What is a good gross margin for a food brand?

A healthy food brand should target a fully-burdened gross margin of 40% to 50%. Anything below 35% makes it incredibly difficult to absorb trade spend, outbound freight, and marketing costs while eventually reaching profitability.

What is a 2% Net 10 payment term?

It is a standard grocery industry term meaning the distributor will deduct 2% from the invoice total if they pay you within 10 days; otherwise, the full amount is due in 30 days. In practice, major distributors often take the 2% discount even if they pay in 45 days.

How do I model slotting fees?

Slotting fees should be modeled as a deduction from Gross Revenue (Trade Spend) in the month the new stores launch. They represent a massive, one-time hit to profitability that must be funded by working capital.

How to Build a CPG Financial Model (With Metrics)

A CPG financial model is fundamentally different from a SaaS or e-commerce model. If you pitch a consumer investor with a model that doesn't account for distributor margins, trade spend deductions, and the cash conversion cycle of manufacturing, you will be laughed out of the room. Here is how to structure a financial model for a wholesale food brand.

1. The Revenue Bridge (Gross to Net)

In CPG, what you invoice is never what you collect. Your model must clearly bridge Gross Revenue to Net Revenue.

Gross Revenue: The total value of the invoices sent to your distributors or retailers.
Less Trade Spend: Deduct your MCBs, off-invoice discounts, and slotting fees (typically 15-25% of gross).
Less Spoilage/Damages: Deduct an allowance for unsalable product (typically 1-2% of gross).
Less Cash Discounts: Deduct the 2% discount distributors take for paying early (2% Net 10).
= Net Revenue: The actual cash you expect to collect.

2. The True COGS Calculation

Your COGS must be fully burdened. Do not just model the invoice price of your ingredients. A fully burdened COGS includes:

Raw ingredients and packaging
Inbound freight (getting materials to the co-packer)
Tolling fees (the co-packer's labor charge)
Yield loss (the 5% of ingredients scrapped during production)

Subtracting your fully burdened COGS from your Net Revenue gives you your Gross Margin.

3. The Cash Conversion Cycle (CCC)

This is where food brands go bankrupt. Your model must project cash flow, not just P&L profitability. The Cash Conversion Cycle measures how long your cash is tied up in inventory before it turns back into cash from sales.

If you have to pay your co-packer Net 30, but the product sits in a warehouse for 60 days, and then UNFI takes 45 days to pay the invoice, your cash is tied up for 75 days. Your financial model must show the working capital required to bridge this gap, especially during periods of rapid growth when you are funding massive pipeline fills.

4. Freight and Fulfillment (OpEx vs COGS)

Be clear about where freight lives in your model. Inbound freight (to the factory) belongs in COGS. Outbound freight (from your 3PL to the distributor) belongs in Operating Expenses (OpEx) under logistics. Separating these allows you to analyze your manufacturing efficiency independently from your logistics efficiency.

Moving Beyond the Spreadsheet

A spreadsheet model is necessary for fundraising, but it is too slow for daily operations. To manage your actual business, you need operations software that tracks your real-time landed COGS and trade spend deductions, ensuring your actual performance matches your modeled projections.