With the indoor agtech sector facing many challenges due to the current crisis, what is the right type of finance to help grow the industry and how can growers access capital? Hear from Delphine Descamps, Managing Director at Creadev share her thoughts on financing growth in the indoor agtech sector, changing consumer habits and how companies can thrive more in an online marketplace.
The wider economic impact of COVID is still unknown, how is this likely to impact the food landscape? How do you expect consumer buying habits to change and how does that impact the indoor sector?
The indoor sector has a lot to contribute to the many challenges faced during the COVID-19 crisis and the following trends have only been accelerated as a result:
- Growth of the plant-based sector due to environmental and health considerations
- The rise of cooking at home favoring premium food categories
- Growing consumer demand for transparency and food safety practices, with higher knowledge and expectations
- Increased awareness around food waste
- Attractiveness of shorter and more reliable local supply chains (leading to longer shelf-life products, more environment-friendly practices and local community development.)
Indoor farming addresses all the above and consumer demand is definitely there for locally grown, healthy, fresh produce.
Forced closures of restaurants and cafeterias in workplaces or universities has of course had a direct negative impact on sales for the indoor ag sector. Retail stores have also encountered slower traffic. Indoor ag companies have had to innovative to further penetrate new online sales channels to reach their consumers. Direct to consumer business models are complex and costly to implement, especially in the fresh produce category.
Uncertainty remains on the impact of the crisis on consumers’ purchasing power. On the one hand, given the current economic crisis, price sensitivity is bound to increase. On the other hand, the “food as medicine” movement is stronger than ever, with many consumers unwilling to sacrifice product quality and increasing their food budgets as a result.
How can indoor agriculture position itself to thrive in an online marketplace?
Indoor farms already have the infrastructure set up for the packaging of their produce with salads, herbs, and micro-greens – so selling online does not add complexity on that front. The beauty of e-commerce is the ability to tell the story to the consumer including what technology was used, how sustainable it is for the environment, how safe and healthy the products are, how local the production is, and what the impact is on local communities. Pictures of beautiful greenhouses, fresh produce of different colours and sizes are easy ways to attract consumer attention and create desirability. Fresh produce is also a very recurring need that must often be replenished. Indoor agriculture can thrive on an online marketplace.
That said, as with any online marketplace, success will require the right mix of products, targeting the right consumer base with a strong value proposition. Online grocery is already a very competitive space so differentiation will be key.
Is now the time for expansion in the indoor agtech sector?
As discussed, many trends that we see today speak to the indoor agtech sector. We have also seen how dysfunctional the food supply chain was during this pandemic. Indoor farming clearly addresses the issue, decentralizing the supply chain by growing produce close to dense urban areas. More broadly, even more so today than before this crisis, we believe companies whose businesses value all stakeholders (i.e. its employees, consumers, suppliers, shareholders, and the environment) – will be those that will succeed. Indoor agtech companies have the ingredients to tackle just that.
Of course expansion in the indoor agtech space will require capital (equity and debt), which may prove to be more challenging in current times but that remains to be seen as investors may be well inclined to reallocate their funds to businesses that have all the valuable attributes that we previously discussed.
Source: Indoor AgTech.