CVS Health SWOT & PESTLE Analysis
COMPANY PROFILE -CVS Health
Business Sector :Retail Pharmacy and healthcare services
Operating Geography :United States, North America
About CVS Health :
CVS Health Corporation (formerly known as CVS Corporation and CVS Caremark Corporation) is an American retail pharmacy offering health care services. It is headquartered in Woonsocket, Rhode Island. Its key business segments include, Pharmacy Services, Retail or Long Term Care, and Corporate. The Pharmacy Services provide pharmacy benefit management solutions, the Retail or Long Term Care vertical deals with selling prescription drugs and assortment of general merchandise, whereas the corporate piece offers management and administrative services. The company was founded by Stanley P. Goldstein and Ralph Hoagland in 1963. The business which initially started as a chain of health and beauty aid store, gradually started adding pharmacies. Stocks of CVS trade on New York Stock Exchange as NYSE: CVS. As of 2017, the company employs 250,000 people.CVS Health's mission statement is "Helping people on their path to better health." The Company's vision statement reads "We strive to improve the quality of human life." CVS Caremark's USP or unique selling proposition lies in being a legacy brand and the largest drug retailer and Pharmacy Benefits Manager (PBM) in the U.S.A.
CVS Health Revenue :
US$184.8 billion – FY ending December 2017 (y-o-y growth of 4.1%)
US$177.5 billion – FY ending December 2016
Ownership / Major shareholders :
Major shares are held by institutions which is 71.9%. A few major institutional holders are, Vanguard Group holding 7.73% stake, Blackrock Inc. with 6.89% stake; State Street Corporation 4.22%, FMR, LLC 3.37% and Wellington Management Company, LLP at 2.22%.Institutional Mutual Fund Ownership holds 12.4% stake. Major holders here are, Vanguard Total Stock Market Index Fund holding 2.38% stake, Vanguard 500 Index Fund standing at 1.62%, SPDR S&P 500 ETF Trust at 1.27%, Vanguard Institutional Index Fund at 1.06% followed by MFS Series Trust at 0.86% Insider Ownership and others stake stand at 0.1% and 13.9% respectively.
This ownership distribution is true as of May 2018.
Competitive Analysis of CVS Health
The SWOT analysis report of CVS Health presents the internal analysis and external analysis of the Company with insightful details of the current market position and future business strategy of one of the biggest US drugstore market player. Amongst CVS Caremark’s major competitors, lies Walgreens and Pifzer.CVS Caremark's SWOT analysis essays the detailed business growth strategy of CVS Caremark Corporation with insights into its strengths, weaknesses, opportunities and threats. CVS Health's case study reveals that it is not only one of the largest retail pharmaceutical companies in the USA with a strong brand presence, which is undoubtedly one of its major strengths, but it also has tremendous opportunity to expand in the international markets.CVS Health is challenged with a titanic threat as formidable rival Amazon prepares itself for foraying into the pharmacy market.CVS Caremark Corporation has diverse offerings in anti-aging and beauty skin care products. CVS health brought about a great change by implementing its business strategy of brand building through pulling the brakes on tobacco sales, although it turned out to be a costly affair. The biggest pharmacy corporation giant CVS health has illustrated sound ability in facing the current headwinds. With a competitive business strategy, CVS is all set to enter a new vertical of insurance and managed care by the acquisition of Aetna.
The SWOT analysis for CVS Health is presented below:
| 1. Largest drug retailer in the U.S.A. 2. Leading Pharmacy benefits Company through Caremark pharmacy services 3. Consistent strong performance and financials building shareholder value 4. Broad spectrum of offerings in health and wellness with great accessibility. 5. ExtraCare loyalty program pushing OTC growth 6. Brand building for putting an end to tobacco sales | 1. Embroiled in lawsuits and controversies over refill practices causing erosion of brand and money 2. Weak presence outside of USA |
| 1. Acquisition of Aetna will help entry into new vertical of insurance and managed care. 2. Growth through acquisitions and collaborations 3. Growth in demand for anti-aging drugs 4. Aging population with increased prescriptive needs 5. Fighting the Opiate crisis | 1. Conventional and un-conventional competition globally, in the drug retail sector and PBM (Pharmacy Benefit Manager) 2. Government regulations and interventions 3. Increasing competition from Mail order pharmacy |
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Detailed SWOT Analysis of CVS Health
Strength
1. Largest drug retailer in the U.S.A.: CVS Health is the nation's largest drugstore chain operating over 9800 retail locations in 49 states, the District of Columbia, Puerto Rico and Brazil. The US drugstore market is ruled by 2 dominant players CVS Health and Walgreens. Drug Channels reported that these two behemoths attributed for over 29% of the total prescription dispensing revenues in America in 2016. A research by Barclays’ Meredith Adler points that over 50% of the drugstore markets in around 70 of the top 100 metropolitan areas are controlled by CVS Health and Walgreens. In 2017, CVS Retail Pharmacy segment's market share was approximately 56.58%. About 5 million customers are served by CVS Pharmacy each day and 2.4 billion adjusted prescriptions were dispensed or managed annually by them.
2. Leading Pharmacy Benefits Company through Caremark pharmacy services: Pharmacy Benefit Managers (PBMs) reduce prescription drug costs and improve convenience and safety for consumers, employers, unions, and government programs. They are a third party of prescription drug programs for commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and state government employee plans.CVS Health is one of the largest PBM in the United States (the other 2 major players being Express Scripts and United Health Group) with the Company's PBM Mail choice segment's market share approximating to about 48.51%. In 2016, CVS was the large with the acquisition of Caremark in 2007, CVS entered the PBM arena and alongside integrated its extensive supply chain and distribution network. CVS earns about 70% of its annual sales from its holistic range of pharmacy benefit management services. CVS's revenue in Q2 FY 2017, from its pharmacy benefits-management (PBM) business, spiked 9.5% year over year, to $32.3 billion. This growth was attributed to soaring pharmacy-claim volume, higher brand-drug prices, and increased specialty drug volume. CVS operates PBM for its over 94 million PBM plan members through 68000+ retail network pharmacies.
3. Consistent strong performance and financials: CVS featured on Rank #7 on Fortune 500 list for years 2017 and 2016, a jump from Rank #10 in 2015. It has shown consistent performance and maintains a strong bottom line. Consolidated new revenues in Q4 2017 jumped 5.3% year-on-year to $48.4 billion with operating profit changing to $3.2 billion, soaring 5.7%. Free cash flow saw a leap of 143% to $642 million. Consolidated new revenues for full year of 2017 stood at $184.8 billion with 4.01% climb over FY 2016 and 15.8% climb over FY 2015 where the figure stood at $153.29 billion.
4. Broad spectrum of offerings in health and wellness with great accessibility: Apart from retail pharmacy and PBM, CVS offers diversified services for minor illness and injuries, wellness services like screenings and monitoring, vaccinations and injections, urgent care and long term management of chronic conditions, through its more than 1,100 MinuteClinics conveniently located, operating 7 days a week with no appointment required. These clinics get over 37 million patient visits and have a 95% customer satisfaction rating. CVS is also the United State's largest specialty pharmacy. They have developed unique solutions for improving patient care under controlled costs. Comprehensive care and online accessibility are the key features of this sector and programs like Specialty Connect, MyHealth Teams and accordant Health Services help disease management on individual case basis for people with rare chronic conditions. With the acquisition of Omnicare and Target in 2015, 1670+ Target pharmacies and 80 new clinics were added to CVS, which has increased its store presence and accessibility galore shown CVS superior specialty services growth.
5. ExtraCare loyalty program pushing OTC growth: ExtraCare® subscribers save and earn rewards on every purchase done via online more or physical stores – from home care goods and beauty products, to gifts for kin and kith, as well as wellness products and prescriptions. Members scan their cards at the ExtraCare Coupon Center in order to benefit from unique offer where they get a window into a summary of their coupons and available ExtraBucks Rewards, free “CVS money” etc. Since its launch ExtraCare program have worked on dispensing innovative features tailored to bring personalized value for their customers. As of 2017, there are 62million ExtraCare members enrolled.
6. Brand building for putting an end to tobacco sales: In 2014, CVS Health was the pioneer pharmacy retailer to slam the brakes on selling tobacco. This decision came at a pricey cost of losing 2 billion in annual sales from tobacco products but it projected the Company in good light and proved its commitment to health and improving lives. It greatly boosted CVS Health's brand image and eversince CVS has been investing $50 million over a 5 year term to extend their commitment to helping people to lead healthy tobacco-free lives.
Weakness
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Opportunity
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Threat
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Major Competitors :
1. Aetna
2. Amazon
3. Cigna
4. United Health Group
5. Anthem
6. Target Corporation
7. Walgreens Boots Alliance
Major Brands :
- MinuteClinic
- Omnicare
- Coram
- Specialty Connect
- MyHealth Teams
- Accordant
- CVS Pharmacy
- CVS Caremark
- CVS Specialty
Key Business Segments / Diversification :
Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :
| Aetna | Health Care | 2017 | Acquisition | The acquisition would combine CVS' drugstores and pharmacy benefits manager platform with Aetna's insurance business, blurring traditionally distinct lines in hopes of lowering costs. The deal is worth $69 billion. The shareholders have approved the acquisition, but it is subject to regulatory approvals by the State. |
| Target Corporations | Retail business | 2015 | Acquisition | This will help them in branching out their retail operations. This deal was worth $1.9 billion. |
| Omnicare | Health Care | 2015 | Acquisition | To give services of long term care facilities they acquired Omnicare. This acquisition happened for $12.9 billion. |
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TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
- Gain information about CVS health competitive analysis
- An overview about CVS pharmacy, brief history,key business segments, diversification, major brands, health benefit offerings etc.
- Key competitive advantages the Company enjoys in the US market
- Detailed explanation regarding CVS Health's case study, market share, revenue growth, ownership and overall business strategy.
- Insights into thehealth benefitsand unique health solutions CVS offers from advising on prescriptions, management of chronic and specialty conditions, running walk-in or minute clinics and pharmacy benefits management.
- Gain a good understanding of CVS health internal analysis which includes its strengths and weaknesses.
- Identify opportunities and threats which affect the external business Environment
- CVS Health'spestle analysis on how the external factors have affected themacro environment of the pharmacy retail business at large and CVS Health in particular.
- Track the pharmacy health sector and how specific political, economic, social, technological, legal and environmental factors wield their influence on CVS's growthstrategy.
- Major partnerships, acquisitions, and mergers and how they have benefited the CVS brand. Gain intelligence on how CVS strategically uses them to ward competition and achieve growth
- An understanding about the Company's health care benefits and business model
- Major traditional and new-age competitors, and the threat they pose.
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CVS Health SWOT and PESTLE analysis has been conducted by and reviewed by senior analysts from Barakaat Consulting.
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