Little Leaf Farms Raises $90M to Grow Its Greenhouse Network

by Jennifer Marston

Image from: Little Leaf Farms

Massachusetts-based Little Leaf Farms has raised $90 million in a debt and equity financing round to expand its network of hydroponic greenhouses on the East Coast. The round was led by Equilibrium Capital as well as founding investors Bill Helman and Pilot House Associates. Bank of America also participated.

Little Leaf Farms says the capital is “earmarked” to build new greenhouse sites along the East Coast, where its lettuce is currently available in about 2,500 stores. 

The company already operates one 10-acre greenhouse in Devins, Massachusetts. Its facility grows leafy greens using hydroponics and a mixture of sunlight supplemented by LED-powered grow lights. Rainwater captured from the facility’s roof provides most of the water used on the farm. 

According to a press release, Little Leaf Farms has doubled its retail sales to $38 million since 2019. And last year, the company bought180 acres of land in Pennsylvania on which to build an additional facility. Still another greenhouse, slated for North Carolina, will serve the Southeast region of the U.S. 

Little Leaf Farms joins the likes of Revol Greens, Gotham Greens, AppHarvest, and others in bringing local(ish) greens to a greater percentage of the population. These facilities generally pack and ship their greens on the day of or day after harvesting, and only supply retailers within a certain radius. Little Leaf Farms, for example, currently servers only parts of Massachusetts, Pennsylvania, New York, and New Jersey. 

The list of regions the company serves will no doubt lengthen as the company builds up its greenhouse network in the coming months.

Is AppHarvest the Future of Farming?

Special purpose acquisition companies, or SPACs, are red-hot right now, with investors clamoring to get into promising young companies.

In this video from Motley Fool Live, recorded on Jan. 28, Industry Focus host Nick Sciple and Motley Fool contributor Lou Whiteman discuss AppHarvest, one such SPAC that is looking to disrupt the agriculture industry. Here are the details on what AppHarvest wants to do, and a look at whether the company represents the future of farming.

Nick Sciple: One last company I wanted to talk about, Lou, and this is one I think it's -- you pay attention to, but not one I'm super excited to run in and buy. It was a company called AppHarvest. It's coming public via a [SPAC] this year. This vertical farming space. We talked about Gladstone Land buying traditional farmland. AppHarvest is taking a very different approach, trying to lean into some of the ESG-type movements.

Lou Whiteman: Yeah. Let's look at this. It probably wouldn't surprise you that the U.S. is the biggest global farm exporter as we said, but it might surprise you that the Netherlands, the tiny little country, is No. 2. The way they do that is tech: Greenhouse farm structure. AppHarvest has taken that model and brought it to the U.S. They have, I believe, three farms in Appalachia. The pitches can produce 30x the yields using 90% less water. Right now, it's mostly tomatoes and it is early-stage. I don't own this stock either. I love this idea. There's some reasons that I'm not buying in right now that we can get into. But this is fascinating to me. We talked about making the world a better place. This is the company that we need to be successful to make the world a better place. The warning on it is that it is a SPAC. So it's not public yet. Right now, I believe N-O-V-S. That deal should close soon. [Editor's note: The deal has since closed.] I'm not the only one excited about it. I tend not to like to buy IPOs and new companies anyway. I think the caution around buying into the excitement applies here. There is a Martha Stewart video on their website talking up the company, which I love Martha Stewart, but that's a hype level that makes me want to just watch and see what they produce. This is just three little farms in Appalachia right now and a great idea. This was all over my watchlist. I would imagine I would love to hold it at some point, but just be careful because this is, as we saw SPACs last year in other areas, people are very excited about this.

Sciple: Yeah. I think, like we've said, for a lot of these companies, the prospects are great. I think when you look at the reduced water usage, better, environmentally friendly, all those sorts of things. I like that they are in Appalachia. As someone who is from the South, I like it when more rural areas get some people actually investing money there. But again, there's a lot of execution between now and really getting to a place where this is the future of farming and they're going to reach scale and all those sorts of things. But this is a company I'm definitely going to have my radar on and pay attention to as they continue to report earnings. Because you can tell yourself a story about how this type of vertical farming, indoor farming disrupts this traditional model, can be more efficient, cleaner, etc. Something to continue paying attention to as we have more information, because this company, like you said, Lou, isn't all the way public yet. We still got to have this SPAC deal finalized and then we get all our fun SEC filings and quarterly calls and all those sorts of things. Once we have that, I will be very much looking forward to seeing what the company has to say.

Whiteman: Right. Just to finish up along too, the interesting thing here is that it is a proven concept because it has worked elsewhere. The downside of that is that it needed to work there. Netherlands just doesn't have -- and this is an expensive proposition to get started, to get going. There's potential there, but in a country blessed with almost seemingly unlimited farmland for now, for long term it makes sense. But in the short term, it could be a hard thing to really get up and running. I think you're right, just one to watch.

Strawberry Growers Take Production Up in The Air to Answer Market Demand

From Open Field to Semi-Hydroponic to Standing or Hanging Systems

Due to growing demand and challenges in cultivation and labour, more and more former open field strawberry growers have shifted to hydroponic or semi-hydroponic cultivation over the last couple of years. The next step for these growers is to lift their growing system in order to improve the working conditions, irrigation possibilities, and to lower the disease pressure. “The growing interest in the market in the berry range has pushed the industry to create new tools and production systems that years ago were unthinkable, thus creating a large decrease in labor costs”, says Isabel Ruis with Hydroponic Systems.

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Growing production

The global production of strawberries has grown exponentially over the last decades. Especially in Europe, the acreage has increased by almost 50%. According to the numbers of trade maps also the Northern and Central American production has grown by almost 30 percent. “This huge development has been caused by the strong increase in demand, as strawberries are considered a fruit with a high content in vitamin C, almost equal to Citrus fruits”, says Isabel. The Spanish company has specialized in offering efficient solutions for hydroponic cultivation. “In Spain, around 93 to 95% of the production of the strawberry acreage can be found in the province of Huelva. This production is mostly destined for the European markets. The demand for higher quality and production urged growers to invest in the growing conditions and techniques,  aiming at efficient use of resources, so to minimize the impact on the environment’, says Isabel.

She explains how in traditional ways of growing, where simple structures are used to protect the crop and there’s hardly any control over the climate, there’s also little control over the water and nutrients dosage and costs. “Irrigating strawberries is especially complicated because the crop is often grown under plastic, on very sandy soils with low capacity to retain water. Leaking of the water into the soil and contamination risks also caused criticism on the cultivation, especially from an environmental point of view.” In addition and especially important nowadays the plants being grown at soil level provide a problem for the labour force: the uncomfortable work makes it harder to find workers.

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Semi-hydroponic as first step

Over the last years, many growers invested in a semi-hydroponic system: growing in substrates placed on the soil. “The need to rotate crops, developed mainly by family farmers in small areas, has encouraged the investigation of new forms of growth to meet the requirements of today’s markets. Since hydroponic growing can be done at any location, this can also occur close to distribution points and consumption points, therefore, saving on shipping and environmental contamination", Isabel explains. 

Now they see how more and more growers chose to elevate their cultivation since it offers better control over the crop, a new opportunity to maximize production in lesser surface and reduce the use of resources further. 

Up in the air

Standing or hanging systems have proven to be a solution for further development. The Elevated Hydroponic System, developed by Hydroponic Systems, has been one of the solutions enabling growers to do so. “By elevating the crop, the disease pressure is lowered so the use of chemicals will decrease. And thanks to elevating the crop, the working conditions are way better: more comfortable and more efficient. A reduction of at least 50% for the harvest costs is within reach thanks to these improved and optimized working conditions. And we can higher the production per square meter”, adds Isabel. “This is thanks to the improved growing conditions and to the higher planting density. By lifting the plants, we can grow up to 200.000 plants per hectare.’

She shows how lifting the crop will also reduce the contamination of the soil and leaking of water, making disinfection of the soil and deep fertilizing unnecessary. “The water is used more efficiently and growers get the opportunity to recirculate the drain water. To realize this and guarantee optimal use of water and nutrients, Hydroponic Systems created the spacer piece. This is a plastic gutter system that is used in many greenhouse operations that place their substrate slabs at surface level. The spacer results in better ventilation between the drain channel and the substrate with a reduction of disease pressure and a healthier root system as a result.

Uniform soil

“With this relatively simple solution, the soil is irrigated in a uniform manner, allowing a uniform development of the roots of the strawberry plants. It will result in a better quality of the roots since they deal with fewer diseases as the soil is aired better and the roots aren’t in contact with the drainages. This will reduce the need to apply chemical products”, Isabel says. “And it will result in better performance of the crop: the fruits will benefit from the better nutritional control and both the cultivation quality as the quantity will improve thanks to this.”

“As we can see, the growing interest in the market in the berry range in the last years has made the industry create new tools and production systems that years ago were unthinkable”, Isabel concludes. “Very important in this is also the reduction in labor costs, which is difficult and expensive to find due to the working conditions of working at ground level.

According to “Revista Mercados” in their article on the 02/2019 about the collection of strawberries, in the year 2019 23,000 positions were offered for workers to collect strawberries in Huelva, having only 970 people replied and showed interest, this figure is only 4.2% of the unemployed people registered in this area, showing a lack of interest in a province with 25% unemployment. The development of systems like Hydroponic Elevated Systems permits the growers to be more efficient while investing in quality and production: answering the market demand.”

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For more information:
Hydroponic Systems
Murcia, Spain
info@hydroponicsystems.es
+34 968 89 81 81
www.hydroponicsystems.eu

Publication date: Fri 22 May 2020
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