As we noted in these abstracts, three years ago, CVS Health Corp. removed tobacco products from its stores. The change cost the chain $2 billion in annual sales, but CVS has stood firmly by the tobacco ban and sought to leverage its ethical stance by setting itself apart from competitors as the healthier alternative to other pharmacy chains.
Ultimately the tobacco ban did not drive customers away, so CVS is planning to expand on its positive image, as well as its underlying goals to make its customers healthier, by targeting candy, low-protection sunscreen, and foods containing artificial trans-fats next. In four test stores, the retailer has moved candy and other snack foods to the back of the store, where they are less visible. The chain will no longer carry any sun protection products with SPF ratings lower than 15. Finally, CVS will stop stocking foods with artificial trans-fats more than a year before a new FDA ban on such ingredients takes effect.
CVS’s largest competitor Walgreens has taken note of these planned changes, but it does not necessarily plan to follow suit. Rather, Walgreens continues to sell tobacco products, even as it also promotes smoking cessation aids. Furthermore, the company will continue to stock candy and snack foods in the usual store locations, though it has plans to offer a greater selection of fresh fruit and vegetables. The Walgreens loyalty program also provides rewards to customers when they demonstrate that they are engaging in exercise and health monitoring behaviors. With these changes, Walgreens believes it is granting consumers the option to make healthier choices, while still allowing them to decide what is best for themselves when it comes to their consumption.
Ultimately, the issue may be moot: Both brands report that retail sales make up less and less of the retailers’ overall revenue. The pharmacy and in-store health care clinics currently account for more than half of the revenues earned by both pharmacy retailers, and this trend is expected to continue. The real impact that these changes will have on the bottom line may be up to the consumer. Will CVS be applauded for putting customer health over profit, or will consumers feel that these new restrictions are an overreach of the chain’s influence on their day-to-day lives? Only time will tell if candy aisle will remain at the back of the store.
- Compare CVS’s and Walgreens strategy with regard to stocking healthy products.
- Which strategy do you believe will be more profitable in the long-run?
Source: Sharon Terlep, “Why Your Local CVS Is Hiding the Candy and Tanning Oil,” The Wall Street Journal, June 28, 2017