September 9, 2014
Should CVS’s competitors also say bye to tobacco?
A month sooner than planned, CVS last Wednesday pulled all remaining tobacco products from its pharmacies nationwide. Despite increasing pleas from legislators and health advocates, its competitors are showing no signs of joining them.
To mark the change, CVS announced plans to rebrand itself from CVS Caremark Corp. to CVS Health while expanding its walk-in clinic business and pharmacy management business. Its stores were plastered with "Ready to quit?" posters to showcase its new quit-smoking campaign with the American Lung Association and a related microsite was also launched.
CVS, the second-largest U.S. drugstore chain, made the move despite estimating the company will lose about $1.5 billion in annual tobacco sales and an additional $500 million in other purchases from tobacco-buying walk-ins. But CEO and President Larry Merlo told Politico that other pharmacy operators also have to grapple with the conflicts of selling such products as a health care provider.
He said, "They need to, quite frankly, go through the same process that we went through in terms of asking the hard questions. We saw a growing contradiction between selling tobacco and delivering health care in a retail environment."
![[Image: CVS Health]](data:image/svg+xml;base64,PHN2ZyB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciIHZpZXdCb3g9IjAgMCAxIDEiIHdpZHRoPSIxIiBoZWlnaHQ9IjEiIGRhdGEtdT0iJTJGcHVibGljJTJGaW1hZ2VzJTJGZGlzY3Vzc2lvbnMlMkYxNzc2NCUyRmN2cy1oZWFsdGgtc3RpbGwuanBnIiBkYXRhLXc9IjEiIGRhdGEtaD0iMSIgZGF0YS1iaXA9IiI+PC9zdmc+)
In a statement last week, the largest drug store chain, Walgreens — also positioning itself around health care — said that only four percent of overall tobacco sales come from retail pharmacies. "As a result — as many health experts and even a recent doctor survey have noted — a retail pharmacy ban on tobacco sales would have little to no significant impact on actually reducing the use of tobacco."
Kroger and Walmart have also indicated they don’t plan any changes.
The American Pharmacists Association called on drugstores to stop selling tobacco in March 2010 and several small, independent chains have complied. But with CVS becoming the first large chain to end tobacco sales, groups including the Campaign for Tobacco-Free Kids and American Lung Association have fresh ammunition to call on others to follow suit.
"They shouldn’t be selling poison along side of medicine," Paul Billings, senior vice president for education and advocacy at the American Lung Association, told CBS News.
- Our New Name – CVS
- Lets Quit Together – CVS
- CVS Stores Stop Selling All Tobacco Products – The New York Times (tiered sub.)
- CVS speeds up its tobacco sales ban, sees impact on smoking – Politico
- CVS ends tobacco sales, but rivals aren’t following – CBS News
- CVS stops selling tobacco, offers quit-smoking programs – USA Today
- Why Walgreen Won’t Stop Selling Tobacco Like CVS Health – Forbes
- E-cigarettes could stub out tobacco bonds sooner than thought – Reuters
- CVS to walk away from $2 billion in cigarette sales – RetailWire
- CVS pulls last of tobacco items a month early, plans name change – Chicago Tribune
- After quitting tobacco, CVS makes its next health-care moves – The Washington Post
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Recent Discussions
Discussion Questions
How much do CVS’s competitors gain or lose in the short and long term from continuing to sell tobacco products? Do you see a contradiction for pharmacies selling tobacco products? Will they eventually have to follow CVS’s lead?
Poll
Kudos to CVS to get smart and in front of this issue! It was a very smart thing for them to do if they want to be viewed and respected as a “health” company. Their competitors will certainly have short-term gains but will have a much more difficult challenge to get the same brand boost that CVS received for being the first. CVS also took the opportunity to introduce the new brand look and logo. Very savvy!
There is a contradiction and CVS Health has made a calculated decision to capture the high ground. That being said, the general public probably won’t view this as I do, so it will be interesting to see what the impact is on Walgreens, Kroger and others who continue to sell tobacco products.
It’s one of those “not either-or but both and more” situations. Some people will now go to CVS in support. Others will stop going because of the move. And it’s pretty hypocritical for the American Lung Association to tell them to stop selling poison alongside medicine when we’ve seen a marked increase in junk food (cookies, sweet baked goods, salty snacks, candy) being sold in drug stores.
Smoke rings will continue to rise through the air. When anything addictive is legal it will continue to flourished with those addicted.
About 25 percent of the folks still smoke, so in the short run CVS’s competition will gain some additional business. But in the long run that will change as the tobacco smoking population doesn’t appear to be conventionally renewable. Then CVS gains big and its lemming-like competitors will follow. That when tobacco’s smoke rings will stop rising in the air.
However as more government units make medical pot legal, and if it becomes widely fashionable, all bets are off. Someone will then promote that smoking medical marijuana is pharmaceutical.
Selling tobacco products, with their black box labels, is inherently inconsistent with a positioning around health and wellness. The competitive impact, and response, will be a function of how aggressively CVS aligns its marketing activities around its brand and business strategy. The more aggressive CVS is, the more pressure on Walgreens and others to follow its lead.
CVS did the right thing by taking tobacco products out of its stores. More retailers should do the same, but as long as tobacco remains legal, they won’t. Walgreens and other drug chains may justify continuing to sell tobacco, but a product that is guaranteed to hurt its users has no place on the shelves of stores that purport to heal.
Drug stores haven’t been drug stores for many years. They are convenience stores that happen to sell drugs. There is very little that is “healthy” in a Walgreens or Rite Aid or CVS for that matter.
But, if the trend is actually to a healthier destination, i.e., with in-store clinics, it is hard to imagine that destination selling tobacco products. Does the doctor’s office sell tobacco?
On the reality side, the tobacco business is not a great business for these retailers. The margins are minute and the regulations are heavy and the penalties great in terms of who you can sell to and inventory control.
Drug stores have expanded their product selection to carry many, if not most, of the same items as convenience stores. Walgreens’ positioning is easy to see as they list a c-store manager (or at least they did, haven’t looked in a while) on their wall along with that of the pharmacists and store manager. The rationale is simple—drive shopping frequency and market basket size.
Tobacco is one of the five destination drivers for c-stores and one of the two (beer is the other) where the consumers will switch stores before switching brands. This makes it an important component of the product mix. By dropping tobacco-related items (including I believe e-cig and vapor devices), CVS has eliminated approximately $2 billion in sales. It will be very interesting to see if it can attract enough additional people who support their new positioning to offset this sizable loss.
I believe Canada has taken the position that if you fill prescriptions you cannot sell tobacco products. Should the same position be taken here it would impact not only the chain drugs and supermarkets, but companies such as Sam’s (who by the way is a favorite tobacco and other-goods supplier to many of the independent c-stores in the U.S.).
The competition will have a short term spike in tobacco sales. That’s a given. How long it will last is unknown. I think the public outcry for them to stop tobacco sales will mount enough steam to make something happen.
We have all known for decades that tobacco is terrible for one’s health, so this retail morality play has really played out in slow motion, with the sales and profit motive being the only conceivable reason to sell tobacco. But, with a product whose use as intended causes illness to and even kills the store’s customers, it has become harder and harder to justify. In ten to twenty years I imagine only smoke shops will sell tobacco and the large underground market for tobacco will cause a host of crime problems. But, for mainstream retailers there is no long-term way to justify continuing to sell these products.
This certainly appears to be a fine statement but it can also represent a slippery slope that can lead to a major loss of sales and profits.
Why not stop selling anything unhealthy or controversial? What about liquor? How about soft drinks, candy or other snacks? How about vitamins and supplements without proven benefits? How about cosmetics?
Will more people shop at CVS because of this? Will shoppers buy more of other items at CVS? Or will smokers simply go elsewhere?
We often forget our role is to satisfy the shopper’s needs, not reform them.
Indeed a very shrewd move by the retailer to re-evaluate its position and strategy with regard to the sale of tobacco items in its stores. Probably no real short term gain but definitely a step toward mid and/or long term preemptive advantages. The market has begun to make the shift from a Boomer emphasis, many of whom are and were substantial tobacco users, to that of a Millennial/Gen X focus and the renewed consciousness and in many cases, burden, of now having to care for parents and grands who were users of these items. Other retailers will be forced to follow.
There are some really interesting comments here. First, I praise CVS for clear branding and message. Then I wonder about the questions raised about providing other unhealthy products. And the notes about “drug store chains” being convenience stores that happen to sell drugs. And the question about how medical marijuana will be regarded—as a drug or as a tobacco product? And where is the tobacco industry on all of this, with, what I assume, are huge resources to level against the diminishment of its products?
Anyway, the question: I think CVS will gain from positive publicity and a clear message; others may gain more business, but I believe that will level out. So my conclusion: Kudos to CVS.
I believe that CVS’s competition will win big in the short term, but lose big in the long term if they don’t follow suit. This is a very courageous move by a very big player in the tobacco products category. I’m really impressed by this move and I certainly hope that no matter how the short side looks, that they stick to their instincts and win big, long range.
CVS’s competition will gain approximately $2 billion in additional sales and the profits from these sales. Tobacco products are very addictive and thus bring customers into the store where they then buy other products.
The contradiction I see is not stocking products the consumers want to buy. If tobacco products harm one’s health, then they provide for sales of other products like prescriptions. Pharmacies will not have to follow CVS unless the Federal or state governments decide where tobacco product can be sold. We still live in a market economy.
While I can’t speak for Mr. Merlo—or his conscience—I think this decision had much (more) to do with CVS trying to seize a branding moment; competitors will gain little by following their example, other than looking like “me-too”ers. That’s not to say the status quo will maintain: I’m sure whenever NGO’s can find a cause for busybody legislators to rally around—unsullied by the facts (as Walgreens has neatly described them)—do-gooder legislation will follow.
I applaud CVS for this decision. It takes vision and courage for a company as large as CVS to take the long view in committing itself to a more authentic market position and brand promise. Rebranding as CVS Health is smart, and can serve to galvanize focus on the company’s renewed values and mission.
It’s inevitable. Sooner or later all pharmacies should eliminate sales of tobacco. As a pharmacist, non-smoker and health professional, I have been saying this for over twenty years. However, as I have personally observed, people will just go to a convenience store or other non-pharmacy place to get their cigarettes. Also, if you’ve read the articles, a company like CVS or Walgreens may lose $1.5 billion a year in tobacco sales but they stand to make $10 billion a year with their minute clinics. Furthermore, in order for a company like CVS to obtain community pharmacy status, they HAD to give up selling tobacco. So yes, they should give up selling tobacco products, but it’s not hurting the pharmacy corporations one bit. Tobacco product sales in pharmacies make up only about 4 percent of the total tobacco sales in this country.
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Kudos to CVS to get smart and in front of this issue! It was a very smart thing for them to do if they want to be viewed and respected as a “health” company. Their competitors will certainly have short-term gains but will have a much more difficult challenge to get the same brand boost that CVS received for being the first. CVS also took the opportunity to introduce the new brand look and logo. Very savvy!
There is a contradiction and CVS Health has made a calculated decision to capture the high ground. That being said, the general public probably won’t view this as I do, so it will be interesting to see what the impact is on Walgreens, Kroger and others who continue to sell tobacco products.
It’s one of those “not either-or but both and more” situations. Some people will now go to CVS in support. Others will stop going because of the move. And it’s pretty hypocritical for the American Lung Association to tell them to stop selling poison alongside medicine when we’ve seen a marked increase in junk food (cookies, sweet baked goods, salty snacks, candy) being sold in drug stores.
Smoke rings will continue to rise through the air. When anything addictive is legal it will continue to flourished with those addicted.
About 25 percent of the folks still smoke, so in the short run CVS’s competition will gain some additional business. But in the long run that will change as the tobacco smoking population doesn’t appear to be conventionally renewable. Then CVS gains big and its lemming-like competitors will follow. That when tobacco’s smoke rings will stop rising in the air.
However as more government units make medical pot legal, and if it becomes widely fashionable, all bets are off. Someone will then promote that smoking medical marijuana is pharmaceutical.
Selling tobacco products, with their black box labels, is inherently inconsistent with a positioning around health and wellness. The competitive impact, and response, will be a function of how aggressively CVS aligns its marketing activities around its brand and business strategy. The more aggressive CVS is, the more pressure on Walgreens and others to follow its lead.
CVS did the right thing by taking tobacco products out of its stores. More retailers should do the same, but as long as tobacco remains legal, they won’t. Walgreens and other drug chains may justify continuing to sell tobacco, but a product that is guaranteed to hurt its users has no place on the shelves of stores that purport to heal.
Drug stores haven’t been drug stores for many years. They are convenience stores that happen to sell drugs. There is very little that is “healthy” in a Walgreens or Rite Aid or CVS for that matter.
But, if the trend is actually to a healthier destination, i.e., with in-store clinics, it is hard to imagine that destination selling tobacco products. Does the doctor’s office sell tobacco?
On the reality side, the tobacco business is not a great business for these retailers. The margins are minute and the regulations are heavy and the penalties great in terms of who you can sell to and inventory control.
Drug stores have expanded their product selection to carry many, if not most, of the same items as convenience stores. Walgreens’ positioning is easy to see as they list a c-store manager (or at least they did, haven’t looked in a while) on their wall along with that of the pharmacists and store manager. The rationale is simple—drive shopping frequency and market basket size.
Tobacco is one of the five destination drivers for c-stores and one of the two (beer is the other) where the consumers will switch stores before switching brands. This makes it an important component of the product mix. By dropping tobacco-related items (including I believe e-cig and vapor devices), CVS has eliminated approximately $2 billion in sales. It will be very interesting to see if it can attract enough additional people who support their new positioning to offset this sizable loss.
I believe Canada has taken the position that if you fill prescriptions you cannot sell tobacco products. Should the same position be taken here it would impact not only the chain drugs and supermarkets, but companies such as Sam’s (who by the way is a favorite tobacco and other-goods supplier to many of the independent c-stores in the U.S.).
The competition will have a short term spike in tobacco sales. That’s a given. How long it will last is unknown. I think the public outcry for them to stop tobacco sales will mount enough steam to make something happen.
We have all known for decades that tobacco is terrible for one’s health, so this retail morality play has really played out in slow motion, with the sales and profit motive being the only conceivable reason to sell tobacco. But, with a product whose use as intended causes illness to and even kills the store’s customers, it has become harder and harder to justify. In ten to twenty years I imagine only smoke shops will sell tobacco and the large underground market for tobacco will cause a host of crime problems. But, for mainstream retailers there is no long-term way to justify continuing to sell these products.
This certainly appears to be a fine statement but it can also represent a slippery slope that can lead to a major loss of sales and profits.
Why not stop selling anything unhealthy or controversial? What about liquor? How about soft drinks, candy or other snacks? How about vitamins and supplements without proven benefits? How about cosmetics?
Will more people shop at CVS because of this? Will shoppers buy more of other items at CVS? Or will smokers simply go elsewhere?
We often forget our role is to satisfy the shopper’s needs, not reform them.
Indeed a very shrewd move by the retailer to re-evaluate its position and strategy with regard to the sale of tobacco items in its stores. Probably no real short term gain but definitely a step toward mid and/or long term preemptive advantages. The market has begun to make the shift from a Boomer emphasis, many of whom are and were substantial tobacco users, to that of a Millennial/Gen X focus and the renewed consciousness and in many cases, burden, of now having to care for parents and grands who were users of these items. Other retailers will be forced to follow.
There are some really interesting comments here. First, I praise CVS for clear branding and message. Then I wonder about the questions raised about providing other unhealthy products. And the notes about “drug store chains” being convenience stores that happen to sell drugs. And the question about how medical marijuana will be regarded—as a drug or as a tobacco product? And where is the tobacco industry on all of this, with, what I assume, are huge resources to level against the diminishment of its products?
Anyway, the question: I think CVS will gain from positive publicity and a clear message; others may gain more business, but I believe that will level out. So my conclusion: Kudos to CVS.
I believe that CVS’s competition will win big in the short term, but lose big in the long term if they don’t follow suit. This is a very courageous move by a very big player in the tobacco products category. I’m really impressed by this move and I certainly hope that no matter how the short side looks, that they stick to their instincts and win big, long range.
CVS’s competition will gain approximately $2 billion in additional sales and the profits from these sales. Tobacco products are very addictive and thus bring customers into the store where they then buy other products.
The contradiction I see is not stocking products the consumers want to buy. If tobacco products harm one’s health, then they provide for sales of other products like prescriptions. Pharmacies will not have to follow CVS unless the Federal or state governments decide where tobacco product can be sold. We still live in a market economy.
While I can’t speak for Mr. Merlo—or his conscience—I think this decision had much (more) to do with CVS trying to seize a branding moment; competitors will gain little by following their example, other than looking like “me-too”ers. That’s not to say the status quo will maintain: I’m sure whenever NGO’s can find a cause for busybody legislators to rally around—unsullied by the facts (as Walgreens has neatly described them)—do-gooder legislation will follow.
I applaud CVS for this decision. It takes vision and courage for a company as large as CVS to take the long view in committing itself to a more authentic market position and brand promise. Rebranding as CVS Health is smart, and can serve to galvanize focus on the company’s renewed values and mission.
It’s inevitable. Sooner or later all pharmacies should eliminate sales of tobacco. As a pharmacist, non-smoker and health professional, I have been saying this for over twenty years. However, as I have personally observed, people will just go to a convenience store or other non-pharmacy place to get their cigarettes. Also, if you’ve read the articles, a company like CVS or Walgreens may lose $1.5 billion a year in tobacco sales but they stand to make $10 billion a year with their minute clinics. Furthermore, in order for a company like CVS to obtain community pharmacy status, they HAD to give up selling tobacco. So yes, they should give up selling tobacco products, but it’s not hurting the pharmacy corporations one bit. Tobacco product sales in pharmacies make up only about 4 percent of the total tobacco sales in this country.