Stephen Lussier discusses his worries about lab-grown diamonds
Yesterday’s Forevermark breakfast saw a flurry of announcements, including new grading reports, its new Black Label collection, a new sub-brand (Petit Diamonds), and an ambitious promotional strategy for the fourth quarter. Those will be the subject of a future report. Following the breakfast, Forevermark CEO Stephen Lussier spoke with me about synthetics, grading labs, and why he feels millennials relate to diamonds, and “A Diamond Is Forever.”
JCK: There was a lot of talk about the Diamond Producers Association (DPA) wanting a new slogan to replace your famous slogan “A Diamond Is Forever.” You had some things you wanted to clarify about that.
Stephen Lussier: “A Diamond Is Forever” is an extraordinarily powerful slogan. We are so fortunate at Forevermark to have access to something that is so well-known and creates such an emotional response. I am slightly torn, I have dual roles—I am CEO of Forevermark, and at the same time I am also chairman of the DPA. The view that I took with one of my hats is “A Diamond Is Forever” is the intellectual property of the De Beers Group. It is not something we are willing to make available to the category.
In some ways it makes the DPA’s challenge somewhat harder that they didn’t have access to such a valuable piece of intellectual property. It makes them work harder for other insights. The team has come up with a very strong concept, which put together, is additive and makes the whole more powerful.
Through Forevermark, we are certainly going to keep “A Diamond Is Forever” alive and powerful among future generations. Now we can add in this new insight and new thought to grab the attention of these young consumers. So maybe in the beginning it felt like a constraint, but now it feels like a win-win.
JCK: Do millennials relate to “A Diamond Is Forever” in the same way as past generations?
Lussier: In the end, everybody does. The concept of timelessness is relevant to the millennials. The reason they desire diamonds as a product category is they have this sense that diamonds are like a rock. They are always there, they always will be. They symbolize this important thing. They have integrity. That is what makes diamonds special. The concept of “A Diamond Is Forever” reinforces those core beliefs about diamonds.
The one thing about millennials that is probably quite different from two generations before is they don’t think about relationships as being as permanent as we did 30 years before, even if our thinking was more aspirational than reality. They have grown up in the world where they can see it’s not. The majority grow up with single parents or mixed families. Their reality is very different. They need to think about relationships, and expressing emotions within relationships, in a way that is not about thinking about the next 40 years, but thinking about this year and thinking about the present. Where [the DPA] go to, and where we are with “A Diamond Is Forever,” the result is additively more powerful, because it allows us to talk to millennials with more immediacy.
One of the things that we learned through our research is millennials have more social contacts with more people more often than any generation that preceded them, but they recognize there is an impermanence. Most of the contacts are digital, not face-to-face. They know that somewhere in there has to be more depth, and there have to be things that don’t always change. Some things have to be permanent. “A Diamond Is Forever” just reinforces that element of timeliness and call it the always-ness of the diamonds. That is what makes our product different than the technological product and even the experiences that we read so much about. Our strength relatively to that is the permanence of our product.
The reason “A Diamond Is Forever” has lasted so long is it’s able to go from generation to generation. I remember the same discussion that [De Beers’ former ad agency] N.W. Ayer had when they were looking at the marketing around the late 1960s and 1970s, saying, “Oh God, here is a generation that is completely different, they doesn’t want material objects. They just want love, peace, and to protest.” And yet, engagement rings were as solid as ever. Because even within that world, you want some things that give you a little bit of foundation and permanence and connect you, and that is why that line is so good. But it doesn’t say everything.
JCK: The DPA has a $6 million budget. That is not a lot. Do you see that increasing?
Lussier: Given the strength of the work to date, that has motivated us all to double the spending for this year. We are putting significantly more money into the fourth quarter. And we have the aspiration to grow that going forward. We are just at the beginning.
JCK: What do you think of Signet’s Chosen Diamond?
Lussier: Let’s just say it looks familiar. I have seen it somewhere.
They are understanding the same insights. Consumers are interested in knowing more about their product. I never mind other people doing it. We execute for our target and our consumers. We don’t own these insights, and capitalizing on them is important. The last thing I want is any consumer exiting the diamond category because of concerns about the integrity of our product. Our industry is extraordinarily proud of what our product does in the areas where it comes from and the places where it’s mined and in places like India. We want to tell that story. It shouldn’t be surprising that others want to tell that story.
JCK: Do you have any comment on the report that De Beers–owned Element Six was involved in negotiations with Swarovski?
Lussier: I read that with interest. There will be lots of people coming into the business. It will be interesting. Swarovski sells a product that I don’t consider precious jewelry. It’s a nice product, very successful company. It is what it is, it doesn’t pretend to be something else. I can see why they might be interested.
I am not so agitated about it all. Do I get annoyed with what I see a lack of transparency in the approach? Of course. But it is not something that I’m preoccupied with. I look at what is happening in the world of synthetic stones. Synthetic emeralds are a very good example. A lot of hype, a lot of excitement, a lot of profit for everybody. And five years later, it’s $150, no margin left, and it is what it is. We all know the technology price curve is only one direction, and that is not the business that I’m in. I am about selling a precious object with an inherent rarity and an enduring value. If I focus on that, I shouldn’t worry about objects that aren’t that. That doesn’t mean that they don’t have a market. But I don’t think it’s my market.
JCK: Getting back to the report, when people read that they inferred that if Element Six is talking with Swarovski, then De Beers is interested in the gem market more than it previously acknowledged.
Lussier: You saw in that report, we are not a supplier to Swarovski. We are very excited about Element Six. It’s a business with tremendous growth opportunity. We just need one or two application breakthroughs, principles in the area of electrical conductivity.
JCK: Could Element Six ever be interested in gem synthetics?
Lussier: I don’t think so.
JCK: Do you think that synthetics are having an impact on the market?
Lussier: I don’t think so today. Production is certainly growing. I am still a little concerned that there seems to be more production than sales, which makes me a little concerned about where they are going. I don’t think in America. I think the quality control for American jewelers is better than other markets perhaps.
My problem is making sure there is demand for the special product that I have. My only concern is that it’s marketed in a transparent way. At the moment, consumers don’t know much about them, there is not much awareness, and consumers are not particularly interested. If consumers are spending quite a lot of money, they are spending it on a product that is not likely to have any enduring value, and if they go back to the store in five years, they will likely see it at a much lower price. If they still want it, it’s a free world.
I am worried that it is being sold on the same basis as having the same attribute as natural diamonds, which beyond it being crystalized carbon, it doesn’t. It is not inherently rare, and as a result, it won’t have enduring value. Quite the opposite, I’m sure. If people know what they are buying, fine. I wouldn’t want consumers to be misled because I think that will impact on the jeweler who sells them. If they come back in five years and see it priced at 10 percent of what they paid, that jeweler may have a problem explaining that. That is really my only concern. I know where it will end. I have seen it with other gems—rubies, sapphires, and emeralds. I just hope it’s handled in such a way that it doesn’t do any damage in getting there.
JCK: The lab that grades for the Forevermark is now open to the trade. How does that work?
Lussier: We built the Forevemark Institute to support Forevermark. We were always of the view that it is a strange industry that outsources its expertise. It is like asking Mercedes to go to some third party to tell you whether their cars are good. I stand behind my car. I have a different view about what works for brands. Tiffany would probably share that view as well. So we needed to build all the capability and that facility because the Forevermark brand is based on it. Having done that, we have the ability and capacity to support our clients, then why not? We think we bring some value, particularly in the consistency that we have in grading and the technology that we use and have brought to the game.
I have great respect for the other major labs. If you ever heard of Andrew Loog Oldham, he was the manager of the Rolling Stones. Before that, he was a junior person in the Beatles. He always said there can’t just be one band in the world, so he went out and found the Rolling Stones. It is useful for our industry to have more than one quality operation to make sure we are both moving forward and we protect the risk within our industry.
The GIA is an excellent outfit and provides enormous good to the industry. Long may they prosper.