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MBPT Spotlight: National Pharmacy Chains Are No Longer Really Pharmacy Chains

The announcement last week by pharmacy chain CVS that it plans to stop selling cigarettes later this year cost CVS Caremark, by its own estimates, $1.5 billion annually in tobacco sales alone through its more than 7,600 U.S. stores.

The pricey decision was a public relations coup and won the chain lots of praise from many sources, including the American Medical Association, American Cancer Society and the government.

The chain expects to make at least some of that lost revenue back by expanding its line of smoking cessation products, and this spring, CVS is planning to launch a major national smoking cessation program. However, the process of ridding its stores of tobacco products is not expected to be completed until Oct. 1.

How CVS markets itself during the process could be handled by a new creative agency as the chain put that account up for review last month. The incumbent, Arnold, is expected to defend.

But the irony in this decision is that while CVS still bills itself as a pharmacy chain, it is certainly more than that, and will have plenty of other products and categories where it could potentially make up some of those lost cigarette dollars.

Like many large retail chains in this country, pharmacy chains such as CVS, Walgreen’s and Rite Aid, among others, seem to be trying to be all things to all consumers. Many Target and Walmart stores are selling food—grocery and cooked. They also have pharmacies in many of their stories. Toy chains are not only selling tablets for kids but also higher-end tablets for the adults. Staples sells household cleaning products and bottled water, and supermarket chains are providing flu shots and other vaccines. Not to be outdone, the pharmacy chains are selling toys, groceries and household goods.

Even though these drug store chains might have expanded their non-pharmaceutical merchandise lines, in order to keep their customers from defecting to discount or department stores and supermarkets that are going after the pharmaceutical category, it’s becoming more of a misnomer to label them as simply “pharmacy” stores.

A Return to Local Roots: One Plan To Combat Current Trends
A few weeks before CVS announced its decision to stop selling cigarettes, this writer stopped by a local, family-owned and operated New Jersey drug store. The store was in the middle of a major renovation; when asked about the changes, the owner and pharmacist replied, “I’m going back to being a real pharmacy.”

He went on to describe how over the past several years, in order to compete with the large drug store chains such as CVS, Walgreen’s and Rite Aid, he also began shifting his merchandise mix, adding toys, expanding his fragrance offerings and selling ice cream and other snack foods and household cleaning items, although he drew the line at selling cigarettes.

Now he’s made a decision to eliminate a lot of those products and add items such as walkers, wheelchairs and a more expansive line of over-the-counter drug products. He is going to start offering flu shots, pneumonia and shingles vaccines and other immunizations throughout the year, and even put in a consultation area where customers can get advice on how to use medications properly, diabetes dieting and potential interactions of multiple medications.

It is, in a sense, a plan similar to local TV stations adding more coverage of the goings-on in their DMA: He wants to get his store back to its roots as a local town pharmacy rather than become more of a general retail store, believing that promoting his store as everything pharmaceutical will, in the long run, be more beneficial. The hope is that more local customers will grow to realize the benefits of stopping in for all things pharmaceutical—as well as the distinction between that and what have become much more general retail stores.

While CVS will no longer sell cigarettes, it continues to promote weekly sales on gum and other candy, potato chips, soda, Red Bull and other snack foods that tend to be not quite so healthy—though nothing that would carry a surgeon general’s warning.

And its shelves—along with those of rivals Walgreen’s and Rite Aid—remain stocked with items that will no doubt help the chain make up that $1.5 billion shortfall, including household cleaners, tissues and other paper goods, canned nuts, fragrances, candy, gift cards, batteries, pet food, groceries and even Spam—to go with all its vitamins and OTC meds.

Clearly chains such as CVS, Walgreen’s and Rite Aid can’t follow the path of the small local pharmacy. They have a different agenda that in part has them competing with the general retail chains and even the supermarkets—who themselves have become mini-pharmacies.

When CVS announced its tobacco decision, it also pointed out that it is the first of the major national drug chains to do so. It will be interesting to see how CVS markets that point in the coming months, and whether its rivals ever decide to follow suit, as the chips, soda and candy continue to fly off the pharmacy shelves.