CVS Calls It Quits: No More Cigarettes
CVS/Caremark, the largest selling drugstore chain in the U.S., announced Wednesday that it will stop selling tobacco products by year’s end, a potential catalyst for more retailers to also consider withdrawing. Smoking-cessation advocates believe less access will help fight the addictive habit, while market analysts said it will likely shift sales to other venues.
“CVS quits for good,” reads the giant retail-pharmacy CVS website, which has had more than 20,000 shares of its announcement on Facebook. Top CVS executives in videos said the company could not sell addictive, cancer-causing products while branding itself a healthcare provider.
“Ending the sale of cigarettes and tobacco products at CVS/pharmacy is simply the right thing to do for the good of our customers and our company,” CVS Chief Executive Larry Merlo said Wednesday in a video. “The sale of tobacco products is inconsistent with our purpose — helping people on their path to better health.”
Anti-smoking advocates and public health officials around the country hailed the decision, expressing hope that other huge retailers such as Walgreens — the drugstore chain with the largest number of stores in the U.S. — will follow suit. Health and Human Services Secretary Kathleen Sebelius and cancer organizations said they viewed the move as ground-breaking.
“Today’s CVS Caremark announcement helps bring our country closer to achieving a tobacco-free generation,” Sebelius said in a statement. “I hope others will follow their lead in this important new step to curtail tobacco use.”
Yet CVS Caremark’s move to drop the carcinogenic products by Oct. 1 was not seen as lowering sales, one of the country’s leading tobacco analysts told investors Wednesday:
Wells Fargo Securities Surprised by the Move
“Although cig margins are low for retailers, they do drive foot traffic, therefore we were surprised by CVS’s move,” Bonnie Herzog, senior analyst for Wells Fargo Securities, said in an equity research update she shared with Elements Behavioral Health. “We believe this will have no impact on tobacco manufacturers as smokers will still buy cigs and other tobacco products; rather, they will simply go to other retailers. Therefore, this is a positive for [convenience] stores, as we believe a portion of the 15% of total tobacco volume sold through drug stores and supermarkets will move to [convenience] stores, especially if more drug retailers follow suit and discontinue sales of tobacco products. Bottom line — we do not believe cigarette manufacturers will be impacted by CVS’s announcement.”
A looming question for the nicotine marketplace is electronic cigarettes, and how the federal Food and Drug Administration may act to regulate sales. The e-cigarette industry has exploded, and is forecast to eclipse tobacco sales globally in less than a decade. The doubling of youth reporting they’ve tried e-cigarettes, known as “vaping,” has alarmed public health officials and drawn Big Tobacco into the rapidly growing $2-billion industry. CVS does not sell e-cigarettes, opting to wait for the FDA’s call on whether it will classify e-cigs as tobacco products, and thus subject to potential regulation. Tobacco products kill an estimated half a million people yearly, according to the federal Centers for Disease Control. For every death, 20 more people suffer at least one or more serious or chronic illness, the American Lung Association reports. The addictive power of nicotine and the estimated 4,800 chemicals added to tobacco cigarettes have led to an abysmally low 3% success rate one year after a smoker quits.
The CVS announcement prompted Secretary Sebelius to remind of the public health cost of such addictive products: $289 billion annually. “Each day,” she wrote in her statement, “more than 3,200 youth under age 18 in the United States try their first cigarette and more than 700 kids under age 18 become daily smokers. If we fail to reverse course, 5.6 million American children alive today will die prematurely due to smoking…. We need an all-hands-on-deck effort to take tobacco products out of the hands of America’s young generation, and to help those who are addicted to quit.”
Smoking-Cessation Programs Coming, CVS Says
It was that grim backdrop that CVS Caremark pointed to Wednesday in vowing to move away from tobacco sales by fall, and offer widespread smoking-cessation programs by spring. Tobacco products are not a large part of CVS’s profits; the New York Times reported that CVS Caremark assessed the drop in tobacco products and other items smokers might buy such as breath-fresheners at an estimated $2 billion in sales out of 2012 figures of $123 billion. And it was the company’s evolving growth from retail to healthcare that CVS Caremark CEO Merlo emphasized.
“Through our 26,000 pharmacists and nurse practitioners, every day we are helping millions of patients manage chronic conditions like high blood pressure, high cholesterol and diabetes,” Merlo said, “and all of these conditions are made worse by smoking. Tobacco products have no place in a setting where health care is delivered, and when we asked ourselves where we expected to be in the future as a healthcare company, it became clear that removing tobacco products from our stores is the right thing to do.”
More details on CVS Caremark’s decision to stop selling tobacco products: //info.cvscaremark.com/cvs-insights/cvs-quits