The entire supply chain is going through a transition. What we witnessed the last couple years, and the impact that we are feeling now, is something that was coming regardless. However, the lockdowns as a result of COVID means that everything is being accelerated. Longer term trends are now pulled forward. Hence, something that was going to take 5-7 years is now being pushed up to 3 or 4.
All facets of manufacturing are facing scrutiny. The fact there is a push being made to more automation means that geographic region is less vital than it was in the past. In other words, we can see a lot of shifting where things are made. We discussed how Samsung is building a $17 billion semiconductor plant in the US, following the likes of Intel and TSMC.
Now we are also seeing a shift in food production. This is something that could also have tremendous impacts upon certain sections of the United States.
Technology is affecting everything. The agriculture industry has been going high-tech for more than a decade. It is one of the leaders in autonomous vehicles along with other advanced devices.
We can add vertical farming (or climate controlled farming) to the list. Here we see the ability to produce crops without the use of land. Traditional farming is being replaced, at least that is the concept.
The goal is to get the production of food as close to consumption as possible. This is the overall trend in manufacturing that we are seeing. However, with food, reducing transportation costs is vital.
Here is where vertical farming could be a solution.
Vertical farming is quickly becoming a popular way to grow organic food close to major urban centers. Indoor “farms” that grow crops in stacked trays using LED light have opened or are underway in Singapore, Japan, the UK, US, and elsewhere. But despite the steady rise of this technology, the food grown in vertical farms is still perceived by many potential consumers as inaccessible, available only in high-end or specialty stores.
If you notice, both Singapore and Japan tend to have large parts of their population in urban areas. This means that it is crucial to try and alleviate the long transportation runs.
While this might seem like a fringe industry, catering to high-end, suburban customers, things are changing rapidly. The largest grocery retailer in the United States is now getting involved.
But this is about to change, after an announcement this week from America’s biggest retailer: Walmart. Consumers in California will soon be able to buy vertical-farm-grown greens in Walmart stores throughout the state. As part of a $400 million Series E funding round that also included SoftBank Group’s tech-focused Vision Fund, Walmart bought an equity stake in South San Francisco-based vertical farming startup Plenty.
Having Walmart involved means the focus is upon scaling. With so many stores across the country, this one retailer can push the entire industry forward.
The company is building a 95,000-square-foot facility in Compton, California, south of Los Angeles, with production scheduled to start later this year. This is where the greens for Walmart stores will be sourced from, with some sold under Plenty’s brand and others under Walmart’s private label. The greens will be available at all 250 of Walmart’s California stores. The Walmart deal, Kukutai said, “…creates the opportunity to actually get to scale, not just being a niche provider of expensive greens, as the category has somewhat been accused of in the past.”
The idea is to generate even more food production, and do so at a cheaper price. This technology is very promising yet is still unproven. Many question whether it can scale.
What this can potentially solve is food inequality around the world. One of the biggest variables is the climate that one's area has. Areas that are very dry will obviously have major problems growing crops. The same is true for those areas that are frozen most of the year.
By turning to indoor farming, it could be possible to grow food anywhere. While the costs are still high, scaling up would bring prices down.
Consider the possibilities if we see these farms build near most major cities. The transportation of fruits and vegetables would have to travel under 50 miles.
Another opportunity is to build smaller locations in the back of stores themselves. Some retailers are already experimenting with "kiosk" type units.
Either way, what was just an idea a few years ago, a proof-of-concept if you will, is now entering the first phases of production. If Walmart is successful with this, expect this to spring up all over the country. Of course, it is only a matter of time before this concept, if successful (and financially viable) spread to all over the world.
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