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CVS Dropping Cigarettes From Its Stores is Shrewd Business Move

02/07/2014 01:08 EST | Updated 04/09/2014 05:59 EDT

In an unprecedented move, U.S. pharmacy chain CVS Caremark announced Wednesday morning that it will remove cigarettes and all tobacco products from its 7,600 pharmacies nationwide by October 1 -- a move that is expected to cost the retailer an estimated $1.5 billion in annual revenue.

The company's chief medical officer Dr. Troyen Brennan said the chain had decided it was time to act, because continuing to sell cigarettes would simply be inconsistent with the company's mission.

With smoking being responsible for more than 480,000 deaths annually in the United States and $132 billion in direct medical costs, a health provider continuing to sell cigarettes was a glaring contradiction. CVS's move was undeniably the socially responsible thing to do.

It was also the smart thing to do.

Between the current government's eagerness to reduce the cost of smoking-related illnesses, health advocates' ever-increasing pressure to make it harder to smoke, and a public's expanding desire to see businesses respond to their health concerns, a new course of ethical action was already being established.

CVS simply decided to be the first one out of the gates.

But shouldn't ethics always override economic viability, and isn't altruism as good as any motivational tool for corporate change?

Don't be silly.

A for-profit corporation is a corporation that is intended to operate a business which will return a profit to the owners. CVS is a publicly owned company that needs to post profits and has to answer to shareholders.

Business must go on. It's the name of the game.

But that doesn't mean you can't change the rules and still come out the winner.

By noon, Twitter was on fire with accolades by public health advocates, and most importantly, the average consumer who now equates responsible, progressive, civic-minded business with CVS.

"Bravo CVS. Bold and forward thinking move on your part!"

"Putting right above revenue. Way to go!"

"Health before profit. Congrats, CVS."

"CVS will no longer sell cigarettes - Makes me want to shop there!"

And that's exactly what CVS was hoping their move would make you want to do.

If anyone finds that questionable, they shouldn't. Capitalism does not have to be a zero-sum game. Conscience and capitalism -- if done right -- can co-exist. A corporation can do business differently, make money, and effect positive social change. The two aren't incompatible. On the contrary, as consumers become more socially conscious, the two are increasingly becoming symbiotic and mutually dependent.

Cultural mores are shifting and changing as consumers increasingly dominate and alter the advertising pitch. Companies can no longer afford to sell their products or services by talking at consumers. They have to engage in a conversation with consumers -- and most importantly, be active listeners. And when they hear the message, they need to act with conviction.

There is an increased consumer value in supporting businesses that support people. Consumers vote with their money. The choices they make with their credit cards and cash represent their views on life and how they feel corporations should conduct business. A company's social reputation and perception of integrity depends on smart moves that don't openly pander to those who control its bottom line.

With one swift move, CVS managed to distinguish itself from its competitors, and gain the moral high ground by cementing itself as a vanguard in responsible health provision. It branded itself as the one who takes people's health in mind; is bold enough to make the right moves, even at the tune of $1.5 billion.

The company has been vocal about the losses it will incur; casually implying that commitment to social issues is ultimately more important than corporate greed.

And they're not lying.

But they're also not telling the whole truth.

Sure, there may be initial losses, but it's a gamble that's been well thought out, and perfectly timed and orchestrated. The new image and recognition as a respected leader in preventive health care in the U.S. will generate new sales in the form of added consumer support, as health-conscious people opt to shop at CVS over another pharmacy that seems to now -- in stark comparison -- be lagging behind in its ethical business model.

And CVS has made it no secret that it already has a plan to make up for the revenue lost from cigarette sales by ramping up a smoking cessation program -- and marketing it to employers and insurers.

The losses will be offset by the future potential financial gains of being branded as the one who took the plunge first, before legislation forced others to reluctantly follow.

It's noteworthy that, while CVS claims that refusing to sell tobacco products in its stores will result in a $1.5 billion loss, the U.K., France, and Italy, as well as most of Canada, have already banned them for decades, and there hasn't been evidence of any huge adverse economic impact on pharmacies' sales.

This announcement also immediately precedes a mass media campaign, expected to be launched in 2014 by the U.S. government, aimed at reducing the availability of cigarettes.

Finally, a revealing article published recently by The Atlantic explains that, as more Americans gain health insurance through the Affordable Care Act, retail clinics (of which CVS makes up the bulk) are expected to play a much larger part in preventing and treating illnesses.

"Last summer, the consulting firm Accenture predicted that the number of retail clinics would grow 20 to 30 percent each year for the next three years, driven in part by partnerships and referrals from hospital emergency rooms and overburdened primary care practices."

Those projections indicate there's vast potential for an additional revenue stream that can more than offset the losses of choosing not to sell cigarettes in their pharmacies.

CVS's move is not only socially conscious; it's also a shrewd business move. And smart, educated, and astute consumers don't begrudge a company posting a profit, if their demands have been met and their concerns addressed.

The bottom line is this: competition in business is fierce, and with Walgreens and Walmart having their own versions of retail clinics, and with more and more people turning to them for their preventative and primary care in the future, what could CVS have possibly done to distinguish itself from them?

Cue this week's announcement.

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