retail news in context, analysis with attitude

The New York Times had a terrific story over the weekend about CVS and its evolution from chain drug store to one of the nation's most significant health care institutions.

An excerpt:

"With 7,800 retail stores and a presence in almost every state, CVS Health has enormous reach. And while shoppers might think of CVS as a place to pick up toothpaste, Band-Aids or lipstick, it is also the country’s biggest operator of health clinics, the largest dispenser of prescription drugs and the second-largest pharmacy benefits manager. With close to $140 billion in revenue last year — about 97 percent of that from prescription drugs or pharmacy services — CVS is arguably the country’s biggest health care company, bigger than the drug makers and wholesalers, and bigger than the insurers."

A critical part of its philosophical and economic transformation, the story says, has been its decision first to stop selling tobacco products, and then become an anti-tobacco advocate. There's no question that there were two rationales at work - to begin with, tobacco sales were dropping and becoming less profitable, but company leadership also saw the category as inconsistent with its long-range plans and broader message.

Now, this strategy has led to the company's decision to resign from the US Chamber of commerce following what the Times describes as "revelations that the chamber and its foreign affiliates were engaged in a global lobbying campaign against antismoking laws."

These moves have had their challenges, primarily the issue of consistency. The company says that when it decided to take an anti-tobacco position, it immediately raised the stakes in terms of credibility, with customers increasingly wondering how a company that does not sell cigarettes can justify selling candy, potato chips and soft drinks. And one might infer from the story that while CVS has no immediate plans to exit these categories, such items may be de-emphasized in marketing and merchandising efforts, and indeed, management likely has begun to at least consider what a future without them might look like.

It is a great piece - and you can read it in its entirety here.
KC's View:
I think this is valuable reading because it addresses how a very big company engineered a major shift in company direction by seeing where the customer and the business was going, and then making the sometimes dramatic moves necessary to be at the nexus of where customers and business trends meet. I'm still not the world's biggest CVS fan, but I do like their Minute Clinics a lot ... and I particularly like the anecdote in the Times story in which a young Manhattan professional with health care coverage but no doctor goes to a Minute Clinic and gets competent, effective treatment for a sore throat in less time than it took him to buy a bagel that morning. That's the future ... and CVS seems ready to embrace it.