FMCG Glossary

What is COGS?

Cost of Goods Sold

Definition

Cost of Goods Sold (COGS) represents the direct costs attributable to producing a product — including raw materials, packaging, manufacturing labour, and utilities. COGS is deducted from net revenue to calculate gross profit.

Examples of COGS in FMCG

  • For a product with a $2.00 RSP and $0.80 COGS, the gross margin is 60%
  • A COGS reduction of 5% through raw material renegotiation or reformulation directly improves gross margin
  • Supply chain managers tracking COGS per unit across different production sites

COGS in the FMCG Industry

Managing COGS is critical in FMCG, where margins can be thin and competition fierce. Brand Managers, Supply Chain Directors, and Procurement Managers all have roles to play in managing and reducing COGS. Inflation periods (2021–2023) significantly increased COGS for most FMCG businesses, forcing difficult price-increase negotiations with retailers.

Why COGS Matters for Your FMCG Career

COGS understanding is expected in brand management, procurement, and supply chain roles. Brand managers who have successfully reduced COGS through reformulation or packaging redesign (without consumer impact) demonstrate strong commercial and technical skills.

Related FMCG Terms

P&L

A Profit and Loss statement (P&L) is a financial summary that shows net revenue, costs, an…

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