“In recent years, a number of large companies, such as Google and Walmart, have entered into Controlled Environment Agriculture (CEA). The main entry routes into the industry are as a grower, product buyer, tech entrepreneur or investor. The participation of commercial leaders is important, because they have the skills and capital to drive the industry forward. In our conversations with large companies, we have found more reasons to approach the growing indoor industry,” writes Janesha Anthony, communications and branding manager at Contain, a US-based consultancy to the CEA sector.
“A key focus for product buyers is improving the customer experience. Being active in an industry like indoor growing allows them to differentiate themselves, build relationships and create long-term benefits for consumers.”
“The driving factor really revolves around the focus on providing added value to the consumer. CEA has been shown to have differentiated value for food quality and durability, product innovation and environmental, social and governance (ESG) criteria. the ability to see innovation as something beyond” organic”, having quality products available all year round and waste reduction are important issues,” says a representative of a multinational company.
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For others, CEA’s appeal lies in its ability to meet sustainability or ESG goals, particularly through its careful use of water and savings in food miles. For example, in a recent announcement of a partnership with Michigan’s Revolution Farms, the supermarket chain Meijer has stated that it will have the ability to provide local produce.
With many countries facing economic difficulties, asset managers at both investment firms and multinationals are turning to defensive sectors, sectors that traditionally perform well in times of recession. According to Janesha, horticulture is one of them, as consumers will naturally prioritize food over consumer goods or travel during difficult times. Rising food prices have accelerated this trend, and vertical farming is a fast-growing subsector of horticulture.
According to market research firm Statista, the value of the global indoor growing technology market is expected to reach around 11.29 billion euros in 2024. This would be an increase of almost 6 billion euros since 2019, when the market was worth around 5.56 billion euros. As the industry has matured – lighting supplier Fluence, for example, had sales of €132 million in the first three quarters of 2021 – investors view the industry as less risky.
Opportunities will come
As more supermarket chains and larger players take an interest in the CEA sector, this situation presents a great opportunity for strategic partnerships with growers to provide consumers with access to products from CEA. The addition of FSG, an installer of lighting solutions and electrical installations, to Contain’s supplier list is a good example of how major players are showing interest in delivering long-lasting and impactful value to the industry.
“Since 1982, FSG has been built on the principle that hard work, the pursuit of excellence and continuous learning will always yield a positive outcome for all involved,” said Chris Hinshaw, director of horticulture at FSG. “Currently, more than 23.5 million people in the United States live in food deserts, and two-thirds of the food in the United States is imported. With our 40 years of expertise, we want to make an immediate difference with our partners and customers. Are you an indoor grower , then you will find a partner with us who is committed to growing together.”
For others, working with startups in the vertical farming sector offers a way to access the innovation that is notoriously difficult to create quickly at large companies. The experiment is not without challenges. Entering the industry can mean a large upfront investment that is difficult to justify for a business unit as managers closely monitor budgets.
To date there is a limited list of successful entries, although this is beginning to change. New entrants can increasingly rely on data becoming available, and the successes of pioneers in the sector have not gone unnoticed. “In our next report ‘How to achieve results in indoor growing?’ we address a topic we intend to explore further: next-generation models for entry into the CEA sector.”
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