Why Quitting Cigarettes Was the Best Thing CVS Could Do for the Health of Its Business

Simon Mainwaring / Brands / 11 months ago

A lot of buzz has been generated by the decision of CVS to stop selling cigarettes in its 7,600 stores nationwide. The response has been evenly split between those remarking on how much it will cost CVS in lost revenue and those who recognize the need for CVS to align what they sell with the fundamental health care proposition behind CVS Caremark. Yet few have recognized what an important opportunity this represents for CVS to not only lead its industry as the healthcare market evolves, but also to shape culture at large.

As CVS Caremark CEO, Larry Merlo, states above, they are the first pharmacy chain to do so and, as such, have instantly established important credentials in the healthcare space that will pay great marketing dividends over the long term.

Obviously CVS has recognized the clear incongruity between promoting healthcare and selling cigarettes, but it has also observed the market share gain and sales growth earned by purposeful industry leaders such as Unilever (Sustainable Living), Starbuck’s (Shared Planet) and Chipotle (Food with Integrity). Merlo acknowledges as much when he states that CVS is the first pharmacy brand to ‘step up and take this action,’ almost challenging his rivals to follow suit.

This opens up a powerful conversation between the alignment of products sold and a brand’s core values in the context of pressing and growing social crises for which brands are increasingly being held accountable, such as public health, diabetes, and obesity, and as some commentators noted, the candy aisle could be next.

This is the start of a very lengthy and difficult conversation for CEO’s and CMO’s that must rationalize their social responsibility with their duty to shareholders or as Merlo explains, in their case it was simply ‘the right thing to do.’

That very sentiment has underscored the rise of purposeful marketing evidenced by some of the world’s largest corporations, and a growing number of social enterprises such as TOMS, Warby Parker and B Corp-certified entrepreneurs. No matter their size, these brands are responding to the undeniable demands for new levels of authenticity, transparency, and accountability in terms of the social responsibility of brands.

Yet such decisions also represent very good business. By responding to customer expectations, companies mitigate the risk to their social license to operate, enhance their reputation, and drive consumer loyalty goodwill and sales. Additionally, they create a brand story based on values they share with those customers who in turn can use social media to amplify the company’s good work. CVS provides a great demonstration of this with their dedicated twitter page and hashtag: #CVSquits.

CVS is also rising to the challenge of becoming a leader in its sector as socially responsible brands play an ever increasingly role in pressing public debates like health. This move and those that no doubt, will follow it, give CVS and its corporate officers the chance to become spokesmen and women for the coming healthcare movement that must address the demands of a growing population and persistent chronic diseases. We have seen other brands like Starbucks lead discussions around job creation, same sex marriage and political gridlock, Chipotle fuel the debate around sustainable agriculture, and Unilever lead the charge on sustainable business practices.

CVS is stepping up to become a healthcare leader that is well positioned to shape culture that in turn will build its business. The short term costs are real but the long-term reputational and competitive advantage gains are far more valuable as the brand leverages its first-mover advantage and positions itself as a model of what responsible pharmaceutical and health care should look like in the future.

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7 Comments

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  1. Sara Stein MD says:

    I think it’s great, but I doubt altruism as a true motive. My guess? They want the Express Scripts/Medco contracts – what better way than to say to the insurer your patient will only be allowed to fill Rx at CVS or CVS mailorder, and we don’t sell tobacco products. That said, the gas stations are doing happy dances.

    1. Simon Mainwaring says:

      Interest, Sara. I wasn’t aware of those considerations. I guess in that ensue it’s still good business for CVS and while it’s true that there will always be other places to get cigarettes, hopefully a few other brands will follow suit and help reduce the toll of lives and health damage.

  2. JackHumphrey says:

    When they announced it, all I could think about a pharmacy selling cigarettes in 2014 was “What is this? 1950?” We are all so used to it seems we weren’t even aware of the hypocrisy until CVS made the announcement. That’s how it felt to me, anyway. That’s how far “inside the Matrix” we can get in society, to not even think twice about such a laughable contradiction in purposes.

    1. Simon Mainwaring says:

      Hi Jack. I so agree. It’s simply incredible that a pharmacy would sell cigarettes. I think in most cases it’s the convenience that leads us to accept things like this. But its up to us as consumers to help brands wake up, so It’s a shared responsibility. Thanks, Jack

  3. […] Reputation enhancement:  Last week the CEO of CVS Caremark announced that they would no longer sell tobacco products through their network of 7,600 stores. […]

  4. dustindsmith says:

    Hey Simon. This is great! So glad to hear it. I’m a big fan of CVS and have a few shares of their stock that I’ve watched double over the last year or so. I’m not concerned with why they made this decision (revenue or altruism) but seems like those things are more often inextricably linked these days, which is even better news.

    1. Simon Mainwaring says:

      I agree, Dustin. I think it’s a really smart long term move for their business and that will support its stock. It’s going to be a blend of short terms and long term thinking now. Thanks, Dustin.