CVS revealed Tuesday that it will stop selling tobacco products in its stores nationwide starting in October.
The decision will barely impact CVS’s revenue — shaving an estimated 1.2% off the pharmacy chain’s annual earnings — and it will have no effect on the tobacco industry as a whole, according to a research note by Morgan Stanley analysts.
The analysts gave these six reasons for why the decision won’t impact the industry:
1. Other retailers, including Target, have stopped selling tobacco products without impacting industry sales.
2. The majority of cigarettes are sold through convenience stores (about 65%) and tobacco outlets (about 10%), “and these channels are gaining market share (due to relative ease/speed/variety of purchase),” the analysts wrote. Pharmacies, by comparison, represent an estimated 4% of industry volume.
3. Roughly 250,000 outlets sell cigarettes in the U.S., so CVS’s 7,600 outlets account for only about 3% of cigarette outlets. The analysts estimate that the pharmacy chain accounts for an even smaller percentage (about 2%) of industry volume.
4. Smokers will not quit buying cigarettes. They will simply go elsewhere to purchase them.
5. Other major retailers, including the Dollar Stores, have been entering the tobacco category.
6. Globally, restrictions on tobacco sales have had no impact on the prevalence or consumption of cigarettes.
“From a global context we see no difference in smoking prevalence and/or total consumption in markets with highly restricted retail tobacco sales (e.g., France or Spain, where a licence is necessary) versus those without any sales restrictions,” the analysts wrote.
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