Saying 'I Do' To Lab-Grown Diamonds : The Indicator from Planet Money A lot of money is pouring into the global diamond industry, but demand for diamonds has been less than lustrous of late. But, at the same time, money has been pouring into the industry. Why? We have on our hands – a four carat mystery.

Saying 'I Do' To Lab-Grown Diamonds

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Sally Herships, welcome back to THE INDICATOR. How are you?


Good. Thank you so much. It is so lovely to be here.

GARCIA: Sally, you have brought us a story that relates to something happening in your personal life now. You just got engaged.


GARCIA: Congrats.

HERSHIPS: Thank you. Thank you. And I have become a little bit obsessed with diamonds, but not in an unhealthy way, Cardiff.


HERSHIPS: I see that look on your face.

GARCIA: (Laughter).

HERSHIPS: There is some really interesting economics going on in the diamond industry right now.

PAUL ZIMNISKY: Yeah. So I think if we look 15 or 20 years out, you know, natural diamond production is probably going to be half of what it is today.

HERSHIPS: That is Paul Zimnisky. He's a diamond industry analyst. And he says that decline in production is because diamonds are really expensive to dig up out of the ground. And while demand for diamonds is growing globally, it's growing much more slowly than it used to. So mining companies are a little reluctant to go looking for stones, but at the same time, something weird is happening. Investors are pouring money into the space.

I'm Sally Herships.

GARCIA: And I'm Cardiff Garcia. Today on THE INDICATOR, the global market for diamond jewelry is worth $80 billion dollars a year. And like Sally just said, money's gushing into the space. But why, given the demand for diamonds just isn't quite as lustrous as it once was? We have on our hands a bit of a mystery.

HERSHIPS: What you might call a four-carat mystery.

GARCIA: Heyo (ph), look at us bringing the puns.

HERSHIPS: Or the sparkle.


GARCIA: So marriage rates are on the decline, and young adults in particular are delaying marriage until later in life. And you know, Sally, we know how those young people are today, right? You know...

HERSHIPS: Oh, my God, yes, get off my lawn.

GARCIA: (Laughter) Interested in spending more maybe on things like travel and fitness and experiences and spending less on luxury items like diamonds. And at the same time, the cost of producing diamonds is still obviously very high. You have to mine diamonds, which is labor intensive. It's dangerous. It's expensive. And, of course, diamonds are a dwindling natural resource. There's only so many of them in the ground, which means eventually we'll run out of them. That leads us to our mystery. Why is all this money pouring into the diamond space?

HERSHIPS: Well, according to Bain's Global Diamond report, in the U.S., affluent consumers are continuing to buy diamonds. And demand in China grew last year for the first time in a half a decade. That is thanks to younger buyers. But there is also something else, a new kind of diamond, one that is grown in a lab. They're chemically the same as the diamonds we dig up out of the earth. So all that money coming in, that is for these new diamonds, manmade rocks. But diamonds grown in the lab raise a couple of pretty big marketing problems.

ZIMNISKY: So it's kind of interesting because the natural industry likes to call them synthetic diamonds, and that lab-created industry likes to call them manmade or lab grown or lab (inaudible).

HERSHIPS: Cardiff.


HERSHIPS: Will you marry me?

GARCIA: Sally, I would, but I think somebody is going to beat me to it.

HERSHIPS: Maybe, but here is a synthetic carbon-based product ring.

GARCIA: Sally, it looks great on you, but I got to say that's not very romantic - synthetic carbon-based product.

HERSHIPS: Yeah, I can see why that might not be so great for marketing. So far, Paul says, lab-grown diamonds are just a small percentage of the market, just under $2 billion. But it has been a while since there's been a new product in the diamond industry, and so he says that number is expected to grow to 15 billion over the next decade and a half. But then we encounter marketing problem No. 1.

Do they look the same? Like, if I was rocking a giant diamond ring, would anyone be able to tell but it was manmade?

ZIMNISKY: There's - no, you would not be able to tell. You would need special equipment to distinguish. So I think it's important - the important caveat is that you can, you know, tell the difference between the two with certainty, but you need special equipment.

GARCIA: And there is problem No. 2. Let's say you're a manufacturer of manmade diamonds. Well, how do you price them? If you price them too low, then you're just a hop, skip and a jump away from being considered another, like, cubic zirconium, CZ. But if you price them too high, then consumers might think, well, why not just buy one of the diamonds that came out of the ground like I had intended to?

So there's this company, ALTR Created Diamonds, and it is one of the new companies creating stones in the lab. Amish Shah is the company's president. Sally, you spoke with him.

HERSHIPS: I did, and here is how he is navigating this marketing dilemma.

AMISH SHAH: We also created diamonds - the way we see them, it's accessible luxury.

HERSHIPS: Accessible luxury - those two words may sound hard next to each other because traditionally, luxury products are about scarcity, not accessibility. So would consumers be happy with, say, a $500 engagement ring? Well, Amish says consumers will be OK.

SHAH: So here we are able to offer a larger, more beautiful diamond without them having to pay the price that they would expect. And this is one of the key reasons that's driving the growth of this category.

HERSHIPS: Amish also says diamonds grown in a lab can appeal to younger shoppers who want to steer clear of conflict or blood diamonds. Lab-grown stones are clean, but they are causing a big problem for companies that deal in traditional diamonds dug up out of the ground like De Beers, the global mining giant. It does not want consumers to get confused. And I think we're all familiar with how De Beers traditionally markets itself. It is a classic.


UNIDENTIFIED ACTOR: The diamond engagement ring - how else could two months' salary last forever? A diamond is forever. De Beers.

GARCIA: I feel like at some point they bumped that up to three months' salary. That must be an old version of the commercial, I think.

HERSHIPS: Yeah. It's from the '90s.

GARCIA: But De Beers did create a kind of expensive aura around diamonds. The company is arguably the reason that so much money gets spent on dime engagement rings every year. And last year, De Beers says that it sold about $5 1/2 billion of rough diamonds. Those are diamonds before they are cut and polished. And that would make the company the largest supplier of those cut diamonds in the world.

And De Beers is fighting back against the manmade trend in two principal ways. First, it says it wants to provide clarity for consumers. So the company has created its own lab-grown diamond product called Lightbox.

HERSHIPS: And if you check out the website for Lightbox, you will see taglines like, we love science and sparkle, and we are lighter on your pocket, which is accurate because De Beers is charging more than 50 percent less for its lab-grown diamonds than companies like ALTR.

ZIMNISKY: I think the biggest threat to, you know, someone like De Beers is a consumer being confused as to the difference between the two and being maybe hesitant to buy a natural diamond because they feel that it might be a synthetic and they can't tell the difference.

HERSHIPS: Which brings us to the second way De Beers is fighting back. It's establishing its core business, traditional diamonds mined from the ground. I talked to a spokesperson for the company, and he says last year De Beers spent 166 million on global marketing. that is more than it has spent in a decade. And he told me next year the company is planning to spend even more.

GARCIA: There are other threats to De Beers and traditional mining companies. Right here in the U.S., there are companies that are also focused on the manmade diamond industry, except these companies are looking to get into making high-tech industrial diamonds. So these are diamonds with high-tech applications like for optic equipment or lasers or diamond-encrusted processing chips.

Paul says it'll be at least a decade before this industry can scale up. But one day, it might end up being worth hundreds of millions of dollars. And so in the meantime, there are labs and startups around the world that are hoping to get in.

HERSHIPS: Diamonds shot through lasers could one day power drones, but science is still in the way, haven't quite figured that one out yet. So in the interim, their rejects are going to the diamond jewelry industry.

GARCIA: And as for De Beers, it says it's going to invest about $10 billion in its natural diamond business in the coming years - so on new mines, new projects, research and development. By comparison, it's going to sink $94 million into its Lightbox manufacturing facility in Oregon, which is currently under construction. By the way, Sally, I never asked - did you get an engagement ring?

HERSHIPS: I did. I'm wearing it. It's an amethyst.

GARCIA: Oh, how characteristically contrarian of you, right? You do a story about diamonds wearing your amethyst engagement.

HERSHIPS: Hey, I bring all the sparkle in my personality.

GARCIA: Love it.


GARCIA: This episode of THE INDICATOR was produced by Constanza Gallardo, edited by Paddy Hirsch. And our intern is Willa Rubin. THE INDICATOR is a production of NPR.

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