“There is a great opportunity in this market to work with indoor facilities, but we’re also aware that this is a capital intensive market,” Marinus Luiten noted. One of the main points in becoming successful is ‘making sure to be aware of the CapEx and operational costs’.
Eri Hayashi, Vice President of Japan Plant Factory Association opened the panel by introducing the panel's topic “Successful factors for scaling vertical farming operations”. The panel was joined by David Farquhar, (CEO of Intelligent Growth Solutions), Jessica Naomi Fong, (Co-Founder and General Manager at Common Farms), Sky Kurtz (CEO of Pure Harvest Smart Farms), and Marinus Luiten (Business Developer Indoor Growing at Priva).
Eri Hayashi leading the panel
Marinus added: “Technology providers like Priva are obliged to deliver cost-price advantage through standardization and an optimized value-offering to reduce their CapEx. Also, we help the growers cut down operational expenditure, like energy use and labor, through automation and robotization. If this technology is flexible enough to attain to the changing needs of the grower whilst being rigid enough to be scalable, then we’re able to standardize.”
David Farquhar highlighted three ‘success factors’ for scaling operations. “Firstly, it’s all about produce quality.” Being able to produce the local market requirements with a system that is capable of serving the diet of a country or region with a high product quality. Secondly, the prices of inputs and outputs need to feed, in terms of inputs, against cost of production and wholesale prices in the operating region. Thirdly, be as environmentally clean as possible can be, thus focus on having zero emissions once in operation.
Jessica Naomi Fong
“There has been a lot of learning in the process, said Jessica Naomi Fong (Common Farms). It’s not a one size fits all model, so make sure to grow produce that fits the market.” Offering products that only small pockets would eat, is not sizable and scalable from a market-perspective. What you grow from the production side is only a small part of the whole equation. “There’s a huge part in the commercial side that needs to make sense,” Jessica added. It all comes down to doing the right financials and cost calculations, alongside with the right pricing.
It’s more than farming only
“It is assumed that high-quality microgreen grown in New York, will also sell in Kuala Lumpur which might be a huge misconception. There are the socio-economic factors, preferences, consumer educational, etc.,” Sky Kurtz, (Pure Harvest Smart Farms) noted. According to him, there are three core disciplines when wanting to be a part of the CEA sector, serving a market. Namely, designing a construction, operating a farms, and market and sell products. Sky added: “The knowledge and capital barriers to enter, are very high.
Then there are the skills to operate a business like this, packaging. Vertical farming is infrastructure as well as there’s a need for access to long-term yield-driven capital. Then finally, apply business model innovation to share the value with the industry to partner with distribution channels e.g..”
A different direction
David noted “In technology markets, many are trying to create their own technology and operate them.” The agritech sector is moving more towards making vertical farming efficient at scale with a wide range of crops by finding the best technology and by being good at operating. “As a provider, we teach growers to better understand the local market, take everything that happens downstream from the technology.”
“Downtime means failure of produce, volume. Thus, understanding it’s a time critical process, we need to have a refined infrastructure, supporting these farms. As a tech provider we aim to work with a support infrastructure of a global supplier network that growers can fall back to. Getting a better understanding of the service level these growers need,” Marinus said.
COVID, a double-edged sword
Sky states that COVID has been a double-edged sword for this industry. “The benefit is that it has woken governments, capital providers and consumers to the idea of controlling production and local for local production in de-risking your exposure to an import driven supply chain for fruit and vegetables a good idea. Governments are scrambling to understand what can and should be produced locally to enable and support this industry.”
“The other end is that the fear and concern of the speed and veracity of that change is challenging to manage when building a business. Also, the fear and concern the bad policy and intervention could destroy the market or create aberrations affecting economics and the evolutions of an industry.”