BUSINESS

Taking on the giants

JENNIFER HUNTER October 6 1997
BUSINESS

Taking on the giants

JENNIFER HUNTER October 6 1997

Taking on the giants

BUSINESS

JENNIFER HUNTER

Once a week or so, a funeral procession passed by Boundary Bay Elementary School in South Delta, B.C., on its way to the local cemetery. Nine-year-old Lawrence Little sat in his Grade 4 classroom watching the procession through the window. The funeral director’s wife would be driving the hearse, head crowned by a black pillbox hat, a black veil covering her face. Little could not keep his eyes off the motorcade. He was fascinated by the burial trappings and the stolid expressions on the faces of the mourners.

Forty years later, Little runs his own funeral operation, but his approach is less ceremonial than the processions he watched as a child. His company, Personal Alternative Funeral Services of Vancouver, is helping to change the funeral industry by cutting the steep cost of burying one’s loved ones. A typical funeral from Personal Alternative, including an elm casket, embalming and professional fees, costs $3,064, instead of the $4,600 to $7,000 normally charged by traditional funeral homes. The five-year-old com-

pany boasts revenues of more than $1 million and four franchises in southern British Columbia; four more are due to open in Ontario next year and 15 are planned for the western United States during the next three years. In the process, Little has become part of a consumer revolution in the funeral busi-

A consumer revolution is shaking' things up in the funeral business

ness, one that is creating problems for industry giants such as Service Corp. International (SCI) of Houston and The Loewen Group Inc. of Burnaby, B.C.

The competition in the funeral business has become so keen that last month Loewen said it was taking a $ 120-million charge in its 1997 third quarter, ending Sept. 30. In addition, the company laid off 540 employees and closed its Cincinnati office. Loewen noted that financial results for the year would be “significantly lower than expected,” partly because of a trend in some regions of the

United States and Cañad towards less costly funeral: “In certain local areas, con petition can be significant, says Paul Wagler, Loewen’ senior vice-president of f nances. “But if you tall about North America-widf

it’s relatively insignificant.” Yet Little and other up starts in the funeral busi ness are bullish about thi future. They think Loewen SCI and the other big play ers in the $14-billion Nortl American funeral busines: are getting worried abou the little guys. “They aren’ happy with our presence, Little says. “We’ve taken ; horrendous amount of busi ness away from them ir the Lower Mainland.” Add: Alex Carey, president of th: Casket Store Inc., anothe: upstart launched two year: ago: “The big companies are threatened by us They’ve driven the prices s( high for funerals that out o exasperation people an looking for alternatives. Based in Burlington, Ont. Carey’s company market: 42 styles of wood and stee caskets in retail-mall stores

Over the past year, he ha: sold seven Casket Stor franchises in Ontario.

Little acknowledges he i:

in business to make money but says he can “put his head down on th pillow each night and sleep easily" knowinj that is not gouging his customers. Dealing compassionately with the bereaved is some thing he has understood since he applied fo his first job as an apprentice at a funera home in Richmond, B.C. After learning hov to embalm, he worked his way to the po sition of funeral director. He even live: at the funeral home. “When my daugh ter, Trade, was born she came from tin hospital to the funeral home,” Litth says. His wife, Dorothy, coiffed the hai of the deceased. Little saw his role a caregiver in the community: “I an proud of what I do.”

In 1989, Little was working as regions manager for a small local chain of funera homes when the company was taken ove by SCI. But Little says he couldn’t live witl SCI’s practice of encouraging employees t: sell, sell, sell—more flowers, expensivi caskets, special cremation urns. After 2 years in the industry, he decided to com pete with SCI, Loewen and the other big fa neral companies.

The pressure those giants feel from th discounters is exemplified by something that happened last month to Jim St. George, president of Consumer Casket U.S.A. Inc. “I had a telephone call from a gentleman who said he had some old oil money and wanted to invest it in the funeral business,” says St.

George, whose Erie, Pa.-based company is planning to open a franchise in Toronto, similar to one of Carey’s outlets. “He said he’d read about us in Money magazine.” St. George sent the man some information about his company and booked an appointment with him. It turned out, however, that the “investor” was an SCI employee, the assistant director of acquisitions. “They acquired a legal document from me under false pretenses,” St.

George says. “I thought they had more class than that.”

The cost of funerals is certainly not a new issue. British-born journalist Jessica Mitford tackled the subject in her 1963 bestseller, The American Way of Death. She encouraged cremation because it was less expensive than a traditional funeral.

Her book led to several reforms, including a requirement that funeral homes itemize their prices. But in an updated edition of the book scheduled to be published next year, Mitford, who died in 1996, wrote that the funeral industry’s treatment of consumers has become worse because of the arrival of SCI, Loewen and other profithungry international chains.

“The funeral chains are driving prices through the roof and using despicable tactics,” says Lisa Carlson, who is helping to finish Mitford’s book and is the executive director of Funeral and Memorial Societies of America. Some of these tactics are described by Don Bohmet, who was recently laid off from his job at an SCI-owned First Memorial home in Abbotsford,

B.C. “We used to offer a free urn for cremations,” he said. “But then SCI brought in this cheap cardboard box to hold the ashes and charged $30 for it. They were hoping the family would look at that ugly cardboard container and want to spend more on an expensive urn.”

Funerals have become expensive because the big chains need to maximize profits and keep shareholders happy. Expansion drives have also increased their debt-loads and put pressure on them to boost rev-

enues. In its boldest move to date, SCI last year launched an unsuccessful $3.2-billion bid to acquire Loewen. Loewen itself spent $1.4 billion in 1996 on acquisitions, bringing the chain’s total to more than 1,000 funeral homes and 400 cemeteries. “Corporations are now competing on both the high end and the low end,” says Carlson. ‘They are trying to steal business from any competitor. And now, in the United States, they are even buying up cemeteries.”

But the voices of protest are becoming louder each month. Rev. Henry Wasielews-

ki of Tempe, Ariz., a suburb of Phoenix, is a Catholic priest who operates an Internet site called Funerals and Ripoffs (www.xroads. com/-Funeral) that offers free advice about funeral costs. He points out, for example, that when the big chains acquire a funeral home “they usually keep the former manager and the mortuary’s former name,” giving consumers the impression that it is still locally owned.

Another activist in the war for less expensive funerals is Father Eloi Arsenault, who organized a funeral services co-operative 12 years ago in his parish of Palmer Road, P.E.I. (population 600). “The prices of funerals had gotten out of hand,” says Arsenault. “It wasn’t even Christian anymore with all the gadgets they were offering.” The big funeral companies tried to shut the co-op down. “They undermined a lot of things,” Arsenault said. “They tried to stop us from buying caskets by threatening the casketmakers.” But none of the threats worked. Now, there are seven such co-ops on the island, and the trend has spread to New Brunswick and Nova Scotia. “This has made a real big difference,” says Arsenault. “Just with the parish of Palmer Road, we figured we saved $150,000 in our first year alone.”

In Vancouver, Little of Personal Alternative says business keeps getting better. Last year, he dealt with 733 families, visiting them in their homes to talk about the service and prices, a touch Nettie Dyck of Abbotsford, B.C., appreciated last April when planning her mother’s funeral. “The first 24 hours after someone dies are the hardest,” she said. “The last thing you want to do is go to a funeral parlor to make arrangements.” Little adds that he can offer less expensive services because he operates on a modest budget and uses local churches rather than building his own chapel. “We don’t have a fleet of jets or a helicopter,” he says. “We don’t have prime commercial real estate or shareholders to answer to.”

His partner, Ron Young, says Little enjoys nipping at the heels of the big corporations. Neither man has any intention of selling out. ‘We’re a pain to those guys,” says Young, whose family has been in the funeral business for four generations. “We’re a royal pain. And Lawrence is enjoying every moment.”

UNDERCUTTING THE COMPETITION

A comparison of prices charged by Personal Alternative, a discount funeral home in Vancouver, and a nearby chain-owned funeral operator:

Personal ■ Chain-owned Alternative I funeral home

Full traditional service (includes consultation, documentation, embalming, transfer of body, use of hearse)

Memorial service without casket and body

Direct disposition of body and cremation without service

Solid ash casket

Oak rental casket

$1,475

$845 I $1,995

$720

i 5, 2,8 I

$1,895 I $3,000

$495

$900