The return of Indoor Ag-Con in Las Vegas this week coincided with several major inflection points for the agtech sector and indoor growing industry, writes Arama Kukutai, CEO of Plenty.
The indoor farming industry has pulled record fundraising numbers. In 2021, Pitchbook Data reported $1.6B invested, and last month Plenty announced the largest round to date with our $400M Series E funding round alongside a landmark strategic partnership with Walmart. Innovation in the field of agtech has dominated headlines with new growing capacity for greenhouses and vertical farms, bolstered by retail demand for the category at double-digit growth rates—albeit off a small base relative to field production.
Indoor Ag-Con had over 800 attendees, with participation from greenhouse growers including Brightfarms, AppHarvest and Soli alongside tech-driven vertical operators like 80 Acre Farms, Aerofarms, Eden Green, Fifth Season and others present. The conference sessions painted a picture of an industry with the potential to transform how we grow and consume our fresh fruits and vegetables.
As the nascent industry still works to define itself, there were some interesting tensions in the room.
The phrase "controlled environment agriculture (CEA)" has become a catch-all term for indoor ag, used by greenhouse and vertical farms alike—but it is a clunky descriptor and one that isn't friendly for consumers to understand what the value in this sector is for them. In an industry that often geeks out on tech, how should consumers understand the differences in how their food is grown and what they’re eating? What are the merits (or not) of organics, soil-based versus hydro and aeroponics, and sustainability?
Lack of transparency
Many speakers rightly called out a lack of transparency and simplicity in understanding the critical metrics and drivers of the industry from unit economics, to costs of construction and operation. It is also encouraging to hear the call for sharing information and aligning on standards and claims. There is a need for a clear and cohesive standard that supports in particular transparency about how our food is grown - for instance, whether pesticides or treatments are being used in the process.
Field vs. Indoor - time for an inclusive narrative
I was disappointed to hear a narrative from some quarters that field-based ag is the primary opponent to indoor ag’s decrying of dirty production methods, unfair advantage conveyed by government subsidies, and cheap imports. Quite frankly, this is a short-sighted debate.
Field farming will continue to be an essential part of the food system. Indoor agriculture offers new solutions to the challenges facing traditional farmers growing fresh produce, including solving year-round supply, supply chain disruption, high water use, labor shortages and widespread pesticide and chemical use.
Many field growers are actually already large players in greenhouse applications and have been for years. I can see the eye roll accompanying the assertion that “CEA” is here to save agriculture. The next wave of tech innovation is helping to provide more choices to consumers, supporting more sustainable food production with innovations while providing more options not only for traditional growers but also strategic supply chain partners like retailers.
Bigger picture - New industry standards
With any growing industry, there will emerge a need for clarity and transparency on standards, and it’s clear to many observers at the event that there will be an opportunity to create new standards beyond organic or conventional field regulations that are consumer-focused and more open about how our current food, including organics, have compromises that consumers should be aware of. This was also commented on under the rubric of sustainability, given the claims on water use, pesticides, fertilizer, food miles and waste, packaging and more.
The good news is that the industry is ready to take an inclusive leadership role here, in partnership with regulators at home and ultimately worldwide. I expect this to also be an area where the collaborative spirit in the sector can come to the forefront.
Innovation and investment
There is a significant bifurcation between the companies investing in deep tech R&D (such as Plenty) with novel growing systems and greenhouse operations using well-proven, low-tech risk greenhouses while integrating improvements from lighting, data/AI and labor-saving robotics. Clearly, there is a huge market to address and room for many different models to successful businesses, especially when you consider indoor serves ~ 1% today of supply.
In my opinion, the greenhouse players will be rewarded for improving operational excellence and getting produce to consumers at affordable prices, given the product offerings are generally commodities, and helping support greater sustainable food metrics and import substitution. The best operators are also proficient technology integrators.
In contrast, vertical farm/tech companies have to prove their case by improving CAPEX, OPEX, and product differentiation to justify the significant investments required in building their farms, carrying out R&D and maturing novel technologies, not to mention breaking through at retail with distinctive crop assortment. Ultimately, setting new standards of quality, choice and safety will be critical to success in creating new ways to grow.
Beyond Leafys - building a product portfolio
With current products in-market leaning heavily toward leafy greens, herbs and hothouse tomatoes, the more prominent, well-funded players in both camps are looking to scale rapidly for national distribution. At the same time, they are looking to meet the price points to get to the holy grail of mass-market. While we are seeing the promise of fruiting crops to come – consumers don't want to see empty shelves or compromised products, and indoor ag is ready to answer this call.
The Indoor Ag-Con event finds an industry in a very different place than it was pre-Covid and despite the "storming and forming" stage, the industry is about to drive explosive growth that will reshape the landscape.
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