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They were touted as the next big thing - indoor farms growing crops year round in controlled environments, reducing not only food miles but also the amount of land and water used. But despite significant hype and $4bn investment in vertical farming over the past five years the sector is struggling. Layoffs and bankruptcies are blighting the industry.
Pittsburgh-based Fifth Season, France's Agricool, and Dutch company Glowfarms are just some of those that have gone out of business in recent months. While Infarm, once one of Europe's largest vertical farming companies, is now reportedly leaving the continent entirely. Though plenty of companies survive, many haven't yet managed to turn a profit.
And the cost of energy is a major culprit. Vertical farms are vulnerable to increases in electricity prices. LED lights, ventilation systems, and temperature controls all depend on a plentiful supply of electricity. But as consumer energy prices skyrocketed over the past year, indoor farms had to spend up to 40 per cent of their operational costs on electricity, up from around 25 per cent in 2021.
Some tap into renewable energy in order to protect against this. But scaling this approach is difficult. A vertical farm producing 11,000 kilos of lettuce would need 6,000 square metres of solar panels to cover all its electricity.
High upfront costs for equipment and labour haven't helped either. Vertical farms cost $2,500 to $3,500 per square metre to set up. And that's just for one level and excludes the cost of construction or rent. Investing in a field, for comparison, could cost from 50 cents to 50 euros per square metre, according to research by the University of Wageningen.
Geography can make a difference though. Cheap energy and a government keen to boost food security have created fertile economic conditions for vertical farmers in Dubai. One of the world's largest vertical farms opened there this year. The $40mn facility produces over 3,000 kilos of leafy vegetables per day, feeding passengers on Emirates and other airlines.
Advances in technology and automation could make vertical farming more viable in the years ahead. But for now the sector is still reliant on venture capital for its financing as profitability can't be guaranteed. With the industry moving away from growth to consolidation, yet more vertical farming businesses are destined to wilt, leaving others to flourish.
