Rhode Island-based CVS announced this week that it would stop selling cigarettes in its stores, saying that such sales are not conducive to a store that is trying to focus more on providing healthcare products.
The move, while perhaps popular with the CVS target audience and partners in the healthcare industry, will prove expensive for the retailer.
It’s a business move worth studying for business students or those thinking of earning a degree in business administration. While costly, CVS’s decision should definitely win approval from the healthcare networks that CVS is trying to partner with in providing services for customers.
On the other end of the deal, the decision is another major blow to the tobacco industry. According to the Wall Street Journal, the tobacco industry has had sales cut in half since the late 1990s, falling from about 500 billion cigarettes sold to about 280 billion.
As the Wall Street Journal noted, tobacco companies face more than just falling sales numbers. They also must deal with tax increases, an increase in smoking bans and more public service campaigns that show the dangers of chronic cigarette smoking.
CVS is the second-largest pharmacy chain in the country, behind Walgreen’s, with about 7,600 locations nationwide. According to the announcement from CVS, sales will conclude Oct. 1, 2014. CVS’ press release also noted that CVS is “the first national pharmacy chain to take this step in support of the health and well-being of its patients and customers.”
Larry J. Merlo, president and CEO of CVS, said in the release that stopping the sale of cigarettes is “the right thing for us to do for our customers and our company to help people on their path to better health.”
The press release goes on to assert that smoking is the “leading cause of premature disease and death in the United States with more than 480,000 deaths annually.” Merlo also said that not only will CVS stop selling cigarettes, but the company will also undertake a “robust” national campaign to support smoking cessation. The program will include online resources and information at CVS stores.
The Wall Street Journal pointed out that the move will be costly for CVS. The annual loss for the company from cigarette and tobacco product sales will be about $2 billion, according to the Journal. The company has annual revenue of about $123 billion.
