"Like any business, there are reasons for failures, and causes of failure are many and vary. In this industry, probably the primary functional failure point is again about choosing technology over purpose," said Joe Swartz, VP of AmHydro whilst answering the question of what CEA is trying to do in the industry.
The goal is not to run a CEA operation, but to produce lettuce, and for who? The community. To feed them. I want to help make money and be an entrepreneur. According to Joe, technology and the approach have always been incongruent with the overall goal of CEA. And in many cases, there isn't one.
"Primarily we've seen horticulturally inappropriate technology and economically unsound technology, or a combination thereof. It is just because the technology and approach do not make sense from a productivity and economic standpoint. We have heard so many excuses, and I have yet to hear one where someone says our system could not produce market-competitive products at an economic price that makes us competitive. That is the cause of 99.9% of all the failures I've seen in this industry."
In a panel on 'Cutting through the noise and navigating the future' moderated by Allison Driskill with Philips, joining her are Glenn Behrman of CEA Advisors, Jennifer Waxmann with Seed2Source, and Joe Swartz with AmHydro.
Glenn Behrman explains that CEA is a relationship-based business and he realized how many people that go into this, create those relationships before they go into the industry. He wonders how many people go into this business and assess the market. The key elements are 'What should I grow and who's going to buy it?'. "What may work in a certain place, might not work elsewhere as it all relates to utility-, labor- and land costs, taxes, government incentives, and the list goes on. When in dialogue with entrepreneurs who want to start a CEA operation, Glenn always advises them to explore the local retailers, talk to the produce manager, and get feedback to do due diligence before actually starting."
Allison Driskill, Glenn Behrman, Jennifer Waxmann, and Joe Swartz
Commonalities of failures
Allison points out that there have been a lot of failures for producers, tech companies, and some that are both, where a lot of lessons were learned. "What are some of the commonalities you've seen over the last years and what can we learn from it?"
Taking the question upon herself, Jennifer Waxmann: says, "There's a 'they will come' mentality, covering a big part of our industry, leading back to what Glenn said about due diligence. Answering the question as to why you'd want to get into the space: "We've done many other farms before we operated one. We thought we knew everything. We were going to adopt low-tech and have some great shrubbery on board and then supplement it with tech."
CEA hasn't cracked the code on some of its operations but the bill of a 'will come' mentality is very dangerous, according to Jennifer, and that's where a lot of the VC models came from. "We have a lot of newbies in the industry, who come in that are charlatans that think they saw the solution from an outsider's perspective. That doesn't work either. We just have to start being honest and work together as we're the 1% against the 99% of what's happening out there. There needs to be more honest dialogue if we want to continue this."
Call for transparency and lobbying
There is a need for lobbying as there's a gap between open field and indoor growers with a lot of incentives out there that CEA should be receiving, including crop insurance in CEA. "These are big deals that are breaking HAVOC. You could have the best operation out there but we still have a lot against us. We haven't unified as a group to lobby to change things that would shed a better light on this industry," Jennifer says.
Yet, the greenwashing has to stop. "Those that are coming in and are probably insecure and talking smack about a lot of people, that's not helping us. The big thread is all the gossip out there, and all the 'I can do it better'. They don't have the background. But that's screwing the industry up. We were growers first, and then we layered in technology. Most of what we're seeing is tech first, then find the grower, and just plug the technology into something that's living 24/7."
However, agriculture doesn't sleep and it has a very different mindset. Fortunately, some companies learned from some of these lessons and are rebuilding right now. I think we're all consultants for part of those. "I think we're going to make a comeback by next year. With some great companies that are in the works, you won't even know they're there yet."
Adding onto that, Joe says "We need some honesty and transparency. As an industry, for the most part, we've been very good in that internally. We should stop the whitewashing too, brushing things under the rug that aren't talked about."
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