For Indoor Ag Startup Freight Farms, Competing With The Mass Market Produce Industry Was Never The Plan
Indoor agriculture, a generalized term used to refer to farms inside structures such as greenhouses, container farms, and multi-level warehouse operations housing thousands of rows of plant space, has been touted as a way to meet the demand for local food, help consumers learn more about food production, and provide a fresher source of produce with fewer food miles.
But some are skeptical about the scalability of an inherently localized industry and whether it will ever truly compete with traditional mass market produce, especially when it comes to container farming where production is housed in an old shipping container.
“The confines of the retrofit shipping container make it inherently inefficient compared to other forms of CEA (controlled environment agriculture) and therefore the audience for container grown produce will be a highly niche one over the long term,” agriculture consultant Peter Tasgal recently wrote in the AgFunderNews guest post What is the Future of Container Farming?
Tasgal also noted that there are significant costs involved with container farming, including retrofitting the box, labor, and the cost of power for the LED lights. He concludes that container farming is at least four times as expensive per pound to produce leafy greens in a container compared to traditional farming methods.
“There is technological innovation that will improve the efficiency of container farming, but I don’t see anything on the horizon that will allow container-grown produce to compete with the quick turning leafy greens sold at your local grocery store or those sold by wholesale distributors,” Tasgal wrote.
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Funding for novel farming systems like indoor agriculture and insect farming dropped between 2018 and 2017 according to AgFunder’s AgriFood Tech Funding Report 2018, which you can download here, raising $596 million. There were 17% fewer deals and only two of those deals were over $100 million after US vertical farming operation Plenty closed a record-breaking $200 million round in 2017.
Different Routes to Market
Indoor ag companies’ route-to-market approaches differ just as much as their approaches to cultivating produce under a roof. Some companies like BrightFarms and Bowery, for example, are offering packaged salads to local retailers to compete with traditional supermarket produce offerings.
But for Boston-based Freight Farms, however, competing with grocery store produce was never the plan.
Founded by Brad McNamara and Jonathan Friedman, Freight Farms has been a longstanding player in the container farming space, raising over $12 million in venture capital funding to-date, including backing from accelerator group Techstars, Right Side Capital Management, Spark Capital, Morningside Group, and The Startup Playbook author Will Herman.
As many startups often say, the idea is to disrupt existing markets, not necessarily to conquer them. For a startup that spends most of its time thinking about how to grow food inside a box, its technology is based on thinking outside of the traditional produce cultivation box.
“They compare container farming to the iceberg lettuce industry. We are not interested in that market,” Friedman told AgFunderNews. “We are interested in a distributed food system and some of the incredible changes that are happening throughout the whole food system like ugly produce, food waste, yield maximization. The entire system is in flux and that’s exciting.”
Introducing Greenery, the Leafy Green Machine 2.0
Freight Farms offers a ready-made shipping container called the Leafy Green Machine (LGM) that can be placed in a wide variety of locations including dense metropolitan areas. It just launched its newest product, Greenery, which is the first deviation from the LGM model.
Within the same 320-square-foot space as the LGM, Greenery boasts 70% more growing space and new IoT technology driven at improving yield, efficiency, and automation. With its real-time transparency feature, a single head of romaine can be traced back through every growing stage to the exact hour its seed was planted. It also features recipes that allow farmers to replicate ideal environmental conditions for specific crops like non-native produce. It supports a variety of crops beyond greens, as well, including tomatoes and root vegetables.
The University of Georgia has already purchased two Greenery containers. An independent farmer operating WhyNot Farms, which supplies pasture-raised meat to chefs in North Carolina and Tennessee, also made a purchase.
Although the duo has been pleased with the LGM’s success, Greenery was developed in response to their clientele’s feedback and ever-changing needs. Freight Farms has diverse users throughout the world, including schools, hospitals, NGOs, corporations, and private owners who develop niche businesses offering locally grown produce to restaurants and chefs in the area.
“The joys of standardizing something is that you get a lot of feedback. We have a network of 200 farmers around the world including Guam, Puerto Rico, Europe, and UAE. When we talk about greenhouse farming or traditional farming, no one farms the same way so it’s hard to collect these metrics,” Friedman says. “We looked at workflow considerations and where operators were spending the most time such as fixing things or having to remove a column to replace a part.”
“We benefited from having hundreds of customers in all these varied segments but at the end of the day, there is overlap among what they want, like more yield, fewer operating costs, flexibility, and customization. Our core, bread-and-butter customers are small business entrepreneurs,” McNamara told AgFunderNews. “And because we had experience developing four generations of the LGM, we were able to move faster and to save development dollars because we had real experience. Something John and I talk about all the time is human centric design. When it came to Greenery’s design process, it was equal parts human and plant-centric.”
Some of the biggest differences between the LGM and Greenery have to do with workflow and appearance. Greenery has mobile LED light boards and grows rows that are both adjustable. This allows farmers to grow a larger variety of crops and makes it easier to maneuver through the grow rows.
“After the fourth evolution of the LGM, there was a significant design jump to increase yield, bring in new tech, and to hit the metrics that all of our customers want, which are things like increased yield and improved workflow,” Friedman adds. “One of the bigger things we ran into is that we felt like we had exhausted as much of the off-shelf tech as we could. We realized we had to go back to the beginning and build from the ground up.”
As a testament to its outside-the-box ethos, NASA selected Freight Farms for a Small Business Technology Transfer grant to fund work with Clemson University exploring how to grow food in extreme climates. NASA is hoping that Freight Farms can help create an off-grid crop production unit that would help facilitate deep space exploration.
It’s a Dynamic Time for Agriculture
As far as the future of container farming, McNamara and Friedman want to remind people that the industries are not static entities, especially when they are so heavily focused on technological innovation.
“What frustrates us is that articles are written as if everything is in a static state. We are in a dynamic time for indoor agriculture. If you could have told us back in 2010 how things would be today, it would have been beyond our wildest dreams,” McNamara says.
“With LGM and Greenery, we offer a new way of growing to build a distributed food system, which is exciting to us. You can lower the bar to entry for agriculture with this technology, making it possible for people who want to get into this professionally but who don’t want to build a warehouse or who don’t have a background in ag,” says Friedman. “If they want to grow their own brand or have a private label deal for a restaurant, we want to give them the tools to achieve that and to bring the other half of the world into farming and agriculture.”