Brilliant Earth’s sales grew 4% year on year to $124.3 million in the fourth quarter amid a record number of orders.
The 18% increase in individual orders offset a 12% decline in the average value per sale during the three months that ended December 31, the retailer said last week. Net profit for the period fell 69% to $1.9 million.
Engagement rings were one of the top sellers for the company, with demand for those above $10,000 increasing year-on-year in the fourth quarter, Brilliant Earth CEO Beth Gerstein said last week in an earnings call, transcribed by Seeking Alpha. The average sales price for engagement rings was up 4% year-on-year during the three months.
Additionally, new campaigns featuring celebrities and influencers brought in consumers. The launch of Brilliant Earth’s Sol collection, in partnership with Emmy-nominated actress Camilla Morrone, proved popular, with productivity “far outpacing” that of prior collection launches, Gerstein explained. The company’s new lab-grown Capture collection, made with synthetic diamonds manufactured using 100% renewable energy, also “resonated strongly” with consumers, it said.
For the full-year, sales rose 1.5% to $446.4 million, while net profit dropped 75% to $4.7 million.
Brilliant Earth expects sales for the first quarter of 2024 to reach between $96.5 million and $98.5 million, ranging from a decrease of 1% to growth of 1%, chief financial officer Jeff Kuo noted on the earnings call. For the full year, net sales are anticipated to rise 2% to 5% to between $455 million and $469 million.
Human-made diamonds come with an appealing claim: Manufacturers say the stones are produced ethically using renewable energy. But many of the products do not meet that claim or their producers do not confirm the electricity sources they use. And, laboratory diamonds require a lot of electricity to produce.
In the United States, lab-grown diamond sales increased 16 percent in 2023 from 2022, says Edahn Golan, an industry expert. The stones cost much less than natural diamonds.
Bario Neal is a jewelry store in Philadelphia, Pennsylvania. It uses lab diamonds. All of the stones are either made with renewable energy or neutral use of energy through the carbon credit system. Credits pay for activities like planting trees, which capture carbon.
Social media posts show Millennials and Generation Zs proudly explaining the purchase of their lab-grown diamonds for sustainability and ethical reasons. But the sustainability of production is questionable. A high number of manufacturers are not transparent, or open, about their operations.
Many of the manufacturers are in India, where about 75 percent of electricity comes from burning coal. The companies use words like “sustainable” and “environmentally-friendly” on their websites. But they do not release reports on the environmental effects of their operations.
Cupid Diamonds, for example, says on its website that it produces diamonds in “an environmentally friendly manner.” But it did not answer questions about the sustainability of its operations.
Solar energy is quickly expanding in India and there are some companies, such as Greenlab Diamonds, that use renewables in their manufacturing processes.
China is the other major country producing laboratory diamonds. The largest makers did not return requests for comment. They also did not release details about their electricity source.
More than half of China’s electricity came from coal in 2023.
Paul Zimnisky is a diamond industry expert. He said few companies are honest about their supply chains and their use of renewable energy.
Zimnisky said a lot of companies claim to make an “environmentally-friendly product when they aren’t really doing anything that’s environmentally friendly.”
How it is made
Lab diamonds have been in production around seventy years. Producers treat carbon to high pressure and high temperature. The idea is to copy the natural conditions that form diamonds underground. But, nature spends at least one billion years to make a diamond. Lab diamonds are complete in a few weeks.
In the past, the stones were used mostly in industries like stone cutting, mining and dentistry tools.
Over time the laboratories, or foundries, have gotten better at making stones. Production costs have dropped as technology improves.
Companies now can manufacture as many stones as they want and choose their size and quality.
Diamonds, whether lab-grown or natural, are chemically identical and entirely made out of carbon. Experts can identify between the two using lasers to examine their atomic structures.
Marketing battle
The lab diamond is competing in the same market as natural stones. Worldwide, lab-grown diamonds are now 5 to 6 percent of that market. And, the public battle for customers has begun.
The natural diamond industry and some experts argue that lab-grown diamonds will not hold value over time.
Zimnisky predicts that natural diamonds will continue to sell in the thousands and tens of thousands of dollars for engagement rings.
And the human-made stone?
“Five to ten years into the future, I think there’s going to be very few customers that are willing to spend thousands of dollars for a lab diamond,” he said.
Page Neal said she co-founded Bario Neal in 2008 to “create jewelry of lasting value that would have a positive impact on people and the planet.”
She added: “We want to only work with materials that we feel like our clients would be proud to own.”
I’m Dan Novak.
Dan Novak adapted this story for VOA Learning English based on reporting by The Associated Press.
WD Lab Grown Diamonds, the second largest lab grown producer in the USA, has filed for bankruptcy.
The Washington DC-based company is the first major casualty of the plunge in lab grown prices.
It filed for Chapter 7 protection last Wednesday (11 October) in a Delaware bankruptcy court, with disclosed liabilities of $44m with assets of $3m.
WD pioneered chemical vapor deposition (CVD) diamonds since 2008 and had its own patented process.
In 2016 it produced its first 5 carat round brilliant diamond and in 2018, it set a record for the largest gem quality lab grown, at 9.04 carat.
In 2021 it acquired J2 Materials, and advanced materials and diamond crystal growth laboratory based in Chicago.
WD generated $33m of revenue last year, according to a Financial Times report. But the company has fallen victim to low prices and intense competition from China and India.
De Beers decided to call time on offering lab-grown diamonds for engagement rings even as the man-made alternatives continue to cannibalize demand in one of the company’s most important markets.
After vowing for years that it wouldn’t sell stones created in laboratories, in 2018 De Beers reversed that position and only this year started testing sales of the diamonds in the crucial engagement-ring sector.
The diamond industry leader said Wednesday that the trial showed that it wasn’t a sustainable market.
De Beers’ move comes as the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market, with the lower-cost lab-grown competition seen behind the collapse.
De Beers has said the current weakness is a natural downswing in demand after the pandemic, with engagement rings particularly vulnerable. The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.
Lab-grown diamonds — physically identical stones that can be made in matter of weeks in a microwave chamber — have long been seen as an existential threat to the natural mining industry. Proponents say they can offer a cheaper alternative without many of the environmental or social downsides sometimes attached to mined diamonds.
While the price of some natural stones used in lower-quality engagement rings have plummeted in the past year, the fall in lab-grown prices has been even steeper. De Beers has said it expects lab-grown prices to continue to decline as more supply comes into the market
Retailers would need to double the number of lab-grown carats they sell every two years, just to maintain profits, De Beers said.
A US advertising watchdog has called on e-tailer Agape Diamonds to make the origins of its synthetic and simulated stones clearer.
The recommendation came from the National Advertising Division (NAD) of BBB National Programs — a nonprofit that helps businesses self-regulate — after the National Diamond Council (NDC) challenged Agape’s claims, the NAD reported last week.
Agape’s promotional material, including how it was presenting products for sale on its website, did not clearly and conspicuously disclose the origins of its stones, the NDC had argued, according to the NAD. As such, the council claimed, the online retailer and lab-grown manufacturer was violating the Federal Trade Commission (FTC) guidelines on jewelry marketing.
Agape changed its advertising across its website and social media in response to the NDC’s complaint, and the NAD declared the company’s modified disclosures effective and consistent with the FTC rules. However, other online advertising lacked “clear and conspicuous” origin disclosure, the watchdog said.
Race to the Bottom? Retailers’ Lab-Grown Doubts
The NAD urged Agape to rectify this by including words such as “simulated” or “lab-grown” immediately before the words “diamond” or “stone,” with “equal conspicuousness so as to clearly disclose the nature and origin of the product and the fact that it is not a mined gemstone.”
Agape and the NDC were unavailable for comment on Sunday. In its advertiser statement to the NAD, Agape said it was “committed to accurate and truthful advertising, as recommended by NAD and as codified in the federal regulations and enforced by the FTC.”
India has introduced an import classification code solely for lab-grown rough diamonds, enabling the industry to keep better watch of synthetics entering the country.
The government has separated the Indian Trade Clarification (ITC) code for rough synthetic gemstones into diamonds and non-diamonds, the Gem & Jewellery Export Promotion Council (GJEPC) reported last week. The move will help organizations such as the GJEPC track the precise quantities of lab-grown diamonds coming into the market, explained Colin Shah, the council’s vice chairman.
Previously, all rough synthetic gemstones carried the same Indian import code — 71042000 — whether they were man-made diamonds or other stones. From now on, rough lab-grown diamonds will fall into 71042010, while other rough synthetic stones will be assigned 71042090. Trade data for the two categories is likely to be available starting in August, the GJEPC said. Natural rough diamonds will retain their code of 71023100.
ITC codes are unique numbers for each type of product, and are based on the international Harmonized System (HS) of codes. The government announced the change in last week’s Union Budget, following lobbying by the GJEPC.
“This will go a long way in strengthening the efforts of the council to monitor the two pipelines and maintain their integrity,” said GJEPC chairman Pramod Agrawal.
India already has the distinction for polished: Synthetic diamonds carry the ITC code 71049010, while other polished synthetic gemstones are labeled 71049090. However, until now, the GJEPC has chosen not to publish the official trade figures for synthetic diamonds in its monthly data release, instead providing one total for all synthetic polished gemstones, including diamonds, and an equivalent for rough. It’s in the process of changing its reporting methods, and will soon publicize the whole range of available data across rough and polished, it confirmed.
India is one of the first countries to keep close tabs on lab-grown trading, the GJEPC claimed. China already has a similar distinction for its import codes, while the European Union will adopt a Combined Nomenclature (CN) customs code for synthetic diamonds on January 1, 2020, the GJEPC added. Australia and Russia are likely to follow suit, it noted.
The budget — the country’s first since the reelection of Prime Minister Narendra Modi — also saw the introduction of an online service enabling small and medium-sized enterprises to obtain loans of up to INR 10 million ($146,000) within 59 minutes. The government will allocate INR 3.5 billion ($51 million) to subsidize interest repayments for companies of that size that are registered for the nation’s goods and services tax. The initiatives are open to a range of industries, including jewelry.
Additionally, the government will charge a 2% “tax deducted at source” on cash withdrawals exceeding INR 10 million ($146,000) to discourage cash payment for business purposes.
