Mountain View Cemetery and Mortuary has been in the hands of the same family since 1882, when Levi W. Giddings migrated to Pasadena from his native Indiana and created a resting place in the shadow of the San Gabriel Mountains.
His descendents resisted selling out to a string of out-of-town cemetery operators who offered top dollar in the 1990s for the 60-acre burial grounds of former television Superman George Reeves, Black Panther founder Eldridge Cleaver and 110,000 other souls.
Instead, the family put the business in the hands of a new generation led by Jay Brown, Levi Giddings’ great-great-grandson.
“Unless you have members of the family or trusted employees who can take over the business, who else are you going to sell to?” Brown asked, referring to the three major U.S funeral home operators. “It’s getting harder and harder for families to have businesses pass from generation to generation because our society is becoming more mobile.”
A decade ago, publicly traded funeral companies promised more efficient operations and a more professional approach to the nation’s death-care industry. However, the consolidation wave was widely considered a failure, with one major funeral home operator declaring bankruptcy and others disposing of newly acquired cemeteries and mortuaries sometimes to the same families that sold them.
Three companies Service Corp. International, Alderwoods Group Inc. and Stewart Enterprises Inc. control about a quarter of the U.S. funeral home business and nearly half of the Southern California market. In a business as tradition-bound as burials and cremations, these companies have kept their presence quiet, often running funeral homes under the name of the operation they acquired.
Still, many family-owned funeral operators consider the chains a threat.
“You live in the community, your kids grow up in the community and you know people and give it 100 percent,” said Richard Gutierrez, co-owner of Guerra & Gutierrez Mortuary, which has operated in East Los Angeles since 1945. “That’s the difference between corporate-owned funeral homes and ones in the community.”
Corporate ownership brings economies of scale. Many corporate owners build clusters of funeral homes that share vehicles, employees and equipment. Houston-based Service Corp., the largest operator in Southern California and nationally, has 46 properties in Los Angeles County.
The largest independent operator in the area, Forest Lawn Memorial Parks & Mortuaries, has five locations.
John Warren, a senior vice president at the non-profit that runs Forest Lawn, said the company is large enough to realize some efficiencies, such as centralized accounting from its Glendale headquarters. Warren said Forest Lawn is able to compete effectively with corporate-owned funeral homes and even acquired one that Toronto-based Alderwoods is selling in the Coachella Valley.
“We haven’t had any adverse impact from (corporate ownership),” Warren said.
Besides sharing employees and equipment, the larger companies are able to negotiate lower prices on supplies such as caskets. Earlier this month, a group of consumer activists sued Service Corp., Alderwoods and Stewart Enterprises, along with casket manufacturer Hillenbrand Industries Inc., accusing them of conspiring to keep coffin prices high and exclude discounters. The companies deny the accusation.
The smaller, family-owned companies are able to compete with efficiency-driven corporations by accepting lower profit margins. Many independents average margins of 5 percent to 10 percent; corporate margins are typically in the 15 percent to 20 percent range.
Building up
In the late 1980s and early 1990s, Service Corp., Loewen Group Inc. and Stewart Enterprises (based in suburban New Orleans) paid high prices for funeral homes but couldn’t generate enough revenue to pay down the new debt.
Demand slackened with a declining U.S. death rate and larger numbers of families turning to cremations and home funerals rather than traditional ones costing $5,000 or more.
Those factors also affected the independents, but they were not saddled with the same debt loads.
Loewen filed for bankruptcy in 1999 and re-emerged in 2002 as Alderwoods Group. Shares of Service Corp. and Stewart Enterprises lost more than three-fourths of their value, and the companies began selling some of their properties.
“It became a nasty, vicious circle,” said Jack Jensen, a Northern California funeral home operator and spokesman for the California Funeral Directors Association. “Essentially, in many ways it just plain failed.”
In a recent research report, Merrill Lynch analyst A.J. Rice wrote that the industry is poised for “modest growth.” Service Corp., the largest funeral home operator with nearly 1,200 mortuaries, plans to build new funeral homes possibly pressuring independents to sell rather than confront new competition, Rice wrote.
Service Corp. spokesman Greg Bolton said the company is considering potential acquisitions, although not at the 1990s pace. He declined to comment on any potential Southern California purchases.
As the larger companies stabilize financially, smaller homes will face renewed pressure to sell, said Daniel Isard, founder of Foresight Cos. LLC, a consulting firm. The pressure could be especially intense in markets such as Los Angeles, where fewer families have longstanding ties to multi-generational, locally owned funeral homes, Isard said. “We’re just about to see acquisitions happen again.”
Many family owners are skeptical. John Cabot, vice president of Cabot & Sons Funeral Directors in Pasadena, said his family spurned approaches from all three majors in the 1990s.
Cabot said he is not frightened by renewed corporate competition, and that clinging to family traditions is the best defense against outsiders.
“It’s about personal service and being there for the family,” Cabot said. “We’re doing fine. We thought we could compete with (corporate owners) and we have.”
