What’s All the Hoo-ha Over Funeral Homes?

Traditional burial has been replaced by scattering ashes.
Courtesy Bay View Yacht Charters

There’s a big hoo-ha taking place over an acquisition in the death care industry. Service Corporation International (SCI), the largest publicly held death care company, is about to acquire Stewart Enterprises (the second largest). Being that I’m on a number of industry insiders e-mail lists, I’ve watched this all play out for quite some time now. Not to mention, there’s been a recent flurry of articles on the topic. I must confess, though, I haven’t given it much attention. As far as I’m concerned, the episode is not of much consequence — and frankly, quite predictable given the death care landscape regarding funeral homes.

“I’ve watched this all play out for quite some time now.”

So why all the hoo-ha over Service Corporation International gobbling up Stewart Enterprises? In my opinion, it’s because people are ill-informed of the full picture. We don’t talk about death. So why would anyone, with the exception of insiders, know the lay of the land or anything having to do with funeral homes?

Here’s the story: these publicly held companies rely on traditional burial for the big profits. They have a business model of grouping costs to gain profit by sharing a crematory, cemetery, embalming facility, monuments, flower shop, hearse, etc., with a number of funeral homes that they own within a radius — thus cutting costs and increasing revenue. What most people fail to understand is that this model has been around for quite a while. And now, these corporations have maxed out on growth. Let’s just say they’re in a corner with almost no where to go — and to make matters worse, their market of traditional burial is dying (no pun intended).

“Here’s the story: these publicly held companies rely on traditional burial for the big profits.”

Remember way back to when Kmart was king, dominating all of the major US cities. Then, when Walmart came along, they opted to strategically grab all the rural areas. Well, the problem with the death care industry is that there could never be a similar Walmart scenario. For SCI’s funeral homes to share resources, they must be 1) within close proximity and 2) each funeral home must handle enough deaths a year for to pay for the bottom line. This is impossible within rural areas. When SCI gobbles Stewart Enterprises (yes, there are some urban independent funeral home hold outs) SCI would still only own 15% of the total US market. I doubt the Federal Trade Commission will stop the merger because it’s impossible for SCI to have a true monopoly.

Limbo Designs provides biodegradable urns; a sign of the future or already the new tradition?

Now, let’s add insult to injury with the fact that cremation is raising at a rapid rate. Well — rapid is an understatement. It’s soaring. And it’s going to continue to do so given we are not the global leaders. The more it soars, the less profits SCI gains. With the progressive Boomers coming down the road, the future does not look bright for old school funeral homes counting on revenue from outdated burial practices. According to Bloomburg Businessweek , SCI charges $6,256 for a burial (not including the casket and cemetery) vs $1,450 for a cremation. The burial market is dissipating and the preneed market (customers prepaying services) is maxed out from the dot com days debacle. The only way for SCI to increase profit is to gobble up what’s left of traditional burial and it’s trappings. But what happens once they have gobbled everything up? Well, don’t be fooled: their business model is indeed going to hell in a hand basket.

“Well, don’t be fooled: their business model is indeed going to hell in a hand basket.”

The most interesting part of this saga is that the majority of the public will never know that any of this is taking place. The funeral industry corporations do not brand their funeral homes, preferring to keep the original family name.

There also seem to be concerns about SCI’s higher prices. A funeral home does not offer the type of experience the Boomers seek — so Boomers are only shopping price when they handle a parent’s death.  And the death care industry is well aware of the fact that the Boomers have the wherewithal to shop price under the distress of grief. Plus, the vast majority of people shop funeral homes via the net, or phone, offering them extra empowerment that will only continue to increase.

“Boomers have the wherewithal to shop price under the distress of grief.”

Boomers are not easily lead by the nose — yup, those days are gone. Times have radically changed.

My prediction is that I will live to see traditional burials become virtually non-existent; monument-laden cemeteries will turn into a thing of the past. So, back to my question: why is there such a hoo-ha? Because late adopters, who are not seeing the full picture, will always remain as a part of our culture.

If you’d like to learn more about the death care industry, read other SevenPonds posts:

• The PBS Documentary “Homegoings” Explores African-American Funeral Customs
• Why Traditional Coffins are Going Under
• The Tell All Book: “Final Rights: Reclaiming the American Way of Death” by Joshua Slocum and Lisa Carlson