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The global market for diamond jewelry is worth $80 billion a year. Money is flooding into this industry, but why when demand for diamonds isn't as lustrous as it once was? Cardiff Garcia and Sally Herships have more from the Planet Money podcast The Indicator.
CARDIFF GARCIA, BYLINE: So marriage rates are on the decline. 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. That leads us to our mystery. Why is all this money pouring into the diamond space?
SALLY HERSHIPS, BYLINE: 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. 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, man-made rocks.
Do they look the same? Like, if I was rocking a giant diamond ring, would anyone be able to tell but it was manmade?
PAUL ZIMNISKY: There's - no, you would not be able to tell. You would need special equipment to distinguish. The important caveat is that you can, you know, tell the difference between the two with certainty, but you need special equipment.
HERSHIPS: That is Paul Zimnisky. He's a diamond industry analyst. 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.
GARCIA: But there are some marketing problems. Say you're a manufacturer of man-made diamonds. How do you price them? Go too low, and you might just be considered another cubic zirconium, CZ. Too high and you may see consumers thinking, why not just buy the real deal? ALTR Created Diamonds is one of these new companies creating stones in the lab. Amish Shah is the company's president. Here's how he's navigating this dilemma.
AMISH SHAH: At ALTR Created Diamonds - the way we see them, it's accessible luxury.
HERSHIPS: Accessible luxury - this feels odd because traditionally luxury products are about scarcity, not accessibility. Will consumers be happy with a $500 engagement ring? Well, Amish says consumers will say yes. Amish also says diamonds grown in a lab can appeal to millennials who want to steer clear of conflict or blood diamonds.
But other companies like De Beers, the global mining giant, took a different approach. The company has created its own lab-grown diamond product called Lightbox. If you check out the website for Lightbox, you will see taglines like, we love science and sparkle, and we're lighter on your pocket, which is accurate because De Beers is charging less for its lab-grown diamonds than companies like ALTR.
GARCIA: Here's Paul Zimnisky again, the diamond analyst.
ZIMNISKY: I think that the biggest threat to, you know, someone like De Beers is a consumer being confused as to the difference between the two.
HERSHIPS: 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 man-made diamond industry, except these companies are looking to get into making high-tech industrial diamonds.
HERSHIPS: Sally Herships.
GARCIA: Cardiff Garcia, NPR News.
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