Cracking the Unit Economics Code for CPG Founders

Scaling a CPG brand in 2025 requires more than a great product and a punchy pitch. It requires number fluency. When founders understand unit economics deeply, they make better pricing decisions, choose smarter distribution paths, and protect cash while they grow. When they do not, growth turns into guesswork and cash burn follows.

This guide breaks down the core equations that power sustainable growth, how to pressure test them before you scale, and a weekly operating rhythm that keeps your numbers honest. It is a practical playbook you can run with a spreadsheet, then enhance with tools as you scale.

1) Start with the profit stack

At the SKU level, four layers decide whether each sale adds fuel or drains cash.

List price → Net price after trade → Gross margin → Contribution margin.

• List price is your MSRP or shelf price target by channel.
• Net price after trade is what you actually realize after promotions, discounts, and distributor margins.
• Gross margin = Net price after trade minus COGS.
• Contribution margin = Gross margin minus variable distribution costs like freight, pick and pack, and per-unit fees.

If contribution margin is weak, every incremental unit sold can hurt cash instead of helping it. That is why trade and freight belong in your unit model from day one, not as afterthoughts.

Tactical check: model the profit stack for each top SKU at your three biggest accounts. If contribution margin varies wildly by account, you either have pricing inconsistency, heavy promo reliance, or a freight problem to solve.

2) COGS truth before scale

You cannot price correctly without COGS accuracy. Break COGS into raw materials, packaging, labor, and overhead. Track purchase price variance and yield loss. Make landed cost a visible line, including inbound freight to your co-man or facility.

• If your ingredient costs are volatile, negotiate shorter quote windows and consider hedging where prudent.
• If yields are inconsistent, investigate line speed, changeovers, and operator training. Small yield improvements compound quickly.

Pressure test: build a COGS sensitivity table that shows margin impact if each major input moves plus or minus ten percent. If a single input can collapse your margin, you need either pricing power, recipe flexibility, or supplier diversification.

3) Price pack architecture, your margin lever

Price pack architecture lets you balance trial, value, and margin. Use a trial unit to lower the barrier for first purchase, a core unit to carry baseline sales, and a value unit to earn family or subscription behavior without crushing margin.

• Set a target price per ounce ladder where your value unit still protects contribution margin.
• Use multipacks or limited flavor rotations for promotions rather than repeated deep discounts on the core unit.

Signal to watch: if average selling price falls faster than unit mix can explain, you are likely discounting too often or pushing volume through lower price channels.

4) Trade spend that builds baseline, not dependency

Trade spend is not optional in retail, but it must earn its keep. Plan allowances, discounts, and demos to drive sustained baseline lift rather than one-week spikes.

• Track promo lift and post-promo dip. If lift is short and the dip is long, your deal is training shoppers to wait for discounts.
• Tie promotional cadence to your cash cycle. Avoid overlapping promos that create deduction waves you cannot absorb.

Weekly view: accrual vs realized trade spend, promo unit share, and baseline velocity trend.

5) Distribution path and landed cost

Your distribution choice changes unit economics as much as recipe or price. Direct models preserve price control but add logistics complexity. Distributor models speed access but compress net price and introduce deductions and fees. Hybrid approaches can work when you have clear geography or account rules. Always compute landed cost at the retailer DC or store, including freight, fuel surcharges, accessorials, and case fees, then compute contribution margin by account so you see where growth pays and where it quietly erodes margin. Do not open a new region or account unless contribution margin stays positive at realistic promo levels and freight lanes.

6) Velocity, repeat, and the retail flywheel

Retailers buy turn, not talk. Your model should link price, promo, and distribution choices to velocity per store per week, repeat purchase, and weighted distribution.

• Velocity tells you how fast you sell where you are.
• Weighted distribution tells you how big the store base is where you sell.
• Repeat indicates whether your product is earning loyalty rather than relying on constant trial.

Design your spend to move baseline velocity. If the only thing that moves units is deeper discounting, your unit economics are being borrowed from the future.

7) Working capital math you cannot skip

Growth consumes cash before it generates it. Watch days sales outstanding, days payable outstanding, and inventory days on hand so you always know your cash conversion cycle.

• If DSO stretches because a retailer delays payment or disputes deductions, your runway shrinks.
• If inventory days swell, you are funding slow movers and risking write downs.

Tie purchase orders to realistic sell through and promo calendars. Inventory built for promotions that shift or underperform will sit and drain cash.

8) The weekly unit economics cadence

Run numbers weekly, not monthly. A lot can go wrong in thirty days. A weekly cadence lets you correct course twelve or thirteen times per quarter instead of three.

Your one page scorecard:

• Profit stack by top SKUs and accounts, list price to contribution margin.
• Trade spend, accrual vs realized, promo share of units, baseline velocity trend.
• Freight and accessorials as a percent of sales, landed cost variance.
• DSO, DPO, inventory days, near dated inventory.
• Velocity, repeat proxy, weighted distribution.

Close each week by choosing two actions with owners. Measure whether the metrics moved as expected.

9) Guardrails before you scale

Before adding doors or launching a new pack, pass three gates.

Gate A, Margin resilience. Model worst case freight, two average deductions you have seen before, and a modest promo. Contribution margin should remain positive.

Gate B, Repeat signal. You should have a credible indicator of repeat from panel data, loyalty data, or DTC reorders.

Gate C, Cash runway. Confirm you can fund production, freight, and expected deductions for at least one full promo cycle without emergency capital.

If you fail any gate, fix the issue rather than hoping scale will smooth it out. Scale amplifies weaknesses.

10) A worked example

Imagine a 12 pack beverage with a 19.99 list price in grocery. Average everyday price nets to 16.99 after distributor margin and typical promotions spread across the year. COGS per 12 pack is 8.60, freight averages 1.10, and variable fees add 0.40. Gross margin is 8.39, contribution margin is 6.89, or 34.5 percent of list.

Now pressure test. If aluminum spikes 8 percent and flavor costs rise 5 percent, COGS moves to 9.12. If diesel increases and freight climbs to 1.35, contribution margin falls to 6.52. Add a deeper holiday discount that lowers net price by 0.60, contribution drops to 5.92. You are still positive, but your cushion is thin. This is what resilience looks like. If those moves push you negative, you need either a price change, a pack change, or a different promo plan.

11) Tools and references

Unit economics is a discipline, not a one time model. Two credible, founder friendly references pair well with this playbook and are worth bookmarking.

• MasterClass, how to calculate unit economics for your business. A quick, accessible overview of unit economics concepts and formulas that you can adapt to CPG. Read it here: How to Calculate Unit Economics for Your Business.
• Startup Grind, how to reach positive unit economics. A founder oriented look at the path to positive contribution, with examples of levers to pull. Read it here: How to Reach Positive Unit Economics.

If you want help pressure testing your model or installing a weekly cadence, reach out through Contact. If you want to see how we work with founders, visit About Come Sell or High Water.

12) Final word

Growth without healthy unit economics is a gamble. Growth with a disciplined model is a strategy. Start with the profit stack, tell yourself COGS truth, design price packs that protect margin, spend trade to build baseline, compute landed cost by account, protect working capital, and run a weekly cadence. When your numbers and your narrative align, you earn the right to scale.