The following post takes a look at this projected strong growth in indoor agriculture, investigates the possible reasons why, and the implications for the industry and our food system as a whole moving forward.
Click to read below.
According to Newbean Capital and Local Roots, the indoor agriculture industry is poised for massive growth. Here's a snapshot:
- Today's market size is $0.5 bn
- The potential addressable market tops $9.0 bn. (That's a pretty conservative estimate according to Nicola Kerslake, the founder of Newbean Capital).
- There are currently 15 large indoor ag. farms operating in the US with another 30 being built.
- Should indoor ag. grow to its full potential its annual revenue will be 4x larger than medical marijuna
Reasons for Growth:
Technology - The technological advances in hydroponics are innumerable since its beginnings in the 20th century. First growers have developed new techniques that allow them to grow plants faster, such as NFT and aeroponics. Second, both the capital and operational expenses has come down with the falling prices of important technology such as grow lights, LEDs, pumps, and monitoring equipment (shoutout to ourselves!). Third, the science behind dosing has become significantly more precise, allowing farmers to accelerate growth and enhance flavor profiles.
Expertise - Piggy-backing off of technology, the number of people in hydroponics who can call themselves experienced growers is rising. Colleges and universities around the country are installing hydroponic systems in their greenhouses at the same time as the rise of medical marijuana has led to many becoming master gardeners in more informal settings. All of this combined with research institutions investing more resources in advancing hydroponic growing techniques and the advancements of innovate companies, like those in Holland, has led to a boom in growers. The demand still far outweighs the supply, but it's catching up.
Capital - If you've been in hydroponics for many years, this must be refreshing. The capital markets are waking up to the potential in all forms of US hydroponics, both food and marijuana. VC firms are specializing solely on hydroponics, such as NewBean, and there are an increasing number of angel investors who have either done very well in the industry and want to reinvest or like to invest in ventures that help build a sustainable future. We can reasonably expect that as indoor ag grows, the level of capital interest will rise right along with it.
Consumer Demand - The slow food movement has been a blessing for hydroponic growers. In the 1990's and early 2000's farms continued to consolidate in response to consumer demands for lower prices. This led to cheaper, but less tasty and nutritious food that often traveled over a thousand miles to reach your plate. When consumers can taste the difference, between 'cheap as possible' and properly grown produce, they will pay a premium. As such, we are seeing hydroponic farmers branch out from their niche of specialty crops and providing fresh, local leafy-greens to snow-locked cities in the middle of winter to competing toe-to-toe with big Ag.
Implications for the Future:
Are hydroponics and indoor agriculture the silver bullet to this looming problem? No, but they will play a key role as the part of that solution, and it's good to see that this industry is not waiting until the issue grows truly dire.