CVS Kicks the Tobacco Habit
It never made much sense that pharmacy chains would also sell cigarettes in this day and age. Sure, tobacco is a drug. Nicotine addicts crave it. And public companies are supposed to be all about boosting sales, earnings and shareholder value.
But you wouldn't expect to see an adult-movie theater in the middle of Disney World, or a pot dispensary inside a Chuck E. Cheese's restaurant, or a cigarette machine inside the lobby of a physician's office. Sometimes building a brand and reputation is more important than incremental gains in revenue. And now CVS Caremark Corp. has reached the same conclusion.
"Put simply, the sale of tobacco products is inconsistent with our purpose," said Larry Merlo, the chief executive officer of Caremark, which today said it will stop selling tobacco products by October at its 7,600 U.S. stores.
"As the delivery of health care evolves with an emphasis on better health outcomes, reducing chronic disease and controlling costs, CVS Caremark is playing an expanded role in providing care through our pharmacists and nurse practitioners. The significant action we're taking today by removing tobacco products from our retail shelves further distinguishes us in how we are serving our patients, clients and health care providers and better positions us for continued growth in the evolving health care marketplace."
Soon parents with small children can take their kids to CVS without exposing them to a wall of tobacco marketing. It's only logical that the store where you get your flu shot shouldn't also be trying to sell you a cancer-causing nicotine delivery device.
In dollar terms the move is a blip. CVS said the decision would cut annual revenue by about $2 billion, which is less than 2 percent of its $123 billion of 2012 sales. The socially responsible investing crowd will be thrilled. President Barack Obama praised the move. A certain majority owner of Bloomberg LP no doubt will be pleased, too. Walgreen Co.'s directors had better be ready to answer questions about why their company hasn't decided to stop selling cigarettes, too.
Usually when faced with the choice between money and principle, public companies go with the money. Closely held companies such as Chick-fil-A, which closes its fast-food restaurants on Sundays in accordance with religious mandates, can be anachronistic if they choose because their owners don't have to answer to outside shareholders. But U.S. public companies have long operated under the guideline that earnings are everything, even the short-term kind that come at the expense of long-term value.
This is the same sort of thinking that has led many companies to willfully violate environmental laws, bribe overseas government officials to win business, or use abusive tax schemes to boost shareholder returns. When maximizing profits is the dominant cultural value, and the odds of being prosecuted for breaking the law are low, corporate crime often pays well. Selling a deadly product that's perfectly legal may seem like a no-brainer, by comparison. But if your business is selling healthy living, it's a terrible idea.
There is some temptation to wonder whether CVS's decision might be the first step down a slippery slope. If CVS is going to stop selling cigarettes, should it also stop selling dangerous nutritional and diet supplements? What about candy or soda? Sugar has been linked to cancer and diabetes, too, you know.
But we shouldn't let the perfect be the enemy of the good, as they say. This was the right call, one that should have been made a long time ago. Pharmacies shouldn't be selling cigarettes. It's bad for business.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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