How COVID-19 Has Impacted Indoor Farming
January 11, 2021
Yahoo Finance’s Zack Guzman and Akiko Fujita discuss indoor farming outlook and the plant-based fresh food categories with Viraj Puri, Gotham Greens Co-Founder, and CEO.
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ZACK GUZMAN: Welcome back to Yahoo Finance LIVE. Of course, 2020 was an interesting year for a lot of startups out there, particularly when it comes to being able to raise capital, as that quickly dried up when the pandemic first hit. But following that, a lot of companies were able to raise new capital to take on some pretty important goals here.
We're going to focus on two, one tied to the reopening of the economy as we continue to-- I don't want to say suffer through online events here, but one Zoom competitor, as well as our next guest here, focused on indoor farming-- a very interesting startup that is trying to challenge some traditional ways of doing things in farming. That would be Gotham Greens, which recently raised $87 million in new investment capital, and we're joined here by the co-founder and CEO of Gotham Greens. Viraj Puri joins us now.
And Viraj, I mean, we've talked about indoor farming for a few years here in the way that it's gained momentum to take on traditional agriculture in perhaps being a way that's more sustainable over the long term. But how have you seen maybe new capital getting put to work here recently as it catches on?
VIRAJ PURI: Absolutely. Well, I think to start with, this pandemic has really underscored the value proposition of more resilient supply chains. And indoor farming can really provide that because one can really farm anywhere, regardless of climate or availability of arable land, et cetera. So in our country, up to 50% of fresh produce is imported, and the balance majority comes from places like California and Arizona on the West Coast, which requires that fresh produce has to travel great distances to reach consumers throughout the country.
Conversely, indoor farming allows one to really grow anywhere, regardless of the climate, regardless of the soil conditions or land, et cetera. So I think when supply chains were really challenged early on this year with the pandemic, it has really revealed some of the benefits of indoor farming. And then, on top of that, sustainability is more of a topic that more consumers and companies care about.
And then on the third, sort of, point is food safety. We've seen more and more incidences of food safety and food safety recalls associated with that over the past decade or so, and indoor farming provides a compelling solution to reduce some of those risks. So as a result, we've seen a lot more capital rush into the space over the last 24 months.
AKIKO FUJITA: When you talk about the reliance that we saw exposed early on, in terms of where the food comes from, in particular states like California or Florida, how do you see the distribution shifting as a result? Indoor farming, of course, inherently means you can farm in any different region here. How have you seen that shift, the distribution channel shift as a result of that?
VIRAJ PURI: Yeah, similar to other sectors, we're seeing more last mile distribution centers, and we're seeing more just-in-time fulfillment, right? So with indoor farming, one can do that. The traditional supply chain is obviously dealing-- it's quite complex. A lot of middlemen, a lot of different actors along the way, and you're dealing with a highly perishable product when it comes to agricultural commodities-- many fresh agricultural commodities, particularly the ones that we grow and sell in market, including lettuce, leafy greens, herbs, things like that.
So this decentralized supply chain allows us to deliver much quicker to retailers. They don't have to place their purchase orders so far out in advance. And then it also allows us to fill those voids on the store shelves, depending on demand and supply with shoppers. So it really also reduces waste, which is a real ill that faces the food supply chain. Almost 50% of fresh produce in our country is thrown away between farm to fork, and we believe that indoor farming systems can really help create that equilibrium between demand and supply, which helps reduce that waste.
AKIKO FUJITA: Viraj, how have you seen your customer base shift? Is it-- is it restaurants that are getting in, that are expanding your base? Is it grocery stores?
VIRAJ PURI: Primarily grocery stores. I think pre-pandemic, it was really both. We did lose some food service business, restaurant business, at the onset of the pandemic, but that was more than made up for by increase in retail sales. Our revenue doubled in 2020, compared to the previous year, and a lot of that is a result of just the supermarkets wanting suppliers that can be more nimble with the supply chain.
And then increasingly, consumers are spending their dollars behind brands that speak to many of their values around ESG, around food safety, around supporting local economies. So those have been some of the factors that have really led to our doubling of our growth this last year, and we're very optimistic about the years ahead, for both our company and the broader indoor farming industry.
ZACK GUZMAN: Yeah, in the broader space discussion, too-- I mean, I know you guys have greenhouses across five states-- New York, Rhode Island, Maryland, Colorado, Illinois-- but when you think about the push here for more sustainability coming from the incoming administration, how much of that really throws fuels on the fire in terms of growth right now in expectations that there could be more friendly policy around indoor farming? Was that the impetus here to raise new capital, and if so, where do you look to put that to work in the short term?
VIRAJ PURI: I think there was a variety of factors that led to raising this capital, but primarily, it's less about the incoming administration and really more about capturing this opportunity in the marketplace to capture share from incumbents that are facing a lot of headwinds, whether it's climate issues, water issues out west, labor issues due to, sort of, you know, the reliance on migrant farmworkers to harvest and package and process product, along with food safety.
So we had actually put an expansion-- a pretty aggressive expansion plan into place prior to the pandemic, but post-pandemic, we're accelerating that change and using this capital to expand our network of greenhouse facilities across the country. As you pointed out, we currently operate-- we have manufacturing facilities in five states, and we service about 40 states. And our vision in the next few years is to really cover much of the country to truly become a national supply chain solution and consumer brand for consumers around the country.
ZACK GUZMAN: Yeah, it was interesting when you first saw indoor farming kind of taking hold here in the country and always interesting to see how fresh this stuff is in the store when I come across Gotham Greens. But Viraj Puri, I appreciate you coming on here. Co-founder and CEO at Gotham Greens. Thanks again.