In a dramatic move today, CVS/Caremark announced that by October 1, its stores will no longer sell cigarettes or tobacco products. (The company has not made formal decision regarding e-cigarettes, but does not currently carry them.) CVS noted that the change could cost them $2 billion in sales, but that it is well worth it to avoid aligning their brand with the chronic illnesses that are a result of smoking and second-hand inhalation. The decision is sure to delight anti-smoking advocates, parents and health practitioners, but will it alienate customers who smoke?
Maybe. But CVS has made the tough call that it can no longer supply a product that is demonstratively damaging to people's health. Embracing "health" as a crucial element of its identity, may help CVS position itself for the future and pave the way for other brands. It will be interesting to see if other "healthy" retailers follow suit. This change may also help CVS grow with the changing healthcare marketplace.
With the implementation of the Affordable Care Act in the US this year, healthcare providers anticipate a huge influx of patients, many of whom may not have had insurance in the past. Small walk-in facilities expect to accommodate many of these new patients. CVS currently hosts 800 MinuteClinics that cater to this very dynamic.
And the company plans to add 700 more by 2017. The New York Times reported that CVS Chief Executive Larry J. Merlo wanted to correct the cognitive dissonance between selling cigarettes and providing health, but that the decision also allows them to position the company for future expansion and growth.
It's a strong demonstration by CVS of the authenticity that we think should go into business goals and then be adapted strategically for brand development. Despite the $2 billion hit, CVS may find its revenues increase based on this decision, which reflects not only CVS's core values, but our culture's own changing behaviors. The decline of smoking overall, ubiquitous government bans and growing popularity of e-cigarettes, all point to a shift in our own thinking about smoking and its role in our lives.
By marrying business strategy with brand strategy, InterbrandHealth believes CVS is well on its way to being both an industry trailblazer and company to watch in the new world of health.