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Covid-19 to make permanent changes to Brazil’s deathcare market

. Jan 27, 2021
deathcare market brazil Cemetery in Rio de Janeiro. Photo: Jorge Hely Veiga/Shutterstock

Last year saw a veritable boom of companies going public on Brazil’s stock exchange. But one potential IPO for 2021 perhaps best underlines the changing landscape of the Brazilian economy amid a deadly pandemic that has claimed at least 215,000 deaths. Funeral home chain Cortel is planning a public offering this year, which could signal a major transformation in the deathcare sector.

For the time being, Cortel is an outlier among deathcare companies, which are predominantly small, local firms.

</p> <p>It owns ten cemeteries in four Brazilian states, and while it remains in the hands of its founding family — typical of most funeral businesses — Cortel counts <a href="https://brazilian.report/business/2020/10/08/brazilians-turn-from-buying-property-to-invest-real-estate-trusts/">real-estate trust fund</a> Brazilian Graveyard, controlled by Zion Investimentos, as one of its largest shareholders. </p> <p>The company has focused on expanding its revenue streams by integrating new segments as part of its portfolio, such as private pension plans and pet cremation services. And judging by its IPO <a href="http://sistemas.cvm.gov.br/port/redir.asp?subpage=ofertaanalise">prospectus</a>, the strategy worked: in the first nine months of 2020, net revenues rose by 37 percent to BRL 75 million (USD 13.7 million), while profits tripled to BRL 21 million.&nbsp;</p> <p>However, Cortel&#8217;s success is only a fraction of the deathcare market potential in Brazil. A preview of a study by consultancy firms Flow and RGF, obtained by <strong>The Brazilan Report</strong>, estimates that the market generated BRL 3 billion in revenue in 2019, with an average growth rate of 5 percent a year. And with Brazil&#8217;s ageing population of 210 million, even this amount is modest.</p> <div class="flourish-embed flourish-map" data-src="visualisation/5036596"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>Data collected by MarketResearch.com <a href="https://www.marketresearch.com/Kentley-Insights-v4035/Death-Care-Services-Research-Updated-13917207/">estimates</a> industry sales of the U.S. deathcare market at USD 18.1 billion last year. There, the market is dominated by three major players, with the NYSE-listed Service Corporate International leading with an <a href="https://www.statista.com/statistics/883513/death-services-market-leaders-united-states/">11-percent share</a>.&nbsp;</p> <p>By going public, Cortel would be able to use funds obtained in the stock market to acquire competitors, which could be an initial step toward consolidating its position in the sector. However, the particular characteristics of Brazilian funeral systems poses a significant challenge.</p> <p>In Brazil, it is up to each city to decide whether it will offer its own funeral services or allow the involvement of the private sector, making it harder for a single company to establish a nationwide presence. In São Paulo, the country&#8217;s biggest city, all funerals depend on the publicly provided service, which is notoriously slow.</p> <p>The privatization of local cemeteries was among the flagship proposals of former Mayor João Doria when he took office in 2017, but neither he nor current Mayor Bruno Covas — who replaced Mr. Doria when he successfully ran for state governor in 2018 — have been able to get the plan off the ground.</p> <h2>Deathcare industry in transformation</h2> <p>With <a href="https://brazilian.report/society/2021/01/06/manaus-biggest-amazon-city-back-in-coronavirus-chaos/">more than 215,000 deaths</a> and strict biosafety protocols being followed at all burials across the country, the Covid-19 pandemic forced a major transformation in the daily business of deathcare companies. According to Gisela Adissi, founder of consultancy firm Flow Death Care and president of Sincep, the Brazilian association of private cemeteries and funeral companies, the biggest change comes in the way Brazilian people grieve.&nbsp;&nbsp;</p> <p>“Everybody is dealing with grief now, so all companies will have to think about how they can approach stakeholders at this difficult time. Think of a notary’s office. From a customer experience point of view, they cannot provide services for grieving people the same way as they would for someone who is getting married.”</p> <p>This change, she says, may broaden the sector’s horizons from what is currently an industry akin to that of real estate. In China, deathcare leader Fo Shou Yan Group expanded services to act as a deathcare equipment manufacturer, as well as providing professional training through its Life-Service Academy.&nbsp;</p> <p>In the wake of the pandemic, Ms. Adissi sees room for new services, as well as market consolidation, but there are more questions than answers at this point. “We must take care of what happens before, during, and after death, which includes education towards death, funeral assistance, and even support to grieving families. So, who is going to take care of that in companies? Might we see mergers between health-insurance companies and cemeteries?” she asks.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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