The food industry is a significant part of New Zealand’s economy and new product development is its lifeblood. So product development facilities for start-ups and scale-ups are a must. Right?
Beware the ongoing cost of owning a pilot plant, says Professor Richard Archer of Massey University, in a recently published article.
How deep are your pockets, now and forever?
Richard makes the following salient points:
- Start-ups (true pilot plants) and scale up facilities apply to different parts of the product development cycle, have different requirements, gear, expertise and costs. Don’t confuse them.
- Scale-ups are small-scale plants that make product for in-market trials. Not counting any capital costs for land and buildings, gear could cost between $3-5 million, with annual fixed costs of around $1.2 million. Clients balk at being charged for fixed costs in addition to their not insubstantial variable costs.
- Start-ups want to experiment and learn and need a range of gear, testing and food science expertise to hand. Start-ups cost even more than scale-ups and small firms cannot afford even the variable costs.
- The major food pilot plants in NZ have been established with government funding assistance
- Most pilot plants that have lasted more than 10 years are based at educational facilities, which can justify the costs for these wider purposes.
- Pilot plants are necessary, the costs are real, and they are not self-funding.
- Whose are the pockets, and how deep are they?
The Government has recently committed to investing $3 billion over three years in regional economic development. The Provincial Growth Fund (PGF) is an initiative that aims to lift productivity in the provinces.
Professor Archer’s thoughts are wise words to consider, indeed, particularly as many regions think about how to use this Provincial Growth Fund.
If you would like a copy of Professor Archer’s article, please contact Jane.