Perspectives from the
inside of the work.

The gap between reported gross margin and true profitability in CPG is larger than most founders realize. The issue is not that brands do not care about margin. It is that the tools most brands use to measure it — category-level P&Ls, top-line revenue reporting, quarterly financial statements — hide the problem rather than revealing it.

True profitability in CPG requires a cost-to-serve model: a bottom-up view of what it actually costs to get each SKU to each customer through each channel. That means freight-in, co-manufacturer fees, inbound logistics, warehousing allocation, outbound freight, retailer fees, broker commissions, promotional trade spend, and chargebacks — all attributed to the specific SKU-channel-customer combination.

When brands build this model for the first time, the results are almost always surprising. Some retail customers that look like top-line revenue drivers are actually margin-negative when full cost-to-serve is calculated. Some SKUs that appear to be core to the assortment are subsidizing others. Some promotional programs with high velocity have negative promotional ROI.

The fix starts with the model — not with pricing actions. You cannot fix what you cannot see. Once the model exists, the decisions become clearer: which customers to reprice, which SKUs to rationalize, which promotional programs to reform, which channels to invest in versus pull back from.

The brands that manage to sustain gross margin through growth cycles are almost always the ones that built this model early. Not because they are smarter, but because they can see what is actually happening in their P&L — and they can act on it before the problem becomes structural.

Building a cost-to-serve model is not a sophisticated analytics project. It is a discipline problem. The data exists in most brands. The challenge is pulling it together in a consistent framework and reviewing it regularly — not as an annual exercise, but as part of the operating cadence.

Minimum Advertised Price policy is one of the most important structural decisions a CPG brand can make about its channel relationships. A well-designed and enforced MAP policy protects your retail partners, maintains price integrity across channels, and prevents the race to the bottom that destroys brand equity and margin simultaneously.

The reason most MAP policies fail is not legal — it is operational. The policy exists, but there is no monitoring process, no escalation path, no consequence structure, and no account management discipline to make it real. Third-party sellers discover within weeks that the policy is unenforced. Once that reputation is established in the seller community, violation becomes the default.

Building a MAP policy that holds requires four things working together. First, the policy itself must be correctly structured — enforceable under US law (resale price maintenance restrictions apply), clearly communicated to all authorized and unauthorized sellers, and consistent across channels. Second, monitoring must be continuous, not quarterly. Violations need to be caught within days, not discovered in a monthly review.

Third, the enforcement architecture needs teeth: a clear process for communicating violations, removing purchase privileges for authorized sellers, and reporting unauthorized sellers to Amazon through the appropriate complaint channels. Fourth — and most important — the policy must be consistent. Selective enforcement is nearly as damaging as no enforcement. If some accounts can violate MAP without consequences, every account will eventually test the boundary.

The brands that maintain price integrity on Amazon are not the ones with the most aggressive policies. They are the ones with the most consistent enforcement. That consistency is an operating discipline, not a legal one. It requires someone who is monitoring, escalating, and following through every week — not occasionally.

If your retail buyers are asking about your Amazon pricing in account review meetings, you have a MAP enforcement problem. The conversation with retail is a symptom. The actual problem is the enforcement architecture — or the absence of one.

The supply chain of a $5M CPG brand and the supply chain of a $50M brand are not just different in scale — they are different in architecture. The problem is that most brands build the $5M supply chain and then try to run $50M of volume through it. The constraints that feel manageable at small scale become existential at growth scale.

The vendor relationship is the most common design failure. Early-stage brands sign with the first vendor who will take their volume at reasonable quality. They do not negotiate meaningful SLAs. They do not build alternative source options. They do not establish clear escalation paths for quality or delivery failures. That single-vendor dependency becomes a fragility that appears every time there is a production disruption, a quality issue, or a commodity cost spike.

Minimum order quantities are the second design failure. Brands accept MOQs that make sense for their current volume but create working capital traps as they grow. Large inventory positions on SKUs that turn slowly tie up cash, create storage costs, and generate write-offs when the product does not move at the velocity that justified the MOQ. The right MOQ negotiation — which requires volume credibility that most brands cannot establish early — is one of the most valuable things a supply chain advisor can do.

Inbound logistics is the third. Most growing brands are still running spot freight at the time they should be establishing carrier contracts and optimizing lane design. Freight-in is a meaningful percentage of COGS for most CPG brands, and it is one of the most addressable cost categories — but only if someone is managing it with discipline.

The co-manufacturer relationship deserves its own category. Co-man agreements that were designed for a small brand often have provisions — exclusivity, capacity allocation, cost escalation mechanisms, termination clauses — that become deeply problematic as the brand grows and the co-man becomes a constraint on growth or a leverage point for renegotiation.

Building a supply chain for scale means making different decisions than the ones that got you here. It means investing in vendor relationships before you need the leverage, negotiating MOQs against a growth projection rather than current volume, establishing freight programs before you have the volume to justify them, and writing co-man agreements with the future state of the business in mind.