CVS Caremark, the second largest pharmacy chain in America, has announced that they are banning the sale of tobacco products in their over 7,600 stores. Effective this October, CVS will become the first major pharmacy chain to do so.
The decision ultimately makes sense for the company since they are in the midst of an ongoing transition from a retail chain to one that focuses primarily on providing health care. They have also increased the amount of mini-clinics in their stores and have begun giving more healthcare advice to their customers.
CVS CEO, Larry Merlo, commented, “We have about 26,000 pharmacists and nurse practitioners helping patients manage chronic problems like high cholesterol, high blood pressure and heart disease, all of which are linked to smoking… We came to the decision that cigarettes and providing health care just don’t go together in the same setting.”
In the short term, CVS will lose an expected 2 billion dollars in annual revenue, which is a small and insignificant loss compared to their 123 billion in sales in 2012 and 92 billion in the first nine months of 2013.
Tobacco sales are more important for gas station based and standalone convenience stores, which account for around 66% of overall tobacco sales. Comparatively, pharmacies, such as CVS, Rite Aid, and Walgreens only make up 3.6% of tobacco sales.
Driving in-store traffic is the true boon that tobacco products offer. They make up 40% of sales at convenience stores but only 21% of the profit. Dollar stores, such as Family Dollar and Dollar General have recently rolled out tobacco as an addition to their product line and have since seen both a rise in store traffic and overall sales.
CVS’s decision has the possibility of increasing revenues at other stores, such as Walgreens, the largest pharmacy store in the United States. Stores like Walgreen however now face the issue of explaining to the media why they are continuing to sell such products. Walgreens has not come out and made any plans to follow CVS’s lead.
“We have been evaluating this product category for some time to balance the choices our customers expect from us with their ongoing health needs. We will continue to evaluate the choice of products our customers want, while also helping to educate them and providing smoking cessation products and alternatives that help to reduce the demand for tobacco products.” Said Walgreens spokesperson Emily Hartwig.
This is not a move that is threatening to tobacco companies in the short term. However, the hope is that this move will begin a ripple effect of pharmacies and other stores ceasing to sell tobacco, as a part of the increasingly successful movement to eradicate smoking. Anti-smoking advocates have already successfully lobbied for a ban of tobacco sales in pharmacies in Boston and San Francisco. On a larger scale smoking itself has gone down dramatically over the past decade. In 2001 an estimated 402 billion cigarettes were sold/given away as opposed to 274 billion in 2011. Also, in 1980 about 1 in 3 people smoked, as opposed to 1 in 5 in 2011.
CVS has already gained widespread positive attention from the U.S. media, which bodes very well for their image. The temporary dent in revenue gained they are taking is a small sacrifice for what will most likely give a CVS an advantage in terms of their public image, along with damaging the image of other pharmacies who are continuing to sell tobacco products.
In addition to the media, CVS’s groundbreaking decision has garnered the applause of Secretary of Health and Human Services, Kathleen Sebelius, in statement released by her department.
“CVS Caremark’s announcement that CVS/pharmacy stores will no longer sell cigarettes and other tobacco products is an unprecedented step in the retail industry. We also commend CVS Caremark on their new national smoking cessation program. With more than 7,600 CVS/pharmacy locations, this private sector health leader’s new policy will have considerable impact.”
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Sebelius, Kathleen. “News.” Statement by Health and Human Services Secretary Kathleen Sebelius on CVS Tobacco Announcement. N.p., 5 Feb. 2014. Web. 11 Feb. 2014.
Strom, Stephanie. “CVS Vows to Quit Selling Tobacco Products.” New York Times. N.p., 5 Feb. 2014. Web. 10 Feb. 2014.