Investment

Vertical farming gets support from a host of family backers as it goes mainstream

A rich mix of family enterprises are backing an agricultural revolution in vertical farming which could offer a solution to growing food shortages by moving production indoors.

Proponents are out to achieve scale as climate disruption and water shortages contribute to food price rises, equivalent to 40% in the year to May, according to the United Nations.

AeroFarms is currently involved in a $1.2 billion merger with a SPAC run by Pearl Energy’s Billy Quinn, following a career dedicated to oil and gas. Kalera, backed by Bjørge Gretland, one of Norway’s top growth investors, plans a US listing. US-based Plenty has attracted the attention of Jeff Bezos and Softbank. 

The idea of converting surplus commercial property into farms could make sense. Urban farms could significantly ease distribution headaches

Vertical farming involves the indoor cultivation of crops on stacks of giant shelves, using hydroponics and artificial lights to achieve growth, rather than soil and sun. 

This means the crops avoid weather damage and pests. They can grow all year round, with limited water requirements. The process consumes energy and requires a heavy financial commitment up front. But the benefits are significant and sustainable.

The idea was proposed in 1999 by Dickson Despommier of Columbia University who once designed a skyscraper farm to feed 50,000 people. Current designs are less dramatic, as giant tents and steel mills are pressed into service. But the idea of converting surplus commercial property into farms could make sense. Urban farms could significantly ease distribution headaches.

To an extent, verticality has developed out of greenhouse production. Paul Mastronadi is a fourth-generation member of a family involved in it. He is now developing facilities using vertical farming, including a 70-acre construct at Oneida, New York State.  Stuppy and Nexus are smaller greenhouse businesses offering technical solutions. Freight Farms converts shipping containers for consumers dreaming of urban allotments.

The US is perceived as the most important market for vertical farms as consumers become more concerned about food quality and sustainability.  Japan has 200 vertical farms operated by companies like Spread and Marai. But China is building faster, often employing systems that are semi-automated. Taiwan was an early innovator. Its YesHealth iFarm has a daily production capacity of 1,600 kg.  Its joint venture with Foxconn in China offers 2,500 kg.

Around 60% of vertical farms in the US are owned by smaller operators. The sector can look quirky. But a successful operation relies on economies of scale and there is no shortage of contenders seeking to tap family enterprises to achieve it. Contracts with a range of traditional suppliers are being signed.

To improve its US profile, Gretland is stepping down as chairman of Kalera, while remaining director, in favour of Kim Lopdrup, renowned for taking a sustainable approach to develop his US Red Lobster seafood restaurant chain, the largest in the world. 

To build Kalera Gretland found finance from a string of Nordic family enterprises led by his wholly-owned investment business, Convexa, and the Hagen family’s Canica. 

Kalera’s biggest, 12.5%, investor is the Prince of Liechtenstein’s LGT Bank. Under CEO Daniel Malechuk, a former Aldi executive, the company has erected giant vertical stacks in Houston and Atlanta, with many more planned. It has acquired a seed producer to produce indoor seeds. Despite startup losses, the company’s market value on Euronext is $640 million.

AeroFarms is set to join Kalera on the public stage by merging with Spring Valley Acquisition in a $1.2 billion deal. The Duke of Westminster’s agricultural technology business, Wheatsheaf Group, backed the company in 2015. Its executive director Stephen Dolezalek is AeroFarms chairman.  

Wheatsheaf says: “Plant roots grow soil-free – misted with nutrients, water, and oxygen – use no pesticides and up to 95% less water than field farming. 365 days of growth can lead to as much as 390 times more productivity per square foot annually than a commercial field farm.”

Bowery Farming of New York has raised $470 million for its vertical plans. New investors in a $300 million May subscription were led by Fidelity, Temasek and the Pinault family, along with celebrities like Lewis Hamilton, Justin Timberlake and Natalie Portman.

Plenty has raised $540 million. The latest investors to follow Jeff Bezos through the door with a $140 million October 2020 raise includes Softbank and Driscoll’s, a tech-savvy family-owned strawberry grower from California.

Gotham Greens has raised $125 million, most recently from Manna Tree whose CEO Gabrielle Rubenstein is daughter of Carlyle Group co-founder David Rubenstein. Ace & Co, a Swiss investment firm owned by Adam Said, the son of prominent, Egyptian American investor Fouad Said, is another Gotham backers.

BrightFarms has raised $210 million, most recently from Cox Enterprises, a fourth-generation family business, and NGEN Partners, whose founder Peter Grubstein, a BrightFarms director and veteran in the sustainable investment space.  Support from sustainable investors provides an extra boost for vertical farming which looked quirky as recently as three years ago, but now has the potential to enter the mainstream.

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