Eliza Wong
The End of an Era for Funeral Services Profitability
China’s funeral services industry, long considered recession-proof due to the country’s aging population and traditional burial customs, is experiencing unprecedented challenges. Fu Shou Yuan International Group (福寿园国际集团), often called the ‘Moutai of cemeteries’ for its historical profitability, reported its first-ever loss since going public in 2013, signaling a potential paradigm shift in the sector’s economics.
The company’s disappointing earnings reflect broader changes affecting the entire funeral services value chain. From premium cemetery plots to traditional burial services, providers are facing declining demand for high-margin offerings as consumers reconsider their options and regulators intensify scrutiny of industry practices.
Fu Shou Yuan’s Financial Performance Deteriorates
Revenue and Profit Metrics Decline Sharply
Fu Shou Yuan’s first-half 2025 results revealed a dramatic deterioration in financial performance. Revenue fell 44.5% year-over-year to approximately 611 million yuan, while the company swung from a 299 million yuan profit to a 261 million yuan loss. This represents the first loss since the company’s Hong Kong IPO in 2013, breaking a long streak of profitability that made it a darling of investors seeking exposure to China’s demographic trends.
The company’s core cemetery business suffered particularly badly. Revenue from cemetery services plummeted from 910 million yuan to 480 million yuan, essentially returning to levels last seen a decade ago. The number of cemetery units sold declined from 6,704 to 6,253, while the average selling price collapsed from approximately 120,000 yuan to 63,400 yuan per plot – a 47.5% decrease that indicates severe pricing pressure.
Regional Performance and Impairment Charges
Geographical analysis shows the downturn affected nearly all of Fu Shou Yuan’s 17 provincial markets. The company’s Shanghai operations, which typically contribute about 40% of total revenue, saw income drop by over 54% to 240 million yuan. Other significant markets including Henan, Anhui, Jiangsu, and Heilongjiang all reported declines exceeding 20 million yuan each.
A substantial 217.6 million yuan goodwill impairment charge further weighed on results. This non-cash charge related to acquisitions in Shandong, Jiangxi, Hebei, and Hubei provinces where acquired subsidiaries failed to meet performance expectations, highlighting the challenges of growth through acquisition in a changing market environment.
Historical Context: The Golden Age of Funeral Services
Extraordinary Profitability Metrics
For years, Fu Shou Yuan exemplified the extraordinary profitability potential in China’s funeral services sector. At its peak, the company achieved gross margins exceeding 80%, rivaling premium liquor producer Kweichow Moutai (贵州茅台). Net margins reached 38%, surpassing even the most profitable real estate developers during China’s property boom years.
The business model leveraged several structural advantages: limited competition due to regulatory barriers, cultural traditions emphasizing elaborate funeral arrangements, and an aging demographic profile increasing demand for end-of-life services. With land costs as low as 190 yuan per square meter but cemetery plots selling for over 100,000 yuan for less than half a square meter, the economics were exceptionally favorable for providers.
Premium Positioning and Brand Building
Founder Bai Xiaojiang (白晓江) built Fu Shou Yuan into a premium brand by adapting concepts from international cemetery operators. The company developed beautifully landscaped ‘final resting places’ that resembled parks more than traditional cemeteries, and strategically invited famous historical figures to be buried in their facilities, creating a sense of prestige that justified premium pricing.
Notable figures interred at Fu Shou Yuan facilities include actress Ruan Lingyu (阮玲玉), scholar Zhang Shizhao (章士钊), and filmmaker Xie Jin (谢晋), among more than 800 prominent individuals. This celebrity association strategy helped create perception of exclusivity and justified the increasingly high prices charged for burial plots.
Industry-Wide Challenges Emerge
Multiple Players Report Declining Performance
The profitability challenges extend beyond Fu Shou Yuan to other listed funeral services companies. Wantong Yuan (万桐园) reported a 54% revenue decline to 11.06 million yuan and swung to a loss from previous profitability. Anxian Yuan China (安贤园中国) and China Life Group (中国生命集团) both issued profit warnings indicating similar pressures on their operations.
Industry analysis shows that in 2024, the five major listed funeral services companies saw collective revenues decline by 19.35%, suggesting the challenges are structural rather than company-specific. The downturn appears to reflect broader changes in consumer behavior, regulatory environment, and competitive dynamics affecting the entire sector.
Changing Consumer Preferences
A quiet revolution in attitudes toward death and burial is underway across Chinese society. Ecological burial options including sea burials, tree burials, and flower bed burials are gaining popularity, particularly among younger urban residents. In Guangzhou, over 3,500 people annually participate in sea burial services, with demand growing each year according to Southern Daily reports.
Social media discussions reflect changing attitudes, with many netizens expressing preference for simpler, more environmentally friendly arrangements. The phrase ‘ashes to ashes, dust to dust’ has become a popular way to describe this shift toward more minimalist approaches to final arrangements, representing a significant departure from traditional practices that emphasized elaborate and expensive funerals as demonstrations of filial piety.
Regulatory and Policy Changes
Increased Government Scrutiny
Regulatory changes are also impacting industry dynamics. In 2024, the National Supervisory Commission launched a year-long special action to address corruption and misconduct in the funeral services sector. This campaign has increased scrutiny of pricing practices, land usage, and business operations throughout the industry.
In April 2025, the Ministry of Civil Affairs (民政部) published a revised draft of the Funeral and Interment Management Regulations (殡葬管理条例), which emphasizes public welfare aspects of funeral services and potentially limits commercial exploitation. The revised regulations aim to ensure basic funeral services remain affordable while restricting certain high-margin practices that had become common in the industry.
Tax Policy Changes
Value-added tax requirements for cemetery sales have also affected industry economics. Fu Shou Yuan specifically mentioned VAT impacts as contributing to their average price decline, suggesting that tax compliance requirements are reducing the net proceeds from each sale and making aggressive pricing less sustainable than in previous years.
Strategic Responses and Adaptation Efforts
Product and Pricing Strategy Adjustments
Funeral services companies are responding to market changes with strategic adjustments. Fu Shou Yuan has implemented pricing strategy changes, increasing mid-priced product offerings and optimizing their product mix between high and low value-added services. The company acknowledged that these changes, while necessary to remain competitive, have contributed to the decline in average selling prices.
Other industry players are similarly adjusting their business models, with many expanding offerings in cremation services, memorial products, and digital solutions that address changing consumer preferences while offering better capital efficiency than traditional cemetery operations.
Innovation and Digital Transformation
Forward-looking companies are investing in technology and innovation to create new revenue streams. Fu Shou Yuan has developed AI memorial services and virtual digital human technology that allows families to create digital representations of deceased loved ones. While these services currently represent a small portion of overall revenue, they represent potential growth areas as physical burial demand declines.
The company has also promoted ‘pre-need contracts’ that allow individuals to arrange and pay for funeral services in advance. However, even this initiative showed declining performance, with contracts signed decreasing by 1,671 year-over-year to approximately 10,000 in the first half of 2025, suggesting that demand weakness extends beyond immediate burial decisions to longer-term planning as well.
Market Implications and Investment Considerations
Sector Valuation reassessment
The changing dynamics in China’s funeral services sector necessitate a fundamental reassessment of investment theses that previously relied on consistent demographic-driven demand growth and high-margin business models. Investors should scrutinize assumptions about pricing power, market growth rates, and competitive positioning when evaluating companies in this space.
Historical valuation metrics based on premium multiples to the market may no longer be appropriate given the structural changes affecting industry profitability. Analysts will need to develop new frameworks that account for changing consumer preferences, regulatory impacts, and the potential for ongoing price competition as companies adjust to the new market reality.
Long-Term Demographic Trends Still Favorable
Despite near-term challenges, long-term demographic trends remain favorable for the funeral services industry. China’s aging population continues to grow, with death rates increasing accordingly. National Bureau of Statistics data indicates over 10.93 million deaths in 2024, representing approximately 30,000 people daily, and market research firm Guanyan Tianxia projects the overall funeral services market will reach 411.4 billion yuan by 2026.
The key question for investors is how this demand will manifest – whether through traditional high-margin burial services or alternative arrangements that may offer different economic characteristics. Companies that successfully adapt to changing preferences while maintaining operational efficiency may still create value despite the more challenging environment.
Future Outlook and Strategic Direction
The profitability in China’s funeral services sector appears to be undergoing a structural reset rather than experiencing a temporary downturn. Companies that historically relied on premium cemetery sales must diversify their revenue streams, optimize cost structures, and develop new service offerings that align with evolving consumer preferences and regulatory requirements.
Success will require balancing respect for cultural traditions with innovation that addresses practical and environmental concerns. The companies that thrive in this new environment will likely be those that develop flexible business models capable of serving diverse customer needs across the economic spectrum while maintaining appropriate scale efficiencies.
Investors and industry participants should monitor several key indicators going forward: adoption rates of alternative burial methods, regulatory developments affecting pricing and land use, competitive dynamics as companies adjust strategies, and financial performance metrics across different service categories. These factors will determine whether the industry stabilizes at a new equilibrium or continues to experience disruption and transformation.
For those involved in China’s funeral services sector, the message is clear: adaptation is no longer optional. The era of easy profits from premium cemetery sales has ended, and sustainable success will require innovation, efficiency, and responsiveness to the profound social changes reshaping how Chinese society approaches life’s final chapter.
