The State Of The CEA Industry

?

As a STRATEGY CONSULTANT, I have a significant amount of time working in the Controlled Environment Agriculture (CEA) industry. I get a lot of questions from the industry members on what’s happening in the CEA industry. For this discussion, we will be focusing on what’s happening in the CEA Leafy Greens Industry.

·????? Here is a quick overview of the main CEA growing processes and how they have evolved to where the industry is today.

o?? Vertical Farming, is defined as a practice of growing in a facility with vertically stacked layers without sunlight. Over the last 5 years, VCs have invested almost 8 billion into vertical farming globally.? As has been widely publicized, 6 vertical farms operation have ceased operation or declared bankruptcy globally. The story here is vertical farming due to the high cost of capital, high cost of energy, and low yields needs more time to achieve profitability.

o?? Hydroponic Farming, is defined as a technique of growing plants using a water-based nutrient solution in growing media rather than soil. The product is grown in glass greenhouses with sunlight and is supplemented by artificial light. Hydroponic Farming dates back to the 16th century. It has evolved in the last 20 years to grow with deep-water culture, which means floating the plants in trays in ponds and in mobile gutter growing systems where the lettuce is grown in mobile gutters. Hydroponic farming by these methods is showing the highest potential to compete with field-grown products while maintaining profitability.

·????? State of the industry today. The investment in vertical farming was down over 90% in 2023. What’s impacting this, is the high cost of capital and the after-effects of the failures are challenging the growth of the vertical farming industry. Overall, the CEA Leafy green industry has grown from 1% to 4% market share and is expected to continue to gain share. Several large hydroponic operations are performing very well in the marketplace. i.e. Revol Greens, Little Leaf Farms, and Gotham Greens are some examples.

·????? The future of the industry – technology is advancing and the next generation of CEA Farms is coming.

o?? Current operations will continue to increase their competitiveness through productivity gains in their operations. There are industry studies that show yield doubling and cost of production going down 40% over the last 10 years. This productivity trend is expected to continue through advances in innovation.

o?? Mega Hydroponic Farms are coming that will give the ability to leverage scale. The average size facility is moving to 20+ acre farms with the ability to expand for example to 50 or more acres. The next generations of high-tech hydroponic operations are expected to have lower capital costs, be supported by artificial intelligence software, will require less labor, generate higher yields, and have lower input and energy costs.

o?? Vertical farming companies are continuing to innovate; some have chosen to invest in methods that save energy costs by growing vertically.

?

For these reasons, the produce industry should be very optimistic about the future of the CEA Leafy Green industry.

?

Craig Carlson of Carlson Produce Consulting is a Strategy Consultant that can be reached on LinkedIn at linkedin.com/in/craigcarlsoncpc

?