The Victorian government is holding further talks with SPC Ardmona, but hasn't committed to bail out the company.
The 93-year-old Victorian company wanted a $25 million federal grant, topped up by $25 million of state government funds and its own $150 million investment, for new product development and technology to prop up its operation.
With the federal cabinet rejecting the plan, Victorian Premier Denis Napthine says the state is looking at a "plan B" to keep SPC Ardmona going and will look at other options for the fruit processor.
Dr Napthine said the federal rejection has changed the game and his government is holding further talks with SPC Ardmona and its parent company Coca-Cola Amatil.
"We do not believe that there is nothing further than can be done," he told reporters after holding crisis talks in Shepparton on Friday.
"We want to have positive discussions with the aim of trying to preserve this production company here in the Goulburn Valley and preserve jobs here."
SPC Ardmona employs 700 people at the Shepparton cannery but the jobs of up to 5000 people in the Goulburn Valley are at stake if the company folds.
The companies say the federal government's decision means that the $25 million grant from Victoria, which was conditional on a positive federal response, will not be forthcoming.
Dr Napthine said his government had supported strategic co-investment with the owners of SPC Ardmona but the federal decision meant the state had to re-examine its position.
"Nobody from SPC Ardmona or Coca-Cola Amatil has asked the state government for $50 million."
Asked if Victoria would still put in its $25 million, Dr Napthine said the proposal was for a joint state and federal contribution.
Victorian Opposition Leader Daniel Andrews says Dr Napthine should have offered the $25 million to SPC Ardmona to reshape the business.
"The least Denis Napthine should have done is turned up with $25 million that was apparently on offer a day ago," Mr Andrews said in Shepparton.
He said the premier had turned up in Shepparton with no answers and no money and had turned his back on the community.
Mr Andrews said he hoped the company could survive, but Coca-Cola Amatil's decision in 18 days after reviewing SPC was pivotal to its future.
The state Nationals MP for Shepparton Jeanette Powell says the Victorian government will do whatever it can to keep SPC Ardmona operating.
"What we will do is continue to work with SPC to see how we can assist them in staying in Shepparton and what they need from the Victorian government," Ms Powell told reporters in Shepparton.
Dr Napthine will contact Prime Minister Tony Abbott on Friday to say he is disappointed and preferred to have federal assistance.
He denied the political fallout if SPC Ardmona folded was influencing the government's decisions ahead of the November election, saying "this is absolutely not about politics".
The Victorian government has offered $4.4 million in assistance for SPC Ardmona and the company has already used $200,000 of that assistance, Dr Napthine said.
A further $2 million was contributed last year by the state government to help people affected by a downturn in the industry and $5 million for a taskforce in the Goulburn Valley to grow opportunities in the region.