SKU Rationalization

SKU rationalization is the discipline of regularly removing low-performing SKUs from a brand's portfolio. The standard cadence is annual, the typical target is to cut the bottom 10 to 20% of SKUs by gross profit contribution.

The reason it matters: SKUs proliferate. Every new flavor, every new pack size, every new channel-specific variant creates inventory, complexity, plant changeovers, forecasting overhead, customer-service exceptions, and finance reconciliation work. The cost is never visible on a single SKU's P&L, but the cumulative drag on a CPG operation is real.

The hardest part is the political conversation. The team that launched a low-performing SKU rarely wants to kill it. Sales worries about losing distribution. Marketing worries about losing brand presence. R&D worries about wasted investment. The S&OP cycle is usually where the call gets made, often with the GM as final arbiter.

A discipline to watch: companies that ratio new SKUs to retired SKUs at roughly 1:1 stay clean. Companies that run 4:1 or 5:1 ratios eventually choke on their own complexity. The bigger the company, the more important the discipline.

Roles where this matters: GM, Operations, Supply Chain, Sales, Brand Marketing.