America’s new agricultural frontier: vertical farms

© David Williams/Bloomberg | Bowery Farming’s indoor farm in Kearny, New Jersey
© David Williams/Bloomberg | Bowery Farming’s indoor farm in Kearny, New Jersey

The asphalt-covered industrial park on the marshlands between Newark, New Jersey and Manhattan looks like a promising place to grow cracked pavement or broken glass. Yet something more appetising is sprouting inside one of its warehouses: strawberries.

Amid the persistent thrum of air conditioning units and beneath the glow of fluorescent lights, berries of exquisite flavour are on display alongside trays of aromatic leafy greens. They are monitored by an array of machines and laptop-toting technicians clad in white jumpsuits, who occasionally speak of “dialling in” certain “flavour profiles” or “optimising” yield. As a scene of nature being mastered by technology, it is both impressive and a bit unsettling. Think Jurassic Park.

“You’re standing in the future”, says Irving Fain, the mastermind of the operation.

Fain is the founder and chief executive of Bowery Farming, a leader among a nascent crop of companies trying to revolutionise the world’s food supply through vertical farming. That is, growing fruits and vegetables in tightly controlled, indoor environments that use automation, cutting-edge plant science and vast amounts of data processing. After years of laboratory testing, Bowery and others are now racing to scale up commercial production and beat competitors to a dominant share of what could be a vast market.

Reliable numbers are hard to come by. But one firm, Grand View Research, estimates that sales reached $4.3bn last year, up from just over $1bn in 2019. It predicts a 25.5 per cent compound annual growth rate up to 2030. While North America has been the industry’s hotbed, governments in the Middle East, where growing conditions are inhospitable, have been particularly keen.

The benefits touted by vertical farmers are manifold. Without having to worry about outdoor scourges such as pests, flooding or drought — “externalities”, as Fain calls them — Bowery’s scientists can choose from a wider and tastier variety of cultivars that might never otherwise make it to a grocery store. The indoor environment allows them to grow crops without pesticides or herbicides — and with 90 per cent less water than is used in traditional farming. In a closed loop, the moisture that growing plants emit is sucked up by dehumidifiers and recycled for irrigation.

With rows of crops piled one on top of another, several storeys high, vertical farms can produce many times more per acre than a comparable greenhouse — let alone a traditional field. And, because vertical farms can, in theory, be located just about anywhere, produce can be grown in an industrial park beside New York City rather than having to truck it across the country. That means it can be shifted from a cutting machine to a store shelf in hours — not days.

“It doesn’t make any sense to bring romaine [lettuce] from California to New York”, says Jose Andres, the Spanish chef who is acclaimed for enlivening Washington DC’s staid restaurant scene and admired for feeding thousands of people in disaster zones through his World Central Kitchen charity.

Andres has signed on as a Bowery investor and adviser. He views vertical farming as an essential way to feed a growing population at a time when the earth is buckling under the stress of traditional agriculture. “There are going to be thousands of these around the world”, he says as he samples a strawberry. “The train has already left the station”.

Others seem to agree. Vertical farms helped the larger agriculture technology sector attract a record $5bn in funding last year, according to Crunchbase, the business information platform.

ARCO/Murray, a Chicago-based engineering company, has created a separate division to help a growing roster of indoor agriculture ventures build and fit out facilities. Patrick Hidder, who leads the group, describes a frenzied industry with a mish-mash of contraptions and closely guarded secrets.

“The cannabis space is probably three to five years ahead of the leafy greens space, in terms of the number of facilities, even though leafy greens have always been legal”, Hidder adds.

‘Reimagining farming’

Alongside the excitement, though, there are also questions about just how widely and profitably the technology will be applied. Some speculate that warehouse farms will be no more than a niche player. There is also scepticism as to whether vertical farmers will ever be able to sell enough lettuce, as one investor put it, to offset their hefty capital costs and justify their lofty valuations.

In October, AeroFarms, a much-touted start-up, abruptly called off a Spac deal that would have valued it at $1.2bn, casting a shadow over the entire industry. The company, based in Newark, New Jersey, gave little explanation for the move.

“Investors are a little bit gun-shy right now. They want to see proof of concept”, one vertical farming executive acknowledges. With the economy headed for a slowdown and private equity investors under pressure, others are whispering about a looming wave of consolidation in the US.

Irving Fain is the founder of Bowery Farming, a leader among a nascent crop of companies trying to revolutionise the world’s food supply through vertical farming © Michael George
Irving Fain is the founder of Bowery Farming, a leader among a nascent crop of companies trying to revolutionise the world’s food supply through vertical farming © Michael George

Yet Fain remains convinced that Bowery is on the verge of not just becoming a successful start-up but literally changing the way humanity is fed. “We’re reimagining farming. But what we’re really doing is reimagining the whole supply chain”, he says.

Fain worked briefly as an investment banker before becoming a technology entrepreneur. He founded Bowery — his most ambitious act to date — in 2015 after exploring a range of ideas. It has raised almost $650mn from investors, including Google Ventures and Temasek, Singapore’s state investment company which has made food sovereignty a national security goal. Like other vertical farmers, its products so far consist mostly of leafy greens such as butter lettuce and basil, which Bowery sells in more than 1,000 stores on the US east coast. Price-wise, the company says its output is comparable to organic produce which it is competing against.

This is shaping up to be a pivotal year for Bowery. In May, it opened its largest and most advanced farm yet — a 150,000-square-foot facility in Bethlehem, Pennsylvania, where it is deploying the technology and techniques it has refined in New Jersey and a separate Baltimore farm. That sort of scale will be essential, executives say, to turn a profit. Other facilities are under construction in Locust Grove, Georgia, and Arlington, Texas.

Strawberries represent another milestone. They are a leap into the more challenging — and higher-margin — world of fruit crops and routinely top the “dirty dozen” list of fruits and vegetables grown with high levels of pesticides. To support its push, Bowery in February acquired Traptic, a company that makes robots capable of picking strawberries — a delicate task that has long resisted automation.

“We think strawberries are just the beginning: there’s a broad assortment of fruit crops — raspberries, blackberries, et cetera — that strawberries will unlock for us”, says Katie Seawell, who joined Bowery as chief commercial officer after 14 years at Starbucks.

She compares the industry’s progress and technical maturity to that of “the desktop computer today, with a sightline on the mobile phone”. Others liken it to the solar panel industry from 20 years ago.

‘Solving a problem that doesn’t exist’

Much of the underlying research for vertical farms comes from Nasa, which was for decades competing with the Soviets to work out how to grow food in the confined quarters of a spacecraft.

Yet as a commercial proposition the vertical farm has only come alive over the past decade or so, thanks to dramatic advances in the efficiency and sophistication of LED lights. These are essential because, unlike traditional farms and greenhouses, vertical farms do not have the benefit of free sunlight.

“It’s expensive to replace the sun, obviously, and bring it indoors”, says Andrew Grimmer, chief operating officer of Crop One, which was founded in 2012 by an eccentric tinkering in a trailer. The operation progressed to shipping containers before Crop One graduated to a fully fledged vertical farm outside Boston. It is now building a $40mn, 160,000 square-foot facility in Dubai for Emirates Flight Catering that, it claims, will be the world’s largest vertical farm.

Scientists working on strawberry cultivar research at Bowery’s Innovation Hub for Plant Science in Kearny, New Jersey © Michael George
Scientists working on strawberry cultivar research at Bowery’s Innovation Hub for Plant Science in Kearny, New Jersey © Michael George

As with any vertical farm, energy is one of the biggest issues. In addition to the lights, it also powers automated systems to tend the plants and massive heating and ventilation systems that maintain the environment. “If you solve the energy problem, you win the vertical farming game”, Grimmer says, estimating that electricity accounts for about half of Crop One farm’s operating costs.

But what type of energy? As with electric vehicles, vertical farmers’ claims of environmental virtue are somewhat undermined if the copious amounts of energy they consume is generated from fossil fuels. Bowery is using 100 per cent renewable energy at its farms. Bethlehem, for example, is powered by hydroelectric. Still, choosing renewables, the company acknowledges, is more cumbersome than simply plugging into the existing grid.

There are other considerations when locating a vertical farm, according to Rick Drescher, who leads a new unit at Savills, the real estate company, that advises clients trying to find properties suitable for indoor farming. The warehouses require tall ceilings, disqualifying many older facilities. Like Amazon and other retailers that have made warehouses the darling of the real estate industry, they also want to be near major markets — although just how close is a matter of debate. All that makes them expensive.

“The more automated these things become, the more power they need and the more capital they need to build”, Drescher adds.

None of that has deterred investors. A turning point for the industry came in 2017 when Japan’s SoftBank invested $200mn in Plenty, a San Francisco-based vertical farming start-up, in what was then one of the largest “ag-tech” investments. Jeff Bezos, the Amazon founder, also participated.

“That’s when the really big dollars started flowing”, says Andrew Howell, who oversees the private equity funds for Ceres Partners, an Indiana-based company that specialises in agricultural investments. “If you can plop down farms next to any major city in the world, that’s an attractive proposition to [venture capital investors]”, says Howell. “Of course, it’s a lot more complicated than that”.

To be viable, Howell argues, vertical farmers must master at least three different businesses. First, there is the engineering knowhow to design and build a facility laden with sensors, robots, sophisticated lighting and giant HVAC systems. Then there is the agricultural and operational expertise to grow and tend produce in such conditions, around the clock, so that you achieve consistent quality and maximum yields. The systems are so finely tuned that a particular plant on one rack may require 40 per cent humidity and another, just a few feet away, may demand 50 per cent. A technical glitch or power failure could wipe out an entire crop.

Even if a company overcomes these challenges, it may yet fall at the last hurdle: the brutal contest to get its salad mix on to a big retailer’s store shelves.

Having studied the industry, Ceres has opted for a different approach. It believes there is still enough inexpensive land a few hours’ drive from major distribution hubs to make greenhouses a cost-effective and less risky alternative. So the firm is investing in state of the art ones, fitted with existing Dutch equipment, rather than taking on the time and expense to engineer vertical farms.

It is the equivalent of buying an Audi rather than building a Formula One car, says Howell: “Sometimes with vertical farming you’re solving a problem that doesn’t exist”.

The world’s largest salad

Bowery has decided otherwise. It debuted its newest and most advanced facility in Bethlehem, about 85 miles west of New York City, in a modern industrial park built on the grounds of a former steel plant.

Like widgets on a production line, plants progress through various stations of a spotless factory that required two years of fiddling by Scott Horoho, an engineering veteran of Amazon and the German auto industry, to assemble.

“We’re constantly fine-tuning”, says Horoho, Bowery’s senior vice-president of farm design. In practical terms, his challenge is to turn the recipes created by scientists in Bowery’s New Jersey research lab into mass-market products that can be churned out at scale. All around him are trays of arugula, basil and butter lettuce, giving the warehouse the fragrance of the world’s largest salad.

In May, Bowery opened its largest and most advanced farm yet — a 150,000-square-foot facility in Bethlehem, Pennsylvania
In May, Bowery opened its largest and most advanced farm yet — a 150,000-square-foot facility in Bethlehem, Pennsylvania

The automated process goes roughly like this: after a seed is spit into a tiny cup by an Italian-made dispenser, its first stop is an ultra-humid germination room. There it will rest for three to five days, not unlike a premature baby. Every few seconds an overhead spray hisses as lights switch on and off at arranged intervals in the germination room. When the plantings have reached a few inches, a machine will suck these “plugs” from their cups, row by row, and inject them into a larger tray that has been designed to circulate oxygen and nutrients around their roots. Bowery calls these larger mattress-sized trays “rafts”.

Each raft has its own barcode and travels on a conveyor belt to one of five grow rooms. Inside, there is a lattice of racks that reaches several storeys high, like a multilevel parking garage. The Bowery operating system determines the appropriate parking space for a particular raft, then uses an elevator and a robot, travelling on rails, to guide it there.

Once in place, the water, nutrients, airflow and lights are customised. Tiny cameras constantly capture images of the growing plants, feeding data back into the operating system so that it can make its own adjustments.

Even though the facility is monitored remotely, Horoho still likes to “walk the farm”, as he puts it. “As much as we rely on technology to monitor the health of the plants, there’s nothing better than a pair of eyes”, he says, gazing at a seemingly endless field of coriander stalks undulated by a breeze preset to an optimal air velocity.

Come harvest time, a machine adjusts its blade height and cutting speed based on each raft’s barcode. Another packages them, using imaging technology and lasers that can be programmed to the millimetre to determine if any leaves should be discarded for imperfections.

“What we build is an ecosystem”, Fain says. “It’s mimicking what’s outside, and what plants want and need”.

Joshua Chaffin

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