Rapaport Magazine - February 2019

VOL. 42 NO. 2 FEBRUARY 2019

THE FIGHT’S GETTING REAL Natural vs. Synthetic

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TRENDS

OPINION

GEMSTONE

FOUR ONLINE INFLUENCERS WEIGH IN ON 2019’S HOT JEWELRY FASHIONS

WHAT DOES CULTURED MEAT HAVE TO DO WITH DIAMONDS?

ON THE RED CARPET AND THE RUNWAY, PEARLS ARE STEALING THE SPOTLIGHT

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Note from the publisher PRODUCING MYTHS

IMAGE: BEN KELMER

W

e are living in an age when truth and facts are often hard to distinguish from lies and fiction.

This becomes infinitely more problematic when lies and fiction are legitimized.

It is a fiction that synthetic diamonds are eco-friendly. They are produced in factories with a massive thirst for power, using a cocktail of chemicals.

It is a lie that synthetic diamonds are an ethical alternative.

There are approximately 1.5 million artisanal miners in Africa digging for diamonds, supporting seven million people with their earnings. These are some of the world’s poorest people, and diamond mining currently provides the only viable income available to them. The investment in and promotion of synthetics as an alternative threatens to destroy the impoverished communities that depend on diamonds. The ethical approach would be supporting and investing in these communities to improve their sustainability and chance for a better future, rather than undermining their ability to earn a living.

Sadly, the lies and fiction being marketed by synthetics manufacturers received their desired legitimacy last year. The Federal Trade Commission (FTC), publishing its new jewelry guidelines in July, said the term “diamond” did not necessarily

apply only to natural stones that were “of the earth.” This, on the surface, at least, appeared to put synthetic diamonds on par with natural ones. But that is simply a fiction.

The truth is, synthetic diamonds are not ethical, not environmentally friendly and not real diamonds. The public agrees: Some 68% of Americans don’t consider synthetics real diamonds, with most citing the fact that they don’t come from the earth, according to a Diamond Producers Association (DPA) poll from 2018.

So with synthetics looking likely to come of age in 2019 (partly thanks to De Beers’ launch of the Lightbox line), our cover story delves deep into the issue with the knowledge that a diamond’s origin still matters to consumers. Real diamonds have inherent value, authenticity and symbolism.

Synthetic diamonds are beautiful, shiny fashion items, but little else. To flaunt them as equal to natural is a lie — one the majority of consumers will not be fooled into believing.

John Costello PUBLISHER john.costello@diamonds.net DIAMONDS.NET

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CO N T E N TS COVER

STYLE & DESIGN

26 Cover story

53 Jewelry Connoisseur

Shedding light on Lightbox: The impact of De Beers’ new lab-grown line on the natural-diamond industry.

Value judgments: Are synthetics prices going up or down? Analysts and producers are split.

Language lessons: Decoding the new standards for gem terminology and what they mean for traders.

The new industrial revolution: Lab-created stones have uses beyond jewelry — in high-tech, the military and other markets.

36 Auction report

56 Page

IN-DEPTH 16 News

Retail: The global footprint of jewelry shoppers.

Mining: Small stones stay sluggish.

Industry: India cracks down on bankruptcies.

The trends and biggest sellers from the Magnificent Jewels sales in Hong Kong and New York.

RETAIL

51 RetailRap How do jewelry displays help with sales?

56 Designer Known for casting gems in molten metal, Polly Wales has taken her business from the UK to Los Angeles.

58 Legacy An appraisal expert warns estate dealers to watch for substitutions of lab-grown diamonds in antique jewelry.

60 Colored gemstone

54

34 Page

IMAGES: POLLY WALES; LAKEDIAMOND; ANABELA CHAN. COVER: ALROSA; SHUTTERSTOCK

From fashion pieces to Hollywood chic, designers are embracing synthetics.

Page

Art contributes to the customer experience at BVW Jewelers in Reno, Nevada.

The trade needs to move off the defensive in the synthetics debate.

54 Style

Is the pearl making a comeback or just cementing its status as a timeless classic?

48 Retail profile

24 Opinion

Boldly versatile, black and white diamonds lend a touch of drama.

MARKETS & PRICING 63 Trade report 65 USA 71 India 73 Israel 74 Antwerp 75 Hong Kong 76 Diamond data 81 Price List 93 RapNet price list 98 Directory 102 Calendar 104 The final cut DIAMONDS.NET

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N EWS | RE TAIL

THE GLOBAL FOOTPRINT Weaker consumer demand in the US and China hit holiday sales, but there were pockets of success in certain corners of the world.

Here’s a roundup of jewelry results in the fourth quarter

UK Signet Jewelers’ UK segment — H.Samuel and Ernest Jones — saw holiday revenue decline 12% to $156.4 million. Lower sales in bridal, as well as in fashion jewelry and fashion watches, were partially offset by higher sales in prestige watches.

EUROPE US Jewelry sales lagged behind general retail during the holiday season, according to Mastercard SpendingPulse. Revenue for the category rose 3.7% year on year from November 1 to December 24, compared with a 5.1% increase for all product types.

Tiffany & Co.’s US holiday sales suffered from weaker domestic demand and lower spending by Chinese tourists.

Its revenue in the Americas region fell 1% to $514 million in November and December.

Sales at Signet Jewelers’ North America segment — including Kay Jewelers, Zale and Jared — fell 2.1% to $1.67 billion in the nine weeks to January 5, with weakness in its long-standing fashion and anniversary collections.

Fine jewelry was a strong category at Macy’s in an otherwise disappointing holiday season for the department store chain. Fashion jewelry and fashion watches underperformed, it reported.

Sales of Forevermark jewelry increased 8% in the US during 2018, according to the brand’s owner, De Beers.

That compares with a 4.4% annual increase for the jewelry industry as a whole, De Beers CEO Bruce Cleaver noted in a January speech.

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Mass street protests in France had a negative impact on tourists’ luxury spending and forced Richemont, the owner of Cartier and Van Cleef & Arpels, to shut certain stores for six consecutive Saturdays. Global sales at the group’s two high-end jewelry houses rose 9% to EUR 1.99 billion ($2.28 billion) in the three months ending December 31, supported by growth in Asia and the Americas.

Tiffany & Co.’s sales in Europe dropped 4% to $132 million.

Paris-headquartered LVMH Moët Hennessy Louis Vuitton reported a strong year for Bulgari, its flagship jewelry brand. The label’s impressive performance helped drive an 8% increase in LVMH’s total watch and jewelry sales to EUR 1.1 billion ($1.26 billion) for the October-to-December period.

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OF JEWELRY SHOPPERS JAPAN Tiffany & Co. saw a bright spot in Japan, where sales grew 4% to $150 million, driven by improved spending among locals.

CHINA Sentiment was shaky going into the Chinese New Year, after Chow Tai Fook’s same-store sales in mainland China fell 7% year on year for the October-to-December period, and Luk Fook’s slid 14% by the same measure. Both companies cited economic challenges in the region.

Tiffany & Co. saw strong growth in China, although holiday sales in Asia Pacific fell 3% to $226 million.

HONG KONG INDIA Titan Company’s same-store sales increased during the third fiscal quarter that ended December 31, driven by strong demand during the Diwali and Dussehra festival period. The company didn’t provide revenue data in its trading update.

The weak Chinese yuan and general sluggishness in the regional economy hit tourist spending in Hong Kong. Chow Tai Fook’s same-store sales declined 6% in Hong Kong and Macau for the three months ending December 31. The slowdown at Luk Fook, another major jeweler, was 9%.

Tiffany & Co. also noted softness in November and December in Asian markets that are more dependent on the tourist industry.

E-COMMERCE

IMAGES: SHUTTERSTOCK

AUSTRALIA Michael Hill’s same-store sales rose 1.3% year on year during the November-December period. The Australia-based retailer made some positive changes to its marketing activities, after failings in that area dampened its performance earlier in the year.

Online sales across Signet Jewelers’ brands increased 5.6% to $222.3 million for the holiday season, although revenue from James Allen was down 0.2% to $50.5 million.

Tiffany & Co. reported healthy growth in its online business for November-December, without giving numbers.

Chow Tai Fook’s e-commerce sales fell 7% by value, but grew 12% in volume terms during the last three months of the calendar year.

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OP INION

THE MEAT OF THE MATTER The natural-diamond trade needs to get off the defensive in the debate over synthetics. By Avi Krawitz

I

n a bold and somewhat savvy move back in January 2018, Tyson Foods, one of the largest food-processing companies in the US, took a minority stake in Memphis Meats, a startup in the budding cultured-meat industry.

Despite the deal’s sleeping-with-the-enemy feel, the investment sparked little controversy, as Tyson was the latest in a line of high-profile investors in the food-tech business. Memphis Meats also counts Bill Gates, Richard Branson and Cargill Inc., another meat producer, among its backers.

Lab-grown meat, which is essentially cultured from animal cells, offers environmental benefits, but it also taps into social trends.

If the product takes off, lab-grown meat could help lower greenhouse-gas emissions and reduce damage to the environment, which the food industry

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currently impacts through deforestation and overcrowding. Economically, it could ride the wave of ethical consumerism and the strong movement toward non-meat diets.

Rather than resist the new product category, meat-processing companies have embraced it as a complementary business that could drive growth. “We continue to invest significantly in our traditional meat business, but also believe in exploring additional opportunities for growth that give consumers more choice,” explained Justin Whitmore, vice president of corporate strategy and chief sustainability officer at Tyson Foods.

THE 4DS The key, it seems, is to know what you’re eating.

While the product is still in its early days and many still question whether consumers will take to it, ordering a steak in the future will likely involve more than choosing rare, medium or well-done.

But for that to happen, restaurateurs will have to provide full disclosure of what’s on the menu, and regulators will need to oversee the correct documentation of that disclosure. The Food and Drug Administration (FDA) in November agreed to share regulation of cell-cultured food, monitoring the collection and differentiation of cells, while the US Department of Agriculture would oversee production and labeling of these products.

That’s led to a debate over what to call meat derived from animal cells rather than the animal itself, and whether you should even use the word “meat” to describe it. Some argue it should be called

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“cultured,” “synthetic” or “in-vitro” meat, while lobbyists such as the US Cattlemen’s Association refer to it as “cell-cultured products” or “cultured tissue” (i.e., not meat).

Correct labeling is vital, since food-tech companies note that their product has the same taste, look, texture and nutrition as regular meat.

Plus, they need to differentiate to demonstrate their added value. Their businesses won’t be viable without the proper detection, disclosure, documentation and differentiation (the 4Ds) of the alternative meat products becoming available.

DIAMOND PARALLELS The diamond industry faces a different set of challenges when it comes to lab-grown, even as one can clearly draw parallels to the meat industry’s experience. It has also reached a more mature phase of its synthetics discussion, particularly when it comes to implementing the 4Ds. Regulators are less involved in the quality control of lab-grown diamonds, although they have weighed in on what is considered a diamond: The Federal Trade Commission (FTC) declared last year that the word “diamond” could refer to natural or synthetic stones. Of course, the trade body still requires labgrown suppliers to make the proper disclosures in their marketing and sales pitches. But it has largely been left to the natural-diamond sector to police synthetics supply through grading and detection.

Undisclosed mixing of synthetics in parcels of natural diamonds remains a significant threat to diamantaires, undermining the value of the mined product. Alarmingly, the number of cases of such mixing continues to rise.

IMAGES: SHUTTERSTOCK

DIFFERENTIATION PHASE Undisclosed synthetics have dominated the labgrown narrative over the last few years. Diamantaires have become aware of the problem, and an impressive number of synthetic-detection services and machines have become available, even if it remains difficult to neutralize the threat.

Today, however, the discussion has shifted to focus on differentiation as lab-grown diamonds gain in popularity and acceptance.

“For us, 2018 was the year that lab-grown diamonds got a place in the jewelry industry,” researchers at lender ABN Amro wrote in a recent report. “We think that 2019 and 2020 will be the years that lab-grown diamonds take off and move from an introduction phase to a growth phase.”

Synthetics producers are investing to tap that growth. De Beers is building a new facility, and Diamond Foundry is expanding to raise its supply significantly. Meanwhile, equity firm Huron Capital bought into WD Lab Grown Diamonds, and even the Flemish government has provided a $2 million grant to develop Antwerp-made synthetics.

THE INDUSTRY HAS HAD TO PROVE ITS ADDED VALUE OVER SYNTHETICS, WHEN IT SHOULD BE THE OTHER WAY AROUND

Differentiation is important for the lab-grown industry, as it is for natural diamonds. A majority of the synthetics players market themselves as the ethical alternative to mined diamonds, which they claim are tainted with conflict and hurt the earth. That has put the natural-diamond trade on the defensive, resulting in the industry having to prove its added value over synthetics when it should be the other way around. The lab-grown product, after all, is the newcomer trying to gain market share.

To ensure sustainable growth, synthetics suppliers need to show that their competitive edge extends beyond badmouthing natural diamonds — particularly since the claim that a lab-grown diamond is eco-friendly, transparent and ethically sourced tends to be vague, as the DPA has noted.

There is very little, if any, source verification of lab-grown diamonds or monitoring of its ethical footprint. Ideally, lab-grown producers should adhere to the same know-your-supplier practices that a growing number in the natural-diamond trade do.

BELIEVING IN THE PRODUCT The mined-diamond industry needs to get off the defensive in the synthetic-diamond debate. It can do so by amplifying the good that diamonds do — through both its corporate social-responsibility programs and its role in providing livelihoods to tens of millions of people. It should also enhance its storytelling about where a diamond comes from, building on the wave of source-verification and traceability programs that have recently emerged.

Consumers do care about what they’re buying, and they want to be assured that their purchase is making a positive contribution. Natural-diamond companies should be providing those assurances regardless of the rivalry with synthetics. It has become quite clear that the natural-diamond and jewelry brands able to garner growth in today’s challenging environment are those investing in technology and telling a meaningful story.

In that context, the synthetic-diamond debate should not be about the threat of losing market share.

Lab-grown products, whether meat or diamonds, provide a different appeal and will evolve to a segmented market. Rather, it’s about the diamond industry believing in its product. Having survived the early-disrupter challenges that cultured meat is now presenting for food suppliers, the natural-diamond trade should have the tools to sell with confidence.

The growth of synthetics may continue to shake the market, but natural diamonds have a unique value proposition that still resonates with consumers. ◼ DIAMONDS.NET

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2020

ABN AMRO EXPECTS LABGROWN DIAMONDS TO MOVE FROM AN INTRODUCTORY PHASE TO A GROWTH PHASE IN 2019 AND 2020 FEBRUARY 2019 25

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TH E FINAL CU T

FASHION WITH A FOLLOWING Rapaport Magazine asks four online influencers to pick out their top jewelry trends for 2019 TRACEY ELLISON, THEDIAMONDSGIRL FOUNDER

BECKY STONE, DIAMONDS IN THE LIBRARY FOUNDER AND CEO Modern jewelry lovers want to put their money toward pieces they can connect with, that make a statement about who they truly are. Charms offer that personal connection like nothing else, and that’s why charms — from medallions and monograms to vintage and newly minted figurals — will reign supreme in 2019. In the past few years, designers have realized the potential of this market and have created a range of charm holders and chains so that styling possibilities for charms have skyrocketed. Eye-catching designs and carefully curated layers make charms Instagram catnip, while symbols of significance offer the wearer comfort and strength on difficult days.

CLAUDIA CARLETTI CAMPONESCHI, HIGH JEWELRY DREAM FOUNDER AND MANAGER In 2019, it will be very interesting to observe how sales of synthetic diamonds will develop. In a time when clients look to make a statement through jewelry, synthetic diamonds could prove an interesting choice for significant creations at equally significant lower price points.

The brooch is definitely making a strong comeback and will be a fashionable touch to every outfit, from day to night. Another trend is architectural earrings, which can be combined by using different shapes and sizes to dress the ear from the lobe and up. This adds great light to the face and a certain note of contemporary glamour.

Finally, necklace layering, through the combination of different materials, lengths and textures, will remain popular. From the shortest chokers to extra-long chains, they will embellish and dress up deep V-neck décolletés in a sexy way.

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KATERINA PEREZ, KATERINAPEREZ.COM FOUNDER AND EDITOR IN CHIEF In my mind, two of the biggest jewelry trends for 2019 will be abundance of color in jewelry, and unusual diamond cuts.

We will see more and more brightly-hued gemstones coming to the fore in designs — not just those created for special occasions, but everyday jewelry, too. Colored stones are more accessible in terms of price and are more casual than diamonds. Considering that every year, more women wear jewelry as a part of their outfits (thanks to jewelry being seen pretty much on every fashion catwalk season after season), it sets the tone for the colored-stone trend.

Van Cleef & Arpels Victoire earrings with rose-cut yellow diamonds.

COMPILED BY: SONIA ESTHER SOLTANI. IMAGES: LOVE & LUCK BY CIRCA 1700; VAN CLEEF & ARPELS

Charms from Love & Luck by Circa 1700.

I’m always reluctant to talk about trends when it comes to diamonds, as I firmly believe it is impossible for a diamond to date — they are timeless, and their beauty never fades!

That being said, there are styles and pieces enjoying a surge in popularity that I believe will continue throughout 2019.

Smaller diamonds: Heartbreaking for someone like me, who adores large diamonds, but more and more, I hear my followers complain that they don’t have occasion to wear the larger pieces, and they want more wearable pieces that can be worn daily.

Layering: The trend for layering is stronger than ever, so while people are buying smaller diamonds, they are buying more pieces than ever before and wearing multiple necklaces, rings and bracelets simultaneously.

Multi-functional pieces: Everyone loves a piece that can be worn in multiple ways, and today jewelry items can be easily transformed by the wearer. I am seeing lots of “EVERYONE LOVES beautiful diamond necklaces with detachable diamond pendants, or A PIECE THAT earrings with detachable drops, that CAN BE WORN IN can be dressed up or dressed down, MULTIPLE WAYS” depending on the occasion.

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