I don’t think anyone would dispute that yesterday’s announcement of CVS’s decision to cease sale of all tobacco products by October, 2014 is bold, socially responsible and consistent with its overall position as a health related retail chain.
The immediate price tag to the chain is projected to be $2 billion in sales off a base of $123 billion in 2012- a little over 1.5 %. However, what is immeasurable at this point is
- The business related value from the exposure and positive coverage CVS is receiving by the media.
- The emergence of CVS as the thought leader in the category and stealing thunder from its primary competitors, Walgreens and Rite-Aid.
Wall Street had an immediate and negative reaction to the announcement with a dramatic drop in CVS stock price. Investors (and marketers) crave answers to the following questions:
- How does CVS plan to make up the lost sales?
- What does CVS project in terms of new customers they will now attract?
- Is this the first step in a multi faceted strategy to further establish CVS as the thought leader in the category?
- Should consumers expect other product related decisions: new categories, items, etc
- Will CVS change or expand its service offerings.
CVS’ decision and subsequent announcement re sale of tobacco products would seem to be a brilliant brand and marketing strategy but the “proof in the pudding” will be if there is a sound business strategy, that leads to enhanced revenue growth and profitability, behind the thought process.