Indoor Vertical Farming Report: Interest Rate Hikes’ Felt Across

Key Takeaways

1. Industry Challenges and Bankruptcies: The indoor vertical farming sector faces significant challenges, including bankruptcies and financial restructuring. Companies like Square Roots and AppHarvest are navigating through layoffs and Chapter 11 bankruptcy protection to reorganize and regain profitability amid escalating interest rates and squeezed profit margins.
2. Strategic Adaptations and Innovations: Despite the challenges, there are examples of strategic adaptations and innovations. Square Roots is transitioning its business model to “farming as a service,” while Freshbay is launching a geothermal-powered agricultural project, demonstrating the sector’s resilience and innovative capacity.
3. Impact of Rising Interest Rates: The increase in interest rates has significantly impacted the cost of debt for vertical farming companies, exacerbating financial pressures and affecting their ability to sustain operations. This has led to a wave of restructuring efforts within the industry.
4. Continued Growth and Investment Opportunities: The industry continues to see investments, mergers, acquisitions, and funding rounds, indicating ongoing growth and opportunities. Projects like the one between Plenty and Driscoll’s, and investments in companies like Brevel, highlight the sector’s potential for sustainable and localized food production.
5. Legal and Financial Mechanisms for Recovery: Chapter 11 bankruptcy protection emerges as a critical tool for companies seeking to reorganize debts and continue operations. This legal avenue, alongside strategic financial management and innovations, offers a pathway for businesses to navigate through current challenges.

The indoor vertical farming industry navigates a complex and challenging landscape marked by bankruptcies, restructuring, and financial struggles. Companies like Square Roots are grappling with layoffs and operational changes, while others like AppHarvest are seeking legal refuge through Chapter 11 bankruptcy protection to reorganize and regain profitability.

Amidst these challenges, the industry is also feeling the impact of recent changes in interest rates, which have escalated the cost of debt and squeezed profit margins. However, it’s not all bleak; there are still flourishing projects, mergers, acquisitions, and funding rounds reflecting the sector’s resilience and innovation.

Mergers and Acquisition Activity Rise

1. Apex Greenhouses Sells Minority Stake to GreenV: The horticultural landscape is rapidly evolving, with Apex Greenhouses, a leading constructor of large-scale commercial structures in Australia and New Zealand, adapting to these changes. The company recently sold a minority stake to GreenV, an international stakeholder in Controlled Environment Agriculture (CEA) businesses. This strategic partnership aims to design and deliver future-proof horticultural solutions, focusing on energy efficiency, lower carbon footprint, and automation. The collaboration aligns with the increasing need to adapt to climate change and the growing preference for locally grown, high-quality greenhouse produce. Apex Greenhouses predicts up to 30% annual growth in the Asia Pacific region’s CEA industry by 2026.
2. DENSO Acquires Certhon Group: In a groundbreaking move, DENSO Corporation has acquired the entire stake in Certhon Group, a Dutch horticultural facility operator known for its advanced technologies. This acquisition aims to accelerate DENSO’s global expansion in agricultural production, addressing challenges like climate change, labor shortages, and sustainable farming. The collaboration between DENSO and Certhon began in 2020, leading to the joint establishment of DENSO AgriTech Solutions, Inc. With this acquisition, the partnership is set to leverage the combined strengths of both companies to solve global food challenges. The collaboration also reflects a commitment to the Sustainable Development Goals, aiming to establish a food value chain business encompassing production, distribution, and consumption.
3. Aurora Cannabis Inc. Closes Sale of Medicine Hat Facility to Bevo Farms Ltd.: Aurora Cannabis Inc., a Canada-based multinational, confirmed the sale of its Aurora Sun Facility in Medicine Hat, Alberta, to Bevo Farms Ltd. Completed on July 21, 2023; the transaction could result in payments of up to $15 million by Bevo Farms to Aurora, contingent on certain financial milestones. Aurora’s CEO, Miguel Martin, expressed satisfaction with the deal, highlighting its potential to improve cash flow and aid Bevo’s business expansion. The deal accelerates Bevo’s plans to increase revenue and earnings and is expected to result in an annual cost reduction of approximately $2 million for Aurora. The sale marks an important milestone in the strategic partnership between the two companies, emphasizing their symbiotic relationship in bolstering business growth and operational efficiency.

Indoor Vertical Farming Companies Are Still Raising Funds

1. Brevel Raises $18.5M in Seed Funding: Brevel, an Israeli startup specializing in microalgae-based alternative protein, has raised $18.5 million in seed funding. The company’s innovative technology combines sugar-based microalgae fermentation with high light concentrations to produce a unique protein that can be incorporated into various plant-based products. Led by NevaTeam Partners and supported by the European Union’s EIC Fund, the funding round aims to propel Brevel’s vision of sustainable nutrition for the future. The company’s approach minimizes environmental impact, enabling full water recycling and utilizing on-site clean energy. Brevel’s seed funding marks a significant step towards integrating sustainable and affordable protein solutions in the global food industry.
2. Agricola Moderna Group Secures €15M to Boost Vertical Farming in Italy: Agricola Moderna Group, a leader in the vertical farming sector, has secured an impressive €15 million investment from Azimut. This investment, made on behalf of the Infrastructure for Growth – ESG Fund, will foster the construction of one of Italy’s most sophisticated vertical farming facilities in Agnadello. The investment signifies strong confidence in the long-term potential of sustainable agriculture and sets a benchmark for similar projects throughout Italy and beyond. As the world increasingly focuses on food security and sustainability, vertical farming, with its reduced land use and water waste, is emerging as a viable solution.
3. CubicAcres Nets $3.7M to Scale Vertical Farming Facility: CubicAcres, a vertical farming company based in Long Island, New York, has closed a $3.7 million funding round in collaboration with Intelligent Growth Solutions (IGS), a Scotland-based agriculture technology titan. The funding will significantly scale CubicAcres’ lettuce production capacity, with plans to construct a fully automated, state-of-the-art vertical farming facility. Projected to produce one million heads of lettuce annually, the facility leverages hydroponic vertical farming methods, offering increased yield, zero use of pesticides, water conservation, and maximized space usage. This collaboration between CubicAcres and IGS represents promising growth in the AgTech sector, potentially setting new standards for efficiency and sustainability in agricultural practices.