The Recipe for Tax Savings: How R&D Tax Credits Fuel the Food & Beverage Industry

Innovation is necessary in the food and beverage industry’s competitive marketplace. Businesses constantly evolve to meet consumer demand, from developing healthier product lines to enhancing shelf life or developing more sustainable packaging. But many companies do not realize that these everyday activities often qualify for research and development (R&D) tax credits.

Eligibility for R&D tax credits is limited to neither scientists in lab coats nor formalized “R&D departments.” Any U.S. company involved in the development or improvement of products, processes, techniques, or other technologies may qualify. Moreover, these tax incentives can benefit businesses of all sizes, from boutique bakeries developing a new recipe to a large corporation pioneering on its production line.

R&D Tax Credits: Secret Ingredients for Profitability

R&D tax credits are federal and often state-level incentives that reward businesses for investing in innovation. These credits are not deductions, which lower taxable income, but rather direct subtractions from tax bills. Originally enacted in 1981, the federal Research credit (i.e., the R&D tax credit) allows companies to reduce their tax liability – dollar for dollar – based on qualified research expenditures (QREs), including for contract research, supplies, and wages.

Qualifying food and beverage companies reap benefits from the results:

• Increased cash flow, generating savings and freeing funds for other business needs or reinvestment, internally or externally.
• Lessened tax liability, directly offsetting tax burdens and decreasing overall financial obligations.
• Maximized time, rendering profitability one less thing to worry about. 

Qualified Activities During Everyday R&D

These day-to-day activities in the food and beverage industry often qualify as R&D:

• Packaging design:
  • Improving sustainability (e.g., a new compostable coffee pod).
  • Preserving freshness (e.g., a resealable pouch that prevents moisture loss).
  • Reducing fabrication materials (e.g., an optimized bottle requiring less plastic).
• Process improvement: 
  • Enhancing production efficiency (e.g., automating a new conveyor system to reduce waste).
  • Scaling batch processes (e.g., perfecting a cooking-and-chilling cycle to ensure consistent taste in ready-to-eat meals).
• Product formulation: 
  • Creating new recipes (e.g., for a gluten-free pizza dough) that maintain texture.
  • Reformulating existing products (e.g., low-sugar beverages) to preserve flavor. 
• Safety improvements: 
  • Creating and evaluating new sanitation processes.
  • Developing new testing methods (e.g., new microbiological testing protocols for a dairy product).
• Shelf-life and stability testing:
  • Innovating more effective preservatives to extend products’ shelf life.

The Proof is in the Pudding: A Real-World Example

A startup bakery wants to create a new high-protein, gluten-free pudding. The bakery’s team experiments with different flour blends and natural stabilizers, adjusts baking times, and tests shelf life. Production staff develop each change, and food scientists analyze the results. 

The requisite QREs – including employee wages and ingredient costs – may be claimed for R&D tax credits.

Putting R&D to Work: Next Steps for Businesses

Innovation is at the heart of the food and beverage industry, and R&D tax credits are powerful yet often underutilized resources.

To take advantage of R&D tax credits, Acena Consulting (Acena) recommends the following steps:

• Conduct an R&D tax-credit study.
  • Partner with an R&D tax specialist to perform a formal study investigating qualifying activities and expenses.
  • Schedule a free consultation with Randy Eickhoff, CPA, Acena’s Founder & Head Coach, for immediate assistance. We will help you plan strategically to get the most out of your taxes.
• Assemble contemporaneous documentation.
  • Keep detailed records of employee hours, expenses, experiments, and projects tied to development.
• Prepare to file.
  • File Form 6765 and any state-specific forms alongside federal and state tax returns.

Your big ideas may come with big tax breaks.

Stay Informed

Register for our free monthly webinar, next on Aug. 19, 2025: “Cracking the (Tax) Code for R&D.”

• This workshop provides one CPE credit for professionals who are keeping up with continuing education.
• Learn more about qualifying and documenting R&D activities for tax incentives.

Visit our Acena Events page to sign up for our newsletter and stay abreast of all upcoming events.

Follow Acena on LinkedIn and X for the latest updates on industry-specific incentives and tax policy.

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Edited by Laura Whittenburg, MSBME, Sr. Technical Writer at Acena Consulting. Photo courtesy of avlxyz on Flickr.