CVS Makes The Right Move

CVS Makes The Right Move

Matt HealeyThursday,4 September 2014

The Snap:

CVS announced yesterday that they are changing their name to CVS Health and eliminating the sale of tobacco products. Personally I think this is a very good idea based on the market dynamics.

The Download:

Just for the record I am not a smoker and never have been. So this does not affect me.  However I do think it is a good idea. Let’s look at this from two perspectives. The first is the revenue they will lose by not selling tobacco products. If they had made this decision in 1950 it would have been a disaster. But, despite the evangelical christian party of god’s attempts to remake the country into 1950, they have not been successful. In 1955, 57% of men and 28% of women smoked. In 2010, 22% of men and 17% of women smoked. So clearly the demand for cigarettes has dropped. It also is not expected to rise any time in the future. So, whatever revenue CVS is losing will be declining as the population of smokers declines.

Now let’s look at it from a revenue gain perspective. The U.S. population is getting older. Specifically, the boomers are either in retirement or nearing it. Generally healthcare demands rise later in life. Personally, mine have not increased, they have just changed. I need less orthopedic work as I am not dislocating joints and tearing ligaments as frequently. As an aside, I also don’t look at the cliff on the side of the ski slope and think “that would be fun to jump off” that often anymore. So with the increased spending, moving from being considered a convenience store to a health care destination is catering to a growing portion of the population.

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Hat Tips:

The New York Times, InfopleaseImage Credit: Flickr

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