In part 2 of our exit interview with De Beers CEO Bruce Cleaver, he reviews the big events of his tenure, from Nirav Modi’s implosion to the COVID-19 pandemic to De Beers’ still-controversial introduction of lab-grown brand Lightbox.
Let’s go back to 2016, when you became CEO. Before that, there was a certain breakdown in relations between De Beers and its clients. Early on, you said that was something you wanted to rebuild.
It’s one of the things that I’m pleased about from my time here. I think our relationships with our customers, and all of our stakeholders, are in a much better place than they were in 2016.
2018 started off with the Nirav Modi scandal, and a lot of people thought that hurt the industry with the banks, and helped push it into crisis. Any reflections on that?
My biggest reflection on that is: However much work you do toward planning for the future, there are things in the diamond industry that you just can’t predict. Also, demonetization just appeared out of the blue in India one day.
We have risk registers at De Beers, where we pore over all the risks we can think of, and we assign people to think about how to deal with them if they happen. Of course, pandemic was not on that list, nor was Mr. Modi, nor was a war in Ukraine.
These are things we couldn’t have anticipated, which require you to change course as a business and spend a lot of time talking to key stakeholders. If you spoke to me in 2016, I would have underestimated how these things could happen and how much time they would take and how much work they require. We live in a world that is so volatile and so subject to change. That’s a lesson for all businesses in the diamond world. You have to be ready, and you have to be prepared to be resilient. You have to try and embrace these things, because they do happen.
Speaking of things people didn’t expect: In 2018, De Beers introduced Lightbox, a lab-grown diamond brand. Was that on the drawing board before you took over, and why did you choose that particular time?
That’s a great question. I think of that as one of the highlights of my time. If you take a step back, we always knew at De Beers that it may come to pass that we would launch a gem synthetic business. Because we always have had the capability to produce quality synthetics.
When it came to Lightbox, we had some very complicated strategic discussions about whether it was the right thing to do, and if we are going to do it, when was the right time to do it?
We saw a number of people entering into the lab-grown market that didn’t try and sell them as different kinds of products [than natural diamonds]. We felt that we had the cost capacity, because of our history in the industrial world, to sell laboratory-grown diamonds at what we thought were more appropriate prices—fashion-related prices rather than luxury-related prices. And then we agonized for a long time about how we would do it and when we would do it. We had to make a very significant investment in production.
I went and spoke to the presidents of Botswana, Namibia, South Africa, and Angola to make sure they were comfortable that we launched this business, and they didn’t think we were trying to undermine the natural diamond businesses. When we got around to launching it, we discussed a great deal the right time to do it. We thought that the right time to launch it was probably the JCK show, as that’s when we have the whole industry together. And we worried if we waited another year there would be even more production on the market and certainly more traction for laboratory-grown diamonds being [sold as] the same as natural. We thought it important to create our own offering.
I say to people, it’s one of the scariest things I’ve ever done. If we launched this product too soon, we may legitimize a whole category quicker than we should have. What if it was launched too late, and the genie was out of the bottle? We probably launched it at about the right time. I’ve been surprised there’s been very significant growth in lab-grown production in the last 18 months. But my view is that will accelerate the two markets separating.
Some thought Lightbox’s $800-a-carat price point was an attempt to drive prices down.
Clearly, price was important, and the reason for that was consumers told us that there needed to be a big difference in the prices of fashion items as opposed to luxury items. We felt $800-a-carat set a very important line in the sand, where we could say to consumers that this was not luxury but quality fashion.
But price has been one part of the journey in getting these two markets to separate out. If you just look at the growth in price of natural diamonds over the last three or four years and the decline in pricing in lab-grown—notwithstanding the recent blip in the natural world—the differences are very significant.