Infarm: a new model for vertical farms and its challenges

Estimated reading time: 2 minutes, 42 seconds.

If you grocery shop in Europe, you might have seen some futuristic stuff. Some stores grow their own vegetables, indoors! They use vertical farms to make this possible. Could this be how everyone gets their vegetables in the future?

What is Infarm?

Infarm It combines vertical farming together with IoT, and Machine Learning to bring fresh herbs and veggies closer to consumers. The farms use hydroponics to pump nutrient dense solutions through troughs of seedlings.

The company works in Urban environments to distribute its smart, modular farms throughout cities to grow fresh produce. This reduces transportation costs.

What Infarm does differently than say, other vertical farming companies is grow their product in stores. This creates a farming as a service model, where they sell and maintain units for grocers and wholesalers.

There are two products here. One for stores, and another for consumers. Stores buy the Farming as a Service platform. Consumers purchase their herbs and vegetables directly from the platform units that live in store.

The platform sells keep track of the plants environment - temperature, pH, nutrient levels and notify caretakers of the actions they need to take. This lets Infarm optimise plant growth at a more granular level.

The Trend

Vertical Farming is riding a growing wave. The market is expected to be worth about $10 billion by 2026, from 3 billion in 2021. That means it should grow about 25% year over year.

For any technology to see adoption, something must change. Vertical Farms are only possible with cheap electricity and LED lighting. The cost of LED’s will drop by a factor of 10 every decade and the light they can produce will improve by a factor of 20. This phenomenon is called Haitz’ law.

While only 13% of consumers have actually bought vertically farmed products, over 70% would trust products from vertical farms. The most important statistic is that only 50% of the surveyed group knew about Vertical Farming. Consumers see products grown in vertical farms as favorable, which hasn’t always been the case.

Vertical farms are way more effective on a square meter, and water basis. Vertical farms use roughly 90% less water than traditional farms, and can offer 20-30x yield dependent upon set up.

Challenges

The vertical farming industry faces a few challenges. These are difficult businesses to run, and finance.

Financing is difficult to come by in an industry like Vertical Farming. While Infarm has been able to raise over $600 million, it operates in a low margin category. Because margins on food are so low, investors may struggle to value Infarm's technology.

Infarm has both high capital and operational expenditures. Engineering, and maintaining the units is expensive. The units require large amounts of electricity and need to be tended to by an Infarm representatives.

Rising Electricity costs create more risk for vertical farming companies. Because they have decided upon a distributed approach, they're reliant upon the point distributors electricity. It took a geopolitical event (War in Ukraine) to understand that electricity is a variable cost, not a fixed one.

Consumer taste may also affect Infarm's top line. As European economies slow down, much of their consumer base may opt out of buying the more expensive vertically farmed herbs. As Infarm has positioned itself as a luxury product, it could be one of the first items to be cut from the shopping list.