"The vertical farming industry has overly focused on the technical aspects of the business while overlooking the sales and marketing side. VAXA has built a strong brand presence in Iceland and conducted extensive market research to understand its customer's needs, which has influenced our business development," Andri Björn Gunnarsson, the CEO of VAXA, a vertical farm based in Reykjavik, Iceland.
Founded in 2017, and now offers a variety of leafy greens, lettuces, herbs, and microgreens. VAXA supplies fresh, locally grown produce to a wide range of Iceland's largest retail chains and to catering, including every Michelin-starred restaurant to fast-food chains.
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Andri Björn Gunnarsson
Consumer-driven brand
As an example, Andri points out, "Our market research revealed that 90% of our customers were throwing away salad due to portion sizes. So, we introduced a new product this year that we call 'Salad for Two' consisting of a 50-gram salad blend with microgreens, perfect for two persons to share. Our goal was twofold: to reduce food waste and effectively meet consumer demands."
From 2021 to 2022, VAXA managed to double its revenue within the same production area and has maintained this growth month to month. "Now more than ever, a vertical farm needs to have a clear and short path to profitability. You cannot build a farm for a boatload of money and sell products for $5 per kilogram," says Andri.
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Scaling up; expanding to Sweden
In less than six years since planting the first seeds in Iceland, VAXA has experienced steady growth in terms of market share. "We are planning to expand in Iceland as we believe there are additional opportunities in our local market, so we are looking into further expansion."
VAXA's focus is not only on Iceland, in recent years, VAXA began considering the development of new farm locations outside of Iceland, ultimately deciding on Sweden. VAXA has recently unveiled its first growing square meters in the middle of Sweden. Andri highlights the strategic choice of Sweden, stating, "Our decision to scale up in Sweden was a strategic choice, primarily due to the sizable market and its ideal location near both Norway and Denmark."
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VAXA has been expanding its team in Sweden, currently employing 8 individuals the first production phase is complete, and VAXA sold its first product in October. "Our location offers great opportunities, and we are working on the next phase in the expansion of Sweden."
Andri further notes that Iceland and Sweden share similarities in terms of market setup, consumer demands, local production, and import prices. As Andri points out, "The word 'VAXA' means grow, and that is similar across the Nordic countries, just like our brand in Sweden is 'VÄXA.'"
VC funding becoming skeptical
Andri explains that the landscape for vertical farming investments is evolving. In the earlier stages of the industry, there was limited knowledge among investors, resulting in somewhat carefree spending. However, as the industry matures, investors are becoming more selective. The aftermath of investments in vague or overly optimistic business plans from five years ago, coupled with external factors like the war in Ukraine, high-interest rates, and inflation, has led to a cautious approach.
Andri adds, "Early on, there wasn't a lot of knowledge in the investment community about vertical farming, and many investors have been burned since and won't pick up the phone if you call. Hopefully, there is now more knowledge and understanding of the industry so that the industry can clearly identify what does or doesn't work."
For the next 5-10 years, VAXA will remain committed to its expansion, maintaining competitiveness in the market while prioritizing its values of growing sustainable, high-quality produce, thus contributing significantly to the transformation of the Scandinavian agricultural landscape.
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For more information:
Andri Björn Gunnarsson, CEO
VAXA
Lambhagavegur 19
113 Reykjavík
Tel.: +354 571 2288
https://vaxafarm.is