CPG margin calculator
Start from your shelf price and see what is left at each step: what the retailer keeps, what the distributor keeps, what you invoice, and what remains after your cost of goods.
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Per unit
- Shelf price (SRP)$6.00
- Retailer margin (40%)−$2.40
- Retailer buying price$3.60
- Distributor margin (25%)−$0.90
- Net revenue (what you invoice)$2.70
- COGS−$1.35
- Gross profit (50% gross margin)$1.35
- Contribution (50% of net revenue)$1.35
Rule of 5x · a rough screening check
Your shelf price is 4.44× your COGS (COGS is 22.5% of SRP). That is less than 5 times COGS. The rule of thumb asks whether SRP is at least five times COGS. It is a quick screen, not a verdict; the waterfall above is the real answer.
Margin and markup converter
Margin is a share of the selling price. Markup is added on top of cost. A 40% margin is a 66.67% markup.
On a $1.00 cost, a 40% margin means a selling price of $1.67.
How it works
Net revenue = SRP × (1 − retailer margin) × (1 − distributor margin)
The retailer's margin comes off the shelf price first. What is left is the retailer's buying price. If you sell through a distributor, their margin comes off that, and the rest is your net revenue: what you actually invoice.
Gross profit is net revenue minus COGS, and gross margin is gross profit as a share of net revenue, not of the shelf price.
Trade spend, broker commission and marketing are percentages of net revenue, taken off below gross profit to give contribution. Some accountants take part of trade spend off revenue instead; either way, count it once.
Prefilled with the glossary's example: a $6.00 shelf price, 40% retailer margin, 25% distributor margin and $1.35 COGS give $2.70 net revenue and $1.35 gross profit, a 50% gross margin. This is the same calculation Vaaha Unit Economics uses.
The terms, explained
Questions about the margin calculator? Ask Vaaha
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