Exploring The Costs And Benefits of Indoor Agriculture

August 24, 2020 IGrow PreOwned

Leafy GreRobert Colangelo and Matt Roy

Yesterday, the Indoor Agtech kicked off its virtual event, joined by many participants. One, of the many seminars, was about 'Exploring the costs and benefits of indoor agriculture'. Robert Colangelo, Founding Farmer at Green Sense Farms, kicked off the seminar by asking what CEA means to Matt Roy, VP Business Development CEA at Tanimura & Antle. Roy answered, “CEA to me, means anything grown inside. There’s a lot of innovation and disruption happening in the space and I think there’s going to be a lot of different technologies that are going to provide the right solutions here.”

Colangelo: “Is it true that, according to the myth, the leafy greens supply chain is broken and where can it be improved?”
Roy stated that one of the misconceptions out there is that there’s this big waste field on the West Coast on how products are grown, harvested, and shipped out. “It’s actually highly innovative and from innovation, technology, and sustainability standpoint, there’s a lot of exciting things happening out there. I continue to be amazed at how well we are able to get fresh fruits and vegetables across the country. A lot of things we’re trying to achieve indoors, in a lot of ways we have accomplished that outdoors. From growing it, getting it harvested efficiently, timely, and done food safely, we’re getting high quality, nutritious fresh produce across the country in a matter of days.”

Colangelo: “Can you give us a quick thumbnail of the different touchpoints, from seed in the field to the supermarket, how does that level travel and where do you see waste along that line?”
Roy: Naturally, with any farming, indoor, or outdoor there is going to be some level of waste. Obviously, putting products on a truck for five days brings challenges and vulnerability along. A misperception is that all of the food is left in the field, but in a lot of ways, it’s organic material feeding the soil. Just because leaves are left in the field after harvesting, it might be viewed as waste, but it goes back in the dirt and provides nutrition to the soil.

Colangelo: "A challenge in vertical farming is packing on a large economy of scale. What are the challenges of packing as a smaller scaled farm with few centralized packing houses near? How do you get packing done economically?"
Roy: “Hyperlocal smaller farms bring value to the supply chain and continue to provide additional ways to provide nutritious products to consumers. I think it’s going to be one of the challenges, and it’s a huge component that is not talked about a lot. There’s a lot of discussion on the growing side, but I think that we need more conversation on what innovation looks like on the packing side. What is looks like for hydro-cooling, think of everything shipped out from the West Coast, is hydro-cooled. So, when growing indoors, pulling the heat out of the product to ensure you have the shelf life needed out of it. It’s a big piece that needs to be solved.

Colangelo: “Most of the packing equipment is geared to large-scale production and there's very little cost-effective low scale packing equipment out there. So I agree, that it’s an area that we all need to work out. Looking at product recall, there's been a number of recalls with field-grown lettuce, but I've not heard of any from a vertical farm. So, can you talk a little bit about health and safety, and food safety when it comes to field production versus indoor growing?”

Roy: “The challenge has been full case-level traceability. A lot of work was done around the first traceability initiative. But, until all channels of the supply chain jump all in together around traceability, it's going to continue to be a challenge rather outdoors or indoors. Controlling more elements inside allows to produce a safer product, but in a lot of ways, it creates more risk because it's easier to contaminate all of your crops. So it’s really an all-in from everybody jump in and says we're going to prioritize food safety. And yes, this product might be 50 cents or a dollar more of a product, but we're putting a premium on food safety. We know these ‘five golden rules’ they are compliant against and we're going to pay a premium for that. As a buyer, you’re not looking at food safety first, so it’s actually a broader conversation that impacts both indoor and outdoor. It's great to have you here with your unique perspective both as a buyer and now our producer.”

Colangelo: Vertical farming is the shiny new toy in agriculture. It's attracted tremendous media attention and VC investments. Mostly, VC seeks a high rate of return. How has VC investment impacted the business decision making in vertical farming operations?

Roy: “I think it creates a different pressure. Whereas, if you're a self-funded or institutionally funded organization, there's more of a long view on what you're doing and when you're crawled by VC money there's a higher expectation on the return. I think that in a lot of ways vertical is still early stage and technology has not gone to a point that had a mass scale to produce cost-effectively. The market has not matured enough to demand a premium to get those returns. The pressure impacts your day-to-day decisions as a business leader. Are you going to make the right decisions, long-term, for the help of a product in your business, or, are you going to make some short-term decisions that might not allow long-term success in your business?

Colangelo: “Banks don’t provide debt finances to new ventures. Private equity and VC being the only few sources, how do new ideas get funded in this market?”

Roy: “In the last four of five years, from an investment side people have really have given more attention to how much food is consumed, and the size of the industries, the supply chains around products. In general, the energy coming into the food space, investing, bringing innovation and new ideas to disruption is all very exciting, but I think you speak to that challenge. ‘How do you balance funding your business to get started, while still staying true to your principles and creating something long-term?’ So I think that these many people were battling with these challenges. From a macro view to me, it's exciting to see a lot more VC money coming into fresh produce than you’ve seen historically. With that will come continued innovation and disruption.”

For more information:
Green Sense Farms
Robert Colangelo, Founding Farmer
www.greensensefarms.com

Tanimura & Antle
Matt Roy, VP Business Development CEA
www.taproduce.com

Indoor AgTech Innovation Summit
www.indooragtechnyc.com