De Beers is grappling with a surplus of natural diamonds, with its inventory reaching $2 billion—the highest level since the 2008 financial crisis—according to the Financial Times. This stockpile has remained at approximately $2 billion for much of 2024, reflecting waning demand for rough diamonds.
"It's been a bad year for rough diamond sales," CEO Al Cook admitted to the FT. De Beers did not immediately comment on its inventory levels or provide comparisons to prior years.
The company has faced significant challenges recently. China's sluggish economy has dragged down the luxury market, including diamond sales. At the same time, Gen Z's growing preference for more affordable lab-grown diamonds has dampened demand for natural stones. The lingering effects of the COVID-19 pandemic have also played a role, with marriages only returning to pre-pandemic levels earlier this year.
For the first half of 2024, De Beers reported a 20% drop in sales year-over-year, falling to $2.2 billion.
Parent company Anglo American has responded by announcing plans to divest De Beers, potentially through a sale or an initial public offering (IPO). Meanwhile, De Beers has implemented several strategies to adapt, including reducing production at its diamond mines, exiting its own lab-grown diamond ventures, cutting prices, and launching a fresh marketing campaign this fall. The company has also doubled down on its retail segment to better compete in the changing market.
Despite the challenges, CEO Cook remains optimistic about De Beers's future. "As we go independent, we have the freedom to focus on marketing as hard as we focused on mining," he told the FT. "This feels to me like the right time to be driving marketing and getting behind our brands and retail, even as we cut the capital and spend on the mining side."
However, a recent McKinsey report painted a more uncertain picture. It warned that lab-grown diamonds could eventually dominate the market, relegating natural stones to niche categories. Alternatively, falling prices for lab-grown diamonds could reposition them as fashion accessories, potentially reducing competition with natural diamonds.
The report also raised a stark possibility: if consumers can’t differentiate between natural diamonds and lab-grown ones, all diamonds might lose their allure. "In such a scenario, diamonds could simply fall out of fashion, losing their appeal as must-have engagement ring staples," the report cautioned.
