Vertical farming, a key subsector of the indoor farming industry, refers to the process of growing crops in vertically stacked beds or shelves inside controlled-environment buildings or containers. The process uses artificial lights and soilless growing techniques to simulate a crop’s optimal growing environment and control the desired outcome in terms of yield, texture, size, and other characteristics.
US VF players including Plenty Unlimited, Bowery Farming, AeroFarms, 80 Acres Farms, and Infarm have seen demand for their products increase amidst the Covid-19 outbreak.
LettUs Grow has ramped up the development of two vertical farm modules so it can supply fresh produce to vulnerable communities in Bristol, England, during the pandemic.
Berlin-based Infarm raised USD 170 million in September 2020 to fund global expansion, as demand for its modular vertical growing system increases
Hydroponic farm operators account for nearly half of our list of disruptors and total funding in the range USD 1.4 - 1.6 billion. These companies follow a soilless growing method that places crops’ roots directly in containers filled with nutrient-enriched water without the need for fish farming tanks (as in aquaponics) or air sprinklers (as in aeroponics). Due to ease of use, lower costs, and higher ROI, hydroponic farms are the most popular growing system in the vertical farming industry.
In contrast, less than 10% of our disruptors operate aquaponic or aeroponic growing systems to vertically produce crops. The average funding per start-up in these segments ranges between USD 35 - 60 million.
Hydroponic farm operators are the highest funded
Plenty Unlimited, Bowery Farming, and Infarm are the top three vertical farming (VF) players in terms of funding with a combined haul of over USD 1.4 billion. These three players are hydroponic vertical farming operators that produce similar products—primarily leafy greens, microgreens, and herbs—and compete on price, volume, location, and efficiency.
Small and independent farmers and less well-funded VF startups tend to operate vertical farms in shipping containers so they can position crops near a point of sale to capitalize on freshness and reduce distribution costs. Given the high cost of purchasing a shipping container facility, often over USD 100,000 per unit, independent farmers cannot easily compete with large VF operators or easily attract mainstream consumers.
Based in New Jersey, AeroFarms, one of the largest disruptors, produces leafy greens using an aeroponic vertical growing system. The company sells locally grown greens to nearby restaurants and grocery stores as well as online. As of October 2021, the company supplies to over 500 grocery stores primarily across the Northeast region of the US including Stop & Shop, Whole Foods, Amazon Fresh, FreshDirect, and Walmart.
The company claims its aeroponics technology yields annual productivity up to 390 times greater than traditional field farming and is packaged conveniently for consumers, ready to consume without the need to wash the product.
As of July 2022, the company operates two farms in New Jersey, and Virginia (136,000 sq. ft) and reportedly has 16 more farms in the pipeline. AeroFarms also announced plans to increase production at its Virginia facility in July 2022 , which will potentially supply 50 million customers in the Mid-Atlantic and Southeast markets. The company also operates a research & development (R&D) center at its global headquarters in Newark and plans to build a new one in Abu Dhabi (expected to open in Q1 2022). To further strengthen its presence in the Middle East, the company partnered with the Qatar Free Zone Authority (QFZA) and Doha Venture Capital in November 2022 to build a new vertical farm in the Qatar Free Zone. In addition, the company is also planning to expand to the Midwest region via a collaboration project with the World Wildlife Fund (WWF) and St. Louis Controlled Environment Agriculture Coalition (STLCEA). Via the project, the company plans to build its largest plant (spanning 150,000 square foot) at St. Louis MO-IL Metropolitan Statistical Area (MSA).
Besides serving the retail market, the company has also entered into partnerships to further strengthen its presence in the vertical farming industry and to further develop its technology. The multi-year partnership with Nokia Bell Labs (Nokia’s industrial research arm) allows AeroFarms to integrate Nokia’s drone and AI technology into its vertical farming system. AeroFarms also entered into a multi-year research agreement with Cargills (a Minneapolis-based sustainable manufacturer of quality cocoa and chocolates) to improve cocoa bean yields and develop climate-resilient farming practices. It has also partnered with Singapore Airlines to supply greens.
In May 2021, AeroFarms submitted IPO documents to go public via a merger with the Special Purpose Acquisition Company (SPAC) Spring Valley Acquisition Corp, valuing the new entity at USD 1.2 billion. However, in August 2021, though the company received approval from Spring Valley’s shareholders, the minimum cash requirement in the merger agreement was unmet. As per the company, if additional capital requirements are satisfied, the business combination would be completed on or before September 24, 2021, with the stocks trading on NASDAQ under the ticker "ARFM". In October 2021, however, AeroFarms terminated the merger as the transaction did not meet AeroFarms shareholders' best interest, halting its IPO plans.
Farm Operators: Aeroponics:
Farm Operators: Hydroponics:
Farm Operators: Aquaponics:
The vertical farming industry has not significantly attracted the attention of large conventional vegetable producers such as Bonipak Produce, Tanimura & Antle, and Duda Farm Fresh Foods. Tanimura & Antle has meanwhile only developed a hydroponics greenhouse in Livingston, California to accommodate consumer demand for fresh and locally-grown foods. However, the industry is seeing large supermarket chains partnering with startups to either set up vertical farms at stores or source vertically-grown produce for their customers. For instance, Kroger, Sobeys, and Publix partnered with startups to set up on-site vertical farms and source fresh produce for consumers. Companies like McCain Foods also invested in startups to support the development of vertical farming technologies.
Kroger, the second-largest retailer in the US, offers its retail services in four major formats—supermarkets, multi-department stores, price-impact warehouse stores, and marketplace stores—under several banners including Kroger, Ralphs, Dillons, QFC, and Smith’s. Its “Zero Hunger-Zero Waste” sustainability initiative, which oversees delivering affordable and fresh produce to consumers year-round, has led to the company’s increasing interest in vertical farming in North America.
Kroger partnered with Infarm, a Berlin-based hydroponic vertical farming company, to develop hydroponic modular farms in North America (November 2019). The partnership was reportedly the first of its kind in the US. The new modular living farms were planned to be established in 15 QFC Kroger stores across Bellevue and Kirkland, Washington. The vertical farms oversee the growth of nine varieties of herb and lettuce. Via the partnership, Kroger expected to develop an in-store farming technology.
To continuously provide its customers with vertically grown produce, Kroger also partnered with 80 Acres Farm, a popular hydroponic vertical farming startup in the US (November 2019). The partnership involved launching a 15-month pilot program to distribute 80 Acres Farm produce (basil, baby cucumbers, tomatoes, and salads) via Kroger’s newly established “On The Rhine” store in Cincinnati. As of March 2021, 80 Acres’ fresh produce is sold across 32 Kroger stores, with plans to further expand the product offering to 316 Kroger stores around Columbus, Indianapolis, Lexington, and Louisville.
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