BCG Report: The Future of the Natural Diamond Industry

A new report commissioned by De Beers Group and conducted by the Boston Consulting Group (BCG) sheds light on both the immediate and long-term prospects for the natural diamond industry. The report provides key insights for jewellers and industry stakeholders amidst a rapidly evolving global landscape.

Short-Term Challenges

In 2023, the natural diamond industry encountered several obstacles. The easing of COVID-19 restrictions led to a “bridal catch-up” effect, reducing the immediate demand for diamonds. Additionally, economic headwinds and a growing preference for lab-grown diamonds (LGDs), particularly in the United States, further impacted demand. Changes in stock levels throughout the midstream and downstream segments also affected the market, leading to a decrease in the value of rough natural diamonds.

Long-Term Prospects

Despite these short-term challenges, the long-term outlook for the natural diamond industry remains positive. The report emphasizes several factors that will drive future growth:

• Constrained Primary Supply: The primary supply of natural diamonds is projected to decline by approximately 1% CAGR over the next decade. This decline is due to the depletion of existing mines and limited new discoveries, coupled with reduced exploration budgets. This constrained supply is expected to provide stability to the market.
• Global Affordability and Demand: Rising global wealth and personal disposable income (PDI) are anticipated to boost the affordability of natural diamonds. This economic growth, particularly in emerging markets, underpins a positive demand outlook.
• Industry Initiatives: Effective marketing and retailer collaborations are essential in reinforcing the desirability of natural diamonds. These initiatives are crucial in differentiating natural diamonds from LGDs and maintaining their appeal among consumers.

Market Dynamics

The report outlines three main dynamics shaping the demand for natural diamonds:

• Brand Influence: The rise of strong brands is driving growth in diamond jewellery sales, capturing a larger share of the market.
• Lab-Grown Diamond Demand: The extent and timing of peak LGD adoption will significantly influence the natural diamond market.
• Comparative Desirability: Natural diamonds must compete with other jewellery options, gemstones, and discretionary spending choices, especially among the expanding middle class in Asia.

Demand Scenarios

Considering these dynamics, the report forecasts an annual demand growth for natural diamonds in the range of 2% to 4% CAGR over the next ten years. This projection accounts for sustained demand in the US, differentiation between natural diamonds and LGDs, moderate growth in China, and robust growth in India.

Industry Implications

The industry has experienced notable fluctuations over the past five years, including increased LGD demand, the impact of the pandemic, and a challenging 2023. To navigate these challenges and capitalize on future opportunities, the industry must focus on fundamentals and strategic initiatives.

• Marketing and Collaborations: Continued efforts in marketing and collaborations are essential to enhance the desirability of natural diamonds, particularly in key markets like the US and Asia.
• Strategic Direction: The industry must collectively set a clear strategic direction to restore the attractiveness of natural diamonds and stimulate demand in new demographics and emerging markets.

In summary, while the natural diamond industry faces both short-term challenges and long-term opportunities, a strategic approach focusing on supply constraints, global affordability, and effective marketing will be crucial for sustaining growth and maintaining the allure of natural diamonds.

To read and download the full report, visit https://www.bcg.com/publications/2024/future-of-natural-diamond-industry