Report: Jewel-Osco SKU rationalization taken to new heights

CHICAGO Even as Walmart has been course-correcting its merchandising and marketing strategies with the de-emphasis of private label and a re-emphasis on national brands, Jewel-Osco is expanding its test market of a Chicago-area supermarket that has cut between 15% and 25% of its SKUs “as part of a major makeover aimed at boosting profits and fending off [Walmart],” Crain’s Chicago Business reported Monday.

According to the report, the new store format fulfills a corporate mandate from parent company Supervalu to reduce clutter, cut costs and increase private label penetration. "Jewel realizes that if they are going to compete with Walmart, they will have to cut back their inventory to reduce costs," Chicago retail consultant John Melaniphy told the Chicago business journal.

“A key initiative we started to execute in Q4 was our SKU rationalization,” Ken Levy, Supervalu VP investor relations, told attendees at the Jefferies Consumer Conference held in June. “We reviewed our category assortments and began to remove duplicative offerings and excess pack sizes,” he said. Levy also reported Supervalu had exited 20 general merchandise categories altogether, including small electronics, motor oil and fragrances as part of Project SHE (Simplify Her Experience). “This process improves shelf space and in-stock position for our best-selling items and helped us reduce inventory levels by about $300 million this past year. SKU rationalization also allows us to more prominently display our private brand products, which have grown increasingly popular with cost-conscious consumers.”

“People wonder whether what we've done is taken assortment and selection away from our customers,” Supervalu CEO Craig Herkert commented during a Barclays Capital conference earlier this year. “And I would argue that in fact what this team has done has improved the true assortment and the true variety that we are now able to show our customers.” Citing oral care, Herkert noted that the grocery chain still carried more than 40 unique Crest SKUs and more than 40 unique Colgate SKUs after 20% of the SKUs had been culled from the assortment. “We have all the efficacy of products in the variations that both Proctor & Gamble and Colgate offer customers. What we have eliminated is multiplication/duplication of sizes on some of the tertiary items.”