The CPG Finance Numbers Nobody Puts in the Pitch Deck

Propeller Founder and Executive Chair Chris Fenster recently joined Adam Steinberg on the Shelf Help podcast to discuss all things CPG: gross margins, the working capital death spiral, SKU focus, equity vs. debt funding, managing cash flow, finance team hiring, and more. Here’s a recap of their conversation and what you need to know (you can watch or listen to the full episode here.)

Every CPG pitch deck has a gross margin slide, and it’s almost always wrong. Founders aren’t lying about that number. Nobody’s told them yet that trade deductions, slotting fees, and distributor and retail margins are supposed to come out of revenue instead of sitting below it. By the time we run the numbers properly, a “45% margin” brand is often sitting closer to 30%.

That gap is the starting point for almost everything else that goes right or wrong in a CPG company’s finances. We’ve written before about what Olipop, poppi, and Liquid Death got right on market timing, competition, and brand. This is the other half of that story: the finance mechanics underneath it, the margin curve, the working capital math, the capital structure decisions, and the leadership transitions that have to work for any of the rest of it to matter. Over 18 years and 1,500 venture and growth-stage clients, we’ve watched the same patterns repeat with enough consistency that they’ve become a playbook.

What Is Trade Spend, and Why Does It Wreck Everyone’s Margin Math?

Trade spend is the money a CPG brand pays retailers and distributors to get and keep shelf space: slotting fees, billbacks, scanbacks, off-invoice discounts, coupon redemptions, and EDLP (everyday low price) allowances. Trade spend is supposed to come out of revenue, not sit below the gross margin line as a separate expense. That single accounting distinction is behind most of the “our margins looked better on the pitch deck” conversations CPG brands have in their first year with a real finance partner.

In practice, trade spend touches nearly every invoice a brand sends. It’s common for a dollar of gross sales to come back with 40-50 cents of deductions already baked in before a brand sees the cash. Slotting specifically tends to run around 0.5% of revenue for very small brands and climbs to roughly 3.5% once a brand is in the $20-80M range and actively buying into new grocery accounts.

Tracking it at the line-item level (by retailer, by category, against what was actually agreed to) is one of the more unglamorous but highest-leverage things a finance function can do, because it’s where a meaningful amount of margin quietly disappears if nobody’s watching.

The Real Gross Margin Curve (It Goes Down Before It Goes Up)

Our benchmarking data show that CPG gross margins don’t climb steadily as a brand scales; they dip in the middle before recovering. Properly accounted for, a $5-10M CPG brand typically runs 35-40% gross margin. That number drops to roughly 30% around $80M in revenue, then climbs back to 40% at $180M and 45%+ past $200M.

Nobody puts that dip in their forecast. But it shows up in the data across nearly every brand we work with, and it’s driven by three things happening at once:

Channel expansion into grocery, where pricing is far more competitive than the natural channel most brands start in
Product expansion into new SKUs that haven’t hit volume yet, so unit economics are worse before they’re better
Growth capital doing what growth capital does, because once a brand raises $10M with a mandate to turn it into $50M, more of that money goes into slotting and trade spend

None of this means the brand is unhealthy; it means the margin conversation has to be stage-aware, not a single number a founder holds themselves to forever.

The Working Capital Death Spiral (aka the Cash Flow Death Spiral): Two Failure Modes

A working capital death spiral (what’s often called a cash flow death spiral in other industries) happens when a CPG brand’s cash needs are roughly double what its P&L suggests, which occurs because nobody accounted for inventory and receivables timing. Commonly cited estimates put CPG product failure as high as 85% within the first few years. While that number covers more than just cash issues, the cash gap between paying a co-packer and getting paid by a retailer is one of the most common and most preventable causes.

There are two distinct versions of the death spiral, and they hit at different stages.

The early failure mode is an unforced error. Founders size a raise off the losses on their P&L and forget the balance sheet entirely. Sixty days of inventory plus sixty days of receivables, minus whatever accounts payable buys back, is often double what the P&L implies. It’s preventable, but only with the right people around the table. A capable bookkeeper may see the problem and not have the standing to flag it forcefully enough.

The second failure mode is about focus, not forecasting. A $20M brand with one product in one channel is nearly always in a stronger financial position than a $30M brand spread across a dozen SKUs in natural, grocery, club, and Shopify (even though the second number looks better on a pitch deck). Every channel and every SKU adds minimum order quantities, receivables, and trade spend that eat working capital: underperformance in any one of them can tie up millions. The bigger, more diversified business also usually took more dilution to get there.

Debt, Equity, and the Right Ratio

Operating losses at a CPG company almost always need to be funded with permanent capital (equity, SAFEs, or convertible notes), not debt. Debt is something healthy businesses layer on top of a solid equity base, not a replacement for it.

Once a brand’s equity foundation is solid, asset-based lending against roughly 80% of receivables and 40-50% of inventory becomes available, and venture debt can supplement it depending on the situation. Past $100M in revenue, private debt markets open up further. The mix is different for every business, but the sequencing—permanent capital first, debt layered on top—doesn’t change.

Finance Leadership: Why CPG Brands Go Through Four Heads of Finance on the Way to $200M

Most CPG brands scaling from zero to $200M go through roughly four distinct finance leaders. Skipping a stage is rare. The mismatch is structural: what each stage requires changes faster than any one person is built to adapt to. (We’ve written about this talent paradox in more depth here.)

Here’s the rough arc of startup finance hires.

$0-5M: you need a generalist who can do a bit of everything. The finances aren’t the thing that gets a brand to the next stage; the product and the customers are.
$5-25M: cash moves to accrual, trade deductions get tracked properly, and the founder needs a translator who can turn numbers into a narrative. This is also where over-titling happens most: a company hires a “VP of Finance” when the job (and the person willing to take it) is actually a Director.
$20-80M: this is the awkward stage. Slotting and trade spend are eating real dollars, channels are expanding, and the finance leader from the prior stage usually doesn’t have the pattern recognition to know whether the spending is working.
$75-150M+: the business is clearly exitable, and it can finally attract someone from a much bigger company who has the resources to build out FP&A properly.

Across this arc, growth typically outpaces the hire before the hire itself becomes the problem. Planning for this evolution (and making sure institutional knowledge doesn’t leave the building with the person) matters more than trying to find one person who can survive every stage.

How This Connects to Olipop, Poppi, and Liquid Death

We’ve written about the billion-dollar beverage blueprint: how Olipop, poppi, and Liquid Death timed the market and out-built competitors on brand. We won’t repeat that here. The TL;DR is that none of it holds together without finance infrastructure that scales at the same pace as the brand.

All three of these unicorn companies moved off cash-basis accounting early and built systems appropriate to their stage, not over- or under-built. The mindset that matters is to build for flexibility, not permanence, because the people and systems that get a brand to one stage will need to be rebuilt for the next one (sometimes multiple times). Liquid Death compressed this cycle dramatically by growing faster than almost any brand we’ve worked with, which is its own kind of stress test on the finance function.

The $100M Raise Problem: Why More Capital Can Mean More Risk

Once a CPG brand has raised $100M or more, every dollar of that capital typically has to be returned to investors before founders see proceeds (except in an IPO, where preferred shares convert to common). This structural fact creates what Chris calls the “risk ratchet”: each raise increases the size of exit required to make the math work for institutional investors, even when a smaller, cleaner outcome would be a great result for the founders.

Propeller alum Casper is a clear public example of this. The company did roughly $1M in revenue in its first month (reported publicly), and its DTC-heavy working capital position was healthy enough that it barely touched its seed round. A $13M Series A came within months, followed by a much larger Series B, and fundraising accelerated from there. But direct-to-consumer mattress sales hit a hard ceiling: there’s no repeat purchase LTV on a mattress, competition grew, and the addressable online audience is finite.

Per Crunchbase, Casper raised roughly $340M across its private rounds. In 2017, Target was widely reported to be in acquisition talks with the company at close to $1B, a deal that became a minority investment instead. When Casper went public in February 2020, it priced at $12 per share, a market value of roughly $476M, less than half its last private valuation of $1.1B. Counting the ~$100M the IPO itself raised, total capital into the company stood near $440M: the public market was valuing the business at barely more than the money that had been put into it.

These were some of the most capable founders in the category, making individually rational decisions at every step. The decisions compounded anyway, into a business that could no longer afford to be merely good. It had to chase a unicorn outcome or nothing at all. One of the most underused tools for catching this phenomenon before it compounds is an independent board seat added early, rather than waiting until a later round. Most companies add one at Series C or beyond, once investors negotiate for the seat. A good independent director’s whole mandate is to have the uncomfortable conversation that founders and investors are both incentivized to avoid.

The Finance Side of a Billion-Dollar Outcome

Picking the right category and building a brand people love gets a CPG company only partway to a billion-dollar outcome. The rest is unglamorous finance discipline: understanding what margin actually looks like at each stage, building working capital models off the balance sheet and not just the P&L, matching debt and equity to the health of the business, planning for finance leadership turnover before it happens, and knowing when raising more money adds risk rather than removing it.

The brands that get all of that right tend to look from the outside like they just got lucky. The truth is that most of the time, they did the hard finance work early enough that nobody noticed it.

Want a look at where your finance function stands relative to brands that have made this transition? Let’s talk.

Frequently Asked Questions

What is trade spend in CPG, and how should it be accounted for?

Trade spend is the money a brand pays retailers and distributors for shelf space and promotional support: slotting fees, billbacks, scanbacks, off-invoice discounts, coupon redemptions, and EDLP allowances. It should be subtracted from gross revenue, not booked as a separate expense below the gross margin line, which is the single most common accounting error that makes CPG margins look better on paper than they are in practice.

What is a normal gross margin for a CPG brand?

Properly accounted for—with trade deductions, slotting, and distributor and retail margins subtracted from revenue rather than treated as separate expenses—CPG gross margins typically run 35-40% at $5-10M in revenue, dip to around 30% near $80M, and recover to 40-45%+ once a brand passes $180-200M.

Why do CPG margins go down before they go up as a brand scales?

Margins dip in the middle stages because of three overlapping forces: expansion into more price-competitive channels like grocery, expansion into new products that haven’t reached volume yet, and increased trade spend and slotting fees funded by growth capital.

What’s a “working capital death spiral” (or “cash flow death spiral”) in a CPG business?

It’s the gap between what a company’s P&L suggests it needs in cash and what its balance sheet actually requires once inventory and receivables timing are factored in, often roughly double the P&L number. Some industries call this a cash flow death spiral; in CPG specifically, it’s one of the most common and most preventable causes behind the high rates of early brand failure commonly cited in the category.

Should a CPG brand raise debt or equity?

Operating losses need to be funded with permanent capital: equity, SAFEs, or convertible notes. Debt, such as asset-based lending against receivables and inventory, is healthy to layer on top of a solid equity base, not a substitute for one.

How many finance leaders does a CPG brand typically go through between $0 and $200M in revenue?

Most brands go through roughly four distinct finance leaders as they scale, because the skill set required at each stage—generalist, translator, truth-teller, architect—is different enough that few individuals can do all four well.

What do Olipop, Poppi, and Liquid Death have in common on the finance side?

Beyond the market timing and branding decisions covered here, all three moved off cash-basis accounting early and built finance systems appropriate to their stage rather than over- or under-building, which gave them the infrastructure to absorb rapid, repeated growth without the finance function becoming the bottleneck.

Why did Casper’s outcome fall short despite raising $340 million?

Casper hit a structural ceiling in direct-to-consumer mattress sales—no repeat-purchase LTV and a finite addressable online audience—after a series of increasingly large raises. Per public reporting, the company raised roughly $340M privately, was reportedly in acquisition talks with Target at close to $1B in 2017, and went public in 2020 at a valuation of roughly $476M, less than half its last private mark, and barely above the ~$440M in total capital the company had raised including the IPO itself. Each successive raise had increased the size of exit required for the math to work.