Source: Walmart
Walmart appears ready to quit its cigarette habit
Walmart has decided to ditch selling cigarettes in some of its U.S. stores and reconfigure its front end space in those locations to make room for more self-checkouts and products including candy and grab-and-go foods.
The Wall Street Journal reports that the retailer has been debating for some time whether it should be selling cigarettes. CEO Doug McMillon has asked top executives within the company to figure out how it could end tobacco sales without demanding that it do so cold turkey.
Weaning itself from cigarettes makes sense for the retailer on a number of fronts. The products are a theft risk throughout the supply chain and profits generated by the category are below what other typical front end items such as candy produce.
Walmart, which is pulling cigarettes in select locations in Arkansas, California, Florida and New Mexico, raised the minimum age to 21 to buy cigarettes in its stores in 2019. Congress raised the federal minimum age to 21 later that year. The company also ended the sale of e-cigarettes in 2019, as well.
Target got out of the cigarette and tobacco business in 1996. CVS made the move in 2014.
A 2017 survey by CVS found that its decision to end cigarette sales may have aided many of its customers in quitting the habit. Reuters reports that customers who bought their cigarettes exclusively at the drugstore chain were 38 percent less likely to keep smoking. Cigarette sales in the states where CVS had stores dropped one percent in the eight months following the chain’s exit from the category, according to the report in the American Journal of Public Health.
Sam’s Club may provide a guide for Walmart as it transitions away from cigarettes. The Journal reports that the chain began pulling back from the category in 2018. Tobacco products are now sold in fewer than 40 of the chain’s 600 clubs.
Walmart, like many key competitors from Amazon.com to Walgreens, sees an opportunity to build healthier relationships with customers by promoting health and wellness products and services.
The retailer launched prescription medicine savings as part of its Walmart+ subscription plan. Members pay as little as $0 on select prescription medicines while receiving discounts on 85 percent of the drugs sold in its pharmacies.
Walmart has also opened primary care clinics inside some stores and acquired the telehealth provider WeMD.
- Walmart Stops Selling Cigarettes in Some Stores – The Wall Street Journal
- When CVS stopped selling cigarettes, some customers quit smoking – Reuters
- Will prescription med discounts help Walmart+ gain ground on Amazon Prime? – RetailWire
- Walmart is going all in on 24/7/365 telehealth – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Do you expect Walmart to phase out most, if not all, of its cigarette sales over the next five years? Will other big box retailers do the same?
Poll
Loading …BrainTrust
Dr. Stephen Needel
Managing Partner, Advanced Simulations
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
This is a step forward in phasing out cigarette sales and I suspect, like the others major players, it will eventually eliminate them all together. When you think about the juxtaposition between cigarettes and Walmart’s expanding health services, it just makes sense to end cigarette sales. Why this is only occurring in select markets is curious, but I suspect some Walmart customers who choose to smoke also have strong opinions about the matter, and that may be part of what’s behind Walmart’s decision to not go cold turkey.
As with most changes Walmart makes, this is the start of a staged phase out. I don’t think it will take five years though. Target and CVS have both shown that a profitable post-tobacco business is possible. The greater question is how the change will impact other retailers and how they view tobacco sales going forward.
The mood has changed – time for the big players to stop selling tobacco.
With Walmart’s push into healthier products and opening at least 20 health centers in four different states, the decision to eliminate cigarette sales is overdue. Walmart ought to ramp up this process and expand its health center operations to more stores in more states, offering consumers high quality and affordable health services.
As with other companies that have decided to leave the cigarette business, I am sure that Walmart is thinking about what will replace those lost sales which is why I don’t think this will be a quick decision to stop sales all at once.
A highly visible, front-of-store focus on cigarette sales is in direct conflict with wanting to build healthier relationships with customers. Knowing others have successfully navigated the transition, including their own Sam’s Club locations, makes this a low-risk move, while creating more upside with higher margin products slotted into that prime store space. I suspect this transition will look more like a two to three year makeover – and good for Walmart to be doing it.
Like ripping off a Band-Aid, Walmart will feel momentary pain but big improvement over the long run. Tobacco use overall is on the wane and Walmart competitors like drug stores, grocery stores, and even Costco have already begun to phase out their own tobacco offerings, meaning Walmart will face little risk in exiting this category.
Tobacco products may be a mainstay for convenience stores, but they are a drop in the front-end bucket for Walmart. Just as eliminating cigarettes was an easy on-brand play for CVS, cigarette sales are increasingly at odds with Walmart’s ongoing health and wellness push. Walmart will have no trouble replacing that real estate with alternative impulse items.
This is good business decision. The case is made that there are better, more profitable options for the front end at Walmart. I do think it will be a bit trickier for Walmart to drop tobacco then it was for Target or CVS. Tobacco is a loss leader because tobacco customers are very loyal. They’re going to prefer stores where they can do their normal shopping and pick up their tobacco. I have no insights here but I suspect smokers make up a higher percentage of Walmart shoppers than a lot of their competition. And as long as grocers continue to sell the product there is some risk that they will lose the entire trip from a number of their customers who smoke. I do believe that this is the right thing to do and I applaud their efforts. I also understand taking a bit more cautious approach to this.
To me the question isn’t whether Walmart will recover sales, but where those tobacco consumers will go. This move, at scale, will open the door to more specialist retailers and e-tailers, as well as boost c-store sales.
Liz, I was thinking the exact same thing. I see a mind-boggling number of younger people smoking and they are going to have to go somewhere for their “fix.” The question is will this be a boon for cigar sellers, hookah bars, and other adjacent forms of retail, or will the majority of these sales shift over to c-stores, gas stations, and bodegas?
That giant “yeah!” you just heard is coming from gas stations and convenience stores.
I agree. While the sales of nicotine delivery devises may be declining everywhere, including c-stores, I am sure they will welcome having one less competitor.
Phasing out most cigarette sales within five years would boost Walmart’s credibility as a wellness destination. Walmart is smart to test how removing cigarettes in favor of speedy checkouts and assortment optimization affects revenue and the customer experience.
Given the leadership shown by Target, CVS, Sam’s Club and Walmart, big box rivals may very well reduce cigarette sales, too. As consumers prioritize their health, more retailers are aligning with their needs, including safer products.
It makes sense for Walmart to withdraw from a category that has a negative health impact and where margins are thinning. In the general scheme of things, Walmart can replace the lost revenue with its new initiatives in health and other areas. On the wider picture of cigarettes, I suspect more retailers will withdraw eventually leaving the category to the convenience stores and gas stations which I suspect will be very reluctant to pull back on what is an important category for them.
Walmart has gotten a lot of heat for not being a good corporate citizen, but this and several other recent initiatives show that they may be having a change of heart.
I expect Walmart will carefully monitor what happen to sales traffic counts and profits in the stores where it is pulling cigarettes and base its decision on the results of its action. This could be gradual removal based on the demographics of the stores where it had a minor impact on sales and profits, or a complete withdrawal. I do not foresee Walmart concluding not to remove cigarettes in at least some of its stores.
As retailers move to a more healthy, holistic living and lifestyle approach and customer experience, Walmart’s phasing out of cigarette products is a logical next step. This won’t be an immediate shift. However we should expect that Walmart and other retailers will be able to make up for the shortfall of business that will come via product and merchandise diversification strategies.
For Walmart this appears to be a no brainer. The category is experiencing declining profits and logistical service issues. I suspect the space will be used for higher margin, fast turn options. It also makes sense from an ethical, not to mention a public relations point of view. Cigarettes are addictive and a leading cause of cancer. For those who still purchase I suspect convenience stores, gas stations and dollar stores will see increased demand.
Walmart demographics align with tobacco users, though total usage is at an all-time low. As an addictive controlled substance it remains a pleasure product for women which still boggles the mind. CVS dropping sales did not cause people to quit. You can easily get the product at any gas station or c-store or grocery chain. Making the product less accessible is an inconvenience, but not a deterrent. Yes they will phase it out – but a trip to the store many times is due to the need for the product.
Another dumb decision, though c-stores will cheer as they own about 70 percent of the cigarette market. Yes, smoking isn’t good for you, but I’m sure Walmart’s candy aisle, soda aisle, and all the other unhealthy foods the retailer sells aren’t going away. It’s ludicrous to talk about Walmart’s decision being born of developing “healthy” relationships with its customers when it’s killing them through obesity-inducing products throughout the rest of its store. It will unnecessarily drive customers who choose to smoke to the competition.
This is clearly an exit of a low or negative margin category. Make no mistake, this is a business decision. Many grocers have also quietly made this decision.
I notice many times lately the only cash register open besides self checkout is the tobacco register at Walart. I suspect they are tired of having to staff it. Also that one line is very long, you may be waiting 15 minutes in that line just so you can buy cigarettes. It would save you time to use self checkout with no line and stop at a convenience store for cigarettes.
Also many Walmart locations have gas stations in the parking lot including 800+ run by Murphy and probably 300 run by Walmart itself so tobacco sales can continue via the gas stations in many cases. It should not be a huge deal for customers. Cigarette use keeps declining.
This is a major Walmart decision. According to the CDC, over 30.8MM adults smoke in the US. Walmart has been carrying conflicting messages through a strong health and wellness focus with pharmacy products and the unhealthy cigarette so this move is a reasoned decision. Will they phase out most of its cigarette sales over five years — yes, much faster than that would be the expectation as they see sales from other less unhealthy products (chips, soda, candy) can quickly replace the loss. It’s important to note, a typical convenience store can generate profit margins in the range of 18.3% for cigarettes, so this remains a potentially profitable category in some parts of the US especially where smoking is more common.
Whether other big box retailers follow suit is hard to say — US tobacco manufacturers still generate over $100B in sales (2022). However, most national big box brands already have removed cigarettes from their assortments. Ironically you’ll still find stores like Home Depot selling ashtrays.
Some key players that haven’t yet made this move include Walgreens, Albertsons, Kroger (though they’ve stopped selling e-cigarettes), some chains in Royal Ahold Delhaize and Walmart. Expect to see some slowly weaning off of this as health and wellness continues to becomes more thematic.
“Target got out of the cigarette and tobacco business in 1996…” More than a quarter century ago. For those who like to compare Walmart and Target, it’s harder to imagine a clearer demonstration of how different they can be.
What’s the role of tobacco category? Are the “Dollar” stores selling them? What about booze? Seems that category also over indexes with WMT shoppers. What drives the WMT decision, low sales or public health?
Why five years? How about ten. Maybe twenty.
Walmart has said their goal is to become America’s neighborhood health destination. Yet, they are on the fence about if, when and how to stop selling tobacco. This is not hard. Stop selling tobacco and become America’s neighborhood health destination. Or, keep selling tobacco and admit the goal of becoming a health destination is really a fantasy.
There is no middle ground here. Few consumers can benefit more from vigilance on health and wellness as Walmart’s consumers.
Walmart has an opportunity to do good and lead healthy change. This is a very real challenge for their affinity for healthy profits.
Yes. All of Walmart’s larger competitors and many of the drug store, grocery store and other big box stores are already well on their way to dropping cigarettes in their stores. It is just a matter of time before we will see the complete elimination of cigarettes from the majority of retail partners, because the product doesn’t make sense or cents…
Annually profiting from the demise of more Americans than those killed by COVID, the bigger question is, what’s taking Walgreens so long to embrace its motto, “Trusted since 1901”? Hundreds of Walmart Neighborhood Markets no longer have cashiers, a cost-cutting trend that makes tobacco sales challenging. CVS, Aldi and Lidl are looking vastly more health-conscious than Publix, Albertsons and Kroger.
A March 2022 study published in Nicotine & Tobacco Research (Seidenberg et al) found that “Cigarette promotions were observed in 94.0% of pharmacies, more than any other retailer type (e.g., convenience stores: 82.0%, tobacco stores: 77.0%).” The authors concluded, “Whether voluntarily or legislatively, tobacco-free pharmacies would eliminate a prevalent retail source of cigarette promotions.”
Most glaring, Publix pharmacy counters are often just feet away from the customer service counter’s tobacco power wall that bombards the subconscious minds of children and teens with the not-so-subtle message that tobacco use is normal, colorful and exciting. Look, if tobacco power wall marketing didn’t work, they wouldn’t exist.