BY JAYSON BUSSA

September 26, 2021

When Brooklyn, N.Y.-based urban indoor farming operation Square Roots Urban Growers broke into the $8.1 billion packaged salads and greens segment of the food industry this month, the company did so by leveraging a crucial partnership in West Michigan.

The technology-focused food producer — which grows a variety of leafy greens, herbs and other produce inside cloud-connected, climate-controlled indoor farms — maintains one of its two campuses at the headquarters of Gordon Food Service Inc. in Wyoming.

There, Square Roots was able to grow the necessary components to launch its new Spring Mix and Super Mix packaged salads, which are available in stores like Whole Foods Market, Fresh Thyme Market, FreshDirect, Meijer Inc.’s market format stores, and D&W Fresh Market, among others. Gordon Food Service helped Square Roots develop those inroads to find space on store shelves.

“People are tired of all the sad, limp salads on the shelf today,” said Square Roots CEO Tobias Pegg, who co-founded the company with Kimbal Musk, the brother of tech entrepreneur Elon Musk. “So our new salad mixes give that everyday salad a big boost — with healthy microgreens, crisp baby leaves and really flavorful and unique produce, like baby kale and tatsoi.”

Farm friends

After launching in August 2016, Square Roots raised $5.4 million in seed funding the following year from individual investors and New York City-based venture capital firm Collaborative Fund.

In 2019, Gordon Food Service (GFS) announced that it had signed a strategic partnership with Square Roots. Under the agreement, GFS plans to create indoor farm campuses at, or near, its own distribution centers and retail stores across the country, enabling the food service company to produce and distribute a variety of herbs, greens and produce all year round.

Square Roots deployed a farm — which is contained within a series of horizontally or vertically stacked storage containers — to the GFS headquarters at 1300 Gezon Parkway SW in Wyoming in September 2019. The company recently expanded that operation.

Citing an increase in demand for locally grown produce, the partners broke ground on an additional farm at the same location in December 2020 during the COVID-19 pandemic and planted seeds already in March of this year.

Square Roots’ other campus is located in the Bedford-Stuyvesant neighborhood of Brooklyn, making Grand Rapids essentially the company’s home away from home.

“We have many shared values, including a willingness to experiment and innovate, and figure it out together,” Pegg said of why GFS was a good fit for the partnership. “It is a great strategic business partnership for Square Roots, but we also have a lot of fun working together, as well. Gordon Food Service is a family values company with a rich history. … They know quite a bit about how to get great food to customers reliably. And we’ve learned a lot working collaboratively with them.”

The deployment of the Wyoming farm was a testament to the flexibility that is built into the Square Roots model. This production nimbleness has come in handy in a volatile market that has accompanied the COVID-19 pandemic.

By developing a sophisticated smart-farm platform, Square Roots is able to keep its thumb on all of the metrics associated with production. The company’s upcycled shipping containers with prefabricated modular grow zones are ready to go the moment they arrive onsite.

“We can ship and deploy these farms to any site in the world, each programmed for a different climate to grow different crops,” Pegg said.

This innovative approach to indoor farming is something that Gordon Food Service was quick to utilize, as well.

“Tobias and the Square Roots team are on the leading edge in their science and technology and equally important their hearts and passion are in the business too, which is so important to us,” GFS President and CEO Rich Wolowski said in an emailed response to MiBiz. “On a purely operational level, having a Square Roots indoor farm in close proximity creates a terrific opportunity to offer hyper-fresh, hyper-local produce, with unmatched quality, to our customers all year long. We’re excited to grow our relationship with Square Roots and have more co-located farms planned in the near future.”

COVID volatility

The various stages of the COVID-19 pandemic brought radical shifts in the food industry with grocery stores experiencing a demand surge in the early portions of the pandemic while restaurants and food services around Michigan slowed to a crawl, hampered by government-mandated shutdowns or capacity restrictions.

Through its flexible business model and relationship with an industry veteran like GFS, Square Roots was able to adjust as needed.

When more people turned to cooking at home, Pegg said many gravitated to locally grown produce because it lasts in refrigerators longer. This is a behavior that has persisted even as the pandemic winds down.

“(A new focus on locally-grown produce) accelerated the adoption of indoor-grown produce across the industry — and we definitely benefit from that,” Pegg said. “Customers and retailers are putting a premium on foods that are healthy and offer longer-lasting freshness, and as a result, we’ve seen a big increase in demand.”

Since the beginning of the pandemic, Square Roots has more than doubled its output for classic crops, like basil, while also introducing several new items like a range of herbs and salad mixes. 

“The indoor farming segment has been a strong performer at grocery stores and we see a long runway of growth for our industry,” Pegg said. “Household penetration for organic produce is nearly 79 percent, but just 8 percent for the indoor segment. We think this shows that the indoor segment has a massive, long runway for growth because there’s a health halo associated with both categories.”

Pegg also predicted that the surge in home cooking and emphasis on locally grown produce is here to stay.

Sharing the wealth

Square Roots isn’t the only operation benefitting from these favorable market trends. Caledonia-based Revolution Farms LLC, a hydroponic farm located at 2901 76th St. SE, grows premium lettuce varieties and field greens year round. The facility features a 2-acre section that is fully automated — from planting the seeds to harvesting.

“We definitely saw the demand spike (during the pandemic) with the retailers,” Revolution Farms Chief Operating Officer Dan Vukcevich told MiBiz. “And with what’s happened with all the supply chain issues, we’ve seen that demand stick. The bump we felt has stayed around. The wholesale business has really come back, as well.”

While more names are starting to gain a foothold in the indoor farming segment of the market, Vukcevich said there is still plenty of space for companies.

“Still less than 1 percent of leafy greens come from places like ours,” he said. “We think Square Roots can do well and we can do well all at the same time. People are paying more attention to where their food comes from. They want local and fresh. Square Roots is one way to do it. We believe in a little different way of growing.”

As for Square Roots and GFS, the two indoor farm facilities in the Grand Rapids area are seemingly only the beginning.

“We see significant potential for Square Roots farms across our U.S. and Canadian distribution footprint,” said Wolowski of GFS. “We’ll pace our investments consistent with demand and other market conditions, beginning with several sites already planned in the next 12 months.”

He added: “We’re excited to see what the future holds beyond that, but certainly we anticipate continued growth as both our commercial and consumer customers become familiar with Square Roots’ great product and unique ability to provide high quality, nutritious produce all year round.” 

Jayson Bussa

Senior Editor

jbussa@mibiz.com

Tagged under Square Roots Urban Grower Gordon Food Service Inc Revolution Farms LLC