Tahitian pearls in a variety of colors and sizes. Photo courtesy Perles de Tahiti.

• Akoya sidebar, Animating the Market

• Pearl Import & Export Statistics

By Morgan Beard and Suzanne Wade

You remember your mother's pearls. Round, white, maybe 6 mm to 7 mm in size, strung in an elegant strand that she wore on formal occasions. Looking at the pearl market today, you might be tempted to ask, "What happened?"

With South Sea pearls from Tahiti, Indonesia, and other sources becoming much more available, and the huge influx of freshwater pearls from China, the consumer market of the 1990s was suddenly faced with more pearl options than ever before. Starting around the middle of the decade, major markets like the United States and Europe began to drastically increase their pearl purchases; in Europe, pearl imports doubled in value between 1995 and 2000, while in the United States they quadrupled.

What were the factors that led to this pearl boom? And can the market be sustained over the years to come? To answer those questions, you have to go back to the beginning.

The Rising Tide

Necklace with Tahitian and South Sea pearls from Yoshiyuki Kanda. Photo courtesy the International Pearl Design Contest.

The roots of the current pearl boom can be traced back to the late 1980s and early 1990s, when production of Chinese freshwater pearls and South Sea pearls of all types began to increase.

For the Chinese, freshwater pearl farming had never really stopped since the infamous flood of "rice krispie" pearls that hit the market in the 1970s. But by the early 1990s, the focus had changed: Instead of more pearls, they wanted better pearls, ones that were larger, rounder, more lustrous. And after years of experimentation, they were finally getting the results they wanted.

Gina Latendresse of American Pearl Co. recalls visiting Chinese freshwater pearl farms in the early 1990s. "I think they were well on their way [to producing the quality of pearls we see today]."

Part of their success, she adds, was likely due to help from Japanese pearl farmers who were looking for ways to boost their profits. "The Japanese government was subsidizing research [in Japan], and it's just that the Japanese had the technology to sell and were able to accelerate the whole process."

In the South Seas, too, farming was on the increase. In Australia, the main source of white South Sea pearls, production remained fairly steady. But up-and-coming sources like Indonesia and the Philippines began to culture more and more pearls, bringing prices down.

Similarly, in Tahiti early experiments in pearl cultivation led to greater investment in pearl farms, culminating in a boom in pearl exports. Beginning in 1992, pearl exports rose every year, almost tripling in value between 1992 and 1994.

Prices were down and, equally importantly, awareness was up. Black pearls became the leading edge of consumer interest in pearls, especially after the launch of Elizabeth Taylor's "Black Pearls" perfume in March 1996. Around that same time, jewelers, particularly Tiffany & Co., got advance wind of the campaign and began their own promotions of black pearls.

While consumers were being introduced to a new look, the new low price of Tahitian pearls made them more accessible to designers, who also played a key role in increasing awareness.

"Whether new designers or established, to me they take a lot of their cues from the fashion industry," says Armand Asher of Albert Asher South Sea Pearl Co. "A great example is the Chanel line; for the past five years she's been really strong on pearls."

Tahitian pearls also benefited from the popularity of platinum and other white metals. "White metals were promoted from the mid-'90s on," observes Avi Raz of A & Z Pearl. "One reason stores use Tahitian pearls is that they go very well with white metal."

The fashion industry's use of cultured pearl jewelry on the runway has boosted pearls' awareness and popularity in recent years. Photo courtesy of the Cultured Pearl Information Center (CPIC).

Suddenly, consumers were thinking of pearls as more than a simple strand of round, white akoyas. With the price of white South Sea pearls also coming down, more and more jewelry makers began experimenting with new pearl looks.

One particularly successful experiment was the "Tin Cup" necklace, based on jewelry from the 1996 movie of the same name. The simple design appealed to consumers on the lower end of the market, sparking yet more interest in pearls.

Looking at global trade statistics, French Polynesia's pearl exports shot up from $103.5 million in 1995 to $152.4 million in 1996. Australia posted similar gains, with its exports rising 70 percent to $200 million the same year. Indonesia's exports were high in the early '90s and then fell in 1995 and 1996, but that was likely due to high oyster mortality rather than problems with demand.

On the market end, U.S. pearl imports increased a staggering 168 percent between 1995 and 1996, from $89 million to $238.8 million. European countries like the United Kingdom, France, Germany, and Italy saw a more gradual rise in imports between 1994 and 1999 as pearls became more accepted there as well. Pearls were riding high, the market invigorated by new looks and increased demand.

And then came China.

Although China had been known for its freshwater pearls for years, the sudden flood that emerged in 1998 and 1999 took the market by surprise. Not only were there good-quality pearls, but they came in an astonishing variety of colors, shapes, and sizes — all for a couple of hundred dollars a strand, one-tenth the price of Japanese akoyas.

Designers were in love, as were retail jewelers. "The designer interest brought pearls to people's eyes a lot more," observes Latendresse. "All that had been available were studs and white, round strands. Designers put pearls with ruby rondelles [and other creative looks], and they really created a lot of interest. There are some very interesting designs at fairly low prices, not out of the range for people to purchase as a gift item."

"With the influence of the Chinese freshwater pearls, with the beautiful multicolor necklaces you can purchase now, pearl necklaces can adorn a variety of fashion looks," agrees Writer D'Elia of D'Elia & Tasaki. "They're much more versatile in what they can be worn with, no longer staid and very traditional."

Even more impressive than the variety was the sheer volume. At the 1999 Gemological Institute of America symposium, James Peach Sr. of U.S. Pearl Co. estimated production of Chinese freshwater pearls at between 800 and 900 metric tons, at sizes ranging from 1 mm to 15 mm in diameter. By 2001, production estimates were up to 1,200 tons per year and rising.

Also in 1999, U.S. pearl imports shot up 37 percent to $385.1 million. Much of that was undoubtedly fueled by consumer demand for Chinese freshwater pearls, although South Sea pearls also played an important role.

It was beginning in 1999 that a second wave of South Sea pearls — both white and black — hit the market, sending prices spiralling downward. Tahitian black pearls were more affected than white pearls because there was less control at the source as new, inexperienced players started up farms. Those farms produced mostly low-quality pearls, but rather than destroy them, as the government wanted, the producers were taking them directly to retailers in the United States and elsewhere, pawning them off for hugely discounted prices. By 2001, it was estimated that prices for commercial- and medium-grade pearls were half their 1996 levels, while the top end remained stable.

Meanwhile Back at the Farm

Pearl production workers inserting mantle tissue into the nucleus of the oysters. Photo courtesy CPIC.

The increasing diversity in the pearl market came at the expense of the traditional Japanese akoya, which might have been a major concern for Japanese pearl farmers if they didn't have trouble aplenty already.

Beginning at the end of 1996, pearl-producing oysters began dying in mass quantities in the waters around Japan. The 1997 harvest came in at approximately 28 metric tons, down from 96 tons in 1996. Production dropped again in 1998 but recovered in 1999 and 2000, hovering just below the 30-ton mark.

Six years later, the cause of the dieoff remains a mystery. Japanese researchers blame the deaths on a virus, boosted by pollution and overcrowding on the farms. Regardless of the cause, production is not expected to recover any time soon.

Does this mean Japan is fading out of the cultured pearl picture? Hardly. In fact, Japan's pearl exports took a 63 percent jump in 1996 to $394.6 million, remained more or less stable for a few years, and then jumped again in 1999 to $460.8 million. Japanese pearl houses adapted to the sudden drop in akoya production by dealing in other types of pearl, especially South Sea white and Tahitian black pearls.

"Japan came into the South Sea pearl trade because Japan at that time [in the later half of the 1980s] had three things," says Andy Müller, president of Golay Buchel Japan and co-director of the Japan Pearl Exporters Association. "By far it was the biggest end-consumer nation in the world, to the extent that we estimate Japan consumed more than 50 percent of global seawater cultured pearls at that time; Japan had the manufacturing know-how necessary; and Japan also had the money — the wholesalers had money from the banks to go to production centers in Australia, Tahiti, and Indonesia to buy the raw goods."

An aerial view of an Australian sea-based pearl farm. Photo courtesy CPIC.

"The only thing that keeps Japan a player in this is that the Japanese have a better know-how with polishing and bleaching; they are more detail-oriented in putting necklaces together, drilling and all that," says Gary Tarna of the Japan-based Pearls of Nippon Ltd. "Some cheaper goods that don't need that kind of attention to detail go straight to the market without coming to Japan. But the better-quality goods come here for added value."

It is that focus on quality, traders say, that will keep Japan competitive against pearl centers like Hong Kong, which is positioning itself as a source for South Sea as well as Chinese pearls.

"For the time being I see Japan playing a major role [in the pearl trade]," confirms A & Z Pearls' Raz. "Hong Kong is attempting to play a major role in pearl trading, but there is no one else like Japan that will put together beautiful strands of pearls. If you take a necklace of black pearls manufactured in Japan and compare it to one from Tahiti or Hong Kong, there is no question the Japanese necklace will be better."

Still, the akoya is Japan's signature product, and few Japanese traders have gotten out of it completely. "The Japanese have had to diversify our business, but everyone relies on the akoya," says Ichiro Asano of the Japan Pearl Promotion Society. "If you import and then re-export South Sea pearls, you just have one profit margin, minus your cost for the added value processes. But with akoya, because we're raising and producing them, and doing everything in manufacturing, the profit is bigger. So everyone is waiting for good akoya pearls to be produced."

When will that happen?

"The Japanese oyster got hit with pollution and the virus, so we tried importing Chinese oysters," says Koichi Takahashi, chief operating officer for Mikimoto (America) Co. Ltd. "It was successful, and the last two years we made Chinese and Japanese half and half. Then we find out [the hybrid oysters] are not creating good quality pearls. So now we're concentrating on Japanese oysters. It takes three years to prepare the nucleus, so in 2004 it will come back, or in 2005 it will come back."

In the meantime, however, a lot can happen. According to a Reuters article, unusually low water temperatures in the first few months of 2002 have killed off about half of the current oyster population in the Ise-Shima peninsula, the historical center of Japanese pearl culture. Growers are expecting the lowest harvest in 40 years.

Fast-Moving Objects

The presence of better-quality freshwater pearls on the market has allowed for nice pearl jewelry to be available at a lesser cost. Freshwater pearl necklaces with gemstones from Sanwa Pearl in Japan.

Spurred by the increasing variety of pearls appearing in display cases, pearl sales have climbed steadily for more than a decade. Loose pearl imports into the United States rose from $72 million in 1994 to $391 million in 2000, making it the world's largest pearl market and accounting for approximately 38 percent of the world's pearl sales. Although those imports dropped slightly in 2001 to $321 million, most market watchers say the cause is likely the slowing world economy and the aftermath of September 11, not fading consumer interest in pearls.

Those imports translated into retail sales of $738 million in 1994 and $1.54 billion in 2000, according to Devin Macnow, executive director of the Cultured Pearl Information Center (CPIC). "We've seen almost a 100 percent increase since 1994," says Macnow. "The return to elegant dressing and the death of grunge" have boosted pearl sales, while post-September 11, women have sought out pearls as a source of "inconspicuous consumption."

Pearl traders also attribute the growth in the market to the diversity of pearls available. "This isn't the same cultured pearl business that [we saw] 10 or 15 years ago," says Raymond Mastoloni Sr. of Frank Mastoloni Sons. "We've had the advent of black pearls, the popularity of white South Sea pearls, and [Chinese] freshwater pearls' entry into the market. I think it's all for the better, as far as the consumer is concerned. There's greater selection of merchandise he can pick from. He's not just relegated to one 15-inch strand of pearls."

A strong economy and an emphasis on quality played a role as well, says Asher. "A couple of years ago, demand was more from people who may have had Japanese strands up to 8 mm and who wanted larger pearls, so they looked to South Seas pearls. The typical necklace [for these customers] was
10 mm to 12.5 mm," he says. "On the other side, there were also people who started in South Sea pearls and had smaller South Sea strands, who started to get into very fine pearls. The stock market [was strong] and there was a lot of wealth and luxury, pearls were hot, and everyone went toward that. So another market was created at the upper end with very fine pearls and necklaces of 12 mm to 16 mm, really large specialty things."

With a slowing economy, demand may be stabilizing toward mid-range sizes with a slightly lower price point. "Starting last season, demand has been more in the middle," says Asher. "Both those markets have slowed down a little, and instead the strongest has been in the middle, in strands that are 11 mm to 14 mm, 12 mm to 15 mm."

While the United States is the leading consumer market for pearls, Europe has played a role in the current boom as well.

"The European pearl market has shown continued growth since 1996," says Peter Fischer, director of the pearl division at the Golay Group in Lausanne, Switzerland. "The growth was more significant in the first five years, and has become more moderated in the last two years. [Today], Europe accounts for 18 percent of the global pearl jewelry market, and its market size is estimated at US$900 million."

The biggest pearl importer in Europe is Germany. "Germans have a reputation for being very big pearl consumers," says Fuji Voll of Pacific Pearls, noting that Germany also re-exports a large number to Eastern Europe and Russia. "A friend of mine who sells pearls in Germany said the market in Russia [is huge]. [The Russian government] wants to tax them some ridiculous amount because luxury items are only of interest to people who have too much money." But the Russians love pearls and are eager to buy when they can afford them, he adds.

Europe also fills a different market niche, since European taste in pearls runs differently from the United States. "We notice a rising trend toward South Sea pearl and Tahitian pearl chokers with uniform pearls instead of strands with highly graduated sizes," says Fischer. "The acceptance of pearls in warm tones such as cream to golden increased, and the popularity of baroque pearls rises." Asher notes that in the United States consumers gravitate to pearls with rosy or silvery undertones.

In Europe, too, quality is the name of the game. "In Germany and Switzerland, people are more concerned about quality than size," says Howard Levine, sales manager for EuroPearls in London, although he also notes that southern Europeans love big pearls. "The bigger the better," he adds.

In Tahitian pearls, Europeans go for both small and large pearls, generally in lighter colors, says Robert Wan, chairman of Tahiti Perles. Grays, blues, and other light colors are particularly popular. Americans, on the other hand, go for smaller sizes and less expensive qualities in more brightly-colored "pistachio" and multihued pearls.

Market Futures

Various types of pearls, including mabe pearls, South Sea pearls, Tahitian black pearls, and akoya pearls. Photos courtesy CPIC.

Like all fashion trends, pearl popularity has traditionally had its ups and downs. Although no one is expecting pearls to repeat the past decade's increases in the next 10 years, pearl watchers are optimistic that pearls' current popularity may have some staying power.

"I think despite our bad year last year, we're going to see an increase this year, and I think it's going to continue for at least two or three years before it stabilizes," says the CPIC's Macnow. "With the new varieties of pearls, we might see this pearl boom we've been riding continue for another few years."

"I'm really bullish on this business right now," comments Joel Schechter of Honora Ltd. "I think [pearls] are great for the retailer. There's margin, and they can sell quality and give the customer an affordable product, an unbelievably durable gem. This is a great opportunity for jewelers to stock in depth, and the more jewelers begin to carry wider assortments, their sales will continue to increase. I think the market will stay buoyant."

While Japan, the United States, and Europe will probably remain the major markets, traders are casting a hopeful eye toward other countries in Asia, especially China.

"We sell mostly South Sea pearls [to China]. It's a hungry market," says EuroPearls' Levine, noting that there are also very few foreign pearl companies operating in China. "It's not easy to get into the country and it's not easy to bring money out."

"The big question mark is what's going to happen in China," says Macnow. "When is that billion-person population going to be able to afford pearl strands? If they ever have the passion [for pearls that] we do in the U.S., they could be our biggest competitor for consumption."

Worldwide, pearl consumption ranges from 5 percent of jewelry sold to 15 percent, says Fischer, leaving plenty of room for future growth. "The potential of growth is still high in major pearl markets," he says. "We believe that to help the market develop further, pearl companies have to work closely with the media and make more efforts in communication and consumer education."

Current estimates are that South Sea white and Tahitian black pearls together represent half of the world pearl market by value, with Chinese freshwater pearls and Japanese akoyas each taking a quarter.

Despite their tribulations, Japanese akoya pearls remain a core product. With a return to classic and even antique styles following September 11, they are starting to rise in popularity again, but no one thinks they will regain their former place in the market — not even the Japanese.

"Before, 25 years ago or so, akoyas had 90 percent of the market," says Seijiro Tasaki, executive vice president of Tasaki Shinju. "Then Tahitian, South Sea, and freshwater production increased. It would be difficult for akoyas to capture a great portion of the market again. But we want to find a stable balance in the market for the production and demand of all of these. I think this balance will emerge naturally, though recently it has been a little unstable."

The drop in price of white South Sea and Tahitian black pearls over the past two to three years has hurt the market, especially for the Tahitian pearls. While the top end of the market is fairly stable, middle-range retailers are reluctant to invest money in a product that might lose 10 percent of its value in a year. Concerned about its product's image, the government of Tahiti has introduced stricter regulations on pearl exports.

As of spring 2002, all pearls exported from Tahiti were required to have a nacre thickness of
0.6 mm from the nucleus of the pearl; as of July 2002, that minimum was planned to increase to
0.8 mm. "The other factor is the pearl has to be clean over at least 30 percent of its surface, which is the highest standard of any pearl-exporting country," says Martin Coeroli, general manager of Perles de Tahiti. "The standard is far higher than what's required in Japan."

Coeroli adds that now pearl farmers and dealers are required to be licensed by the government, in cooperation with the local pearl farming associations.

Those regulations seem to be working: At the most recent Robert Wan/Tahiti Perles auction in Hong Kong in March, prices were up 23 percent over the previous auction in September. Tahiti Perles, the largest grower of Tahitian pearls, also announced that it would be cutting production during the first six months of 2002.

"This an absolutely necessary measure," Wan said in announcing the cutbacks. "To continue pearl production at the same pace in view of the economic situation both worldwide and in French Polynesia would only force the price of Tahitian pearls even lower."

During an interview in May, Wan told Colored Stone that he was pleased with the results. "I think it was a good decision. It was psychologically very well accepted by the pearl industry, and there are signs that pearl prices are picking up. . . . Next year at this time we hope to have prices back to the 2,000 French Pacific franc [approximately US$15] per gram level," up from the current price of 1,296 francs [$9.50] per gram.

And Chinese freshwater pearls? "I think the flood has been continuing unabated since 1970, and probably is increasing still," says Pacific Pearls' Voll, who specializes in freshwater pearls. "They could increase production sharply if there was any reason to do so, but even they must be aware it's a saturated market. They're moving in the direction of improving quality."

On the other hand, the Three Gorges Dam project, which is being built upriver of the vast majority of China's pearl farms on the Yangtze River, remains an unknown. While the water flow will remain the same, the dam will change the ecology of the river downstream, and no one knows what effect that will have on the freshwater mussels or the fish that the infant oysters latch onto in the earliest stages of their lives.

"Damming up a river here in the U.S., we've had fish become endangered," says American Pearl Co.'s Latendresse. "If [the Chinese oysters] live on a particular type of fish and that fish is not coming down the river," the result could be trouble for the oysters.

Whatever the size, shape, or color, the diversity of current pearl offerings has served to support the market even in economically challenging times. In fact, that diversity has fed the market as different pearls occupy different niches, offering, literally, something for everyone.

"If you look at different categories of retailers across the board, whether Mom-and-Pop or department stores or even costume jewelry, pearls are all over the place. They weren't there eight years ago," says Asher. "In any product, whether it's electronics or television or a luxury product such as pearls are, there is a point where it's finally made the grade, it's a must-have." For pearls, it seems like that time is now.

Catherine Pawasarat in Japan contributed to this article.