The American Way of Death Revisited (30 page)

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.

O
f 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 Management
was 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:

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:

In February 1996 Merrill Lynch noted that

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:

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:

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.

The next step is to move the essential elements of the trade to a central depot. “Clustered” in this hive of activity are the hearses, limousines, utility cars, drivers, dispatchers, embalmers, and a spectrum of office workers from accountants to data processors, who are kept constantly busy servicing, at vast savings, the needs of a half dozen or more erstwhile independent funeral homes. Needless to say, the savings obtained via the cluster approach are not passed on to the consumer. SCI prices have risen sharply, with a targeted increase of 30 percent. In markets like Houston, where SCI with its 20 funeral and cemetery businesses has a predominant position (75 percent of the market), its prices—according to a recent survey—average 60 percent higher than those of independents in the area; in Washington D.C., 40 percent higher. Prices of Loewen Group mortuaries tend to parallel those of SCI.

Although the consolidators own only about 10 percent of the nation’s funeral homes, these tend to be prime properties in key markets and account for 20 percent of the country’s funerals. The funeral customer is totally unaware of the strategy of clustering because of the immensely successful SCI policy of anonymity. In general, the plan is to acquire Johnson’s Chapel of Eternal Rest and keep not only the name but also Johnson himself, now installed as salaried manager, thus ensuring continuity of recognition and goodwill. When the occasion arises, you think of dear old Mr. J., honest old chap that your family had dealt with over the years, and so you go to Johnson’s, where Mr. J. greets you and leads you through the casket-selection room and signs you up for the funeral. Little do you know that the Dear Departed has been whisked off for embalming elsewhere, to reappear looking twenty years younger, nicely made up, and elegantly dressed in Johnson’s “slumber room,” where friends and family may gather to say their last farewells. Nor do you know that Johnson’s Chapel is now a highly predatory outfit where nothing’s the same—particularly the prices.

As a customer following Mr. Johnson into the casket-selection
room, you may think you are being shown some randomly placed caskets, with nary a clue to the strategy carefully plotted by SCI, Johnson’s employers, as he leads you through your paces. An SCI directive to its Australian employees reads like a TV miniseries script, complete with stage directions:

There follows a glowing description of the Hanover, which is priced at $2,995. Doe or counterpart then tells the family:

The final stage direction:

The casket prices quoted for Australia may be increased by a factor of three or more for their U.S. equivalent. Note, too, the use of the word “coffin,” a definite no-no in the lexicon of the American funeral trade. But Down Under, the word “casket” may mean—as elsewhere in the English speaking world except for the United States—an ornate box for jewels and other valuables. Australians are just now being indoctrinated by SCI into its undertaker-bestowed meaning of burial receptacles.

SCI has improved upon the somewhat primitive list of okay words (see
chapter 5
) in its recent manual for the use of its cemetery salespeople (emphasis as in the original text):

Herewith a partial list of SCI’s deathless words:

The gravedigger has a problem. He may not fill the grave with Dirt, he must fill it with Earth. His task will be preceded not by a Funeral, but by a Memorial Service. The decedent was not Sick, he was Ill. And he didn’t Die, he Passed On. His remains were not Embalmed, they were Prepared. There were no Mourners present for the Service, only Relatives and Friends.

Mortuaries acquired by the Loewen Group have their own method of boosting casket prices, known in-house as “Third Unit Target Merchandising.” It capitalizes on the propensity of the muddled survivors to avoid the cheapest caskets and choose the next one up in price. This means chucking a newly acquired mortuary’s usual lowest-priced offerings and replacing them with more expensive substitutes, so that when the customer picks that third-unit target he ends up choosing a casket that yields a much sweeter profit. A similar practice is in general use among consolidators; who refer to it simply as “remerchandising.”

The buccaneering tactics introduced by the consolidators have paid off in enviable profit margins. The Loewen Group in a recent filing with the Securities and Exchange Commission (SEC) reported a stunning gross profit margin of 41 percent from its funeral operations. SCI’s profit margin for funerals for the same period was a still robust 25.3 percent.

According to a survey by the nonprofit Memorial Society of North Texas, mortuaries owned by SCI, Loewen, and Stewart Enterprises, the three largest consolidators, were consistently more expensive
than the independents in the area. A Loewen-owned mortuary in Amarillo, Texas, charged a “basic services fee” (the nondeclinable fee allowed by the FTC) of $1,638. The other three Amarillo funeral homes in the survey charged an average of $863.

A
Time
magazine price survey found that Amarillo’s Boxwell Brothers, an independent, charged $185 for embalming, but the Loewen’s N. S. Griggs charged $425.