Vertical Farming

Bringing fresh produce closer to consumers with efficient, advanced technology.

Overview

Vertical farming, a key subsector of the indoor farming industry, refers to 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.

Indoor farming allows growers to grow pesticide-free crops year-round, regardless of weather conditions and the availability of arable land. Demand from growing urban populations and limited arable land drives the industry. The industry's main obstacle is the limitations of proprietary technologies for mass production. As a result, vertically farmed food products currently on the market command a significant price premium due to high capital and operating costs.

Industry Updates

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Market Sizing

The US vertical farming market is estimated to reach USD 1.3 billion–3.5 billion by 2027

Conservative case

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Base case

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Expansion case

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Market Mapping


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.

Incumbents
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Farm Operators: Aeroponics
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Farm Operators: Hydroponics
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Farm Operators: Aquaponics
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Growing System Producers
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The Disruptors


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.

Funding History

Competitive Analysis


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Incumbents


Supermarket giants show interest in on-site vertical farms 

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.

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Notable Investors


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Market Sizing

The addressable market in the US for vertically produced leafy greens, herbs, and strawberries is estimated at USD 36.4 billion

The total addressable market (TAM) refers to the total revenue opportunity available for a product or service, while the actual market is the market size based on revenue projections.
We estimate a TAM of USD 36.4 billion in the US, which includes 1) USD 19.8 billion for lettuce and spinach, 2) USD 1.8 billion for herbs, and 3) USD 14.8 billion for strawberries. See the Appendix for the breakdown and assumptions for TAM estimates.
In general, vertical farming stands to capture more and more market share from conventional farming. For this analysis, only the markets for leafy greens and herbs are assessed, as they are the primary crops currently being grown by larger vertical farms. We have also assessed the vertical farming market for strawberries given that the players are just starting to focus on growing strawberries vertically and have set aggressive targets for production. The addition of any new crops will add further upside to the following estimates.
The actual market for the three types of produce is estimated at USD 796.7 million in 2022, with a penetration rate of just 2.2%. This is expected to grow at a strong five-year compound annual growth rate (CAGR) of nearly 25% to reach USD 2.4 billion in 2027, implying a penetration of 6.6%, following the trend of organic farms, based on the government's intention to double.
Our conservative case expects the market to grow at a relatively slow five-year CAGR of 10.4% to reach USD 1.3 billion by 2027. This assumes slower consumption of vertically farmed produce, mainly due to premium pricing and affordability concerns. Our expansion case expects the market to grow at a five-year CAGR of 34.4% to reach USD 3.5 billion by 2027. This assumes a rapid increase in the production capacity of vertically farmed produce alongside growing demand for the produce, which could help in stabilizing prices.

Appendix: TAM calculation by segments

1. Lettuce and spinach
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