Entering an established marketplace with disruptive technology is not for the faint of heart. Ask anyone who has tried and nearly succeeded, such as Evernote, Quibi, FarmedHere, and PodPonics. You are on a lonely course to convince others of the viability of your business plan and the desirability of your product or service. It is a long slog of pitching to investors, building a network of suppliers and distributors, and ultimately winning the trust of your buyers. The benefits of being a first mover don’t often outweigh the disadvantages, writes Kasey Snyder at the Netled blog.
Fortunately, in the vertical farming space, we have moved beyond the early stages of introduction or existence. Many brave and risk-tolerant innovators have paved the way. Some have come and gone, unable to establish credibility or drive consumer demand, or they were too focused on developing technology and did not put enough effort into business planning. For those early movers, awareness of this type of farming was too limited and perhaps confusing. There was also the enormous cost of capital investment for research and technology because the process of growing indoors was still inefficient and expensive, hurdles that the industry has significantly overcome in recent years.
We are all still learning
The companies that survived the early stages of development now occupy a considerable amount of shelf space in grocery stores. The marketing efforts of big-name brands like AeroFarms and Plenty have driven industry awareness for everyone. Proven quality and the success of product sales have led to the emergence of industry-specific conferences, associations, and university programs.
Yet even the largest and most recognizable name brands in controlled environment agriculture are still working towards profitability and cash-positive farms. So, what lessons can a new vertical farm operator or investor take away from the journey taken so far, and how can they take advantage of the opportunities before them?
Business strategy first
At Netled, we are confident that the best business strategy in vertical farming requires preparation and collaboration. No company should be trying to do it all. As a startup or early-stage company, it is an unnecessary burden to be a tech innovator, crop specialist, business analyst, consumer marketing expert, and farm operator. Often, we meet aspiring entrepreneurs who want to build their own farms and also think they can manage distribution and direct sales. We receive many inquiries for the price of our Vera vertical farm technology when clearly the sales strategy and distribution processes have not been carefully considered. We do not want to see any of our future partners rush into investing without developing a viable business strategy first.
Do you know your market?
It is important to recognize that while vertical farming is an innovative growing method, the produce industry is not new in the least. International trade of produce has existed since the 1850s when shipping and refrigerated rail cars were able to move food more easily. According to Grand View Research, the total US fruit & vegetable market was valued at $62.52 billion in 2021. In 2019, more than 23,500 industry actors visited The Global Produce & Floral Show in Orlando, Florida, hosted by the International Fresh Produce Association. This included 1,332 retailers, 483 food service operators/ distributors and 2,348 wholesalers/ distributors. Similarly, at Fruit Logistica in Berlin in 2022, there were 40,661 visitors from 132 countries.
To break into this large but lucrative marketplace, our recommendation is to begin with market research and business planning. As a service for all our customers, we offer thorough primary and secondary research of a specific region. We investigate market landscape and sizing – from brick-and-mortar retailers to e-commerce, food service companies, and private label providers. We offer a complete five forces and PESTLE analysis to understand all threats and opportunities. We also consider the produce in the marketplace currently, issues with the supply chain, and room for improvement. From there, we conduct direct interviews with key industry actors to validate our research and establish future partnership opportunities.
Solid business case attracts investments
With this information, we are then able to offer our customers a clear business case and financial model for building a Vera vertical farm. This information helps them acquire the necessary funding as well as create a viable business plan for their region.
From there, we provide crop testing and horticulture support to ensure our partners have the most reliable grow recipes and understand the process of caring for plants in a Vera vertical farm. This ensures that we treat these living organisms with care so that they consistently grow to become healthy, consumable crops.
Partnering for success
Those early-stage vertical farm innovators had a daunting task before them to build effective technology, grow successful produce, manage costs, and market their products. Today, vertical farm operators and investors have the opportunity to partner with established technology providers who can relieve them of the burden of creating the ideal growing environment and can instead focus on building a profitable brand. Netled now offers our expertise in market analysis and crop testing to prepare our partners as they enter the mega-produce industry.
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