CPG Terms Explained, a series by Cyril Ovely

Cyril Ovely, Co-Founder and CTO, Vxceed  ·  August 2026

Product, Pricing & Packaging Terms: The Complete CPG Guide

Product master data, pricing strategies, and packaging hierarchy. These terms define how CPG products are identified, priced, packaged, and positioned in the market.

Why product, pricing & packaging matters in CPG

Every commercial decision in CPG ultimately connects back to the product: what it is, what it costs to make, what it sells for, and how it's packaged for each channel. Product master data is the foundation of every system in the business: ERP, SFA, trade promotion management, and analytics all depend on clean product data.

Pricing determines margin. Packaging determines shelf impact and supply chain efficiency. Get these wrong and everything downstream suffers: promotions that destroy margin, packs that don't fit the channel, or products that can't be measured because the master data is inconsistent.

Key product, pricing & packaging terms

COGS (Cost of Goods Sold)

The total direct cost of producing a CPG product, including raw materials, packaging, manufacturing labor, and factory overhead. COGS is the starting point for all pricing and margin calculations. It does not include distribution, marketing, trade spend, or head office costs. In CPG, where margins are tight and volume is high, even a 1% change in COGS can mean millions in profit impact.

Gross Margin (GM)

The profit remaining after subtracting COGS from revenue, expressed as a percentage. Gross margin sets the ceiling for everything else: distribution costs, trade spend, marketing, and overhead all come from the gross margin. Typical CPG gross margins range from 25% (fresh dairy) to 70% (premium coffee). Understanding gross margin at the SKU level is essential for profitable pricing and promotion decisions.

GTIN / EAN

The globally standardized numeric identifier printed as a barcode on every product. GTIN (Global Trade Item Number) is the overarching standard managed by GS1. UPC (12 digits) is used in the US and Canada. EAN (13 digits) is used everywhere else. Every distinct product variant gets its own GTIN. Without GTINs, POS scanning, inventory management, and syndicated data measurement would not be possible.

UOM (Unit of Measure)

The standard measurement unit for a product: each, case, pallet, kilogram, liter. UOM is critical for ordering, inventory management, and data consistency. A single product may have different UOMs at different levels: eaches for store ordering, cases for warehouse handling, pallets for transport. Mismatched UOMs between trading partners cause ordering errors and inventory discrepancies.

MOQ (Minimum Order Quantity)

The smallest quantity of a product a supplier will sell in a single order. MOQs are common in distributor and wholesale relationships. They protect the supplier from unprofitable small orders but can create challenges for small retailers or new product trials. MOQs vary by product value, pack size, and the supplier's cost structure.

NPD (New Product Development)

The process of creating and launching new products, from concept through development, testing, and commercial launch. NPD in CPG involves market research, product formulation, packaging design, cost engineering, retailer negotiations, slotting fee payments, and launch promotion planning. The NPD pipeline is a key input to joint business plans and promotional calendars.

NSV (Net Sales Value)

The revenue after deducting trade spend, off invoice discounts, and rebates from gross sales. NSV is a more realistic measure of what the brand actually earns than gross sales. The gap between gross sales and NSV reveals the total cost of trade investment. NSV is the starting point for net margin calculations.

RRP / RSP (Recommended Retail Price / Recommended Selling Price)

The price the manufacturer suggests retailers sell the product for. Not binding, but serves as a reference point for pricing consistency across channels. In some markets, retailers deviate significantly from RRP; in others, RRP is closely followed. The relationship between RRP and actual selling price affects margin for both the retailer and the brand.

SRP (Suggested Retail Price)

Equivalent to RRP. The manufacturer's recommended selling price to the end consumer. Used interchangeably with RRP in some markets.

Average Retail Price (ARP)

The weighted average price at which a product sells across all outlets, accounting for both promotional and regular pricing. ARP is lower than RRP because it includes the effect of temporary price reductions. Tracking ARP over time reveals the effective price realization after promotions.

Line Extension

A new product variant (flavor, size, format) added to an existing brand's range. Line extensions leverage established brand equity to reduce launch risk. They're the most common form of NPD in CPG. However, excessive line extensions can fragment the range, increase complexity, and cannibalize existing SKUs without growing the category.

Private Label

Products manufactured by a third party but sold under a retailer's own brand name. Private label products typically offer lower prices than branded equivalents while maintaining acceptable quality. In developed markets, private label can account for 20 to 40% of grocery sales. Private label has evolved from "cheap alternative" to "value proposition" with premium private label ranges now common.

Store Brand

Equivalent to private label. Products sold under a retailer's own brand name.

Brand Equity

The commercial value a brand derives from shopper perception, loyalty, and association beyond the functional benefits of the product. Strong brand equity allows premium pricing, better shelf positioning, and more effective promotions. Brand equity is built over years through consistent quality, marketing investment, and shopper experience.

Shelf Life

The period during which a product remains fit for sale and consumption under specified storage conditions. Shelf life determines inventory management parameters (FIFO rotation, safety stock levels) and affects distribution economics. Products with short shelf life (fresh dairy, baked goods) require more frequent delivery and tighter inventory control.

Attribute (Product Attribute)

A characteristic of a product such as flavor, size, packaging type, or dietary claim that differentiates it within a range. Product attributes are used in range planning, shopper segmentation, and e-commerce product content. In digital shelf contexts, attributes become searchable metadata that affects product discoverability.

List Price

The manufacturer's suggested price before any trade discounts, promotions, or negotiated reductions. List price is the starting point of the price waterfall. The gap between list price and actual selling price reveals the total cost of trade investment, discounts, and promotional activity.

Base Price

The regular selling price of a product before any temporary promotions. Base price is used as the reference point for calculating promotional lift and incremental revenue. It differs from list price in that it reflects the actual everyday selling price after trade agreements.

Tertiary Packaging

The outermost layer of packaging used for transport and warehousing, such as pallets and shrink wrapped cases. Tertiary packaging protects products during distribution but is not seen by the end consumer. It affects supply chain efficiency: pallet configuration determines how many units fit on a truck, in a warehouse, and on a store's backroom.

Bar Code / RFID

Technologies for automatic product identification. Bar codes (printed labels scanned at POS) are universal in CPG. RFID (Radio Frequency Identification) uses radio waves to identify products without line-of-sight scanning. RFID adoption is growing in CPG for inventory accuracy and anti-counterfeiting, though cost remains a barrier for low value items.

SOVI (Standard Order Volume Indicator)

NZ A NZ specific metric indicating the standard order volume for a product at a given store, used for replenishment planning.

How these terms connect

• COGS determines the floor for pricing
• Gross Margin = Selling Price minus COGS
• NSV = Gross Sales minus Trade Spend
• RRP/SRP sets the reference price for the channel
• UOM and MOQ determine ordering parameters
• GTIN/EAN enables product identification across systems
• Shelf Life drives inventory management and distribution frequency
• Packaging hierarchy (each > case > tertiary) affects supply chain efficiency
• Line Extensions and NPD expand the product range
• Private Label competes with branded products on price and value