The Great Indian LGD opportunity

India has already become the global hub for manufacturing CVD diamonds. The lab grown diamond category has caught the fancy of the American consumer in the last four years.

This offers a splendid opportunity not just to exporters but to Indian wholesalers and retailers as well. In a digitally connected world, fashion and lifestyle trends that originate in the US are soon embraced by young Indian consumers.  

Market size: The lab grown diamonds have been in circulation for more than a decade. Unscrupulous traders have been mixing them with natural diamonds. With the progress in detection technology and availability of sophisticated machines, the incidents of mixing have reduced. “7 years ago 95% of the jewellery that came to us for certification was contaminated with lab grown diamonds, today the contamination levels have come down to just 2%, said Tehmasp Printer President & MD of IGI.

The global lab grown diamonds market size is projected to register a CAGR of 9.4% from 2021 to 2030 to reach $49.9 billion. Diamonds below 2 carats are estimated to grow the fastest with growth in the CVD segment outpacing HPHT. The Colored diamonds are predicted to grow at a CAGR of 10.2%. The current market size as estimated by various sources ranges from $ 4 billion to $6 billion per annum.

Government of India has identified LGDs as a focus area for its Make In India program.

”Focus on four points in the coming period. Good design should be patented; include new things such as pearls, platinum and fashion jewellery in the exports basket; increase collaboration with businesses of other countries for fusion jewellery; and (focus on) lab grown diamonds,” The honorable minister for commerce & Industry Mr. Piyush Goyal said  at the inauguration ceremony of Gems & Jewellery Manufacturing Association, 2021.

The Indian domestic market is estimated to be around Rs.2500 crores and expected to grow at a healthy rate of 25%.

According to the Bain report :

1) Diamond Jewellery (DJ) outperformed Luxury during the 2020 downturn and proved its resilience.

2) DJ came back extremely strongly in 2021, particularly in the US, which saw 38% year on year growth.

Speaking at a recent session titled:   Opportunities in the lab grown diamonds Industry,  Dilip Mehta, co founder Lumex  said that the lab grown diamonds are slowly gaining the acceptance across all spectrums. “In the initial years De Beers had estimated that LGD’s appeal will be restricted to the fashion segment. However, in recent years, lab grown diamonds have found acceptance in the bridal segment as well.” Said Mr. Mehta

Opportunity for the LGD jewellery: The current global scenario offers tremendous growth opportunities to the LGD industry due to the depleting source of natural diamonds and acceptance by the global millenials. The two features of LGDs that find a favor among the young consumers are the eco friendly aspect and affordability.

Supply of natural diamonds is limited:

1) Mine closures have significantly impacted available carats in cheaper ranges.

2) Argyle mine has stopping production (about 2.5m carats polished)

3) Miners’ abilities to increase production are constrained, with no major mines coming on stream

4) Opening opportunity for LCD jewelry at lower entry points (for diamond jewelry)

5) Reduces overlap between mined diamond and LCD jewelry

Together with the above, price inelasticity at retail level should permit significant growth opportunities for lab-grown.

India exported $1045.19 million worth of polished lab grown diamonds from April 2021 to January 2022 registering a growth of 112.64% (source: GJEPC). India exports mainly CVD diamonds and diamond studded jewelry using both HPHT and CVD diamonds. Most of the HPHT rough used for jewelry manufacturing is imported from China. Growers are investing in and mastering the new CVD technology to ramp up the production. None of the Indian growers use the old  HPHT technology.

It is difficult and more expensive to grow small diamonds with CVD technology. This is precisely the reason why HPHT rough is imported from China. 

Upstream opportunities:
 Surat, the world leader in diamond cutting and polishing has in recent times, witnessed a growing number of CVD diamond manufacturers.

Abhishek Saraiya, Vice President Meraya diamonds estimates that there are 2500 reactors active in India predominantly in Surat and a few in Jaipur and Mumbai. “The average monthly output of a typical reactor is 125 carats and costs $175000. Most commonly used reactor is Japan’s Seki.

Lumex DMCC has a diamond cutting, polishing and jewelry manufacturing unit in Surat. Their founder Vishal Mehta said, “We use both HPHT and CVD diamonds for jewelry manufacturing. Being technology agnostic we started with the former as it was the easiest available material.  The CVD business is becoming more transparent and with supplies improving, we now use both. Surat has 15 to 20 significant CVD growers with an installed base of 50 to 500 reactors”.

Anup Zaveri , Director of Real Illusion that has a CVD growing facility at Jaipur says “we have 80 reactors at the moment. Whatever is being produced gets sold and we have waiting lists. We are therefore working on expanding our production capacity significantly.

Anmol Bhansali, Director of Goldiam International shares his experience,

“We started growing diamonds at SEEPZ , Mumbai in 2015 and realized that the growing process of diamonds is quite different from the labor oriented jewelry manufacturing. The high tech business requires high caliber talent, patience and commitment.  During the first two years getting the product of desired quality, size and color was a challenge. In 2017 we would be lucky to grow round stones of 1 carat. With sustained efforts and persistent experimentation we were able to get the formula right. We can now produce polished diamonds of 2 carats easily.  It is not uncommon to get a smooth production run for two months followed by an output of cracked and broken stones.

Consistency is directly linked to profitability in this high fixed cost business. We hope to increase our current production to 650 polished carats by April 2022.

 We grow, cut, polish diamonds, design and manufacture jewelry in house that is distributed through our US office. Vertical integration adds 20% to our bottom line”. 

The midstream/ distribution opportunity:

With its affordable pricing, LGD fashion jewellery with small sized diamonds is ideally suited for retailing from large format departmental stores and gift stores located at malls. Watch stores retailing fashion and luxury timepieces are also ideal for shop in shop arrangements.

A similar opportunity exists to sell LGDs online. The Indian consumer is comfortable buying consumer products online. Retailing through e commerce enabled brand websites and marketplaces such as Nykaa fashion are good avenues to distribute LGD jewellery. 

Limelight, a Mumbai based lab grown diamond jewellery brand is building its distribution channel by retailing through jewellery stores. “We have received an encouraging response from jewelers and Limelight jewellery is available through a network of 20 reputed Indian jewelers” said Pooja Sheth, Managing Director, Limelight lab grown diamonds.

During the last few years of rapid growth, a short term trading approach is prevalent in the industry says  Amish Shah President of ALTR  “I believe that owning the entire supply chain requires a long term vision rather than just finance and talent.  In the absence of vertically integrated players, the mid stream segment in the LGD business will be under pressure as it did in the earth mined category. The fragmented supply chain of growers, distributors and retailers operating independently is inefficient.  We have positioned ALTR in the US as an integrated lab grown diamond and fine jewelry brand. Retailers are our partners and we support them with branding and point of sale display material. “We are currently studying the Indian market before launching ALTR here” he added.

“At Lumex our skill sets are in cutting, polishing of diamonds, manufacturing and wholesale of LGD jewelry to select retailers in the US as well as India. ORRA is one of them.

We focus on our strengths and aspire to be the best in our domain. Our partners can access our digital library Lumex.online and access with a single click 3000 options of white and colored lab grown diamonds. A natural vivid blue or pink diamond could be priced at a million dollars/carat while its LGD counterpart is available at a fraction of its cost” adds Vishal.

The Downstream opportunity:

While Goldiam, ALTR and Lumex are integrating their upstream and midstream operations, companies like Renaissance Global and ORRA have adopted a D2C approach.

The SEEPZ Mumbai headquartered Renaissance has taken a digital only route to launch its exclusive LGD jewelry portal www.diamondsmadeforyou.com for the millennial consumer.

Proactive Indian retailers have spotted the LGD jewellery opportunity and are selling it with full disclosure. Vandals a Mumbai based boutique store is the first exclusive LGD store to be set up in Mumbai.

Wondr diamonds is a chain of exclusive LGD jewellery store chain focusing on the south Indian market. It has set up stores in Coimbatore, Chennai and Bangalore.

ORRA’s sub brand Divaa is among the first companies in the world to launch a national network of exclusive LGD jewelry boutiques. Its online portal (www.divaa.co.in) gives Divaa an Omni channel presence. We have Encouraging Consumer response to our Brands and are working Under rollout Plan For National presence Says Dipu Mehta MD & CEO of Orra.