Government Funding for the Food Industry

  • By Lior Stein
  • 06 Oct, 2015

An interesting anomaly about government funding is that, on the one hand it is such an attractive source of cash, but on the other hand the majority of eligible companies either don’t know it exists or don’t know how to access it says Lior Stein from Rimon Advisory.

If I were to simplify government grants I would explain them in two points:
The first being Innovation and the second being assistance for bringing foreign revenue to Australia.
The benefit involved in attaining government funding can be quite large and at times could amount to between 40% – 50% of funds spent in innovation or marketing to foreign markets.

The beginning of assessing innovation is quite simple. Ask yourself the following question, are you doing something different that you believe your competitors aren’t doing and that is new in the space?
If the answer to that question is yes then the next step would be to consider the 3 basic principles of innovation grants

The 3 basic principles of innovation grants are
1. New Knowledge
2. Experimentation
3. Uncertainty

These three principles all flow into each other.
Lets explain these principles using actual case studies.

1.    New knowledge begins by identifying a gap in the market.

An organic beverage manufacturer and formulator (Organics Pty Ltd) realised that the short shelf life of organic beverages is a limiting factor for exportation. Some web searches were done and the result was that there seems to not be an off the shelf product available in the world that solves this problem.

A doughnut maker (Jam Pty Ltd) realised that the insertion of jam into doughnuts was exceptionally time consuming and limited the speed of their production run. Some web searches were done and the result was that there seems to not be an off the shelf product available in the world that solves this problem.

2.    Experimentation
At this point Organics Pty Ltd started developing a solution to fill the gap that was found. The development process required experimentation and different iterations of the product. The process is an ongoing process as Organics Pty Ltd is continuing to improve their findings in this area.

Jam Pty Ltd needed to automate their insertion of jam and cream into their doughnuts process. Process engineers were hired to design and develop the process. Experiments were required in order to get the process precisely correct to optimise the automation

3.    Uncertainty
Both Organics Pty Ltd and Jam Pty Ltd didn’t have certainty at the outset that these new projects were going to work. They did believe that each would be a success but the final products were achieved through much trial and error.
These final products are the items that filled the initial gap and are now the new knowledge that each company has brought to the world.

The main innovation grant available in Australia is the R&D Tax Incentive and can definitely be applied to the food business industry should the project be eligible.

Foreign revenue being brought to Australia

This avenue is simpler to explain than that of innovation grants.
There is funding available for exporters who are spending money on marketing their products to foreign markets.
Again, 3 basic principles, the first being an Australian product, the second being that revenue flows to Australia and the third being that marketing expenses are recognised in Australia.

1.    Australian Product
The product needs to be either completely made in Australia or the majority of the product made in Australia.
If the products have an element made in a foreign country e.g.China it could still be considered an Australian product.

2.    Revenue flows to Australia
The revenue gained from the Australian products being marketed abroad needs to be recognised in the Australian entity.
An entity need not have actual revenue in the first two years of applying for this grant.

3.    Marketing expenditure being recognised in Australia
Expenditure spent on marketing to foreign markets needs to be recognised in the Australian entity.
These expenses could include staff and consultants employed in the foreign country, flights, conferences attended, google and facebook advertising, websites targeted overseas, trademarks and patents, pamphlets and flyers made and free samples being given to enter a market.

The incentive described above is known as EMDG (Export Market Development Grant).
EMDG offer up t0 a 50% grant on the expenses described above.

Statistics show that about 70% of eligible Australian companies either are unaware that they are eligible or simply don’t know how to go about accessing the funding available.

Best practice would be to consider the principles explained above and enquire as to a possible benefit and eligibility.

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