CPG Finance Glossary: The Terms Every Brand Founder Should Know

CPG Finance Glossary

CPG has its own vocabulary. You will hear these terms in buyer meetings, broker calls, investor conversations, and financial statements. Founders who know the language move faster and get taken more seriously.

This is not an exhaustive accounting glossary. It is the specific subset of terms that come up in consumer packaged goods, explained in plain language.

**AOP (Annual Operating Plan)** The yearly budget and operational plan for the business. Typically finalized in the last quarter of the prior year and used as the baseline against which actual performance is measured.

**Billback** A trade spend program where the retailer deducts an agreed amount from their payment to you after the sale, rather than taking the discount upfront. Common for off-invoice promotions.

**Broker** A third-party sales representative who sells your products to retailers on commission. Brokers typically earn 3-7% of gross sales and can cover regional or national territories. Good brokers have existing relationships with buyers and can accelerate distribution; bad brokers collect commission on accounts you would have opened anyway.

**Case pack** The number of individual units in a case shipped to a retailer. A case pack of 12 means 12 eaches per case. Case pack affects shipping economics, shelf merchandising, and minimum order quantities.

**Category management** The retailer-side function that oversees a product category (e.g., salty snacks, pet food). The category manager decides which brands get shelf space, how much, and what promotions run. They are the decision-maker in most buyer meetings.

**Chargeback** A deduction taken by a retailer against your invoice for reasons like non-compliance, short shipments, damaged goods, or promotional allowances. Chargebacks are one of the biggest sources of margin leakage in CPG and often go uncontested.

**CMO (Co-manufacturer / Contract manufacturer)** A third-party manufacturer that produces your product. CMOs (also called co-packers) handle production, and sometimes packaging, on contract. The terms of the CMO relationship — minimum order quantities, lead times, payment terms — drive a significant portion of your cash cycle.

**Consignment** A selling arrangement where the retailer does not pay you until the product sells through to the end consumer. Rare in mainstream retail, more common in specialty or boutique channels. Consignment inventory is an asset on your balance sheet until it sells.

**Co-pack** Short for co-manufactured or co-packed. Products produced by a third-party manufacturer, as opposed to in-house.

**DSD (Direct Store Delivery)** A distribution model where you or a third party deliver directly to each retail store, bypassing the retailer's distribution center. Common for perishables, baked goods, and beverages. DSD gives you control over merchandising and velocity but is operationally expensive.

**EBITDA** Earnings Before Interest, Taxes, Depreciation, and Amortization. Essentially operating profit, adjusted for accounting non-cash items. The metric investors and acquirers care about most when valuing a CPG business.

**Fill rate** The percentage of ordered units you actually ship to a retailer. A 95% fill rate means you shipped 95 of every 100 units ordered. Retailers monitor fill rate closely and may penalize brands that fail to hit their target (often 98%+).

**Free-fill** The practice of providing free product to a retailer, typically to initially stock shelves in a new distribution launch. One case free per store times 400 stores is 400 cases of free product — often a material cost line.

**Gross sales vs. net sales** Gross sales is your invoice total. Net sales is gross sales minus returns, allowances, trade deductions, and any customer discounts. The gap between gross and net is often 20-40% in CPG, and net sales is the number that matters.

**Landed cost** The total cost to get your product into your warehouse, including raw materials, production, packaging, inbound freight, duties, and 3PL receiving fees. Landed cost is the correct basis for calculating unit margin.

**MAP (Minimum Advertised Price)** The lowest price a retailer is allowed to advertise your product at. MAP policies protect brand equity and channel relationships, though enforcement varies.

**MCB (Manufacturer Chargeback)** A specific type of chargeback where the retailer bills back to the manufacturer for promotional activity or damaged product. Often negotiable but requires a process for review and dispute.

**MOQ (Minimum Order Quantity)** The smallest quantity a co-packer, supplier, or retailer will accept in a single order. MOQs drive inventory levels, cash flow, and the minimum viable scale of a product launch.

**Off-invoice** A trade spend discount taken directly off the invoice at the time of purchase. Simpler than billbacks but requires the retailer to pass the discount to consumers (which they may or may not do).

**PDP (Product Detail Page)** On an e-commerce site, the individual page for a specific product. On Amazon, optimizing the PDP is a core merchandising activity.

**PO (Purchase Order)** A binding order from a retailer or distributor. A PO commits the retailer to buying the specified quantity at the specified price, terms, and delivery schedule. In CPG, POs drive cash flow — you produce against them, ship against them, and invoice them.

**Price ladder** The stack of prices from manufacturer cost up to shelf price. MSRP, wholesale price, distributor price, retailer margin, and any trade funding stack up into the final shelf price. A price ladder shows each layer.

**ROAS (Return On Ad Spend)** Revenue generated per dollar of advertising spend. A ROAS of 3.0 means $3 of revenue for each $1 spent. For CPG DTC, ROAS targets vary widely — but $3+ is generally considered a minimum viable level for paid acquisition.

**Scan-down** A trade promotion where the retailer scans products at a reduced price for a limited window, and the brand reimburses the retailer for the discount on each unit sold. Reconciled through the retailer's deduction process.

**Sell-in vs. sell-through** Sell-in is product shipped to the retailer. Sell-through is product purchased by the end consumer. A brand can have great sell-in (filling shelves) and poor sell-through (consumers not buying), which is a setup for deletion in the next category review.

**Slotting** A fee paid to a retailer to place a new SKU on shelf. Slotting can range from a few hundred dollars per store to thousands, and is typically non-refundable. A major launch with significant slotting represents a large upfront cash outflow.

**SKU (Stock Keeping Unit)** A unique identifier for each variant of a product. Different sizes, flavors, or pack configurations each have their own SKU. SKU count drives inventory complexity, production runs, and shelf footprint.

**SRP (Suggested Retail Price)** Also called MSRP (Manufacturer's Suggested Retail Price). The recommended price at which retailers sell to end consumers. Retailers are not obligated to follow SRP.

**Trade spend** The aggregate cost of all promotional programs funded by the brand — slotting, scan-downs, billbacks, free-fill, features, demos, coupons. Trade spend is typically expressed as a percentage of gross sales and often runs 8-20% for emerging CPG brands.

**Velocity** Units sold per store per week. Retailers use velocity to evaluate whether your SKU earns its shelf space. Industry benchmarks vary by category, but a new SKU with velocity below 1 unit per store per week is at high risk of deletion.

**3PL (Third-Party Logistics)** A warehouse partner that receives, stores, and ships your product. 3PLs charge for receiving, storage, pick-and-pack, and outbound shipping. Choosing the right 3PL affects both cost and service level.

Using this glossary

If you are new to CPG finance, read this glossary once end-to-end. The terms that are unfamiliar are where the conversation will move ahead of you in meetings — that is where to focus.

If you have been in CPG for a while, this serves as a quick reference when a term gets used in an investor meeting or a broker conversation and you want to confirm you are both defining it the same way.

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*Thryve is the accounting and finance partner for CPG brands from pre-revenue through exit. If any of these terms are showing up in your books wrong — or not at all — a Quick Review can identify what needs to change.*