A few months ago, a stock analyst issued a critique warning against investment in the industry’s public companies. A few weeks later, the critique got a second wind when chat pages and social media forums picked up on the critique’s conclusion, and circulated the article as proof that certain trends will ‘haunt’ all funeral homes and cemeteries for years to come. Several weeks later, the critique’s attempt to assess or explain the industry’s key issues continues to haunt me. If a professional who makes his living from investment assessments has difficulty grasping and explaining the intricacies of the death care industry, consider the difficulties our regulators and legislators may have understanding the business.

The critique identified “the” three issues impacting the industry’s revenues and profitability: cremation, preneed and longer life expectancies. This post will focus on cremation.

The analyst opens with the statement that ‘several unfavorable secular trends’ are hampering long-term growth and profitability in the death care industry. But, the critique concludes with sticking the “unfavorable secular trend” label solely on cremation. There is no doubt that cremation is turning the industry on its head, but is the “secular trend” label important? It is when you view the history of the business, and need to convey the depth of the cremation issue, and that it will continue to grow.

The American way of death was shaped by the Christian funeral and burial. Theology professor Thomas Long has written several insightful books and articles regarding the Christian funeral and the role of the body. Another excellent work is Paul Irion’s “The Funeral: Vestige or Value?” The growth of death care business can be traced to the fact funeral homes profited by establishing a good relationship with the local church. That fundamental relationship served the funeral home well for several generations. But as our society became more pluralistic and secular, the acceptance of cremation grew.

For theologians, cremation represents a challenge to long standing beliefs about the funeral ritual. But, the emerging message to clergy is one of education and adaptation. As a follow up to his seminal work on the funeral ritual, Paul Irion wrote a book simply titled “Cremation”. This blog has previously discussed this issue, and one form of adaptation by churches: the columbarium.

For the funeral director, a church’s shift to embrace cremation sends a mixed message. The families from these churches view the funeral as having value as a ritual, but a ritual that does not require the purchase of a casket. If the funeral home does not own a crematory, the director will have to compliment the church’s pastoral care, or risk losing the church’s business altogether.

Operators must also market to a public that has become more secular, and view the funeral home as providing a utilitarian service. As the analyst alluded to, once the body is disposed of, all other services are ‘auxiliary’ in nature. The secular public is more likely to purchase a cremation, and forego any type of memorial service.

While cremation has taken away casket sales and cut into the purchase of services, is the critique accurate in its warnings about the death care industry? Keep in mind that the analyst was assessing the industry for profitability and growth, and that growth is difficult for a mature industry to achieve. The death care business has all the characteristics of a mature industry: limited or declining markets, intense competition, and evolving consumer demands. Individual companies may be able to achieve growth, but the industry as a whole may not until the Baby Boomer generation ages another 10 years.

Some mature industries do wither and eventually die away. But in contrast to industries that produce a product with a definitive life cycle, death care is based on a service that will always be needed. Funeral homes may have been guilty of having allocated too much of their profit to the sale of a casket and too little to their services. But, they have the ability to adapt their pricing strategies. For the small operator who cannot afford a crematory, alkaline hydrolysis may provide a less expensive investment. And, there is the green burial alternative to explore.

Next: Dark Clouds and Preneed