CVS Stops Selling Tobacco Earlier Than Planned

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Sept. 3 (Bloomberg) -- Bloomberg’s Olivia Stern and Erik Schatzker report on CVS’ plan to stop selling tobacco starting a month early and their overall business strategy. They speak on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

Olivia sterns and erik schatzker , who will be talking about the issue on his program.

Olivia, they were supposed to do this october 1 but now they are doing it now.

It was a long time coming.

Cvs does not want you to think of them as a retail pharmacy but as a health care provider.

That is why we have seen the rollout health clinics, nurse practitioners, health consultations.

They realize selling cigarettes puts them fundamentally at odds of the mission statement of being a health-care provider.

A lot of other pharmacy chains have been doing this.

Boston and san francisco have been pushing for tobacco-free pharmacies.

They got out ahead of it and got the pr bump for.

And they are sacrificing about $2 billion for it.

$150 million of that from direct cigarette sales, 500 million from the incremental foot traffic from those people going into by cigarettes, but they could be getting into more higher-margin businesses.

They are rolling out this new smoking cessation program, and those problems are more profitable.

Perhaps they could use that shelf space for groceries, or some analysts told me for diabetes medicine.

Perhaps getting into something that is, sadly, a growth market.

That is where cvs sets itself apart from, say, walgreens.

They have become more of a distributor where cvs has been trying to position itself further upmarket, closer to the benefits business, insurance.

They are a pharmacy benefits manager takes to the acquisition of caremark in 2006. the ceo who runs the show, larry merlo, will be on with me and stephanie ruhle at 10:00. he came out of the old cvs but it is really pharmacy benefits and caremark business that is driving them forward, and that raises questions about what kind of other business opportunities he sees as cvs transitions it sell to more of a quote health-care company.

From what i hear about cbs and the management is that they have always been very measured and steady, and some would criticize them, slow, in the changes they have made, but when they do, they stick to them.

It took them a while to transition to online, but once they did it, they did it with success against their competitors.

Erik is right, cvs is differentiating itself by moving more of middle market.

In terms of reputational benefits, this was an obvious move.

Everyone thought they should not be selling cigarettes if they are a health-care provider, except for smokers, and they got the pr bump.

It increases their brand credibility as a health-care provider.

What are your burning questions for the ceo?

We want to find out what cvs wants to be when it grows up.

Walgreens has gone international . it decided not to become a tax in version, which disappointed investors and activists.

The stock has been crushed.

Does cvs want to build an international business?

The bigger you get, the more power you have the go shooting with drug companies.

They are in brazil, puerto rico, but nowhere else.

Also, what is their capital strategy?

They generate a lot of free cash and investors are interested to know how aggressive they will be with their dividends and stock back.

-- by back.

-- buyback.

Erik schatzker, olivia sterns, thank you.

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