Private equity-backed vertical farming business AeroFarms plans to enter the Chinese market, with plans to build two state of the art vertical farms in Shanghai and another city.
AeroFarms, a US company, is planning two 70,000 square foot indoor farming facilities in China, one of which will be constructed in China’s most economically developed city, Shanghai. Another farm with herb and leafy veg beds stacked from floor to ceiling is likely to be built in an as yet unspecified Chinese city.
AeroFarms is still in fundraising stages for both projects, which will be funded in a public-private partnership with investors including institutions and the Chinese government. Chief executive David Rosenberg said he expects to finalise at least one of the deals within the next three to six months. The warehouse-sized farms will eventually make locally grown, environmentally friendly organic greens available to health-aware Chinese urbanites on an industrial scale.
Aerofarms would not disclose the cost of the projects, but Rosenberg told Agri Investor that two facilities of similar scale the company hopes to build in the north-eastern US will be more expensive. The budget of those projects, for which the company is in advanced talks with potential financing partners, is $30 million. Rosenberg attributed the difference to lower labour and material costs.
The entry into China connects AeroFarms to a growing, health-savvy middle class consumer base. It also follows AeroFarms’ established strategy to build its farms near their targeted urban markets, cutting down transport costs.
Food safety scares, including a 2008 tainted baby formula scandal, have helped drive the development of small organic farms in China. Last year, new food safety laws were implemented, intended to improve consumer confidence in local produce.
Food security and environmental concerns are also an important part of the picture. Depleted soil and stressed water sources have sown deep-rooted concerns in Beijing that the country’s agricultural capacity is not enough to meet growing food demand.
Beijing has been working to building up larger-scale farming projects for several years, encouraging state-owned enterprises such as COFCO to form consortiums with private equity, while also financing environmental cleaning projects. At the same time, state-backed Chinese companies have been involved in a flurry of foreign investment activity, believed to be aimed at shoring up the country’s food security challenges.
AeroFarms claims its aeroponics growing technique, which nurtures root systems in nutrient-enriched mist rather than soil or water, produces 75 times the yields per square foot seen on conventional farms. The company’s vertically farmed produce consumes just 5 percent of the water and 60 percent of the nutrients of conventional farmed greens, Rosenberg said.
In addition to fundraising for farms in the US and China, Rosenberg said the company will begin taking steps toward a Series C equity raise in May to fund staff expansions, research and development. The company landed $20 million in a Series B round in December, led by the Grosvenor Estate’s sustainable agri investment firm, Wheatsheaf Group.
“We see a lot of opportunities for improving the top line, as far as quality and our cost structure. So our technical structure is ever-growing,” he said. “We’re recruiting at MIT right now.”
In addition to Wheatsheaf, Aerofarms investors include sustainable-focused private equity firm MissionPoint Capital, agri-focused venture capital firm MiddleLand Capital and early-stage tech venture capital firm GSR Ventures.