It is not who is right, but what is right, that is of importance.
-- Thomas Henry Huxley
Every once in a while I see a company making a strategic decision, not because of the money, but because it is the right thing to do.
CVS Caremark just announced it will remove all tobacco products from its stores by October 2014. The sale of tobacco products is less than 2 percent, but given the average gross margin on cigarettes is 6 percent, CVS will be giving up a profit of $120 million dollars annually. Multiplied across their 7,600 stores, that comes out to $2 billion in total revenue annually. That is not an insignificant amount, no matter how you look at it.
Above and beyond the direct loss of revenue from cigarette sales, many customers will likely migrate to other drugstores where they can still buy cigarettes. Thus far, CVS's primary competitors, Walgreens and Rite Aid, have shown no inclination to follow suit. In fact, recently in San Francisco, Walgreens went to court to fight in favor of cigarette sales when the city sought to impose a ban.
Clearly, CVS Caremark is making a bold move, but they understand being in the health business and selling cigarettes is a paradox. Though CVS is the only one making this adjustment, Walgreens' tag line, "At the corner of happy and healthy," is just as contradictory if they continue selling cigarettes.
I do not like cigarettes and do not really like being around people who smoke, but I believe it is up to each person to make their own choice. Many, many years ago (over 50), even I smoked while I was attending college. That said, my objective in writing this column is not to say I am against people smoking, only to say businesses really need to make sure everything they are involved in is in line with their missions.
CVS Caremark, for instance, identifies itself as a pharmacy innovation company, and their mission says, "Every day we're working to make health care better." With all the health concerns associated with smoking, everyone can agree that is a blatant inconsistency.
CVS has been selling cigarettes for a long time, so this change is going to be tough for them. It is going to be a blow to their bottom line, but it is the right thing to do.
Now go out and ensure you are doing the right thing in all of your business dealings and that all your operations are congruent with your purpose and goals.
Jerry Osteryoung, a consultant to businesses, is the Jim Moran professor of entrepreneurship (emeritus) and professor of finance (emeritus) at Florida State University. He can be reached by email at email@example.com.