The Real Story Behind Tobacco-Free CVS Stores
On September 3, 2014, almost a month before its planned due date of October 1, the CVS Caremark Corporation, the nation's second largest pharmacy retail chain, announced that all its nearly 7,700 pharmacy outlets (including Longs Drug Stores), now re-named CVS Health, are "tobacco free", and celebrated by filling New York City's Bryant Park with red hearts and a blow-up cigarette reading, "Cigarettes Out, Health In." While becoming "tobacco free" was not costless - CVS Health reported that it takes in approximately $2 billion in revenue annually from tobacco sales - it is a small fraction (1.5 percent) of its $132.9 billion in revenues for 2013. CVS is already poised to replace some of its foregone cigarette sales with smoking cessation programs and products for its customers.
Since the 1960s, tobacco products, and specifically cigarettes, have been a declining consumer market in America. As the U.S. Centers for Disease Control and Prevention reports, the prevalence of current cigarette smoking among American adults has declined to 18.1 percent of adults (age 18 or older) in 2012, down from 42.4 percent of adults in 1965, with 20.5 percent of adult men and 15.8 percent of adult women current smokers as of 2012.
Many elected officials and public health organizations offered political support for CVS management's decision to go "tobacco free." In February 2014, after CVS first publicly announced its intention to voluntarily drop tobacco products from their retail shelves, President Obama praised CVS for being the first national drug store chain to forego tobacco revenue, and implored other pharmacy chains to voluntarily follow suit. Also, in a February open letter to major American retailers (especially those with pharmacies), 26 major public health organizations, including the American Lung Association, asked their executives "to move quickly to end tobacco sales in their stores." In a March 2014 letter, the attorneys general of 28 states and U.S. territories requested that the CEOs of Walgreens, Rite Aid, Walmart, Kroger and Safeway retail chains remove all tobacco products from their shelves.
The CVS decision was not the first by a major U.S. retailer, as Target Corporation, in 1996, and Wegmans Food Markets, in 2008, had previously stopped selling tobacco products in their retail outlets. CVS executives believe that more interventions, such as reducing the availability of cigarettes, are needed to dissuade tobacco usage among Americans. Some municipalities, including Boston and San Francisco, already ban the sales of tobacco products in pharmacies. One question, however, has been raised by the business media: Would the CVS Health decision have a salutary impact on other pharmacy retail chains adopting similar "tobacco free" operating policies?
While this "tobacco free" policy has attracted widespread media attention since the company's original announcement in February, pharmacy chain competitors of CVS, including Walgreens and Rite-Aid, have not yet opted to follow the CVS self-regulation policy example - although they are reportedly considering it. Even if other major pharmacy chains follow CVS's example, their effect on consumer access to tobacco products will be essentially symbolic in nature. According to consumer research firm Euromonitor International, it estimates that only 3.6 percent of all cigarette sales are transacted in U.S. pharmacies, with the overwhelming majority of consumer tobacco purchases occurring at gas stations or in convenience store outlets, such as 7-Eleven. Meanwhile, since CVS Health has become a tobacco free retail pharmacy, two large general discount retail chains, Dollar General and Family Dollar, are poised to occupy the marketplace void left by the company, as both discount retailers recently added cigarettes, identified by industry analysts as a consumer product that drives retail store traffic, to their product repertoire.
While CVS Health touts itself as a "socially responsible" company, and the company has published a "Corporate Social Responsibility" Report annually since 2007, the decision to drop tobacco products from its shelves has much more to do with the company's rebranding strategy, than being driven by corporate social responsibility. And to CVS's credit, they have not actively attributed this company policy decision to a corporate social responsibility motivation; any social responsibility outcome is a result of this rebranding strategy. This company rebranding strategy, however, will not necessarily be noticed by the average consumer, as the store fronts will remain branded as "CVS", but will reflect its evolving business model: "We're doing more and more to extend the front lines of health care," said CVS CEO Larry Merlo.
The concept of CVS Health is much more reflective of how America's pharmacies will have a greater role in the healthcare industry, partially due to Obamacare's healthcare options now available for uninsured people who are expected to receive medical treatment and vaccinations, and partially to better serve an aging American population. CVS competitors, such as Walgreens and Rite-Aid, have already added new health care products to their inventories, as well as adding health care walk-in clinics to their stores; CVS is not be far behind in embracing similar business opportunities. As the generic pharmacy industry strategy evolves, the enhanced "health" aspects of pharmacy chains will supplant their general "retailer" aspects, and other pharmacy chains will eventually follow CVS's "tobacco free" example.
