CVS is announcing today that it's going to stop selling cigarettes as part of a strategic pivot to a deeper involvement in the health care sector. CVS operates a network of Minute Clinics that provide health care services in a more convenient setting than a traditional doctor's office, and expanding that business is involving them in contracts with health insurers. In the short-term, not selling tobacco products is going to hurt their business. But in the longer term it opens the door to those deeper ties—you can try to make money by selling cigarettes to addicts or you can try to make money by being part of a health strategy, but it's hard to do both simultaneously.
It's a pretty smart idea, and I'm very enthusiastic about retail health clinics both as a business opportunity and part of broader health care reform.
But the cigarettes issue seems to me to mostly raise the question of how far CVS can really go down this road. After all, I was in CVS just yesterday to buy myself some Diet Coke. The Diet Coke sits next to the sugary sodas. And they're across the aisle from the potato chips. Up front where you cash out there are lots of M&M's and Snickers bars.
There is, to be sure, also some medicine for sale in your typical "drugstore." But junk food is a massive product line. I'm not sure how junk food sales compare to tobacco sales, but much more square footage of the stores is dedicated to chips and sodas than to smokes. To really make the pivot CVS is talking about, it seems to me they'd have to change their business pretty drastically.