CVS ends tobacco sales, changes name
Published 11:32 am Wednesday, September 3, 2014
By Tom Murphy
Associated Press Writer
As CVS sharpens its focus on customer health, the nation’s second-largest drugstore chain will tweak its corporate name and stop the sale of tobacco nearly a month sooner than planned.
CVS Caremark said it will now be known as CVS Health, effective immediately. The signs on its roughly 7,700 drugstores won’t change, so the tweak may not register with shoppers.
However, those customers will see a big change when they check out. The cigars and cigarettes that used to fill the shelves behind store cash registers have been replaced with nicotine gum and signs urging visitors to kick the tobacco habit.
A store in downtown Indianapolis also stocked free tobacco quit packs where cigarettes used to sit. The red-and-white boxes, nearly the size of a cigarette pack, contain coupons, a card showing how much a smoker can save by quitting and a booklet with Sudoku and other games to distract someone fighting the urge to smoke.
CVS and other drugstores have delved deeper into customer health in recent years, in part to serve the aging baby boom generation and the millions of uninsured people who are expected to gain coverage under the federal health care overhaul. While competitors Walgreen Co. and Rite Aid Corp. still sell tobacco, they’ve all started offering more health care products and added walk-in clinics to their stores while expanding the care they provide.
Drugstores now offer an array of vaccinations and flu shots, and many of their clinics can help monitor chronic illnesses like diabetes or high blood pressure.
“We’re doing more and more to extend the front lines of health care,” CVS CEO Larry Merlo said.
The corporate name change reflects this push while removing a reference to the company’s biggest revenue producer, its Caremark pharmacy benefits management side.
That’s good because the average person didn’t understand the word Caremark, according to Laura Ries, president of the brand consulting firm Ries & Ries.
While the new name won’t appear on store signs, it may provide a better sense of what CVS does to the few investors or people on Wall Street who don’t know about the company, which is ranked 12th in the 2014 Fortune 500.
Even so, Ries said the name’s power is limited because health is a generic word that is common in many company names.
“It’s an improvement off of Caremark, but it’s not some amazing wonderful thing that will change the world,” she said.
CVS announced earlier in February that it would phase out tobacco sales by Oct. 1 because it could no longer sell smokes in a setting where health care is delivered. Merlo said the company moved up its quit date nearly a month because they got ready for the move sooner than they anticipated, not because its distribution centers had already run out of tobacco.
The CEO has said CVS will lose about $2 billion in annual revenue by phasing out tobacco. The company still expects that, but its executives also believe they can counter that loss at least in part through growth the company may get from health care. Merlo declined estimate how much of a benefit CVS expects.
The potential revenue loss hasn’t spooked investors so far. CVS shares closed at $79.73 on Tuesday and have climbed about 21 percent since the tobacco announcement. That outpaces the 14 percent gain notched by the Standard & Poor’s 500 index over the same span.