HALAL INDUSTRY BY PETRA LOHO

08 MAY 2020

INSIGHT

SALAAM GATEWAY

When Stanford Graduate School of Business alumnus and private equity expert Sky Kurtz started in Silicon Valley, he had no idea his investor and entrepreneur journey would lead him to farm tomatoes in the middle of the Arabian desert.

While a New Zealand composite materials business brought Kurtz to Dubai, what made him stay was to help the United Arab Emirate build food security.

“There’s a need to move to more resource-efficient agriculture everywhere, not only in the UAE,” Kurtz told Salaam Gateway. “The Middle East is just an extreme case with less arable land and little water.”

Food security largely covers three dimensions — the availability, affordability, and accessibility of food. The UAE’s biggest challenge is availability, given its agricultural limitations.

Conscious of the importance, the UAE established a State Ministry for Food Security in 2017, leading to the UAE National Food Security Strategy 2051 formulation.

The strategy aspires to champion agribusiness trade facilitation, enable technology-based production and food supply, promote international trade partnerships, enhance nutritional intake, and reduce waste, according to the ministry’s website.

Supporting the strategy financially, in March 2019, the Abu Dhabi government announced a 1 billion dirhams ($272 million) incentive package to support the development of the domestic agri-tech industry.   

Offering rebates up to 75% of R&D costs, along with other monetary and governing privileges, the scheme targets three agricultural segments to increase production: precision farming and agrarian robotics, bioenergy, and indoor farming.

SMART FARMS

Having co-founded his tech-enabled agribusiness focusing on year-round generation of fruits and vegetables already in 2016, Kurtz’s Pure Harvest Smart Farms hasn’t enjoyed grants from this government package yet, albeit being a perfect match.

However, in April, the firm raised $20.6 million in additional funding and secured a further $100 million commitment from Kuwait’s national investment company Wafra to finance the company’s local and regional expansion.  

“We want to grow very quickly. That’s why we raised such a large sum of capital,” Kurtz said. “Access to funds is a competitive advantage in this capital intensive business as we’re building food infrastructure.”

Initially, Pure Harvest received a $5.6 million seed funding from Shorooq Investment Partners and aligned with the UAE government by securing a 5.5 million dirhams ($1.5 million) investment through the Mohammed bin Rashid Innovation Fund in October 2018. 

Kurtz’s fundraising success reflects on a worldwide trend: the global funding to agriculture technology start-ups grew by 43% year-on-year, to almost $17 billion in 2018, according to AGFunder, an online venture capital platform. The U.S., China, and India accounted for almost 80% of all agri-tech funding.

GREENHOUSE PROOF OF CONCEPT

Pure Harvest operates a high-tech, semi-closed, and climate-controlled greenhouse.

“We see ourselves as an energy company,” said Kurtz. “We harvest solar power and turn it into healthy calorie sources as cheaply as possible.”

Growing the product hydroponically, Kurtz views Pure Harvest exceedingly similar to a vertical farm.

“The big difference is we use natural light. We have more than most plants can utilize,” Kurtz said, alluding to the Middle East’s equator proximity.  

However, the entrepreneur feels his business model is to a greater extent financially viable than vertical farming.

“Our costs for certain products are under one dollar per kilogram,” the Pure Harvest CEO added. “Vertical farms produce typically between $3.50 and $5.50 per kilogram.”

Kurtz claims to have one of the world’s lowest manufacturing costs, of any food production system, including the most ambitious Dutch producers. 

“We are producing at a competitive cost structure now at our pilot farm. At scale, we believe we can do even better,” Kurtz said.

Pure Harvest’s pilot facility harvests about 600 tons bumblebee-pollinated and pesticide-free-grown tomatoes annually.

The company grows a variety of 17, soon to be 20, different kinds of tomatoes — from small, snack-able ones to exotic and aromatic Japanese pink ones.

“Tomatoes are a truly dynamic and technically challenging crop to grow,” Kurtz explained. “Growing greens is a lot easier, and the tomato market is super competitive with both local, regional and international competition – making it a great test case.”

“It was a matter of proving our concept from a technical but also commercial standpoint,” Kurtz explained, referring to the firm’s institutional investors seeking an ROI-making mass-market product as the company matures.

NO WASTE OF WATER

“We don’t waste anything. We capture it and use it somehow. Whether that’s heat energy, cooling capacity, or water,” Kurtz said.

When the greenhouse is closed, Pure Harvest controls and captures evaporation, the treated condensation is reinjected into the irrigation system to water the plants.

According to Kurtz, Pure Harvest uses a little over 30 litres of water per kilogram of production, compared to the around 250 litres of traditional farms.

This is a saving that is crucial for a water-scarce country like the UAE, listed the third most insecure country in the Middle East, after Yemen and Kuwait on the Pardee RAND Food-Energy-Water security (FEW) index.

The country’s renewable water resources are less than 100m3/capita/year — or one-tenth of the 1,000 m3/capita/year water poverty line — according to an article by Hameed et al. published by MDPI, a peer-reviewed journals issuer.

STRAWBERRY FIELDS AHEAD

Forming a partnership with Sheikha Shamma bint Sultan bin Khalifa Al Nahyan, the founder and CEO at the Alliances for Global Sustainability, Pure Harvest secured over 30 hectares to design more greenhouses.

“We’ll build out Sheika Shamma’s land in multiple stages to a production capacity equaling around 24 hectares,” Kurtz said, noting the current farm is just under one hectare.  

The geographical expansion plans will see Pure Harvest also build in Saudi Arabia and Kuwait. Extending the product line, Pure Harvest will start growing greens and strawberries in the UAE soon.

MORE INVESTMENT

Early April, the Abu Dhabi Investment Office (ADIO) announced it would provide 367 million dirhams ($100 million) to four firms – two local, two American – to establish new R&D and farming facilities.

“The UAE has been keeping the investments in the agricultural R&D in focus for a transformative food system,” Dr. Dino Francescutti, the United Nations Food and Agriculture Organization’s (FAO) UAE representative, told Salaam Gateway.

“By determinedly facilitating R&D among its stakeholders, the UAE will be able to develop and benefit from new technologies, increase productivity and efficiency of its limited agricultural resources, thus contributing to the country’s food security and resilience.”

One of the four recipients of ADIO’s $100 million is Madar Farms, a vertical farming pioneer operating a R&D farm growing seven different microgreens in Masdar City.

Founded in 2017 by Kuwaiti Abdulaziz AlMulla, Madar will build the world’s largest commercial-scale indoor tomato farm located in the Khalifa Industrial Zone Abu Dhabi that lies between Abu Dhabi and Dubai.

Farming vertically is certainly going up. From $2.5 billion in 2017, the vertical farming market size will likely surpass $20 billion by 2026, according to a research report by Global Market Insights.

Vertical hydroponic farms require artificial lighting, heating, and cooling systems, ventilation, shade and nutrient dosing, the Produce Marketing Association writes in the 2019 Fresh Produce Industry: United Arab Emirates report.

This explains why many UAE farms are hesitant to adopt the new technology regardless of the government support offered, fearing the increased set-up and electricity costs, according to the trade organisation.

There are more challenges to deal with, though.

“The agri-tech products developed in Asia, Europe, or North America were created to be successful in their environments and cannot simply be copied and pasted here in the UAE,” Madar Farms brand manager Haifa Alrasheed told Salaam Gateway.

“Effective localisation is the key to success as dust, humidity, and heat can take their toll.”

The tomato farm, designed by the Dutch producer Certhon will be installed with more than 5,000 LED fixtures and is expected to be fully operational by the end of 2020. Certhon also equipped Pure Harvest’s pilot farm.

“This 5,000 square meter (0.5 hectares) facility will enable us to grow approximately more than a ton of fresh tomatoes every day,” Alrasheed said. “The domestic production only covers about 8% of the total consumption.”

“We’ll also triple the microgreens supply, sold through four online portals,” Alrasheed explained.  Demand dependent, the current daily capacity is up to 10 kilograms.

UAE CONSUMPTION   

By one calculation, the UAE’s food consumption is to grow at an annualized rate of 3.5% from 8.7 million tons in 2018 to an estimated 10.3 million tons in 2023, according to Alpen Capital’s September 2019 “GCC Food Industry” report.

In 2016, the UAE consumed 1.5 million tons of vegetables, with tomatoes being a favorite.

Domestic tomato production grew to over almost 79,000 tons in 2018, nearly 80% up from 2016, according to FAO statistics.

Despite the increase, the UAE is still not self-sufficient and must import to meet the demand.

With a 27.4%, 13.5%, and 12% share in dollar value, Jordan, India, and the Netherlands were the top three source markets for the UAE in 2018, according to the U.N. Trade Map, International Trade Centre. Iran and Malaysia followed with a 10.5% and 7.7% share, respectively.

COVID-19 CHALLENGING FOOD SECURITY

Now, the COVID-19 pandemic amplifies just how fragile food security is beyond the lack of arable land and water scarcity. 

“The diffusion of the pandemic poses major food security and supply chain threats worldwide,” the United Nations’ FAO UAE representative Dr. Francescutti said.

Labour shortages to produce, harvest and process food; an increasing farmer’s struggle to access the markets; the decreased perishable commodities supply, and transport restrictions blocking deliveries cause the risk, the FAO expert explained.

Sky Kurtz’s solution to mitigate such food supply chain risks is simple. “Support the homegrown champions,” he said, appealing to both the UAE leadership and to consumers.

(Reporting by Petra Loho; Editing by Emmy Abdul Alim emmy.abdulalim@salaamgateway.com)

Lead photo: Photo: Vertical farming at Madar Farms in the UAE. Photo supplied by Madar Farms.

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