If you’re considering a vertical farming business, you may wonder, “Is vertical farming profitable?” Like any other type of business, it depends significantly on many factors. Read on to learn more about what impacts vertical farm profit and indoor farming profitability in general.
What is a Vertical Farm?
Most farms are row upon row of plants, stretching out for acres. It’s a traditional way of doing things, but it takes up a lot of space. Vertical farming reimagines this setup by stacking plants vertically in either trays or towers.
Advantages and Disadvantages of Vertical Farming
Vertical farms are a big deal in the AgTech world right now. The advantages of such a farm design are many, but the most obvious is that you can have a much larger output in a much smaller space. They’re also not tied to the ground, which means they can be built in greenhouses, indoors, on rooftops, or even underground. Such farms can thrive in nearly any climate or surroundings, even in the most inhospitable parts of the world or in dense urban settings.
Vertical farms are typically far more sustainable than most soil-based options. Generally, they do not contribute to topsoil degradation and use far less of our natural resources. Indoor vertical farms can protect their crops from pests without toxic chemicals and are far less likely to face recalls due to contaminants.
Yet vertical farms are not a perfect solution. Some vertical farm designs require significant power to run grow lights for the plants. Vertical farms also can’t produce every type of crop. Most leafy greens and some other crops can quickly adapt to vertical growing methods, but other crops still require soil-based methods.
Types of Vertical Farming Systems
Vertical farming systems may be hydroponic, aeroponic, aquaponic, or (more rarely) soil-based. If these terms are foreign to you, you’re not alone. We’ll explain each below.
Hydroponics
In a hydroponic growing system, plants are grown with their roots suspended in water rather than soil. Nutrient solutions are added to the water to give the plants everything they need to thrive. The water is typically circulated through the system to ensure root systems remain healthy, and hydroponic growers must design their systems carefully to avoid root rot.
Aeroponics
An aeroponic system is very similar to a hydroponic system, except the plant roots are left hanging in the air rather than directly in water. These roots are then misted with nutrient solutions and water, providing everything the plant needs to grow.
Aquaponics
Aquaponics is a subset of the hydroponic system in which plants and fish grow together. In this system, plant roots get their nutrients primarily from the waste produced by the fish.
Key Components of a Vertical Farm
There are four main components of every vertical farming system. They may differ significantly from one system to another, but they are the basic building blocks for how you want to create and run your vertical farm.
Growing environment and infrastructure
The first component to consider in a vertical farm is the growing environment. You might farm fish alongside your greens and create an outdoor aquaponic vertical farm. Or you could select a hydroponic tower system inside a greenhouse on the roof of your big box store. Whichever environment you choose, this will be the most impactful driving factor for your other decisions when designing or selecting your vertical farming system.
Lighting technologies
Next, you must decide how to light your farm. Plants need sunlight, or a synthetic version of it, to grow. Most indoor vertical farms employ some artificial light, though the extent they rely on it varies. A vertical farm inside an underground bunker or one that grows plants in trays stacked on a shelving unit must install many lights. In a glass greenhouse with plants spaced far enough apart for the sunlight to penetrate, you might not need to use grow lights as often.
Climate control and automation
Indoor farms have the benefit of not needing to match crops to the season or climate outside, but that means they must control the climates indoors. Additionally, many of today’s vertical farms tend to be fairly high-tech, so they embrace automation and use it to good advantage.
If you plan to grow only one crop at a time, you can use a simpler climate control system, as the entire area will be at the same temperature and humidity. However, if you want to grow a variety of crops, you’ll need to find a way to control the climate so that each plant has its own optimal temperature and humidity.
You’ll also want an automated system to run your climate control, lighting systems, water systems, and other aspects of your vertical farm.
Plant nutrients and growing media
Finally, you’re going to need to feed your plants. You’re also going to need to plant them in something. You’ll need to research carefully to develop appropriate nutrient solutions for the plants you’ve chosen to grow. As for growing media, a few common options include:
Clay pellets
Coco coir
Peat moss
Perlite
Rockwool
Why Aren't Traditional Vertical Farms Profitable?
Challenges and Risks
Energy Consumption
Most vertical farms (but not all) have two significant problems that need to be solved to turn a vertical farm profit. Both relate to energy use.
In tray-based vertical farming systems, the top trays block the light from all those below, meaning growers have to install lighting on each level. This means they must supplement 100% of the lighting used to grow plants, greatly increasing utility costs.
With all of this energy output, indoor farming profitability can be tricky. Their unit economics skyrocket, and in most cases, they are forced into extensive reliance on fossil fuels. If you’re looking for a profitable and sustainable business opportunity, you must find a way to reduce this energy consumption and lower the selling price of your goods.
Since these operations have no levers to reduce utility costs, they have to find another way to reduce spending. They’re designed to be self-run systems, a priority for farms that don’t want to deal with the costs of hiring a workforce. Unfortunately, the lack of employees means most everything must be done with technology, further increasing the power required to run their operations. It’s not the winning equation that many operators are seeking.
The Trade-Off
There is a considerable trade-off involved in running this type of vertical farm. The method of growing creates an unsustainable cycle of chasing marginal operational efficiencies with disproportionate increases in capital costs. As these costs go up, the price of the goods sold must also rise simply to break even. This makes it difficult to find buyers for the produce since most consumers, restaurants, and grocery stores are priced out.
Without significant innovation in lighting technology or ag-focused automation, both of which are still in their infancy, traditional vertical farms will struggle to achieve profitability. Many operators are running on the hope that energy costs will go down soon, but if this decline is slower than predicted or doesn’t happen at all, profitability will continue to suffer.
Technical challenges
Another significant challenge for a first-time vertical farmer is the amount and quality of technology employed. Advanced control systems large enough to work at a commercial scale can be very expensive, especially if you’re developing them on your own. Would-be vertical farmers without adequate funding may find themselves doomed from the start by the high costs associated with setting up their system’s technology.
Market competition
Finally, market competition can be a huge hurdle for any new business. People are used to getting their vegetables from the same sources they always have, and supermarkets already have relationships with established distributors. Breaking into the market can be a challenge because the new product is unknown.
Vertical farmers can combat this difficulty by playing up the strengths of their products. Vertically farmed produce is not bound by seasonality and can be grown locally rather than trucked across the country. It offers a more predictable crop not impacted by weather problems like drought, flooding, and catastrophic storms. And since contamination is nearly ruled out, the likelihood of a food recall is extremely remote.
Profitable Vertical Farming Success Stories
Innovative vertical farming companies
Despite these difficulties, there are several successful vertical farming companies today. A few of the most prominent include:
AeroFarms
CubicFarm Systems
Eden Green Technology
Grow Pod Solutions
Kalera
and many more!
For more details, check out our post, “The 17 Biggest Companies in Vertical Farming Today.”
Key factors for success
These companies are often large enough to raise appropriate funding for advanced technology and with a strong sense of purpose or mission that directs their operations. They’ve found ways to minimize or offset the high cost of energy use, and they’ve broken into the market by clearly explaining the value of their products and the benefits of their growing method.
Eden Green Technology
So if you’re still wondering, “Is vertical farming profitable?” the good news is that with Eden Green Technology, it certainly can be!
Fortunately, a solution is readily available to provide your brand with white-label, sustainably-grown produce. Eden Green Technology creates and runs vertical hydroponic farms in greenhouses full of growing towers. These greenhouses boast five times fewer startup costs and five times more efficiency by using energy-saving technology and sunlight.
Eden Green has developed a far more sustainable system designed to run with 30 full-time employees per greenhouse, offering each a livable wage and benefits. And yet, even with the labor costs, our greenhouses can quickly turn a profit.
We’ve dedicated ten years of R&D to developing our microclimate technology and hyper-responsive smart greenhouse systems. They feature the following upgrades over the standard vertical farm operation:
90% less light energy is used as plants grow primarily in natural sunlight
2-min ramp-up or downtime compared to hours in a traditional greenhouse
20% conditioned environment compared to 100% in a traditional greenhouse
Continuous nutrient and air infusion compared to traditional, periodic watering methods
All these factors save energy, time, and money — increasing yield, producing a higher quality product, and offering a faster return on investment.
We aim to grow sustainable, top-quality produce at affordable prices.
