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February 5, 2014

CVS: No Smoke Screens

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Written for: Communicado Magazine
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CVS announced on February 5, 2014 that they will no longer sell tobacco products as of October 1, 2014. Their rationale is that, as a wellness center, they should be focused on and in promotion of healthy lifestyles and smoking is not a component of a healthy lifestyle. It makes good sense, but, does it make good business sense…

It is estimated that tobacco sales account for $1.5 billion in annual sales and another $500 million in related sales; Related sales being lighters and any other tobacco accessory sold with or for the products.

In addition, the 401k plans to which CVS contributes on behalf of their employees is speculated to have tobacco stocks in its mutual funds. While only to a small degree, it is still an investment to which CVS is contributing. This is a tough one to pin on CVS because mutual fund stocks are chosen by independent advisors to create a profitable mix of securities. The best CVS can do is hope the plan fiduciaries decide to change the mix because CVS has changed their view.

All great facts, but, what’s the real winner in this decision… Public opinion…

I’m a former tobacco executive. Very few people have nice things to say about cigarettes and smoking. A smoker will be the first person to tell you they know its a bad habit. They’ll also be the first to tell you they don’t plan to quit anytime soon. It’s likely they’ve tried before or even want to try, but, just aren’t motivated as much as having a good drag. It’s the non-smoker who’s the vigilante advocate…

The smoker who dies of lung cancer didn’t spend their life blaming the tobacco companies for making them smoke, it ends up being the smoker’s survivors that point the finger of blame and shame at the tobacco companies. These are the same people who need to be appeased in mass by a decision like this…

FACT: Tobacco companies get sued regularly, but, most of the cases get dismissed for lack of merit or verdicts get overturned. Civil lawsuits turn on fault and consumers accept the risk when they make the purchase.

So the decision of the tobacco companies has to be this: Get out of the drug store/pharmacy/wellness center business and get into the independent tobacco store business. This is an opportunity for a new venture all together. Europe is already there. Start small, see how it takes. No, smoking is not growing, but, yes, there is still a market for smoking and that will likely continue – not to the volume it once was – but it’s likely never going to disappear completely.

The word is also that Walgreens has decided to capitalize on CVS’s decision. Though Walgreens has admitted that they’ve seen the population of smokers drop from 50% to 18% over the past 40 years, it has been steady for many years. They also hope to continue selling smoking cessation aids.

Smoking cessation aids should continue to be sold by all wellness centers and pharmacies. They do help consumers get to healthy living.

That only leaves Rite Aid. The big three. Give it another year or so – they will all come around. Business models have to evolve and when everyone sees how well this will go, everyone will embrace it.

It also becomes the will of the company’s leadership to grow new markets and new opportunities for the company. It shouldn’t be so difficult considering the drug store business is built on product diversification. Find new products that support your mission of healthy living – build your business on that. It can be done.

I’m not a smoker and I never have been. Even while working for a tobacco company, not a smoker. But, I am an uber consumer. I believe retail is how our economy continues to grow and sustain itself and tobacco is a consumer product. If consumers are out there buying things, we’ll be okay.

I acknowledge that smoking is bad for you just like I acknowledge that drinking can be bad for you. But, as consumers, we all have to make our own choices about how to live our best lives and what to do to excess and what to do in moderation.

Something I noticed recently: Many grocery stores no longer sell cigarettes. When did that happen? I guess it happened when food became the new tobacco… 🙂

Stay tuned – Food IS the next thing we’ll all have to deal with to the degree we’ve had to deal with smoking… if we’re not already dealing with it in that way.

Interim, let’s see how this decision unfolds. I’ll be curious to see what consumers and businesses have to say post October. What do you have to say now?