As food and beverage businesses grow, so do their product lines; but more SKUs (Stock Keeping Units) do not always mean more profit. In fact, many brands find that some of their products are costing them more than they are bringing in. Rising ingredient, material and labor costs are making it even more important to know which products support a company’s bottom line and which ones might need to go.
Understanding what products generate revenue or perform well can help brands curate long-term business strategies that evolve with consumer preferences and economic trends. Tools like Fathom, NetSuite, OBeer, Crafted ERP, Ekos, Cin 7, Toast and Square are also available to food and beverage companies and can turn financial data into simple visuals that show where they are making money and where they are not. And without regular profitability reviews at the SKU level, businesses may end up producing products that no longer justify their shelf space.
EVERY SKU SHOULD EARN ITS SPOT: WHY SKU-LEVEL VISIBILITY MATTERS
Product margins are under pressure as ingredient prices fluctuate, labor costs rise and logistics remain unpredictable. Often, it is not until margins deteriorate or working capital is stretched that brands realize the hidden cost of keeping underperforming SKUs alive.
For example, recent tariff changes on imported packaging or specialty ingredients may have quietly increased cost per unit and turned a once-profitable product into a margin drain. If brands are not tracking these shifts at the SKU level, it is easy to miss the impact until it is too late.
As food and beverage businesses review their products, it is important to uncover answers to questions like:
- Is the business still making a profit on this SKU after recent cost increases?
- Is this product worth the time and space it takes to make and store?
- Is the company carrying too many low-margin products that could be streamlined?
WHEN IT IS TIME TO RETIRE, PAUSE OR CONSOLIDATE
Not all underperforming products need to be scrapped immediately. Some may be paused temporarily during ingredient price surges. Others may be consolidated with similar offerings to reduce redundancy and streamline operations.
When going through a company’s SKU rationalization strategies, companies should ask:
- Does this product meet the brand’s target gross margin?
- Is the company selling enough volume to justify the production complexity?
- Could eliminating this SKU simplify purchasing or reduce spoilage?
WHAT IS NEXT FOR FOOD AND BEVERAGE BRANDS?
Technology enables the analysis, but it is thorough guidance backed by decades working in the industry that drives action. GHJ’s Food and Beverage Practice does more than present reports. The practice collaborates with clients to understand the “why” behind the numbers and map out what is next for the brand.
Whether a company is launching new products, navigating cost volatility or preparing for a capital raise, knowing how each SKU contributes to its profitability is key to making smart business decisions. For better visibility into SKU profitability or margin performance, reach out to GHJ’s Client Accounting and Advisory Services Practice and learn how it helps brands evaluate product performance, improve financial clarity and build more resilient product portfolios.
