Starting a food or beverage business usually begins with a recipe, an obsession with flavour, and a dream of seeing your product on retail shelves. Yet across Australia, more than 70% of food and drink founders cannot pay themselves a decent wage.
They work 70-hour weeks, land coveted retail stockists, and win awards, but the financial reward simply does not follow.
Chelsea Ford, a highly regarded and award-winning collaboration and business growth expert, advisor and consultant, helps consumer packaged goods brand owners realise their dreams, at scale, by putting more money in their pockets. Having spent years at the leadership table of big CPG companies like Dyson, Sara Lee, Nestle and Kellogg, today Chelsea is a Director of Chelsea Ford Co. Consulting & Advisory , host of five-star rated Foodpreneur with Chelsea Ford podcast, and Founder and Managing Director of Foodpreneurs Festival.
“If we think about it in a simple Venn diagram, you have product, brand, and finance,” Chelsea explains. “Most founders nail the product and fall in love with the branding. What they miss is the financial engine: how is this actually putting money in my pocket?”
Here is why so many food businesses struggle to generate profit, and the commercial disciplines that profitable foodpreneurs use to build sustainable, rewarding businesses.
Why does chasing volume push food businesses into debt faster?
The most common trap in consumer packaged goods (CPG) is believing that higher sales volume will automatically solve cash flow problems. Founders assume that if they can just get from 50 stores to 500 stores, economies of scale will kick in and profit will appear.
In reality, if your unit economics are broken, scaling up simply accelerates your losses.
“If there is no contribution margin for you, the business owner, then the more you sell, the more you lose,” says Chelsea.
Volume does give you table stakes to negotiate better rates with packaging or ingredient suppliers, but getting onto hundreds of major supermarket shelves requires significant working capital. You need cash to finance larger production runs, pay for inventory weeks before you get paid, and fund listing fees. If each unit leaves you with thin or negative margins, chasing volume without margin discipline is the fastest way to run out of money.
What is the price waterfall, and why must you price backwards?
Many founders calculate their wholesale price using standard cost-plus thinking: they add up ingredients and packaging, tack on a small markup, and assume there is room for everyone.
Chelsea advises taking the exact opposite approach by pricing backwards from the shelf:
- Recommended retail price (RRP): What will the end consumer realistically pay based on your positioning, whether everyday, premium, or luxury?
- Retailer margin: Allow roughly 40% of the retail price for the retailer.
- Distributor margin: Allow around 30% for the distributor who manages warehousing and transport (and in beverage, this can run even higher).
- Logistics and listing costs: Budget for freight, warehousing, and retailer promotional allowances.
- Cost of goods sold (COGS): The raw ingredients, packaging, and manufacturing labour.
- Contribution margin: The profit left over to cover your overheads and put money in your pocket.
“There are a lot of mouths to feed across the path to market,” notes Chelsea. “If you do not account for all the intermediaries from day one, you cannot afford to bring them on when you need them to scale.”
This rule applies to direct-to-consumer (DTC) models as well. While selling online through Shopify may avoid the distributor cost, the marketing spend required to acquire customers and drive digital traffic often equals or exceeds wholesale margins.
How do you audit your product range using a traffic light system?
When you have multiple SKUs, you cannot afford to guess which ones are funding your business and which ones are draining it. During her time at Kellogg, Chelsea developed a visual traffic light system to audit product portfolios:
- Green (36%+ margin): Your cash cows. These are the core products you actively promote and want to sell the most of.
- Amber (30% to 35% margin): Products that meet your baseline target. There is room to push these into green by negotiating ingredient costs or refining packaging.
- Red (under 29% margin): Underperforming products that need urgent attention.
If an audit reveals your best-selling product sits in the red, the solution is rarely to kill the SKU outright. Instead, Chelsea recommends pulling specific commercial levers:
- Review the market context: If you are not already the most expensive item on the shelf, an incremental wholesale price increase may be viable.
- Negotiate input costs: Speak with your suppliers about price breaks at higher order volumes or explore alternative packaging formats.
- Set strategic intent: If a low-margin product remains in your range, it must serve a clear purpose, such as volume throughput thereby giving you leverage with your suppliers or opportunity to drive trial bring new eyes to your broader range.
Are you playing a retail game or a food service game?
A frequent point of margin erosion comes from treating every sales channel the same way. Chelsea makes a clear commercial distinction between two major paths to market:
- Retail is a branding game: Success depends on shelf presence, consumer awareness, and generating demand. If you sell through independent grocers, you need local marketing to drive consumers into those stores. If you sell through the majors, you need consumers to choose your brand every week.
- Food service is a cost-per-serve game: Cafes and restaurants care primarily about portion control, useability, prep efficiency and labour cost.
“Founders often start out selling condiment jars at weekend markets, and then approach local cafes,” says Chelsea. “If that cafe decants your product onto sandwiches in the kitchen, nobody sees your packaging. Supplying them in premium glass retail jars simply wastes your margin. They need bulk pails behind the counter.”
Understanding how your stockist uses the product prevents you from paying for packaging and branding that nobody ever sees.
What weekly habits separate profitable food founders from the rest?
The founders who consistently turn a healthy profit and pay themselves well share distinct operational disciplines. They treat their numbers as an ongoing operational rhythm rather than a once-a-year tax chore.
- A structured finance calendar: Profitable founders review their figures weekly, monthly, and quarterly. They consistently track key metrics against the previous period, the previous year, and performance across individual stockists and between channels.
- Documented systems and processes: Good business can feel repetitive. Profitable operators document standard operating procedures for ordering, production, onboarding, and customer service so the business is not entirely dependent on the founder.
- Active outsourcing: When a founder scales beyond $500,000 towards $1 million in revenue, they recognise their limitations. They stop trying to force themselves to do tasks they dislike or lack skills in, choosing to outsource bookkeeping, compliance, administration and perhaps sales and marketing.
- Peer benchmarking: Working in isolation distorts perspective. Joining a community of fellow founders provides objective benchmarks on turnover, margins, and operational setups, helping owners see what good performance looks like. It feels good to be in like-minded company too when times get tough.
Building a business that supports your life
Creating an exceptional food or drink product requires vision, culinary skill, and resilience. But transforming that product into a sustainable, profitable company requires equal respect for commercial reality.
When you master your unit economics, price backwards for every intermediary, and maintain regular financial rhythms, you take the anxiety out of the numbers. You build a business that not only feeds your customers but supports you properly as the owner.
If you are looking to scale your food or beverage brand, navigate retail buyers, or join a community of founders focused on profitable growth, connect with Chelsea Ford at chelseaford.com or tune in to the Foodpreneur with Chelsea Ford podcast.
For growing food and consumer brands that need a dependable finance engine, BlueRock provides integrated accounting, tax compliance, bookkeeping, and commercial lending to help business owners protect their margins and build sustainable value.
