CPG Glossary

Reductions to invoice payments taken by retailers or distributors — for shortages, compliance failures, pricing discrepancies, or promotional fees. One of the highest-impact line items for CPG brands to manage.

A financial penalty assessed by a retailer or distributor for a specific failure — late delivery, incorrect labeling, non-compliance with routing guides, or pricing errors.

Total manufacturer investment in retailer promotional activity — TPR, display fees, slotting, free fill, and ad allowances. Typically the second-largest line item after COGS for CPG brands.

Trade spend expressed as a percentage of gross revenue. A key benchmark for evaluating promotional efficiency and overall profitability.

Recognition of a promotional or trade expense before cash is paid. Trade accruals are booked when a promotion runs, not when the deduction arrives.

A pre-negotiated promotional fee billed back to the manufacturer by a retailer after execution — often appearing as a deduction from an invoice.

Gross revenue minus all deductions, allowances, and trade spend. The actual revenue retained by the brand after the full cost of doing business with a retailer.

Net revenue minus variable costs — what each unit contributes toward fixed costs and profit. The most meaningful profitability metric at the SKU level.

Revenue minus cost of goods sold, expressed as a percentage of revenue. Does not include trade spend or freight.

Total product cost including manufacturing, inbound freight, duties, and 3PL receiving fees. The true cost to get product to a distribution point.

Product cost at the factory gate, before any freight, insurance, or distribution costs are added. The starting point for landed cost calculations.

Total cost to deliver product to a destination including all freight, insurance, and import duties. The fully-loaded cost of getting product to a customer's door.

Direct costs to produce a unit — ingredients, packaging, co-man fees, and direct labor. The primary input for gross margin calculation.

A financial statement summarizing revenues, costs, and expenses over a defined period. For CPG brands, the P&L must account for gross revenue, trade spend, COGS, freight, and overhead.

Component-level breakdown of ingredients, packaging materials, and labor required to produce one unit of a finished product. The foundation for COGS calculation.

A retailer compliance metric tracking whether orders arrive complete and on schedule. Walmart, Target, and most major retailers assess fines for OTIF failures — typically 3% of the purchase order value.

The retailer-specified deadline by which a shipment must arrive at the DC or store. Missing MABD is the primary trigger for OTIF non-compliance fines.

A standardized electronic format for transmitting purchase orders, invoices, and ship notices between trading partners. Most major retailers require EDI compliance.

An electronic notification sent to a retailer before a shipment arrives, containing PO number, item details, quantities, and expected delivery date. Required by most major retailers.

A formal order from a retailer or distributor requesting product from a manufacturer, specifying items, quantities, pricing, and delivery requirements.

A provider handling warehousing, fulfillment, pick/pack, and outbound shipping on behalf of a brand. Most emerging CPG brands use 3PLs before operating their own warehouses.

A retailer or distributor facility receiving, storing, and redistributing product to individual stores. Product typically flows manufacturer → DC → store.

A distribution model where product is delivered directly from the manufacturer or distributor to individual retail stores, bypassing the retailer's DC.

A retailer-issued document specifying required carriers, shipping methods, label formats, and delivery windows. Violations trigger compliance chargebacks.

Product provided at no cost to stock a retailer's DC or store shelves at the time of new item setup — typically required as a condition of distribution.

A promotional deal allowing retailers to purchase multiple cases at a discounted rate. Often used to drive forward buying ahead of a promotional period.

A store authorized to carry a product with no inventory currently available on shelf. OOS events directly reduce velocity and can trigger retailer penalties.

The discipline of planning, executing, tracking, and reconciling retailer promotional investments — TPR, display, feature, slotting, and free fill.

A time-limited discount offered at the consumer shelf level, funded by the manufacturer. The most common form of retail trade promotion.

A one-time fee paid to a retailer to secure shelf placement for a new item. Required by most conventional grocery retailers and many distributors.

A promotional discount paid per unit scanned through the register during a promotional period. Funds are paid after the promotion runs, based on actual scan data.

A payment from a manufacturer to a retailer to fund advertising or circular feature placement. Typically paid as a lump sum or per-case allowance.

A product advertisement in a retailer's printed or digital circular or promotional flyer — one of the highest-impact promotional tactics for driving trial.

A secondary or off-shelf product placement in a retail store — endcap, pallet display, or freestanding unit — designed to drive incremental impulse purchases.

The high-visibility shelving at the end of a retail aisle. One of the most valuable promotional placements in a store, often sold on a weekly basis.

The combination of a feature ad and an in-store display occurring simultaneously. The highest-performing promotional condition for driving incremental volume.

A visual schematic defining product placement, facings, and positioning on a retail shelf. Retailers use planograms to standardize shelf sets across locations.

The number of product units visible from the front of a retail shelf. More facings mean greater visibility and typically higher velocity.

The percentage increase in sales driven by a promotional activity compared to baseline non-promoted sales. The primary measure of promotion effectiveness.

The portion of promoted sales that would have occurred without the promotion. High subsidized volume indicates an inefficient promotion — you're paying for sales you would have gotten anyway.

A distribution measure weighted by store sales volume, not store count. 80% ACV means your product is sold in stores representing 80% of total category sales — more meaningful than raw store count.

The sum of SKUs carried across all authorized store locations. One SKU in 100 stores = 100 TDPs. Tracks both breadth of distribution and depth of line.

Rate of product sales at retail, typically measured in units per store per week. The most important single metric for assessing retail performance.

A store location authorized to carry a product but with no inventory currently on shelf. Voids represent distribution you're paying for but not getting credit for.

An independent sales representative managing retail and distributor relationships on behalf of a CPG brand, typically compensated on commission.

An intermediary — UNFI, KeHE, regional — that warehouses and delivers product to retailers on behalf of brands. Takes a margin (typically 10–15%) for the service.

A periodic retailer evaluation of product assortment — items are added, retained, or cut based on velocity, margin, and strategic fit. Missing a category review can mean losing distribution.

A retailer-required document submitted during new item setup, containing product specifications, pricing, barcodes, pack configurations, and vendor information.

A one-page marketing document presenting a product's key attributes, pricing, distribution, and sales story to retail buyers and distributors.

The percentage difference between a retailer's cost and selling price. Understanding retailer margin requirements is essential for pricing and promotion planning.

A business model where brands sell directly to end consumers through their own website or channels, bypassing retailers and distributors entirely.

A unique identifier for a specific product variant — brand, product name, size, flavor, and format. Every distinct purchasable item needs its own SKU.

The 12-digit consumer-unit barcode used at retail checkout. Issued under a GS1 company prefix. Required for retail distribution.

The standardized barcode identifier family. GTIN-12 for consumer units (UPC), GTIN-14 for cases and master cases using an indicator digit prefix.

The global standards organization that issues company prefixes and GTIN barcode licenses. A GS1 company prefix is required to generate valid UPCs.

A third-party manufacturer producing finished product on behalf of a brand under a contract manufacturing agreement. The brand owns the formula and label; the co-man provides production.

The smallest production or purchase order a supplier or co-manufacturer will accept. MOQs directly impact cash flow and inventory planning for emerging brands.

A production batch identifier enabling full traceability of product from manufacture through retail. Essential for recall management and retailer compliance.

An inventory management practice ensuring the oldest stock ships before newer product — critical for perishable and short-shelf-life CPG products.

The FDA-required declaration of what a product is, appearing prominently on the principal display panel — e.g., "Marinara Sauce." Governed by 21 CFR 101.3.

The FDA-required statement of product weight, volume, or count on the principal display panel. Governed by 21 CFR 101.7.

Food Allergen Labeling and Consumer Protection Act — requires declaration of the nine major allergens on food labels. Non-compliance is a serious regulatory and liability risk.

The period during which a product remains safe and acceptable for consumption under specified storage conditions. Directly impacts retailer distribution requirements and inventory rotation.

Third-party retail sales data — Nielsen (NielsenIQ), Circana (formerly IRI) — showing category, brand, and SKU-level performance across retail channels.

Expected sales in the absence of any promotional activity. The baseline from which incremental lift is measured.

Additional sales generated above base as a direct result of a promotional activity. Mathematically: Total Sales minus Base Sales.

The percentage increase in sales driven by promotional activity versus baseline. The primary measure of promotion effectiveness and ROI.

A brand's portion of total category sales, expressed as a percentage. Can be measured in dollars, units, or equivalized volume.

A cross-functional process aligning sales forecasts, production plans, inventory levels, and financial targets — typically run on a monthly cadence.

Cumulative performance from the start of the fiscal year to the current date. Standard benchmark for financial and commercial reporting.

Net profit from an activity divided by its cost, expressed as a percentage. In trade promotion, measured as incremental gross profit divided by total promotional spend.

A measurable metric used to evaluate performance against specific objectives — velocity, ACV, trade rate, OTIF compliance, gross margin, and deduction rate are core CPG KPIs.

A strategic discipline optimizing revenue through pricing, pack architecture, trade spend efficiency, and product mix — balancing volume growth with margin improvement.

The process of forecasting future consumer demand to align production, inventory, and supply chain capacity — essential for avoiding both stockouts and excess inventory.

How closely a sales forecast matches actual results. Higher forecast accuracy reduces excess inventory, stockouts, and the cost of supply chain inefficiency.