Service Corporation International (SCI) is to death what H&R Block is to taxes. SCI, the largest funeral and cemetery services company in North America, operates more than 1,400 funeral homes and about 375 cemeteries in 43 US states, eight Canadian provinces, the District of Columbia, Puerto Rico, and Germany (for now). The company's primary services include embalming, burial, and cremation. As part of its business, SCI also sells traditional funeral necessities, including prearranged funeral services, caskets, burial vaults, cremation receptacles, flowers, and burial garments. The company has expanded significantly in recent years through acquisitions.
SCI's most recent purchase was a relatively large one. In 2010, the company acquired Keystone North America for about $289 million. As North America's fifth-largest provider of death care products and services, Keystone operates about 200 funeral homes and 15 cemeteries in some 30 US states, as well as in Ontario, Canada. (Keystone's corporate headquarters is located in Toronto; its management operations take place in Tampa.) SCI cited Keystone's attractive presence in small to midsize markets as SCI seeks to grow its business in rural and suburban areas. Also, the resolution of an antitrust lawsuit with the Nevada state attorney general cleared the way for SCI to purchase the biggest southern Nevada funeral services provider, Palm Mortuary, in 2010. To gain approval for the acquisition, SCI had agreed to sell assets, including one Las Vegas-based mortuary company.
The Keystone acquisition came years after SCI's purchase of chief rival Alderwood Group in 2006 -- the biggest in a series of acquisitions that have fueled SCI's growth. The acquisitions have enabled the company to operate clusters of funeral homes in the same geographic regions, which allows them to share personnel, vehicles, and preparation services, thereby lowering their operating costs. SCI maintains the local identity of each home, allowing it to handle services for different religious and ethnic groups. In Manhattan, for example, SCI owns the top Christian funeral home (Campbell) and the leading Jewish funeral home (Riverside).
Not all of its acquisitions have panned out. The company sought to expand in 2008 by making an $881-million bid to acquire rival Stewart Enterprises. Stewart rejected SCI's initial offer as inadequate. Not one to give up easily, SCI sweetened the offer but eventually gave up and withdrew its bid.
During the past few years, SCI has been reducing its international holdings to focus on its core business of North American funeral service locations and cemeteries. To that end, it has sold its minority interest in its UK operation and its funeral homes in Argentina, Chile, Singapore, and Uruguay. SCI also is looking to sell about a dozen funeral homes in Germany, which represents its only remaining international holding. As of 2011, the business accounted for less than 1% of its revenue.
As the popularity of lower-cost cremation in North America has increased to about 44% of SCI's business in 2011 (up from about a third 10 years ago), the company has been focused on adding new products and services, including online memorials and themed ceremonies, in an attempt to boost revenue. As a result, SCI has posted higher average revenues for each cremation service that's performed. Other parties cutting into SCI's profits include competition from casket wholesalers (Costco), online retailers, and independently owned funeral homes.
For those who are organized and proactive, SCI offers Dignity Planning. It's an end-of-life planning tool available through a website, on the telephone, or in a paper version. This tool is aimed at families who are in the process of estate planning and gives them an opportunity to plan a funeral, detailing the types of services and products they would prefer. One does not have to be a customer of SCI to use Dignity Planning; however, the company says that most people who use the service end up as SCI customers. To keep this service fresh for potential pre-need customers, the care provider is tapping technology in 2012 to help its sales people during the planning process.
Call it unburied treasure: SCI has $6.9 billion worth of backlogged unfulfilled funeral contracts. – less