Publications

- March 1, 2021: Vol. 8, Number 3

Indoor farming: Dozens of new companies enter ‘controlled environment agriculture’ field

by Andrea Zander

AppHarvest, an indoor farming company backed by Martha Stewart, has begun shipping beefsteak tomatoes to Kroger, Walmart, Publix and other grocers.

The company’s 60-acre greenhouse contains 720,000 tomato plants, and AppHarvest has plans to ship 45 million pounds of tomatoes each year.

This first harvest occurs as AppHarvest continues expansion plans for additional indoor farms to meet the increasing demand for sustainably grown U.S. produce. The company is preparing to list publicly after the closing of the previously announced business combination of AppHarvest with Novus Capital Corp. and then will trade on Nasdaq under the ticker APPH.

AppHarvest has two more facilities under construction — a similar 60-plus acre facility outside Richmond, Ken., and a 15-acre facility to grow leafy greens in Berea, Ken. AppHarvest also is planning for more facilities across Kentucky and Central Appalachia, with the goal of 12 total farms by the end of 2025.

The agtech company recently appointed AppHarvest board member David Lee as president to manage strategy and operations, while leading the sales, marketing and finance functions as AppHarvest continues to grow as a sustainable fresh foods company. Lee joins AppHarvest from Impossible Foods, where he has served as chief financial officer since 2015.

In August 2020, AppHarvest announced that food entrepreneur and icon Martha Stewart and bestselling author and investor J.D. Vance would join the board of directors, alongside Inclusive Capital Partners founder and managing partner Jeffrey Ubben and Rise of the Rest Seed Funds partner Anna Mason and others committed to transforming the future of agriculture and supporting entrepreneurial efforts in Middle-America.

AppHarvest’s high-tech indoor farms are designed to use 90 percent less water with yields that are up to 30 times higher compared with traditional open-field agriculture on the same amount of land. Its location in Appalachia allows it to deliver a strong social impact by building a more diverse economy in economically distressed areas of the country, while enabling its products to reach about 70 percent of the U.S. population within a single day’s drive. As a result, AppHarvest expects to deliver fresher fruits and vegetables, ripened on the vine for peak flavor and nutrition, with an 80 percent reduction in diesel consumption required for transportation, as compared to produce shipped from Mexico.

“As a mission-driven company that prioritizes ESG principles, this first harvest is monumental for our business, and we want to set a benchmark for the industry,” said Jonathan Webb, founder and CEO. “We are determined to build a climate-resilient infrastructure to offer folks a delicious tomato that is sustainably grown right here in Appalachia with 100 percent recycled rainwater and zero chemical pesticides, making it better for both them and the environment.”

AppHarvest is one of many players in indoor farming. In a recent global survey, Agritecture Consulting, which works with urban farmers, found that at least 74 indoor farming companies were founded in 2020 alone. Investor interest in controlled environment agriculture (CEA) surged in 2020, reaching $929 million invested across 41 deals in the United States. This is more than double the 2019 aggregate deal value, according to PitchBook. Most of 2020’s investments were in operators of end-to-end CEA facilities, with smaller amounts invested in CEA suppliers developing indoor farming components and systems. CEA operators comprised the 10 largest CEA deals of 2020, with Revol Greens’ $203.7 million Series A leading the pack.

2020 exposed many frailties within the food supply chain. In response, researchers have identified CEA as a potential solution to increase the resilience of food systems by making them more local and adaptable. For example, the U.S. imported $2.6 billion of tomatoes in 2018, primarily from Mexico. Tomatoes grow well in controlled environments, and domestic demand could be met entirely by building new CEA facilities in the United States. By shortening supply chains and accelerating production cycles, CEA farmers have proven more adaptable to food chain disruptions than conventional farmers. The result: fresher produce and less waste.

 

Andrea Zander is website content editor at Institutional Real Estate, Inc.

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