Vertical farming is gathering momentum and venture capital and supermarket chains are among those taking an interest in the fast-evolving space, which involves growing food indoors in a controlled high-tech environment. By stacking soil on shelves, it essentially combines a greenhouse with a warehouse, says a report from JLL on the topic.
Witness the deal made by Leaps by Bayer, the impact investment arm of Bayer AG, and Temasek, the global investment company headquartered in Singapore. The two organizations announced a joint investment to form a new company named Unfold, a venture that will focus on innovation in vegetable varieties with the goal of lifting the vertical farming space to the next level of quality, efficiency and sustainability.
While most startups in the vertical farming market are focusing on the development of more efficient infrastructure, Unfold is expected to have the assets required to unlock the genetic potential of vertical farming. By utilizing the seed genetics from vegetable crops, Unfold aims to focus on developing new seed varieties and farming techniques to advance vertical farms. The company raised $30 million in the initial funding round.
Vertical farming’s smaller space requirements work in its favor, especially in densely populated urban areas. JLL cites one of London’s former air raid shelters, as an example, where a company named Growing Underground has a farm that uses LED technology and hydroponic systems to grow vegetables.
“The main advantage of vertical farming is the increased crop yield that comes with a smaller unit area of land requirement,” says Peter Davies, an associate at JLL Energy & Infrastructure Advisory. “It’s also very topical right now with the disruption from COVID-19 pushing countries to look for ways to be more self-reliant.”
By 2026, the industry could be worth as much as $12.8 billion globally, compared with $2.2 billion today, according to Allied Market Research.
“Producing crops in controlled environments is fast becoming a major component of the grocery sector’s carbon-cutting efforts,” says Davies. “Supermarkets are eager to reduce their carbon footprint by getting closer to their end consumer, as we’ve seen more broadly with the growth of last-mile logistics.”
Such locally grown food is expected to have special appeal to consumers, although saving on packaging, energy and water is also a factor for eco-conscious consumers.
“People may be willing to pay a premium for fruit and vegetables which come with benefits such as a lower reliance on pesticides than mainstream produce,” says Davies.
Unlike outdoor farming, the carefully controlled climate conditions mean a year-round output of fruits, herbs and vegetables.
Mike Consol (m.consol@irei.com) is editor of Real Assets Adviser. Follow him on Twitter @mikeconsol to read his latest postings.