Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Funeral Industry
Transcript
- Lucas: Luna, I want to start with a simple number. In 2025, the U.S. cremation rate crossed 65 percent — up from about 25 percent in 2000. Luna: That's a huge shift in one generation. And I assume it's not just about personal preference — demographics play a role. Lucas: Exactly. And that's our angle today. We usually talk about how falling birth rates affect the young — schools, housing, childcare. But there's a quieter story on the other end of life. Fewer births today means fewer deaths decades from now. And the funeral industry is staring at that math. Luna: So the same demographic wave that's emptying kindergarten classrooms is eventually going to empty funeral homes too. That's grim but fascinating. Lucas: Right. Let's put some numbers around it. The U.S. death rate is currently about 10.4 per thousand people — that's roughly 3.4 million deaths per year. But the baby boomer bulge is still working through the system, so deaths are actually rising in the near term. The peak is projected around 2045 to 2050, when the last boomers pass. Luna: And then what? The generations after boomers are much smaller — Gen X, millennials, Gen Z. Lucas: Yes. So from about 2050 onward, the annual number of deaths is projected to decline — maybe 10 to 15 percent lower by 2070. Fewer deaths means fewer funeral services, fewer caskets, fewer plots. It's a shrinking addressable market. Luna: But the cremation rate is climbing even faster than that decline. That's a double hit — fewer deaths and a cheaper disposition method per death. Lucas: That's the real squeeze. A traditional burial with a casket, vault, embalming, viewing, and grave marker can run $8,000 to $12,000 or more. A cremation with a simple memorial service? More like $2,000 to $4,000. And direct cremation — no service at all — can be under $1,000. Luna: So funeral homes are seeing both volume and revenue per case decline. That's a brutal business model. Lucas: It is. And the data backs it up. According to the National Funeral Directors Association, the average funeral home's revenue per death has fallen about 40 percent in inflation-adjusted terms since the early 2000s. Meanwhile, the number of funeral homes has only declined modestly — about 5 percent. So there's too many operators chasing fewer dollars. Luna: I've seen this play out locally. In my hometown, two of the three funeral homes have been bought by a large chain. The third is a third-generation family business that's struggling to find a successor. Lucas: That's exactly the trend. About 20 percent of U.S. funeral homes are now owned by just three large companies — Service Corporation International, Carriage Services, and StoneMor. And they're getting bigger. SCI alone owns about 1,700 funeral homes and 500 cemeteries. They can centralize embalming, share vehicles, negotiate volume discounts on caskets. Luna: So the independent operators are getting squeezed. And the demographics don't favor them. They're also aging — the average funeral director is in their late 50s. Lucas: Right. It's a succession crisis. Many small funeral homes don't have a younger family member willing to take over a business that requires being on call 24/7, handling embalming, dealing with grieving families — and earning maybe $50,000 a year in a good year. So they sell to a chain or just close. Luna: And the chains are also adapting the business model. I've seen some offering 'pre-need' plans — essentially selling funeral packages in advance, like a life insurance policy. Lucas: That's a huge part of the strategy. Pre-need sales lock in revenue decades before the service happens. The money sits in a trust or insurance policy, and the funeral home earns a commission upfront and then the investment returns. It's a way to stabilize cash flow in a declining-volume environment. About 40 percent of funeral homes now offer pre-need contracts. Luna: But there's also a cultural shift happening. People are less attached to traditional burial. They want something more personalized, more environmentally friendly. That's not just a cost thing — it's values. Lucas: Yes. The green burial movement is small but growing. Instead of a concrete vault and a metal casket, you get a biodegradable shroud or a simple wooden casket, buried in a conservation cemetery. No embalming. The land is preserved as a nature preserve. There are now about 300 green cemeteries in the U.S., up from maybe a dozen in 2010. Luna: And that's a lower-cost option too. Green burials typically run $2,000 to $4,000 — comparable to cremation but with a different meaning. So the industry is fragmenting: high-end traditional burial, mid-range cremation with a service, low-end direct cremation, and niche green burial. Lucas: Let's zoom out to the macro picture. The demographic story is really about the next 30 years. Japan is a preview. Japan's cremation rate is already over 99 percent. They've been dealing with a shrinking population and a declining death rate since about 2010. Funeral homes there have consolidated heavily, and some have diversified into pet funerals — because Japanese pet ownership is rising as the human population falls. Luna: That's fascinating. So the pet funeral industry in Japan is now a meaningful offset. I wonder if we'll see that in the U.S. The pet care economy is huge — over $100 billion — but pet funeral services are still a tiny slice. Lucas: It's possible. But the bigger picture is that death care is becoming more like any other consumer service — fragmented, competitive, and price-sensitive. The old model of a local funeral director who knows every family in town is fading. The new model is a call center, a website, and a fleet of vehicles. Luna: Before we go further — and this ties into what you just said about business models adapting — I want to mention something. If you find this kind of economic analysis valuable, a couple of dollars a month makes a real difference in keeping these episodes ad-free and independent. You can support us at buy me a coffee dot com slash fexingo. It genuinely helps, no exaggeration. Lucas: Yeah, and we mean it — a few small contributions from listeners like you add up and let us keep digging into these niche corners of the economy. So thank you to anyone who's considering that. Luna: Alright, back to the numbers. So we've got declining deaths, rising cremation, and consolidation. What about the economics of cemeteries themselves? That's a different business. Lucas: Cemeteries are especially interesting because they're essentially land banks. They sell plots now, but the revenue comes from perpetual care fees — a portion of the plot price goes into a trust that funds mowing and maintenance forever. In a declining death market, you're selling fewer new plots, but you still have to maintain all the existing ones. So the economics get worse over time. Luna: Some cemeteries are converting unused land to parks or green space. I've also seen columbariums — walls with niches for cremated remains — becoming more common because they use less land per person. Lucas: Exactly. A traditional cemetery might get 200 plots per acre. A columbarium can get 2,000 niches per acre. So the land yield is ten times higher. That's a direct response to both cost pressure and shrinking demand. Luna: And there's a tech angle too. Some startups are offering digital memorials — QR codes on headstones, online tribute pages, even AI avatars of the deceased that can have conversations with family members. That's a whole new revenue line. Lucas: It's an interesting pivot. The funeral industry has historically been slow to adopt technology, but demographics are forcing change. One example: 'Tributes' is a platform that lets families livestream funerals — that started growing during the pandemic and has stuck around. About 15 percent of U.S. funerals now have a livestream component. Luna: Okay, so to summarize the economic picture: fewer deaths coming in 20-30 years, higher cremation rates, lower revenue per case, consolidation into chains, green burial as a niche, pre-need planning as a financial buffer, and tech-enabled services. That's a lot of moving parts for an industry that used to be very stable. Lucas: It's a classic case of demographics disrupting a mature industry. And the interesting thing is that most people don't think about death care as a business — they only encounter it when they have to. But the structural trends are powerful. The funeral home that serves you in 2040 will likely look very different from the one that served your grandparents. Luna: And the biggest unknown is how consumer preferences will evolve. Will younger generations, who are already less religious and more price-sensitive, continue to choose simple, cheap dispositions? Or will they want more elaborate celebrations of life? The data so far points toward simplicity, but it's not a straight line. Lucas: Right. And that's the question I'll leave listeners with. We know the demographic direction — fewer deaths, cheaper options — but we don't know exactly how culture will respond. The funeral industry of the future will be shaped as much by values as by numbers.