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The Demographics of Death

The funeral industry was long viewed as being the most recession-proof industry in the world outside of basic staples like food.  As Ben Franklin told us, along with taxes, death is the only real certainty in life.  But in this most unusual of recessions, even the business of burying the dead is suffering.  Consider this headline from today’s FT: “Death is certain, but it is far from recession-proof.”

The FT writes,

However grand or modest, everyone must have a funeral and publicly listed “death care providers” offer a way to profit from nature taking its course.

Yet even this $15bn a year business has not been recession-proof. Operating earnings of the four largest vertically integrated operators of funeral homes and cemeteries fell by between 10 and 38 per cent over the past six months, compared with a year earlier.

The FT tells us that survivors of the deceased are not the ones pinching pennies.  It is the deceased themselves, while still alive, that are cutting back on prepayments.   There is an entire sub-industry dedicated to prepaying future funerals and investing the proceeds.

At any rate, the Great Recession has only exacerbated a much bigger and more significant trend:  there are fewer people dying.   This is great news, of course (unless you’re a funeral director).   But it has nothing to do with Americans living longer or being healthier.

As you might expect, demographics provide the answer.  We are currently experiencing a “death trough.”   The Boomers are still far too young to be meeting their Maker en masse.  At the same time, the bulk of the Greatest Generation (the World War II generation) has already left us.   This means that the generation now in their golden years is the much smaller Silent Generation, the generation that was too young for WWII but too old for Vietnam.

Fewer people born means fewer people to die — and less business for funeral operators.

The funeral industry will have another decade or two of tight conditions.   But when the Boomers begin to enter their 70s and 80s, business should boom again.

Will many Boomers, reminiscing about their hippie past, opt to be cremated and have their ashes scattered at Woodstock?  Maybe.  But the Boomer generation is so large, it won’t matter.  Even if a smaller percentage of Boomers opt for traditional burial, the shear number of Boomers will insure that business will be good.

In life, the Baby Boomers have been the proverbial “pig passing through a python,” making fortunes for marketers smart enough anticipate what they will buy next.  And the same will be true in death.

Charles Sizemore, CFA
Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy