The Death Care Industry
Benjamin Franklin, 1789
Analysts divide the death care industry into three segments: ceremony and tribute (funeral or memorial service); disposition of remains through cremation or burial (internment); and, memorialization in the form of monuments, marker inscriptions or memorial art. The industry is highly fragmented with the majority of businesses being small and family-owned. The only exceptions are bronze memorial suppliers and casket manufacturers where considerable concentration exists.
Approximately 50% of all internments are memorialized in some permanent manner. Individual lots typically have a bronze or granite memorial while communal internments such as columbaria and cremation niches have a wide range of stone, masonry and wood construction. For more information on the death care industry, please see Exhibit 14.
b. Market Trends
In contrast to the high growth rates in the health care industry, market growth in the death care industry is low but extremely stable. The total number of internments in 1995 was 1.8 million, and the death rate is projected to grow at 1% annually through 2010. Although demand is stable, the types of death care services change with tastes and fashions and the amount of money spent on any given burial and memorialization can vary widely.
Indigents are buried by the state in simple boxes and unmarked graves for a total cost of under $1000. Most people who die are buried or cremated in more elaborate ceremonies. The total cost for a funeral typically runs from $2000 to $8000 and the cost for a memorial could run another $500 to $20,000. Two side-by-side burial plots (e.g. for a husband and wife) typically cost approximately $6000. Financing for the funeral and any memorialization is provided by life insurance payments, funeral insurance, and surviving family members or friends. Although burials and cremations almost always take place within a week of the death (some religions require burial within one day of death), monuments are often not installed for several months or years after burial. Because of the time required to cut, polish, and engrave the stone, relatives of the deceased typically have to wait several months after ordering a monument before it is finished.
The death care industry has experienced a trend toward "pre-need" planning in which elderly or terminally ill people plan their own services. Although burial plots had been sold ahead of time for decades, death care salesmen are arranging packages including caskets, cemetery fees, and funeral services, along with burial plots. Pre-need planning appeals to people concerned with easing the concerns of their loved ones after death and with designing their own memorials. It is also part of a standardization of death care as the industry is increasingly dominated by large professional companies as opposed to the Mom-and-Pop funeral homes of the past.
The most rapidly growing aspect of internment is cremation. In 1980, 10% of the deceased were cremated but by 1996 that fraction had grown to 22% and the Cremation Association of North America expected increase in market share to 29% by 2010. Cremations can be arranged ahead of time, and cemeteries increasingly set aside areas devoted to the cremation remains. Cremation is usually less expensive than burial and better suits mobile lifestyles for the deceased's family who may wish to take the remains (called cremains) with them as they relocate. Increasing environmental awareness makes cremation more attractive as it reduces the consumption of land.
c. Retail business and customers
Wholesale monument customers include cemeteries, retail outlets, and funeral homes and generated sales of $350 million in 1996. Retail sales of monuments through these channels amounted to an estimated $1.5 billion in the same year. There are an estimated 3000 retail monument dealers in the U.S. Frequently located near the entrance of large cemeteries to catch the interest of visitors, monument retailers usually maintain model stones in their yards. Some retailers maintain excessive inventories. Buyers generally select stones from catalogue brochures and specify the type of engraving they want on the stone. There is a wide range of prices. Retailers generally arrange for installing the stone in the cemetery, and pay applicable fees to the cemetery operators.
Although every town has monument retailers, they tend to maintain low profiles. Many are family businesses that were established decades ago and in which many younger family members have no interest. Although software has been developed to custom-design monument engravings, many retail monument sellers do not have a computer and still take orders on written paper. Some still do not have facsimile machines and must send orders to wholesalers by mail. Many retailers do not accept payments by credit card.
Retailers generally have no substantial marketing strategy. Using newspaper obituary pages, some retailers contact the families of the recently deceased, but most rely on simple yellow-page advertisements and word of mouth or passer-by interest to build potential sales. It is difficult for new businesses to get started in the retail business because of the importance of having a local, long-term presence and tradition. The large margins for retail (50-70% versus 20-30% for wholesalers) have permitted these businesses to operate successfully with low sales levels and low efficiency.
The Memorialization IndustryMemorialization of the deceased is the only funeral expense that can be delayed. Half of all people who are buried or cremated eventually have some sort of head stone or equivalent but it might not be installed until months or years after the burial. Family members buried next to each other often have matching headstones or a common stone with multiple names. Traditional inscriptions included the name of the deceased and dates of birth and death. Epitaphs and poems can also be included. New laser imaging techniques allow pictures of the deceased or favorite scenes to be engraved into the stone.
Traditionally stone monuments in Europe and North America were made from marble and granite. Granite is much harder and can withstand centuries of weathering. Marble degrades, especially in cold climates where water enters microscopic cracks and expands upon freezing, eroding the rock. Marble is preferred by artistic sculptors who admire the stone's softness and excellent cleavage characteristics. Marble was also used for simple tombstones in the past because it was much easier to engrave than granite. However, marble's cost and lack of durability has made it a specialty material in modern memorialization. The introduction of a sandblasting process for engraving and power tools for cutting and polishing has greatly reduced the effort required to carve a granite monument from the days when chisels were used. Also, there are a declining number of qualified sculptors who can hand sculpt monuments.
Granite's availability and durability make it ideal for a variety of construction purposes. Almost half of the stone produced in the United States is granite with quarries in 20 states. In 1996, about 36% of granite quarried was used for construction of monuments. The industry is fragmented with 39 companies operating 74 quarries nationwide and a large number of smaller proprietorships in Appalachia
The most common and least expensive color of granite is gray. Most monument stone is quarried in Georgia and New England with special stones coming from other locations. For instance, central Texas is a source of pink granite. Sometimes exotic stone is imported from overseas. Transportation cost is a major part of the cost of stone at any significant distance from the quarry.
Bronze is another material used in memorializing the dead. Bronze markers are used to indicate burial sites, and bronze is sometimes attached as an enhancement to stone monuments. Unlike the granite industry, bronze is highly consolidated with three companies supplying 90% of the bronze used in memorials. Many monument retailers offer customers bronze markers or bronze-embossed granite monuments. But unlike granite monuments, most bronze markers are purchased through cemeteries and funeral homes as part of package deals. Although durable, bronze oxidizes after a few years of exposure to the elements. Although it can be cleaned, many people think the green patina of an old bronze marker has a cache that new bronze or granite cannot match and most bronze markers are not polished.
Funeral homes are the place that most consumers think about in connection with death care. These homes, also called mortuaries, prepare the bodies, put the deceased into caskets, and host services. They also coordinate funerals with religious authorities. There are about 23,000 funeral homes in the United States, almost the same number as there are cemeteries. Funeral homes do not make monuments, but they sometimes maintain sell-through arrangements with monument companies. Homes will refer family members to monument retailers, and some offer customers the ability to order monuments at the home. In return for acting as an agent, the home will typically receive 15% of the monument price.
The funeral home industry was traditionally dominated by family-owned local businesses. Recent consolidation of homes into chains is bringing professional management into the industry and offers a way for families that wish to sell their business to realize an acceptable price. States regulate funeral homes under consumer protection laws in order to prevent gouging of bereaved family members, and some states prohibit the sale of monuments by funeral homes.
The most rapidly growing part of internment is cremation. Growth in cremation has arisen because of its two core benefits : lower cost and the transportability of the remains. In 1980, 10% of deceased were cremated but by 1996 that fraction had grown to 22% and the Cremation Association of North America expects further increase in market share in the years to come. Cremation is usually less expensive than burial and better-suited mobile lifestyles for the deceased's family who may wish to take the remains (called cremains) with them as they move around. Cremation rates vary geographically. Florida, New England, and the Rocky Mountain states all have high cremation rates. Canada, where the ground is frozen for much of the year, also has high cremation rates. Although some caretakers prefer to scatter cremains in the ocean, keep them in the family living room, or dump them down the garbage disposal, the death care industry has built crematoriums and cremation gardens for the permanent internment of cremains. Indeed, death care companies such as SCI operate many crematoriums for the storage of cremains.
There are about 23,000 active cemeteries in the United States. The industry is fractionated with the five largest publicly held companies owning 5% of the active commercial cemeteries. Other non-commercial cemeteries include military, fraternal, and religious cemeteries. The Catholic Church is the largest owner and operator of cemeteries in the country. Cemeteries restrict the type of monument that can be installed on their grounds. Some, like military cemeteries, require a standard monument such as a cross or a Star of David. Others permit only flat monuments that lay flush to the ground. Aside from maintaining an aesthetic consistency, flat markers allowe the cemetery groundskeepers to easily cut grass. Other cemeteries regulate the color and/or size of monuments.
During the late 1960's, a consolidation effort was initiated in the funeral home and cemetery segments. This consolidation resulted in five sizeable public companies: Service Corporation International, Stewart Enterprises, The Loewen Group, ECI, and Carriage Services. Together, these companies have an aggregate market capitalization in excess of $16.8 billion and own 5% of all active commercial cemeteries and 12% of all funeral home operations.