Leo Vercollone doesn't like smoking, but his customers do, so that's why he keeps selling cigarettes at his gas station convenience stores.
CVS, the nation's second-largest drugstore chain, got a lot of props this week for declaring it would stop selling death sticks. But if this country really wants to reduce smoking, we need to get gas stations and convenience stores to stop carrying packs of smokes, too.
Here's why: More than 60 percent of cigarette sales take place there compared with only 3.6 percent at drugstores, according to Euromonitor International, a consumer research group.
Put that way, it should have been an easy decision for CVS Caremark to give up $2 billion from tobacco shoppers. It's less than 2 percent of the Woonsocket, R.I., chain's $123 billion in annual sales, but the good PR is priceless.
"If (my) sales of this product declined to the level at CVS, I would seriously consider whether I would sell it," said Vercollone, who owns two dozen gas station convenience stores in Massachusetts and New Hampshire.
Gas stations and convenience stores are addicted to cigarettes much in the way smokers are. Getting these merchants to quit will be much harder than getting Walgreens and Wal-Mart to take cigarettes off their shelves.
For Vercollone, tobacco sales represent nearly 40 percent of his business. Not something he likes, given that they are the lowest profit margin item in the store. He can make twice as much on a cold bottle of Coke. But the customer who dashes in for cigarettes is often buying high-profit items like bottled water or coffee.
And as other retailers figured out that peddling cigarettes is fundamentally bad business — low margins and eroding customer base — they have pulled back over the years. That gave gas stations and convenience stores an opportunity to become the go-to places for smokers by offering a big tobacco selection.
There are other factors at play here. Cigarettes have gotten really expensive because the government has been taxing the hell out of them as part of public health policies to discourage smoking. A pack of Marlboros sets customers back about $10 in Massachusetts, with about half of the price coming from taxes. At a price point like that, a single pack at a 7-Eleven is more affordable than a $100-plus carton at the supermarket.
And then you get into the psyche of a smoker. Seven out of 10 want to quit, so they buy one pack at a time, holding out hope that each purchase may be their last. It's kind of like how the rest of us satisfy a craving for a Ho Ho, reaching for a single package instead of a more economical box.
When Larry Southard opened Papa's Healthy Food and Fuel in East Otis, Mass., he didn't want his business to develop a bad habit so he refused to sell cigarettes. Plus, they didn't fit with his concept for a Whole Foods-style convenience store in the Berkshires.
After a year and half, that plan, well, went up in smoke.
"I would say 70 percent of the people walking through the door were looking for cigarettes," Southard recalled. And the reaction from those unhappy customers was pretty much the same. "They looked at you like you are from another planet: 'Are you kidding me?'" So along with organic milk, free-range eggs, and locally-baked bread, Papa's sells cigarettes, which make up 20 percent of his business today.