-Caveat Lector- The business of dying http://www.philly.com/specials/99/burying/html/bury03.asp The conflict of conglomerates Corporations are making a big business out of once-independent funeral homes. Second of five parts By Dianna Marder INQUIRER STAFF WRITER When Margaret McKenney Dupree, now 77, was growing up at 13th and Diamond Streets in North Philadelphia, the undertaker and the barber were virtually the only independent business owners. Along with the church, these businesses were the backbone of the African American community. "They were the people who were looked up to," she said. In fact, they inspired her to go to mortuary school. Those were the 1940s, an era of de facto segregation. Blacks were turned away from white-run mortuary schools. Black bodies could not lie at white-owned funeral homes or be buried near whites. The white community was divided, too - along ethnic lines, with Polish, German and Italian funeral homes. But those communities had other small-business options and never relied as heavily as black communities on the mortuary trade for economic strength. Today, separation along religious lines persists. Indeed, the funeral probably always will remain a religious rite. Ethnic peferences persist as well. And African Amerian funeral directors feel doubly threatened: Their customer base is limited and their businesses have been targeted for takeover by international conglomerates. Elementary math explains why small funeral parlors, regardless of the mortician's race or ethnicity, have a hard time competing: Dupree handles perhaps 50 funerals a year. Large operations such as the Givnish Funeral Home, with 18 locations in Pennsylvania and New Jersey, handle 4,500 a year. The independent does all the work himself - gardening, interior decorating, bookkeeping and landscaping, in addition to embalming and meeting with families. And if the undertaker's children want a different career, there's no one to leave the business to. The cost of complying with environmental and safety regulations has grown over the years, as well. "The conglomerates came into being because the funeral and burial business is a capital-intensive business," said Joseph B. Hornett of Christian Funeral Services, a new company of the nation's largest conglomerate, Service Corporation International. "It's cheaper," Hornett said, "to consolidate." Service Corporation International, the Loewen Group and Stewart Enterprises own about 15 percent of the nation's funeral homes, controlling 25 percent of the market. This worries consumer advocates because: Corporate ownership is not noted in a funeral home or cemetery's literature or signs - and that's significant because name recognition and reputation are important in this business. So families who contact several funeral homes don't realize that they are simply calling one corporation's multiple locations. A number of states have adopted, or are considering, legislation that would require ownership disclosure. Price comparisons become even more difficult for families because some chains charge vastly different prices for identical products and services at each funeral parlor they own. Those locations may be only a few blocks apart. And the chain centralizes its resources, using the same limos and drivers for each funeral in the area and often moving the deceased to a central location for embalming without the knowledge of the family. Corporations have an advantage over independents because they are able to negotiate discounts with casket manufacturers. But unlike retail superstores such as Wal-Mart and Home Depot, the funeral giants say in corporate literature that their policy is to pass savings on to stockholders. Some communities already have been affected by the presence of conglomerates. In New York City, for example, where SCI owns 14 of the 28 Jewish funeral homes, a Department of Consumer Affairs survey showed funerals at SCI-owned homes cost, on average, 50 percent more than those at independently-owned Jewish funeral homes. In his 1999 report, "The High Cost of Dying," consumer affairs commissioner Jules Polonetsky faults publicly-traded companies with deceptive trade practices, increasingly exorbitant prices, and monopolization within the industry. SCI officials say the company uses what it calls a "cluster system" in which funeral homes in a geographic area share resources. Embalming is done in a central location, one fleet of hearses and limousines is shared by all the funeral parlors in the cluster, and caskets are purchased with a significant volume discount. Yet Polonetsky's report shows that the company charges vastly different prices for identical services at its Manhattan funeral homes - $295 for a hearse at one home, for example, and $550 for the same hearse at another. Scott Young, the SCI executive in Pennsylvania, said the pricing at each SCI funeral home was based on the particular expenses of that home. Besides, Young said, the larger the corporation, the greater the government scrutiny - and that's good news for consumers. "You won't find a horror story about somebody absconding with the trust funds of a multibillion-dollar company like ours," Young said. In the Philadelphia region, home to 300,000 Jews, 70 to 80 percent of the Jewish funerals are handled by Goldsteins' Rosenberg's Raphael-Sacks Inc. - which, as its name indicates, is the product of consolidation among local Jewish funeral homes. Bennett Goldstein, who heads the family-run company, says he has been approached by the conglomerates but won't sell because he wants to protect the business for his children. Wall Street analysts have recommended investing in death-care company stocks for several years - and most still do, despite financial problems experienced recently by Loewen and SCI. Both companies face class-action lawsuits from investors because earnings estimates came in below company predictions in 1998 and subsequently forced down stock prices. Ray Loewen, the company founder, resigned and the company reported losses totaling nearly $600 million in 1998. Loewen's stock went from $27 a share on June 30 to $1.19 on Friday. SCI's stock price was $38.13 at the end of the last quarter of 1998. As of Friday it was $20.75. Many analysts say Loewen's financial situation is extremely serious and reflects inflated prices the company has paid for some acquisitions. In addition, Loewen had to pay judgments in 1995 and 1996 in two multimillion-dollar lawsuits involving claims of unfair pricing and breach of contract. Loewen has taken steps to reduce its cash-flow problem. The company closed its Philadelphia office in 1998. And Loewen is selling 124 cemeteries in Pennsylvania, New Jersey, Delaware, Connecticut, Rhode Island, Virginia and West Virginia, to two former company executives. Still, analysts say that may not be enough to generate the cash to make its interest payments to lenders. And on April 16, Loewen officials, who did not return phone calls for this article, said the company may be forced into bankruptcy. SCI's crisis is less serious, the analysts say. The company's stock dipped seriously in the first quarter of 1999 - by $15.31 on Jan. 26 when it announced that earnings for the fourth quarter would miss analysts' estimates. At the time, company officials blamed the loss on a decline in deaths, but industry experts said the stock drop was more realistically linked to concern about SCI's then-pending acquisition of the fourth-largest death-care company, Equity Corp. With the acquisition of Equity, SCI will have estimated annual revenues of about $3 billion; it will own 3,800 funeral homes, 515 cemeteries, and 199 crematoriums in North America. Ron Hast, publisher of Funeral Monitor, says the Big Three all face the problem of pleasing the nation's 76 million baby boomers, who will drive the death rate higher as they age. Boomers, Hast said, are rejecting traditional funeral home services - especially the chapel, because it is too much like a church. So the conglomerates, who paid top dollar in many cases to buy traditional funeral parlors with chapels, are left without sufficient customers, Hast says. SCI disputes Hast's theory, saying it offers a wide range of options for consumers. Susan R. Little, who was until recently an analyst with Raymond James & Associates Inc., says SCI will rebound. "Loewen is in big trouble," Little said. "But the industry as a whole is still strong." At a convention of African American funeral directors in August, Baltimore funeral director Victor March displayed boxes of Uncle Ben's Rice and Aunt Jemima Pancake Mix - symbols, he says, of black images used to promote white-owned businesses. The Big Three death-care conglomerates - all white-owned - have been particularly interested in the African American market. For one thing, the nationwide trend toward cremation has not extended to the black community, according to the Cremation Association of North America. Many black families still favor large-scale, somewhat expensive funerals with in-ground burial. Such rituals reflect back to ancient Egyptians, who developed mummification and the ultimate grave marker - the pyramid, said Ronald Keith Barrett of Loyola Marymount University, who specializes in cross-cultural differences in death, dying and funeral rites. Those 4,000-year-old traditions promote mental health, Barrett says. "A decent funeral is important to us," said Barrett, an African American. "It's our way of trying to triumph over a life that didn't give us dignity." The Big Three seek black business for another reason: The death rate for black males between the ages of 15 and 24 is more than twice as high as the death rate of whites in the same age group. One white-owned casket manufacturer even went as far as introducing a casket aimed at the teenage market. It could be written on with felt-tip markers. The company expected it to be a popular item in inner-cities, but the product apparently did not sell well there. The white funeral industry also tried to enter the African American market through the church because of its importance in the black community. In 1995 the white-owned Loewen Group struck a deal with the Rev. Henry Lyons, then president of the National Baptist Convention, based in Florida. Lyons agreed to give Loewen the exclusive right to solicit business from his organization's 8.5 million members. But the agreement fell apart when independent funeral directors objected. Lyons was later forced to resign his post. He was convicted of racketeering by a St. Petersburg, Fla., jury in January and still faces federal charges of tax evasion, extortion, money laundering and fraud. Black entrepreneurs like James A. Stinson Jr. say that if independents must sell, they should go with black-owned corporations such as his. His grandmother Sulee Stinson started the family funeral business on the first floor of her Detroit house. Her son, James Sr., expanded with funeral homes in Milwaukee. In the early 1990s, James Jr. started Liberty Service Corporation, one of three black-owned funeral conglomerates funded by black investors. "We're trying to preserve a heritage," he said. In her early days in the business, Margaret Dupree said, viewings and funeral services were held at night because everyone worked during the day, and the trip to the cemetery was scheduled for the following morning. Even the funeral director had a day job; her husband, Troy, worked for the telephone company and conducted funerals at night. After her husband died in 1987, her son, the Rev. Kenneth Dupree became the first in the family to work at the business full-time. It's a two-person operation, with Mr. Dupree making arrangements and his mother keeping the books and answering the phones at their home near 28th and Diamond Streets. Mr. Dupree is president of Quaker City Funeral Directors - the local professional organization for African American funeral directors. He worries about the future. "I don't want to be bought out at all, by a white or a black company," he said. "That would mean I would revert to working for somebody else." -------------------------------------------------------------------------- � 1998, Philadelphia Newspapers Inc. All rights reserved. Any copying, redistribution, or retransmission of any of the contents of this service without the express written consent of Philadelphia Newspapers Inc. is expressly prohibited. ================================= Robert F. Tatman [EMAIL PROTECTED] [EMAIL PROTECTED] Remove "nospam" from the address to reply. NOTICE: In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. 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