Jun. 7--In the past 12 years or so, John and Linda Amey have been approached numerous times by Service Corporation International (SCI) -- the billion-dollar Houston funeral giant that has been buying up local, family-owned funeral homes like theirs.
But the Ameys -- like many of their Austin peers -- refuse to sell to "consolidators" like SCI.
"The control of the funeral home management becomes centralized elsewhere," said Linda Amey, who dreamed of being a mortician since she was 12 years old.
Too often, she said, the consumer pays the price because consolidators tend to raise the price of everything from embalming to caskets to the organist.
This year, the Ameys have taken the unusual action of placing newspaper ads on the obituary page comparing their prices to those of their SCI-owned competitor, Cook-Walden. According to the ads, a funeral at Cook-Walden would cost $728 more than one at an Amey Funeral Home.
The ads are the Ameys' way of fighting the consolidators who are transforming their industry.
Some critics, like the Ameys, say consolidators have hurt the industry- taking over regional markets, raising prices and using aggressive sales tactics to boost their bottom line. But those in the death-care consolidation business believe they have the resources to run the businesses more efficiently, without compromising service.
"When SCI buys (a property) we bring a lot of resources," said Allan Akens, vice president of operations for Cook-Walden in Austin, which was bought by SCI in 1993. "When we cluster the funeral homes, we're able to pool our labor force together. We have the capabilities of updating facilities and fleets because we have the capital to do so."
The top four companies in the $12 billion funeral industry -- SCI, Loewen Group of Canada, Equity Corporation International (ECI) of Lufkin and New Orleans-based Stewart Enterprises -- now own close to 13 percent of the 22,500 funeral homes and 9,600 cemeteries in the United States. One Texas funeral director estimated as many as 60 percent of the nation's funeral homes could be owned by consolidators within 15 years.
Although Benjamin Franklin wasn't an investment banker, he knew life's only certainties were death and taxes.
And corporations like SCI -- and the investors who buy their stock -- are attracted to the stability and profitability of the "death-care" industry. Recessions may come and go, but most people are willing to pay the price to honor the life of a loved one. The average cost of a funeral in 1994, the most recent information available, was $4,470.
"Most people arrange a funeral once every 12 years," said M. Lynn Detrick, vice president of research for Williams MacKay Jordan & Co. Inc., a Houston investment firm. "They make it a high priority when they do it."
Consolidation of the death-care industry was just one of the topics on the lips of Texas funeral directors who gathered in Austin this week for the annual convention of their state association.
Gathered in the lobby of the Hyatt Regency -- most attired in shorts, khakis and polo shirts -- they bore no resemblance to the stereotypical undertaker. They are young and old, male and female.
They will be the first to tell you that most things in their industry have changed in the past 20 years, some dramatically. Many changes have been driven by government regulations, while others have been the result of market forces.
Convention topics include trends in cremation; (at)use of electronic mail, the World Wide Web and the Internet; and modernization of the funeral business.
Only 15 percent of the 570 members of the Texas Funeral Directors Association are consolidators like SCI. But their influence is widespread, especially in large cities like Houston and Dallas.
And if these large corporations have their way, they will get a greater piece of the Austin pie, as well. At the moment, Cook-Walden, with five funeral homes and two cemeteries in the Austin area, is the only local business that is owned by a consolidator.
Weed-Corley-Fish Funeral Home, which got its start more than 100 years ago, has been approached many times over the years by SCI, Stewart Enterprises and Loewen.
"I say we're not interested in selling," said Laurens Fish Jr., who runs the business with his son, Laurens Fish III. "We're a family-owned business and we plan on staying that way."
Over the years, the tree-shaded funeral home at 3125 N. Lamar Blvd. has buried seven governors and dignitaries such as Lyndon B. Johnson and Barbara Jordan.
Running a funeral home, although profitable, is costly business, Fish said. The limousines and funeral coaches cost more than $60,000 each. Because of the unpredictability of the business, the facility must be staffed 24 hours a day, seven days a week.
One large room showcases 30 varieties of caskets, ranging from a $665 wood model to The Parliament, a $7,856 mahogony casket.
A funeral home must be a first-class establishment, Fish said. Each room of Weed-Corley Fish is immaculately decorated. Classic oil paintings hang on the walls. A fountain flows serenely in the courtyard of the red-brick building.
"I think it's a different kind of business," said Lawrence Fish Jr. "On one hand, you're got a profit-oriented business. On the other hand, you're providing a very sensitive service."
Texas has become a mecca for large corporations in the funeral industry; it is home to SCI, ECI and Carriage Services.
SCI Chairman Robert Waltrip started his company with one family-owned funeral home.
Over the past 45 years, he turned it into the world's largest funeral and cemetery company -- serving as a model for other death-care consolidators.
"SCI was the original consolidator," said Detrick of Williams MacKay Jordan & Co. Inc. "I think (SCI) brought a high degree of professionalism to the business."
In 1995, SCI reported record earnings of $183.6 million on revenues of $1.7 billion. During 1995, SCI acquired 1,204 funeral homes, (at)99 cemeteries and 29 crematoria. As of March 31, the company owned 2,795 funeral homes, 324 cemeteries and 138 crematoria.
The company has attracted attention of investors, who have watched the price of the stock jump from $39.62 1/2 in January to $59 Thursday.
SCI is able to take advantage of economies of scale that boost its profitability. In Houston, SCI sends most Houston-area corpses to a prep center, according to an article in the June issue of Texas Monthly. Hearses and limousines are dispatched to the company's funeral home from a livery system.
Akens of Cook-Walden said companies like SCI can provide young funeral directors with the opportunity to rise through the management ranks, without having to worry about the high costs of running the business. The consolidators also provide older funeral directors the opportunity to sell their businesses.
In most cases, the consolidators retain the management and name of a property when they buy it, although they may change the way the business is operated.
"We offer our companies local autonomy," said Anthony Crespo, vice president of operations for Houston-based Carriage Services, which owns 70 funeral homes in 15 states.
But the activities of SCI and other chains have attracted the attention of regulators, who required the company to sell properties in some cities to preserve local competition. In Great Britain, regulators recently asked SCI to identify its funeral homes as corporate-owned and to provide customers with lists of competing cremation rates.
An SCI official did not respond to a request for an interview.
In a highly publicized case, a jury in Jackson, Miss., awarded Jeremiah O'Keefe $500 million in damages last November from the Loewen Group. O'Keefe alleged Loewen had tried to put him out of business.
"Chains have bought mortuaries and doubled the price the next day," said Rev. Henry Wasielewski, a Catholic priest who is a member of the Interfaith Funeral Information Committee, which does price surveys of mortuaries. Wasielewski's committee recently surveyed Houston funeral homes to find out the cost of their least expensive traditional funeral service and lowest priced metal casket. The lowest price available, offered by the Community Chapel Funeral Home -- an independent funeral home -- was $1,495. The lowest price offered by SCI's George H. Lewis Funeral Home was $6,890.
Akens maintains that Cook-Walden does stay competitive with other funeral homes. Prices might be slightly higher because the company has to pay off the debt of acquiring the property, he said.
"Anytime anybody buys anything, there will be some changes," Akens conceded.
SRV, LWNGF,
