Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Funeral Industry
Transcript
- Lucas: When we talk about declining birth rates, we usually focus on the obvious knock-on effects — pension solvency, labor shortages, housing demand. But there's a quieter, more morbid corner of the economy where the math is just as brutal: the funeral industry. Luna: That's kind of dark, but you're right. Fewer births today means fewer deaths decades from now. And the funeral business is built on a relatively predictable death rate. Lucas: Exactly. In Japan, the number of annual deaths peaked around 2023 at roughly one point five seven million. Projections from Japan's National Institute of Population and Social Security Research show that number falling to about one point three million by 2050. That's a fifteen percent decline in customers — and these aren't customers you can market your way back to. Luna: Right, because the alternative to death is, well, not ideal for business. So what's happening on the ground in Japan right now? Lucas: Consolidation. Japan has over forty thousand funeral homes — one of the highest per capita rates in the developed world. But many are small, family-run operations that were already struggling with a cremation rate over ninety-nine percent. Cremation is cheaper, simpler, and leaves less room for the add-on services that drive margins. Luna: So fewer deaths plus higher cremation equals a lot of funeral homes fighting over a shrinking pie. Sounds like a race to the bottom on pricing. Lucas: It is. The average cost of a funeral in Japan has actually declined in real terms over the past decade — down about ten percent since 2015. Some operators have started offering bare-bones plans for around two hundred thousand yen, which is roughly thirteen hundred dollars. That barely covers the cremation permit and the urn. Luna: And you mentioned consolidation — are the big players moving in? Lucas: Yes. Companies like Sanyo and the publicly traded Nichii Holdings are acquiring smaller independents. Nichii now operates over three hundred funeral halls. They're standardizing operations, centralizing cremation logistics, and — crucially — introducing subscription-based pre-need plans. You pay a monthly fee, and when the time comes, the service is covered at today's rates. Luna: A funeral subscription. That's somehow both morbidly practical and very Japanese. But how does this play out in Europe — say, Germany, which has a similar demographic profile? Lucas: Germany's death rate peaked a bit later, around 2024, at just over one million. The projections from Destatis show it falling to about nine hundred thousand by 2050. That's a ten percent drop. But Germany has a much lower cremation rate — around sixty percent — which leaves more room for traditional burial services. Even so, consolidation is happening. The largest player, a company called Ahorn-Grieneisen, has been acquiring regional firms and now holds about fifteen percent of the market. Luna: Fifteen percent still seems low for a consolidating industry. Is there a lot of resistance from families who want the local undertaker they've known for generations? Lucas: Huge resistance. But the economics are forcing it. Funeral homes have high fixed costs — refrigeration, chapel space, hearses — and volume is dropping. The ones that survive will either be very efficient chains or very high-end boutiques that can charge a premium for personalization. The middle is getting squeezed. Luna: Speaking of personalization, I've heard about 'death positivity' movements and eco-funerals. Is that a real growth area, or just a media trend? Lucas: It's real, but small. In the US, natural burials — no embalming, biodegradable caskets — have grown from about one percent of funerals in 2010 to maybe three or four percent today. They command a premium, but they're not enough to offset the demographic headwind. The bigger story in the US is that the baby-boomer peak hasn't even hit yet. The US death rate is projected to rise from about three point three million in 2025 to a peak of around three point seven million in the early 2040s. Luna: So the US funeral industry actually has a couple of decades of growth ahead before the decline sets in. That gives them time to prepare. Lucas: If they use it wisely. But the industry is notoriously fragmented — there are about nineteen thousand funeral homes in the US, and the largest player, Service Corporation International, only has about fifteen percent market share. SCI has been buying up independents for decades, but they're also facing a challenge: the cremation rate in the US has risen from about twenty-five percent in 2000 to nearly sixty percent today. That eats into margins on caskets and burial vaults. Luna: And there's another demographic shift that's less talked about: the rise in people who die without close family. If you have fewer children, and those children may live far away, who arranges the funeral? Lucas: That's a huge issue. In Japan, the term 'kodokushi' — lonely death — has become common. Municipalities now have programs to check on elderly residents, and in some cases, they handle the funeral if no relatives step forward. In the US, counties are increasingly dealing with unclaimed bodies. The National Association of Counties estimates that about one point five percent of deaths are unclaimed, but in some urban areas it's over five percent. That creates a new public-sector burden. Luna: And a business opportunity, I suppose. Some startups — particularly in Japan — are offering 'simple farewell' services that cost a few hundred dollars and include just cremation and a basic ceremony with no family present. Lucas: Right. And in the US, there's a company called Tulip Cremation that offers direct cremation for about a thousand dollars — no embalming, no viewing, no service. They've raised venture capital. It's a low-margin, high-volume model, and it only works if you have scale. But demographics are pushing that way. Luna: So what's the takeaway for someone who's not in the funeral business? I mean, this is an economics show — what does this tell us about broader demographic trends? Lucas: I think it's a reminder that every industry has a demographic footprint — and that footprints change slowly but inexorably. The funeral industry's pain today is a preview of what other age-linked sectors — healthcare, housing, even travel — will face as birth rates stay low. If you're in a field that depends on a certain age cohort, you need to think about what happens when that cohort shrinks. Luna: And you need to think about it before the peak, not after. Because once the decline starts, it's very hard to reverse. Lucas: Exactly. That said, looking at how Japan is adapting — with consolidations, subscriptions, and leaner models — there are lessons for other countries. But it's not a happy industry to be in right now. Luna: Not unless you're buying up those small funeral homes at distressed prices. But that's a whole other episode. Lucas: We should do that one. You know, if this conversation has given you something useful — maybe a new way to think about how demographics touch even the most tradition-bound parts of the economy — the way we keep this show free and ad-free is listener support. It's a small thing, but if you'd like to help, you can buy us a coffee at buy me a coffee dot com slash fexingo. That's all lowercase. And it genuinely helps. Luna: Yeah, I second that. We put a lot of time into finding these specific numbers and case studies, and knowing it's useful to you makes it worthwhile. So thanks to anyone who does that. Lucas: Alright, back to the grim reaper's balance sheet. One more angle I wanted to mention: the impact on funeral pricing in the US. Because while the death rate rises, the cremation rate is also rising, and that's compressing revenue per funeral. Luna: Right. A traditional burial in the US averages around seven to ten thousand dollars. Direct cremation is more like one to two thousand. So even if the number of deaths goes up, total industry revenue might not rise as much. Lucas: Exactly. The National Funeral Directors Association projects that US funeral industry revenue will grow at about one point five percent annually through 2030, down from about three percent in the 2010s. After the baby-boomer peak around 2042, revenue will likely start to decline in real terms. So the industry has maybe fifteen years of tailwind, then a long headwind. Luna: And that's assuming no major changes in consumer preferences. But we're seeing more people opt for celebration of life events, or even at-home wakes. The pandemic normalized a lot of that. Lucas: Big time. In 2020, many families held virtual funerals or delayed services. Some of those habits stuck. The industry is having to offer more flexible, a la carte options — you can rent a chapel for an hour, stream the service, have the ashes delivered by mail. It's becoming more transactional. Luna: Which sounds impersonal, but it's what a lot of families want — especially when they're scattered across the country. And it's cheaper. Lucas: So the long-term picture: in countries with very low birth rates, the death care industry will shrink. In countries with still-rising death rates, like the US, there's a window. But the adaptation strategies are similar: consolidate, standardize, offer subscription models, and get comfortable with a lower-margin, higher-volume reality. Luna: And maybe start thinking about what happens after the baby boomer peak, because that will come faster than many expect. A decade and a half is not that long for an industry that moves slowly. Lucas: Right. And that's the demographic lesson in a nutshell: the numbers don't care about tradition. They just march forward. For The Demographics Podcast, I'm Lucas. Luna: And I'm Luna. Thanks for listening.