The Greening of The Food Supply Chain: Vertical Farming
Helen Carey Aug 02, 2018
Today’s consumers are more eco-conscious than ever, seeking information regarding the origins of the products they purchase in search of greater peace of mind that their buying habits are not harming the environment or workers. In recent years, some players in the agriculture industry have been shifting operations to meet these changing consumer demands, “greening” their processes and seeking more sustainable methods of farming.
Aside from meeting consumer demand for more eco-friendly, socially responsible practices and fresher, local food, these greening initiatives can also benefit food companies themselves by reducing costs and shortening delivery distances while creating better working conditions for employees and protecting the environment.
So, how exactly does vertical farming work, and how are today’s companies and startups taking advantage of the shifting landscape to offer a new way to acquire fresh produce?
The Benefits of Vertical Farming
Vertical farming also referred to broadly as indoor farming, is the practice of growing produce in layers, stacked vertically, as opposed to the traditional method of growing in the ground. Vertical farms may make use of soil, aeroponic, or hydroponic growing techniques.
Some of the main benefits of vertical farming include:
- Ability to garden anywhere, in any kind of environment
- Almost complete immunity to pests
- Enhanced consumer safety as risk of pathogens is virtually eliminated
- Insusceptibility to harsh climate and weather
- Consistently high quality
- Greatly reduced need for soil and water
- No dependency on sunlight
- Ability to grow produce closer to consumer base
- Ability to utilize renewable energy for power
- Typically higher pay for workers
How Food Supply Companies Are Implementing Vertical Farming
Several companies in the food supply and agriculture industry are implementing vertical farming techniques, pioneering a new way of growing, distributing, purchasing — and thinking about — our food. Investors are taking notice.
For example, BrightFarms, a high-tech greenhouse operator, has raised $55 million for vertical farming initiatives. The company stated that it plans to use the money to extend its greenhouse farms. Another company, New York-based Gotham Greens, recently announced it had raised $29 million to expand facilities, take on new employees, and enhance R&D efforts.
San Francisco-based food start-up Plenty, which grows various leafy greens hydroponically, raised an impressive $200 million from the SoftBank Vision Fund. They now produce 4.5 million pounds of greens every year and are testing some food products for scalability.
The ability to supply retailers with locally grown, sustainable products year-round has caught the attention of many investors, along with the increased consumer demand for more eco-friendly food purchasing options — for which today’s consumers are willing to pay more money. Companies are incorporating these trends into their business strategies: In June, fast-food giant Wendy’s announced that it plans to source vine-ripened tomatoes solely from greenhouse farms by early 2019.
This goes hand-in-hand with rising consumer concern for employee working conditions, which are often unsafe and low-paying in the agriculture sector. Combined with extreme weather patterns and land disputes, the situation can lead to a very insecure industry.
Vertical farms tend to pay higher wages than traditional farming setups. Further enhancing safety, the chance of acquiring foodborne illnesses is greatly reduced with vertical farming, cutting down on overall liability and the risk of damaged reputations and associated costs.
The Challenges Surrounding Vertical Farms
While vertical farming is an exciting new development for the food supply sector, this new method is not without its drawbacks.
First off, the consumer cost of items grown in vertical farms is much higher than the costs of traditionally grown items. This is a result of the massive amount of funding still needed to build farms large enough to allow for lower prices. Equipment also adds to the price tag; heating and cooling systems, shading technologies, lights, environmental controls, and other equipment all require considerable capital. As an example, AeroFarms, a leader in the field, spent $30 million on its flagship aeroponic farm in Newark.
This makes for high electricity bills as well, and operating costs can near $27 per square foot. The overall carbon footprint of these farms remains high, though proponents say technology is advancing every day to make vertical farming more sustainable and affordable.
Even still, vertical farming requires intense oversight, labor costs can add up quickly. Some studies show that vertical farms will need to hire 100,000 workers over the next 10 years if growth continues at the same pace.
And while consumers have shown they are willing to pay more for local, eco-friendly products, it’s not yet proven that customers are willing to shell out more for food grown indoors, specifically. Studies have shown that consumers do not necessarily think of vertical farms as “natural,” which may impede overall growth.
Many analysts say the demand is not yet high enough to safely call vertical farming a guaranteed success story, but experts, consumers, and those in the industry are sure to keep an eye on future innovations and advancements as the food supply sector continue to shift and evolve.
Looking Ahead, Looking Up: The Future of Vertical Farming
While R&D is ongoing, and the various benefits and drawbacks of vertical farming are still being explored, food supply companies and investors alike will be keeping tabs on the growth of this new industry.
Through lean methodologies, optimization, improved inventory forecasting, and a range of other techniques currently being explored, vertical farming and other new food supply initiatives may indeed prove to be as beneficial as they are revolutionary.
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