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Commentary: The CVS Tobacco Ban

11 Feb 2014



Last week CVS (NYSE: CVS) made big news when it announced they would no longer be selling tobacco products in their drug stores. The decision itself doesn’t have direct implications on premium handmade cigars, but it does raise some issues that should be of interest to all smokers.

CVS

First off, let’s recognize that this is a very significant decision for a corporation to make. The company sells $1.5 billion worth of tobacco every year (presumably with a healthy profit margin), which probably is why the stock dropped the day of the announcement. Any time a company eliminates over 1% of their total revenue (more when you look at total estimated revenue losses) with nothing to replace it, it’s a big deal.

This isn’t the first time a business has made a decision to go anti-tobacco, but I can’t think of another decision that cuts into the bottom line so obviously. Local bars and restaurants go smoke-free all the time before laws dictate they have to, so have national hotel chains and Starbucks, which now forbids smoking even in outdoor areas.

But none of those decisions so obviously impact the bottom line. Sure, I go to Caribou Coffee now instead of Starbucks when I want to sit outside and smoke a cigar with some coffee, but it’s not nearly as apparent to shareholders that my revenue is lost in the way that cigarette sales at CVS are now gone because, as the CVS CEO puts it, “We came to the decision that cigarettes and providing health care just don’t go together in the same setting.”

First off, let’s recognize that businesses are free to make their own decisions, though a public company does have to answer to shareholders. There’s nothing inherently wrong about CVS deciding not to provide cigarettes in the same way that a government prohibition in allowing smoking smoking does infringe on the rights of a business owner to choose to provide a customer something he or she wants (in this case a place to smoke).

But let’s not glance over the hypocrisy either. CVS still sells plenty of products that contribute to the overall bad health of our society (even before you dig into the overuse of over-the-counter and prescription drugs). Potato chips, candy bars, and soda, not to mention beer and wine, all will presumably keep being sold at CVS.

Take a look at the obesity, diabetes, etc. that this country faces, and it’s clear that CVS has singled out one product among many unhealthy things. People are already noticing this hypocrisy, even if they don’t realize that it’s likely because anti-smoker discrimination is far more acceptable than other types of judgmental discrimination.

Still, perversely, if CVS’s move catches on, it could end up helping the independent cigar shops that often carry, though hardly emphasize, cigarettes. Until CVS’s competitors like other drug stores, grocery stores, and 7-11-style convenience stores take the same approach, it will just hurt CVS’s bottom line to the benefit of those who don’t go along. If it ever does catch on more widely, specialty tobacconists will be there to sell cigarettes to smokers, along with the premium tobacco products they currently focus on selling.

And that’s the beauty of the free market. Paternalistic types can bully businesses around, but as long as some businesses are free to cater to adults who choose to enjoy tobacco products, they only open up more opportunities for those who celebrate, or at least don’t moralize about, the freedom to choose to smoke.

Patrick S

photo credit: Flickr

Drew Estate

6 Responses to “Commentary: The CVS Tobacco Ban”

  1. Rene Cardona Tuesday, February 11, 2014 at 5:22 am #

    I agree, Patrick

  2. Brice S. Tuesday, February 11, 2014 at 8:17 am #

    Do you buy your cigars at CVS? I didn't think so. The move will not affect cigar smokers. I agree, it may actually benefit the local tobacconist–a little. As for CVS's motivation to remove tobacco, well they are in the pharmacy business. It has never made sense for a pharmacy to sell tobacco. Call me cynical, but I bet their bottom line won't be hit as hard as we think. I enjoy the opinions. Keep up the good work.

  3. Mike Tuesday, February 11, 2014 at 11:27 am #

    According to the articles I read, they do not expect it to a have long-term impact on profits. Cigarettes — not cigars, chewing tobacco, etc. — were the bulk of CVS' tobacco revenue. Since they are highly taxed, there is little room for stores to mark them up. Cigarettes are a low-profit product that mostly drives traffic with the hope that customers buy chips, soda pop or other more profitable products. (That's why some tobacconists I visit told me they dropped long ago.)

    And since smokes are available at numerous other locations, it probably won't cause many people to quit smoking, unless they were more committed to buying cigarettes at CVS than to smoking itself.

  4. Aaron Wednesday, February 12, 2014 at 7:46 pm #

    I really dislike when anyone talks about the removal/banning of tobacco that they decide to bring in the hypocrisy of them not making the same decision on other products. It's bad form and doesn't help the argument. You mentioned in the article choices. Choices sometimes go hand in hand with opinions which means they don't have to be fair or logical. Stay focused on the product/service that is being targeted and don't point the finger at what you consider all of the other offenders. Face the battle head on and don't try to spread the damage to others.

    Other than that one area, I liked the article.

    • Patrick Semmens Wednesday, February 12, 2014 at 9:07 pm #

      I get what you're saying, and I don't promote banning one item because you have a bad reason for banning another. People and companies are free to make choices, even bad or hypocritical ones.

      But I still think it's valuable to point out their hypocrisy. All the time people cite principles as reasons for banning smoking, hiking up tobacco taxes, etc… But when you boil it down their actions show that the principles are empty, and really there's just anti-tobacco animus, because they won't apply them evenly or consistently to other areas.

      I have no problem with CVS making hypocritical decisions because they are a private company, but the exact same motivations are what politicians use to promote anti-tobacco policies. For that reason, I think we should point it out. Not to promote banning junk food or anything else, but to oppose anti-tobacco laws that eliminate adults’ choices.

      • Aaron Thursday, February 13, 2014 at 3:08 pm #

        I appreciate the response. Absolutely call out a politician. They are supposed to be representing their constituents and not just trying to get re-elected, but they actually work opposite of that.

        A store is supposed to look out for its best interests while a politician is supposed to be looking out for everyone else.