Six Themes Guiding the Future of Indoor Agriculture, from Indoor AgTech – Produce Blue Book

0

BROOKLYN, NY—While billions of dollars have been invested in indoor farming, is there a financially viable future? Investment dollars have paid off for high-tech innovation, but with it come higher upfront costs, higher unit costs, and a larger carbon footprint.

So where are we now? And where are we going? These were the topics discussed at Indoor AdTech in Brooklyn in June.

1. Maturing the Business Model

In the early days of vertical farming, early companies had to develop everything from lights to towers to growing recipes. They had to buy off-the-shelf genetics, figure out how to grow, brand their product, and distribute, sell, and support retail. We are going to see a disintegration of vertical farming. The company’s equivalents of pickaxes and shovels develop superior technology around lights, digitization, AI and automation – as well as marketing, distribution and branding.

Interior farms no longer need to be vertically integrated and develop and manage all parts of the chain. We will also see more grower consolidation and the blurring of boundaries between indoor and outdoor growers. Outdoor growers see indoor farms as a way to spread their risk and ensure they have quality produce in their supply all year round in times of high transportation costs and dwindling plant availability. the water. We are already seeing more turnkey operations where farm developers license/sell farms. We also see hybrid hoop house and greenhouse designs and vertical trusses performing different functions in the same location.

At Indoor AgTech, there was talk of branching outdoor leafy greens into berries and other vegetables. And offstage there was talk of using vertical farms to breed outdoor crops and produce pharmaceuticals and botanicals for perfume.

2. Genetics

Indoor farms use genes developed for outdoor use – crops that fight pests as well as variability in humidity and weather.

In a world where every day is perfect in weather; what flavour, nutrition, improved architecture and yield can genetics provide? Can we grow fruits and vegetables that require less prep time (and less labor) for chefs?

While acknowledging that simply replacing better flavor with disease resistance isn’t easy, panelists were excited about what could be done for the interior. Unfold and Vindara are selectively breeding for indoor farms while traditional seed breeding companies like Rijk Zwaan are starting to ask indoor growers what they want and are breeding for them. This will allow for increased flavor profiles and interesting varieties for custom blends. Due to regulation of gene editing as a GMO in Europe and uncertainty of consumer/retailer acceptance in the United States, products developed using gene editing of genes are not in the current pipeline.

But the companies said it was a tool they used to speed up replication by understanding what to replicate while using more traditional techniques. In a tech-based industry, it’s a waste of time and money, but hopefully consumers and regulators will eventually accept new molecular breeding techniques to unlock even more genetic gains for indoors. .

3. Energy: the elephant in the room

The industry is tackling vertical farming’s biggest complaint head-on – carbon footprint and energy consumption. A recent NYT opinion piece discussed various studies in the United States, Europe, and Canada that estimated that producing a pound of tomatoes in a US or North European greenhouse used about six times the carbon footprint. field tomatoes, even after accounting for emissions from refrigerated transport trucks. travel hundreds to thousands of kilometers to consumers.

Industry leaders insist that the whole system must be considered, not just what is used but also what is produced. Growing crops indoors means less food waste, fewer transportation miles, less pesticides and water, and less land use. The industry must continue to make the whole chain more energy efficient by using innovation to reduce energy consumption and carbon footprint. Renewable energy and thoughtful truss placement will help. Industry leaders are looking for ways to measure and communicate reduced energy consumption.

4. Funding

The type and extent of funding is an important topic for the fledgling industry. Over $3 billion in venture capital has been invested in vertical farms.

Many companies with investments of $500 million to $1 billion will likely go public for a positive exit.

There are still companies looking for venture capital funding, but much of the industry is past that stage. Venture capital has helped the industry move forward, now it must evolve to develop a positive unit economy. The industry is looking for project finance and infrastructure finance to build and scale with a lower cost of capital. As companies apply for project funding, there will be more transparency (and control) over unit economics and the drive to continually reduce costs.

5. The other elephant: Who is the customer?

When indoor farming started to take off, the conversation was all about technology, but customers were often not part of the conversation.

As the industry matures, growers realize that growing the best product doesn’t matter without a sustained buyer. Retailers talked about what a leap of faith it was to depend on SKUs from an indoor farm in the beginning. They want strategic relationships with inland farms and they want farms to educate consumers, but there’s only so much that can be communicated on a package label.

QR codes and websites can help, but online marketing for home delivery has been a boon for more informative content and consumer feedback. Local has a strong appeal, but freshness, taste, quality and shelf life are the main selling points of produce grown indoors. Another common theme was retail cost must be reasonable and quality bonuses don’t go far.

6. Food security

Due to COVID and conflict-related trade restrictions, countries are increasingly concerned about food security, especially those dependent on imports. People feel the need and urgency of food supply, which leads to a shift towards home cultivation.

The last time we saw such a significant change was during World War II, when the Netherlands developed its domestic greenhouse industry to stave off starvation. We are likely to see more money invested in countries that cannot produce food abroad domestically. Governments in the Middle East and Singapore are deploying indoor farming as a strategy to overcome their land and water limitations.

Indoor farming is no longer a niche and continues to grow and evolve to become an important part of the global produce industry. The future is bright for indoor farming as the industry continues to produce differentiated products that consumers understand and want.

Share.

Comments are closed.