Shares in Dignity fell six percent after Co-op offered to beat the cost of the funeral services offered by rivals.
As the competition within the funeral industry grows more intense, Co-op said on Monday said it would reduce the cost of its “simple” funeral by £100, to £1,895.
“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,” said analyst Charles Hall.
Peel Hunt, an analyst firm, warned that if Dignity cut prices more it would knock up to £1.5 million off the group’s profits.
A report from Sunlife said in its Cost of Dying report that the cost of the average basic funeral had risen for the fifteenth year in a row to £4,271.
Dignity and Co-op both own a big share of the market and are responsible for 12 percent and 16 percent of the market respectively.
Robert Maclachlan, the managing director of Co-op’s Funeralcare business, said the decision to lower prices and match competitors was to focus on “tackling affordability”.
“In the last two years we have seen a huge shift in the number of clients seeking affordable funeral choices,” he said.
James Congdon, an analyst at Canaccord Genuity, said: “There is plenty of evidence that prices are too high.”
“With the backdrop of the CMA investigation into pricing, and clarity of pricing, perhaps its not a surprise that prices are coming down.”
Shares in Dignity (LON: DTY) are down 5.33 percent at 977,00 (1804GMT).