Tobacco sales accounted for around $2 million of CVS's $1.6 billion total revenue last year. That is around .13% of their sales for the year, far less than 1%, which leads me to believe that CVS is giving shelf space behind the registers to a product that will contribute a higher percent to its total revenues. This is marketing, not a concern for health issues related to tobacco sales.
The CVS pharmacy where I fill prescriptions sells my brand of cigars. A box of four Dutch Masters Caronas sells for $6.48. However, I do not by my cigars from CVS. I go 250 feet across the street to a Racetrac convenience store and pay $4.41 for my cigars. High prices at CVS for tobacco products is the reason sales of those products account for only .13%, far less than 1%, of the company's annual sales.
Did anyone else notice that the CEO of CVS did not comment on the percent of annual sales given up by his company through discontinuation of tobacco sales? He mentioned the $2 million loss in revenue, but not that it is far less than 1% of the company's annual sales. He also failed to mention that the prime "behind the register" shelf space can be devoted to higher revenue items. I guess the true facts slipped his mind while media news talk show hosts were slobbering all over him with praise for his decision to give up the revenue. As soon as the segment was over... the talk show hosts probably took their smoke breaks.
Here is a fact. Many items in CVS are priced very high in comparison to other retail outlets. I realized this recently when Jan needed a can of Hormel chili for a recipe. CVS was the closest place to buy it, so I went there. CVS certainly does not draw customers to the store for Hormel chili. I paid $1.99 for a can of chili I could have bought at Walmart for $.89. I chose the closer, more convenient place to go for one item Jan needed. If CVS really cares about me, why not sell me a can of Hormel Chili for $.89? I didn't expect them to, but is it not a fair question to ask?
The shelf space given up by CVS for Hormel Chili was minimal.. they had a total of 6 cans on the shelf and I had to look for the location of the product. Contrast that to the prime, "behind the register" shelf space given up for tobacco sales, which is far less than 1% of CVS annual sales.
If you go into a CVS store, look at the shelf space given to alcohol products. You will find displays on end caps throughout the store. CVS has no issue with selling alcohol products. Why? Could it be that alcohol products add more to the gross revenues and profit margin of the stores than tobacco products?
CVS does not need to sell tobacco products in its stores, but why lie to us about the reason the company is discontinuing sales of tobacco products in the stores. It's a business decision based on profit and loss, not health concerns for the company's customers. Just be honest about it.
Will it hurt the store? Time will tell. Let's see if customers move prescriptions to Walgreen's so they can buy tobacco products when they fill prescriptions. I'm sure CVS has studied this and the effects will most likely be minimal with respect to lost customers. They will not lose any business from me over tobacco products, because CVS is the closest place for me to fill a prescription... right now. Of course, when Jan and I move to a new house later this year, there might be a Walgreen's closer to our new neighborhood.
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