Home » Articles, News from Euromonitor, North America, Tobacco » CVS Decision To Cease Tobacco Sales A Confirmation of Long Existing Trends

February 6, 2014

CVS Decision To Cease Tobacco Sales A Confirmation of Long Existing Trends

Shane_MacGuillAnalyst Insight by Shane McGuill - Tobacco Analyst

It’s the kind of disruption to the status quo which - rather than startle - makes you shrug and wonder how the status quo got away with it for so long. On the 5th February the US’s second-largest pharmacy, CVS Caremark announced that it was to stop selling tobacco products from October 2014. It is a development with resonance, as the availability of distinctly unhealthy products such as booze and fags in US drugstores conjured an America of Midnight Cowboy, where tobacco was ubiquitous, culturally vital. But those days are gone. The US tobacco market is in secular decline and CVS seem to have accepted that the shelves of a healthcare provider are a contrary place to find cigarettes.

In other global markets the concept of drugstores/pharmacies selling cigarettes seems utterly anomalous so CVS’s decision, if it is followed by other pharmacy chains (which is by no means certain) would simply bring the US into line with wider international tobacco distribution norms. In this respect, and given the US’s broader dwindling enthusiasm for tobacco, this announcement amounts to a confirmation of existing trends rather than an indication of unfolding ones.  

Main Beneficiaries will be CVS's Competitors not the General Health

So a symbolic development then but one unlikely to have substantial material impact. CVS’ tobacco sales of about $US2 billion represents less than 2% of total tobacco sales in the US in 2012. For all President Obama’s eulogising of CVS’s bravery in delisting tobacco products, the move is likely to have little to no effect on smoking rates in the US (it would need to lead to a cascade of similar moves from retailers outside the drugstore channel to achieve that). Their share of the market will be gratefully gobbled up by convenience stores and discounters, not least, the Dollar General chain of dollar stores which took up selling tobacco in early 2013.

A Very Modest Revolution

The parapharmacy/drugstore channel accounted for 3.6% of volumes sales of cigarettes in the US in 2012 and is declining year-on-year, so in one sense, it is difficult to imagine a less significant ‘revolution’ in the US tobacco landscape. One suspects that at least some of the brouhaha is intended as cover for CVS who may find it hard to sell the long term strategic value to shareholders of dropping a product that they sell relatively little of, which has poor margins and a poorer reputation when the cost is US$2 billion in cold hard cash. Call me cynical, but being universally feted as heroes in the war against tobacco can only be good for business.

Confusion Over Approach to E-Cigarettes

From where we sit in 2014, all stories about changes to the US tobacco market contain e-cigarettes as a component and CVS is no different. Currently the chain does not stock e-cigarettes, suggesting that it is waiting to examine guidance from the FDA on the products. Proponents of e-cigarettes were quick to claim yesterday that CVS could more usefully help America's smokers by stocking nicotine vapour products than by simply refusing to sell combustible tobacco. Indeed, if the FDA (as looks likely) begins to regulate e-cigarettes, to all intents and purposes as tobacco products, CVS will need to defy the strict interpretation of their own logic to stock this potentially very lucrative, smoking-related product category.


Have a question or a thought to add? Leave us a comment below.

« Foodservice Operators in Asia Responding to Healthy Trends | Main | Spirits Consumption: Absolute Volume vs. Shots »


 RSS Feed

Receive New Posts via Email:


Join us on...

Filter by Category

Filter by Geography

Filter by Industry

Recent Posts

Changing Income and Expenditure of the Global Middle Class since the 2008-2009 Financial Crisis

Contagion Effects of Greek Default Should be Limited

Euromonitor to Speak at Verifone Accelerated Commerce Conference

Lessons from Singapore, Unchanged as Doing Business Leader from 2006 to 2015

Russian Electronics Market on the Brink

Overview of Russian New Car Market Part 1: Insights and Forecasts for Russian Car Industry

How Retailers are Addressing Global Food Waste

World Urban Population Share to Hit 60% in 2030

Three Trends Driving Forward Remote M-Commerce in 2015

El Bachaqueo and the Striving Venezuelan Black Market for Tissue and Hygiene Products