Marijuana and makeup are new growth areas for vertical farms
Supercharged by the need to secure local supplies of fresh vegetables during the pandemic, some vertical farms are now branching out into other high-margin areas such as medical cannabis, health supplements and cosmetics.
South Korean startup Farm 8 is among a proliferation of indoor urban growers that saw sales jump during Covid-19. It's looking to increase sales by almost 50% to 90 billion won ($79 million) this year, partly by boosting production of medical and cosmetic-based plants such as ginseng, centella asiatica and artemisia campestris, CEO Kang Dae Hyun said. In August, the company joined the country's first regulation-free zone for medical cannabis, growing and processing hemp for cannabidiol (CBD).
"There's massive demand for medical cannabis and the market's growing rapidly," Kang said in an interview. "Most of our production is dedicated to salad greens at the moment, but ultimately we'll be ramping up production of cosmetic and medical-based plants to maximize profit."
Other vertical farms are also using the technology to meet rising demand for stringent quality control in medical and cosmetic applications, such as Denmark's International Cosmetics Science Centre, Poland's Vertigo Farms and California-based MedMen Enterprises.
Farm 8 currently grows about 1.2 tons of salad greens per day on less than an acre (0.5 hectare) of land, spread across locations in three cities in South Korea, including in a busy subway station in South Korea's capital. It's one of the top local lettuce producers for fast-food chains including Subway, Burger King and KFC. Sales rose 30% last year.
That's the traditional market for vertical farms -- guaranteed delivery of quality controlled fresh produce that needs to reach the consumer quickly regardless of weather or season. Those advantages were underlined as pandemic supply disruptions and unreliable harvests pushed global food prices to a six-year high in February.
"You need the right amount of everything from water to light, and the weather has to be perfect, which is increasingly hard to predict," said Kang. "We started as a traditional farming company 16 years ago, but we've learned to incorporate technology because we needed to protect ourselves from the changing climate."
Vertical farming uses as much as 90% less water and reduces emissions caused by plowing fields, weeding, harvesting and transportation, but uses much more energy than traditional methods, making it unsuitable for many crops like grains.
Farm 8's greens grow in six-story hydroponic trays, lit by LED panels, allowing the company to produce plants twice as fast as a conventional farm. Light, water, temperature, humidity and carbon dioxide levels are controlled by robots that use artificial intelligence to assess data collected from the farms.
The company received 10 billion won from investors including Korea Development Bank in a private share sale in 2020 and plans to list on Kosdaq in the second half of next year. Backers include IMM Investment which invested about 20 billion won in 2014.
South Korea became the first country in East Asia to legalize cannabis for medical use in 2018, and in August 2020, the government set up a free trade zone for industrial hemp in the southeastern city of Andong to develop and extract cannabidiol for medical use with private companies. Marijuana remains illegal for recreational use in the country.
Besides growing and selling plants, Farm 8 wants to export its system, which can be fully automated from sowing to harvesting, to countries in the Middle East and Southeast Asia, Kang said. It's hoping to ink a contract in Kuwait and recently sent a 40-foot container to South Korea's research center in Antarctica. The polar farm will replace a smaller 10-year-old unit and provide 2 kilograms a day of chilies, zucchinis and cucumbers, all monitored remotely from Korea.
Cannabis has, of course, been grown illegally indoors on a small and large scale for decades, and the gradual legalization of the plant in some U.S. states has led to a plethora of vertical farms there. But the big advantage of new technology for industries such as cosmetics and medicine is the ability to meet stringent quality measures.
"The industry's going through a major shift," Kang said.