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Exploring The Costs And Benefits of Indoor Agriculture
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?
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
Publication date: Fri 24 Jul 2020
Author: Rebekka Boekhout
© HortiDaily.com
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Florida Indoor Farming Firm Turns Pandemic Disruption Into Opportunity
Orlando, Fla.-based Kalera had to give away an entire harvest in March when the company's commercial customers closed amid stay-at-home orders. But, like some other greenhouse operations around the country, Kalera found other customers and avoided layoffs or going out of business
JULY 9, 2020
A large greenhouse operated by Brooklyn, N.Y.-based Gotham Greens helped produce food as the coronavirus pandemic cut supply chains in March.
Photo courtesy of Gotham Greens
ORLANDO, Fla., July 9 (UPI) -- A Florida company that grows lettuce in greenhouses turned a desperate situation during the coronavirus pandemic into new opportunities, thanks to a nationwide upswing in produce purchases from indoor farms.
Orlando, Fla.-based Kalera had to give away an entire harvest in March when the company's commercial customers closed amid stay-at-home orders. But, like some other greenhouse operations around the country, Kalera found other customers and avoided layoffs or going out of business. Indoor farms like Kalera produce food close to their customers, in clean, hygienic facilities. The process also is called vertical farming because produce is grown on racks, using hydroponics -- raising crops with water and nutrients, but without soil.
Good hygiene and a local supply are more important than ever during supply chain disruptions and waves of panic buying during the pandemic, said Daniel Malechuk, Kalera's chief executive officer.
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It was literally the day of our first harvest at a new facility when the state announced stay-at-home orders and many of our food-service customers closed overnight," Malechuk said about what the company faced in March."
My reaction at first was massive disappointment. That would be an understatement. But we rolled up our sleeves and were determined to make the best of it," he said.
Kalera has developed its farm technology over the past 10 years and had built a demonstration farm and production facility in Orlando. To the CEO's dismay, the crops in the new greenhouse became ready for harvest just as Gov. Ron Desantis ordered all restaurants closed to indoor dining.
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That meant Kalera -- and other farmers who faced similar closures around the nation -- had nowhere to sell their crops. Some growers buried their produce rather than shoulder the expense of harvesting crops without having buyers waiting.
Among the customers Kalera lost were Marriott Orlando World Center, the Orlando Magic basketball team, and area theme parks, Malechuk said.
Kalera had built a large grow house on the grounds of the Marriott resort to supply fresh lettuce and micro-greens to the kitchens there. But the resort has been closed for months and does not plan to reopen until Aug. 1.
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Instead of destroying the food, Malechuk donated his crop directly to local residents and food banks. That's also when he reached out to Florida-based Publix, one of the nation's largest grocery chains with more than 1,200 stores in the Southeast and Mid-Atlantic regions.
At first, Publix paid Kalera for some crops and donated the produce to food banks.
Worried about possibly laying off his workforce of about 100, Malechuk wrote a heartfelt email to a Publix executive with whom he previously corresponded. His subject line was "Humble Plea."
The email asked Publix to make Kalera a permanent supplier. It worked, and Kalera produce now is sold in hundreds of Publix stores."
I knew Publix wasn't accepting new suppliers at that point, and I didn't think it would work," Malechuk said. "But I had to try, and I told Publix that.
"Unexpectedly, Publix expedited its process for accepting new products because of Kalera's crisis, said Curt Epperson, the company's business development manager for produce and floral.
“We were not only able to help their business -- and all the people who depend on them -- but our customers and our community," Epperson said in an email to UPI.
Kalera was not alone in turning a dismal outlook to a brighter future. Other indoor farm companies overcame difficulties during the pandemic and saw new opportunities.
Brooklyn, N.Y.-based Gotham Greens opened new greenhouses in several states as the pandemic spread around the world, CEO and co-founder Viraj Puri said.
His employees already had been wearing masks in growing areas before the pandemic struck. As coronavirus advanced, management added more levels of safety. "We started detailed health screening calls, temperature checks, increased distancing. It was a hard time for everyone. We all knew people who tested positive, and we saw people lose their jobs," Puri said.
Gotham Greens soon saw increased demand from retail merchants for its greenhouse produce as other farmers around the country struggled to find labor for harvests and had difficulties shipping food across the country during the pandemic, the CEO said."
The pandemic altered life around us, unfortunately, but it also showed that we can help ensure food security with indoor farming in controlled environments," Puri said. "These local supplies for growing produce are going to be important."
A number of other indoor farming operations found new customers -- and appreciation for their products -- during the pandemic, said Joel Cuello, a professor of agricultural and biosystems engineering at the University of Arizona and vice-chair of the Association for Vertical Farming, based in Munich, Germany.
“In the future, customers want to make sure they have reliable access to food nearby. Vertical farming can be hyper-local, with a facility next to your restaurant or inside your grocery market if wanted," Cuello said.
As people value their health more during a global pandemic, nutrient-packed leafy greens are the most likely food that will be produced indoors, especially in remote areas with harsh environments, said Krishna Nemali, assistant professor of controlled environment agriculture at Purdue University in Indiana. "In northern places, like Iceland or Alaska, or in desert regions, like the Middle East, they struggle to grow food outdoors, so they are turning more to hydroponics," Nemali said. "That's where we will see more demand."
Another vertical farm company, Indiana-based Green Sense Farms, also reported an increase in calls and inquiries to its sales staff from potential customers about its technology, said Robert Colangelo, a founder, and CEO.
Colangelo's company provides contract research, design, and construction of indoor, controlled-environment agriculture facilities. Green Sense charges a little under $1 million to provide a system that includes an automated germination room, grow room, equipment room, and cooled packinghouse room."
What we found is the COVID virus caused people to look at the length of their supply chains. Long complex supply chains can really be disrupted," Colangelo said.
He said he has spoken to officials in various cities who want to learn more about setting up vertical farms."
If you have a food desert [an area with few grocery stores] or a school or hospital in a remote area, you could produce greens right on your property or right next door for that," he said.