In Minnesota town, a co-op funeral home builds community
NEW ULM, Minn. -- When his wife, Florence, died six years ago, Mert Gustad wanted to give her the kind of funeral she’d wanted — at a cost he could afford.
That’s often out of reach in many parts of the country — but not in New Ulm, Minn., where the local funeral home is community-owned, a sharing arrangement more common to farming than the funeral business.
About 5,000 people in this southern Minnesota city are members of the Minnesota Valley Funeral Homes & Cremation Services cooperative. Co-op members pay in a little money when they join; any year-end profit is returned to members.
Funeral director Eric Warmka said it pays dividends in more ways than one, strengthening community ties while helping keep costs in check. The funeral home has also defied industry standards: Warmka says it hasn’t raised its prices in three years.
"We operate the exact same as any for-profit funeral home,” Warmka said. “It's just we're unique that if at the end of a given year, Minnesota Valley Funeral makes a profit instead of it being kept by an owner or ownership or partnership or anything along those lines, it's given back to every family we serve that year.”
The co-op was founded by a group of residents in 1929 as a way to help provide proper, affordable burials to people in Depression-era New Ulm. For a one-time payment of $5, members could help offset the cost of funeral services, and vote on how the business should operate.
"Back then, that was more a pooling of funds to help alleviate the financial burden … and that's what we've stuck with for all of these 90 years,” Warmka said.
Today, it still costs $5 to become a member.
Once all the funeral home’s bills are paid for the year, the profits are paid out to member families that used the co-op's services that year. The annual checks help defray the costs of a funeral, which average about $6,000 for cremation and $10,000 for a traditional service.
Since revenue varies year to year, Warmka said it's hard to know exactly how much each family's check will be, but he said they often range from $500 to a few thousand dollars.
"It does feel good to be able to show (members that) we're not overcharging,” he said. “We're strictly here to provide the service that's asked of us. And if by chance, we made that profit, they're going to get that back in the end as that dividend."
The co-op model is rare in the industry. According to the National Funeral Directors Association, about 89 percent of funeral homes in the United States are privately owned by families or individuals. Most of the rest are owned by corporations. The association’s Minnesota chapter believes Minnesota Valley is the only one of its kind in the state.
The industry has been under pressure in recent years with higher operating costs and more people choosing cremations instead of burials, said Joshua Slocum, executive director of the national Funeral Consumers Alliance.
“Fewer and fewer people are doing [the service] where the body's laid out and the casket is open and it's there for two days and everybody stands and there's a receiving line and then they follow the Cadillac to the cemetery,” he said. “Every year, there are fewer of those.”
Most funeral homes are only doing between 50 and 100 funerals a year, he said. “That's not really full-time work, especially if those funerals are not conventional funerals, but if they're just a simple cremation or direct burial, it's a straightforward process.”
By contrast, Warmka said Minnesota Valley handled more than 270 funerals last year, a record for the co-op.
Warmka, 36, took over Minnesota Valley Funeral in 2017. He grew up an hour south of New Ulm in Easton, Minn., and was looking for another small town to raise his family.
An increasing number of other younger people are joining the cooperative, Warmka said, to have a say in how their community should honor the dead.
Co-op members meet once a year to evaluate the business and discuss changes.
“It gives them the opportunity to go and talk to me, talk to my board of directors and express things that they might want to see change,” Warmka said. “Maybe they’ve seen something different in another place run a different way. They can have that public outlet to do that.”
Minnesota Valley’s board of directors is made up of farmers, bankers, retirees and business leaders — none are funeral industry insiders. That’s by design: Warmka said having people with a variety of backgrounds on the board helps offer more well-rounded input to developing the business.
“It isn’t just one owner’s decision in making changes, it’s seven people that get input from the community,” Slocum said.
That allows members like the Gustads to have a say in how their funeral home runs, he said.
"I absolutely love that," he said. “There isn't just one man or woman running this place, and it helps me as a manager keep the pulse of the community."