The Co-op Group has pledged to slash the cost of funerals and match any rival offers plunging the market into a price war. With the company holding around 16% of the UK market, the impact on the rest of the market could be significant.
Dignity, the UK’s second largest funeral group with around 12% of the market, also slashed the cost of services in January. The Co-op’s offer to price match any rival quote will certainly rachet up the pressure among all of their competitors.
The latest Plimsoll last sentence has taken a close look at the financial performance of the UK’s 700 leading Funeral companies from the two majors right down to the small family owned firms. It shows a market in fairly rude health but with a gap emerging between healthy and struggling Funeral Directors:
| Healthy companies |
| 11 are making twice the average profits |
| 384 are rated as Strong |
| 336 are selling more this year |
| 349 are more profitable |
| Struggling companies |
| 134 are making a loss |
| 149 are rated as Danger |
| 289 are selling less this year |
| 302 are less profitable |
Christopher Evans, senior analyst at Plimsoll explains his view of the damage a long price war would have on the market, “Funeral costs are already a sensitive subject. The average cost of a funeral is now estimated to be £4078. Many families suffer financial hardship burying a loved one. However, while a small, short term price reduction is welcome, it could alter the make-up of the market and drive long term prices even higher”.
“Almost half of the market is making less profit in the latest year. Around 1 in 5 are already losing money. Burial plots and cremation fees aren’t coming down while wages, rates and other costs are rising. Price wars affect the bottom line as everyone has to compete for business. Many in the market simply can’t afford a long war. Others can use price reduction as a handy means of eliminating their competition”.
“With so many Funeral Directors already losing money, a further hit on margins could be fatal. As smaller, independents find they can no longer compete with larger rivals, expect a period of consolidation. Larger players will acquire struggling, smaller competitors or more likely, move into their territory and squeeze them out on price.
“The end game is the same; less consumer choice, less competition, greater pricing power. In 20 years will the small, family owned Funeral Director have gone the same way as the Butcher or Greengrocer? Will we all be using a handful of larger operators with shareholders and dividends to worry about?”