CVS Quits Selling Tobacco Products, But What's In It For Them?
It's not about the money. At least, that's what CVS claims about its decision to stop selling all tobacco products. CVS Caremark, one of the top drugstore chains in the U.S., announced Wednesday that it will cease its availability of cigarettes, cigars, and chewing tobacco by Oct. 1, using the slogan "CVS Quits For Good." Anti-smoking advocates and even former smoker President Obama were quick to praise the decision. But besides the obvious health benefits for its customers — and the added attention and accolades — why did CVS decide that now is the right time to quit tobacco?
CVS Caremark CEO Larry Merlo told CBS News that the decision was based on the evolution of the pharmacy chain in regard to health care. CVS already doles out walk-in treatment with its MinuteClinic — which employs 26,000 pharmacists and nurse practitioners — and the company also plans to implement a smoking cessation program.
Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health. Put simply, the sale of tobacco products is inconsistent with our purpose.
Sure, CVS made the move because they want to be seen as a health-care provider, but that's likely not the only reason — especially when the decision will cost them about $2 billion in tobacco and residual sales.
Laurent Huber, executive director of Action on Smoking and Health, applauds CVS' bold stance, citing legislative action banning tobacco sales at health-care facilities and stores with pharmacies in Alberta, Canada, and Target's decision to stop selling tobacco in the mid-90s. He tells Bustle:
In terms of the costs and benefits of the decision, I personally believe that the $2 billion in lost revenue will be more than made up for in other ways. CVS has plans to become a major provider of cessation services. The vast majority of smokers want to quit and most have tried. A drug store that offers nicotine replacement therapy and other cessation help without the temptation of tobacco products will be very helpful for someone trying to beat addiction. It may become the “go-to” store for millions of current quitters and former smokers.
But human Yak Bak Jim Cramer actually makes a valid point: People didn't avoid CVS because of its availability of tobacco over the cashiers' shoulders. The decision to take tobacco off shelves will hurt shareholders and cause smokers to simply go to another retail store, like Rite-Aid, Walgreen's, or even Dollar General, Cramer argues.
This is not a market that's saying, 'You know what? I am going to buy CVS because they are good citizens.' It just doesn't work like that. That's a nice world, like Oz. Oz is terrific.
Since the CVS decision came so bluntly, as compared to a more modified roll-out experiment, it'll be interesting to see whether the big-name drugstores follow suit. Some experts agree that giving up tobacco products will create a faster, more efficient system at the cash register, because cashiers don't have to fumble with different cigarette packs. And CVS racks up a revenue of $125 billion, so the loss sustained without tobacco amount to a mere drop in the bucket for the company. Plus, CVS now has some room to put up more appealing (and pricier) products for customers.
But other stores may not be so willing to give up revenue loss. RetailWire's Steven Needel agrees that there will be a domino effect with shoppers.
As a former smoker, I can say that there will be a secondary loss of revenue from other products purchased from shoppers who went to buy cigarettes. So it's more than the tobacco sales loss.
That said, good for them that they're taking a stand, and I'm selling my CVS stock.
It's unclear exactly how long CVS mulled over the decision, or if any organizations or outside influencers played a vital role in the push to nix smoking products in the company's stores.
What is clear, however, is that smokers in the U.S. are dying out. According to the Department of Health and Human Services, 42 percent of American adults were smokers, while only 18 percent smoked in 2012. And a Gallup poll reports that 67 percent of Americans view smoking as a serious problem. Since CVS obviously has a vested interest in its customers living healthy, long lives, it makes sense that the company would want to maintain good relationships with pharmaceutical companies and medical device manufacturers as well.
CVS and Johnson & Johnson have yet to answer Bustle's request for comment.
Another outside influence on CVS' decision? President Obama and the Affordable Care Act. CVS plans to expand its MinuteClinics from about 750 locations to 1,500 in 2017. And it needs the backing of medical insurers and hospitals to ensure the plan's success. If you were a hospital rep and walked into a place prominently featuring cigarettes, how comfortable would you feel pursuing a partnership?
Basically, now that more people can get insured, the more people can walk into CVS for their health care. Business Insider explains more about the Obamacare connection:
Pharmacy chains have been a critical partner in the ACA rollout, and in banning cigarettes from their stores, CVS demonstrates its commitment to providing health care — a move that will potentially give it a leg up in drawing in more insured customers.
Last year, CVS announced that it would help promote the health law; it now offers in-store ACA experts at select events and an online guide for consumers. It also has agreed to offer "bridge prescriptions" to anyone facing coverage interruptions.
Some scoff at the move, asking why CVS also doesn't remove alcohol and sugar from its shelves. CVS chief medical officer Dr. Troyen Brennan says the company is dealing with one problem at a time, nothing that cigarettes are "unalterably unhealthy" for people.
David Livingston, a supermarket consultant with DJL Research in Milwaukee, said CVS could attract a better mix of customers, noting that Whole Foods, Trader Joe’s and other retailers do not sell cigarettes.
“I can remember when drugstores sold pornography,” he said. “But they have taken steps to improve their image, and this is the same type of thing.”
For CVS, one thing is for sure: There's no going back now.
"The decision has been widely reported in national news, and this will garner CVS widespread good will," Huber says. "Almost everyone has lost a loved one to tobacco. Many people that have a choice may switch their patronage (and their prescriptions) to CVS."