The Emerging Challenges of Product De-Specialization

The Emerging Challenges of Product De-Specialization

There is a significant trend toward “SKU-mageddon” in food products today. What is SKU-mageddon, what is driving it, and what challenges are it bringing for food manufacturers and processors?

December 12, 2019

If you received a text from your spouse asking you to stop and pick up some “fried pickles with ranch” on your way home, you’d likely either start perusing the take-out appetizer menus of a few local sportsbar restaurants, or you’d end up in the deli and condiment sections of your local grocery store. While the second locale would have put you to closer to the needed product, you’d have to make your way across the aisles to the snack section if they were actually asking for Lay’s Fried Pickles with Ranch potato chips.

The vast range of flavored potato chips – now carried by a multitude of brands, is just one example of the explosion of variety marking today’s “SKU-mageddon” trend. In fact, according to RSM Food and Beverage Monitor Survey, introducing new products is now the top growth strategy in the food and beverage industry.

And it is evidenced by statistics from the PMMI Food Packaging Trends and Advances Report that 80% of food and beverage production facilities produce more than 100 product SKUs — and most expect this number to grow in the near future.

There are three key trends that are driving this SKU-mageddon:

• Younger consumers crave experimentation. Described as open-minded and curious, millennials – who are expected to have a collective spending power of $1.4 trillion by 2020 (Motley Fool) –  actively seek out new experiences as consumers. They like trying bold flavors and exotic foods; want variety; and can morph from vegan to vegetarian to flexitarian from one day to the next. To meet the needs of this variety-seeking group, manufacturers have to provide options – and a lot of them.

• Snacking is on the rise. Consumer research is also showing that consumers are eating smaller meals with more “grazing” in between. This has led to a surge of easy, portable, resealable snacks and meal replacements with an array of options – and sizes – to fit the differing palates of individuals.

• Health niches are expanding. But even while increasing their snacking, consumers are paying more attention to healthful eating than ever before. And the varying perspectives of “healthy,” especially between generations, leads to an array of label claims to meet their needs: from organic and all-natural to low-fat, vegan, gluten-free, dairy-free, nut-free and other “free-from” products. Many brands even produce the same product in several varieties to suit the widening array of health niches.

While new product introduction can bring about growth opportunities for many, it also brings challenges for both the industry as a whole and food facilities in particular. Some of the most evident of these are:

• Volume. The more SKUs that are produced, the more lines that are needed to run them. This can mean adding equipment therefore adding expense and requiring space, or increasing changeovers on a limited number of lines, thus increasing downtime and reducing productivity.

• Inventory. Increasing the number of products or varieties thereof requires additional ingredients and, often, additional suppliers – which brings additional challenges of managing new supplier relationships, new inputs, and a more diverse inventory. 

• Food Safety. Each new ingredient, product, process, equipment, and employee carries with it additional, and potentially previously unforeseen, food safety risks. With food safety costs and requirements already having increased through the implementation of FSMA, deciding to introduce a new product or flavor requires serious consideration of all the pros and cons before implementation.

• Food Quality. With quality specifications having to be customized to every product, and to every variety produced, it can be challenging to ensure appropriate employees are properly trained in each, and quality stays high across the board.  

• Compliance. Producing a wider range of products expands the challenge of ensuring compliance with ever-increasing regulations governing ingredient receiving and storage, as well as changeover procedures.

• Allergens. As the variety and sourcing of ingredients increases, so does the potential for allergen cross-contact.