November 19, 2007
CVS Conflicted Over Cigarette Sales
CVS Caremark is a company in conflict. CEO Thomas Ryan recently admitted CVS Caremark has wrestled internally with its self-image of a company that promotes health while at the same time being aware it makes a great deal of money selling cigarettes.
“We have a vision in our company to strive to improve human life and it is a challenge around cigarettes,” Mr. Ryan said at the recent Reuters Health Summit in New York.
“It’s a big number (cigarette sales) from a dollar standpoint,” he said.
The reality of the contribution made by cigarettes means CVS will likely continue selling the products even though Mr. Ryan said he wouldn’t rule out ending sales “at some point down the road.”
In the meantime, he said, CVS stores would continue to sell cigarettes but not “promote them.”
According to Mr. Ryan, CVS has done consumer research to gauge how consumers would react to a decision to end cigarette sales. The research found that consumers would not be likely to change their shopping behavior to reward the chain for taking the health high road.
Discussion Questions: Does the sale of cigarettes color the perception that consumers have of drugstores as health and wellness solution providers? Can drugstores financially afford to kick the cigarette habit? If drugstores are going to sell cigarettes, should they be managing the category like they would any other they were looking to grow?
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I think there is an image that the CEO needs to deliver to his retail consumers and employees and as such the sale of tobacco might be viewed more negatively by consumers of Drug Stores than hard alcohol or other similar commodities. This will also depend on the manner in which these products are merchandised in the store…are they very visible or kept under the counter and available only by request?
As I think about this, I guess I’d also need to compare this dilemma to Whole Foods, Trader Joe’s, and the new TESCO Fresh and Easy Stores–do they sell tobacco products?
I’ve predicted for years that cigarette sales would be relegated to tobacco specialty stores (which happen to be cropping up all over) until they become illegal. When that happens, there will be the largest gain in organized crime in history. Today, while not illegal, the state and federal governments are making a fortune in taxes, while at the same time trying to convince us not to use the product that they in fact need for income to survive.
Whether CVS continues to sell cigarettes or not is their choice. However, I find that statement may not really be so valid either. The politics of choice are extremely interesting. While they may be a perfectly legal product, they certainly aren’t politically acceptable any longer. It is, however, interesting to observe what becomes politically unacceptable and how the opponents and proponents of each make it all even more interesting to follow. Those that claim choice on one subject, call for less choice on another–and likewise. Thus, in the end, it the purest form of politics because it truly determines “who gets what, where, and how.” While we think that many of these choices should be our own in most any regard, they likely never really are our choices. They tend to be made by those that believe they know what’s best.
We often forget that the real purpose of retailing is to be profitable. Certainly there are other lofty measures of purpose, but in the end without profit, no other measure is possible. If a retailer makes ‘their choice’ to not sell a product to make ‘their choice’ to sell a product, they should be expected to be able to do so in a profitable way and nothing less.
I do wonder, however, what would happen if a pharmacist at CVS or any other drugstore refused sale of cigarettes on the grounds of personal belief….
While Drug Stores have a greater health orientation, Convenience Stores have the same concerns. From alcohol, smokes, and snack food, convenience stores sell many items that other stores can’t or won’t because of health initiatives. While some convenience store groups like BP have tried to change the image of these types of stores by going healthy and upmarket, they have of course struggled. The convenience store is the one place that items on the controlled list can be found, available and on display. It also appears that the clerk behind the counter is non-judgmental of what is being purchased as long as the customer meets the minimum age for the item.
So they serve an important purpose to a significant number of customers. This is still America, and unless it is illegal, drug stores and convenience store have a right to sell those items. Their brand image of availability is probably more important than applying their own opinion on what is right or wrong to sell to their merchandise selection.
Nearly everything in the store is harmful to someone’s health. From liquor to peanuts to cleaning supplies, customers must be responsible for their own wellness. Wal-Mart sells firearms. Should they discontinue doing so because some customers will use them in a way harmful to their health or the health of others?
Target stopped selling cigarettes and they have a pharmacy!
It is a brand issue. As CVS looks to differentiate from other stand-alone pharmacies, they are staking their claim on “improving life.” Selling products in conflict with that vision makes them unfocused and hypocritical. Building true brand loyalty requires that every aspect of a brand be in alignment with what the company is telling its shoppers about their brand. There shouldn’t be any dissonance between what they say and do.
That Thomas Ryan even thinks about his brand’s promise this way tells me CVS will figure out a more compelling product offering to replace declining cigarette sales.
The drug store is there to serve the customer. It is not there to be the conscience of the consumer. If they were to take everything off the shelves that might cause a problem or that some group was against, they would be out of business.
The consumer is smart enough to figure out how and where they want to spend their money.
In Ontario, it is actually against the law for any store that sells medicine to sell tobacco. Many pharmacies have had to reinvent themselves in the last 15 years or so as the lucrative cigarette sales have disappeared. Is a pharmacy hypocritical for selling health products and products that cause cancer? That could be another debate but the socially responsible thing to do is to not sell them as they have been proven to kill people.
Drug stores have been around for a little while so I have complete confidence that consumers know pretty well that drug stores are general stores in as much as they are health care centers and pharmacies. But hey, should hospitals stop serving hamburgers and fries in their public cafeterias?
I think it is difficult for retailers to choose what products they sell based on moral issues, and cigarettes are a moral issue. Yes, cigarettes cause cancer and it conflicts with a health and wellness store. But what about snack foods? Obesity and heart disease are huge problems in America, but is CVS considering the eradication of salty snacks from their stores? If a product is legal, and is monitored properly for age requirements, I don’t think that CVS should worry about the conflict. There are a lot of products within the store that border on being unhealthy, and it would be difficult to remove all of them to meet the health and wellness claim.
As mentioned, Ontario Canada has previously made it illegal for drug chains to sell cigarettes. They’re thriving and have made changes to their product offerings (more convenience items, deeper assortments in fragrances and the like) to offset this. Take the Shoppers Drug Mart Chain as a prime example.
There are a lot controversial products sold in drug stores besides cigarettes. The CEO’s job is not to wrestle internally with the company’s self image. The CEO’s job is to make as much money for the stockholders as possible by any legal means.
Probably most non-smoking consumers won’t even notice the sale of cigarettes, because they aren’t shopping the category. A few health zealots may.
The real question on the table, I think, is–to what extent is Drug competing against C-stores? There’s a lot of money to be made in staying in the C-Store game. Strategically, other drug chains can continue to offer tobacco and retain the C-store traffic….
Different “tracks” around the store can help alleviate some cross-over between the pharmacy and the convenience categories.
The issue might not be “Should drug stores sell tobacco products?” How about “What can drug stores sell that will beat tobacco profits?” Cigarettes have tiny margins, but the turns are among the best in retailing. Sometimes promotion allowances improve the margins significantly. If the tobacco shelf space was given to cosmetics, for example, would drug store profits rise? Supermarkets have the same issue: it’s not easy to find a substitute category that beats tobacco.
It is an interesting philosophical discussion and is one that can be colored in one of two ways; as a moral/ethical or business issue.
One occasionally reads about companies struggling with decisions such as this one and it is rare for a company to make business decisions based upon such moral/ethical issues. That is not to say it doesn’t or hasn’t happened. We all remember when international companies took a moral/ethical stand regarding sales to the then apartheid government of South Africa. In a more recent case, you might know that the owners of companies such as Hobby Lobby and Chick-fil-A do not operate their stores on Sundays (for reasons which cover both their spiritual and ethical beliefs concerning families).
Yet there are many companies who trumpet healthy fare (such as McDonald’s) who also sell unhealthy products. Many retailers provide products and services which are both healthy and unhealthy and do so because they are looking to serve their customer base as best they can.
The decision rationale on products and services should be about how best to serve their customers’ specific needs and not about how to please one group at the expense of another. As the article pointed out, it is rare to see research that supports the idea that customers will reward retailers for such decisions.
My pharmacies are located in a city where many persons were tobacco workers. Many had “this is tobacco money” on their checks.
We stopped selling tobacco products in the 1970s. The sale of tobacco products, alcohol and food with high sodium content in what we call either pharmacies or drug stores goes against what pharmacists should be: persons who are about improving health. If pharmacists want to be seen as health care professionals, some things must go. The bottom line is important but not at any cost.
Selling cigarettes is clearly at odds with CVS’s health image. Surely, consumers have the right to choose the products they want. Although taking a stand on “not promoting” cigarettes sounds good, what does it really mean? Does it mean not putting cigarettes in an ad, not putting them on sale, not putting them in a visible location in the store? It’s not clear to me.
If Target stopped selling cigarettes, why can’t other retailers take a stand on health and find other profitable categories?
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I think there is an image that the CEO needs to deliver to his retail consumers and employees and as such the sale of tobacco might be viewed more negatively by consumers of Drug Stores than hard alcohol or other similar commodities. This will also depend on the manner in which these products are merchandised in the store…are they very visible or kept under the counter and available only by request?
As I think about this, I guess I’d also need to compare this dilemma to Whole Foods, Trader Joe’s, and the new TESCO Fresh and Easy Stores–do they sell tobacco products?
I’ve predicted for years that cigarette sales would be relegated to tobacco specialty stores (which happen to be cropping up all over) until they become illegal. When that happens, there will be the largest gain in organized crime in history. Today, while not illegal, the state and federal governments are making a fortune in taxes, while at the same time trying to convince us not to use the product that they in fact need for income to survive.
Whether CVS continues to sell cigarettes or not is their choice. However, I find that statement may not really be so valid either. The politics of choice are extremely interesting. While they may be a perfectly legal product, they certainly aren’t politically acceptable any longer. It is, however, interesting to observe what becomes politically unacceptable and how the opponents and proponents of each make it all even more interesting to follow. Those that claim choice on one subject, call for less choice on another–and likewise. Thus, in the end, it the purest form of politics because it truly determines “who gets what, where, and how.” While we think that many of these choices should be our own in most any regard, they likely never really are our choices. They tend to be made by those that believe they know what’s best.
We often forget that the real purpose of retailing is to be profitable. Certainly there are other lofty measures of purpose, but in the end without profit, no other measure is possible. If a retailer makes ‘their choice’ to not sell a product to make ‘their choice’ to sell a product, they should be expected to be able to do so in a profitable way and nothing less.
I do wonder, however, what would happen if a pharmacist at CVS or any other drugstore refused sale of cigarettes on the grounds of personal belief….
While Drug Stores have a greater health orientation, Convenience Stores have the same concerns. From alcohol, smokes, and snack food, convenience stores sell many items that other stores can’t or won’t because of health initiatives. While some convenience store groups like BP have tried to change the image of these types of stores by going healthy and upmarket, they have of course struggled. The convenience store is the one place that items on the controlled list can be found, available and on display. It also appears that the clerk behind the counter is non-judgmental of what is being purchased as long as the customer meets the minimum age for the item.
So they serve an important purpose to a significant number of customers. This is still America, and unless it is illegal, drug stores and convenience store have a right to sell those items. Their brand image of availability is probably more important than applying their own opinion on what is right or wrong to sell to their merchandise selection.
Nearly everything in the store is harmful to someone’s health. From liquor to peanuts to cleaning supplies, customers must be responsible for their own wellness. Wal-Mart sells firearms. Should they discontinue doing so because some customers will use them in a way harmful to their health or the health of others?
Target stopped selling cigarettes and they have a pharmacy!
It is a brand issue. As CVS looks to differentiate from other stand-alone pharmacies, they are staking their claim on “improving life.” Selling products in conflict with that vision makes them unfocused and hypocritical. Building true brand loyalty requires that every aspect of a brand be in alignment with what the company is telling its shoppers about their brand. There shouldn’t be any dissonance between what they say and do.
That Thomas Ryan even thinks about his brand’s promise this way tells me CVS will figure out a more compelling product offering to replace declining cigarette sales.
The drug store is there to serve the customer. It is not there to be the conscience of the consumer. If they were to take everything off the shelves that might cause a problem or that some group was against, they would be out of business.
The consumer is smart enough to figure out how and where they want to spend their money.
In Ontario, it is actually against the law for any store that sells medicine to sell tobacco. Many pharmacies have had to reinvent themselves in the last 15 years or so as the lucrative cigarette sales have disappeared. Is a pharmacy hypocritical for selling health products and products that cause cancer? That could be another debate but the socially responsible thing to do is to not sell them as they have been proven to kill people.
Drug stores have been around for a little while so I have complete confidence that consumers know pretty well that drug stores are general stores in as much as they are health care centers and pharmacies. But hey, should hospitals stop serving hamburgers and fries in their public cafeterias?
I think it is difficult for retailers to choose what products they sell based on moral issues, and cigarettes are a moral issue. Yes, cigarettes cause cancer and it conflicts with a health and wellness store. But what about snack foods? Obesity and heart disease are huge problems in America, but is CVS considering the eradication of salty snacks from their stores? If a product is legal, and is monitored properly for age requirements, I don’t think that CVS should worry about the conflict. There are a lot of products within the store that border on being unhealthy, and it would be difficult to remove all of them to meet the health and wellness claim.
As mentioned, Ontario Canada has previously made it illegal for drug chains to sell cigarettes. They’re thriving and have made changes to their product offerings (more convenience items, deeper assortments in fragrances and the like) to offset this. Take the Shoppers Drug Mart Chain as a prime example.
There are a lot controversial products sold in drug stores besides cigarettes. The CEO’s job is not to wrestle internally with the company’s self image. The CEO’s job is to make as much money for the stockholders as possible by any legal means.
Probably most non-smoking consumers won’t even notice the sale of cigarettes, because they aren’t shopping the category. A few health zealots may.
The real question on the table, I think, is–to what extent is Drug competing against C-stores? There’s a lot of money to be made in staying in the C-Store game. Strategically, other drug chains can continue to offer tobacco and retain the C-store traffic….
Different “tracks” around the store can help alleviate some cross-over between the pharmacy and the convenience categories.
The issue might not be “Should drug stores sell tobacco products?” How about “What can drug stores sell that will beat tobacco profits?” Cigarettes have tiny margins, but the turns are among the best in retailing. Sometimes promotion allowances improve the margins significantly. If the tobacco shelf space was given to cosmetics, for example, would drug store profits rise? Supermarkets have the same issue: it’s not easy to find a substitute category that beats tobacco.
It is an interesting philosophical discussion and is one that can be colored in one of two ways; as a moral/ethical or business issue.
One occasionally reads about companies struggling with decisions such as this one and it is rare for a company to make business decisions based upon such moral/ethical issues. That is not to say it doesn’t or hasn’t happened. We all remember when international companies took a moral/ethical stand regarding sales to the then apartheid government of South Africa. In a more recent case, you might know that the owners of companies such as Hobby Lobby and Chick-fil-A do not operate their stores on Sundays (for reasons which cover both their spiritual and ethical beliefs concerning families).
Yet there are many companies who trumpet healthy fare (such as McDonald’s) who also sell unhealthy products. Many retailers provide products and services which are both healthy and unhealthy and do so because they are looking to serve their customer base as best they can.
The decision rationale on products and services should be about how best to serve their customers’ specific needs and not about how to please one group at the expense of another. As the article pointed out, it is rare to see research that supports the idea that customers will reward retailers for such decisions.
My pharmacies are located in a city where many persons were tobacco workers. Many had “this is tobacco money” on their checks.
We stopped selling tobacco products in the 1970s. The sale of tobacco products, alcohol and food with high sodium content in what we call either pharmacies or drug stores goes against what pharmacists should be: persons who are about improving health. If pharmacists want to be seen as health care professionals, some things must go. The bottom line is important but not at any cost.
Selling cigarettes is clearly at odds with CVS’s health image. Surely, consumers have the right to choose the products they want. Although taking a stand on “not promoting” cigarettes sounds good, what does it really mean? Does it mean not putting cigarettes in an ad, not putting them on sale, not putting them in a visible location in the store? It’s not clear to me.
If Target stopped selling cigarettes, why can’t other retailers take a stand on health and find other profitable categories?