Canadian Funeral Industry

Canadian Funeral Industry

In the United States and Canada there are an estimated 2.75 million deaths per year. In the United States there are approximately 2.5 million deaths compared to Canada’s 250,000 per year. Between the two countries the “Death Care Business” creates around $17 billion of revenue per year. The Canadian portion of this revenue is estimated at around $1 billion with approximately 1500 registered funeral homes. The five year trend for deaths per year in Canada as seen in figure 1 shows an 8.25% increase, which only emphasises the importance of funeral homes in this time of need.

Figure 1

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Funeral homes offer a verity of services and when the time comes the first point of contact more often than not is the funeral director.  The funeral director will help the family make decisions on the elements of the funeral such as, embalming, visitation, music and chapel/church. There are more decisions to be made such as what type of casket or urn and by the way of referral by the funeral director, what cemetery to use.

The largest operator of funeral homes and cemeteries in North America is Service Corporation International (SCI). With revenues of around $2.5 billion and holding of 1712 funeral homes and 490 cemeteries in 48 states, eight Canadian provinces and Puerto Rico. In contrast the only publicly traded Canadian-based death care service company is Arbor Memorial Services Inc. Arbor offers a full range of services through 94 funeral homes, 41 cemeteries and 27 crematories. All of Arbor’s facilities and cemeteries are located in Canada, serving all provinces except Newfoundland & Labrador and Prince Edward Island.

Loewen Group

Through the 1990’s there was a consolidation trend within the funeral industry. Due to the increasing death rate consolidators felt that there was an opportunity to acquire small family run businesses and through centralization could reduce costs and increase revenues. One company that followed this philosophy was the Loewen Group. Ray Loewen graduated from Briercrest Theological College and joined his father in the family run business in Steinbach, Manitoba. After a few years Ray and his wife left the business and purchased their own funeral home in Fort Frances, Ontario and soon after another in the Lower Mainland of B.C.

Ray left the funeral business for a short term in politics. On his return to the funeral business in 1979 Ray realized that there was an opportunity for the Loewen Group to acquire second generation family operated funeral homes. Children who inherited and were unwilling or unable to carry on the business and current owners ready for retirement were looking for an answer. Ray raised money on the stock exchange to purchase these family operations. In 1987 Ray Loewen acquired $24 million in funeral establishments and his first U.S. property. Ray and his wife owned 15% of the voting share of The Loewen Group with Ray acting as the CEO and Chairman of the Board of Directors.

The Loewen Group contributed four key competitive advantages they had in the acquisitions business,

1. Acquisition group was skilled and dedicated to identifying and closing the sale.
2. The Regional Partnership Program allowed Loewen to capitalize on the skills and network contact acquired through its acquisitions.
3. Reputation for doing its utmost to satisfy the needs of sellers.
4. Built in-house expertise in cemetery management through the acquisition of Osiris Holdings.

In the consolidation business there were three main companies, SCI, Loewen and Stewart. By 1996 these three companies owned 9% off the funeral homes and 6% of the cemeteries in North America.

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Although SCI was the largest consolidation company out of the three, by 1996 Loewen Group had spent $1.1 billion on acquisitions compared to $500 million by SCI and $200 million by Stewart.

Strategy Diagram

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Ray Loewen did not follow the same business plan when it came to acquisitions. He believed that the value in a funeral home came from the management and staff that had ran the homes. Other main differences were,