How about this one correct me if i am wrong

;WITH C AS

(

SELECT *,ROW_NUMBER() OVER(PARTITION BY Status ORDER BY Product) AS Rn FROM #TestData

),

C1 AS

(

SELECT *,MIN(Rn)OVER(PARTITION BY Status) MinRn FROM C

)

SELECT Product,Status FROM C1 WHERE Rn=MinRn

ORDER BY Product ASC