CVS Caremark Corp. got a nod Wednesday from the White House for its decision to stop selling cigarettes and other tobacco products in its stores by Oct. 1. The country’s second-largest drugstore chain also plans on launching a campaign encouraging Americans to stop using the products.
Besides cigarettes, targeted products include cigars and chewing tobacco. The company, believed to have some of the lowest prices on tobacco, is sporting a new logo on its website declaring “CVSquitsforgood.”
CVS, based in Woonsocket, R.I., said it will focus more on being a health-care provider, not a detriment to consumers’ health. The company operates 7,600 stores and says its new position on tobacco will help grow its business in areas where it works with doctors and hospitals on improved health.
CVS does not sell electronic cigarettes, but is expected to expand its offerings for smoking cessation.
Pharmacists also will be trained in counseling smokers on how to quit. U.S. retail sales of tobacco, made up largely of cigarettes, were about $107.7 billion in 2012, according to market researcher Euromonitor International.
“CVS Caremark sets a powerful example, and today’s decision will help advance my Administration’s efforts to reduce tobacco-related deaths, cancer, and heart disease, as well as bring down health care costs - ultimately saving lives and protecting untold numbers of families from pain and heartbreak for years to come,” President Barack Obama said in a statement from Washington on Wednesday.
The impact on CVS’ bottom line could be as much as $2 billion, which includes the tobacco products and other incidentals that cigarette buyers gravitate toward once they’re in the store, analysts said. The company had more than $123 billion in revenue in 2012.
Deerfield, Ill.-based Walgreen Co. is the largest U.S.-based drug retailer, with nearly 8,600 stores in all 50 states, the District of Columbia, Puerto Rico and Guam. Global retail giant Wal-Mart Stores Inc. operates pharmacies in its stores and sells cigarettes. Target operates pharmacies within its stores, but does not sell tobacco.
Wal-Mart would not comment for this story.
Some in the retail industry don’t think other retailers will be as quick to halt cigarette sales, mostly because tobacco prices continue to rise and are a profitable category.
“I don’t know if Wal-Mart would ever go to that extreme, but I do wonder if Walgreens won’t,” said Brian Yarbrough, a retail analyst with Edward Jones in St. Louis. Pills, prescriptions and other health and wellness products make up 40 percent to 50 percent of the business for major drugstore chains such as CVS and Walgreens, he said.
CVS’ decision constitutes “a statement, and an important one,” said Paula Rosenblum, managing partner of RSR Research.
“I am hopeful about companies that do things because they’re the right things to do rather than just things that add shareholder value in the short term,” Rosenblum said.
“I have never understood how chain drugstores could rationalize the sales of tobacco - and alcohol, too, really,” she said. “I mean, you’d never find either at a vitamin shop. I don’t expect the company to go completely overboard and stop selling sugar and the like … but cigarettes were sort of a no-brainer.”
Some independent stores - and even a few chains -may follow suit, but Rosenblum doesn’t expect Wal-Mart to be one of them, saying, “No, I don’t see Wal-Mart doing anything like this. Wal-Mart tends to do things that put competitors at a disadvantage, not themselves.”
W. Frank Dell II, president and founder of general management and consulting firm Dellmart & Co. Inc., declared CVS’ actions “a bold move” considering cigarettes are an addictive product.
“My feeling in looking at it is, if consumers are going out to buy cigarettes and they’ve got other things they’ll buy at the store, they’ll go to CVS,” he said. “If CVS is not selling cigarettes, that business is going somewhere else.”
Cigarette sales are not driving consumer trips to Wal-Mart like they are to drug stores. “There’s a convenience factor,” Dell said, talking from Connecticut, which is replete with CVS locations. “Drugstores are more frequent on every corner than gas stations anymore.”
The federal government kicked up efforts to reduce death and disease caused by tobacco after the 50th anniversary of the landmark 1964 surgeon general’s report that incited the anti-smoking movement. A new 980-page report issued recently by acting Surgeon General Boris Lushniak also urged new resolve to make the next generation smoke-free.
Business, Pages 25 on 02/06/2014