How Streamlining Your Product Line Can Unlock Growth for CPG Brands
A while back, I advised a CPG brand that came to us looking for help with fundraising prep. Their assumption was that they needed a sharper pitch deck and investor story. But once we took a closer look at the business, we realized the real issue wasn’t fundraising readiness—it was product complexity. They were sitting on way too much inventory, and they had six flavors in rotation that were spreading their operations thin.
We drilled into the data together and identified their top-performing SKU and strongest channels. A year later, they’re cash flow positive and operating with two flavors. Not only did they avoid the dilution of a raise—they also built a healthier business by getting focused.
That’s the heart of SKU rationalization. Cutting SKUs is a power move when you know which products are earning their place and which ones are just adding friction. In the early stages, breadth can feel like momentum, but clarity is what actually scales.
Why Too Many SKUs Can Hurt a Young Brand
More SKUs can mean more stress under certain circumstances. Every variant you launch creates its own ripple effect—longer production runs, smaller MOQs, fragmented inventory, and higher packaging costs. It slows your ops and eats your margin, even when it looks like growth on the surface.
Let’s say you’ve got eight flavors of a sparkling tea, but two of them account for 70% of sales. The others? They’re slow-movers, tying up capital in labels, ingredients, and co-packing line time. Implementing SKU rationalization for CPG brands is the answer.
The operational effects of SKU bloat include:
Smaller, less efficient production runs with higher per-unit costs
Partial pallets and less-than-truckload shipments that drive up freight costs
More packaging inventory sitting on shelves (and on your books)
Slower turns that weaken your distributor relationships
Confused retailers who don’t know which SKUs to prioritize
Add it all up, and you’ve got cash stuck in motionless products, and team hours sunk into managing items that don’t move.
Sometimes the pressure doesn’t come from your team, it comes from your buyers. A retailer might ask for an exclusive flavor or a store-specific label. If you say yes too often without running the numbers, you’ll end up carrying SKUs that cost more to make than they earn. Remember, it’s okay to push back or ask for commitment volume that justifies the complexity.
When SKU count grows to meet retailer demands, it often comes with hidden costs—like slotting fees that eat margin before you even start selling. Here’s how to evaluate those tradeoffs and offset the impact.
How to Analyze Which SKUs Are Underperforming
When cutting underperforming SKUs, start with a clear, accessible data pull. For each one, look at:
Gross revenue
Contribution margin (net of all costs, including freight and discounts)
Sales velocity (units sold per door per week)
Inventory turnover
Shelf presence or DTC conversion
Now look for the SKUs that check multiple low boxes. If a product has low movement, low margin, and sits in your warehouse for more than 2 months at a time, it’s likely burning more value than it creates.
Accessible tools for SKU rationalization review include:
Once you start looking SKU by SKU, you’ll see where cash is hiding—and where it's evaporating.
Your SKU-level decisions ripple through your margin structure. Our profitability roadmap teaches you how to tie each product back to your bottom line.
What to Consider Before Cutting a Product
Not every low-performing SKU is a bad one. Some SKUs play a strategic role that doesn’t show up on a margin report.
Before you cut anything, ask:
Does this SKU win us shelf space with a key buyer?
Is it a strong discovery product (e.g. variety pack, small size)?
Is it new and just starting to scale?
Does it support bundles, subscriptions, or upsell logic?
Is it seasonal, and you're looking at the wrong time window?
Let’s say your matcha flavor underperforms in the summer but becomes a hero during January resets. Or maybe a 4-pack format sells slowly DTC but gets you into a convenience channel. Don’t let short-term sales alone drive decisions—consider brand role, long-term opportunity, and buyer behavior.
A SKU may not be profitable on its own—but if it opens a channel, completes a set, or gives you leverage in a buyer meeting, it might still earn its place.
The Benefits of a Focused Product Line
What happens when you tighten your line?
Fewer changeovers, fewer delays, and fewer co-packing headaches
Higher MOQs on core SKUs means better pricing and margin
Easier forecasting, better inventory planning, and faster turns
Simpler shelf story and stronger retailer confidence
Clearer digital messaging and higher conversion rates
When your team isn’t tied up managing SKUs that don’t contribute, you get faster at everything that matters, including innovation, retail readiness, margin planning, and supply chain coordination.
Explore our operations services if you need support aligning SKU decisions with supply chain systems.
SKU Rationalization at a Glance
Here’s a decision table I use when helping CPG brands with inventory efficiency:
SKU rationalization is never black and white—but this framework helps you prioritize where to dig deeper.
How to Have the SKU Conversation With Buyers
Say a buyer loves a niche flavor that barely moves and is costing you in packaging minimums. Cutting it outright could risk the relationship—but so could continuing to lose money on it.
What I recommend is transparency backed by data. Come to the table with:
A clear picture of the SKU’s performance and unit economics
Your plan to support the buyer’s needs through alternative SKUs
An offer to support remaining inventory with an exit promo or display
An ask for help shifting attention to SKUs that are ready to scale
You’re not pulling the rug out—you’re leading with operational discipline. Buyers respect that. And in many cases, they’re dealing with SKU bloat from other vendors too.
What Founders Often Miss
Most founders think rationalization is a one-time clean-up exercise. But really, it’s a business muscle.
What’s essential this quarter may be excess next year. The best operators I know revisit their assortment at regular checkpoints: after major launches, before investor conversations, and especially when facing cash constraints. Making SKU review part of your operating cadence means you’re always selling with intention, not inertia.
Great brands review their assortment quarterly, especially around:
Seasonal resets
Promotional planning cycles
Retail line reviews
Packaging or supplier changes
Inventory pressure from overordering
Why Focused SKUs Signal a Stronger Brand
If you’re thinking about raising capital—or even just building your investor pitch—a bloated SKU list can work against you. Investors want to see traction, margin, and a clear go-to-market path. A messy assortment muddies all three.
When you streamline CPG operations, you’re signaling that you know what drives your business—and you’re willing to focus on it. You’re showing you’ve learned and refined. That’s a story they can believe in.
From a financial modeling perspective, fewer SKUs make for cleaner forecasts. In turn, cleaner forecasts make for more credible growth planning. It all adds up.
Streamlined product lines make your brand more fundable. See what today’s investors actually look for in CPG.
Simplify to Scale
You don’t need 20 SKUs to look like a serious brand. What you need is an optimized product line that works hard for you—in production, on the shelf, and on your P&L.
The best-performing brands I’ve worked with are the ones with the clearest line, the cleanest ops, and the strongest pitch to retailers. SKU rationalization isn’t about giving up—it’s about making space for what’s really driving your business.
If you’re ready to simplify, but not sure where to start, let’s talk. Contact BBG, and we’ll help you analyze your product line and build a product assortment strategy that scales with your CPG brand.
