The Cost of Kicking the Habit

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CVS/Caremark Corporation has made waves in the news this week for severing their relationship with the tobacco industry.

The Woonsocket Rhode Island based pharmacy is aiming to reposition its brand from a convenient store to a healthcare provider. CVS has been taking the proper steps to really promote health and wellness to their customers, starting with the launch of “MinuteClinic’s”—walk in medical centers—in their stores. In some states, CVS’s “MinuteClinic’s” are affiliated with local health systems to provide even more specialized care.

CVS’s decision to stop selling tobacco related products is a great reputation move. Selling tobacco products does not fall in line with promoting proper healthcare, and makes CVS’s mission look less credible. They have been lauded by several medical associations such as the American Cancer Society and the American Medical Association—even President Obama has been singing praises.

While CVS is being portrayed as a hero in the healthcare industry, their decision comes at a price, and at a price that ultimately hurts CVS’s bottom line. The pharmacy chain will lose a core demographic: tobacco users. Annually, they are expected to take a $2 billion hit which accounts for “$1.5 billion in tobacco sales and the rest from other products tobacco shoppers purchase while in the store”

While tobacco related products will be completely phased out of all CVS stores come October 1st, 2014, CVS will still be lending a helping hand to customers who struggling to quit, by offering smoking-cessation programs, and continuing to sell cessation aids like Nicorette in stores.

Alienating current consumers could be a fatal move for some companies, but it is a necessary move for CVS to support their rebranding efforts. After all, a $2 billion dollar annual loss is a “small price” to pay to show that CVS truly practices what they preach.

What would you say?

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