Benjamin is the co-founder and director of technology of Agricola Moderna, an almost three-year-old Milan-based company developing the next-generation technologies for indoor agriculture. Benjamin is a mechanical engineer with a PhD and Masters from Imperial College in London.
Gabriela: We came across Agricola Moderna on LinkedIn and we were very intrigued. You have an urban operation and is a still young company but already selling to a large player like Carrefour. We appreciate the opportunity to talk to you as we wanted to better understand the economics of your business. Most of the products you grow are leafy greens such as lettuce brassicas and Basil. Does it make economic sense to produce vegetables out of an indoor farm? Is the business sustainable from a financial perspective?
Benjamin: The facility we are in now is a pilot facility. It has been built without a massive investment and it has been a learning-by-doing process. We designed it two years ago and we moved in one year ago. The production here is viable, but the economics are not. This was only a proof of concept. There’s not enough automation, the margins on the products we are selling are not huge and the volume we produce is not enough, but this was our best option to start as we did not have enough money and credibility to build a bigger facility. The strategy was, let’s get into it, let’s get into the market.
We found funding through several sources - the Italian government has very advantageous formulas now for innovative start-ups. We arrived on the market in May last year. Now we are working to move into another much larger facility that will be ten times the size of this one and where the level of automation would be a lot higher. It would be fully automated from seed to product. Of course that will allow us to achieve higher margins. We will be able to go for volumes to a point where the model is economically viable. On paper, the numbers are coherent.
Gabriela: Even at this pilot phase, you already grabbed the interests of a big retail company like Carrefour. Is there differentiation in telling a final buyer “This basil is organic, and sustainably grown”? Is the market in Italy making that distinction? Can you sell your products at a premium?
Benjamin: We sell to Carrefour, but we are also very present on a platform which is called Cortilia. It is a platform that gathers local producers. It connects consumers with carefully selected artisan producers, breeders, and farmers and delivers fresh products to the consumers’ homes. The products are high standards from a sustainability and quality point of view. Carrefour and Cortilia are our two current customers. Carrefour is selling our products as premium vegetables, and we are at similar price ranges as farm produced organic ones. The fact that we are on a platform that already has a faithful customer base makes it a lot easier for us to pass our message and to sell our products.
As a small player, competing with large distribution supermarkets is hard. It is more difficult because we need to have a decent number of packages on the shelves and people need to know us.Despite these difficulties, we were able to go from ten Carrefour supermarkets selling our products to thirty. We tripled the number of Carrefour outlets very fast. Italy might be considered as a harder market from this point of view because consumers are more conservative. Vertical farming is much talked about nowadays, and we have the feeling that customers are curious to start eating the products we grow. On top of that, we are in Milan which is an international and modern city.
Gabriela: Can you walk us through what type of products are suitable for vertical farming. How far and how big could this go?
Benjamin: Many vertical farms are indeed hitting on the point of sustainability as being the core message. This has been the mantra that everyone has been repeating for some time. Of course, we don’t dislike the fact that we are seen as sustainable but what we are aiming for is putting out there a product that is of higher quality and higher nutritional value.This is our goal. Of course, we are taking the steps to be as sustainable as possible. The point is, if you buy the same product produced in the old-fashioned industrial way versus with our technique, you will eat something healthier and you will put more nutrients in your body. This is just the beginning because, in vertical farming, every aspect of production is under control. We can control the temperature, the humidity, the exposure to light, the nutrients, etc. We believe that we would be able to increase the quality of our products by optimising the conditions. This is something you cannot do infields or greenhouses because you depend on the sun and outdoor climates - those are conditions you cannot control.
We are producing to the market everyday while doing our own research. We take a hardcore data approach. We are storing all the results and we are building a knowledge base that is growing by the hour. Coupled with an infrastructure that allows us to module the production conditions, we are now understanding how to improve quality and yield.
Gabriela: That is so impressive and exciting.Extrapolating from your current pilot, is the plan to be on top of the biggest cities in Italy and then later London, Paris, Madrid?
Benjamin: Why not! The plan, for now, is to build a new facility which will be next door. There’s going to be a lot of technology. There is a market to “disrupt” because vertical farming is still a novelty.
Gabriela: What about your yield. What are some of the key parameters in your production?
Benjamin: Our yield is great if we compare it to a square meter in a field. Vertical farming allows us to stack more square meters on top of each other. That is not the whole story. The farm is hydroponic, and it is indoor, therefore the yield is higher per square meter and the cycles are quicker as we can give to the plant exactly what it needs, and when it needs it. Salad produce in fields in 6 to 8 cycles a year, while we can produce almost 20 per year, depending on the species. It is one of the parameters we are trying to tune because as you push forward the daylight, you get an increase of the yield but a decrease in quality. You have a higher yield per square meter, you can stack square meters exploiting the three-dimension and you have a quicker cycle. So it’s a no-brainer.
Gabriela: How much effort are you putting on the sustainability aspects? Are you trying to source your electricity from renewable sources? And of course, your scope 3 emissions will not be so bad because you will not be driving thousands of miles with trucks that burn fossil fuels to distribute your products. You focus on local distribution. What about the plastic packaging? Are you putting efforts into figuring out the most sustainable and lowest carbon footprint way for your whole operation?
Benjamin: Absolutely. Not only from the sustainability perspective but because by consuming less electricity we can have higher margins. Of course, we believe in this, we want to create something that is sustainable and can reduce carbon emissions. We are now understanding how to solve the energy issue. For this to be economically sustainable, you must produce a big amount of your energy because if you buy it from the grid, it is too expensive. You must find a way to produce your energy, so we are gladly forced to generate our own power. The focus for us is to decrease the amount of energy we need to produce the same kilo of salad in the conventional way. We do that by optimising the source of energy which means producing the energy ourselves through renewable sources. There is also the possibility of usingLEDs which are more efficient and produce more energy. We are also studying the reaction of the plants to the different light waves. These are other ways to tackle the energetic issue.
Gabriela: Dr Jonhatan Foley - the ExecutiveDirector of Project Drawdown - has written an article in 2018 explaining his scepticism towards vertical farming. He pointed out the expensive costs of installation and production as well as the amount of energy required to power the lights and pumps. It sounds like one of these cases of scale: the bigger you become, the better you and most cost-efficient you become. With that, you become more competitive, and the solution is more robust from an economic point of view. Have you investigated that in more detail into the determination of how big you need to be more economically sustainable?
Benjamin: It’s an industrial process so the bigger you get, the more you get economies of scale, that is for sure. We are very scientific in our approach – we have collected a lot of data, we are looking at all angles, and like I said we are investigating renewable energy and different LED technologies. There are many key variables, and we think we have made great progress in figuring things out. We do think with the new facility we will be producing at much more price competitive levels and will have profitable operations, producing vegetables of higher quality and nutritional value at a lower carbon footprint.