Life After Corporate Death Care

It has been a bad few years for the corporate death care or "after-death" industry, and people aren't dying fast enough or expensively enough to fix the problem. As traditional religious death rituals have given way to more secular alternatives, a consumer revolt against the high cost of dying in America is well underway.

After more than a decade in which corporate death care providers aggressively sought to expand their market share, particularly in communities of color, run funeral homes and crematoriums like stealth franchises, and introduce concepts like "branding" into the death care mix, they're now clearly on the retreat. Several major providers have filed for bankruptcy, while others have faced serious legal troubles related to their business practices.

The dramatic contrast between the present and the recent past is evident in a March 1998 U.S. News and World Report article. The article reported that the price of funerals in the preceding five years had risen three times faster than the cost of living, that the "Big Three" death care businesses -- Service Corporation International (SCI), The Loewen Group and Stewart Enterprises -- owned 15 percent of the country's 23,000 funeral homes, handled one in every five funerals, and enjoyed average profit margins approaching 25 percent. The article reported that the average cost of a funeral in 1998 in the United States was $8,000.

Houston-based industry leader SCI saw its revenues drop from $3.3 billion in 1999 to $2.2 billion in 2002, and lost more than $1 billion during that time period. In 2000, SCI owned 3,382 funeral homes. As of April of this year, that number had dropped to 2,393. The San Antonio Business Journal reports that SCI "faces stiff competition from a growing number of independent funeral homes," most of which, the article continues, were once owned by SCI. "In the past few years, many of those independents were able to repurchase their autonomy... Now these independents are aggressively bleeding revenues from [SCI]."

Canada-based Loewen Group, which deliberately targeted black-owned funeral homes for acquisitions, bought up more than 340 properties between 1996 and 1998, and reported an operating profit of nearly 58% in 1997. After studying federal census and crime statistics, the Loewen Group apparently concluded that higher mortality rates -- coupled with a cultural preference for high-markup burials -- made funeral homes in black communities attractive properties. In addition to buying up large numbers of funeral homes in black and Latino communities, The Loewen Group went still further, making a deal with the National Baptist Convention USA -- the largest black organization of churches in the U.S. -- to appoint two Loewen-trained "funeral counselors" to every congregation. These "counselors" sold graves, tombstones, vaults and other Loewen Group services to congregants for a 10 percent commission.

Loewen declared bankruptcy in May of 1999, but has since restructured and now operates as The Alderwoods Group, albeit on a far smaller scale. The decline of the Loewen Group was precipitated in part by two judgments against the company -- one for $150 million and the other for $50 million -- for unfair pricing.

SCI and the Loewen Group represent two of the more dramatic examples of the corporate death care industry's decline, but across the board, corporations attempting to turn a profit on death have seen their incomes and market shares dwindle.

So what happened to an industry once considered recession- and inflation-proof?

What Went Right

The best answer is that the death care industry, long one of the most ethnically diverse and economically stable sectors of the economy, simply proved to be incompatible with corporate values and business practices.

Despite the best efforts of companies like SCI to provide "value to families at their time of need or on a prearrangement basis" while "blazing new trails through corporate innovations and revolutionary services in quality, value and care," a clear shift is taking place in the way Americans deal with -- and pay for -- death and grieving.

"Funeral service is very personal and doesn't lend itself to a standardized cookie-cutter approach," says Bill Isokait, Director of Advocacy for the National Funeral Director's Association (NFDA). "Most funeral home owners have been in business for over 60 years as family-owned businesses. They know most of the people in their communities... There are different cultures, ethnicities, different customs, which these owners are more responsive to."

According to Isokait, the corporate consolidation of the death care industry has stopped. "[Death care] corporations like SCI, Stewart Enterprises and the Loewen Group were anticipating, with the aging of the baby boomers, an increase in the death rate. They saw a market opportunity which didn't materialize... death rates have been steady over the past ten years, and that consolidation has begun to reverse itself... it's down now to about 9 or 10 percent."

"Consolidation has reached a point of saturation," agrees Ron Hast, publisher of the industry publications Mortuary Management Monthly and Funeral Monitor. "None of [the corporate providers] have brought anything better to the community. In fact, they're generally known for higher prices and certainly nothing of any higher standard than has been delivered by private ownership. One would think that the economics of scale would bring lower prices, but it has done just the opposite. In order to carry the burden of the price they paid to acquire a business, plus the cost of middle and corporate management, they've had a difficult time."

Simplicity and cremation are the two most significant trends in death care today, according to Hast. "Those two factors have a strong influence on what people choose. In the past, it was taken for granted that there would be a visitation of the body, typically a religious ceremony, and a procession to the grave. This has changed noticeably, particularly in the coastal regions. Many funeral directors now are serving people for simplicity instead of tradition."

"There are more personalized funeral services," says Bill Isokait, "with an emphasis on the celebration of the life of the deceased, their interests, their hobbies. The rise in the cremation rate, as opposed to traditional burials, is anywhere as high as 55 or 60 percent out west and 30 percent nationally, creeping up every year."

When asked about the economic and religious implications of this trend, Isokait says he sees less and less religious and cultural reluctance to cremate. "Many people these days don't have a religious affiliation at all. You have Catholics who at one time did not approve [of cremation] and that's changed. It's an increasingly viable alternative -- the scattering of ashes to reflect the life and interests of the deceased."

Still Dearly Beloved

One interesting aspect of the rise and decline of the corporate death care industry is how people came to entrust the final care and disposition of their loved ones to businesses in the first place. Certainly, it wasn't always this way.

Jerry Lyons, the founding director of Final Passages, a non-profit program in Sonoma County that educates people about their rights to home funeral arrangements, has some insights on the subject.

"It's similar to births. We've institutionalized many things in this country -- we used to do home schooling, home births, and home weddings. Service businesses have grown up in this country and we've turned things over to other people to handle. We started taking less time to really celebrate the passages in our lives. We hire people to help us do it all and they've kind of gotten bigger -- that's what happened here -- weddings got bigger, people fly now from place to place to attend things and made it harder for people to handle all of their own arrangements. Eventually it evolved to where we got more and more help.

"But then at a certain point," she continues, "greed took over and people being in that emotional state at that time makes them all the more vulnerable to people wanting to make more money off of the situation."

Lyons is one of three women interviewed in "A Family Undertaking," an upcoming PBS documentary that profiles several families who made the decision to forego the typical mortuary funeral and instead care for their loved ones at home. She says the stealth practices of corporations are something she talks to people about.

"I do my best to educate people at my workshops and presentations, making them aware that corporations are buying up independent funeral homes all over the place, and that they don't change the name. Most people aren't even aware of it. One of the easiest examples to give is the Neptune Society, because most everyone has associated them with low-cost funerals and cremation -- they were one of the first crematoriums. People don't realize that they've been bought out by Stewart Enterprises, and are one of the highest cost crematoriums. Their starting cost is around $1500 for direct cremation. When people learn this, they seem completely unaware that there are other services in the area besides Neptune Societies."

When asked for estimates on low-cost, alternative cremation arrangements, Lyons says they can run as low as $300. (She adds that this is the cost for cremation alone and does not include fees associated with filing paperwork or any additional services.)

Compared to the average cost of a traditional burial in the United States -- roughly $6000 in 2001 -- it's not hard to see why the rising popularity of cremation and simple ceremonies honoring the life of the deceased have corporations dying to get out of the business.