Why Vertical Farms WORLDWIDE Are FAILING!

Summary

Vertical farming, once hailed as a sustainable solution for feeding a growing population with less water and land, is facing a crisis with numerous startups going bankrupt. Despite the high yields and reduced water usage, the industry struggles with high labor and capital costs, making it uncompetitive against traditional farming. The script explores the reasons behind the failure of this technology and its potential future in regions with abundant renewable energy.

Takeaways

• 💡 Vertical farming was once seen as a revolutionary solution to feeding a growing global population with less water and land.
• 📉 Despite the optimism, numerous vertical farming startups have filed for bankruptcy, including those in the US, Europe, and the Middle East.
• 💰 Over $2 billion were invested in vertical farms in 2022, but by 2023, venture capital investment plummeted to just $275 million, indicating a significant loss of confidence in the industry.
• 🌱 The concept of vertical farming involves growing crops in stacked layers within a controlled environment, using hydroponics or aeroponics, and LED lighting to replace sunlight.
• 🌿 Vertical farms promise benefits such as higher crop yields, reduced water use, year-round production, and minimized pesticide use due to controlled environments.
• 🚀 Some vertical farming companies, like Infarm and Bowery Farms, achieved 'unicorn' status, with valuations exceeding $1 billion, sparking excitement in the industry.
• 📉 The high costs of labor, equipment, and energy for LED lighting have made profitability a challenge for vertical farms, even with higher yields.
• 🌍 The industry's reliance on the proximity to customers and sustainability did not translate into lower costs that could compete with traditional farming in regions with abundant sunlight and lower labor costs.
• 🛠 The high initial investment and ongoing maintenance costs for vertical farms, including specialized equipment and sensors, have contributed to financial strain.
• 🌞 Vertical farms face the challenge of competing with traditional farming that utilizes free sunlight, which raises questions about the economic viability of artificial lighting.
• 🌱 While many companies are struggling, the vertical farming industry as a whole is still growing, albeit at a slower pace, with a compound annual growth rate of about 25%.

Q & A

What was the initial promise of vertical farming?

Vertical farming was initially seen as a solution to feed an ever-increasing world population with less water and by using less land through vertical stacking of crops.

Why did vertical farms start to fail in 2024?

Vertical farms began to fail due to various challenges including high operational costs, the need for skilled labor, and the high initial investment in equipment and technology.

How much investment was there in vertical farms in 2022?

Over $2 billion was invested in vertical farms in 2022.

What was the market value of the vertical farming industry by 2023?

The vertical farming market was worth over 5 billion by 2023.

What are the key benefits of vertical farming that were widely publicized?

The key benefits included better crop yields, reduction in water use by up to 90% or more, year-round production, land use reduction, minimized use of pesticides, and the potential for high automation.

Which company was the first unicorn vertical farming startup?

Infarm, a German company founded in 2013, was the first unicorn vertical farming startup.

Why did venture capital investment in vertical farming drop significantly in 2023?

The drop in investment was due to the realization that vertical farming was not as profitable as initially thought, with high costs and operational challenges becoming apparent.

What are the main operational costs in vertical farming?

The main operational costs in vertical farming include labor, capital expenses for equipment and technology, and electricity for running LED lights and other systems.

How does the cost of producing a pound of lettuce in a vertical farm compare to traditional farming?

Producing a pound of lettuce in a vertical farm costs six times more than in a traditional open field farm.

What is the current state of the vertical farming industry despite the bankruptcies?

Despite the bankruptcies, the vertical farming industry is still growing with a compound annual growth rate of about 25%, and companies are relocating to areas with abundant renewable energy.

What is the potential future for vertical farming if costs are reduced and automation is improved?

If costs are reduced and automation is improved, vertical farming could become more competitive and viable, especially in areas with limited land or unfavorable growing conditions.