Diamonds Disrupted

In the luxury goods market, there has been growing consumer preference for sustainable products—particularly for diamonds and other fine jewelry. In this episode of The Active Share, Hugo is joined by Marie-Ann Wachtmeister, co-founder and creative director of Courbet, a Parisian fine jewelry company, for a conversation on how luxury brands are embracing technology, how lab-grown diamonds have upended the traditional diamond industry, and how this shift in values offers new opportunities for companies to appeal to consumers’ changing ethical and environmental concerns.

Comments are edited excerpts from our podcast, which you can listen to in full below.

What made you want to be an entrepreneur?

Marie-Ann Wachtmeister: While on maternity leave after my third child, I relocated to start the McKinsey office in the south of Sweden. When McKinsey decided not to open that office, I ended up launching a consultancy company that specialized in helping pharmaceutical companies deploy global strategies behind blockbuster drugs.

At the same time, I started Telebox, a telecommunications company. It was the first cloud-based voice over intellectual property (IP) platform in Sweden.

We were disruptors, and at that time, companies only had large physical equipment for their switchboards, which cost several hundred thousand euros to update. Our cloud-based service was €9.00 a month and was quite successful.

Why did you want to break into the jewelry industry?

Marie-Ann: It was a serendipitous, deliberate move. On Sundays, I would create my own jewelry in a workshop. My sister told me, “You should try to make a ring where you can change the stone yourself.” So, I did—I invented simple mechanics to make the stone interchangeable and ended up patenting it.

That kicked off my idea to start a business around jewelry. I started producing the interchangeable ring and developed a whole collection with a producer in Italy. I also signed a licensing deal with the Tata Group for India, and then with a French brand for the rest of the world. That connected me to Manuel Mallen, who asked if I wanted to start Courbet.

It’s been a long road that has gone in strange directions. Courbet was based on a gut feeling of knowing what the components of success are. For me, these components are innovation, feasibility, and good timing. And the timing was just right.

How did you decide to consider the ethical side of the jewelry industry?

Marie-Ann: At the time Manuel reached out, I had promised myself that I wouldn’t do any more start-ups. They can be emotionally draining and difficult. But Courbet was more than just another great business idea. I was attracted to its potential sustainable value.

For quite some time, I had been preoccupied with certain environmental issues, and I was excited that Courbet could be meaningful in that way.

When we launched Courbet in 2018, we had no sustainable benchmark that we could compare ourselves to. The closest brand was Chopard, which had talked a bit about ethical gold. And in luxury handbags, Stella McCartney had created a vegan leather for her products.

At the time, we wanted to be the Tesla of jewelry. Tesla had been driving change in the electric vehicle (EV) industry, offering the same, or even higher, performance as other EVs, as well as a cool design and innovative control panels.

We wanted Courbet to be similarly positioned. Today, the brand is known as an innovative, high-end jewelry brand, and is in the Place Vendôme in Paris. Without this positioning, we weren’t going to be able to change consumer behavior or even producers’ behavior.

With market disruption, there are always many forces converging at once.

What is a lab-grown diamond?

Marie-Ann: A lab-grown diamond is chemically and physically the same as a natural diamond, crystalizing in the same way that carbon atoms crystalize in the earth.

Natural diamonds form inside the earth through a process called high pressure high temperature (HPHT) and can take up to billions of years to work their way up to the earth’s surface.

In the 1950s, General Electric and ASEA, a Swedish electrical equipment manufacturer, both discovered how to replicate the HPHT process in a laboratory. But the first lab-grown diamonds weren’t very nice (they were grayish in tone) and were expensive.

But over time, as technology evolved, a second way of creating diamonds emerged: the chemical vapor deposition (CVD) process, which replicates how diamonds are created in space (carbon atoms, under negative pressure from the void, eventually crystallize into diamonds).

What is the difference between a natural diamond and a lab-grown diamond?

Marie-Ann: Comparing a natural diamond to a lab-grown diamond is like comparing an ice cube to ice that was taken from the surface of a frozen lake. Both are the same thing, but one has been created through man-made conditions.

But one key difference is the diamonds’ environmental impact and the conditions in which each diamond is grown. Natural diamonds must be mined and then extracted through digging, which is done using dynamite. The pits that are created to dig up these diamonds are huge; the typical size diamond mine pit is nearly the size of the city of Paris.

Diamond mines are usually active for 20 years, after which the equivalent of half a bathtub of diamonds will have been extracted.

With lab-grown diamonds, there’s no reason to dig. And while they may require more energy, different energy sources, including alternative energy, are available to choose from, resulting in a reduced carbon footprint.

Because natural and lab-grown diamonds are identical—gemologists can’t even tell them apart without significant testing—there’s really no reason to continue digging and mining diamonds.

Comparing a natural diamond to a lab-grown diamond is like comparing an ice cube to ice that was taken from the surface of a frozen lake.

How disruptive are lab-grown diamonds to the traditional diamond industry?

Marie-Ann: Today, lab-grown diamonds have successfully replicated earth-mined diamonds and are even sold in the same way.

Traditionally, when you buy a piece of diamond jewelry from a jeweler, the gold, diamond, craftsmanship, and margin are all included in the total price.

At bigger jewelry brands, two new components are added to the value proposition: brand image and brand innovation. It’s not just about lab-grown diamonds vs. earth-mined diamonds anymore; it’s also about branded vs. non-branded jewelry.

And this matters as innovation comes into play and more jewelry brands talk about moving into the lab-grown diamond space.

Lab-grown diamonds vs. earth-mined diamonds is never going to be an ecological argument or a pricing argument (lab-grown diamond jewelry still costs a lot). It will be about what can be done with lab-grown diamonds that can’t be done with earth-mined diamonds.

Are lab-grown diamonds capable of expanding the demand for diamonds?

Marie-Ann: Lab-grown diamonds are opening the diamond industry to a new consumer—people who would never buy an earth-mined diamond for sustainable reasons.

Today, Millennials and Generation Z are the world’s biggest consumers, and many of them are concerned about the environment, especially those that live in France. Many in the market for a diamond would prefer to buy a lab-grown diamond.

But in terms of affordability, lab-grown diamonds don’t really expand the industry, as there are many options available for low-cost earth-mined diamonds. Some supermarkets in France, such as Leclerc, even sell cheap, earth-mined diamond rings.

I think people want to trade up. When consumers come to Courbet, and they see they can buy a three-carat lab-grown diamond for roughly the price of a one-and-a-half carat earth-mined diamond, they usually won’t say, “I can save a little bit of money and buy a smaller diamond.”

This is why I see the U.S. lab-grown diamond market moving completely to two to four carats in size. With engagement rings, the preference has been for a larger stone for some time now. More and more, people are leaning towards buying a bigger diamond.

Do you think shifts in social attitudes can drive luxury market behavior?

Marie-Ann: Today, values have become part of the luxury concept. And there are several forces at work behind the adoption of lab-grown diamonds.

One is supply-chain efficiency. With lab-grown diamonds, transferring value to the end-consumer is more efficient than with earth-mind diamonds. There are only one or two steps from production to consumers, compared to upwards of 12 intermediaries for earth-mind diamonds. Efficiency in the value chain makes it possible to acquire these diamonds at a more attractive price without giving up quality. It’s a very strong driver of change.

Second is being independent of the diamond industry oligopoly. It bothers many brands to have that kind of dependency. Lab-grown diamonds break this dependency.

Third is the degree of innovation. Today, you have companies that are working towards creating diamonds using CVD technology that enables them to create any stone shape.

Luxury is becoming a silent choice.

With market disruption, there are always many forces converging at once. But I think it’s an exciting period when everything’s up in the air and a possibility, as the traditional diamond industry has historically been conservative and difficult to penetrate.

Right now, there are many new market entrants, there’s a lot of technological innovation occurring, and consumers are changing their behavior.

But the threshold for entering the lab-grown diamond production business is high. It’s not easy to become a producer because the equipment is expensive to build and there are a lot of patents out there.

Will big players in the diamond industry adapt to the lab-grown diamond trend?

Marie-Ann: Diamond industry incumbents have such powerful brand names that I don’t think they are in any danger of losing market share. I think they will be reactive, simply because lab-grown diamonds are not their positioning, and they have nothing to gain from being proactive.

For example, when I worked at Procter & Gamble (P&G), I was in the division that produced Pampers diapers. People began to grow concerned that Pampers’ bleaching process was bad for the environment and bad for babies’ skin.

Initially, P&G wasn’t going to change its bleaching process. But as sales began to decrease, the company decided to make a change. It sent a delegation to Sweden and negotiated a new bleaching process with its key supplier to become environmentally compatible.

Similarly, the big jewelry brands will likely only move into lab-grown diamonds if the total market moves in that direction. These brands can also buy smaller, lab-grown diamond companies, securing their future via acquisitions, as Louis Vuitton Moët Hennessy (LVMH) has done with Parisian jeweler FRED.

How do you perceive luxury?

Marie-Ann: In the past, luxury was quite different. It was simplified. Everything was branded and logos were everywhere. If you had the right logo on your handbag, for example, you carried luxury.

But today, I think people are tired of showing luxury in that way. Luxury is becoming a silent choice, a behavior—and still linked to money, of course—and more about what a person does with it.