January 17, 2018

Indoor Vertical Farms: The Wave of the Future?

On November 1, 2017, the National Organic Standards Board (NOSB) voted—by the narrowest of margins—to allow growers utilizing container, hydroponic or aquaponics production to keep their organic certification. While the NOSB is advisory in nature, with the staff of the National Organic Program and other USDA officials making the final call, this vote is significant in that it maintains the organic integrity of growing practices employed in many non-traditional, urban farming-type scenarios, including vertical farming.

Vertical farming touts the use of vertical space—from the floor to ceilings that can be several stories high—to reduce inputs and increase outputs, leading to “more food per square foot of land.” Predictably, the indoor environment can be managed to yield year-round production. Indoors, out of the elements, the problems of pests and weeds can be virtually eliminated, with a corresponding near-elimination of the need for chemical applications. Water and nutrients can be applied and adjusted in controlled amounts at precise times. And portability—the ability to place vertical farms closer to population centers—lessens the carbon footprint generated getting food from field to fork.

Although not without its growing pains—as evidenced by the spectacular failures of Atlanta-based Podponics and Chicago-established FarmedHere, once the largest vertical farm in the U.S.—what began as a niche segment of the agriculture industry has developed into a fast-evolving, increasingly viable method of production.

Look no further than Plenty, a young Silicon Valley startup that is currently building a 100,000 square foot vertical farm outside of Seattle, WA, the first of what the company envisions to be many full-scale indoor farms near every major city in the world. Venture capital is paying attention, as Plenty has the backing of SoftBank, a tech-investment fund led by Japanese billionaire Masayoshi Son, and Bezos Expeditions (yes, as in Jeff Bezos of Amazon fame), who recently bet $200 million on Plenty’s global rollout plans.

Plenty claims their indoor vertical farms can produce crops at yields far greater than traditional farms, citing the statistic that a 50,000 square-foot room—about the size of an acre—can produce two million pounds of lettuce a year. They boast the ability to grow Whole Foods quality produce at Walmart prices, which makes the recent Amazon-Whole Foods connection even more intriguing. And they label their produce “super organics” or “beyond organics,” as there are no pesticides or chemicals used to grow their crops.

Other players in the vertical farming game are also receiving big-time funding from big-time investors. For instance, New Jersey-based Bowery has raised more than $30 million from GGV Capital (formerly Google Ventures) and others. Another New Jersey startup, AeroFarms, has reeled in over $140 million from the likes of Goldman Sachs and Prudential.

With all of the capital flowing into indoor vertical farming, should traditional farms be worried about increased competition in the marketplace?

Yes, and no. But mostly no, according to Jim Pantaleo, general manager of Urban Produce, an upstart vertical farming company nestled amidst a maze of industrial and office buildings in the heart of Irvine, CA. On 1/8th of an acre of space, Urban Produce can grow the equivalent of 16 acres of organic wheat grass, up to 10,000 pounds per month, which is supplied to a host of retail and foodservice companies, including a range of global cold-pressed juice clients.

“No, we’re not a threat to traditional farming,” Pantaleo states affirmatively as he scrubs his hands and dons a safety net before opening a heavy door to reveal his high-density, vertical-growing system. Once inside, under the bright pink LED lights, Pantaleo’s sharp, inquisitive eyes and wide, expectant grin seem better situated in a Las Vegas nightclub than an urban farm.

Pantaleo found indoor vertical farming almost by accident, as he was searching for a meaningful second career following two decades in the software-licensing business. After a friend introduced him to a vertical farm in Hawaii, Pantaleo became “hopelessly smitten with the world-changing possibilities vertical farming offered.” Then and there, he dedicated himself to learning everything he could about indoor vertical farming, and has since found an opportunity to apply the skills from his previous life to his newfound passion with Urban Produce.

“We’re not coming after anyone’s market share,” Pantaleo continues, offering a reassuring smile. “Indoor vertical farming is still a nascent industry with not enough players and not enough capital.”

However, Pantaleo does believe that outdoor farmers can learn lessons from the production systems employed in indoor farming. “At its core, vertical farming is about precision agriculture, using science and technology to increase yields while reducing inputs,” Pantaleo explains.

While traditional farming has made significant strides in conservation and efficiency in recent years, Pantaleo notes that the industry is still very resource heavy. “I know we can do things to make the industry, as a whole, even more sustainable. Agriculture and ultimately humans can greatly benefit when technology and science are applied at its highest levels,” he asserts.

Like the Ghost of Christmas Yet-to-Come, Pantaleo points to the success of indoor vertical farming in other, often resource-starved countries such as the Netherlands, Singapore, which has less than 250 acres of arable land, and Japan, which is still reeling in the wake of the 2011 tsunami that resulted in the meltdown of the Fukushima Nuclear Power Plant and widespread radiation contamination of the island nation’s farm land.

Since Fukushima, the number of Japanese vertical farms has almost tripled, from approximately 75 to more than 200. Led by Dr. Toyoki Kozai, the father of Japanese indoor farming and president of the Japan Plant Factory Association, the country has leveraged the tech prowess of several of its major companies, like Panasonic and Fujitsu, to reconstitute old semiconductor facilities into giant factory farms. One such Japanese plant factory, Spread, is capable of harvesting 20,000 heads of lettuce every day.

For Pantaleo, the ultimate success of indoor vertical farming, both here and around the world, will come down to capital and intelligence; businesses securing both the financial resources and management capabilities needed to build sophisticated growing systems and expand market opportunities.

But, even as this budding industry begins to sink its roots (pun intended), Pantaleo believes the role of vertical farms will never be to replace traditional farmers. Instead, he says, “It should be viewed as complementary to traditional farming, as a way to help the industry to meet the challenges of feeding more people, potentially 10 billion by 2050, with dwindling resources and increasing climate uncertainties.”