Three years ago, CVS Health Corp. removed tobacco products from its store. The change cost the chain $2 billion in annual sales, but CVS stood by the tobacco ban. It also sought to set itself apart from the competition, as a healthier alternative to other pharmacy chains. Ultimately the tobacco ban did not drive customers away, and CVS is now planning to expand on its goals to make its customers healthy. It is targeting candy, low-protection sunscreen, and foods containing artificial trans-fats.
In four test stores, the retailer has moved candy and other snack foods to the back of the store where these items will be less visible. The chain will no longer carry any sun protection products with SPF ratings that are lower than 15. Furthermore, CVS will stop stocking foods with artificial trans-fats more than a year before the new FDA ban on these products takes effect.
As CVS’s largest competitor, Walgreens could not help but take notice. Yet it does not necessarily plan to follow suit, at least immediately. Walgreens continues to sell tobacco products, alongside smoking cessation aids. The company will continue to stock candy and snack foods in usual store locations, but it also has plans to offer a greater selection of fresh fruit and vegetables. The Walgreens loyalty program offers rewards for customers who commit to exercise and health monitoring behaviors. With these changes, Walgreens believes it has a more appealing offer, because the consumer can choose to make healthier choices, but still decide what is best, on his or her own/
Ultimately the issue may be moot though: Both brands report that retail sales make up less and less of their overall revenue. The pharmacy and in-store health care clinics currently account for more than half of revenues of 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 the candy aisle will remain at the back of the store.
Discussion Questions:
- 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, The Wall Street Journal, June 28, 2017