Maintaining Variety While Consolidating SKUs | The Garage Group

Maintaining Variety While Consolidating SKUs

There’s been a lot of press about SKU consolidation from BigCos in both the CPG and Food/Bev industries. Coke announced its decision a few weeks ago to eliminate over 200 brands. And, an article from Bloomberg from June 26, 2020 references many others:

“General Mills Inc., maker of Cheerios and Progresso soups, has pared its roster of about 90 soups nearly in half, focusing on the 50 top sellers. Rival cereal maker Kellogg Co. is “focusing on core SKUs,” Chief Executive Officer Steven Cahillane said April 30. ConAgra Brands Inc., maker of Banquet frozen meals, and Campbell Soup Co. have done the same. Meanwhile, organic food maker Amy’s Kitchen had to reduce its offering to just 71 products, down from 228 before the pandemic.”

It’s logical, really. Both traditional manufacturers and retailers want and need products that sell faster and more frequently. Their business models depend on these items. So, naturally, more niche items are discontinued and the core is prioritized, which can impact consumers and BigCos in the following ways:

  1. Consumers are left with fewer and fewer choices as the unique, quirky, and niche products disappear from shelves and BigCos’ websites.
  2. BigCos fall behind on innovation, leaving them at risk for a slow demise due to a lack of relevance.

While these outcomes may not feel too detrimental in the short-term, we hypothesize that consumers, craving variety and experience, will return to the market for new flavors, scents, and ingredients. And, when they don’t find what they’re looking for from BigCos, they’ll search elsewhere.

Where will consumers look for new products and more choices?
Consumers are turning to eCommerce more often to shop for day-to-day items, including food, cleaning products, and other household items. Supermarket News reported that online grocery sales have jumped 300% since the beginning of COVID-19.

As a result, BigCos are scrambling to master new DTC strategies to prevent giving up their margins to a host of delivery services and other go-betweens. It’s important to keep in mind, though, that eCommerce puts consumers in control of where and when they shop.

Entrepreneurs have been launching products through eCommerce for several years now, and it’s only become faster, cheaper, and easier. Now, with consumers shopping online more regularly, there’s a greater opportunity for brands to generate trial, especially when their new, unique products stand out from traditional retailers and manufacturers’ limited set of core SKUs.

So, what’s a BigCo to do?
This could be the perfect opportunity for new partnerships or M&A. Branding partnerships, equity investments, or bundling/distribution cooperation could be smart ways for BigCos to stay engaged with evolving consumer preferences.

Co-marketing/brand partnerships, such as GoPro & Red Bull, work well when they leverage the strengths of both brands. M&A is another viable, albeit expensive route to maintaining relevance and variety across a portfolio of products. Recent examples include Nestle’s acquisition of Freshly and Ingredion taking full ownership in their joint venture with Verdient Foods.

If you are a BigCo and need to cut SKUs to meet retailer and cost requirements, you may want to consider creative ways to maintain an investment in the variety you are being forced to cut. If you can’t, you may find yourself with a host of new competitors on the fringes of your category, and out of touch with consumers in a way that hampers your ability to win them back.

The Garage Group works with BigCos in the Food/Bev, CPG, and Financial Services industries to help them create consumer-relevant strategies and innovation, leveraging the approaches and tools used by entrepreneurs. Get in touch if you need a partner to help think through how to maintain variety in your portfolio, even as you consolidate SKUs.

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