ResearchandMarkets estimates the US hydroponics market to be worth $6.8bn in 2020 ($25.2bn globally) and predicts it could reach $7.6bn in 2027, growing at a CAGR of 8.3% over the next several years.
"The demand for indoor grown [lettuce] will [ultimately] be 10x the size it is today," BrightFarms CEO Steve Platt told FoodNavigator-USA.
"Across the country, we're still at the infancy stage. It's hard to find indoor-grown lettuce at all grocery stores across the country. Some markets are more developed than others, and a lot of those are the markets that we're in," Platt said, noting that its distribution is highly developed in areas with "progressive retailers" including Giant stores in Pennsylvania and Mariano's locations in the Midwest.
According to founder Paul Lightfoot, BrightFarms is on the right track to achieving his original vision for the company.
"I envisioned that we’d disrupt the salad supply chain, that we’d gain distribution in the nation’s leading retailers, and we’ve done that," said Lightfoot, adding the next phase of the growth journey is to enter supermarkets located farther outside metropolitan areas where consumers have less access to fresh, locally-grown produce.
The company just opened the doors to its fifth greenhouse facility in North Carolina and is set to drastically expand its distribution reach along the East Coast, according to Platt.
"We’re also looking to grow in the New England area. We see ourselves providing leafy greens up and down the East Coast, from Maine to Georgia. We think the farms are going to get bigger, because the demand in each region will get larger."
1-week freshness advantage
For consumers shopping the produce section where brands are less dominant than in other areas of the store, and where products must stand out for their freshness, BrightFarms leads with a clear quality advantage, claimed Lightfoot and Platt.
For most lettuce, which is grown mostly in California, the products must travel great distances to reach the end consumer meaning that by the time the lettuce is purchased, its freshness window has diminished by up to a week. Because of its decentralized model, BrightFarms can reach retailers in less than 24 hours from the time of harvest giving consumers up to a week of added freshness and consequently, a longer shelf life.
"You can buy the same package of lettuce from us for the same price you would buy organic from California. And when you taste the product, it's just a better product -- your kids will eat more lettuce because it tastes better," claimed Platt.
Attractive investment opportunity?
Last year, BrightFarms raised $100m in Series E funding bringing the company's total funding to over $200m. Competitors in the industry are also attracting large sums of capital including Gotham Greens, which completed a $87m Series D fundraise this month and Little Leaf Farms which raised $90m in a funding round led by Equilibrium Capital last month.
Asked what makes indoor farming facilities such an attractive investment given that the industry attracted over $1bn in investment in 2020, and over $650m in 2019, Lightfoot and Platt both agreed that many investors with deep pockets are looking to put their money into companies that are solving fundamental issues within the food industry.
"Part of what’s happening is that the world’s largest investors have a strong appetite for more ESG (Environmental, Social, and Corporate Governance) focused places to put their capital, and in the food industry there simply isn’t that much. So I think we are seeing our space getting a lot more attention because of the scarcity of good investments in sustainably produced food," said Lightfoot.
Platt added that from a basic investor's playbook, the investment makes a lot of sense.
"There are structural issues with the way that salad greens are grown today, so the supply chain industry is very vulnerable. At the same time it’s a big industry, there are billions of dollars spent on lettuce and the lettuce retail category is $9bn. It’s big, it’s structurally in trouble, and we think we have a better solution. We think we’re in the front because we’ve been at it for a long time," said Platt.
Greenhouse advantage: 'We don’t see an avenue where the sun doesn’t play a big factor'
A quick glance at the indoor farming sector, and you'll see a multitude of companies including dozens of new entrants employing different growing methods from hydroponic greenhouses where plants are fueled by sunlight to vertical farms which use less square footage to grow towers of greens relying on artificial light.
Now its tenth year, Lightfoot said that the company has considered every possible indoor growing method and that systems using sunlight rather than artificial light are more cost efficient.
"We actually weren’t biased when we began. We had a bias towards sustainability and a bias towards economic feasibility, but along the way we’re consistently faced with forks in the road. When we applied those two lenses, growing vertically never really rose to the challenge. It uses energy from the plants which starts with electricity – which often comes from fossil fuels – and it is a whole lot more expensive to grow plants using electricity instead of the sun, which is ubiquitous and freely available," said Lightfoot.
Platt added, that at its core, BrightFarms remains flexible and adaptable to change if new and better technologies come along.
"We’re agnostic, but we don’t see an avenue where the sun doesn’t play a big factor," Platt said.
The next 10 years
Looking ahead to its next ten years, Platt and Lightfoot are committed to democratizing access to local and fresh leafy greens across the country by continuing to scale their business, which currently distributes to 3,000+ retailers in the US.
Today, BrightFarms is the largest indoor grower of spinach, and according to Platt will remain focused on growing its household leafy greens rather than extending into other plant species such as tomatoes or strawberries.
"We’re keeping our focus there in the short term because there’s a lot of advancements to be made there, there’s a lot of growth there," he said.