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Beyond price parity, CEA must focus more on consumer demand to truly scale

March 29, 2023

Peter Tasgal is a food and agriculture & CEA consultant and co-founder of Farmbook Project, based in Boston, US. The views expressed in this guest article are the authors’ own and do not necessarily represent those of AFN.

Much of the controlled environment agriculture (CEA) industry currently focuses on improving the cost and efficiency of growing (supply). Articles and discussions highlight things like implementing robotics and AI, the use of alternative power sources and better seed breeding, to name just a few areas. All of this is very important to get CEA produce closer to cost parity with outdoor-grown products.

However, the industry must also work on increasing consumer demand for CEA-grown specialty products, which is critical to the sector’s overall growth.

Certainly, there is demand for CEA-grown products — but only for those sold at a price that’s at parity with outdoor-grown items. For example, a large percentage of tomatoes, cucumber and peppers sold at US food retailers are grown in greenhouses today.

On the other hand, CEA-grown products that do not meet the price points of conventionally grown products (“specialty products”) have to-date shown limited demand. Based on my research, retail sales of CEA-grown lettuce and leafy greens were under $500 million in 2022; strawberry sales were under $100.

Key factors impacting consumers’ purchasing decisions include:

  • Retail pricing: What price point will significantly drive volumes
  • Produce inflation: What is happening to overall prices of lettuce, leafy greens, and strawberries
  • Availability of organic: Limited amount of CEA-grown produce is certified organic
  • Consumer education: Increase understanding of CEA by the consumer
  • Competition: What are the alternatives

Pricing will likely always be the largest factor driving consumers’ purchasing decisions. However, if the industry can reduce the pricing gap between outdoor grown and CEA products, other factors will increasingly impact purchasing decisions.

Retail pricing:

Strawberries grown in a CEA environment still cost significantly more than outdoor-grown strawberries. For example, consider the retail pricing at Costco Northeast:

  • Outdoor grown, conventional: $2.85/pound
  • Outdoor grown, organic: $3.70/pound
  • Greenhouse-grown, conventional: $6.28/pound

Greenhouse-grown berries (non-organic) are priced at a 121% premium to conventional and a 70% premium to organically grown berries.

Similarly, most lettuce and leafy greens grown in a CEA environment sell at a significant premium to outdoor-grown lettuce sold as a whole head or in a bag format. Most CEA-grown lettuce and leafy greens sell in 4 oz. clamshells priced at retail between $2.99 and $3.99. This equates to $12 to $16 per pound.

Food price inflation:

CEA facilities have high levels of fixed costs compared to outdoor growers, including capital expenditures for the high-tech structures and internal systems as well as the equipment and management needed to oversee the complex structures.

The benefit of significant upfront capital expenditures should be lower variable costs (e.g., direct labor, water, etc.). In contrast, outdoor growing should have a higher share of variable costs compared to fixed costs.

In a time of high inflation, both food prices and variable costs should rise. This scenario should be a positive development for the competitiveness of fixed-cost facilities like those in CEA.

Per the California Strawberry Commission, freight on board (FOB) prices for conventionally grown strawberries increased at a CAGR of 2.6% between 2012 and 2022. During that same period, organic strawberry prices went up at a CAGR of 0.8%. High levels of food price inflation, at least in terms of products able to be grown in CEA, have yet to show themselves.

Narrowing the pricing gap between CEA-grown and conventionally grown products will be augmented if there is significant food price inflation for relevant products.

Organic product:

Most produce grown today in a CEA environment is not certified organic.  There has been a long-running controversy over whether products grown outside of dirt (hydroponic, aeroponic, aquaponic) can even be labeled certified organic. Despite recent rulings in the California courts, most CEA facilities are not currently considered organic. Reasons for this include:

  • Uncertainty regarding future rulings
  • Downtime required to convert to organic growing methods
  • Reduced yield/higher cost to grow
  • Willingness of consumers to pay a premium over conventionally grown CEA product

In my work, almost all newly built CEA facilities are at least completing a cost-benefit analysis of producing organic product.  There is significant crossover between premium buyers of CEA grown produce and premium buyers of organically grown produce. To the extent product is not certified organic, the premium buyer market is further apportioned.

Consumer education:

In many ways CEA-grown produce is the cleanest, most ESG friendly and best-tasting product in the market. Some reasons for that include:

  • It is frequently grown closer to the end consumer, resulting in fewer travel miles and fresher product.
  • Facilities can grow varieties for taste and texture rather than transportability.
  • There is no use of pesticides and much less use of water in growing process.
  • All inputs are controlled in closed environments.

Given the early stage of the CEA industry for products like lettuce and leafy greens and strawberries, there has been little focus on educating the consumer on the above benefits. Most investment to-date has gone towards supply efficiency and improvement. If the pricing gap narrows and the industry becomes more profitable, I would expect far more resources to be devoted to consumer.


Those competing against CEA for share of consumers’ wallets include outdoor growers, alternative products and other CEA growers.

Based on my research, consumers will pay a premium to conventionally grown product up to the price of organically grown product. The amount of premium is based on the importance of the purchasing decision. If the consumer considers the purchasing decision important (e.g., fresh strawberries for the kids in the middle of winter), they’re more likely to pay a higher premium. There is a ceiling, however. Based on my research, that ceiling is at or close to the price of a comparable organic product.

In the case of strawberries mentioned earlier, the greenhouse-grown product sells a 70% premium to the organic product. This greenhouse-grown product will in all likelihood not reach scale until the product can be sold at or close to parity with the organic product.

CEA-grown lettuce and leafy greens sold in a 4 oz. clamshell format sell at price parity with outdoor grown organic product sold in a 4 oz. clamshell format. If this portion of the market grows, I would expect large packaged-salad producers (Dole, Fresh Express, Taylor Farms) to enter the CEA market.

Towards the mass market:

The CEA industry as a whole has done great work to improve efficiencies and ultimately bring down the cost of produce grown in this format. This is essential to moving the to a fully mass-market one.

As pricing parity gets closer to conventionally grown produce, focus on demand attributes will be increasingly important to the whole industry competing in the mass market. It will be highly evident that the industry has reached scale when the amount of shelf-space allocated to all CEA grown product has expanded significantly.



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