At Synovia Digital, we investigate emerging technology trends to stay aligned with where the CPG industry may be heading. While the insights here are grounded in credible 2025 sources, nothing in CPG is 100% predictable — new market shifts, shopper behaviors, and retailer dynamics can always reshape what’s next.
Still, the direction is clear: AI-driven SKU rationalization is becoming a critical capability for CPG companies under pressure to simplify, optimize, and grow smarter.
AI-Led SKU Rationalization Could Save CPG Millions — While Improving Shelf Availability
SKU proliferation has been one of the biggest hidden costs in consumer packaged goods for more than a decade. More flavors, more sizes, more pack formats, more channel variations — all in an attempt to capture every consumer micro-segment.
The outcome?
- bloated portfolios
- operational complexity
- reduced line efficiency
- higher safety stock
- shelf clutter
- poor availability of core SKUs
That’s why 2025 has seen a sharp acceleration of AI-based SKU rationalization, where machine learning evaluates portfolio performance far beyond what traditional tools can handle.
1. AI Identifies Unprofitable SKUs Quickly and Objectively
AI models bring together:
- cost-to-serve
- production line efficiency
- promotional performance
- customer returns
- retail velocity
- margin contribution
- distribution cost
- cannibalization impact
A 2025 report from Wipro highlights SKU portfolio simplification as one of the most ROI-positive levers in the entire CPG operational transformation playbook, especially when combined with AI analytics.
Source: Wipro — Innovation Imperatives for CPG in 2025
https://www.wipro.com/consulting/articles/ahead-of-the-curve-2025-innovation-imperatives-for-consumer-packaged-goods/
What usually takes months of manual analysis now takes minutes.
2. AI Spots Redundant Variants and Hidden Cannibalization
Consumers love choice — but only the right kind of choice.
AI helps identify:
- variants that do not add incremental growth
- products that cannibalize the parent SKU
- formats that slow down shelf replenishment
- SKUs that retailers phase out faster than suppliers notice
According to SR Analytics’ 2025 CPG AI Guide, machine learning models can detect SKU overlap patterns that humans frequently miss, especially in crowded categories like beverages, snacks, dairy, and beauty.
Source: SR Analytics — AI in CPG 2025 Guide
https://sranalytics.io/blog/ai-in-cpg-complete-guide/
3. AI Pinpoints SKUs That Drain Capacity or Create Bottlenecks
Some SKUs:
- slow down lines
- require complex changeovers
- create unstable production cycles
- demand oversized safety stock
- generate disproportionate logistics cost
NVIDIA’s 2025 CPG and Retail AI study found that companies using AI-driven operational modelling were able to identify up to 30% of SKUs that consumed significant operational resources but added little strategic value.
Source: NVIDIA — State of AI in Retail & CPG Report 2025
https://www.nvidia.com/en-us/lp/industries/state-of-ai-in-retail-and-cpg
This is exactly where rationalization becomes a margin lever — not a sales concession.
What We’ll Probably See in 2026
Based on current 2025 adoption curves, 2026 will likely bring:
Autonomous SKU Rationalization Engines
AI continuously recommending portfolio changes instead of annual or quarterly reviews.
Joint Retailer–Supplier SKU Optimization
Retailers and CPGs collaborating on shared shelf models to reduce low-value variants.
Rationalization Linked Directly to Sustainability Targets
AI eliminating SKUs that create excessive CO₂ or packaging waste.
Predictive “Portfolio Risk Scores”
Models flagging which SKUs may fail due to demand trends, retailer delists, or cost spikes.
Simplified Production Portfolios
Factories running fewer SKUs but at higher throughput, improving availability of winning products.
This isn’t guaranteed — the industry evolves quickly — but these trends point toward a more disciplined, AI-guided approach to managing product portfolios.
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Final Thoughts
SKU rationalization is not about reducing choice — it’s about eliminating waste and strengthening availability of products that matter.
AI brings the scale, speed, and objectivity that CPG companies have needed for years.
In a market where shelf space is shrinking and operational complexity is rising, AI-led SKU rationalization is one of the smartest levers CPG leaders can pull going into 2026.
Synovia Digital will continue tracking these developments closely to help brands simplify confidently and collaborate more effectively with retailers.