The American Way of Death Revisited - Jessica Mitford [106]
In February 1996 Merrill Lynch noted that
operating results were strong in the fourth quarter.… However, the year-over-year increase was below our 51% estimate. The shortfall is attributable to continued softness in the U.S. death rate.
J. P. Morgan in February 1996 carries an optimistic headline: SERVICE CORP. INTERNATIONAL: A STRONG 1995 AND POSITIONED FOR 1996. Here also the continued softness in the death rate is perceived as a bit of a problem:
Throughout 1995, the death rate in North America was lower than the historical trend. Case volume was down 3% year to year.…
But there was a silver lining. As John Betjeman wrote in his poem “For Nineteenth Century Burials,” “This cold weather/Carries so many old people away.” The J. P. Morgan bulletin continues:
With extremely cold weather in North America during the first two months of 1996, the first quarter death rate should be closer to the historical trend of approximately 8.8 deaths per thousand. It is our understanding that where extreme weather conditions have been experienced in Europe and North America, volume did, in fact, increase during the first five weeks of 1996, and Europe appears well on its way to meeting or exceeding its plan for the first quarter.
The twin strategies that go far to account for SCI’s phenomenal success, both concepts entirely new to the funeral industry, are “clustering” and anonymity.
Of the twenty-two thousand funeral homes in the United States, the vast majority are small operations doing somewhere between fifty and one hundred funerals a year. Critics of the industry attribute high prices to this factor; they point out that the owner who performs one or two funerals a week must nevertheless maintain a full complement of embalmers, equipment, hearses, funeral cars, and sales personnel to serve these few customers. “It’s full-time pay for part-time work,” as one analyst put it.
SCI entered this picture with the force of a hurricane, swept away the antiquated methods of the old-timers, and substituted “clustering,” the latest in streamlined mass production. Borrowing from the successful techniques of McDonald’s, where food preparation and management functions are centralized, SCI first buys up a carefully chosen selection of funeral homes, cemeteries, flower shops, and crematoria in a given metropolitan area.
The next step is to move the essential elements of the trade to a central depot. “Clustered” in this hive of activity are the hearses, limousines, utility cars, drivers, dispatchers, embalmers, and a spectrum of office workers from accountants to data processors, who are kept constantly busy servicing, at vast savings, the needs of a half dozen or more erstwhile independent funeral homes. Needless to say, the savings obtained via the cluster approach are not passed on to the consumer. SCI prices have risen sharply, with a targeted increase of 30 percent. In markets like Houston, where SCI with its 20 funeral and cemetery businesses has a predominant position (75 percent of the market), its prices—according to a recent survey—average 60 percent higher than those of independents in the area; in Washington D.C., 40 percent higher. Prices of Loewen Group mortuaries tend to parallel those of SCI.
Although the consolidators own only about 10 percent of the nation’s funeral homes, these tend to be prime properties in key markets and account for 20 percent of the country’s funerals. The funeral customer is totally unaware of the strategy of clustering because of the immensely successful SCI policy of anonymity. In general, the plan is to acquire Johnson’s Chapel of Eternal Rest and keep not only the name but also Johnson himself, now installed as salaried manager, thus ensuring continuity of recognition and goodwill. When the occasion arises, you think of dear old Mr. J., honest old chap that your family had dealt with over the years, and so you go to Johnson’s, where Mr. J. greets you and leads you through the casket-selection room