CVS’ decision to exit tobacco has already paid dividends

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WOONSOCKET, R.I. — It is never easy for a retailer to walk away from business, especially when $2 billion in sales are on the line. CVS/pharmacy recently did just that.

Acting on the conviction that it is an anomaly for a health care provider to sell tobacco products, the company decided to stop carrying cigarettes and related products by October 1.

“This decision was driven by two things,” says CVS/pharmacy president Helena Foulkes. “First, it’s the right thing to do. We’re a health care company and we know that the statistics around the effect that smoking has on people’s health are really horrible. Second, it is a good business decision, because it starts to position us as a better health partner. So we said to ourselves, ‘If we are going to really live up to the promise of what we want to achieve as a company, it’s the correct decision to make for the long haul.’ ”

In the short term, however, the exit from the tobacco business will cause some disruption. Besides the lost sales, store traffic will likely suffer, and although the company has assured Wall Street that earnings will not be negatively impacted, Foulkes indicates it will take time to replace the revenue now generated by tobacco.

Despite those challenges, the move has already paid off.

CVS Caremark enjoyed a windfall of favorable publicity in response the decision, with everyone from President Obama to other health care providers and consumer groups lauding the move.

“The reaction we’ve gotten in the marketplace has been phenomenal,” notes Foulkes. “The thing we most underestimated is the incredible sense of pride that our exit from tobacco has created among our 200,000 employees. It’s something that we’ve seen at every level of the company. What’s so striking is that everyone has a personal story about smoking — a friend, a loved one, a parent who’s been negatively impacted by it.”

“Removing tobacco reinforces our purpose of helping people on their path to better health. It’s been embraced inside the business, and we are encouraged by the support from clients and customers,” she says. “We’ve taken a very powerful action and, at the end of the day, we hope it will help change the American health care system for the better.”



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