Where all good things come to pass
Andrew Smith is a key player in the $900 million funeral market, writes Miriam Steffens.
Andrew Smith is a key player in the $900 million funeral market, writes Miriam Steffens. Andrew Smith has heard his share of gallows humour about the death industry."There's a couple of jokes around the place at the moment," the 40-year-old boss of InvoCare, Australia's biggest funeral operator, says.Examples? "Everyone's dying to get into the industry," he chuckles. "It's not a dead-end job."Warming to the theme, he offers his personal favourite: "When I left retail, which I spent more than 10 years in, the joke was that I had gone from big-box retailing to small-box retailing."Meeting Smith at InvoCare's North Sydney head office, the traditional undertaker's dark suit has been given a corporate touch, matched with a Ralph Lauren shirt and yellow tie.Talking about "the death-care industry", he says there is a "natural defensive mechanism for people who work in this industry day to day, you have the black humour".But, jokes aside, he's at pains to point to the sensitivities of dealing with families in grief and stress how the company and its 1500 staff are making sure its 150 funerals a day are done "to a very very high standard".It's been a big year for the company behind brands such as Simplicity and White Lady Funerals. With nothing in life certain but death and taxes, the funeral giant has become something of an investor favourite. Its shares have gained 12 per cent over the past 12 months in the double-digit market rout as analysts point to its "inevitably growing customer base" of ageing baby boomers.Having pushed through the takeover of its nearest rival, Bledisloe, in June, InvoCare now controls about a third of what traditionally has been a cottage industry of family businesses.And the New Zealand-born former retail and tobacco industry executive, who took its helm in early 2009, has become the key player of Australia's $900 million funeral market.Ask him about the company's firming grip on the industry and Smith is quick to play down concerns that InvoCare is taking on the role of the big corporate player, able to monster family run parlours using its economies of scale and branding power."It's not as cut-throat as some of the competition would like to think," he says, citing a case in Melbourne where InvoCare took over a small funeral home whose owner had cancer, continuing its services to the local Polynesian community."We certainly went in there with the community at heart. When the community knows we're there to provide the customer service, the bottom line will take care of itself."There's little doubt Smith is an accomplished salesman, having earned accolades in industries ranging from insurance to cigarettes, handbags, CDs and lingerie.But his career couldn't have begun any further from the solemness of the funeral business, involving a four-year stint as cone maker at Royal Copenhagen's ice-cream store in Surfers Paradise.He enjoyed it so much "on the people side" that he kept moonlighting there at weekends even after he had started as an auditor at corporate advisory firm KPMG.To Smith, selling caskets and funeral services isn't that far a stretch from his ice-cream days."The principles are very similar. You have to make sure the interaction you're providing with the customer at the end of the day is better in their experience than what they were expecting." Dealing with grieving families just "makes the challenge even harder".While his KPMG and retail days are clearly spelled out on his InvoCare-supplied CV, other career turns aren't. Smith moved on to doing internal audits for the Swiss-owned CIC Insurance, just after it merged into the ill-fated HIH Insurance.In an ironic twist, the face of Australia's biggest undertaker next became financial controller for sales and marketing at tobacco company Rothmans, the maker of Winfield and Dunhill cigarettes.Joining Oroton, with its popular handbags and Polo Ralph Lauren fashion label rights, 18 months later proved an "eye-opener" and fuelled his passion for retail, Smith says. He stayed for five years until the retail king Brett Blundy poached him to work as the numbers man for his Brazin group and help expand chains such as Sanity Entertainment, EzyDVD and Bras N Things.Blundy became an important mentor, teaching Smith on Thursday late-night shopping trips to Brazin's stores to "get out of the office and at the coalface".These days, Smith - to the detriment of his three children - uses weekend car trips to do the odd cemetery tour and check on the grounds.But what possessed the music, DVD and underwear retailer to go into funerals? Smith says his "wife wasn't too happy about missing out on products we would readily get. She didn't particularly like the joke when I said well if you're really naughty you might get a nice casket".Headhunters encouraged him to do an interview with an unidentified "service-oriented" company. "When I got told they were in funeral services my heart sank a little," he says. But the prospect of becoming chief executive after proving his mettle (plus a gym across the road from head office) were enough to win him over.And while retailers are doing it tough with weak consumer spending, Smith says InvoCare's business has been "90 per cent unaffected" by the global financial crisis, buffered "by the fact that the baby boomer generation are now starting to come through".In a break from past generations, where a burial with a black-clad funeral director and hearse would do, families now expect tailored send-offs and elaborate celebrations of life.Demand for pre-paid funerals has also been growing at double-digits a year as people seek to lock in funeral costs and avoid becoming a financial burden to their families.Then there are emerging trends such as green funerals, with biodegradable cardboard coffins, and new technology. InvoCare has been testing live-streaming of funeral services and recently bought a stake in an internet site where families can post virtual flowers and tributes.Smith declines to give profit guidance for his business, citing year-on-year fluctuations in the death rate. Yet with Bureau of Statistics projections estimating the number of deaths a year accelerating from close to 150,000 in 2011, he reckons that over the long-term, InvoCare should be able to grow revenues by about 6 to 7 per cent a year.Talking about business drivers such as death rates, memorialisation revenues, average contract values and cremations yields, does it ever feel strange to the former ice-cream seller to juggle the financial metrics of death?"It's a tough one to answer," he says. Yet, with InvoCare's "good little business model" of annuity-like revenue growth and small operating margin improvements, "it's actually quite a nice position when you're talking to an investment community that's struggling"."For a number of people it's a nice reminder ... of the fact there's a death care industry and people are passing away. It's a reminder not to take life for granted."The CVSMITH, AndrewBorn Auckland, October 1970.Education Bachelor of Commerce, University of Queensland; MBA, University of New England.Occupation Chief executive of InvoCare since January 2009. Joined the company as chief financial officer in 2006.Career1998-2005 Chief financial officer and company secretary of Brazin Ltd and OrotonGroup.1996-98 Sales and marketing controller at cigarette maker Rothmans.1994-96 Internal audit manager for CIC/HIH Insurance.1991-94 Senior auditor at KPMG, Brisbane.Family Married with three children, aged five, eight and 10.