"CEA Can Increase Its U.S. Market Share By 5x Over The Next 10 Years"

S2G Ventures rResearches

Controlled Environment Agriculture Market:

Investment in CEA has surpassed $2.0B across North America and Europe spurring new start-ups, innovation and corporate engagement across the supply chain. With increased demonstration of the viability of controlled growing, a newly launched report predicts that CEA will support more than 10% of US vegetable and herb production by 2025 leading to significant opportunities for growers over the next decade.

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The new report, Growing Beyond the Hype: Controlled Environment Agriculture, launched by S2G Ventures reveals how innovation in the field of Controlled Environment Agriculture (CEA), including greenhouse and indoor farming, will lead to ripple effects across the food system and more sustainable methods of production. S2G Ventures is a multi-stage investment firm committed to advancing sustainable solutions in food and ag – its portfolio companies include Beyond Meat, sweetgreen, Lavva, Apeel Sciences and more. The report predicts the maturation of CEA will lead to differentiated, quality products, cost-competitive pricing and a more resilient, traceable and trustworthy supply chain. These new supply chains may represent a transition for the changing urban real estate landscape post-covid.

"Controlled farming has the potential to offer consumers and supply chain stakeholders resilient, sustainable, local, high-quality products," said Walter Robb, Executive-in Residence at S2G Ventures and former co-CEO of Whole Foods. "It is a growing part of our evolving food system and can work alongside outdoor production to mitigate climate risk and help solve systemic nutrition and food access challenges."

S2G Ventures expects that CEA will have far-reaching implications for the future of our food system in three key areas.

Local production and controlled environments will lead to a more resilient, traceable and trustworthy supply chain
Despite being a $1.2 trillion global industry, fresh produce faces significant supply and demand challenges resulting in a systemic lack of high-quality, affordable products reaching consumers. According to the Lancet, only 36% of the global population in 2015 had adequate availability of fruits and vegetables to meet the WHO age-specific minimum nutrition targets. 

In the United States, for example, the fresh produce market is challenged by the limitations of outdoor production, including climate, field loss exposure, resource intensiveness, and limited ability to iterate or diversify, as well as geographic constraints resulting in products traveling 7-10 days on average from farm to consumer. As a result, the U.S. is reliant on other countries to meet demand with 53% of fresh fruit and 32% of fresh vegetables imported annually according to the FDA.

If just 13% of vegetables and herbs shift to local CEA production by 2025, the United States can add $2.3bn additional production capacity and reduce our need for fresh vegetable imports by 15%. Local production can save up to 9 Trillion food miles through shorter transportation routes minimizing shelf life time spent in transit and reducing the amount of food waste by retailers and consumers. Additionally, controlled environments improve food safety, traceability and consistency of production.

Technology and operations advancements drive improvements to CEA unit economics that can compete with or beat outdoor production.
In order to gain market share, CEA production must become cost competitive with outdoor production. High upfront capex costs of facilities and equipment as well as energy costs, labor and product inputs, have historically made costs of CEA growing prohibitive. But innovation of grow inputs, improved grow systems, and optimization of facility productivity are driving more cost-effective production. Those innovations combined with CEA's higher number of grow cycles, 10+ for Greenhouse and 20+ for Indoor, will enable CEA to achieve unit economics that are at cost parity with outdoor.

CEA will usher in the next wave of biodiversity, nutrient density, and flavor innovation providing retailers with differentiated, quality products.
According to the UN's Food and Agriculture Organization, about 75 percent of the world's food comes from just 5 animal species and 12 plants. Almost half of our plant-derived calories come from just three foods: wheat, corn and rice. Germplasm for these plants are bred for long storage time and disease resistance, at the expense of flavor, color, and nutritional value. The lack of biodiversity and nutritional value in our global diet restricts the value that plant molecules can play in human health.

Indoor Agriculture offers new grow formats, methods and technologies that promise to increase the quality, consistency and diversity of produce. Advancements in CEA-tailored seeds bred for traits such as flavor, color, nutrient density and ripening will expose consumers to new flavors and more varied products. Ultimately, indoor agriculture will support customized grow recipes as IP, branded produce, local production of hard to access specialty ingredients, spices and superfoods and eventually inputs for food as medicine. 

"Controlled growing is a critical solution to address both the current supply challenges brought to light by COVID and the pressures on outdoor growing exacerbated by climate change," said Sanjeev Krishnan, S2G Ventures Managing Director and Chief Investment Officer. "We believe CEA can grow its US market share by five times over the next 10 years in response to these pressures and continued consumer demand for fresh produce."

The report
Growing Beyond the Hype: Controlled Environment Agriculture is based on S2G Ventures desktop research and interviews with over 20 industry experts including CEA growers, systems providers, policymakers, academic institutions, outdoor growers, ag input suppliers, philanthropists, and other investors. The report outlines the opportunity for CEA to resolve the current lack of high-quality, affordable produce driven by limitations in outdoor production and customer geography and outlines three areas indoor production must overcome to take significant market share including cost, product selection and productivity.

To read the full report, download at https://www.s2gventures.com/reports 

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3 Dec 2020

Farmers Markets Across the US Face Potential Economic Crisis from COVID-19

Across the US, farmers markets operators–the organizations and individuals who plan, coordinate, and run America’s farmers markets, are engaging in herculean efforts to protect their communities from COVID-19. But even as interest in local foods spikes nationwide, many market operators face the double threat of increased costs to operate during a pandemic, in addition to declining income. To make matters worse, many aren’t eligible for current federal relief efforts.

Farmers markets have always been a hub for innovation. When farmers have opted or been forced out of the traditional supply chain, farmers markets have served as a lifeline to their business, filling a vital role to move their goods from field to plate. Now, in this time of crisis, farmers markets are at the forefront of adapting rapid solutions and innovation to protect staff, customers, and community. Apart from these efforts, emerging research suggests sunlight  effectively kills COVID-19, adding more support to the idea that farmers markets may be the safest place to shop for groceries during the pandemic: 

“There are benefits to visiting a farmers market in light of coronavirus in terms of the fact that you’re outside, there’s fresh air moving and the supply chain is shorter,” said Yvonne Michael, an epidemiologist at Drexel University School of Public Health. “…so I would definitely encourage people during the coronavirus to visit a farmers market.”

But changes come with both increased costs and decreased revenue for organizations that run farmers markets. According to a Farmers Market Coalition member survey, 74% of respondents reported decreased income, while 93% report added costs, including the purchase of PPE for market staff, rental of more handwashing stations, new software or services, and additional staff to rearrange market layouts and monitor customer traffic. The need to reduce the number of vendors to enforce physical distance requirements, while other vendors are unable to attend markets due to health concerns, age, and labor shortages, points to a steep decline in revenue for market organizations. In a similar survey by the California Alliance of Farmers Markets, nearly 20% of respondents reported concern that they may not survive the economic impacts of COVID-19.

“We expect to lose almost $200,000 by the end of the year” said Kate Creps, Executive Director of the Heart of the City Farmers Market, in San Francisco, an organization that distributes $1.5 million in food assistance through its markets each year. “Only 50% of our vendors are able to continue selling during this crisis. At the same time, we anticipate over $60,000 in additional expenses to maintain strict social distancing protocol to protect customers, vendors, and staff.”

To make matters worse, farmers markets operators have largely been left out of relief efforts, both public and private. “Farmers markets are probably the safest place to shop now, but that hasn’t happened by accident. It’s thanks to the committed efforts of the community based farmers market operators who deliver for their communities,” said Ben Feldman, Executive Director of the Farmers Market Coalition, a nonprofit representing 4,500 farmers markets across the country. “These are very lean organizations and we are close to a breaking point for many of them, especially if they continue to be shut out of support other sectors of the economy are receiving.”

The impact of losing farmers markets would be massive. Farmers markets facilitate an estimated $2.4 billion dollars in sales for farmers each year. “Without direct assistance for our state’s farmers markets, many of which already operate on a shoestring budget and an all-volunteer staff, we risk losing this vital outlet, drastically affecting the livelihoods of farmers,” according to Robbi Mixon, a farmers market manager and Director of the Alaska Farmers Market Association. “Small to medium scale farmers are the cornerstone of local food systems. If farmers markets disappear, these farmers lose market access and economic stability”

“We are imploring state and federal governments to keep farmers markets in their mind as they develop relief packages,” said Feldman. “Please help markets keep their communities safe and thriving.” 

For more information:
Farmers Market Coalition
farmersmarketcoalition.org

Monday, May 11, 2020