diamonds in a modern-day lab environment that is far more beautiful and affordable than anything we will get out of the earth. Alisa Moussaieff would absolutely not agree with the above statement of course.

What a lab-grown diamond is not?

The diamond industry, through years of lobbying, wants you to associate lab-grown diamonds with fake diamonds or even synthetic diamonds. I experienced the result of this million-dollar lobby exercise first-hand when I would share my own story of picking out my engagement ring. Oh so you have a fake diamond they would say with a look of pitty (or even disgust)?

First of all, let’s be clear, the reason you want a diamond in the first place is purely the creation of many many years of lobbying efforts and big marketing campaigns. Secondly, a lab-grown diamond is in fact a diamond. It is just not a mined diamond. The product structurally and chemically is the same, the creation process is simply different.

The benefits of lab-grown diamonds

Diamond Mining is extremely invasive on the environment. We know mining has the largest carbon footprint of any kind of human activity. Lab-grown diamonds, on the other hand, have 7 times less the environmental impact than an earth-mined diamond.

Although, it’s important to note that there is still an impact nonetheless. According to The Guardian, the “FTC has warned lab-grown diamond sellers over the veracity of their environmental claims”. Indeed, the huge amount of power needed to produce a lab-grown diamond can lead to a significant output in carbon pollution.

Lab-grown diamonds are 10 times more durable than mined diamonds, and often cost 1/3 less than a mined-diamond with prices expecting to drop further.

The earth mined diamond industry has a long history of workers and human rights violations and while there have been reforms, blood diamond trade still exists. Many jewelers that offer “conflict-free” diamonds are limiting themselves to the Kimberley Process’s definition, which narrowly defines conflict diamonds as “diamonds that finance rebel movements against recognized governments.” What this definition leaves out is large numbers of diamonds that are tainted by violence, human rights abuses, poverty, and environmental degradation.

Marketing lab-grown diamonds

From a marketing perspective, the lab-grown diamond industry front-runners have taken different approaches; from sustainability and an eco-friendly option, to “bigger is better” or even increased quality.

“Because lab-grown diamonds are in every way equal to mined diamonds chemically and structurally, the conversation around lab-growns versus natural diamonds has shifted to the financial aspects of the purchase. That is their last calling card,” says Ada’s co-founder Lindsay Reinsmith, who formed the company with her software engineer husband when they were looking for a diamond engagement ring that matched their personal values.

🙋‍♀️The incumbents and the disruptors

When De Beers surprised us all

For a long time, diamonds could be marketed on their intrinsic value alone. As for many legacy companies, the transition away from a marketing-driven approach backed by millions of dollars in lobbying efforts has not been easy.

The lab-grown diamond industry has paved the way for new brands (mostly Silicon Valley-based companies such as Diamond Foundry and Ada) in this space who are revolutionizing the business and catering to today’s new consumers.

And it’s not just the Silicon Valley-based companies, the mining giant, De Beers, who once vehemently opposed the marketing (and even existence) of such stones and diamonds, jolted the industry back in 2018 when it decided to get on the lab-grown bandwagon. Although, it’s worth noting that De Beers, has in fact been manufacturing lab-grown diamonds since the 60s for testing and industrial purposes.

They announced Lightbox — a direct-to-consumer subsidiary that sells laboratory-grown diamonds online. Some experts in the industry have argued that this strategy has served as a potential safety net for the diamond giant as some younger customers are turning away from mined diamonds.

“The efforts of DeBeers to price Lightbox diamonds at such a low price point are a very clear effort to denigrate the product,” says Jason Payne, CEO of Ada Diamonds

A new type of consumer

All of the above may require a very particular, perhaps even novel, kind of customer: one who cares sufficiently about social values, who demand social and environmental responsibility from the industry and are looking for a unique experience.

And the Millenials and now GenZ consumer base (who together make up the main purchasers of engagement diamonds) are the primary target market, and are currently moving away from conventional diamonds.

According to the latest MVI Research, in 2018 “nearly 70% Would Consider Lab Grown Diamond for Engagement Ring” and the research has shown “continued growth in both awareness and acceptance of lab-grown diamonds.”

🌱A new product category?

Finally, should we treat lab-grown diamonds as a piece of the existing pie, or look at it as creating a whole new pie?

We have seen similar discussions with Airbnb and Uber/Lyft in the past; are they taking money and business away from existing players, namely the taxi and hospitality industry, or have Uber/Lyft created a new category by catering to a new consumer.

I personally argue that we treat lab-grown diamonds as a completely new product category that is catering to a new customer with a unique product and proposition. I also don’t believe that in order to survive lab-grown diamonds will need the glamour and romance associated with mined diamonds. I personally find the technological advancements made by men and women far more appealing than a marketing campaign from the 40s created purely to sell us a fantasy. And they say romance is dead. 😂

Is this a new beginning for the diamond industry where mined-diamonds and lab-grown diamonds can coexist and offer more than they have been up until now?