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Behind the greens: Why greenhouse lettuce is not competitive yet

January 11, 2021

Editor’s note: Peter Tasgal is a strategic consultant to the food and agriculture industries and co-founder of the Farmbook Project, based in Boston, US. The views expressed in this guest article do not necessarily represent those of AFN.

The lowest retail price for hydroponically and locally grown lettuce — ‘hydroponic lettuce’ — in New England is $2.49 per 4-ounce package. This is equal to $9.96 per pound. Frequently the price is well in excess of $10 per pound, depending on retail outlet.

Conventionally grown lettuce, similarly packaged, is often sold below $4 per pound. This large price difference is justified; as hydroponic lettuce has a better taste, is grown without pesticides, and requires significantly less water to grow.

In the same region, hydroponic tomatoes often sell for below $3 per pound. These tomatoes are priced in-line and even below the price of conventionally grown tomatoes.

The pricing differential for lettuce compared to the lack of pricing differential for tomatoes is a function of each of the following:

  • The market will bear higher prices for hydroponic lettuce.
  • Production cost variance between hydroponic and conventional lettuce is much greater than that of hydroponic and conventional tomatoes.
  • The hydroponic lettuce market is in its relative infancy.

In my opinion, technology and larger greenhouses will bring down the cost of production over the next two to three years. This will allow lettuce and leafy green greenhouses to serve all segments of the market over the same timeframe.

Price the market will bear

Store checks of cut lettuce and leafy greens were performed on December 15, 2020, at both an economical retailer and a premium retailer in the Boston, Massachusetts area [see Appendix A below].

Key findings include:

  • Hydroponic and locally grown product is priced at a premium, even versus organic.
  • All packages priced at $4.99 or below.
  • All packages of less than 8 ounces were priced $3.99 and below.
  • 16-ounce packages were priced at a significant discount; as compared to those below 8-ounces (on a per pound basis). Frequently the differential was over 50%.
  • Most were packed in clamshell boxes, providing a voluminous feel to the product.
  • The economical retailer had one brand of hydroponic lettuce. The premium retailer had four brands of hydroponic lettuce.

The data shows each retailer’s approach to lettuce pricing:

  • The economical retailer prices 4 to 5-ounce containers of lettuce at $2.99 and below.
  • The premium retailer keeps prices at $3.99 and below.
  • An identically branded product sells for $2.50 at the economical retailer and $3.99 at premium. This represents a 60% premium.

Pricing data is much less clear for tomatoes. Especially during colder weather, most tomatoes being sold are greenhouse-grown. According to the US Department of Agriculture‘s 2017 Census of Agriculture, “75% of fresh market tomato retail sales in the US are from greenhouse production.” The only option for full-sized, field-grown tomatoes in the store was $1.99 per pound. This matches the price of greenhouse-grown.

Pricing for full-sized tomatoes varies based on branding. It’s independent of whether grown locally or using hydroponic methods, and also did not correlate to the type of retailer. For example, the same brand of hydroponic tomato sells for $2.99 per pound at the economical retailer and $1.99 at the premium retailer.

Cost of production

Greenhouse lettuce has a much higher production cost than conventionally grown product.

Cost of lettuce production

The lowest cost per pound for hydroponic lettuce was $10 at retail. Typical produce departments have margins in the range of 40% to 50%. Therefore, wholesale costs are at least $5 per pound. Our modeling depicts $5 per pound wholesale as close to breakeven on a fully costed basis.

A summary of store checks for lettuce and leafy greens on December 15, 2016 is outlined below:

Local / hydroponic  



Package size


Package type


Price per pound

Yes No 4 to 5oz Clamshell $10 to $16
No Yes 4 to 8oz Clamshell $8 to $13
No Yes 16oz Clamshell $5
No Yes 5oz Bag $6 to $9

Most product was branded. Price was independent of whether product was sold as branded or private label. The hydroponic and locally grown product is consistently the most expensive item in the market, even compared to organic product.

Cost of greenhouse tomato production

AppHarvest, a greenhouse operator in Kentucky, recently did its first planting of tomatoes in its newly-built 60-acre greenhouse facility. AppHarvest is in the process of becoming a public company through its merger with Novus Capital Corporation, a ‘SPAC’ [special purpose acquisition corporation]. AppHarvest’s investment documents depict 45 million pounds of tomato capacity and corresponding annual revenue of $42.5 million in this greenhouse. This equates to a price per pound of $0.94. AppHarvest depicts a 40% gross profit margin at this price.

Additionally, AppHarvest’s investment documents [see Appendix B below] outline plans for a 15-acre leafy green greenhouse, which broke ground recently in Berea, Kentucky. The facility, for which capital costs are $43.5 million, is expected to begin growing in 2022. AppHarvest depicts revenue from the leafy green greenhouse of $16.2 million. However, it does not provide guidance as to pounds of production, in order to derive a price per pound.

Production cost summary

Greenhouse production costs of lettuce and leafy greens are significantly more than field production. In contrast, tomato production costs are directly competitive with field production.

Relative infancy of the hydroponic lettuce market

Numerous lettuce and leafy green greenhouses are being erected in the US. Although growing quickly, the technology is not at a place where greenhouse-grown lettuce can compete with that grown in dirt. As more capital is invested and people become more experienced, greenhouses will become more cost competitive.

A review of the highly developed greenhouse market in neighboring Canada, curated over decades, finds a market dominated by the production of tomatoes, cucumbers, and peppers. According to Statistics Canada, 98% of production from commercial Canadian greenhouses in 2019 consisted of these top three products. Lettuce represented 1.3% of production.

We spoke to representatives of the Ontario Greenhouse Vegetable Growers Association (OGVG), which represents a majority of production by vegetable greenhouses across Canada. Per OGVG, many greenhouse operators in Canada are family businesses, which have operated for generations. They do not want to move seasoned personnel to new crops for which they are less experienced. OGVG also stated that lettuce greenhouses are highly technical and require significant upfront capital expenditures.

The information provided by AppHarvest depicts large capital cost requirements for both tomato and lettuce greenhouse production. However, capital costs per dollar of revenue are similar for tomatoes and lettuce. The following is represented by AppHarvest:

  • Greenhouse tomatoes: $107.1 million capital costs to $42.5 million of annual revenue ($2.52 of capital costs per revenue dollar.)
  • Greenhouse leafy greens: $43.5 million capital costs to $16.2 million of annual revenue ($2.69 of capital costs per revenue dollar.)

For generational greenhouse farmers it is understandable to invest in the products they know. Canadian growers seeking to diversify product offerings tend to invest in berry production, rather than lettuce. Mucci Farms announced in October 2020 it would increase strawberry capacity over two years at its Kingsville, Ontario greenhouse to 72 acres, or 3.1 million square feet. As a comparison, per Statistics Canada, total greenhouse lettuce square footage across Canada was 3.4 million square feet as of 2019.

Realistic opportunity

I believe that lettuce today cannot be grown in a greenhouse at a price competitive with field-grown lettuce. This is likely the primary reason that Canadian greenhouse operators have instead focused on tomatoes, cucumbers, and peppers.

My prediction is that over the next two to three years, hydroponic lettuce production costs will come down dramatically. This will be possible through technological innovation and further development of large-scale greenhouses. The reduced cost structure will allow hydroponic lettuce to compete directly with conventionally grown product. At that point, all aspects of the lettuce market will become available to greenhouse farmers. Specifically, the entire food service channel will become a realistic opportunity.

AppHarvest outlined to sophisticated investors expectations of selling tomatoes at $0.94 per pound to customers such as Walmart and Kroger. These customers serve the mass market consumer. In my opinion, AppHarvest and others will also reach production efficiencies to serve mass market consumers from the latest lettuce greenhouses.

Appendix A: Store checks for cut lettuce, December 15 2020

Economical retailer: Market Basket – Waltham, Massachusetts
Brand Local & hydroponic? Organic? Packaging Package size (oz) Price per package Price per pound
Little Leaf Farms Yes No Clamshell 4 $2.50 $10.00
Olivia’s Organic No Yes Clamshell 5 $2.50 $8.00
Olivia’s Organic No Yes Clamshell 8 $4.99 $9.98
Northeast Fresh No No Clamshell 5 $2.50 $8.00
Fresh Express No Yes Clamshell 16 $4.99 $4.99
Fresh Express No Yes Bag 5 $2.79 $8.93
Premium retailer: Whole Foods – Newton, Massachusetts
Brand Local & hydroponic? Organic? Packaging Package size (oz) Price per package Price per pound
Private label No Yes Clamshell 5 $3.49 $11.17
Private label No Yes Clamshell 16 $4.99 $4.99
Organic Girl No Yes Clamshell 5 $3.99 $12.77
Gotham Greens Yes No Clamshell 4.5 $3.99 $14.19
Little Leaf Farms Yes No Clamshell 4 $3.99 $15.96
Lef Farms Yes No Clamshell 4 $3.49 $13.96
Green Mountain Harvest Yes No Clamshell 5 $3.99 $12.77
Private label No Yes Bag 5 $1.99 $6.37

Appendix B: AppHarvest investment documents – indicative economics

Product Tomatoes Cucumbers Lettuce
Facility size (acres) 63.4 60 15
Facility size (sq ft) 2,761,704 2,613,600 653,400
Annual pounds of production 45,000,000 [No information] [No information]
Revenue $42,500,000 $47,900,000 $16,200,000
Labor cost ($12,300,000) ($12,000,000) ($2,400,000)
Utilities ($6,400,000) ($5,800,000) ($2,400,000)
Other costs ($6,700,000) ($10,800,000) ($4,600,000)
Gross profit $17,100,000 $19,300,000 $6,800,000
Crop selling, general & administrative expense ($1,400,000) ($1,300,000) ($1,000,000)
Facility EBITDA $15,700,000 $18,000,000 $5,900,000
Gross profit as % of revenue 40% 40% 42%
Capital costs $107,100,000 $107,100,000 $43,500,000
Unlevered return 15% 17% 14%
Price per pound $0.94
Pounds per acre 709,779
Pounds per sq ft 16

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