Industry Executive Summary. Funeral Homes in the US Nov , NAICS 81221

Transcription

1 Definition This industry comprises establishments primarily engaged in preparing the dead for burial or interment and conducting funerals (i.e., providing facilities for wakes, arranging transportation for the dead, selling caskets and related merchandise). Funeral homes combined with crematories are included in this industry. STATISTICS 2006 KEY FACTS Revenue $17,307 Million Number of Enterprises 28,281 Forecast Revenue Growth to % Forecast GDP Growth to % Recent Employment Growth -1.7% Average Wages per Employee $30,633 Average Profit Margin 14.0% Average Revenue of Enterprise $611,966 Imports Share of Domestic Demand N/A% Exports Share of Revenue N/A% Competition in this industry is high Volatility low (revenue fluctuations less than 3 points.) The life cycle stage is mature The top 3 players account for 12% of industry revenue: - Service Corporation International 8.96% % - Stewart Enterprises, Inc. 1.63% % - Carriage Services, Inc. 0.66% % Industry Summary PRODUCTS AND SERVICE SEGMENTATION Product/Services Share Fees from funeral 54.7% services Sales of caskets and 33.4% other merchandise Repayment of cash 6.9% advances for funeral services Other sales including 3.3% burial plots Other 1.7% MAJOR MARKET SEGMENTS Market Segment aged 80 years and over aged years aged years aged years aged years aged years aged years aged under 10 years aged years Share 43.3% 23.6% 12.8% 8.6% 5.4% 2.4% 1.5% 1.4% 0.8% MARKET SIZE According to the latest available estimates, in 2005 there were 2,432,000 deaths, up from 2,398,343 in Investment Bankers to the Funeral Industry

2 2004, but down from 2,448,288 in Of this, there were estimated to have been 778,025 cremations, which represented almost 32% of total deaths. The share of cremations has almost doubled from 16.4% in Cremations involve far lower billable costs than burials, meaning reducing industry revenue. Revenue and Value Added In 2007, Funeral Homes and Funeral Services Industry is forecast by IBISWorld to generate revenue of $17,497 million, in constant 2006 prices, representing real growth of 1.1% compared to 2006, due to a continuing low rise in deaths. This industry is also estimated to generate value added of $6,695 million, representing a real increase of 1.0% compared to This industry is expected to account for less than 0.05% of total US GDP in Enterprises and Establishments In 2007, this industry is estimated by IBISWorld to comprise about 28,309 enterprises and 34,091 establishments, both representing a rise of 0.1% compared to 2006, as industry consolidation continues. Employment and Wages In 2007, this industry is estimated by IBISWorld to employ about 145,848, representing a decline of 1.7% compared to Wages for the year are expected to fall 0.2%, in real terms, to $4,535 million. INDUSTRY REVENUE & FORECASTS COST STRUCTURE Item Cost Purchases 30.0% Wages 26.3% Depreciation 5.1% Rent 5.0% Utilities 2.0% Other 17.6% Profit 14.0% Geographic Spread SHARE OF EMPLOYMENT BY REGION Region Share South East 31.1% Great Lakes 18.6% Mid East 14.3% South West 11.0% Far West 9.7% Plains 9.2% New England 4.3% Rocky Mountains 1.8% SHARE OF ESTABLISHMENTS BY REGION Region Share South East 26.3% Great Lakes 20.6% Mid East 18.4% Plains 11.1% South West 9.0% Far West 6.4% New England 6.2% Rocky Mountains 2.1%

3 Recent Industry Performance IBISWorld estimates that this industry will grow at an average annual rate of 1% over the five year period to Marginal growth was achieved in 2003 as slow economic growth and only a small increase in the death rate saw operators engaged in fierce price-based competition. Despite stronger economic growth in 2004, there was a decrease in deaths, which increased competition further. The trend towards low cost/low profits cremations and the increased proportion of pre-need funerals also affected overall industry profit and employment. The industry experienced another poor year in 2005 with the industry continually seeking to raise the average price per funeral by developing and selling value-added after-care services. Slow growth continued into 2006 and 2007 is expected to follow a similar path. The industry has, therefore, returned to being small and fragmented, with a large number of small operators competing in a market which is showing only marginal growth, where quite often price based competition has become rife and there is a clear and growing preference by a large number of consumers towards cremation. In this environment many companies have sought to expand and develop a range of niche and higher value added services, have increased their advertising and promotional expenditure and their training of staff to offer a higher level of personal service, being more aware of religious or ethnic customs of the people and newer arrivals/migrants and in dealing with grieving families and friends of the deceased. Revenue $ Million Growth % ,781.0 N/A , , , , Industry Outlook IBISWorld forecasts that this industry will grow at an average annual rate of 1.3% over the five year period to For 2008, the forecast continuing low economic growth and number of deaths, is expected to lead to a small increase in revenue. The small rise in deaths is expected to lead to on-going fierce price-based competition and an increasing proportion of cremations due to its comparative cost advantage. Over the period to 2012, it is still expected that the number of deaths will increase only slowly, so in the short term, the industry will continue to feel the pressure of competing in a slow growth market where there are many small and fragmented operators. Together with the forecast of low economic growth right through to 2012, the industry will continue to experience only marginal growth in the number of deaths to at that year. This is expected to lead to some improvement in the real industry revenue growth, but continuing significant price-based competition will still affect the industry over this period. The increasing proportion of pre-need and pre-payment services will escalate as will the proportion of cremations, will continue to depress the growth in industry revenue and profitability, and therefore value added, as the number of deaths increases. The industry is expected to experience continuing stricter regulations associated with funerals and cremations services, especially in areas such as occupational health and safety being introduced as well as increased educational requirements for operators to hold or be issued with a license to operate in this industry.

4 Revenue $ Million Growth % , , , , , Factors Influencing the Industry External Drivers of Change The key sensitivities affecting the performance of the Funeral Homes industry include: Age Group (65+). Increasingly, the proportion of the population over 70 years, and in particular from years and over, tends to be a good indicator of the demand for funerals in the future. Deaths - Number. The industry is sensitive to the number of deaths which relates to the age structure of the population, infant mortality rates, impact of diseases, natural and other disasters, and deaths from accident, suicide and other causes. Advances in medical treatments and procedures, medications and general health of the population also impact on this industry. Number of Cremations. The funeral industry is experiencing a shift by consumers away from the relatively high cost/revenue burial services towards the cheaper cremations. Per Capita Disposable Income. Trends in real household disposable income are important since they have an effect on the quality of the service sought by customers, and merchandise sales (including caskets). Key Success factors for operators in the industry Having a good reputation. Always maintaining a good reputation Effective cost controls. As a high labor input industry to ensure effective cost controls are in place. Must comply with government regulations. Complying with all government regulations Product is sold at high profile outlets. Having a high profile or visible location Having links with suppliers. Having links with downstream service providers in areas such as ministers or civil servants, florists, coffin suppliers etc. Receiving the benefit of word of mouth recommendations. Receiving good word of mouth recommendations from families of the deceased. Access to niche markets. To develop niche markets and products, if available Access to multiskilled and flexible workforce. To have access to multi-skilled and trained staff to provide services in a variety of areas

5 Market Characteristics and Industry Conditions Market Characteristics Level Trend Competition high Industry Exports low decreasing Industry Imports low steady Life Cycle Stage mature Industry Conditions Level Trend Barriers to Entry medium increasing Level of Assistance none steady Volatility of Industry low THREATS - Number of Cremations The funeral industry is experiencing a shift by consumers away from the relatively high cost/revenue burial services towards the cheaper cremations. Growth in the number of cremations is expected to continue increasing, rising at around 2.5 percent per annum over 2005 to In 2010 the first of the baby boomers will be entering the senior citizen age bracket, and the death rate is expected to increase. The number of cremations will rise exponentially as a result. OPPORTUNITIES - Age Group (65+) Increasingly, the proportion of the population over 70 years, and in particular from years and over, tends to be a good indicator of the demand for funerals in the future. Over 2006 and 2007 this demographic group is expected to increase at an average rate of 1.56 percent per annum. Following this, the baby boomers will be entering this demographic en mass, and growth rates will average up to 2.5 percent per annum. The proportion of Americans over the age of 65 is projected to increase from 13 percent in 2000 to 23 percent by 2040.

6 EXTERNAL IMPACTS INTERNAL MANAGEMENT ISSUES Trends in real household disposable income are important since they have an effect on the quality of the service sought by customers, and merchandise sales (including caskets). How important is the level of real household disposable income in the amount that customers will spend on a funeral? Are any sales terms negotiable? The industry is expected to experience continuing stricter regulations associated with funerals and cremations services, especially in areas such as occupational health and safety being introduced as well as increased educational requirements for operators to hold or be issued with a license to operate in this industry. What do you envisage the costs of increased regulation to be? How will stricter regulations affect you? What licenses do you currently have? The industry is sensitive to the number of deaths which relates to the age structure of the population, infant mortality rates, impact of diseases, natural and other disasters, deaths from accident, suicide and other causes. Advances in medical treatments and procedures, medications and the general health of the population also impact on this industry. Do current health issues and medical advances affect the pace of business for this industry? Does the aging of the population provide long-term growth for this industry? Always maintaining a good reputation is a key success factor for this industry. Does the company have a good reputation? How is demand affected by recommendations from family and friends, clergy, hospitals and nursing homes? Complying with all government regulations is a key success factor for this industry. Regulations are high and increasing. What local, state, and federal regulatory issues does the company face? How has the company responded to changing regulatory requirements and what were the related costs? When was the company's last environmental audit? Is this company licensed and/or certified? As a high labor input industry, firms need to ensure that effective cost controls are in place. Do wages account for more than 25% of total revenue? Does the company maintain a balance between fixed and variable costs? What is the plan for increasing revenues, reducing costs and improving profits? DISCLAIMER This product has been supplied by IBISWorld Inc. ('IBISWorld') solely for use by its authorized licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Inc. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. In the event that the purchaser uses or quotes from the material in this publication - in papers, reports, or opinions prepared for any other person - it is agreed that it will be sourced to: IBISWorld Inc.