Funeral Chain Exploits Demise of Tradition

Newcomer Family Mortuary ignored industry taboos by advertising discount funerals on television. Will competition usurp tradition in this high-growth industry?

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Upstarts: New-Biz Watch

Mortuary maverick undercuts competitors' rates and trumpets his business in TV spots

A clean-cut man in a dark suit stands in the middle of a cemetery. Soft music plays in the background. "If you could save hundreds, even thousands, of dollars on a funeral," he inquires, "wouldn't you? At Newcomer Family Mortuary, you can."

It's a TV ad that last year started piping a ghoulish note onto the Denver airwaves. In the staid funeral-home industry, running televised spots that tout discount services marks a break with tradition. The ads were purchased by Warren "Ren" Newcomer, 45, founder of Newcomer Family Funeral Homes Inc., based in Topeka, Kans.

The aptly named Newcomer is bucking convention in another way. He is starting a string of discount homes to rock an industry drenched in tradition. He opened his first in September 1995 in Denver; now he has a total of five others--in Topeka; Phoenix; Dayton; Akron; and Albany, N.Y. By the year 2003 he envisions 50 in his chain.

Newcomer is betting on a shift in funeral-buying habits. There are signs of an attitudinal change, particularly among baby boomers, who, as their parents die, are increasingly becoming consumers of funeral services. Some of those consumers, albeit still a distinct minority, are snubbing their established neighborhood funeral home in favor of once-unthinkable alternatives, shopping for cut-rate funerals like those Newcomer offers, buying caskets from retail stores, or choosing cremation, to mention three. (See "Pioneers Thrive As Old Ways Die," below.) "We've moved away from conformity to a moment when the alternative is more acceptable," says David Charles Sloane, associate dean of the School of Urban Planning and Development at the University of Southern California.

However unconventional his business, Newcomer's background is anything but. A stalwart Republican, he belongs to the fourth generation of a Kansas funeral-home-owning family. In 1978, when Ren was just three years out of the University of Kansas, he and his brother, Jeff, entered the business by buying a traditional neighborhood funeral home in Topeka. By 1992 they owned 17 funeral homes and two cemeteries, but they parted ways two years later and split the company between them. (Ren's interest in the traditional funeral business, embodied in Heartland Management Co., now encompasses 15 homes and two cemeteries.)

In the meantime, Ren Newcomer had watched consolidation in the funeral industry become rampant. As he now recalls, "Large public companies were acquiring local neighborhood funeral homes all over the United States and raising prices." That spelled opportunity.

He and partners Ed Tuggle, a former executive at Batesville Casket Co., and Mike Land, a Topeka accountant, ponied up $3.2 million and searched for communities with an aging population and lots of funeral homes. "We believe it's easier for us to gain a little bit of business from a lot of competitors than a lot of business from a single competitor," Newcomer says. As he and his partners built new funeral homes from scratch they advertised heavily--spending $350,000 on TV ads just last year. The same year, the company posted a before-tax profit of $300,000 on revenues of $4.2 million. For 1998 Newcomer projects revenues of $5.5 million.

The trend toward higher funeral prices that Newcomer identified four years ago has gained momentum with the continued consolidation in the industry. Now three giants--Houston-based Service Corp. International, British Columbia-based Loewen Group Inc., and New Orleans-based Stewart Enterprises Inc.--own an estimated 10% of the nation's 22,200 funeral homes. It now costs more than ever to die, reflecting the high price the large chains have paid to acquire funeral homes, says David Brodie, an analyst with Toronto-based CIBC Wood Gundy. An average funeral in 1996, the most recent year for which figures are available, cost $4,782, up 17% since 1993, according to the National Funeral Directors Association.

By contrast, Newcomer Family Funeral Homes charges $2,585 on average, including all the basics, like embalming and a casket. Newcomer slashes prices by following the discounter's age-old formula: reducing margins to increase volume. If he prides himself on maintaining homes that are clean and comfortable, they nonetheless lack gilded amenities like grandfather clocks and grand pianos, as competitors are only too happy to note. "If you want the Kmart of the funeral industry, then go there," says Mike Gordon, a licensed funeral director at Drinkwine Family Mortuary, in Littleton, Colo., a Denver suburb.

Newcomer prefers another metaphor. "I want to be the Herb Kelleher of the funeral industry," he says, referring to the highly regarded chairman of Southwest Airlines Co. By modeling himself on the brash discounter, Newcomer appears to be waving a flag: that his tradition-bound competitors had better change their ways or he will bury them.

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