"The last few years have seen a number of large corporations, such as Google and Walmart, enter the indoor agriculture industry. The primary avenues of entry into indoor agriculture are as a farmer, produce buyer, tech entrepreneur, or investor. Their participation is important because these commercial leaders have the skill set and capital to help drive the industry forward. In our discussions with large firms, we found multiple justifications for entering the space," writes Janesha Anthony, Communications and Branding manager at Contain.
She continues, a major one for produce buyers is improving the customer's experience; breaking into an industry like indoor agriculture can set them apart, build rapport, and create long-term benefits for consumers.
"The driving factor to be in this space really centers around being laser-focused on providing value for the consumer. CEA has proven itself to have differentiated value for food quality, product innovation, increased shelf life, and encouraging ESG capabilities. Surety of supply, the ability to see innovation within produce beyond "organic," year round quality product, and waste reduction are big deals." says a representative from a multinational corporation.
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For others, fulfilling sustainability or ESG goals attracts them to controlled environment agriculture thanks to the industry's careful use of water and ability to cut food miles. For instance, supermarket chain Meijer mentioned the ability to provide local produce in its recent announcement of a collaboration with Michigan's Revolution Farms.
As many countries move into recession, asset allocators at investment firms and multinationals alike are moving into defensive sectors, those that traditionally do well in downturns. According to Janesha, agriculture is one of these, as consumers will naturally prioritize food over consumer goods or travel when times are tough. High food inflation has exacerbated this trend, and vertical farming is a fast-growing sub-sector of the agriculture industry.
According to market research firm Statista, the value of the global indoor farming technology market is expected to reach approximately 12.03 billion U.S. dollars by 2024. This would be an increase of over six billion dollars from 2019 when the market size was around 5.92 billion U.S. dollars. Now that the industry is more mature – lighting firm Fluence had revenue of US$141mm in the year to September 2021. For example – investors perceive it as less risky.
Opportunities are coming
As more commercial leaders and large corporations show interest in the indoor agriculture industry, it provides a large opportunity for strategic partnerships and alignments with indoor growers and companies to help create a more accessible transition to indoor-grown goods for the consumer. Commercial lighting and electrical contractor major, FSG's addition to Contain's vendor list is a great example of how commercial/corporate giants are joining the space to provide long-term and impactful value for all parties involved.
"Since 1982, FSG has been built on the guiding principle that hard work, dedication to excellence, and continual learning will always yield a positive result for everyone involved. Currently, in the U.S., there are over 23.5 million people living in food deserts, and 2/3rds of our produce is imported into the U.S. FSG aims to utilize its 40 years of expertise and, with our partners and clients, make an immediate difference in our communities, our states, and our Nation. When growing indoors, you have a partner that is committed to growing together," said Chris Hinshaw, Director of Horticulture at FSG.
For others, working with startups in indoor ag allows a way to access the innovation that is notoriously hard to create quickly at large firms. The endeavor is not without challenges. Entering the industry can mean a large upfront investment that can be hard for a business unit to justify as management eyes budgets more carefully.
To date, there is a limited track record of successful exits, though this is beginning to change. The future of the industry for new entrants is backed more and more by emerging data and the successes of industry pioneers. "A topic we plan to explore further by looking at the next-gen models for entry in our upcoming briefing paper "How to break into Indoor AG."
For more information:
Contain
www.contain.ag