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1、The Future of the Natural Diamond IndustryMay 2024in collaboration with De Beers GroupContents01 Executive Summary02 Introduction The Natural Diamond Value Chain05 Long-Term Fundamental Drivers Impacting the Diamond Industry Supply Drivers Primary Production Secondary Supply Value Chain and Stock Le

2、vels Demand Drivers Three Dynamics Influencing Diamond Demand Growth The Continuing Rise of Brands Lab-Grown Diamonds Desirability Among the Growing Middle Class in Asia The Impact of Recycling The Future of Demand25 Future Outlook for the Diamond Industry Long-Term Outlook Stress Testing the Outloo

3、k:Beyond the Most Likely Corridor Downsides to the Most Likely Industry Outlook Upsides to the Most Likely Industry Outlook28 Final ReflectionsTHE FUTURE OF THE NATURAL DIAMOND INDUSTRY 1Executive SummaryThe drivers of the natural diamond industry differ in the short and long term.The short-term out

4、look is driven by,among other factors,stock levels in the midstream value chain segments and retail propensity to restock before and after key selling periods.The long-term outlook(the focus of this report)is driven by supply and demand fundamentals.While demand conditions may remain uncertain in th

5、e short term,a more positive long-term industry outlook is supported by constrained primary supply,rising global affordability underpinning demand growth,and industry initiatives(for example,effective marketing and retailer collaborations)to reinforce the desirability of natural diamonds.This report

6、 looks at these fundamental drivers in turn,aiming to bring greater trans-parency to the complex set of factors affecting the natural diamond industry.Primary supply of natural diamonds is expected to decline by approximately 1%CAGR over the next ten years.Future production increases are unlikely to

7、 offset decreasing vol-umes from mines reaching the end of their productive life.Suppressed exploration budgets over the past decade,a scarcity of large new discoveries,and lengthy mine develop-ment timelines make it difficult to foresee significant new volume increases,although there is some potent

8、ial for brownfield expansion of cyclically viable supply if prices rise.Artisanal mining volumes are a relatively small share of supply volume.Beyond primary supply,recycled diamonds are expected to have limited supply impact in the next decade,contributing less than 10%of the supply of natural poli

9、shed diamonds.This overall constrained supply outlook provides positive stability for the natural diamond industry.Long-term demand for natural diamonds is driven by af-fordability and the desirability of diamonds relative to other jewelry,discretionary goods,or experiences.In the coming years,the c

10、ontinuing growth of global real GDP,wealth,and personal disposable income(PDI)is expected to drive overall affordability.Comparatively,desirability faces greater uncertainty over the coming decade,with three main dynamics shaping natural diamond demand:The continuing rise of brands,which is driving

11、growth in diamond jewelry and capturing a larger share of value in diamond jewelry sales LGD demand,including the timing and degree to which LGD adoption will peak within these ten years The relative desirability of diamonds versus gold,oth-er gemstones,and alternative discretionary spending(includi

12、ng experiences)among the growing middle class in AsiaA range of demand scenarios is possible across these dynam-ics.Taken together,a likely outlook sees annual demand growth over a ten-year period in the range of 2%to 4%CAGR.This outlook reflects growing GDP and PDI;sustained under-lying demand in t

13、he US;eventual differentiation between natural diamonds and LGDs as LGD prices and retailer mar-gins fall;a more moderate outlook for China;and the realiza-tion of strong growth in India.Given the instability of the past five yearswhich have seen increased demand for LGDs,the pandemic,the catch-up e

14、ffect after COVID restrictions eased,and a challenging 2023understanding the industry outlook requires a fundamentals approach:the likely outlook on many factors is not necessarily a continuation of momentum.This also means the natural diamond industry cannot stay idle.A positive demand outlook is a

15、lso driven by several industry initiatives.These include effective marketing to support category and industry collaborations that reinforce the desirability of natural diamonds among US consumers.They also include continued efforts to build desirability in Asia.We hope you find the report instructiv

16、e in understanding the long-term natural diamond industry outlook,particularly at this dynamic moment in time.The natural diamond industry navigated a challenging 2023.Demand was impacted by the bridal catch-up effect after COVID-19 restrictions eased,macroeconomic headwinds,and increasing demand fo

17、r lab-grown diamonds(LGDs),particularly in the US.In addition,short-term supply was affected by changes in midstream and downstream stock levels.This resulted in a weakening of the value of rough natural diamonds.2 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYThe Natural Diamond Value ChainThe diamond

18、value chain starts with the physical ex-traction of diamonds,followed by a series of value-add-ing processes including sorting,cutting,polishing,and finally retailing.(See Exhibit 1.)All segments create value and,in the aggregate,inform diamond jewelrys retail value.The value chain is globalized,wit

19、h different stages concen-trated in specific regions or countries.Upstream.The upstream steps of the value chain include the exploration and mining of rough diamonds.The largest diamond-producing countries include Russia,Botswana,Angola,Canada,South Africa,and the Democratic Repub-lic of Congo.1 Dia

20、mond mining can range from simple small-scale noncommercial artisanal mining to sophisticat-ed large-scale commercial operations.The two largest rough diamond producers account for approximately 60%of supply by value.1 Smaller producers comprise the re-maining share of production.Introduction1.Kimbe

21、rley Process;De Beers Group;BCG analysis,2024.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 3There are four methods for mining diamonds,including open-pit,underground,marine,and alluvial.Open-pit min-ing is the most common method.However,many open-pit resources are becoming depleted,and surface diamond

22、 resources are now becoming scarcer.As a result,mining companies are looking to more costly underground mining for future expansion.Midstream.Once rough diamonds are extracted,there are two rounds of sorting.First,they are sorted by industrial and nonindustrial grade,usually on site at the mine.Then

23、 they are transported to another location and sorted based on various characteristics such as size,color,and quality.This sorting is crucial for determining their potential value and the most suitable distribution channel.The sorting centers of the biggest producers are typically located in regions

24、of mining operations or close to customers;for example,in Botswana,India,Israel,the US,Belgium,and Dubai.Next,the sorted rough diamonds are cut and polished into a finished gem to enhance their appearance and value.This process requires skilled artisans and is labor-intensive,which adds to the final

25、 wholesale value of a polished dia-mond.Moreover,a significant portion of the rough dia-mond is lost during this stageon average,50%to 60%of its initial weight.2 India is the worlds largest center for cutting and polishing rough diamonds,particularly for small and medium-sized diamonds.It accounts f

26、or 90%(volume)of polished diamond manufacturing globally.3Sources:BCG analysis;expert interviews.Exhibit 1-The Natural Damond Value Chain Includes Extraction,Cutting,Polishing,and Retailing2.Essilux Group:Knowledge Base,2024.3.The Gem and Jewelry Export Promotion Council,“Indias Time to Shine in the

27、 Global Gold Trade,”2021.Explorationand Projects5HighMediumLowMedium1005,000(90%in india)10,000100,000UpstreamExplorationfor depositsMine and process rough diamondsSort by quality and valuationSell to traders and polishersSell to consumersSome retailers fully integrated from cutting stepProcess roug

28、h to produce polishedValue added,termed“R to P”Combine with other goods to create jewelry piecesDescriptionNumberof playersresponsible for 70%of revenueBarriersto entryMidstreamDownstreamRoughPolishedJewelrySorting,Valuation,and TradingCutting,Polishing,and TradingJewelry Design andManufacturingMini

29、ngJewelryRetail 4 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYCutters and polishers typically pay up front for rough invento-ries,often relying on debt financing to fund purchases.Fund-ing was historically supplied by international banks but has increasingly shifted to India,consistent with the growth

30、 of the midstream industry there.Conversely,businesses often sell polished goods on credit,usually offering terms of 30 to 60 days.4 Proficient inventory management is thus critical for sustaining financial viability.Cut and polished diamonds are then set into jewelry,which accounts for almost all d

31、iamond demand in value.The remaining diamonds are used for industrial applications.5 This stage involves design and craftsmanship to create finished products.Manufacturing takes place in a wide range of locations,from specialized hubs to local jewelers.Jewelry manufacturers do not normally own their

32、 own inventory of diamonds but rather work with either cut-ter-polisher-or retailer-owned stones.Downstream.The final stage of the value chain involves the sale of diamond jewelry to consumers.The sale price is typically informed by the polished diamond wholesale price,the cost of additional non-dia

33、mond content(such as pre-cious metals or other gemstones),retailer operating costs,and retailer margin.Retailers range from high-end brands to online platforms.Inventory levels required to fulfill retail orders have decreased over the past ten years as retailers have become more efficient at stock m

34、anagement,in addi-tion to an increase in the share of online sales.The major downstream consumer markets for diamonds are the US,China,and India,with the Gulf States and Japan making up the largest five markets.In 2023,the US account-ed for more than 50%of natural diamond polished whole-sale demand

35、globally,followed by China and India with a combined 25%share of global polished wholesale demand.6 Europes top four marketsthe UK,Germany,Italy,and Franceaccount for 8%of total demand-based on sales to consumers resident in each country.Globally,regions vary strongly in maturity and demand landscap

36、e.The US is mature,with high ownership and larger diamond sizes.Although China and India have a higher share of smaller diamond sizes,consumers demand higher clarity and color.In India,for example,more than 85%of polished wholesale demand has historically been for high-clarity stones.74.Rapaport,“Fr

37、om Crisis to Crisis,”2021.5.UBS,“Diamond 101,”2023.6.De Beers Group,2024.7.De Beers Group,India consumer study,2019.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 5The outlook for the diamond industry is influenced by a variety of factors and differs by time horizon.The short-term outlook is influenced

38、by midstream stock levels and midstream risk perception,as well as the pro-pensity of retailers to restock before and after key sales periods.In contrast,the long-term outlook is driven by the long-run equilibrium of supply and demand,which is based on consumer demand and expected return on supply i

39、nvestments.This report focuses on the supply and de-mand fundamentals that impact the long-term outlook.Supply DriversUnderstanding supply in the diamond industry requires a broader perspective than production alone.It is essential to consider the entire supply chain,recognizing that inventory decis

40、ions at various stages influence the final supply available to the downstream,particularly in the shorter term.Long-Term Fundamental Drivers Impacting the Diamond Industry6 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYDiamond supply is predominately made up of newly mined stones,referred to as the“prim

41、ary supply.”Some second-ary supply comes from existing stones reentering the value chain through diamond recycling.Primary supply is determined by the underlying resource attributes and lifespan of the key diamond-producing min-ing deposits.It is also affected by mining companies deci-sions about ex

42、tending the lifespan of mines and investing in new(greenfield)or existing(brownfield)projects,as well as in new technologies that improve mining efficiency.Secondary supply is from pre-owned polished diamonds,often referred to as“recycled diamonds.”While the majori-ty of recycled jewelry pieces are

43、resold“intact,”in some cases set diamonds can be removed and reenter the dia-mond value chain,to be“sold as new”in freshly crafted jewelry.In this case,diamonds are used either in their original state or after being repolished or recut.These augment the natural polished diamond supply but repre-sent

44、 a small percentage of the total supply.Primary ProductionLong-Term declining production The largest two diamond producers,De Beers and Alrosa,account for roughly half of the primary supply in terms of volume.In 2023,they contributed 25%and 27%,respective-ly,of the approximately 130 million carats(M

45、ct)volume globally.8 In terms of value,De Beers Group holds a larger share at 33%,compared to Alrosas 25%8,attributable to its greater relative production of larger-carat and higher-quality diamonds.The remaining share of supply is fragmented across several smaller producers and artisanal mines.Acro

46、ss this industry landscape,annual supply volume has fallen since 2006,when production peaked around 160Mct.Production exceeded 150Mct again in 2017,but fell to 129 Mct in 2023.Annual global production is anticipated to fall to between 110 Mct to 120 Mct by 2033,9 as future produc-tion increases are

47、unlikely to offset the decreasing volumes from mines reaching the end of their productive life.(See Exhibit 2.)Catocas Luele project in Angola,opened 2023 and forecasted to yield around 628 Mct over 60 years,is the only major new mine entering into commercial produc-tion this decade.10The supply of

48、diamonds takes place on a global basis,with the provenance becoming more important.Immediately following Russias invasion of Ukraine,the US banned imports of all sizes of diamonds that came directly from Russia.In 2024,the G7 countries are implementing new sanctions in phases,by size of diamond,from

49、 January through September.The sanctions are expected to cover all Russian diamonds and diamond jewelry,both directly and indirectly imported,of greater than 0.5 carats.11 In addition,global brands also self-imposed their own bans on both the direct and indirect supply of all sizes of Russian diamon

50、ds.These actions banning direct and indirect supply are ex-pected to have a greater impact than the initial direct bans.New greenfield sites are unlikely to contribute any signifi-cant upside to the current ten-year supply forecast.Mine exploration budgets are heavily suppressed and have fallen to 2

51、0%of 2007 levels:12 approximately$200 million in 2023 versus approximately$1 billion in 2007.In addition,lengthy mine-development timelines will prevent significant volume increases over the next ten years,even if diamond values increase.For example,the Luele mine was discovered in 2013 but producti

52、on did not start until 2023.Despite this long-term outlook for greenfield sites,supply elasticity from existing mines based on prevailing dia-mond demand is possible.Cyclical supply from mines higher up the diamond cost curve is more sensitive to fluctuations in demand.Periods of depressed demand of

53、ten result in supply pauses(sometimes permanently)from such mines.Conversely,positive demand conditions increase the financial viability,resulting in(re)opening or life-extension projects.8.De Beers Group;BCG analysis,2024.9.Kimberley Process;BCG analysis,2024.10.Reuters,“Angolas New Diamond Mine Op

54、ens Against Backdrop of Weak Demand,”2023.11.US Treasury;European Commision,2023.12.S&P Capital IQ,2024.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 7For this reason,the currently depressed demand environ-ment has put downward pressure on supply.More mines are suspending production or shut down earlie

55、r than expected(for example,De Beerss Snap Lake mine paused production in 2015 and began active closure in 202213).A continued negative price outlook could drive additional declines in supply as more projects face delays or are discontinued due to low financial viability.Conversely,a potential susta

56、ined positive price outlook could promote some cyclical supply with higher operation-al capability to be maintained.This could potentially re-sulting in an overall flatter supply forecast.Secondary SupplyRecycled Diamonds Maintain a Small Share of Volume Recycled diamonds have always contributed to

57、the natural polished diamond value chain,albeit at a low level relative to the primary polished supply.Recycling begins when diamond jewelry owners sell or trade in their items for various reasons,such as not wanting inherited pieces,a change in preferences,or financial necessity.The jewelry can the

58、n be directly resold as pre-owned vintage pieces(especially if it is branded)in the secondhand sector,by-passing the upstream and midstream natural diamond value chain.Alternatively,the metal in the jewelry can be melted down and the diamonds“sold as new”in freshly crafted jewelry,either in their or

59、iginal state or after being repolished or recut.This augments the natural diamond supply(but represents only a small percentage of total supply).(See Exhibit 3.)Sources:Kimberley Process;De Beers Group;BCG analysis.Note:Mct=million carats.Exhibit 2-Modest Decline in Primary Supply of Natural Diamond

60、s Expected over the Next Ten Years13.De Beers Group,“Victor and Snap Lake Mines Enter Final Stages of Closure,”2023.Global rough diamond production volume(Mcts)2001501005002014201520162017De Beers GroupAlrosaRio TintoNew minesLife extentionsExisting minesDRCAngolaOther2018201920202021202220232024202

61、5202620271%202820292030203120322033HistoricalForecast8 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYNon-inheritance-related diamond recycling,typically stem-ming from changes in preference or life events such as divorce or financial necessity,is estimated to account for approximately 80%of recycled dia

62、mond volume today.Given that no significant changes in the sale and purchase rates of used diamond jewelry are anticipated,these non-inheritance recycling drivers are likely to persist and continue to fluctuate with the price of diamonds,albeit with a limited incremental impact on the long-term supp

63、ly development through to 2033.Inheritance,on the other hand,will grow as the initial generations who owned dia-monds age.For instance,in Japan,individuals over age 60 possess more than half of the countrys diamonds;in the US,the first generation of diamond engagement rings(DER)at scale(the generati

64、on where 50%brides received DER)could be inherited in the next 20 years,driving an increase in the inheritance-based recycling volume.14Yet,the proportion of diamonds removed from recycled jewelry and sold“as new”has steadily declined in recent years(compared to recycled pieces being sold“as is”),fr

65、om approximately 60%of the total recycled jewelry PWP value in 2015 to approximately 30%in 2021.This trend is expected to extend into the future,albeit at a slowing pace,thus limiting the share impacting the dia-mond supply chain.(See Exhibit 4.)The increased focus on vintage pieces is driven by buy

66、ers and sellers alike.Sellers can often capture more value from vintage jewelry than removed stones.Reintroducing diamonds into the value chain reduces their value by 30%to 40%,15 owing to costs associated with the dealer margin,melting and logistics,testing and proving authenticity,and recutting or

67、 polishing.Once the stones enter the market,they must compete on price with newly mined diamonds.In addition,unlike with gold,there is no way to trade recycled stones and a lack of transparency on the price of recycled stones.Buyers,on the other hand,increasingly value the unique design,affordabilit

68、y,and sustainability aspects offered by vintage jewelry.This increases the value of vintage jewelry com-pared to that of pure recycled material.Finally,the trend is supported by an increasing number of online consumer-to-consumer platforms that make trading of secondhand vintage jewelry simpler.Thes

69、e channels are highly sought after by vintage jewelry shoppers.Source:BCG analysis.Exhibit 3-Pre-owned Diamond Jewelry Can Reenter the Value Chain in a Variety of Ways14.De Beers Group;Japan Ministry of Finance Trade Statistics;BCG analysis,2024.15.Paul Zimnisky,“Recycling Could Save the Natural Ind

70、ustry,”2019.Jewelry pieceSold ortraded inRecut andpolishedRe-entry into diamond supply chainLeftintactReasons to sell Inheritance Financial need Change of preference Divorce OtherPre-owned diamond jewelryDiamond separated from frame materialVintage jewelry(piece remains intact)New jewelry,with recyc

71、led as new stoneNew jewelry,with recycled as new stoneDiamondTHE FUTURE OF THE NATURAL DIAMOND INDUSTRY 9Overall,the impact of recycled diamonds on supply in terms of PWP value is expected to remain stable,contributing less than 10%of the supply of natural polished diamonds.Total recycled diamond vo

72、lume is forecasted to grow at a CAGR of approximately 2%through to 2033,mostly driven by an increase in inheritance across mature markets,as well as an overall larger global“installed base”of diamonds to feed recycling going forward.However,there will be a decreasing share of diamonds removed from t

73、heir settings and reenter-ing the value chain compared to pieces resold on used markets as vintage jewelry.This dynamic is reflected in the supply forecast in this report.Value Chain and Stock LevelsStable Midstream inventories expected to remain,while efficiency reduces Downstream inventory Natural

74、 diamond inventories are held across all stages of the diamond value chain at varying levels.Inventory man-agement dynamics directly influence diamond price forma-tion in the short term by impacting the immediate supply availability.Midstream and downstream inventory levels are particularly relevant

75、 as demand flows up through the value chain.Sources:De Beers;BCG analysis.Exhibit 4-Share of Vintage Sales out of All Recycled Diamond Pieces Forecast to Increase68%32%74%26%24%20232033Out of all recycled diamond pieces:30%of sold pieces are added back into the supply chain as new,removed from their

76、 current settingShare trending downDiamonds sold as used vintage diamond jewelryDiamonds sold“as new70%of sold pieces are resold on used markets as vintage jewelry(especially branded)or stand-alone stonesShare trending up10 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYMidstream.In the short term,midstr

77、eam inventories fluctuate,largely driven by prevailing market conditions,short-term views on the market outlook,and financing.Longer term,structural midstream inventory levels are dictated by the need to manage stock for operational pur-poses.Although efficiency and scale gains in the midstream have

78、 generally reduced stock levels from those observed in the early 2000s,lead times for processing and sales require cutters and polishers to generally maintain a minimum inventory level.However,this floor is occasionally breached in very sharp demand-recovery scenarios.Downstream.Historically,retaile

79、rs have held structurally higher inventory levels than midstream players to ensure that a wide range of products are available to consumers.However,the growth of more efficient major brands and retailers and the rise of online retail have reduced stock-to-sales ratios,albeit at a slowing rate.While

80、stock-to-sales ra-tios could continue to decline,they are increasingly nearing their technical inventory floor(for example,approximately 90 days for major brands),absent a fundamental change in downstream industry structure.Demand DriversDemand for diamonds over the long term is influenced primarily

81、 by affordability,which is closely linked to key eco-nomic fundamentals such as the growth of GDP and PDI.Additionally,the desirability of diamonds,both within the jewelry sector and relative to other nonessential goods and experiences,plays a significant role.Historical data shows a close correlati

82、on between the de-mand for luxury goods,including diamonds,and real GDP and PDI.Affordability will continue to be supported in the long term by GDP and PDI expansion.However,a closer examination by country reveals a more nuanced picture.In the US,diamond demand has recently been somewhat stronger th

83、an PDI growth would indicate.The natural diamond sector was notably robust after COVID-19 restirctions eased,benefiting from a rebound in weddings(a 12%increase in 2022 over the long-term average16)and a heightened emphasis on emotional gifting and self-reward.Conversely,in China,natural diamond dem

84、and has not kept pace with PDI growth.The countrys share of global diamond polished wholesale demand increased from 4%in 2000 to a peak of 18%in 2015 but receded to 12%in 2022.17Beyond the economic fundamentals,diamonds desirability among consumers is strong relative to alternative goods.However,dia

85、monds face increased competition within the jewelry sector and from other discretionary goods and experi-ences(for example,leather goods,travel,and technology).(See Exhibit 5.)In the US,consumer analysis shows that diamonds desir-ability remains high within the broader competitive set.However,their

86、desirability within the jewelry industry has decreased over time.(See Exhibit 5.)Natural diamond demand has reduced following the entry of LGDs.In China,gold retains the highest desirability,with its popularity further increasing since 2020.In India,natural diamonds have surpassed gold in consumer d

87、esirability.1816.Wedding Report:Covid-19 Wedding Market Update,Global,2021.17.De Beers Group data,2024;BCG Analysis,2024.18.De Beers Diamond Acquisition Study:US 2021 and 2023(18,000 respondents),China 2023(10,000 respondents),India 2023(9,000 respondents).THE FUTURE OF THE NATURAL DIAMOND INDUSTRY

88、11The future trajectory of luxury goods,including diamonds,is increasingly influenced by millennials and Gen Z.By 2026 they will represent approximately 75%of the luxury goods market.19 These younger consumers have a higher average spend per person.They also prioritize innovation,brand visibility,an

89、d sustainability in their purchasing decisions;and are more open to adopting new ownership modelsfor example through renting or buying secondhand luxury items.20The regional and generational differences underscore the importance of understanding the specific growth drivers influencing diamond demand

90、 beyond macroeconomic factors.19.BCG Fashion&Luxury market study,Global,2023.20.BCG True-Luxury Global Consumer Insight Survey(12,000 respondents across 12 countries),2023.Sources:De Beers Diamond Acquisition study:US 2021 and 2023,India 2022,China 2022.1Survey question:If money was no object,which

91、one of these items would you most like to receive as a gift or would you most like to buy for yourself?Exhibit 5-Desirability for Diamonds Remains High,but Faces Competition with Jewelry and Other Discretionary GoodsMost desired gift,money no object1%of respondentsMost desired self-purchase,money no

92、 object1USNatural diamond desirability has increased,but holidays abroad remain the most desirableChinaGold remains the most desirable,and popularity has increased further since 2020IndiaNatural diamonds are the most desired and gold desirability has fallenHolidayabroad2520151311125545Weekendgetaway

93、Natural diamondjewelryPC/laptop/tabletOtherprecious stonejewelryHolidayabroad17149106107675WeekendgetawayNatural diamondjewelryPC/laptop/tabletOther precious stonejewelry16Goldjewelry2211 11687766HolidayabroadNatural diamondjewelrySmartphoneWeekendgetawayGoldjewelry1421911885675HolidayabroadSmartpho

94、neNatural diamondjewelryLuxurywatchNatural diamondjewelry713271676125Other precious stonejewelryGoldjewelleryLab-growndiamondjewelrySmartphoneNatural diamondjewelry51238427645Other precious stonejewelryGoldjewelryLab-growndiamondjewelryPlatinumjewelry201920222020202220182022Diamond jewelry desirabil

95、ity rank(2022)#1#3#3#4#3#1There is a growing consumer emphasis on brand and design in jewelry selections,particularly in the US.The growth of brands is expected to continue driving overall diamond jewelry growth.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 13 Polished Wholesale PricePolished wholesale

96、 price(PWP)is the wholesale value of the diamond content in a piece of diamond jewelry sold at retail.It is a measure of the value of the natural diamond industry.Diamond jewelry value and PWP value do not necessarily move together as retail prices tend to be“stickier.”Unlike other commodities,which

97、 typically measure demand in terms of volume,total demand for diamonds is measured using PWP.Three Dynamics Influencing Diamond Demand GrowthThe demand for natural diamonds,in terms of polished diamonds wholesale price(PWP),is projected to increase at a CAGR of 2%to 4%nominal from 2023 to 2033.(See

98、Exhibit 6.)This growth,and its potential upsides and down-sides,will be shaped by three principal dynamics over the next decade:Exhibit 6-The Most Likely Range for Annual Demand Growth fom 2023 to 2033 Is CAGR 2%to 4%Natural diamond PWP($billions);historical actuals 20162023;forecast 202420332000200

99、42008Sustained demand growth,with temporary dip post-2008 financial crisis(0017)LGD demand andeasing of COVID restrictions(1823)LGD differentiation(2427)Return to long-term growth(2833)201220162020202420282032HistoricalForecast3%4%0%1%1%3%2%4%Sources:De Beers Group;BCG analysis.Note:PWP=polished who

100、lesale diamonds.The continuing rise of brands,which is driv-ing growth in diamond jewelry and capturing a larger share of value in diamond jewelry sales.LGD demand,including the timing and extent to which LGD and natural diamonds will differ-entiate within these ten years.The relative desirability o

101、f diamonds versus gold,other gemstones,and alternative discre-tionary spend among the growing middle class in Asia.14 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYThe Continuing Rise of BrandsThe branded segment will continue to drive diamond growth,capturing a larger share of value in diamond jewelry

102、sales Branded jewelry has been a key driver of global luxury jewelry growth,with 8%CAGR over the last five years compared with a 1%decline for unbranded.21(See Exhibit 7.)The branded segment will likely capture more than 50%of future revenue from 2023 to 2033.This growth is sup-ported by significant

103、 marketing investments from leading brands.For example,the marketing spend of the top four brands as a percentage of sales rose from 8%in 2006 to 12%in 2022.In addition,there is a growing consumer emphasis on brand and design in jewelry selections.Among Chinese consumers in 2022,for instance,92%of d

104、iamond jewelry acquisitions were branded(based on pieces),with Chinese brands accounting for almost four out of five acquisitions.22 In the US,the share of branded jewelry acquisition in 2021 was highest among younger generations:76%for Gen Z and 72%for millennials versus 64%for Gen X and 38%for bab

105、y boomers.23The growth of brands is expected to continue driving overall diamond jewelry growth.However,this may affect the dia-mond content used in jewelry.To maintain their higher profit margins,brands often use fewer diamonds in their pieces,with diamonds serving as high-end price anchors.To full

106、y capitalize on the preference for branded jewelry,the dia-mond industry needs to enhance the diamond content of branded offerings,ultimately resulting in higher PWP value as a share of the total diamond jewelry industry.21.BCG Fashion&Luxury market study,Global,2023.22.De Beers Diamond Acquisition

107、Study:China 2023(10,000 respondents),US 2021 and 2023(18,000 respondents).23.De Beers Diamond Acquisition Study:China 2023(10,000 respondents),US 2021 and 2023(18,000 respondents).Source:BCG 2023 Fashion&Luxury industry study;BCG analysis.Exhibit 7-Historic Growth in Jewelry Fueled by Brand GrowthTr

108、end Is Expected to ContinueLuxury jewelry market split between branded and unbranded segments($billions)201895100510100105303513514017017525302023BrandedUnbranded20282033+8%1%+4%+9%+4%+8%THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 15Lab-Grown DiamondsThe extent and timing of LGD differentiation will

109、depend on the trajectory of future price changes and the positioning of LGDs and natural diamonds LGDs have the same chemical,physical,and optical proper-ties as natural diamonds,but are created in a controlled laboratory environment using high pressure high tempera-ture(HPHT)and chemical vapor depo

110、sition(CVD)methods.In contrast,natural diamonds are recovered after forming naturally below the earths surface over billions of years.Both HPHT and CVD methods are commonly used to pro-duce LGDs.However,CVD is becoming more popular for producing gem-quality synthetic diamonds,while HPHT is used more

111、 for industrial applications.LGDs have been seen as a significant challenge to the natural diamond industry over the last five years(albeit during a period in which the pandemic also disrupted demand),with some uncertainty over the future of LGDs within the diamond jewelry sector.The supply of LGDs

112、has surged over recent years,increas-ing more than tenfold since 2018.24(See Exhibit 8.)Supply growth has been fueled by technological innovations,lower barriers to entry(for example,costs of CVD reactors have significantly decreased)and supportive government poli-cies in India.Prior to 2020,LGD pro

113、ducers enjoyed considerable profits due to low marginal production costs(around$150 per carat)and high wholesale prices(around$3,000 per car-at).25 This motivated substantial capital expenditures on LGD reactors,which spurred rapid supply growth and the development of new technologies.24.Paul Zimnis

114、ky,“What a Mature Lab-Grown Diamond Jewelry Market Could Look Like,”2022.25.Edhan Golan data,2024;BCG analysis,2024.Sources:De Beers Group;Paul Zimnisky;Edahn Golan;BCG analysis.Notes:LGD=lab-grown diamonds;Mcts=million carats;e=estimate.1Excluding melee diamonds.Exhibit 8-LGD Supply Has Rapidly Gro

115、wn over 10 x in the Past Six Years,Driven by Technological Innovation and Government Support,While Wholesale Prices Declined by over 90%,Nearing Marginal Cost of ProductionGlobal LGD supply(Mcts)1Marginal cost of production($/ct)LGD wholesale price and marginal cost of production($/ct)20300250150502

116、0010020181.42.94.96.710.512.915.9201920202021202220232024e161284010 x2018202020192021202320227,5006,0004,5003,0001,500090%0.5 carat1 carat2 carat0.5 carat1 carat2 caratAverage marginal cost of production16 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYHowever,in recent years,profit margins have narrowed

117、.Marginal production costs have decreased to less than$100 per carat,while wholesale prices have fallen to approximate-ly$200 per carat.26 As a manufactured product,there are no limitations to the supply of LGDs beyond the economics of the business model(in contrast to the supply of natural diamonds

118、).Despite narrowing profit margins,supply growth has continued,bolstered by government support in India(including subsidies,tax cuts,and discounted energy prices),the recoupment of initial investments,and volume growth compensating for unit margin decline.Driven by the decline in the wholesale price

119、s of LGDs,some producers are exploring new strategic directions:WD Lab Grown Diamonds,the second largest US LGD producer and known for high-quality stones,filed for bankruptcy protection in 2023 and has since pivoted to manufacturing industrial-grade LGDs.27 Diamond Foundry,a major US producer accou

120、nting for around 20%of the global LGD output,has diversified from jewelry to industrial applications,notably in the semiconductor sector.28 Lusix,an Israeli LGD producer,has recently had to“rethink and recalibrate”its strategy.Originally focused on lab-grown rough,it is now moving downstream to prov

121、ide premium polished stones and looking to develop high-tech applications for synthetic diamonds.29Although the high profits LGD producers once had have declined,current wholesale price levels continue to deliver reasonable margins,particularly for larger producers in India,where production continue

122、s to grow.With suppliers still incentivized to increase production even if wholesale prices continue to decrease,continued supply growth is expected,which will support further price competition.Demand for LGDs has accelerated,now accounting for more than 10%of the global combined natural and syn-the

123、tic diamond jewelry demand in terms of value.30 This rise can partly be attributed to incentives for retailers to switch customers from natural diamonds to LGDs,as the margin on selling an LGD was initially higher than for a natural diamond.In promoting LGDs,retailers highlighted the opportunity to

124、buy a larger,higher-quality diamond at the same or lower price point(the retail discount for a 1.5 carat LGD relative to a natural diamond increased from 40%in 2018 to 80%as of Q1 202431).Some retailers also emphasized LGDs as a sustainable purchase.Owing to these retailer incentives and the resulti

125、ng growth in aware-ness among consumers,LGDs have affected the demand for natural diamonds.To date,the LGD category is primarily US-centric,with the country accounting for approximately 75%of LGD retail sales.32 In the US,perceived value for money has bolstered demand,particularly among younger cons

126、umers who have traded up to buy a bigger or higher-quality stone for the same budget.The highest demand impact has been in the bridal segment.LGDs represent more than 20%of dia-mond engagement ring demand value,compared with approximately 10%of the total diamond jewelry demand.33 The retail conversa

127、tion has been critical to converting US consumers from natural diamonds to LGDs.Signets CEO stated in March 2024 that“we see some customers com-ing and wanting a lab-created because they have realized that they can get a bigger carat size for their same budget.And then we have some customers,the big

128、gest percentage,who come in looking for the advice of our expert jewelry consultants to really help them make that choice.”34 This is supported by research indicating that more than 70%of decisions to buy LGD happen in stores.35Conversely,in China,LGDs have not gained the same traction as in the US.

129、This reflects the fact that LGDs have a low resale value and Chinese consumers see diamonds as a source of wealth for future generations.In addition,LGDs have seen insufficient marketing and distribution scale,with most being offered and sold online only.26.Edhan Golan data,2024;BCG analysis,2024.27

130、.Financial Times:“US Lab-Grown Diamond Producer Files for Bankruptcy,”2023.28.Diamond Foundry,“Worlds First Single-Crystal Diamond Wafer,”2023.29.JCK,“Lusix,Much-Touted Lab-Grown Diamond Producer Shifts Strategy,”2024.30.Edahn Golan,“The Case for Shifting Product Mix Away from LGD and Back to Natura

131、l Diamonds,”2024.31.Paul Zimnisky,“Sample of Man-Made Diamond Prices Relative to Natural,”2024.32.DNB Markets;Pandora research report,2024.33.Edahn Golan,“The Case for Shifting Product Mix Away from LGD and Back to Natural Diamonds,”2024.34.De Beers Group,US Retail Sentiment Study.Based on retailers

132、 that stock LGD,Q4 2023.35.Signet Investor Presentation and Q&A,March 2024.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 17In India,LGD penetration remains marginal.Gift-givers at weddings,the primary consumers of diamond gifts,tend to buy diamonds for their perceived cross-generational value and bette

133、r resale prospects.Currently,LGDs are only dis-tributed in independent retailers or sold online.However,awareness is increasing,partly due to the growth of LGD manufacturing in India.Further penetration of LGDs in India will likely depend on the perception of natural dia-monds as a source of cross-g

134、enerational value.Although LGDs initially had attractive margins for retailers,incentives have been changing.The absolute achievable margin on LGDs has fallen,owing to declines in LGD retail prices.Since 2018,increased supply and a continual drop in wholesale prices have led to steep retail price re

135、ductions for LGDsapproximately 70%since 2018.36 Larger mid-market retailers,such as Signet,actively participated in the LGD market,accelerating penetration.More recent-ly,other mass channels have emerged,such as Walmart.In order to gain market share,several retailers aggressively reduced prices of L

136、GDs.Other retailers followed suit to compete,driving the average LGD retail price down.As a result,to achieve comparable absolute margins to selling a natural diamond,retailers now must persuade consumers to buy ever larger LGD stones.At the same time,consum-ers are becoming increasingly aware that

137、not all LGDs represent a sustsainable purchase and have not held their value over time.At the higher end of the diamond market,luxury brands have not adopted LGDs at scale.The top four luxury jewel-ry brands continue to support and exclusively use natural diamonds and openly state this to consumers.

138、For exam-ple,LVMHs luxury jewelry brands continue to promise and promote naturality.Some fashion houses have experiment-ed with the incorporation of LGDs in select lines,often through the use of different colors or shapes to position LGDs differently from natural diamonds.Looking ahead,retail prices

139、 for LGDs are projected to decrease further,although the rate of decline is slowing.Deepening discounts support even greater differentiation between LGDs and natural diamonds.The extent and timing of LGD differentiation will depend on the trajectory of future price changes and the relative positioni

140、ng of LGDs and natural diamonds,including the ability to detect the differences between them.These factors will affect retailer margins and,in turn,influence their incentive to promote LGDs and shape consumer perceptions of LGD desirability compared with that of natural diamonds.Retailer Incentives.

141、More than 70%of consumer conversion to LGDs over natural diamonds occurs in-store,37 with retailers incentivized by the higher profit margins.As the retail prices of LGDs continue to fall and wholesale prices level off near the marginal costs of production,the incentive for retailers to promote natu

142、ral diamonds is expected to increase.In the past,even as retail prices decreased,retailers still saw growth in absolute profits as consumers traded up and opted for LGDs with higher clarity and carat sizes for the same original budget.This was also promoted by the over-all increase in LGD sales volu

143、mes.Year-over-year LGD jewelry sales and gross profit have been on the rise from 2018 to 2023.However,in the US as of December 2023,the pace of decline in retail prices sur-passed the rate of volume growth,leading to a decrease in revenue from LGD loose stones compared to the previous year.This decl

144、ine has continued for four consecutive months.In March 2024,retail sales of loose LGD by value fell by 5.6%year over year.38The average gross margin for loose LGDs has increased from approximately 50%in 2021 to approximately 60%to 65%today,39 which is higher than for mined diamonds(approxi-mately 35

145、%to 40%).40 However,the retail prices are much lower for LGDs than natural diamonds,resulting in a lower unit gross profit value of$1,000 for a 1-to 1.49-carat loose LGD in 2023,compared to more than$2,600 for a loose natural diamond of the same size.36.DNB Markets,based on surveys of prices by cate

146、gory sampled from prominent online diamond retailers,excluding Lightbox,2024.37.Signet Investor Presentation and Q&A,March 2024.38.Tenoris,“March Sales Weak,LGD Revenue Issues Continue,”2024.39.Edahn Golan,“The Case for Shifting Product Mix Away from LGD and Back to Natural Diamonds,”2024.40.Tenoris

147、 market comments,2023.18 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYDespite retail price declines,retailers have been able to increase their gross profit through consumers trading up to larger sizes of LGDs.For example,purchasing a 2-carat LGD instead of a 1-to 1.49-carat natural diamond.However,in 2

148、023,driven by accelerated retail price reduction,the gross profit for a 1-to 1.49-carat loose natural diamond exceeded a larger 2-carat LGD by over$600.41 Therefore,larger-carat sizes will be needed to maintain the same unit gross profit value for LGDs.With the continuing decline in retail prices,fr

149、om 2024 on-ward,retailers now need to trade consumers up to a 3-carat and above LGD in order to achieve the same gross profit as a 1-to 1.49-carat loose natural diamond.(See Exhibit 9.)With LGD retail prices continuing to fall given oversupply,the trade-up required increases to very large sizes(for

150、example,5 carats)by 2026.Yet there are indications that consumers willingness to trade up is limited.Currently,the maximum size that consumers typically trade up to is 2 to 3 carats.In 2023,the average stone size purchase for lab-grown diamond engagement ring pieces was 1.9 carats.42 The extent of s

151、ize trade-up is constrained by both budget and limits on con-sumer preferences for very large stones.For lower-priced diamond simulants(lab-grown moissanite,white sapphire,or cubic zirconia),the sub-4-carat range is the most popular,with the risk that sizes above 3 to 4 carats could be seen as fake.

152、43 Given this margin decline of LGDs and limited further compensation through consumers trading up their diamond size,a retailers incentive to focus on selling LGDs over natu-ral diamonds will decrease.Consumer Perceptions.Demand for LGDs is driven by consumers attraction to acquiring a larger or hi

153、gher-clarity diamond at a lower price point.Consumer interest in LGDs remains relatively modest(approximately 25%of women in the US and 5%in China),but it is rising in the US44 and India(particularly for self-purchase).45 The rate of LGD unit sales growth continues to climb,although the pace is slow

154、ing.46Exhibit 9-In 2023,the Gross Profit for a 1-to 1.49-Carat Loose Natural Diamond Exceeded a Larger 2-Carat LGD by over$600201920212023Trade-upTrade-upIn future,further size trade up will be needed to maintain the same gross profit for LGDsAverage gross profit(loose)1($000s)2462.62.01.11.51.91.61

155、.02.03.44.02.62.6011.49ctNDAvg.LGDsize ct11.49ctLGD2ctLGD11.49ctND11.49ctLGD2ctLGD11.49ctND11.49ctLGD2ctLGD+1.5+0.80.6Sources:ERA independent US Point-of-Sales data;BCG analysis.Note:ND=natural diamond;LGD=lab-grown diamond.1Loose round D-I FL-SI.41.ERA independent US Point-of-Sales data,2024;BCG an

156、alysis.42.De Beers Group data,2024;BCG analysis.43.Tenoris,as per DNB markets;Pandora research report,2024.44.De Beers Group,US Retail Sentiment Study.Based on retailers that stock LGD,Q4 2023.45.De Beers Diamond Acquisition Study:US 2021 and 2023(18,000 respondents),China 2023(10,000 respondents),I

157、ndia 2023(9,000 respondents).46.Edahn Golan,“The Case for Shifting Product Mix Away from LGD and Back to Natural Diamonds,”2024.The extent and timing of lab-grown diamond(LGD)differentiation will depend on the trajectory of future price changes and the positioning of LGDs and natural diamonds,as thi

158、s will affect retailer margins and therefore the incentive to promote LGDs and shape consumer perceptions of LGD desirability compared with that of natural diamonds.20 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYMany industry stakeholders recognize the differing attri-butes of the LGD and natural diam

159、ond categories.For example,the price points are now recognizably distinct,the two have different perceptions of retained value,and there is an infinite supply of LGDs compared to a more lim-ited supply of natural diamonds.In addition,LGDs are driving new purchase occasions within the fashion jewelry

160、 segment and there is increasingly differing brand position-ing and channel separation.Notably,leading luxury brands are not using LGDs in their jewelry.As these attributes continue to contrast,consumer perception could shift,leading to a differentiation between LGDs and natural diamonds as distinct

161、 categories,with LGDs seen as more of a fashion jewelry purchase and natural diamonds re-maining within fine jewelry.Given consumer interest in LGDs is primarily occurring in-store,a key consideration will be whether major jewelry retailers continue to sell both categories in the same store environm

162、ent.Greater differentiation between natural diamonds and LGDs may be most pronounced in the bridal segment,where the traditional value of natural diamonds may contrast more distinctly with the perceived attributes of LGDs.The long-term success of LGD jewelry relative to natural diamonds is likely to

163、 be influenced by the marketing strat-egies employed by both sectors and also the ability to detect the difference between LGDs and a natural dia-mond.There is an opportunity for the natural diamond industry to enhance the desirability of their mined stones over LGDs,especially in the bridal and gif

164、ting segments.For example,the industry could emphasize the rarity and unique nature of natural diamonds,as well as their ethical and environmentally sound sourcing credentials and the socioeconomic development benefits from natural dia-mond mining.Such factors are increasingly significant to millenn

165、ial and Gen Z consumers,who prioritize sustain-ability and ethics in their purchasing decisions.Desirability Among the Growing Middle Class in AsiaChina continues to favour gold,while in India the desirability of diamonds and other gem jewelry is increasing The future success of diamonds in Asia is

166、closely tied to several key factors:Growth of GDP and PDI.The jewelry sector in India,for instance,is expected to expand by approximately 10%,propelled by an expanding middle class benefiting from increased per capita income(PDI per household forecast to increase 130%by 203347)and a growing number o

167、f higher-income households.Desirability.Although consumers in China and India have historically favored gold,recent trends show a divergence in consumer preferences between the two nations.47.Oxford Economics,Global,2024.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 21In China,gold has continued to per

168、form strongly over dia-monds.From 2018 through 2022,gold ownership in China increased by approximately 30 percentage points,while diamond ownership remained flat.48 This trend is likely driven by economic uncertainty,golds established reputa-tion as a secure investment asset,49 and record prices,ree

169、s-tablishing it as a desired store of value with appreciation potential.According to 2023 surveys by the Peoples Bank of China,household saving intentions remained near-record highs,50 favorably impacting gold.Consequently,in 2023,China surpassed India to become the largest gold jewelry market globa

170、lly in terms of volume,with annual gold jewelry demand of 630 tonnes versus India at 560 tonnes.51 In main-land China and Hong Kong,pure gold remains the most favored jewelry.This trend is expected to persist amid con-tinuing economic uncertainty.In addition,Gen Z consumers are more attracted to gol

171、d jewelry compared to other age groups.And younger Chinese consumers continue to pur-chase gold jewelry products as a symbol of Chinese tradition and heritage.Further,they perceive gold as having enduring investment value preservation.52In contrast,India has seen an increase in the purchase of gem j

172、ewelry compared with plain gold.This has been par-tially driven by gold demand decline,given higher gold prices and lower investment relevance among younger generations.Although the 18-to-24 age group in India ac-knowledges golds long-term value,they do not regard it as the most desirable choice.53

173、This is especially true among urban young women,who feel less emotionally connected to gold than older generations.However,the more prominent driver has been the accelerat-ed desirability for modern jewelry designs among the young-er,Western-influenced generation.Compared to 2018,Indi-an consumers i

174、n 2022 spent almost three times more on diamond jewelry,rising from an average of approximately$560 to approximately$1,500.54 Millennials and Gen Z accounted for more than 75%of diamond jewelry share value.55 Looking forward,with gold prices expected to remain elevated and the younger population gai

175、ning purchasing power,this trend is likely to continue.Retail Strategies.The push for diamonds over gold by retailers is likely to be important in driving overall demand in the region.In India,local brands and retailers are partic-ularly important in the purchase of jewelry,with interna-tional brand

176、s having less impact.Footprint expansion plans,combined with target product mix by major local retailers,will likely influence whether gold,diamonds,or other gemstones become more prominent.Currently,retailers are incentivized to promote diamond sales,given the generally healthier profit margins for

177、 diamonds.It is therefore important to note that while India can be a signif-icant driver of natural diamond demand growth in the coming decade,the natural diamond industry must take an active approach to continue to build desirability in India and promote the inclusion of natural diamonds within re

178、tailer expansion plans.In China,the natural diamond purchase journey increasingly includes a digital element,particularly for research,but physical stores remain dominant(96%of diamond purchas-es are made in a physical store).In China,mega-chains including Chow Tai Fook and Chow Sang Sangrepresent a

179、pproximately 50%of retail demand.56 In 2021,the Natural Diamond Council announced a strategic partnership with Chow Tai Fook to“convey the value of natural diamonds to Chinese consumers,”57 and an increasing number of Chi-nese brands are promoting engagement rings.However,according to a World Gold C

180、ouncil survey,most Chinese retailers anticipate further growth in gold inventory,with the inventory shares of diamond and platinum products trending lower.The soaring popularity and recent tightening in supplies of coloured gem and pearl products has led 21%of surveyed retailers to plan to increase

181、their stock of these items.58 Only a few retailers experienced growth in diamond and platinum product sales in 2023,which partially explains the declining share of these items in their inventories.48.De Beers Group,Diamond Acquisition Study:China 2023(10,000 respondents).49.World Gold Council:Jewelr

182、y Market Insights,China,2023.50.Peoples Bank of China:Urban Depositor Survey,China,2023.51.World Gold Council:Demand Trends,Global,2023.52.Chow Tai Fook:Jewelry Consumer Trends Report,2023.53.World Gold Council:Gold Market,Reform and Growth,India,2023.54.De Beers Diamond Acquisition Study:China 2023

183、(10,000 respondents),India 2023(9,000 respondents).55.Edahn Golan,“The Case for Shifting Product Mix Away from LGD and Back to Natural Diamonds,”2024.56.De Beers Diamond Acquisition Study:China 2023(10,000 respondents),India 2023(9,000 respondents).57.Natural Diamond Council,“Natural Diamond Council

184、 Announces Strategic Partnership with Chow Tai Fook,”2021.58.World Gold Council:Jewelry Market Insights,China,2023.48.22 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYThe Impact of RecyclingInheritance could emerge as a factor affecting demand towards end of next decade Financial distress and divorce wi

185、ll continue to be contribu-tors to supply of recycled jewelry.However,inheritance is expected to emerge as a factor toward the end of the next decade(see the Secondary Supply section for recycling impact on natural diamond supply).Among new inheri-tance owners,one-tenth intend to sell their inherite

186、d dia-mond jewelry.59 Therefore,while the supply impact of inheritance is expected to be limited,inheritance has the potential to impact demand trends due to inherited vin-tage jewelry pieces being kept and worn by recipients.Sales of vintage items can either stimulate the used mar-ketplace only(buy

187、er would not consider buying new)or they can substitute the otherwise planned purchase of new diamond jewelry.Considering that the majority of inherited jewelry is retained,approximately 20%of the total value of inherited jewelry is likely to influence the purchasing be-havior of the new owners,disp

188、lacing their new diamond jewelry demand within the investigated period.59 Based on the distribution of diamond ownership in the respective age groups,the incremental impact of inheri-tance-based recycling from vintage sales and displaced demand is expected to increase in the 2030s and plateau after

189、2040.The Future of DemandThe US will continue to be key for future value growth,with India emerging as the second largest diamond-consuming country Based on the future demand dynamics shaping the indus-try over the next ten years,the US is anticipated to remain the biggest contributor to the diamond

190、 industrys future value growth.(See Exhibit 10.)India is emerging as the second largest diamond-consuming country,overtaking China in terms of total value based on polished wholesale prices.The US is expected to grow at a CAGR of approximately 1.5%to 3.5%from 2023 to 2033.Weddings will continue to c

191、onstitute a major portion of this demand,despite the demand for LGDs continuing.However,as LGD prices con-tinue to decrease,the most likely consequence is greater differentiation of LGD and natural diamonds.This would lead to a decrease in preference for LGD versus natural diamonds in the latter hal

192、f of the decade and incremental LGD growth within the fashion jewelry segment as more mass-market retailers continue to push LGDs.Moreover,the projected rise of inheritance during the 2030s is likely to influence demand patterns.Chinas demand is expected to be challenged in the near term owing to co

193、nsumer caution,with a tendency to invest in gold due to its perceived stable investment value.China is expected to grow at a CAGR of approximately 1%to 4%,through 2033.Source:BCG analysis.Note:PWP=polished wholesale price.Exhibit 10-The US Is Anticipated to Remain the Biggest Contributor to the Indu

194、strys Future Value Growth;India Is Emerging as the Second Largest Diamond-Consuming Country2%4%CAGR40%40%PWP natural diamond demand($billions);historical actuals 2023;forecast to 2033Total demand for polished diamond by geography 203340302010020232033USChinaIndiaRest of world%growth contribution10%3

195、0%20%59.De Beers Group;BCG analysis.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 23India is forecasted to experience robust demand growth of approximately 5 to 8%CAGR through 2033.The growth will be underpinned by rising disposable incomes,a strong jewelry demand,expanded retailer operations,and a fur

196、-ther building of desirability for diamond jewelry catalyzed by the diamond jewelry industry.To increase the market share of natural diamonds within the jewelry and discretionary goods sectors,industry participants must reinforce the desirability of natural diamonds across key diamond-consuming coun

197、tries.This can be achieved through strategic brand collaborations,targeted marketing efforts,and other demand-strengthening initiatives.“Natural diamonds are still highly desired.Gen Z are interested,engagement with social content related to natural diamonds is still high,and diamonds are often talk

198、ed about in popular culture.Future success or failure will be about natural diamonds remaining high on that tree of desirability of products.This part is within control of the industry to drive demand.”Natural Diamond Council CEO,April 2024Stakeholders in other product categories have cultivated des

199、irability through coordinated marketing campaigns.For instance,the growth in demand for Bordeaux fine wine from 2003 to 2022 can be attributed to exclusive promotional events that showcased the superior quality and reputation of Grands Crus.60 Another example is Woolmarks success in boosting global

200、demand for Australian wool.Approximately 90%of merino wool used in fine apparel originates from Australia.61 Woolmark achieves this by positioning Austra-lian wool as a premium fiber,educating brands about its benefits,and closely monitoring long-term and emerging consumer trends.Notably,their recen

201、t“Wear Wool,Not Fossil Fuel”campaign emphasizes wools role in sustainable circular models that minimize waste and pollution com-pared with synthetic fibers.62In the US,a pronounced shift toward branded jewelry has made category-level marketing more challenging within the diamond jewelry sector.Inter

202、national brands have signifi-cantly increased their marketing investments(more than fourfold since 2008 across the top four brands),fueling a robust 9%CAGR for the branded luxury jewelry sector from 2010 to 2022.63 As a consequence of this brand-driven growth,diamond category marketing has experienc

203、ed a sharp decline in its share of voicefrom 25%in 2006 to only 5%in 2022versus the top four brands.64Looking ahead,strategic collaborations with large brands and retailers will be critical for the US diamond industry to enhance desirability and promote the use of natural dia-monds.The industry can

204、strengthen US demand for natu-ral diamonds through targeted lobbying efforts and educa-tional initiatives.These efforts should emphasize the unique qualities of natural diamonds in contrast to alter-natives like LGDs.In India,iconic brands have made limited inroads.A large share of the sector is mad

205、e up of local brands,unbranded pieces,and gold jewelry rather than diamond jewelry.The diamond category has a higher category share of voice.This presents an untapped opportunity to activate marketing in support of the category within India.Collaborating with local retailers can also promote the des

206、irability of natural diamonds,especially given retailers expansion plans.In China,collaborating with the major Chinese retailers could also support growth as they plan to expand while also increase profitability.Promoting new occasions for the category beyond bridal will be critical in China as the

207、number of marriages declines,partly driven by younger generations postponing marriage or choosing not to get married.Having a strong presence online and across social media channels will be important to ensure diamonds are highly desired among a maturing Gen Z population.6560.Livex Fine Wine 100;Dim

208、son,Rousseau,and Spaenjers,“The Price of Wine,”2015;Union Grand Crus Bordeaux;BCG analysis,2024.61.Woolmark,“Where Wool Comes From,”2024.62.Woolmark,“Wear Wool,Not Fossil Fuel,”2022.63.BCG Fashion&Luxury market study,Global,2023.64.Natural Diamond Council and De Beers marketing data;Cartier,VCA,Tiff

209、any,and Bulgari company reports,2006 and 2022.65.De Beers Group,Diamond Acquisition Study:China 2023(10,000 respondents).To increase the market share of natural diamonds within the jewelry and discretionary goods sectors,industry participants must reinforce the desirability of natural diamonds acros

210、s key diamond-consuming countries.This can be achieved through strategic brand collaborations,targeted marketing efforts,and other demand-strengthening initiatives.THE FUTURE OF THE NATURAL DIAMOND INDUSTRY 25Long-Term OutlookMost likely Growth Corridor over the ten-year period Given the complexitie

211、s and specificities of the dia-mond value chain,there are several ways to trans-late long-term supply and demand fundamentals discussed in this report into a potential outlook for the industry(including for rough diamond values).Considering growing long-term demand and the likely constrained supply

212、environment,a likely scenario for long-term nomi-nal rough values indicates growth in the corridor of 3%to 5%CAGR from 2023 to 2033.(See Exhibit 11.)This growth is supported by economic foundations that bolster affordability and industry initiatives,such as market-ing,to reinforce desirability in th

213、e US resulting in differentia-tion between natural diamonds and LGDs and building of desirability in Asia.The anticipated supply constraints fur-ther contribute to expectations of growth in values in the longer term,recognizing that values have been more chal-lenged in the past years.Future Outlook

214、for the Diamond Industry26 THE FUTURE OF THE NATURAL DIAMOND INDUSTRYWhile long-term growth is expected,short-term volatility may arise from purchasing behaviors in the midstream.The most likely scenario above assumes that the factors adversely affecting diamond prices between 2020 and 2024such as L

215、GD demand,economic uncertainty,and midstream destockingwill subside.Consequently,prices are projected to rebound to a pattern of long-term growth,albeit this upswing will be stronger from 2028 to 2033,coinciding with anticipated tighter supply constraints and the waning effect of LGD substitution.Th

216、e long-term growth outlook falls within the long-term range historically observed in the industrywhile higher than the less than 1%annual growth rate(nominal)ob-served from 2013 through 2023,it remains below the higher historical growth rates(5%to 6%CAGR,nominal)observed in the preceding decade(2003

217、 to 2013).Sources:De Beers Group;BCG analysis.Note:Long-term inflation assumed 2%2.5%;LGD=lab-grown diamond.Exhibit 11-A Possible Scenario for Long-Term Nominal Rough Price Indicates Growth in the Corridor of 3%to 5%CAGR200Nominal Rough Price Index15010050020242026202820302032Higher likelihoodLower

218、likelihoodPrice upside:Accelerated LGD differentiationand uptake in desirabilityDriven by Increasing long-term diamond desirability versus other discretionary purchases Full natural diamond-LGD market differentiation Offset by increase in supply given improving marketconditionsPrice downside:Lasting

219、 LGD undifferentiatedand lower desirability Shift away from diamond jewellery(consumer preference)Natural diamond and LGD undifferentiated for longer Recycling dampens natural demand at the beginning of 2030s Offset by decrease in supply given worsening marketconditions3%to 5%CAGRInflationMost likel

220、y corridor Short-term price dynamics not in focusMid-to long-term price trend2023 to 2033 ten-year rough price CAGRTHE FUTURE OF THE NATURAL DIAMOND INDUSTRY 27Stress Testing the Outlook:Beyond the Most Likely CorridorAs with any outlook on supply and demand drivers,one may want to consider the set

221、of assumptions on supply and demand fundamentals that would need to eventuate to result in industry scenarios outside the most likely range.While natural diamond supply is likely to change in light of anticipated values over the long term,the key drivers to stress test remain on the demand side.Down

222、sides to the Most Likely Industry Outlook A less positive(but lower probability)industry outlook could occur if the industry saw major demand discontinuities in the coming decade that cause consumers to shift away from the category.New consumer categories could emerge,per-haps underpinned by innovat

223、ive marketing approaches.Social norms(particularly in markets with lower historical natural diamond marketing)could shift away from the wearing of fine jewelry as an outward display of wealth and success.Geopolitical factors could rapidly affect consumer purchasing behaviors,given the relative geogr

224、aphical con-centration of natural diamond supply.Extending the horizon further,the development of orga-nized platforms for recycling and a rise in demand for secondhand jewelry(in conjunction with inheritance)could put additional pressure on demand.And while differentia-tion between LGDs and natural

225、 diamonds is the most likely consequence of continued LGD price decline,it remains difficult to assess the long-term impact the emer-gence of LGDs has had on natural diamond desirability.The fact that many of these potential downsides relate to desirability underpins the unique opportunity the indus

226、try has to shape its future.Upsides to the Most Likely Industry Outlook As there are lower-probability downsides,there are also upsides for the industry on both demand and supply driv-ers.The obvious upside is a rapid and successful full differ-entiation between LGD and natural diamonds,particularly

227、 in the US,coupled with LGD differentiation in other mar-kets.There is a strong opportunity to shape desirability in high-growth and emerging markets.Small share gains compared to gold and other gems in China would have a large positive impact.There are also several potentially large economies(for e

228、xample,Indonesia,Turkey,and Brazil)whose middle classs income and wealth will grow substantially in the next de-cade.The diamond industry has historically focused on a small number of geographies.Yet in India,the growing middle class has spurred the diamond industrys growth.If other emerging markets

229、 follow a growth trajectory similar to Indias(reaching approximately 0.1%of their national PDI),there could be an additional upside for the global diamond industry of$7 billion PWP by 2033,which would represent approximately 20%incremental demand above the most likely corridor.And in many of these m

230、arkets,technology and marketing innovation(including using social media and GenAI)means driving desirability may not need to follow the same path the US followed over decades fifty years ago.Innovative industry,brand,and retailer collabora-tions will be critical.28 THE FUTURE OF THE NATURAL DIAMOND

231、INDUSTRYAfter several dynamic years that have seen the rise of LGDs,COVID-19,and the sharp boom as pandemic restrictions eased,the diamond industry now faces a critical moment.Macroeconomic fundamentalsincome,wealth,and disposable incomeand emerging mid-dle-class growth are important.But unlike most

232、 non-luxury commodities,desirability is key to the long-term industry outlook.Demand,underpinned by some of the worlds most recognizable historical marketing campaigns,faces recent challenges.The industry structure is changing.Yet through analysis of the supply and demand fundamentals,one can see a

233、positive outlook for the industry.New natural diamond supply remains limited.The industry has an opportunityunique among mined productsto catalyze industry participants across the value chain to continue to restore the attractiveness of natural diamonds and stimulate new demand in new demographics,g

234、rowing emerging markets,and new purchase occasions.This is a unique characteristic of the natural diamond industry.And it is a uniquely important point in time for the industry to collectively set a clear strategic direction to benefit from this.Final ReflectionsNew natural diamond supply remains li

235、mited.The industry has an opportunityunique among mined productsto catalyze industry participants across the value chain to continue to restore the attractiveness of natural diamonds and stimulate demand in new demograph ics,growing emerging markets,and new purchase occa sions.De Beers GroupEstablis

236、hed in 1888,De Beers Group is the worlds leading diamond company with expertise in the exploration,mining,marketing and retailing of diamonds.Together with its joint venture partners,De Beers Group employs more than 20,000 people across the diamond pipeline and is the worlds largest diamond producer

237、 by value,with diamond mining operations in Botswana,Canada,Namibia and South Africa.Innovation sits at the heart of De Beers Groups strategy as it develops a portfolio of offers that span the diamond value chain,including its jewelry houses,De Beers Jewellers and De Beers Forevermark,and other pion

238、eering solutions such as diamond sourcing and traceability initiatives Tracr and GemFair.De Beers Group also provides leading services and technology to the diamond industry in the form of education and laboratory services via De Beers Institute of Diamonds and a wide range of diamond sorting,detect

239、ion and classification technology systems via De Beers Group Ignite.De Beers Group is committed to Building Forever,a holistic and integrated approach for creating a better future where safety,human rights and ethical integrity continue to be paramount;where communities thrive and the environment is

240、 protected;and where there are equal opportunities for all.De Beers Group is a member of the Anglo American plc group.For further information,visit .This report was commissioned by De Beers Group.This document has been prepared in good faith on the basis of information available at the date of publi

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251、a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo a

252、nd spark change.BCG delivers solutions through leading-edge management consulting,technology and design,and corporate and digital ventures.We work in a uniquely collaborative model across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.in collaboration with De Beers Group