SCI Merger With Stewart Enterprises Doesn’t Worry New Jersey Funeral Homes

November 11, 2013
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Death care isn’t a new term to disparage healthcare reform.

It’s how funeral industry insiders refer to the services they provide and it has changed a lot in the past year.

Outside of New Jersey, news that Service Corporation International, the largest American funeral company, has inked a $1.4 billion deal to acquire its largest competitor has turned heads. The resulting deal would give SCI control of 15 percent of the U.S. market.

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Two weeks ago a Bloomberg Businessweek cover story cast SCI’s acquisition of New Orleans-based Stewart Enterprises in a troubling light. Funeral home directors in West Palm Beach told the magazine that the merger would give SCI control of 60 percent of their local market.

Directors and owners in New Jersey tell a very different story, according to an annual survey published by accounting firm Citrin Cooperman. Funeral home owners acknowledge the merger will increase competition for colleagues in some states, but say it’s been a nonissue here.

New Jersey laws that prevent funeral homes from owning cemeteries or cremation facilities have made their turf unappealing to corporate competitors, according to local industry leaders and business owners. In many of the markets where large companies dominate, that’s exactly how they like to do business.

“That’s a common Stewart Enterprise model. They don’t do standalone, general funeral home operations like you see here,” said Wilson Beebe, executive director of the New Jersey Funeral Directors Association. “The public company model also has a lot of emphasis on pre-need sales as a primary business driver.”

New Jersey laws ban commissions on funeral arrangements paid for in advance. Beebe said that’s also helped insulate the New Jersey market from the effects of a big player growing its presence in the state.

At the start of 2013, SCI owned 21 funeral homes in New Jersey, according to spokeswoman Jessica McDunn. Stewart doesn’t own any funeral homes in the state.

For New Jersey funeral home owners, that leaves them grappling with a different set of changes, like technology and license standards, in an otherwise steady market.

“With death rates so low for the time being, it’s a very static market. There’s not been much growth in this market, as morbid as that sounds,” said CPA Ed Horton and the Citrin Cooperman partner that oversees the annual funeral home report. “There’s only one exit for all of us, personally.”

Cremation has started to seem less like a trend and more like the new normal, he said, which has put a squeeze on profits. Compared to funerals involving burials, which ranged from $8,000 to $16,000 in 2013 according to the state funeral directors association, services with cremations cost from $4,000 to $12,000.

In 2012, 38 percent of people chose cremations over burials.

“As you can see, we’re nearing that one out of two mark,” said Beebe. “That has an impact.”

Several clients of Horton’s have started looking to acquire more funeral homes as a way to grow their footprint and share staff and equipment among locations.

“You may see an owner who owns five funeral homes and has preparation facilities in two or three locations,” he said. “I think that’s a trend we’re starting to see in New Jersey and we’ll see more of it.”

For Anthony Mastapeter, having multiple locations has always been part of the plan for his family.

“We’ve had two locations for more than 30 years because our family grew. How many people can you put under one roof?” he said.

Mastapeter runs the Bayville location for Mastapeter Funeral Home and his brother, Arthur, runs the other in Roselle Park.

Several SCI-owned funeral homes happen to be his competitors.

“In my town alone, they took over half of the funeral homes. What’s bad is they have more power and money behind them to steal business from me,” Mastapeter said. “They have an aggressive pre-need program too, but I’ve seen that if people get wind of them being corporate-owned, it helps people like me at family-owned homes.”

Bob Kugler, owner of Kugler Community Home for Funerals in Saddle Brook, runs his one location with his daughter Shayna Kugler.

“We’re small,” he said. “We do about 80 funerals a year.”

Recently he’s been looking for ways to use technology to extend the reach of his services. “We had one a few weeks ago and the sister of the decedent couldn’t get up here from Florida. During the funeral a family member made a video call on their iPhone,” Kugler said. “They handed me the phone and I was positioning it during the service so the sister in Florida was almost present and felt like she was here.”

He’s a bit of an anomaly in the industry.

Kugler splits his time between the business and working as the town’s chief of police. He also earned a master’s degree. So it’s no surprise that as New Jersey’s funeral home community considers upping license education requirements to a 4-year degree minimum, he’s in favor of the change.

For years the New Jersey license process has required applicants to earn an associates degree or 60 college credits, attend mortuary school and complete an internship at a funeral home.

“There’s no doubt about it. Anyone coming into the profession in 2013 should at the very least have a college degree. Education isn’t everything. You have to have a sincere willingness to help people and you have to be morally and ethically correct,” he said. “I’m not saying uneducated people aren’t ethical. I think the more educated you are, the better prepared you are to serve people.

[via: NJ.com]

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