Are we finally past peak SKU?
After at least five years of consistent growth driven primarily by an explosion in craft, the active number of individual beer items sold at U.S. retailers is in decline.
The number of SKUs — an acronym for stock-keeping unit, a measure used to track unique items available for sale — available on retailers’ shelves stood at 12,786 on Aug. 31, down 3.4 percent from 13,238 at the end of 2016, according to a report from Brett Cooper at Consumer Edge Research.
While that is nearly double the 6,388 active SKUs at the beginning of 2011, the retreat this year shows the craft segment may be in a period of rationalization, Cooper says in his Sept. 14 report on the state of the beer industry. At the end of August, the number of active items in the craft segment dropped to about 9,021, down 5.7 percent from a peak of 9,537.
The declines are not just limited to the craft segment, where volume and dollar sales growth have begun to slow, the report notes. Instead, they extend across all segments of the industry, “as non-productive SKUs are getting deleted out of retail shelf sets.”
In addition to culling non-performing items, brewers also are releasing new products at a slower clip, aside from in the economy segment, where new package sizes are driving SKU counts, Cooper says in the report.
The overall industry’s decline comes after a slowdown in the growth of SKUs that dates back to April 2016; the trend line crossed into negative territory earlier this year for the first time in more than five years.
The retreat comes as little surprise to Lester Jones, chief economist of the National Beer Wholesalers Association, a trade group. “The market for a couple of years now has been in a state of seeking a new equilibrium,” Jones says.
Starting about last year, something Jones calls “high-end” fatigue began to set in with consumers, leaving a glut of higher-priced beers gathering dust on retailers’ shelves. “The pendulum swung too far to the oversupply side, and now you’re seeing brewers start to back off a little bit and come down (on the number of SKUs they produce,) which is exactly what should happen,” Jones says.
He expects the number to continue to fall in the months ahead, pointing to a recent trend among beer, wine and spirits wholesalers, which are reducing the amount of inventory they carry relative to sales. Jones thinks this shift, which began in 2015, indicates that wholesalers burdened with excess inventory took steps to pull back on orders of higher-end, slower-moving products.
Brewers apparently got the message. “They realized that not everyone can drive a Mercedes-Benz,” Jones says. “I think they realized they overshot in 2014, 2015.” The declining SKU numbers of 2017 are starting to bear that out.
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