February 5, 201412 yr CINCINNATI (CBS news) -- CVS, one of the country’s largest pharmacy chains, will stop selling cigarettes and all tobacco products at their more than 7,600 stores on October 1, 2014. It is the first national chain of pharmacies to make that decision. Tobacco use is the number one cause of preventable death in the United States and the government says it kills more than 480,000 Americans each year. According to the U.S. Department of Health and Human Services more than 42 million people in the country smoke and 16 million current and former users have smoking-related illnesses. President and chief executive officer of CVS Caremark, Larry Merlo, joined “CBS This Morning” to discuss why his company made this decision. He explained that the decision was based on helping improve their consumer's health. “There’s a growing focus and emphasis on healthy outcomes, managing chronic disease and, by the way, more than half of all Americans today suffer from one or more chronic diseases as well as a focus on controlling and reducing health care costs,” he said. Merlo told the co-hosts that they believe that banning these products “is the right decision” for their company even though they generate $2 billion in tobacco and related sales. “It positions us for future growth and the opportunity to play a bigger role in our evolving health care system,” he said. Merlo explained to the co-hosts how he justifies eliminating such a massive source of revenue from his company. “It’s my job at the CEO to ensure that we’re positioning the company for not just short term success, but long term success,” he said. “We’re evolving into more of a health care company and we’re doing many things. We have 26,000 pharmacists and nurse practitioners, who are helping millions of patients across the country everyday, manage conditions like high blood pressure, high cholesterol, diabetes - all conditions whose effects are worsened by the impact of smoking.” Read More at: CVS to stop selling tobacco products - Local 12 WKRC-TV Cincinnati - Top Stories
February 5, 201412 yr As a business practice, it takes some guts, because I'm sure their bottom line will be affected to some point. However, I think this would be a short-term impact, as there's plenty of other places where people will get their smokes. But, you can't get your prescriptions filled at the local gas station, so there's still other major reasons to go to CVS. As a philosophical statement, it makes complete sense. I mean if you're trying to help people become "healthy", why in the world would you offer something that is completely "unhealthy". Never made any sense to me in the first place (other than the $$$ associated with it).
February 5, 201412 yr Author As a business practice, it takes some guts, because I'm sure their bottom line will be affected to some point. However, I think this would be a short-term impact, as there's plenty of other places where people will get their smokes. But, you can't get your prescriptions filled at the local gas station, so there's still other major reasons to go to CVS. As a philosophical statement, it makes complete sense. I mean if you're trying to help people become "healthy", why in the world would you offer something that is completely "unhealthy". Never made any sense to me in the first place (other than the $$$ associated with it). I am sure Walgreens (and any other chain pharmacies) are jumping up and down with joy.
February 5, 201412 yr It's their business. If they don't want to sell tobacco anymore, that's their call. I don't have a problem with it either way.
February 5, 201412 yr Saw an article on Forbes.com that stated that tobacco products account for about 2 billion in annual revenue for CVS, which is just under 2% of their total revenue.
February 5, 201412 yr Taking tobacco products off their shelves will not harm CVS in anyway as their main business is the pharmacy with the other things they do is on the side. It will be a small hit but money wise, they should be fine. When its not affecting your main business, it isn't much of a problem.
February 5, 201412 yr There isn't much profit in tobacco at the retail level, but a lot of inventory dollars have to be tied up to stay in stock on the multitude of brands, flavors and sizes. In the end this probably has as much if not more to do with the decision than what ever reason they gave. Going to effectively free up $200,000,000 in inventory cash right away. $200M cash flow will probably make the company more than the $200B in low margin sales would.
February 5, 201412 yr Taking tobacco products off their shelves will not harm CVS in anyway as their main business is the pharmacy with the other things they do is on the side. It will be a small hit but money wise, they should be fine. When its not affecting your main business, it isn't much of a problem. They are a $125 billion dollar business and they will lose 2 Billion dollars in volume by making this decision. Have you seen a CVS? The pharmacy takes up about 5% of the entire retail footprint. As you say, they are in the pharmacy business, but they offer a lot of goods as convenience items. They tend to make high margins on these goods. So you are correct that they do not make as much on cigs as they do on the pharmacy, but one main issue with them is foot traffic. They could really shoot themselves in the foot by dropping high volume, low margin items such as cigarettes. Not sure what they will replace the space with since they already carry a little of everything? The reason sited for dropping the tobacco products is that they don't want to offer goods that do not promote good health? So I'm guessing they will be dropping candy, soft drinks and snack foods as well?
February 5, 201412 yr I don't get why anyone should take issue with this. They're a business....If they want to stop carrying a product, they're well within their right to do so....:idunno:
February 5, 201412 yr I don't get why anyone should take issue with this. They're a business....If they want to stop carrying a product, they're well within their right to do so....:idunno: I agree! They can sell what they want. The consumer will dictate if they will survive.
February 6, 201412 yr I agree! They can sell what they want. The consumer will dictate if they will survive. CVS is easily going to survive. It accounts for 2% of their annual revenue....They'll be alright.
February 6, 201412 yr CVS is easily going to survive. It accounts for 2% of their annual revenue....They'll be alright. No doubt they will survive. Just curious as to what will make up the 2%
Archived
This topic is now archived and is closed to further replies.