Rethinking SKU Rationalization: A Strategic Approach to Portfolio Optimization

September 25, 2025

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In 2025, SKU rationalization is no longer just a cost-cutting exercise. Focusing on an efficient assortment is a critical lever for profitable growth. As CPG manufacturers navigate inflationary pressures, evolving consumer preferences, and operational complexity, the focus has shifted from reactive SKU cuts to intentional product line optimization. 


Leading companies are choosing to proactively streamline product lines within their existing brand portfolios, preserving equity with consumers and strengthening relationships with merchant partners while improving velocity and margin. 


In PwC’s 2025 CPG Executive Survey, product rationalization and portfolio optimization ranked second in the list of planned approaches to cost optimization – right between investment in AI and automation of manual work. 


The Challenge: Balancing Simplification with Shopper Reach 

Trimming SKUs can unlock efficiencies, but it can also carry risk if executed without an evidence-based approach: 


  • Reduced shelf presence 
  • Lost consumer segments 
  • Retailer pushback 


The key is to optimize without oversimplifying. You can remove redundancy while preserving reach and relevance if you understand how your existing and new SKUs interact with each other and can best work together to satisfy critical consumer groups and occasions. 


From SKU Cuts to Strategic Curation 


SKU rationalization isn’t about eliminating; it’s about focus: 

  • Identify low-performing SKUs that dilute focus 
  • Highlight high-potential variants worth investing in because they benefit you, your consumer, and your merchant. 
  • Align product mix with channel-specific strategies (e.g., convenience, eCommerce, club) 


This approach allows brands to retain their identity while evolving their assortment to meet today’s demands.  

 

The Solution: Product Variety Profiler by Astrea Analytics 

Product Variety Profiler empowers you to take ownership of their portfolio strategy by bringing data-backed recommendations to merchant partners. And you’ll have insightful results and a user-friendly simulator in hand in as few as three weeks. 


With this tool, manufacturers can: 

  • Evaluate SKU performance across velocity, reach, and strategic fit 
  • Model trade-offs between SKU reduction and consumer coverage 
  • Build persuasive, sell-in stories that justify keeping or evolving SKUs 


Instead of waiting for retailers to flag underperformance, manufacturers can proactively say: “Here’s how this product contributes to the category, and here’s how we can optimize it.” 


Final Thought 

In today’s competitive CPG landscape, manufacturers must lead the conversation on portfolio strategy. By leveraging tools like Astrea’s Product Variety Profiler, brands can streamline intelligently, strengthen retailer relationships, and drive sustainable, profitable growth without sacrificing consumer reach. 


Ready to take control of your product portfolio? Let’s talk. 

_____________________ 

Source: “The state of consumer packaged goods: Why it’s time to self-disrupt.” August 13, 2025. PwC CPG Executive Survey 2025. Multi-response question: What is your company’s planned approach to cost optimization in the next 5 years? 

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