Funeral Operations
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Industry Overview
The US funeral industry includes 22,000 companies that generate about $14 billion of annual revenue from the operation of funeral homes, crematoriums, and cemeteries. Major companies include Service Corporation International (SCI), Keystone North America, and Stewart Enterprises. The industry is fragmented: the top 50 companies generate about 30 percent of revenue.
Competitive Landscape
Demand for services is driven mainly by the number of older Americans. The profitability of individual companies depends on sales and marketing and efficient operations, because local demand is relatively fixed. The main advantage of large companies is their ability to share resources (limos and hearses, embalmers, and marketing costs) among clusters of funeral homes. Small operators can compete successfully with national companies because the funeral business is intensely local. The industry is labor-intensive: annual revenue per employee is around $130,000.
Products, Operations & Technology
Companies in the industry sell products including caskets, burial vaults, burial garments, flowers, burial rights, memorial stones, and cremation urns. Services include embalming and cosmetic preparation, transportation, facility rental for wakes and memorial services, opening and closing burial plots, and cremation. Caskets are the largest cost item for most funerals. National suppliers include Batesville Casket, Aurora Casket, and Matthews International. Most funeral homes conduct around 100 funerals a year and have a large investment in physical assets (facilities, hearses, limos) that are often idle.
Cremations have become a significant and less-expensive alternative to a traditional burial with casket. About 35 percent of funeral customers chose cremation in 2007, according to the Cremation Association of North America. Many funeral homes offer cremation services.
Cemeteries or memorial parks (those with headstones flush with the ground) are operated by municipalities, religious and fraternal associations, the military, and for-profit or non-profit companies. Some funeral homes operate their own cemeteries. Most cemeteries are regulated by the state. Cemetery services include providing earth burial, mausoleum, or columbarium lots or spaces, maintaining grave sites (families pay annual or perpetual care fees) and grounds, and selling grave markers and other ornamentation.
In addition to providing products and services for current ("at-need") funerals, some companies sell "pre-need" services, including price-guaranteed prearranged funerals and sales of burial plots. These sales are generally paid for through monthly installments, although lump-sum payments may also be made. Because the installment payments may be insufficient to cover costs if the customer dies early, companies often use the installment payments to buy a life insurance policy on the customer. State laws may require companies to put a portion of the installment payments into a trust fund to ensure the delivery of future services, or may require companies to post surety bonds to ensure future performance.
