Co-op is upping the price war with funeral provider Dignity, as the group promised to beat its competitor’s quotes.
Despite Dignity’s £340 price cut two weeks ago, Co-op responded on Monday by reducing the cost of its lowest-priced “Simple” funeral.
Shares in Dignity fell by over six percent on the news as investors feared a price war.
Analyst Charles Hall said: “The key concern post Dignity’s announcement of price reductions in January to match the Co-op on Simple funerals was that the Co-op would respond – it now has with a £100 price reduction.”
A report published on Monday by Sunlife, which monitors funeral costs, said in its Cost of Dying report that the average cost of a basic funeral had risen for the fifteenth year in a row to £4,271.
Robert Maclachlan, the managing director of Co-op’s Funeralcare business, said the decision to lower costs was about “tackling affordability”.
“In the last two years we have seen a huge shift in the number of clients seeking affordable funeral choices,” he added.
Dignity and Co-op dominate the growing funeral market, which is currently worth £2 billion in the UK. Both have a market share of 12 percent and 16 percent respectively
The funeral services sector has come under pressure this year and in June the The Competition and Markets Authority (CMA) launched an investigation to make sure that customers were “not getting a bad deal”.
“There is plenty of evidence that prices are too high,” said James Congdon from Quest, a division of Canaccord Genuity.
“With the backdrop of the CMA investigation into pricing, and clarity of pricing, perhaps its not a surprise that prices are coming down.”
The results of the CMA investigation will be published next summer, with an interim report expected before the end of this year.
Shares in Dignity (LON: DTY) are currently trading at 1.011,00 (1601GMT).