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After years of working on building supply chains to make 'farm to fork' a reality, large retailers are now betting on taking the farms to the consumers
10,000 years ago humans started engaging in agriculture. (yeah, we can argue over it, just shut up, it’s a nice round number) This meant we did not have to run around the planet trying to find fresher berries and more animals to kill.
The map below shows the areas of the world where agriculture predominates.
You see the fag end of the Mediterranean Sea, north of Saudi, that is Syria. It’s so hot there that crops have been failing for years. Hence the war and the migration to Europe; but that is for another post.
Agriculture feeds all of the people in the world today. But in vast countries, the agricultural produce needs to be moved around a great deal. While it may be obvious if you look at the coastal population of the US and their production belts, why transportation is necessary; even in a country like India which looks completely arable a lot of movement takes place. This is because not all crops grow in all parts of the country.
COVID changed customer behaviour. The surge in online purchases broke the website of entrenched players. Especially, for grocery delivery companies. It produced market gains and the companies expanded accordingly. And then people got less scared of COVID.
The intelligent grocery delivery startups sold out during the pandemic phase. Others saw huge valuation jumps thanks to the surge and have been left promising 15-minute, then 10-minute deliveries to deliver sustained growth.
If you look at groceries that get bought often and that needs to be delivered fresh, a huge percentage of it would be farm produce and dairy. People tend to buy vegetables in smaller amounts because they tend to have a low shelf life and also people like having it fresh.
Enter Vertical Farming
Vertical farming is a set of techniques used to grow plants.
Hydroponics involves growing plants in the absence of soil often in a solution. Aeroponics was developed by NASA to grow plants in space where the plants do not require a medium at all but have nutrients delivered through a mist in an air chamber.
As you can imagine, if land, weather, etc are no longer a constraint then you could probably do this in any random warehouse located anywhere in the world so long as you can air-condition and light it. And if the local weather supports, even on terraces and roof-tops. It is land efficient, water efficient and if done without a lot of air-conditioning, incredibly energy efficient.
The trouble with vertical farming has been that, it is hard to scale and quite frankly, it has not got as much attention as it deserves. Many things are hard to scale, if there is enough money poured into it, solutions emerge.
Scaling a company that makes cars with 50-year-old battery technology is hard, but we have Tesla.
Walmart wants to bring the farm closer to the store.
The retail giant said today that it is investing in Plenty, an indoor vertical farming company, and will sell leafy greens from Plenty in its 280 California stores later this year. Some greens, which will come from Plenty’s new vertical farm in Los Angeles, will be sold under the startup’s brands, and others will be sold under Walmart’s private labels.
For Walmart, they kill three birds with one stone.
Firstly, it gets to project this as a climate win to all of the ESG funds and stave off the criticism that comes from climate advocates.
It also gets into a position to tighten its supply chain and compete with the delivery apps. Knowing Walmart, they may just end up supplying to the delivery companies and let them burn up all the cash while Walmart makes all the money.
Further, the one thing that COVID has shown us is the fragility of supply chains. The best way to overcome the fragility is by shortening it.
Walmart is not the first retailer to invest in alternative farming. In 2019, Kroger installed vertical farms from Infarm, a German startup, in two Seattle stores. The seedlings spend the first few days at Infarm’s centralized nursery, and the rest of the growing happens on-site at the grocery stores. A year later, Publix partnered with local hydroponics company Brick Street Farms, to add a 40-foot hydroponic farm in a parking lot outside its store in Lakeland, Florida, where Publix is headquartered. Each week, the farm produces about 720 heads of lettuce, which are all sold in the store.
While vertical farming may strengthen food supply chains it also takes time to grow the product consistently, Curt Epperson, a business development director at Publix, told Greenbiz in 2020. To get significant business and sustainability impacts from vertical farming, vertical farms will need to get large enough to scale. Walmart, with its 10,500 stores globally and $500 billion in annual revenue, may be able to help.
Farming is not a very sexy business so you would not see a lot of VCs competing to invest in the space, but a quiet revolution is brewing.
In 10 years if you were to order vegetables it would be highly likely that it came from a nearby warehouse or rooftop where it was grown.