Merchant of Death

Overpaid price gouger or legitimate entrepreneur? Either way, Houston’s Robert Waltrip has turned the funeral business into quite a profitable undertaking.

WHEN ROBERT L. WALTRIP’S TIME COMES, he will likely get the same treatment accorded any of his customers at Houston’s Service Corporation International (SCI). Two men will pick him up, place him in a black plastic bag, lift him onto a stretcher, load him into a dark-colored vehicle, and drive him to a low-slung metal building at Thirty-Fourth Street and Ella Road—what SCI insiders call the prep center.

No matter that Waltrip built SCI into a multinational funeral home conglomerate with $1.7 billion in annual sales. One of the company’s nearly 29,000 workers will treat his body just like the others they handle each day: It will be sprayed with disinfectant, and his throat and anus will be packed with gauze to prevent fluids from leaking. His mouth will be closed with glue or sewn shut by a thread run through his septum and lower gum. His eyes will be closed with plastic eyecaps or glue. Then an incision will be made in his throat, upper arm, or pelvis, and embalming fluid—a solution of methyl alcohol or formaldehyde—will be pumped into his body, forcing all the blood out. Waltrip, a large man of perhaps 250 pounds, will require about five gallons of embalming fluid. Upon completion, another worker will dab a bit of makeup on his face and hands and ship him back to the SCI location handling the arrangements, where he’ll be dressed in one of his many dark suits.

There’s nothing romantic or sentimental about preparing a corpse for the grave, but that’s the point: Waltrip, who is 65, has made himself a very rich man by taking sentimentality out of the funeral trade and replacing it with a tough—some might say ruthless—business mentality. Over the past four decades, he has parlayed a single funeral home on Heights Boulevard into the world’s largest provider of “death care” by exploiting advantages that other CEOs would die for: His industry is recession resistant; the logistics and cost of entering the market keep competitors at bay; customers rarely if ever shop for prices; and everyone needs the service eventually. Best of all, many people pay in advance—SCI currently has more than $2.4 billion in prearranged funerals on the books.

“People who don’t buy our stock just don’t like money,” Waltrip once said. He’s right: SCI’s profit margin in 1995 was 11 percent, nearly twice the average of all American companies, and its revenues were more than twice what they were only three years earlier. Over more than three decades, SCI has buried more than two million people, everyone from regular Joes and Janes to such luminaries as John Lennon, Howard Hughes, Jacqueline Kennedy Onassis, and J. Howard Marshall II; in fact, an SCI home held two funerals for Marshall last year—one given by his wife, Anna Nicole Smith, the other by his son E. Pierce Marshall. This year the company will handle one out of ten services in the U.S., about 230,000 in total. And Waltrip is just getting started. During the past three years, his company has nearly quadrupled its holdings; at the end of the first quarter of 1996 SCI operated 2,795 funeral homes, 324 cemeteries, and 138 crematoriums, making it ten times larger than its closest U.S. competitor, Stewart Enterprises of New Orleans. He’s already the largest funeral services provider in the United Kingdom, having acquired two chains there in 1993, and last July he snatched up France’s largest funeral home operator, Lyonnaise des Eaux, for $423 million. Now he’s looking at other purchases in western Europe and the Pacific Rim. “Germany is a very attractive place to be,” he says. “We will be there one of these days.”

Pale and dour, Waltrip speaks in measured sentences with a distinct Texas twang. He is always clean shaven and wears the standard uniform of the funeral director: starched blue shirt, conservative tie, dark blue suit, polished black tassel loafers. “I always wanted to be a funeral director,” he says, resting his hands in his lap. “I liked it, I was good at it, and I never wanted to do anything else.” In particular, he adds, he has always understood the power of emotion when dealing with customers. “The relationship a funeral director has with the people he serves is very rewarding,” he says. “If you don’t have empathy and a desire to serve, you won’t be very good. You’ll come across as cold.”

Waltrip’s office, on the twelfth floor of a nondescript tower on Allen Parkway, is just a few miles from his boyhood home. Growing up, he knew he would someday be an undertaker, just like his father, Robert E., who co-owned the Heights Funeral Home with his grandmother, Mrs. S. P. Waltrip. But in 1951, while he was a student at Rice University, his father died suddenly, and Waltrip had to leave school so he could help manage the business. Young Robert ran the funeral home while completing his degree at the University of Houston. By 1957 he had come to see the profit potential of buying more funeral homes, and the family acquired two more in Houston. Five years later he founded SCI, and by 1974 he owned three hundred funeral homes and the company’s stock was trading on the New York Stock Exchange.

Just as Ray Kroc, the founder of McDonald’s, brought efficiencies of scale to fast food, Robert Waltrip did the same for funeral homes. The analogy isn’t perfect—while patrons of McDonald’s may spend $5 per visit, SCI’s customers often spend a thousand times that much—but as Waltrip explains, “Things about each business are the same.” Like McDonald’s, SCI has fixed costs. Buying in quantity such commodities as coffins and embalming fluid allows the company to increase its profits. Once the fixed costs are met at an SCI home, between 60 and 80 percent of the remaining revenues go straight to the bottom line. And like McDonald’s, SCI cuts costs and ups income by employing mass-production techniques. For instance, rather than have an embalmer

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