Why Did CVS Stop Selling Cigarettes? It Wants to Be Taken Seriously as a Health Care Company.

Moneybox
A blog about business and economics.
Sept. 3 2014 1:58 PM

Why Did CVS Stop Selling Cigarettes? Because It Wants to Be Taken Seriously as a Health Care Company.

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Now carcinogen free.

Photo by Justin Sullivan/Getty Images

Your local CVS is now tobacco free. Having previously announced that it would stop selling cigarettes by October, becoming the first national pharmacy chain to do so, the company decided to finish the job a few weeks early while also launching a program to help customers quit smoking.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate's senior business and economics correspondent.

All of this will be capped off with a corporate rechristening. Henceforth, CVS Caremark shall be known as CVS Health.

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That name switch encapsulates the big story here. CVS wants to be thought of as a health care provider, not a general store where shoppers can stop in to pick up some Pepsi, deodorant, and a pack of smokes.

Why the shift? Because health care is a far more promising industry than retail. The company already runs 900 walk-in medical clinics, and it’s a whole lot easier to market yourself as a good place to get a checkup when you don't have a giant display of cancer sticks behind your cash registers. Just imagine walking into your doctor’s office and seeing a shelf of Jim Beam bottles and Camel packs for sale. How seriously would you take the people checking your blood pressure?

Ditching tobacco won’t be much of a financial sacrifice for the company either. CVS says cigarettes drive about $2 billion of its annual sales—or less than 2 percent of its total revenue, which hit $126 billion in 2013. Chances are, cigarettes are responsible for even less of its profits, since tobacco is a fairly low-margin product, fine for a 7-Eleven or Piggly Wiggly, but a counterproductive sideline for a company that makes most of its money selling prescription drugs. More than half of CVS’s revenue comes from its "pharmacy services" segment—its quickly growing business managing pharmaceutical plans for corporate clients and insurers. If anything, the PR boost from ditching cigarette sales might make it easier to expand that piece of the company.

Plus, cigarette sales are on the decline. Why not abandon them while it still yields some goodwill from the public?

While the business case for bidding the Marlboro man adieu might be air tight, the pharmacy might need to do a little work evangelizing its staff. A colleague of mine reports that while visiting a CVS this morning, he asked a woman behind the counter how customers were reacting. The forlorn employee held up a no-smoking pin and explained (in my colleague's recounting): “I gotta wear this pin. And when people ask, I have to say, ‘Smoking is bad for you.’ I don’t want to lie to people, because I smoke, and I don’t think it’s that bad.”

Perhaps we've found a candidate for CVS's new stop-smoking program.

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