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05/21/2020

Beer Needs “More Rigorous Approach” for Nixin’ Inefficient SKUs, Sez Consumer Edge’s Brett

Accelerated beer SKU rationalization a clear byproduct of COVID-19 as all 3 tiers reassess portfolios and shelf-space allotment amid pandemic. Total beer SKUs collectively declined 6% in latest 8 wks thru May 3 vs yr prior, falling to 19,822 active SKUs in IRI data for period, Consumer Edge’s Brett Cooper shows in latest report. US beer has had “too many inefficient SKUs” for some time as beer SKUs rose nearly 50% since 2015 to 25,057 in 2019, with ~20% more SKUs added annually vs ~9% removed per yr. 

New SKUs drove industry growth (in scans) over last 5 yrs, making up 2/3 of growth from 2015-2019. Yet of 3,700 new SKUs introduced in 2016, only 2,700 were still around in 2019. “We would argue” that’s “too high of a count,” said Brett.  Those 2700 SKUs made up just 4% of sales in 2019.  And just 42 of those SKUs intro’d in 2016 made up 75% of that 4% last yr. Notably, growth shifted toward pre-existing brands and SKUs since pandemic, and largest brewers and “those with the most efficient portfolios” stand to benefit most amid this recent shift. But regardless of how this came about, and who benefits most, “there needs to be a more rigorous approach to killing the zombies,” i.e. the long tail of underperforming SKUs still hangin’ around, “so as to make room for existing brands that can drive growth and innovation to come to market,” Brett concludes.

MC Has “Most Work to Do” Among Major Suppliers; ABI “Room for Improvement” Too Among major beer suppliers, MC “has done a better job removing SKUs from its portfolio relative to other large players,” but still seems to have “the most work to do to remove underperforming SKUs,” sez Brett. MC reduced SKU count from 1,010 in 2015 to 982 in 2019.  That’s only reduction within that 5-yr period among top cos. Yet a whopping 861 SKUs (88% of total) represented bottom 1/3 of sales for MC in 2019. And bottom 1/3 of SKUs declined 4% annually over last 4 yrs vs total co declines of ~1.6% per yr (in scans). So lots of “poor performing SKUs in this part of their business that don’t have long-term potential to drive growth.” There’s more room for improvement on innovation too, Brett notes. New SKUs only added 70 bps to MC annually, partially offsetting 230 bps annual decline from existing SKUs. MC actively looking to address innovation in 2020, with wide array of new products, tho so far only Blue Moon Light Sky making significant impact.

AB also has done “better than the beer industry average” at SKU rationalization but Brett sees room for improvement. Co had 1,808 active SKUs in 2019 vs 1,451 in 2015, including an annual increase of 16% on new SKUs vs removal of 11% of pre-existing SKUs per yr. AB’s bottom 1/3 of SKUs in terms of sales still made up 3/4 of total SKU count in 2019, and that cohort still collectively declined 1% annually from 2015-2019. New SKUs added 180 bps on an annual basis and drove about 2/3 of AB’s sales growth over last 4 yrs.

Constellation Fewest SKUs, Most Room for Innovation; Boston Best Innovator “By Far” Meanwhile, Constellation has fewest SKUs overall, but continues to intro new packs and innovation each yr, marking the largest SKU % increase among major suppliers. Active beer SKUs grew 79% to 188 from 2015 to 2019. Bottom 1/3 of volume, 148 SKUs in 2019, outpaced other SKUs, “suggesting productivity within that cohort” (i.e. Corona and Modelo Chelada innovation and smaller packs for core brands). And co still in early stages of innovation pushes. “We continue to believe that innovation offers the opportunity to sustain better growth for longer,” wrote Brett.

Boston Beer had 407 active SKUs in 2019 vs 351 in 2015, removing 13% of existing SKUs per yr while adding 17% per yr. Ongoing SKU rationalization “likely to continue” for Boston, sez Brett. But Boston Beer has been best “by far” at introducing new SKUs, “with a contribution roughly 2x that of the broader industry” over last 4 yrs, including “notable acceleration in recent periods,” with Truly hard seltzer driving growth. Brett doesn’t deal with craft in this report, but keep in mind craft beer makes up majority of SKU count in scans, adding to inefficiency. Then too, total SKU count is lower mkt by mkt vs total US since many craft SKUs are only available regionally/locally.

Publishing Info

  • Year: 2020
  • Volume: 22
  • Issue #: 12
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