Wednesday, February 05, 2014

CVS to end tobacco sales by October 1st

This story is from the NY Times:
CVS/Caremark, the country’s largest drugstore chain in overall sales, announced on Wednesday that it planned to stop selling cigarettes and other tobacco products by October.
The company’s move was yet another sign of its metamorphosis into becoming more of a health care provider than a largely retail business, with its stores offering more miniclinics and health advice to aid customers visiting its pharmacies.
The company estimated that its decision would cost an estimated $2 billion in sales from tobacco buyers, which includes incidental items like gum that those customers might also purchase. That is a mere dent in its overall sales of $123 billion in 2012, the latest figures available.
“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,” said Larry J. Merlo, chief executive of CVS. “We came to the decision that cigarettes and providing health care just don’t go together in the same setting.”
CVS does not sell electronic cigarettes, the highly popular but debated devices that deliver nicotine without tobacco and emit a rapidly vanishing vapor instead of smoke. It said it was waiting for guidance on the devices from the Food and Drug Administration, which has expressed interest in regulating e-cigarettes.
Some major retail stores like Walmart and convenience stores still sell cigarettes and other tobacco products, although antismoking groups and health care professionals will probably use CVS’s decision to try to pressure others to consider doing so. Municipalities have also begun enacting legislation governing where cigarettes can be sold.
Kathleen Sebelius, secretary of Health and Human Services, said in a statement that the CVS decision was “an unprecedented step in the retail industry” and predicted it would have “considerable impact.”
I am not a smoker, however my mother smoked for almost 20 years before quitting cold turkey.  I remember the smell of tobacco that permeated throughout the house and furniture.  Even today, I will gag at the smell of cigarette smoke.

Do I applaud CVS's move to ban cigarette sales in their stores?  I'm not sure. There is this issue of CVS's attempt to "metamorphosis into becoming more of a health care provider than a largely retail business, with its stores offering more mini clinics and health advice to aid customers visiting its pharmacies."  To me, this sounds like a marketing / PR and strategic business decision to shift from pure retail sales to a hybrid retail / health clinic store.  I know that CVS has offered flu shots in their stores for years.  With the rollout of health care reform, maybe the CVS execs are seeing potentially bigger sales revenue in providing simplified health care services to customers in their stores, over the sales of cigarettes.  According to the NY Times:
Nik Modi, an investment analyst who follows tobacco stocks at RBC Capital Markets, said he doubted CVS’s move would have a major impact on tobacco sales, noting that roughly three-quarters of cigarette sales occur in convenience stores. Additionally, he said, “the dollar channel recently started to get into the tobacco space because they were losing foot traffic to other channels as cigarettes are key to driving in-store traffic.”

On Tuesday, CVS executives met with executives from tobacco companies to discuss the shift. “Obviously, you would expect they would be disappointed with this decision,” Mr. Merlo said. “At the same time, I think they understand the paradox we faced as an organization.”
In other words, American smokers are buying their cigarettes from 7-Eleven, liquor stores, and gas station mini-mart stores.  The cigarettes are usually located in a locked case, somewhere behind, or under the cashier counter.  It is a simple matter for the cashier to turn around, unlock the case, and remove the cigarette package for the customer's purchase.  In my local CVS store, the locked cigarette case is located at the front wall of the store.  The cashier needs to leave the register to unlock the case and remove the product for the customer's purchase.  It is not as convenient to purchase such cigarettes.  Or the cashier may have to call a supervisor to get the cigarettes.  Remove the locked cigarette case from the front, and you free up more retail space to place other impulse-buying products for customers.

Both Walgreens and Rite-Aid have said that they are "assessing" the sales of cigarettes "to make sure it suits the needs and desires of customers."  In other words, both stores will continue retail selling of cigarettes to their customers. 

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