Alrosa - De Beers' Lab-Grown Diamonds a Disruptive Force?

De Beers on Tuesday launched a new jewelry brand called Lightbox, which will offer synthetic diamonds at a fraction of the price of both natural and other lab-grown stones. For example, a one-carat polished stone will be sold for around $800, versus the roughly $8,000 consumers pay for natural stones that size and $4,000-5,000 for the lab-grown stones marketed by a host of synthetic stone producers. De Beers claims that the main idea is to address customers' growing confusion and their inability to differentiate between natural and synthetic stones. De Beers believes that the marketing and positioning of current lab-grown diamond producers is somewhat misleading, as they advertise synthetic diamonds as something no worse and in some senses better than natural ones. De Beers aims to counter these claims. It also attributed the move to simple business logic - it will be able to make a small profit in a new niche market. To explain the company's strategy, De Beers CEO Bruce Cleaver recently gave an interview to Bloomberg. He said, "Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren't getting: affordable fashion jewelry that may not be forever, but is perfect for right now." He added, "Lab-grown are not special, they're not real, they're not unique. You can make exactly the same one again and again."Therefore, De Beers claims that it will be able to split the market in two, with mined gems in luxury settings and engagement rings at the high end and lab-made jewelry for millennials at the low end. It is committed to a $3 bln investment program in natural diamonds, as it believes that the new Lightbox brand is not a threat to its core business of $6 bln in revenues. In fact, we think that the new strategy is an attempt to protect the core business.