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In fact, the consolidators have driven prices so high in some markets that they have opened new opportunities for the growing alternative-funeral industry. Russell Moore, a cultural anthropologist, located his Casket Gallery International--which sells low-priced caskets--on the outskirts of Dallas. He based it there precisely because SCI, Loewen and Stewart had such a huge presence in the region. "Many families are literally being priced out of the funeral industry," he says. "They're choosing cremation, or they're trying to do it themselves."
Ray Loewen counters that the average Loewen funeral generates only about $300 profit--although this average includes everything from direct cremations to premium traditional services and excludes all cemetery costs. Revenue from existing homes increases only 3% to 5% a year, he says, and he notes that Loewen also spends "huge amounts" to upgrade new additions. "It used to be thought that funerals were a big-ticket item," he says, "but really the dollars aren't that big."
But in disclosures to the SEC, Loewen reported that last year, through a combination of price increases and cost cutting, the company managed to generate a gross profit margin from its funeral operations of 41.5%--the kind of spread that executives of the FORTUNE 500 almost never see. (By comparison, SCI's gross profit margin for funerals was 25.3%.)
From 1991 through 1995, Loewen more than tripled its revenue, to just shy of $600 million. But most of that growth was generated by a kind of fiscal illusion. The company boosted sales not by attracting more and more corpses to its existing mortuaries but rather by buying up funeral homes at an increasingly fast pace.
The company has had little choice but to keep raising its rate of acquisition lest it disappoint shareholders, whom Ray Loewen has promised annual earnings growth of 25% or more. Perversely, though, that promise prompted stock analyst Steve Saltzman to recommend last April that Loewen shareholders sell their stock. "My concern," he says, "is that at some point this company suddenly hits a wall because it simply can't manage the growth." Even under the best conditions, such rapid growth would be hard to sustain; Loewen's battle with Jerry O'Keefe has made it infinitely more difficult. THE COST OF DYING
Soon after the Loewen group made its offer to sell O'Keefe the Riemanns' insurance company, the deal began to erode. Or so it seemed to O'Keefe, who suspected the Riemann boys of using their insider status with Ray Loewen to undermine the sale. All at once the company seemed to drag its feet and impose new barriers. Even John Turner, then Ray Loewen's right-hand executive, later testified that he too became convinced that no matter how cooperative O'Keefe tried to be, the deal would not be completed.