“Diamonds are forever, but consumer preferences are not. The iconic slogan coined by De Beers in 1948 may no longer hold true for many consumers today. Increasingly, people are opting out of purchasing diamonds and turning to gold, lab-grown stones, or other colored gems.
Following the rejection of a takeover bid from BHP, the largest shareholder of De Beers, Anglo American, is planning to divest itself of De Beers as part of a business restructuring. The CEO of Anglo American, Duncan Wanblad, told the Financial Times that selling De Beers would be the most challenging aspect of the company’s overhaul.
Independent diamond industry analyst Paul Zimnisky told CNBC that while De Beers has a strong traditional business under Anglo American, the diamond industry no longer seems to be the right fit.
As reported by CNBC, with the waning allure of diamonds in China, a key consumer market, the demand for diamonds is on the decline. According to Statista data, the Chinese diamond jewelry market was valued at around $8.8 billion in 2022.
Market research firm Daxue Consulting stated that declining marriage rates, the increasing popularity of gold and lab-grown gems, have all contributed to reducing the demand for diamonds in China. Factors affecting demand also include slowed income growth, a soft real estate industry, and a shift in Chinese consumer spending towards travel experiences post the COVID-19 pandemic, rather than physical goods, further impacting diamond sales.
Official data from the Chinese government revealed a record-low marriage rate in 2022. The number drastically dropped from around 13.47 million couples in 2013 to 6.84 million couples in 2022. The younger generation prioritizing personal development and financial stability over marriage has led to a decreased demand for engagement and wedding rings.
Daxue Consulting noted that more and more newlyweds in China are considering gold as an alternative investment, as the rising price of gold has spurred a significant increase in gold jewelry consumption. Unlike diamonds, gold jewelry has deep cultural roots in Chinese weddings, symbolizing wealth, prosperity, and good fortune for centuries, while diamonds are more associated with Western traditions.
In 2023, the price of gold continued to steadily rise, a typical sign of economic slowdown with increased demand for gold.
On the contrary, according to Zimnisky’s rough diamond index, diamond prices have fallen by 5.7% year-to-date, a decrease of over 30% from the historical highs of 2022.
Marcelo Esquivel, the PR manager of Anglo American, told CNBC that last year was a particularly challenging time for the diamond industry due to economic challenges, lackluster engagements post-pandemic, and the increasing supply of lab-grown diamonds affecting demand conditions.
Ankur Daga, the founder and CEO of jewelry e-commerce company Angara, stated that the growing preference for lab-grown diamonds is a significant factor contributing to the decline in natural diamond prices.
He explained, “The core issue is the rapid growth of lab-grown diamonds,” noting that in the US, the largest diamond-consuming country, half of the gemstones used in engagement rings this year are lab-grown, up from just 2% in 2018.
Lab-grown diamonds are created in a controlled environment using high pressure and heat to replicate the formation process of natural diamonds deep within the mantle. The appeal of lab-grown diamonds lies in being 85% cheaper than natural diamonds.
Based on Zimnisky’s data, the sales of lab-grown diamonds accounted for 18.4% of the global diamond jewelry market in 2023, significantly up from 2% in 2017.
Moreover, Daga mentioned that the trend of purchasing diamonds as an investment is also declining. He stated that for the past 50 years, diamonds have been considered an asset and a hedge against inflation. However, with the sharp drop in diamond prices, this investment rationale has largely diminished.
According to Daga, “The diamond industry is in distress,” adding that he believes natural diamond prices could further decline by 15% to 20% in the next 12 months.
However, some experts remain optimistic. Anish Aggarwal, the co-founder of professional diamond consulting firm Gemdax, remarked, “There are challenges facing the diamond industry, but they are not insurmountable.”
He pointed out that diamonds, like high-end watches and bags, are discretionary products that require ‘demand creation.’
Aggarwal stated, “The diamond industry has not undergone a large-scale category marketing initiative in nearly 20 years, and we are seeing the consequences of that.” He added that the diamond industry needs to make efforts to rekindle the demand from Chinese consumers.
De Beers’ 2023 Diamond Insights Report indicated a growing allure for natural diamonds, with an increasing number of Chinese women considering it as the third most desired gift in 2023. However, Daxue Consulting noted a gap between the purchasing intention of Chinese consumers and their actual buying behavior.
Aggarwal stressed the need for a cohesive marketing approach to bridge this gap. Similarly, Zimnisky also believed that meaningful industry marketing could lead to significant changes in the diamond market.”