Business, Finance

From the investment community: U.S. funeral costs, Australia funeral trends

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To roll into the weekend we thought we would give you some food for thought in the funeral industry from almost 10,000 miles apart.  Our articles today come from the investment community in both the United States and Australia.  Both are good, well thought out articles that deal with the world of death care in their own countries.

I’ve always been one to look at these type of articles which deal with the funeral business on a large scale and try to decipher them into how they affect my business.  From my perspective, when I read these particular articles on trends and pricing, I tend to look at them and hypothesize  that my average service dollar volume will eventually decline because of continued cremation and no services choices by the consumer.  And, if and when I come to that as a conclusion, then I can look into planning how I would make changes in my business to be relevant to those findings.

In effect, these types of articles are fact-finding and potentially confirmation type of articles to me.  Here is what we offer today:

From Livewire Markets and Fiftyone Capital from Australia an article entitled “One industry is very scared of the COVID-19 deaths. . . .” This article from writer Scott Williams delves into the trends in the Australian funeral market and how it might affect Australia’s largest player in the death care business, public company InvoCare.  Here is a portion of that article:

So while death volumes in Australia have historically grown by around 1% p.a. (per annum) due to an ageing population, one would typically think this is a great sector to have exposure to… death is inevitable after all and with a growing population, it has had a favourable tailwind.

However, It could be a tough few years ahead for the funeral industry should people remain cautious and continue with vaccinations and social distancing. As an example, 2018 actually saw negative death rates YoY (Year over Year) due to a milder winter and effective flu vaccinations. 

With large fixed costs, funeral services operators are sensitive to changes in death volumes. To put this fall in perspective, a fall in death rates in 2018 led to a double-digit EBIT decline at Australia’s largest funeral services operator, Invocare (IVC AU). This then translated into a -45% decline in the share price… “

The article concludes by saying the following:  “The combination of falling death rates, pricing pressures and a shift towards lower-cost funeral offerings could see a favourable tailwind, turn into a headwind for the funeral home industry in the years ahead.”

Our second article comes from the ascent, a Motley Fool company.  Their article is entitled “The Average Cost of a Funeral in 2020”.  Here is some of their findings:

  • In 2019 the median funeral cost in the Unites States for service and burial was $7,640
  • Adding a burial vault brings the median up to $9,135
  • The median cost for a cremation and service was $6,645.
  • The cremation rate in the United States is projected to be 56.4% in 2020 and is projected to hit almost 80% by 2040.

From my perspective, I thought the cremation and service cost was fairly high for an average.  When I looked closer, the cost included embalming and a $1200 cremation container.  So, I’m under the impression that the “true average cremation cost” would be much lower because, at least in my opinion, when the average cremation consumer thinks “cremation”, I don’t think that they are thinking embalming and casketing.

So, knowing from other articles that I have read, that the fastest growth segment of American human disposition is “Direct Cremation”, I would hypothesize the average funeral costs will be moving down.  Again, how I use that information will be vital to how I make changes and continue to make my funeral home as profitable as possible.

This article also has some nice graphics which show funeral cost disparities in different areas of the country which are interesting.

Always nice to get some food for thought.  Have a great weekend.

More from the world of Death Care:

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