The following blog post was authored by Maggie Christ, Renáta Sándor and Andrew Tonne, whose case study was awarded the Jack Koten Page Principles Case Study Award for their entry into the 2015 Case Study Competition in Corporate Communications. They are students in the M.A. in Public Relations and Advertising program at DePaul University and will graduate in June 2015. Their full case study is available here, and they welcome your thoughts and comments. In 2014, CVS Health, formerly known as CVS Caremark, surprised the country by removing tobacco products from its shelves and rebranding the entire corporation. Despite the anticipated $2 billion loss in sales due to the removal of tobacco products, CVS Health was optimistic that it was making the right choice for society. As CEO and President Larry J. Merlo stated, "Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health. Put simply, the sale of tobacco products is inconsistent with our purpose."
Immediately following the initial announcement, there was a noticeable spike in online activity about CVS Health. The overall consensus of the public response to this decision was positive. The public took to social media to congratulate and thank CVS Health for the bold change in services. The decision was respected and celebrated by celebrities, public figures and even First Lady Michelle Obama. Investors responded, too. CVS' stock price rose in October of 2014, a month after the changes went into effect. It would be a while before CVS Health would recover from the immediate loss in tobacco sales, but the initial feedback from all stakeholders was promising.
In CVS' 2014 annual report, published after we submitted our award-winning case study to the Arthur W Page Society Case Study Competition, our optimistic predictions proved true. CVS Health did the right thing for society and made money. Merlo boasts in his Letter to Shareholders, “net revenues for the year increased nearly 10 percent to a record $139 billion, while adjusted earnings per share from continuing operations rose to $4.49 – up 13.5 percent." Merlo is proud of this growth that comes despite the 8 cents loss per share due to removing tobacco from their product offerings. Merlo said, “We met our 2014 financial targets while creating significant shareholder value." Skeptics may claim that CVS Health just made a “PR move," something to make them look good and get attention. To that we say, yes, CVS Health made a PR move. Sometimes we forget what PR means and its purpose.
PR is not just about making things look good or right; it can and should be a part of the business strategy. A PR move is a business move; it's strategic, bold, honest and in keeping with the company's stated mission and values. It is listening to the public and maintaining good relations with stakeholders. CVS Health took a calculated risk. Of course, a skeptic might say that CVS did not really have the betterment of society in mind. But what company would risk losing $2 billion in revenue, plus shareholder trust and value, just to look good. Yes, it's possible the leaders of CVS Health don't truly believe in health or that tobacco use contradicts their mission. But that's unlikely, too. Who doesn't understand that tobacco use has fatal consequences?
CVS Health was the number two pharmacy chain in the United States in 2014, with strong earnings. Their backs were not against the wall; there was no heavy pressure from consumers to make this change. However, the company was not going to wait until they were losing money or have their corporate character called into question. The company's leadership and PR team followed the Page Principles and reaped the benefits of their strategic and gutsy PR move.
Simply put, CVS Health embraced its corporate character and was rewarded for doing so.