How CPG Brands Can Transform COGS with Better Shelf Intelligence: Best Strategies Included

Margins are shrinking, costs are rising, and every inefficiency in your retail execution is hitting your bottom line. For most CPG brands, Cost of Goods Sold (COGS) remains a constant uphill battle, affected not just by production or logistics, but also by how your products show up (or don’t) on the shelf.

The on-shelf availability (OSA) market alone is projected to grow from USD 5.8 million in 2024 to USD 6.3 million by the end of 2025, eventually hitting USD 12.5 million by 2033 at a CAGR of 8.7%. This kind of growth signals something deeper: CPG brands are waking up to how shelf visibility directly impacts cost structure and profitability.

If you're a CPG decision-maker wondering why promotions underdeliver, why SKUs stagnate, or why execution gaps persist despite planning, this is where shelf intelligence can help. It closes the loop between retail performance and operational cost, helping you optimize COGS at the shelf.

Key Takeaways:

• Shelf Execution Directly Impacts COGS: Inefficiencies like out-of-stocks, planogram violations, and promotional gaps increase costs beyond production and logistics, making shelf visibility critical for cost control.
  
  
• Technology Enables Real-Time, Data-Driven Decisions: AI-powered solutions like ParallelDots’ ShelfWatch provide continuous shelf monitoring and automated compliance checks, helping brands resolve issues faster and reduce manual audit expenses.
  
  
• Integrated Shelf Insights Drive Smarter Production and Replenishment: Using shelf data to align manufacturing inventory restocking and merchandising helps reduce overproduction, minimize stock imbalances, and avoid costly emergency shipments, leading to more efficient resource utilization.
  
  
• Pilot, Collaborate, and Scale for Sustainable COGS Transformation: Start with focused pilot projects, train teams to act on shelf intelligence, and use collaborative tools to embed data-driven decision-making across departments for lasting impact.

Why CPG Brands Are Struggling to Control COGS in 2025

Despite cost-cutting across packaging and logistics, COGS remains a major challenge for most CPG brands in 2025. 

Inflation and retailer demands squeeze margins, but the biggest blind spot is the retail shelf, the critical last step in execution. Most COGS strategies overlook this stage, where poor shelf execution, like out-of-stocks, wrong product placement, and missed promotions, increases costs and reduces profits.

Let’s break it down:

• Out-of-stock products: Stockouts lead to wasted trade spend and lost sales. Brands often overproduce or reroute inventory at higher costs to compensate.
  
  
• Planogram violations: When high-performing SKUs lose shelf visibility and non-compliant items occupy space, the return on investment per SKU drops.
  
  
• Promotional inefficiencies: When shelf execution doesn’t match HQ plans, promotions underperform, draining margins and wasting marketing spend.

These inflate COGS in ways traditional reporting never captures.

And that’s where the opportunity lies: by capturing real-time shelf data, CPG brands can close the execution gap, reduce unnecessary spending, and finally turn COGS into a controllable metric, not just a financial afterthought.

How Does COGS Matter for CPG Brands?

For CPG brands, COGS includes all the direct costs required to get a product ready for sale. This covers everything from raw materials and packaging to production and distribution — all the way to getting products on store shelves.

In simple terms, COGS represents the essential costs a brand must cover before it can make a profit.

What makes COGS especially important for CPG companies is its direct connection to volume, scale, and in-store execution. Even minor issues, like low on-shelf availability (OSA) or inconsistent shelf space, can have a huge impact. When these problems occur across thousands of stores, they can lead to millions in lost sales and unnecessary costs.

Best Strategies for COGS Reduction in CPG

CPG brands understand how COGS affects profitability, and how shelf-level inefficiencies quietly increase those costs. Here are four practical strategies that CPGs use in 2025 to reduce COGS with a clear focus on improving shelf execution.

1. Using AI and Technology for Process Optimization

AI and retail execution software like ShelfWatch are essential for success. They help CPG brands identify hidden execution gaps, such as out-of-stocks and poor planogram compliance that inflate COGS. 

Image recognition and AI-powered audits track on-shelf availability, share of shelf, and execution accuracy in real time, speeding up issue resolution and reducing manual audit costs.

Result: Lower field audit costs, faster issue resolution, and better ROI on trade investment.

2. Implementing Lean Manufacturing Practices

Leading CPGs use shelf data to spot SKUs that consistently underperform on shelves and adjust production plans accordingly. This prevents overproduction and reduces excess inventory holding without focusing on manufacturing operations.

CPG brands are now aligning production more closely with actual shelf performance, using data from in-store execution to optimize batch sizes, run rates, and product distribution.

Result: Reduced overproduction, less inventory holding, and minimized freight corrections.

3. Enabling Smarter Replenishment Decisions

Shelf-level visibility helps CPG teams react quickly to real-time store conditions like low stock or execution delays. This enables timely restocking, avoiding costly stockouts or excess shipments.

Result: Faster issue resolution at the shelf, fewer missed sales, and better alignment between store conditions and brand actions.

4. Reducing Waste and Improving Resource Utilization

By regularly capturing shelf data, brands can identify slow-moving SKUs, avoid overstocking for promotions, and optimize in-store strategies to reduce waste.

Result: Less retail waste, fewer markdowns, and more efficient resource deployment.

Every COGS reduction strategy depends on quick access to accurate shelf data. That’s why retail execution software like ParallelDots’ ShelfWatch helps in empowering CPG brands to make informed, timely decisions at the shelf.

How Technology Helps Transform COGS for CPG Brands

With top-notch technology these days, it is all about turning execution gaps into measurable cost savings. AI-powered tools like ParallelDots’ ShelfWatch simplify compliance checks, improve on-shelf availability (OSA), and reduce the cost of manual audits by delivering real-time visibility.

Instead of relying on periodic store visits or delayed reports, ShelfWatch gives brands instant insights at the outlet level. This ensures faster corrective action, better alignment between teams, and smarter allocation of resources.

For CPG leaders, the outcome is simple: fewer hidden COGS leaks and more efficient use of trade and operational spend.

Implementing ShelfWatch Effectively for COGS Transformation

When a top food products company operating across 10,000+ general trade outlets struggled with poor shelf execution, the impact was clear: their visual merchandising investments weren’t translating to sales, and manual audits left them flying blind. 

Compliance tracking was inconsistent. SKU visibility? Practically nonexistent.

The solution was simple: Shelf intelligence on a large scale.

By deploying ParallelDots’ ShelfWatch, the brand transformed its monitoring of key shelf KPIs, including planogram compliance and on-shelf availability (OSA). Field reps were no longer working on guesswork. They received outlet-specific layout guidance directly through the app. And with real-time data, corrective action was no longer delayed by weeks.

Within just two months, the results spoke volumes:

KPI

Improvement

Planogram Compliance

30% improvement in planogram score 

Execution Visibility

Significantly Enhanced

Operational Efficiency

Faster, scalable audit rollouts

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Not only did this reduce execution costs, but it also encouraged wider adoption among distribution partners. Field team visits became more efficient, more targeted, and ultimately more impactful.

For CPG brands looking to reduce COGS while maximizing shelf impact, this is a proven playbook worth replicating.

ParallelDots offers advanced AI-powered solutions designed to provide CPG brands with real-time visibility and control over their on-shelf execution. ParallelDots helps eliminate these leakages by giving brands real-time, outlet-level visibility into what’s driving up their Cost of Goods Sold (COGS). 

• Real-Time Shelf Monitoring: Continuous tracking of shelf conditions using ShelfWatch ensures products are correctly placed and fully stocked to capture customer attention.
  
  
• Planogram Compliance: Automated checks guarantee adherence to shelf layouts, maintaining consistent brand presentation, and maximizing promotional impact.
  
  
• Stock Availability Insights: Accurate detection of stockouts and low inventory allows timely replenishment to avoid lost sales.
  
  
• Promotional Execution Verification: Confirms that point-of-sale materials and displays are deployed as planned, enhancing promotional effectiveness.

ParallelDots empowers brands to optimize field operations, reduce waste, and provides the real-time visibility needed to control COGS without sacrificing shelf performance. Ready to stop invisible cost leaks at the shelf? Schedule a demo with ParallelDots today!

FAQs

1. What is COGS in CPG?

COGS (Cost of Goods Sold) represents the direct costs tied to producing goods sold by a CPG company, including raw materials, manufacturing, and logistics. It directly affects profit margins and helps brands price products competitively.

2. How can CPG brands reduce COGS?

Brands can reduce COGS by improving supply chain efficiency, minimizing waste, optimizing shelf execution with technology like ParallelDots, negotiating better supplier contracts, and streamlining production processes to cut unnecessary costs.

3. Why is on-shelf availability important for COGS?

On-shelf availability ensures products are consistently stocked, preventing lost sales and costly emergency restocking. It helps optimize inventory levels, reducing excess stock and markdowns, which lowers overall COGS.

4. What role does technology play in managing COGS?

Technology, especially AI-powered shelf monitoring, helps CPG brands track shelf compliance, detect stockouts, and optimize promotions in real-time, enabling faster corrective actions that reduce inefficiencies and control costs.

5. How does planogram compliance affect COGS?

Poor planogram compliance leads to misplaced products and ineffective displays, reducing sales and increasing waste. Ensuring compliance improves product visibility and sales velocity, which helps lower COGS by reducing markdowns and inventory holding costs.