North America’s indoor farms plan to add 500-plus acres over next 5 years: report

Indoor farming analytics provider Artemis has just released its annual State of Indoor Farming report, which reflects a survey of 205 enterprise horticulture facilities across the US and Canada. Put together in partnership with research firm Startle, the report’s goal is to assess where the region’s industry is today – as well as giving growers a voice around the latest trends, challenges, and opportunities it presents.

It covers everything from container farms to high-tech glass greenhouses and vertical farms.

“One thing we did this year that was different from last time was asking things like, ‘How are you actually getting capital? How are you getting contracts with buyers? How did the mechanics work to make sure that you can actually expand and build projects?'” Artemis co-founder and CEO Allison Kopf tells AFN.

“There are some really interesting tidbits that might go unnoticed, like the small number of people who indicated that part of their expansion plan includes packing operations. I think this is probably driven by Covid-19 and the supply chain holes that we saw. Doing more on-site packing and increasing on-site capacity is very different from field ag.”

A few other notable findings from the report include:

• 77% of respondents are growing multiple crops while 23% are growing a single crop.
• The three most commonly cultivated crops indoors are leafy greens (26% of total), herbs (20%), and microgreens (16%). Tomatoes (10%), cucumbers (8%), peppers (8%), ornamentals (6%), and strawberries (6%) round out the list.
• The average revenue reported by growers selling the leading indoor crop, leafy greens, is $7.82 per pound.
• Inputs remain one of the biggest drivers of operational costs for indoor growers with average annual costs for seeds ($24,989), grow media ($19,190), and nutrients ($17,510) among the most expensive.
• Retail and grocery outlets (28%) remain the dominant sales channel for indoor growers, followed by direct-to-consumer outlets (26%) and wholesale accounts (17%).

Indoor growers are also eager to expand their footprints. Roughly three-quarters have expansion plans that they aim to execute in the next five years. If they are successful in their endeavors, they’ll add a predicted 544 acres to North America’s indoor farming industry.

Technology adoption indoors

The indoor farming industry has a big appetite for technology, according to the Artemis report. Just over a third of respondents are using mainly tablets and mobile phones to run their daily operations, with 24% using desktop computers. Six percent have adopted barcode scanners.

When considering new technologies, 39% of indoor growers are eager to find solutions to manage operations more efficiently. Lowering the cost of production (20%) and increasing yields (19%) are also high on the tech discovery list.

Investing in technology and understanding it is a critical ingredient for success, according to Kopf.

“Now that the market has established itself, you’re going to see a lot of technology in the next few years come on to the market. New hardware, new sensors, new control systems, new lighting, new physical structures, new growing system automation, robotics, AI — you name it,” she says.

But the increase in choice comes with its own problems. Some growers may find themselves overwhelmed by the flood of new offerings, or lack the time to research the optimal products for them.

“Being able to find the right stuff to operate the facility the way you want for the crops that you are growing is going to be really, really critical. [Tech vendors] that differentiate based on product are going to stand above the rest,” Kopf suggests.

This could include products that help indoor farms prove they are carbon neutral or negative, opening up a new world of branding and marketing opportunities.

Advancements in breeding technology are also starting to open the door to new types of crop cultivation. As developments in genetics unlock the right varieties for indoor conditions, the industry will be better equipped to move beyond leafy greens and herbs.

Suited for public markets

As more indoor farming startups raise substantial rounds or take their companies public — like AppHarvest and Aerofarms have done recently through SPAC mergers — questions are bubbling up around whether the momentum can last.

For Kopf, the fact that indoor farms are producing tangible products differentiates them from some of the other hyped subsectors within agrifoodtech. Indoor farming operations can also involve substantial physical infrastructure, making them well suited for public markets, she says – while they can also tick the increasingly important ESG box for investors. As a result, she sees more SPAC deals and IPOs on the horizon.

There’s also room left for indoor farming to expand in certain geographies where massive consumer markets await.

“If you look at the Netherlands or Spain, markets where greenhouse production is commonplace, we’re really behind in the US. If you’ve got plenty of room to grow – that changes the dynamic,” Kopf says.

“I don’t think we are anywhere near where we will be in the next five to 10 years, which to me indicates you’re not in a bubble. You’re in the early stages of a transitional period for an industry as a whole.”