Jewel-Osco Cuts SKUs and Steps Up Store Brands Merchandising

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July 13, 2010

Supervalu’s Jewel-Osco places more focus on store brands merchandising and reduces inventory levels to better compete against Walmart.

In addition, the Chicago-based chain is testing a new format with15 percent to 25 percent less SKUs as part of Supervalu’s mission to make more room for its more profitable on store brands, and reduce costs and clutter, according to a Crain’s Chicago Business report.

As Jewel thins inventory, it is also more prominently displaying its own store brands.

"There is an opportunity for them to sharpen their inventory, but (product) reduction is always very difficult because you are always taking out something that someone bought," Scott Mushkin, an analyst in New York at Jefferies & Co. told Crain’s, adding that over the past three years Jewel has lost significant market share to discounters such as Walmart and Aldi.

In April, Supervalu’s CEO Craig Herkert, a former Wal-Mart executive told investors that SKU rationalization was a critical component of "Project SHE,” the company’s growth strategy, which stands for “Simplify Her Experience.”

Industry consultant Jim Hertel of Willard Bishop LLC estimates that Project SHE could increase profits by $40 million across Jewel’s 180 stores.

"If the assortment rationalization is done right, it can provide many financial benefits to the grocer," Hertel said. "But if it is not done well, it can end up irritating a ton of shoppers and manufacturers."

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