invocare: faces a grave decision

Welcome to this month’s standoff. This time you’re CEO of funeral company InvoCare.

The good news is, your customers are, literally, not going anywhere. You operate 300 homes and about a third of the after-death market with major brands White Lady, Simplicity, and Guardian and local brands like Le Pine in Victoria and George Hartnett in Queensland. Behind the scenes, you also have 20 crematoria.

And you also have what most businesses dream of: a guaranteed sales pipeline. But in 2016 you have a problem because you’ve noticed more families take up cheap online funeral offers.

With your market share slipping and online competitors arriving, what should you do next?

A New Kind of Send-Off

You've been watching as online discounters like Bare concentrate on the cremations and leave the families to organise the rest of the farewell in their own time . It’s a simpler offer and growing fast because it's much cheaper. (According to Reddit, Bare charges $3k compared to $6-16k for a White Lady funeral under the old model.)

The Strategy Standoff

You see cremation competitors eating into your market share. Would you spend $200M on improving the classic high-service funeral model - or would you spend the cash on blocking the pesky newcomers by launching your own online cremation offer, perhaps under the Value Cremations brand you already own.

the strategy standoff

Strategy A: Coffin Up Coin for Refurb

Invocare could invest in store renovations and improve the experience for traditional customers.

Most families still value the traditional model and this is an Invocare strength. Renovations would improve the customer experience and “earn” the increased price.

However, with $200M capex funded by debt, would this actually deal with the new competitor growth at the low end?

Strategy B: Urn Your Keep Online

Invocare could launch an online direct cremation brand to compete with the new discounters. You would use your existing brand, Value Cremations.

However, this direction would take you into a low-margin model and could be a cultural stretch for a premium business with physical shop distribution.

answer

so, which did they choose?

Cast your vote to find out!

Coffin up for Store Refurb

Urn Your Keep Online

good job, strategy a was chosen!

better luck next time, strategy a was chosen!

But what did this mean for Invocare...

outcome: facilitator commentary

Matt Braithwaite-Young

Managing Partner

t +61 2 9002 3100

contact matt

InvoCare launched its Protect and Grow program in 2017. It was a $200 million capex program to renovate over 300 locations and improve the end-to-end customer experience.

They decided to leave low margin direct cremation to the newbies and back themselves in the traditional full service market.

The results were initially encouraging and renovated sites delivered good sales because many families still wanted a traditional send-off.

But the InvoCare share price fell because investors saw the momentum building in the discount segment. Meanwhile the $200 million debt was stuck on the balance sheet.

Bare Disruption

COVID hit the funeral industry hard. At the peak of restrictions, services were limited to 10 attendees which accelerated the trend toward direct cremation and created a disaster for full service funerals.

By 2020, consumer magazine CHOICE gave InvoCare a 2020 Shonky Award for its perceived pricing opacity and the ACCC opened an inquiry into the industry.

Meanwhile, the direct cremation segment of Australian funerals grew from under 5% a decade ago to roughly 23% today (and it's still climbing).

In an interesting twist, discounter Bare moved upmarket too, adding more complete funeral services, digital wills, probate, and grief support. Very clever!

As the counterfactual, InvoCare had the perfect brand (Value Cremations) which wuold have been the perfect name for a direct cremation competitor. But that business was never properly resourced, probably because the company culture, training and shops pointed towards premium.

The Final Chapter

By early 2023, the share price had fallen below $9. In November 2023, US private equity firm TPG Capital took the company private at $12.70 per share.

Was Strategy A wrong? Not necessarily. The renovated sites did outperform the old ones. But the bigger question InvoCare perhaps failed to fully answer was whether protecting the premium experience was enough on its own or whether they should properly contest the discount segment.

My personal experience has been, if you're a market leader at scale then 9 times out of 10 you should at least put up a defence to match new offers and segments emerging. You might as well make it hard or expensive for the new guy!

Don't Get Buried in the Past

The founders of Bare found a product-market fit with a growing niche and a way to simplify and redefine what a funeral needs to be.

Simple and cheap is a great model if you’re the disruptor in an opaque, complex market. AMAYSIM comes to mind as it did the same thing in the mobile phone market, which was so complex and confusing that just a simple, cheap plan was distinctive and a high-appeal offer relevant to at least 20% of the market.

But when a disruptor is growing fast, your strategy question moves from “how can we make existing our service better?" to, “Can our brand stretch to cover the new customer needs?”.

How to Give Your Strategy a Pulse

Your leadership team may not be facing a startup that puts cremations online.

But chances are, someone somewhere is already rethinking what your customers actually need …and whether they need you to provide it!

If your market is being reshaped by new entrants, changing consumer expectations, or digital models that undercut your cost structure, the old playbook may not be enough.

A Turning Leaf strategy project will make sure your leaders are aligned on your direction and committed to getting it done. If that's of interest, let me know today and we can chat about your options.

Signup

get strategy standoff straight to your inbox

Enjoying Strategy Standoff? Get new stories regularly delivered to your inbox to improve your strategic prowess!