Shares in funeral provider Dignity crashed on Monday after rival Co-op fired the latest salvo in the sector’s price war.
Co-op Funeralcare said over the weekend it is reducing the cost of its “simple funeral” by £100 to £1,895, and by a further £200 for its 4.7 million members.
The shake-up – which includes a guarantee to beat other providers’ funeral prices on a like-for-like basis – knocked Dignity, which offers a similar service for £1,995.
Shares in the firm were down over 6% in morning trade following the news.
Charles Hall, analyst at Peel Hunt, believes that if Dignity tries to respond by itself lowering prices, it could wipe £1.5 million off its profits.
He added: “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.
“If Dignity follows suit, it would reduce profits by circa £1.5 million in a full year.”
Britain’s funeral market is dominated by Co-op Funeralcare and listed rival Dignity, which have been slugging it out for market dominance.
The Co-op holds about a 16% share of the market in the UK and Dignity has around 12%.
But Dignity has come under acute pressure this year and was forced to issue a profit warning after a lower-than-expected take-up of its “no frills” funeral option, despite slashing prices.
It has also called in management consultants LEK to help lead a revamp to fight off increasing competition.