So much for the FTC’s official concession. The Funeral Monitor’s account is a far better read, and it includes some significant items omitted from the FTC’s announcement for public consumption. Here we learn that
specifics of the FTC offenders program include: The FTC will no longer publicize the names of funeral homes accused of violating the rule. Funeral homes which violate the rule will be able to avoid a complaint filed in federal court, as well as an injunction against the funeral home and owner. And to top it off, violators will receive an emblem telling consumers that the establishment is a program participant and has voluntarily agreed to comply with the provisions of the Funeral Rule.
No wonder that NFDA executive director Robert Harden exultantly told the Monitor, “These programs create a win-win situation!”
But will the FTC be able to assure the anonymity of its favored offenders—known now only as “FROPees”—under its Funeral Rule Offenders Program? Not if the ever-troublesome band of “Memorialites”—as one industry writer has dubbed them—has its way. Exercising rights under the Freedom of Information Act to obtain the names of FROPees, the Funeral and Memorial Societies of America (FAMSA) is posting the names of offending funeral homes on its Web site: www.funerals.org/famsa/frop.htm.
But that is a small gesture compared with the current goal of FAMSA—the umbrella organization for the 125 nonprofit funeral and memorial societies in the U.S.—which is nothing less than to recast the FTC rule altogether to make it truly, in the FTC’s own words, “proactive” on behalf of the long-neglected consumer. High on the list of changes being sought are elimination of the nondeclinable fee and bringing cemeteries under coverage of the rule.
16. A GLOBAL VILLAGE OF THE DEAD
Of all the changes in the funeral scene over the last decades, easily the most significant is the emergence of monopolies in what the trade is pleased to call the “death care” industry. Leaders in the drive to upgrade and up-price funerals, the principal beneficiaries of the Federal Trade Commission’s ignoble retreat, are the multinational corporations that have put their imprint on every facet of the business. Of the three publicly traded major players—Service Corporation International (SCI), the Loewen Group, and Stewart Enterprises—SCI, incorporated in 1984, is the undisputed giant.
To trace its brilliant trajectory, a good starting point is its 1995 annual report to stockholders, which vibrates with pride of accomplishments: “SCI experienced the most dynamic year in its history in 1994, reaching new milestones in revenue and net incomes while establishing a solid presence in the European funeral industry.” Revenues exceeded the $1 billion mark for the first time. Its crowning achievement was the takeover of some 15 percent of British funeral establishments added to its existing 9 percent in the U.S. and 25 percent in Australia.
Ever on the prowl, by mid-1995 SCI had devoured yet another large U.S. holding, Gibraltar Mausoleum Corporation, with its 23 funeral homes and 54 cemeteries, and had obtained a foothold in Europe with the acquisition of France’s largest funeral chain, Lyonnaise des Eaux, comprising 950 funeral homes in France and others in Switzerland, Italy, Belgium, the Czech Republic, and Singapore.
SCI’s annual revenue for 1995 exceeded $1.5 billion. By 1996 its prearranged funeral revenue surpassed $2.3 billion and its prepaid cemetery sales accounted for an additional $251 million.
Given these outstanding accomplishments, much now depends on the level of performance of the Grim Reaper. Can he be counted on to do the job? Mortuary Managementwas gloomy on this score, noting that due to medical advances in the treatment of cancer and heart disease, the death rate was bound to decline.
Not so the brokerage houses and investment analysts, who are showing much interest in the new “consolidations,” as they are called. The Goldman, Sachs brokerage house, analyzing their prospects, predicts a rosy future:
Aggregate deaths have increased at roughly 1.1 percent on a compound basis since 1940…. Going forward, the continued aging of the baby-boomers, coupled with an increasing proportion of people over age 65, should keep aggregate deaths rising…. The aging of America should enable the death care industry to experience extremely stable demand in the future.
The Chicago Corporation is equally sanguine. “The addition of well-chosen death care stocks to an investment portfolio can increase the value of that portfolio nicely.” One advantage cited: “Consumers rarely comparison shop due to the infrequency of purchase, which averages once in every 14 years. In many instances, a deceased’s survivors will trade up for more expensive options than what may have already been prearranged.” There is also a word of caution:
Cremation, which is becoming an increasingly popular option, is seen as the biggest risk to the industry. We agree that it is a risk, but do not believe that it is as great as perceived—and it may even yield some opportunities. Moreover, there are risks inherent in the aggressive strategies and tactics favored by industry participants. Industry pricing practices could be subject to greater scrutiny.
In February 1996 Merrill Lynch noted that
operating results were strong in the fourth quarter…. However, the year-over-year increase was below our 51% estimate. The shortfall is attributable to continued softness in the U.S. death rate.
J. P. Morgan in February 1996 carries an optimistic headline: SERVICE CORP. INTERNATIONAL: A STRONG 1995 AND POSITIONED FOR 1996. Here also the continued softness in the death rate is perceived as a bit of a problem:
Throughout 1995, the death rate in North America was lower than the historical trend. Case volume was down 3% year to year….
But there was a silver lining. As John Betjeman wrote in his poem “For Nineteenth Century Burials,” “This cold weather/Carries so many old people away.” The J. P. Morgan bulletin continues:
With extremely cold weather in North America during the first two months of 1996, the first quarter death rate should be closer to the historical trend of approximately 8.8 deaths per thousand. It is our understanding that where extreme weather conditions have been experienced in Europe and North America, volume did, in fact, increase during the first five weeks of 1996, and Europe appears well on its way to meeting or exceeding its plan for the first quarter.
The twin strategies that go far to account for SCI’s phenomenal success, both concepts entirely new to the funeral industry, are “clustering” and anonymity.
Of the twenty-two thousand funeral homes in the United States, the vast majority are small operations doing somewhere between fifty and one hundred funerals a year. Critics of the industry attribute high prices to this factor; they point out that the owner who performs one or two funerals a week must nevertheless maintain a full complement of embalmers, equipment, hearses, funeral cars, and sales personnel to serve these few customers. “It’s full-time pay for part-time work,” as one analyst put it.
SCI entered this picture with the force of a hurricane, swept away the antiquated methods of the old-timers, and substituted “clustering,” the latest in streamlined mass production. Borrowing from the successful techniques of McDonald’s, where food preparation and management functions are centralized, SCI first buys up a carefully chosen selection of funeral homes, cemeteries, flower shops, and crematoria in a given metropolitan area.