What if some of the money you've already invested in developing new products could be put back into your business?
Developing a new recipe. Reformulating a product to remove sugar. Scaling production from the test kitchen to the factory floor.
If these challenges sound familiar, you could be eligible to recoup some of the costs of this work through New Zealand's Research & Development Tax Incentive (RDTI).
Yet despite undertaking these types of activities every day, many food and beverage businesses never claim the RDTI because they don't recognise their product development as eligible R&D.
This guide explains how the RDTI works, where the biggest opportunities exist for food and beverage businesses, and the key eligibility considerations to help you identify whether your product development activities could qualify.
The R&D Tax Incentive: An opportunity to reinvest in innovation
The Research & Development Tax Incentive (RDTI) is a government initiative that helps New Zealand businesses reduce the cost of innovation.
Businesses can claim a 15% tax credit on eligible R&D expenditure, which is often received as a cash refund. That means some of the money invested in solving technical challenges today can be reinvested into tomorrow's innovation.
For food and beverage businesses, this presents a significant opportunity. Developing new products, improving formulations and refining manufacturing processes all require considerable time and investment, often in an industry where margins are tight.
More than half of businesses claiming the RDTI receive over $100,000 each year. That funding could help hire your next NPD Technologist, expand your production team, invest in new equipment, or accelerate your next product development project.
Importantly, the RDTI isn't a one-off opportunity. As long as your business continues to undertake eligible R&D, you can claim each year. For innovative food and beverage businesses, it can become a reliable source of funding that supports continuous product development and long-term growth.
So, what actually qualifies?
One of the biggest misconceptions is that only groundbreaking innovation qualifies for the RDTI.
The line between routine product development and eligible R&D isn't always obvious. That's why we encourage businesses to start by asking three simple questions.
1. What were you trying to achieve?
Every eligible R&D project starts with a clear technical objective. In other words, what were you trying to develop or improve?
For food and beverage businesses, that could include:
- Developing a new formulation
- Extending shelf life
- Reducing sugar while maintaining taste and texture
- Creating a clean-label product
- Improving a manufacturing process
2. What didn't you know?
This is the most important question.
The RDTI isn't based on how commercially innovative a product is. It's based on whether there was a genuine scientific or technological uncertainty that couldn't be resolved using existing knowledge or standard industry practice.
For example:
- Could a sugar substitute deliver the same texture?
- Would a new preservative system achieve the required shelf life?
- Could a formulation be successfully scaled from the test kitchen to commercial production?
- Would a new ingredient remain stable throughout processing and distribution?
If you couldn't know whether it would work, or how you were going to make it work, without testing and experimentation, there's a good chance you're dealing with the type of uncertainty the RDTI is designed to support.
3. How did you go about solving it?
Finally, you need to show that you took a systematic approach to resolving the uncertainty.
That often involves developing prototype formulations, running benchtop and pilot trials, testing different ingredient combinations, analysing results, refining the formulation and repeating the process until the uncertainty is resolved.
It's this structured process of testing, learning and iteration that distinguishes eligible R&D from routine product development.
Where food and beverage businesses commonly undertake eligible R&D
Innovation in the food and beverage industry rarely follows a straight line.
A formulation that performs well in the test kitchen may behave very differently in production. An ingredient substitution might improve the nutrition profile but compromise texture, stability or shelf life. A process that works at pilot scale may not translate to commercial manufacturing.
Solving challenges like these is simply part of developing and improving food products. And in many cases, it's also where the R&D Tax Incentive comes into play.
Below are some of the most common areas where food and beverage businesses may be undertaking eligible R&D.
1. Developing new products and formulations
Developing a new product often involves much more than creating a recipe.
Whether you're developing a completely new formulation or a new product format, the challenge is getting the product to consistently perform the way you need it to.
That might mean:
- Developing a high-protein product without compromising texture
- Reducing sugar while maintaining flavour and mouthfeel
- Creating a clean-label formulation using natural ingredients
- Removing allergens without affecting product performance
- Achieving a target shelf life without artificial preservatives
Getting there often requires multiple rounds of formulation, benchtop trials, pilot production and sensory evaluation. More often than not, the first formulation doesn't deliver the desired outcome.
What matters from an RDTI perspective is why that experimentation was needed.
If you were trying to resolve a technical challenge that couldn't be answered using existing knowledge or standard formulation techniques, that work may qualify for the RDTI.
2. Reformulating existing products
Some of the most valuable innovation happens when improving products already on the shelf.
Whether the goal is to improve nutrition, reduce costs, meet retailer requirements or respond to changing consumer preferences, reformulation often involves much more than swapping one ingredient for another.
Common examples include:
- Replacing imported ingredients with locally sourced alternatives
- Removing artificial additives or preservatives
- Creating vegan or allergen-free versions of existing products
- Reducing sugar or sodium while maintaining product performance
- Replacing functional ingredients with more cost-effective alternatives
The commercial objective isn't what makes the work eligible.
The opportunity arises when those changes introduce genuine technical challenges. If replacing an ingredient affects texture, stability, processing behaviour, flavour or shelf life, and experimentation is needed to achieve the required outcome, that work may qualify.
3. Scaling from the test kitchen to commercial production
If you've ever scaled a product from the test kitchen to full-scale manufacturing, you'll know the formulation doesn't always behave the way you expect.
A product that performs perfectly in small batches can behave very differently on commercial equipment.
Viscosity changes. Emulsions become unstable. Fill accuracy varies. Processing conditions need to be adjusted. Shelf life no longer meets expectations.
These aren't simply production issues. They're often technical uncertainties that only become apparent during scale-up.
Where production trials are undertaken to resolve those uncertainties, rather than simply commissioning equipment or optimising an established process, they may qualify for the RDTI.
4. Shelf-life and stability testing
Shelf-life testing is another area where eligible R&D is often overlooked.
The key question is why the testing is being carried out.
If you're investigating whether a new formulation, ingredient system, packaging format or processing method can achieve the required shelf life, that testing may form part of an eligible R&D project.
For example, you might be assessing whether the product can maintain its flavour, texture, microbial stability or structural integrity over its intended shelf life.
Routine shelf-life testing carried out for quality assurance or compliance purposes, however, is generally not eligible.
5. Packaging and transport performance
Product performance doesn't stop once it leaves the production line.
Packaging plays a critical role in protecting product quality throughout storage, transport and distribution.
You may be investigating whether a product can withstand transport without damage, whether a new packaging format maintains freshness, or whether changes to the formulation affect seal integrity, moisture migration or product stability.
Where experimentation is needed to understand how the product, packaging and distribution environment interact, that work may qualify for the RDTI.
6. Process innovation
When people think about R&D, they often think about developing new products. But some of the most valuable R&D in food and beverage businesses happens on the factory floor.
Improving the way a product is manufactured can involve just as much technical problem-solving as developing the product itself. Yet these projects are often overlooked because they're seen as operational improvements rather than innovation.
Examples might include:
- Developing a new manufacturing or processing method
- Improving yield while maintaining product quality
- Reducing water or energy consumption without compromising performance
- Adapting existing equipment to handle a new formulation or product format
- Developing a process to consistently manufacture a product that hasn't previously been produced at commercial scale
The key question, as always, is whether there was a genuine technical challenge to overcome.
If your team needed to test different process parameters, equipment configurations or production methods because the outcome couldn't be predicted using existing knowledge, that work may qualify for the RDTI.
It's an area that's frequently overlooked, but for many food and beverage businesses, process innovation can represent some of the most valuable R&D undertaken each year.
What doesn't qualify?
While the RDTI is broader than many businesses expect, not every product development activity will be eligible.
The key question is whether you were trying to resolve a genuine scientific or technological uncertainty. If the answer was already known, or the outcome could be achieved using standard industry knowledge, it's unlikely to qualify.
For food and beverage businesses, activities that are generally not eligible include:
- Routine flavour changes or product line extensions
- Simple ingredient substitutions where the outcome is predictable
- Standard quality assurance or batch release testing
- Nutrition panels and routine compliance testing
- Consumer taste testing or market research
- Branding, packaging design and marketing activities
- Routine production optimisation once the technical challenge has been resolved
That doesn't mean these activities can never sit alongside an eligible R&D project. For example, shelf-life testing may be eligible if it's being used to determine whether a new formulation meets its target shelf life. The same testing carried out later as part of routine quality assurance generally wouldn't qualify.
It's this distinction that matters. The RDTI is designed to support experimentation that generates new knowledge, not routine business activities where the answer is already known.
Final thoughts
New Zealand’s food and beverage industry has built its reputation on innovation. From developing healthier products and cleaner labels to improving manufacturing processes and taking Kiwi brands to the world, innovation continues to move the sector forward.
The R&D Tax Incentive exists to support that work.
Yet many food and beverage businesses do not realise that some of the product development work they are already doing could be eligible. Understanding where routine development ends and eligible R&D begins can unlock valuable funding to reinvest in future innovation and long-term growth.
If your business is investing in new products, reformulating existing ones or solving technical manufacturing challenges, it is worth exploring whether you may be eligible.
Ready to explore your eligibility?
At Swell, we help New Zealand businesses identify eligible R&D, navigate the claim process, and prepare claims that are both complete and compliant.
If you're developing new products, reformulating existing ones or solving technical manufacturing challenges, get in touch with Swell for a no-obligation conversation. We'll talk through the work you've been doing, assess whether it could be eligible, and help you understand what a potential R&D Tax Incentive claim could look like.