Cost, Speed, Quality — Pick Two - ft. Somil Shah (Shah CPG Consulting)

Episode Description

Most CPG founders fall in love with a product, build it, get it to market, and only then go looking for the margin. By then the formula is locked, the manufacturer is chosen, the price is set, and the margin is whatever happens to be left. That is not a strategy. That is a hope.

Somil Shah spent more than a decade inside Procter & Gamble and Reckitt, learning how the biggest companies in consumer goods build products that hold margin at scale. Then he left to bring that same discipline to founders who don't have a three to five year runway to get it right. The short version: your gross margin is mostly decided before you make a single unit — it is set in the brief, the formulation, the ingredients, and the manufacturer you pick.

In this episode, Nate plays a founder building his first CPG product and puts Somil through the real decisions — formulation, contract manufacturers, pricing, clean label, and the conversations most founders don't know to have before launch. P&G's rule applies every time: cost, speed, quality — pick two.

Key Takeaways

• Cost, speed, quality — pick two. At P&G, this is a standing rule. You can get it fast and cheap, but the quality won't be there. Fast and good won't be cheap. Good and cheap won't be fast. Most founders don't know they're making this trade-off when they brief their first manufacturer — and they pay for it after launch.
• Your gross margin is decided before you make a single unit. It's locked in at the brief, the formulation, the ingredients, and the contract manufacturer you choose. The question to ask your formulator isn't "can you make this?" — it's "what does this cost at 5,000 units, 25,000 units, and 100,000 units, and where does my margin land at each?"
• Choosing a contract manufacturer is matchmaking, not shopping. It's not about finding the cheapest option. It's about finding the right fit for where you are now, where you want to be in three years, and where you want to be in ten. The wrong CM at the wrong stage costs you far more than the difference in unit price.
• "Clean label" has no regulatory definition. Ask ten people what it means and you'll get ten answers. No artificial flavors. No preservatives. Under five ingredients. Organic. Non-GMO. Every brand is self-certifying, and every retailer interprets it differently. If your go-to-market is built around clean label, be precise about which definition you're using and which buyer you're selling it to.
• Fewer, better SKUs is the winning strategy at scale. Road Energy is doing $10 billion with 10 SKUs. Most founders think more products means more revenue. The brands that win figured out that depth beats breadth — and that SKU proliferation destroys margin, operations, and focus simultaneously.
• You don't have to be first to win in CPG. You can be the fifth or sixth mover in a category and still build a meaningful brand — if you have a loyal following and a niche that genuinely benefits from what you're bringing. Timing matters far less than fit.

See More:

• Shah CPG Consulting - fractional CPG expertise for founder-stage brands
• Somil Shah on LinkedIn

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