How do you calculate true inventory carrying costs?

Add up your annual storage fees, insurance, spoilage and obsolescence write-offs, financing costs (if you're using credit to fund inventory), and the opportunity cost of capital tied up in stock (this can make or break early stage brands, particularly in an environment where investment capital is increasingly hard to come by). Divide that total by your average inventory value. Most CPG brands land between 20% and 30%. If you're higher, that's where to start digging.

What is a healthy inventory turnover ratio for a $10M CPG brand?

It varies by category, but most CPG brands should aim for an inventory turnover ratio between 4 and 8 times per year, meaning your average inventory sells through roughly every 6 weeks to 3 months. Perishable categories (refrigerated, fresh) should turn faster. Shelf-stable brands with long lead times might sit on the higher end. The key benchmark is whether your turns are improving year over year.

How does 'ghost inventory' impact my balance sheet?

Ghost inventory is stock that shows as available in your system but isn't actually sellable. It can be damaged goods, products that were miscounted, or items lost in a 3PL. It inflates your inventory asset on the balance sheet, understates your actual shrinkage costs, and causes you to under-order products you actually need. Regular physical cycle counts and 3PL reconciliations catch this early.

When should a brand hire a fractional COO for inventory control?

When inventory decisions are costing you more than the hire would. That usually shows up as recurring stockouts during promotional periods, out-of-control carrying costs, retail chargebacks you can't get ahead of, or a founder spending too many hours a week on supply chain problems instead of growth. A fractional COO or embedded ops team gives you senior-level oversight without the full-time executive cost.

How often should we conduct an ABC inventory analysis?

Quarterly is a solid cadence for most brands. If you're launching new SKUs or entering new retail channels, do it more frequently. Your 'A' movers change as your business evolves, and your safety stock and reorder points should reflect current velocity, not assumptions you made 18 months ago.

What is the difference between JIT and Safety Stock models?

Just-in-Time (JIT) means ordering inventory as close to when you need it as possible, minimizing on-hand stock. Safety stock is a buffer you hold above your expected demand to absorb forecast errors or supply delays. Most CPG brands need some version of both: lean on fast-moving, predictable SKUs, with a deliberate safety stock buffer on items where a stockout would be catastrophic (your top retail SKU, for example).

How do MOQs (Minimum Order Quantities) affect working capital?

MOQs force you to buy more than you might need in the short term, which ties up cash. If your co-manufacturer requires a 5,000-unit minimum but you're only turning 1,500 units a month, you're carrying roughly 3.3 months of stock from day one. Renegotiating MOQs is one of the most underutilized levers in CPG operations. Even modest reductions in MOQs can meaningfully reduce the cash you need to keep the supply chain running.

While CPG brands are fighting over retail, the real money may be in another overlooked channel

Thought Leadership

Jun 11

Written By Josh Leider

Written by our partner Mike Levinson at FS Octopus - The clear, concise, to the point, in your face, no BS approach to foodservice and alternative channels.

You got the meeting with a regional buyer. Maybe they said yes. Your investors are pumped. Your friends are posting congratulations on LinkedIn. And somewhere in the back of your mind, you feel like you've finally made it.

That feeling is a trap.

Grocery retail has been sold to CPG founders as the mecca. Get on the shelf at Whole Foods or Sprouts, and you're set. The orders roll in, the brand grows, the story writes itself. But the reality on the ground looks a whole lot different, and I've watched too many good brands learn that lesson the hard way, after they've already burned through their runway trying to support a retail program they weren't ready for.

Here's what's actually happening out there, and why more founders are waking up to it.

The Retail Reality Check

There are roughly 77,000 grocery retail distribution points in the U.S. That sounds like enormous opportunity. And it is, for two groups of players: private label and the big CPG conglomerates.

Private label already owns 24% of retail food and beverage dollar share in the U.S., and it's trending higher every year. The trajectory is clear: store brands are growing at nearly double the rate of overall food and grocery, and there's no sign of that slowing down. Every major grocery chain, from Kroger to Albertsons to Wegmans, is investing heavily in its own store brand. They watch velocity data closely. If your product is moving, they notice. They go to their co-man, knock off your flavor profile, put it on the shelf next to you at 25% less, and count on the fact that most shoppers don't have strong brand loyalty at the shelf level.

Then there's the other Goliath. Mondelez, Kraft, Unilever, Kellogg's, Mars, Campbell's, PepsiCo, Nestle. These companies own grocery retail. They have the promotional budgets, the distributor relationships, and the shelf placement to crowd out anyone without the same resources. As a growth-stage brand, you are renting space in their house.

Getting on the shelf is about 25% of the battle. The other 75% is staying there, which means you need spend behind TPRs, BOGOs, social media support, distributor programs, and promotional compliance. Most emerging brands don't have the capital to sustain all of that, which is why so many end up getting delisted and going bankrupt after a retail win that should have been a milestone.

The analogy I use: imagine your kid has a great swing at age seven. All your friends are telling you he's incredible. So instead of t-ball or pee-wee, you decide to take him straight to the major leagues and try out for the Dodgers. That's what brands do when they jump to Target or Whole Foods before they own their backyard. The result is predictable.

The Case for Food Service and Alternative Channels

When most founders hear 'food service,' they picture a massive SKU of bulk olive oil going to a pizzeria through Sysco. That's part of it, but it's not the whole picture, and it's not the part most retail CPG brands should be focused on.

The more relevant opportunity is what I'd call the alternative channel: corporate campuses, universities, hotels, convenience stores, gyms, micro-markets, gift shops. Think about a company like Google, Meta, or Salesforce. They have 5,000 to 50,000 employees on campus, and they're giving away product for free. Velocity at a grocery store might be two or three units per store per week. Velocity on a corporate campus can be 100 units a day. Run those numbers and tell me which channel is more profitable.

The channel is fragmented, which is actually an advantage for smaller brands. There are fewer gatekeepers, lower barriers to entry, and in most cases, no slotting fees. You might encounter a small marketing program with a distributor or a fee to get slotted in a convenience store, but nothing close to what traditional grocery demands. Compare that to UNFI and KeHE chargebacks, promotional compliance costs, and free fill expectations, and the math shifts pretty quickly.

Right now, 90 to 95% of emerging CPG brands are focused exclusively on retail. They're leaving a massive open field to anyone willing to look left when everyone else is looking right.

Ready to stabilize ops and unlock growth?

Bravo CPG is the #1 fractional operations firm for growing CPG brands.

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Who This Channel Is and Isn't For

Food service and alternative channels aren't the answer for every product. If you're selling something with a 35-day shelf life, that creates real constraints. If your product is multi-serve only or price-prohibitive for a grab-and-go context, you'll have a harder time fitting into these environments.

But if you have a single-serve retail pack size, a competitive price point, a flavor profile that travels well, and a product that can ship anywhere without refrigeration or special handling, there's almost certainly an alternative channel play available to you.

This is also not a reason to avoid retail forever. Onesie-and-twosie partnerships with local grocery chains, especially independent retailers in your own market, can be meaningful. The mistake is using UNFI or KeHE to go wide before you've proven velocity, built brand loyalty, or capitalized yourself to support the program.

What to Do Instead: Advice for Founders at the Crossroads

If you're 18 months in and a regional buyer just emailed you, here's the honest advice I'd give you.

First, know exactly who you're selling to. Not 'health-conscious millennial women.' Be specific enough that you could describe one real person. The brand that wins is the one built for a very specific customer, not the one trying to appeal to everyone. Graza, Truff, Liquid Death, Dr. Squatch, none of them talk about protein content or non-GMO certifications. They build an emotional connection with a specific kind of person. That's why they grew.

Second, own your direct customer before you hand that relationship to a retailer. Build on DTC, Amazon, TikTok Shop, and Shopify. These are channels where you control the data, the story, and the margin. If your product melts, requires refrigeration, or has a short shelf life, you need to solve that first, because the best channel strategy in the world won't rescue a product with logistics problems.

Third, own your backyard. Start with local hotel gift shops, college campuses, gyms, and corporate offices near you. These are relationships you can manage directly, with fewer intermediaries, better margins, and faster feedback on what's working. Then build out from there.

The 85% failure rate among emerging CPG brands within two years isn't a mystery. Most of those brands ran out of cash trying to support channels they weren't ready for, with products that weren't differentiated enough to survive the competition. The brands that make it focus early, build real loyalty with a specific customer, and don't confuse getting on the shelf with building a business.

The Real Proof Point

Retail isn't the proof that you've made it. Velocity is. Loyalty is. A customer who buys from you again without a coupon, who tells someone else about your product, who seeks you out whether you're at their grocery store or on their office campus or in their Amazon cart. That's the proof point that actually matters. When you've built that, retail becomes an expansion play instead of a hail mary.

Need help navigating foodservice or alternative channels?

Reach out to Mike Levinson at Foodservice Octopus - The clear, concise, to the point, in your face, no BS approach to foodservice and alternative channels.

Need help with fractional operations and/or navigating retail?

Navigating channel strategy is one of the most consequential decisions a growth-stage brand makes, and getting it wrong early is expensive. Bravo CPG is an embedded operations team for food, beverage, beauty, and wellness brands that combines hands-on execution with senior-level ownership across production, co-man and 3PL management, demand planning, wholesale orders, and freight. We've seen what happens when brands scale into the wrong channel at the wrong time, and we work directly inside brands to help them avoid it. If you're standing at that crossroads right now, we're happy to talk through what the right path looks like for your business at bravocpg.com.

Josh Leider