Salvation Army says entry into funeral business will help disadvantaged
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Version 0 of 1. The Salvation Army has entered Australia’s funeral industry, a move welcomed by consumer advocates concerned by a “long history” of unscrupulous providers taking advantage of the newly bereaved and a lack of competition. Salvo Funerals officially launched in Sydney this week, following a successful six-month trial in which it delivered more than 90 funerals. Malcolm Pittendrigh, the chief executive, said it was a social enterprise designed to both meet the needs of the community and return money to the not-for-profit. He had worked at the Salvation Army as an accountant for nearly 20 years and pitched the idea of a funeral service to senior leadership as a “natural extension” of its work. “Part of our approach was a lean, start-up methodology, where you build, you test, you learn – just to prove that you have something that’s worthy of putting into the community.” In a market dominated by “a couple of big players”, he said Salvo Funerals’ point of difference was its lower-cost offerings. “I really do feel there was an opportunity for a fairer price model and one that was transparent with families,” he said. “We are, I believe, meeting a particular need of the lower socio-economic folk who just can’t afford thousands and thousands of dollars for a funeral.” Salvo Funerals’ base offering is $2,180 for a no-service, no-attendance cremation – significantly less than the figure of $4,000 quoted by Asic for a basic cremation. “We’re finding that’s quite a popular product, if you like, not just for those without means but those with means who are looking for a basic funeral,” Pittendrigh said. While the cost of a funeral ranges widely, industry members spoken to by Guardian Australia indicated that $10,000 was about average in Sydney. But all of them gave the caveat that most newly bereaved did not have the knowledge or the emotional capacity to make savvy decisions. “It is a complex process and people are grieving ... it’s very easy for funeral directors to sell them products that just aren’t required and make ridiculous margins,” said Pittendrigh. Only 20% of people pre-planned their funeral, he said, meaning the vast majority “don’t really have a clue when it comes to organising or coordinating a funeral”. “There’s a real knowledge gap there and I take pride in being able to close it.” The Australian funeral sector is dominated by InvoCare, a listed company and the largest private funeral, cemetery and cremation operator in the Asia-Pacific region. In Australia it operates three national brands (White Lady Funerals, Simplicity Funerals and Value Funerals) as well as more than 30 regional ones. Last month InvoCare announced it would scale back its US operations – closing the funeral business but not the cremation operation – to focus on Asia-Pacific markets. Its 2016 full-year results, published on 23 February, showed a nearly 12% increase in operating earnings after tax to $55.2m. Overall gross sales were $450.7m, up 3.3% on the previous year. A spokeswoman for InvoCare said she could not comment on the activity of its competitors but that a no-service, no-attendance cremation was available for as little as $1,500 through its Value brand. Funerals by Simplicity started at $5,000. In November 2014, InvoCare paid a penalty of $102,000 after the ACCC received complaints that it had told some consumers who had pre-purchased burial sites that they were contractually required to purchase memorial plaques as well. At the time the ACCC expressed especial concern that InvoCare was “dealing with consumers in circumstances where they were particularly vulnerable”. The Consumer Action advocacy group welcomed Salvo Funerals’ entry into the industry, especially because it offered prepaid plans not funeral insurance. “Generally we say there’s much room for competition in this sector and a not-for-profit provider targeted at those with limited incomes might reduce the opportunity for exploitation and high charges from for-profit funeral services,” a spokesman said. “Funerals are such an emotional decision and unfortunately we’ve seen a long history of commercial providers taking advantage of that.” Salvo Funerals’ operations will be restricted to New South Wales with an expansion to Brisbane possible in 2018. “Being a typical bean-counter ... I won’t expand or push the organisation until we’re very clear that we have that capacity to scale,” Pittendrigh said. |