Indoor Farming in Growth Mode

Growth Mode

CLIMATE-CONTROLLED INDOOR FARMS ARE A NEW LINK IN THE FOOD CHAIN

By Lynn Petrak

he future of indoor farming, including vertical farming, has nowhere to go but up. With parallel and perhaps inevitably colliding trends of sustainability, plant-based eating, food safety and labor-saving agricultural practices, produce grown in controlled environments is likely to become much more common in grocery stores. As a testament to the sunny future of the ag tech niche, the U.S. Department of Agriculture started a new Office of Urban Agriculture and Innovative Production last year. More than $3 million in initial grants were made available through the department in 2020.

Prognosticators have weighed in on a future of food that includes strategically located indoor farms throughout the country. In a report released late last year, Allied Market Research, whose Americas office is in Portland, Ore., projected that the global vertical-farming industry is expected to reach $1.38 billion by 2027, with a compound annual growth rate (CAGR) of 26.2% from 2021 to 2027.

Several grocers are already buying into this type of produce supply. Earlier this year, The Kroger Co., based in Cincinnati, began sourcing fresh produce from Hamilton, Ohio-based indoor grower 80 Acres Farms for the retailer’s stores in Ohio, Indiana and Kentucky. In 2020, Kroger partnered with German startup Infarm to add modular vertical farms to two of its Quality Food Centers in the Seattle area.

Also last year, Publix Super Markets said that it would invest more in hydroponic produce and added a new on-site trailer farm from a local hydroponic grower to its GreenWise Market store in the grocer’s hometown of Lakeland, Fla. Boise, Idaho-based Albertsons Cos. has collaborated with South San Francisco, Calif.-based Plenty and with Bowery Farming, based in New York, to provide its shoppers with fresh produce grown indoors. Natural and organic retailer Whole Foods Market, based in Austin, Texas, recently added a mini-farm from New York-based Farm.One to one of its Big Apple stores to provide herbs for prepared pizzas and drinks. In addition to these and other large grocery players, smaller chains and independents have teamed up with various greenhouses and growing operations near their locations.

Consumers have expressed their opinions about produce grown indoors. According to the 2021 “Power of Produce” report published by Arlington, Va.-based FMI — The Food Industry Association, and conducted by San Antonio-based 210 Analytics, 43% of shoppers don’t have a preference for produce coming from indoor versus outdoor farms. Those most likely to prefer indoor growing include urbanites, consumers with above-average spend per person, members of the Generation Z age demographic, higher-income households, core value-added shoppers, organic produce buyers, and men. Those more likely to prefer outdoor-grown produce include consumers in rural areas and conventional produce buyers, the report found.

Key Takeaways

More grocers have begun sourcing from or partnering with indoor-farming companies to procure fresh local produce. One of the biggest drivers of the move to produce more food in indoor-farming facilities is sustainability. Grocers can merchandise indoorfarmed produce in a creative way to distinguish their offerings and connect with shoppers.

Greener Pastures

One of the biggest drivers of the move to produce more food in indoor-farming facilities is sustainability. From an environmental standpoint, indoor-grown produce may be part choice, part necessity, depending on the area and the circumstances.

Necessity is born of conditions wrought by continual weather extremes that are often attributed to a changing climate. Unusual weather patterns resulting in droughts, floods, storm damage and harmful freezes take a toll on traditional farms and on the farmers who grow fresh fruits and vegetables.

Weather extremes have always happened, but are becoming more frequent. For example, coming off last summer’s devastating derecho event, a drought that began in late 2020 in Iowa and has continued through early summer is stressing that state’s corn and soybean crops. Earlier this year, rare heavy snow, ice and frigid temperatures in Texas hurt winter wheat and some citrus crops.

At the same time, there’s an overall push to produce food in a more sustainable way. More than two-thirds (64%) of American consumers say that they’re willing to pay a premium for environmentally friendly products. “There is a trend — not a fad — of consumers who appreciate the benefit of getting produce soon after it’s harvested,” says David Rosenberg, co-founder and CEO of vertical-farming leader AeroFarms, based in Newark, N.J., “and more and more customers are realizing that they want products with no pesticides, because those are not meant for human beings.”

On the business side, sustainability is a central part of many CPGs’ and grocers’ corporate responsibility platforms as they pledge to reduce their use of resources like water and energy. Many manufacturers and retailers have also revealed goals to cut down on or eliminate the use of pesticides in their products.

Hydroponic farming company Vertical Roots is growing its footprint with a new indoor lettuce farm in the Atlanta area.

IT’S IN THE BOX The Sustainable Profile of Recycled Corrugated Containers

Speaking with Rachel Kenyon, Senior Vice President, Fibre Box Association (FBA)

SUSTAINABILITY IS MORE THAN JUST A BUZZ WORD THESE DAYS; it is a must-embrace approach to business for any company that wants to thrive in today’s increasingly environmentally conscious marketplace. Progressive Grocer asked Rachel Kenyon, senior vice president of FBA, to explain how boxes used by grocers in their stores can play such an important role along the route to a sustainable future. losing its properties during the recycling process. From a sustainability standpoint, it minimizes the use of resources, and reduces waste, pollution and carbon emissions. That’s why renewable resources and circularity go hand-in-hand.

So, here’s what’s so great about OCC: The average corrugated box contains nearly 52 percent recycled content — and every box that’s recycled is transformed into a new corrugated box.

How does that happen? The containers travel ina continuous loop: After they’re used, they’re collected and compacted, transported to a paper mill, fed into a repulper, agitated to form a slushy pulp, and cleaned of contaminants. The OCC’s “new life” begins when new corrugated board is formed using three or more pieces of paper, sandwiched together, cut into sheets, and passed through machines that make them into new boxes.

PG: Why are grocery retailers such important players in this circular economy?

RK: Approximately 40 percent of boxes are used to package food and beverage products, and much of that ends up in grocery stores. That makes it easy to see why grocery retailers have such an important role to play along this road to a sustainable future.

Statistics show that shoppers are more concerned than ever about the environment: 76 percent say they’re looking for brands that support recycling3, and they’ll support retailers who show they are, too. Fifty-seven percent of consumers are willing to change their purchasing habits to help reduce negative environmental impact3 — that is an impressive number for retailers who want to attract new shoppers to their stores!

Letting customers know your store recycles the corrugated boxes their food is delivered in, and encouraging them to recycle the boxes they receive at home, is one way you can help the industry create new boxes from old ones… and in the process help create a truly circular, sustainable economy.

Progressive Grocer: As popular as sustainablilty has become, there’s been somewhat of a backlash on recycling. What is that all about?

Rachel Kenyon: There have been so many news reports about the amount of plastic debris in our oceans that consumers, even those who had embraced recycling, have become skeptical. And you can’t blame them! Some data shows that 8 million metric tons of plastics enter our ocean every year1 — it’s no wonder they question whether what they’re putting in their recycling bins is really being recycled.

PG: Is corrugated cardboard a different story?

RK: Absolutely! Old Corrugated Containers (OCC) are definitely being recycled — it really is a resounding success story. In fact, we’ve been building the infrastructure for recycling since 1970! Corrugated packaging, which is made from a balanced system of new tree fibers and recycled fibers, is the most recycled packaging material in the world with a recycling rate that has hovered around 90 percent for the last decade — that’s more than 32 million total tons each year2!

PG: There’s been a lot of talk recently about the circular economy. What does that mean and how does recycled OCC play a role in creating that economy?

RK: The goal of a circular economy, which is often called “circularity,” is to eliminate waste and use resources continually. It creates a closed-loop recycling system in which a product or material is used and then turned into a new product without

1Ocean Conservancy 2 American Forest & Paper Association 3 “Meet the 2020 consumers driving change,” IBM Institute for Business Value and National Retail Federation

Visit www.corrugated.org to find out how boxes can improve your business

Other Seeds of Change

In addition to the pursuit of sustainable growing practices, other factors are contributing to interest in this method of agriculture. The need to shore up food security in the face of a booming global population and the problem of urban food deserts are notable catalysts. So is consumers’ penchant for eating more fresh plantbased foods, and foods grown in a more sustainable way.

Meanwhile, as evidenced by ubiquitous “Now hiring” signs, it can be tough to find workers to plant, care for and harvest crops. Indoor farms run with several automated controls, and tasks are less affected by fluctuations and stresses in the labor market.

The global COVID-19 pandemic also contributed to the acceleration of indoor farming. When some retailers faced supply chain issues and had difficulty sourcing fresh products, they turned to new vendor partners that operated indoor farms with more controlled conditions and inventories. Indoor farms typically can be built faster and are also versatile operations that allow for pivots in the event of changing circumstances.

There are additional practical reasons for sourcing produce from indoor growers. “Right now, retailers want consistency in price, quality and delivery. At its core, we are delivering consistency,” notes Rosenberg, citing other profit-driven benefits such as reduced shrink and spoilage.

Indoor-Farm Tour

Generally, plants in indoor-farming facilities are grown in cells stacked for space savings and efficiency. In lieu of the sun, LED lights are used to facilitate growth.

Watering techniques vary. In hydroponic farms, plant roots are placed in nutrient-rich solutions instead of soil. With aeroponics, exposed roots hang down from the plant and receive nutrients via a system that sprays nutrient-filled water.

Indoor farms take different forms in the United States and around the world. Some indoor farms are massive in size and almost industrial in their setup. Others are smaller and hyperlocal, using locations like repurposed shipping containers or greenhouses. Some farms are constructed vertically to minimize the physical footprint or to use existing buildings, while others are more spread out in their design. Farms are being built in urban areas, often in former manufacturing facilities, warehouses or multilevel stores, and in more rural areas, where they are run by longtime family farm owners who are looking for ways to reinvent their businesses in the wake of competition from big farms.

One thing is for sure: There are more of these types of growing operations. AeroFarms is one grower on the march, with a l36,000-square-foot aeroponics farm under construction in Virginia, set to be finished sometime in 2022.

In June, Vertical Roots, a Charleston, S.C.-based hydroponic container farm that’s part of Amplifed Ag, opened its third indoor farm in Atlanta at a facility run by two large produce suppliers in the Southeast. According to the company, the new farm will eliminate the need for transportation to the distributor and will enable produce to be delivered to local customers the same day that it’s harvested.

In mid-June, Morehead, Ky.-based grower AppHarvest revealed that it’s adding two large indoor farms in the Bluegrass State. With a completion time at the end of 2022, the farms will produce non-GMO leafy greens and fruits for shipment to grocers and restaurants. Also in 2021, Irvington, N.Y.-based BrightFarms opened its newest indoor farm, in Hendersonville, N.C., a 6-acre greenhouse that will deliver to retailers in nearby areas in that state, as well as in South Carolina and Georgia. Startup Bowery Farms is opening an R&D hub called Farm X that will help expand product development. The facility includes a new sensory lab and innovation center. In another sign of the health of this sector, there’s major seed money — no pun intended — going toward indoor farming. Berlin-based Infarm, for example, is said to be going public following a reported merger with Kernel Group Holdings Inc., of San Francisco. In May, Bowery Farming revealed a new round of funding to the

AeroFarms uses aeroponic methods to grow healthy plants, using up to 95% less water and no pesticides.

“There is a trend — not a fad — of consumers who appreciate the benefit of getting produce soon after it’s harvested.”

—David Rosenberg, AeroFarms

Flagstone Foods’ Healthy Bees, Happy Snackers Shines Spotlight on Sustainability

SPEAKING WITH ROBERT SCALIA, CEO, Flagstone Foods

As the premier North American manufacturer of private label label nuts, trail mixes, and other nut-based snacks, Flagstone Foods takes its responsibility to cultivate a more sustainable almond industry seriously. As a part of its Healthy Bees, Happy Snackers initiative, the company has now committed to sourcing 100 percent of its almonds from bee-friendly farms by 2025, becoming the first private label nut manufacturer to take that important step.

Progressive Grocer asked Robert Scalia, CEO of Flagstone Foods, about the role sustainability plays in the company’s overall vision, and why now is the right time for grocery retailers to embrace sustainability, too.

Progressive Grocer: Sustainability is such an important issue today. Is it something Flagstone Foods has increased its focus on recently, or has the company always been committed to sustainable business practices? Robert Scalia: Flagstone Foods has a 100+ year history in better-for-you snacking. While the company has evolved in many ways, food safety and quality, operational excellence, innovation, continuous improvement, and superior customer service have remained the hallmarks of our business. Now, we’re adding sustainability to that list; it’s an integral part of our new vision as we enter an exciting new chapter. “Appreciation Grows Goodness” is our brand belief. With our commitment to sustainable and ethical sourcing, we’re putting that belief into practice.

PG: Almonds are an important ingredient in Flagstone Foods’ snacks. And almond crops depend on honey bees, which are in ecological distress. Why does honey bee health matter to the almond industry? RS: Honey bees carry the food eco-system on their wings. They pollinate 1 in every 3 bites of food we eat, including almost 100 percent of the almonds in our snack products. In fact, over 80 percent of the nation’s honey bee hives (over 2 million hives) make their way to California each year for almond bloom. Sadly, 40 percent of honey bees die annually due to poor nutrition, pesticides, parasites and pathogens1. It isn’t hard to see how this could threaten the sustainability of the almond industry and the grocery retailers who sell those products if we don’t take steps to promote bee health and bee-friendly farming practices. PG: How is Flagstone Foods working to help honey bees in ways that also will help the almond industry? RS: While California produces the vast majority of the world’s almonds on over 1.5 million acres2 of almond orchards, only a fraction of that acreage is currently verified as bee-friendly. By setting this goal, we are joining forces with other industry leaders to significantly expand the adoption of bee-friendly farming practices within the almond industry. We are partnering with growers and processors like California’s Pomona Farming that share our commitment to sustainable, bee-friendly farming practices. Pomona, for example, dedicates more than 3,300 of its approximately 40,000 acres to providing forage for bees and other pollinators and has eliminated the use of pesticides that can be harmful to bees and other pollinators. Our goal is to source exclusively from bee-friendly certified farms by 2025. We are also making charitable contributions to Project Apis m. and its Seeds for Bees program, which gives almond growers the seeds and skills they need to create habitat and forage for bees while also improving soil health.

PG: Why should grocery retailers carry products made with bee-friendly almonds? RS: Private label has a 40 percent share of the $4.5 billion snack nut industry3 — so it is a very important category for retailers. Offering bee-friendly almonds can give retailers a competitive advantage and help them capture consumers willing to pay more for products from companies and brands committed to ethical and sustainable sourcing. Retailers become more relevant to consumers, build their own brand(s), and achieve the sustainability goals they’ve set for themselves simply by having products made with bee-friendly almonds on store shelves.

1 Project Apis m.: News from Project Apis m. 2 California Almond Board: 2019_AcreageReport.pdf; 3 IRI 52WK 4.18.21

To learn more about our Healthy Bees, Happy Snackers initiative and how supermarket chains can benefit from our commitment to sustainable sourcing, visit https://flagstonefoods.com/ sustainability/healthy-bees/

tune of $300 million that lifted the company’s estimated value to about $2.3 billion. Indoor-farming company Gotham Greens, based in Brooklyn, N.Y., revealed $87 million in new funding in December 2020.

While indoor farms are expanding, crops produced in such facilities are expected to grow, too. Most ag tech companies currently produce leafy greens and herbs in hundreds of different varieties. Tomatoes are also grown hydroponically in many places. Better technologies and a greater collective knowledge are spurring innovations in other types of crops grown indoors in an eco-friendlier way. AppHarvest, for its part, is growing strawberries in one of its new locations, and vine crops in another.

Implications for the Retail Produce Section

More and different types of indoor farms are transforming agriculture — and the retail produce department. Since many of these products are packaged on site, supermarket produce sections now feature a greater mix of packaged and bulk items. Offerings like packaged salads and tomatoes also help define and elevate a brand, whether it’s a store brand or a grower brand.

Coming off a year in which consumers prepared more foods and experimented with new products and varieties, several new products grown in indoor-farming facilities have hit the marketplace. Medford, Minn.based Revol Greens recently rolled out new varieties of chopped romaine salads made with lettuces grown at its indoor farm in its home state. Revolution Farms, in Caledonia, Mich., is launching four new salad mixes. One of Bowery Farming’s latest products is a new Bowery Crispy Leaf Lettuce, deemed to be a “reinvigorated version” of iceberg lettuce. And that’s just the tip of the iceberg (lettuce).

Grocers can merchandise indoor-farmed produce in a creative way to distinguish their offerings and connect with shoppers. “We’ve worked in a process of co-creating with retailers,” observes AeroFarms’ Rosenberg. “It is an opportunity to deliver innovation and excitement for an exciting category.”

Modern indoor farms combine technology and agriculture to provide fresh produce in a more sustainable way.