The Cleanup in the Checkout Aisle

Bed, Bath & Beyond (NASDAQ:BBBY), Walmart (NYSE:WMT), Target (NYSE:TGT), supermarkets and all convenience stores like 7-11 must stop displaying junk food items like candy, gum, chips, cookies, and soda at checkout aisles because it induces obesity and diseases like diabetes. Instead, they must put fruit, vegetables and granola bars in their checkout aisles.

That's what the influential Center for Science in the Public Interest now says in a heavily detailed new report, "Temptation at Checkout: The Food Industry's Sneaky Strategy for Selling More." The advocacy group is now sending letters to retailers about the problem of a “polluted food environment.” It's also aiming to stop Coca-Cola's (NYSE:KO) and Pepsi's (NYSE:PEP) push to bundle soda and "salty junk food" near the checkout aisle, too. Similar shaming worked in the U.K., where three major retailers, Lidl, Tesco, and Aldi, each eliminated candy from checkout aisles.

It’s a big business for the food industry, with about $5.5 billion of food, drinks and other products sold from checkout aisles in supermarkets alone. As of 2012, (the latest data available), businesses sold $11.3 billion worth of junk food, including 799 million pounds of potato chips and 1.2 billion pounds of cookies. They sold another $34 billion worth of candy (movie-sized candy, now a big hit), and soda sales amount to $76 billion annually.

“Retailers could support their customers’ health, rather than pushing the consumption of extra―and often unwanted―calories from candy, soda, and other junk food and sugary drinks,” the Center says. “Supermarkets and other stores that sell food, like Target, Walmart, and 7-Eleven, should adopt food and nutrition standards for checkout, selling only non-food and healthier food and beverage options there.”

But will changing the offerings at the register help or hurt?  If you're CVS (NYSE:CVS), it hurts. The drugstore chain stopped selling tobacco products last year, and CVS reported an 8% drop in general merchandise sales last quarter because of the ban.

Last September, CVS Caremark became the first major pharmacy chain in the U.S. to stop selling cigarettes and tobacco-related products at its 7,600 retail outlets. Even though it said at the time it would sting sales by some $2 billion annually, the drug store chain said it was the right thing to do, making a bet on bolting its brand image to a more health conscious America. CVS also changed its name from CVS Caremark to CVS Health at the time. Walgreens (NYSE:WBA) and Rite-Aid (NYSE:RAD) have yet to follow suit.

But now, CVS’s second quarter report reveals weak front-of-store business, as overall same-store sales grew a flat 0.5%. CVS blamed the sales weakness on the tobacco ban, which is cutting into valuable customer traffic and sales, given that smokers often pick up other products to buy. CVS shares have been taking hits since its earnings report came out. CVS generates about $139 billion in annual sales, which are helped by tobacco users’ other purchases, including impulse buys.

The Center for Science in the Public Interest is now sending letters to Bed, Bath & Beyond to rethink their candy sold in checkout aisles, and is ordering its members to bombard the retail chain with emails and tweets to pressure it to stop. The Susan and Michael Dell Foundation, the American Heart Association and the Robert Wood Johnson Foundation all back this latest effort by the Center.

The Center notes that “one reason why it is so difficult to eat well in America today: retail marketing manipulates food choices.”

It adds: “Like food manufacturers who have agreed to policies on food marketing to children, they should voluntarily agree not to use placement fees to induce retailers to place unhealthy foods and beverages at checkout."

The advocacy group also says: “Customers don’t go to those stores with the idea of buying candy and snacks that are displayed at children’s eye level or pushed on tired adults susceptible to impulse buys.”

Children, the report says, “get, on average, 436 more empty calories each day from store-bought foods than from fast-food restaurants and school cafeterias.”

The Center also wants “health departments, other government agencies, hospitals, and other institutions to adopt healthy checkout policies for the properties they own or manage.”

The ubiquity of food is also an issue, the advocacy group says. “People are prompted to purchase food at shopping malls, gas stations, stadiums, workplaces, airports, movie theaters, bowling alleys,” pharmacies, “almost anywhere else they go,” the Center says.

Children, too, “encounter food through school cafeterias, school vending machines, fundraisers, parties, snack time at school, after-care programs, rewards for good behavior or performance, parks, soccer games, concerts, stadiums, toy stores, convenience stores, grocery stores, the zoo, circus, movies, and checkout counters at toy, clothing, home goods, and hardware stores,” it says.