Will Walgreen and Wal-Mart Follow CVS’ Lead and Stop Selling Tobacco?

CVS has already dropped tobacco and attorneys general from across the nation are asking other chains to do the same.

Mar 20, 2014 at 8:39AM

First CVS Caremark (NYSE: CVS) voluntarily decided to end all tobacco sales in its stores and now a group of 26 state attorneys general have asked other retailers to do the same.

Letters were sent to Walgreen (NYSE: WAG), Rite-Aid (NYSE: RAD), Wal-Mart (NYSE: WMT), Kroger (NYSE: KR),  and Safeway (NYSE: SWY) from the prosecutors urging them to stop selling tobacco, CNN Money reported. 

"There is a contradiction in having these dangerous and devastating tobacco products on the shelves of a retail chain that services health care needs," the AGs wrote.

The letter, CNN Money reported, also said "that drug store sales make it easier for teens and young adults to take up smoking, and that selling tobacco products along with smoking cessation products are likely to increase impulse buys of tobacco by people trying to quit."

Following CVS' lead

CVS previously announced it will stop selling cigarettes in its stores Oct. 1. 

"The decision to stop selling tobacco products underscores our role in the evolving health care system," said CVS spokesman Danielle Marcus in an email interview with the Fool at the time it announced the end of cigarette sales. "Smoking is the leading cause of premature illness and death in the United States. Unlike those other products, which are OK in moderation, no amount of tobacco use is safe."

In an earlier article, Why CVS stopped selling cigarettes, I wrote that, "Dropping cigarette sales ... would cost the company $2 billion in 2014, but while health care spending is rising, health officials expect cigarette smoking to continue to fall -- perhaps even to zero. Acting U.S. Surgeon General Boris Lushniak last month released a 980-page report on smoking that pushed for stepped-up tobacco-control measures."

"I can't accept that we're just allowing these numbers to trickle down," he said in a recent interview with the AP, as reported by the Denver Post. "We believe we have the public health tools to get us to the zero level."

Smoking may not be where the dollars are

The biggest reason for other companies to follow CVS' lead may not be the altruistic idea that smoking is bad, but the profitable idea that it's going away anyway and more profit lies in selling increased health care services than in selling cigarettes. In the earlier article, I also noted that "Health insurance provider Aetna examined the rising cost of health care and found total health care spending in the United States is expected to reach $4.8 trillion in 2021, up from $2.6 trillion in 2010 and $75 billion in 1970."

Wal-Mart, Walgreen, Rite-Aid, Kroger, and Safeway may decide that by playing along with the attorneys general and ending tobacco sales they can profit from the good public relations such a move will generate. Of course that benefit diminishes from the first company to do it to the second and continues falling as it becomes less of a novelty.

Will stores not selling tobacco reduce smoking?

Limiting access to harmful products -- like tobacco and alcohol -- is a proven prevention tactic that does drive down use. 

"We expect that fewer points of purchase for tobacco products will result in less people smoking," William Gerrish, spokesman for the Connecticut Department of Public Health told the Fool. "Research has shown that policies that reduce access to tobacco products, such as creating smoke-free public and private environments and increasing the unit price of tobacco products, have significantly contributed to reductions in the rate of tobacco use." 

It's important to note that CVS alone not selling tobacco products won't have much impact because of the prevalence of stores that do sell tobacco. To put it simply, you're not really limiting access if CVS doesn't sell tobacco but a Walgreen across the street does. In pushing such a large volume of stores to drop tobacco sales, the attorneys general are looking at limiting access in a large enough way to actually make a difference. 

Is dropping cigarette sales good for business?

For the companies like Walgreen and Rite-Aid that are pharmacies first, selling cigarettes may simply be incongruous with their core business of selling good health. For Wal-Mart, Kroger, and Safeway it's a more complicated decision -- their brands are not built around health or promoting healthy lifestyles. 

CVS may have given up $2 billion in tobacco sales, but it's likely to make that up through selling more health services such as its walk-in clinics. The grocery chains face a more realistic prospect of actually losing revenue on the deal. The nature of grocery store shopping makes cigarettes an add-on purchase when someone is shopping anyway. It's hard to imagine that the customer who would have added a carton of cigarettes to their cart would spend that money on fresh fruit instead.

Pharmacies are also able to drop tobacco without risk of a backlash from smokers as the move just seems to make sense -- like banning open flames at gas stations. Grocery chains won't have the same protection and smokers may push back on the idea that their vice is being singled out while alcohol, fatty foods, and others are not.

Dropping tobacco for Wal-Mart, Kroger, and Safeway would be good for the health of their customers, but not necessarily the health of their bottom lines.

3 stocks to help you retire rich

It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Daniel Kline has no position in any stocks mentioned. He does not smoke. The Motley Fool recommends CVS Caremark. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers