Product and SKU profitability
SKU Profitability Analysis for FMCG Distributors
An SKU with growing volume can still destroy value when purchase cost rises faster than selling price, discounts expand, returns increase or inventory becomes slow and exposed to expiry.
Why product averages hide the problem
A product-level average can look healthy while specific customer combinations sell below the intended margin. The reverse is also true: a modest-margin SKU may play an important range role and support profitable sales elsewhere. Product decisions require both SKU totals and customer × SKU detail.
Evidence required
Use detailed invoice lines, credit notes, actual or supportable item cost, product master data and purchase-cost history. Inventory snapshots and movements add the cash and risk view.
- Units, net sales, COGS and gross profit by SKU
- Margin trend and price-cost gap
- Customer-level price dispersion
- Discount and return concentration
- Inventory ageing, expiry and stock cover
- Supplier cost, rebate and claim evidence
From ranking to action
The purpose is not a red-and-green product table. Management needs to know whether to reprice a combination, renegotiate the purchase cost, correct a discount exception, reduce stock, investigate returns, protect a strategic line or remove an economically weak item.
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