Over the weekend I read an interesting article from the British publication Moneywise, which you can read here.  The article was titled, “Cremation monopoly force prices Up” and deals with, what I would call cremation prices outside of a major metro area.

For the sake of this discussion, I believe that the definition of cremation used would be as follows, “a direct cremation is when the deceased is cremated shortly after death with no family members or friends present.  The ashes are then returned to loved ones once the process is completed.”  According to a second article from Moneywise that you can read here, direct cremation in the United Kingdom has risen from 5.8% of all cremations to 12.5% of all cremations in just the past six months.

In a survey of direct cremation prices, Moneywise found that a lack of competition in areas more than 7.5 miles from a competitor cause prices to rise up to 36%.  They say that the average direct cremation price in a United Kingdom city is US $1,042 but where there is a lack of competition that number rises to US $1,423 — a difference of 36%.

The sharp rise in direct cremations in the United Kingdom has led Co-op Funeralcare to begin a service they have branded “Cremation Without Ceremony” (CWC).  Commenting on the launch of the brand, a Co-op spokesman said, “We’ve seen an increased demand for this simpler service and our priority is always to do right by families in our care.  We’re expecting the demand for this offering to continue to rise, by introducing Cremation Without Ceremony we’re ensuring that we’re offering choices to families when the time comes to say goodbye”.

Funeral Director Daily take:  I see two telling statistics or trends that bear watching with this article and how it will affect us in the U.S. direct cremation market.  The first statistic is the rise in the percentage of direct cremations to all cremations.  It states that the UK percentage of direct cremations to all cremations is about 12.5%.  While I don’t have a concrete U.S. number I would believe that direct cremation is about 25% of all cremations in the states. And, I believe that number will continue to rise.

The other telling trend or statistic that I see in the U.S. mirrors what the Moneywise article talks about — that cremations are more costly the farther you get from a metropolitan area that has price competition.  For instance, I am a resident of Minnesota, and we have about 5.6 million people in the state with about 3 million in the metropolitan Minneapolis-St. Paul market and the rest around the state in what we call Greater Minnesota that live in smaller communities — as a matter of fact probably only Rochester and Duluth reach into 100,000 populations – the rest of the communities are smaller.

So, in the metropolitan area direct cremation is advertised in the large newspapers for as low as $995 — in essence, there is tremendous price competition going on for the vast numbers of deceased people who prefer the direct cremation alternative.

In Greater Minnesota, especially more than 90 miles from the metro area, direct cremation is much higher priced.  At some funeral homes, more than $3000 or triple the cost of the metro area.  Providers know that they will lose some price-shoppers to the low-coast alternative in the metro market at that price, but cannot cut prices at the risk of charging a price that makes them un-profitable.

Here’s where I differ from the Moneywise article — I don’t believe that this is “monopolistic” pricing — I believe it is pricing to fit the market and the realities of doing business in an area where the numbers of deceased are limited.  And, many times, families are aware of the price difference and willing to pay the difference to have their hometown funeral director do the work and give the consumer public the confidence that their loved one is taken care of properly.  The alternative is to call the metropolitan low-cost provider and have your loved one put into the care of someone you know nothing about.  That is a scary proposition to many people.

At the end of the day, it is my opinion that these prices will eventually “meld” together with the metro area charging more and the rural areas will have to charge less or lose too many calls to the low-cost operators.  As the percentage of “direct cremations” go up, death care businesses will have to be profitable on these calls just to stay in business.  It is another piece of the puzzle in operating a death care business profitably in these times.

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