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Serving: United States

Can CEA increase food diversity?

Stone/Getty Images Wide shot of a young man working in a hydroponic farm, controlled environment agriculture
New report examines Controlled Environmental Agriculture, which has potential to increase access to fresh produce.

A new report, Growing Beyond the Hype: Controlled Environment Agriculture, explores Controlled Environment Agriculture.

Launched by S2G Ventures, the report is based on research and interviews with more than 20 industry experts, including CEA growers, systems providers, policymakers, academic institutions, outdoor growers, ag input suppliers and other investors. The report outlines the opportunity for Controlled Environment Agriculture to resolve the lack of high-quality, affordable produce driven by limitations in outdoor production and customer geography. It also outlines areas indoor production must overcome.

"Controlled farming has the potential to offer consumers and supply chain stakeholders resilient, sustainable, local, high-quality products." said Walter Robb, executive-in residence at S2G Ventures and former Whole Foods co-CEO, "It is a growing part of our evolving food system and can work alongside outdoor production to mitigate climate risk and help solve systemic nutrition and food access challenges."

S2G Ventures expects that CEA will have implications for the future food system in these key areas:

1. Local production and controlled environments will lead to a more resilient, traceable and trustworthy supply chain. Despite being a $1.2 trillion global industry, fresh produce faces significant supply and demand challenges resulting in a systemic lack of high-quality, affordable products reaching consumers. According to the Lancet, only 36% of the global population in 2015 had adequate availability of fruits and vegetables to meet the WHO age-specific minimum nutrition targets.

In the United States, for example, the fresh produce market is challenged by the limitations of outdoor production. Products travel seven to 10 days, on average, from farm to consumer.  As a result, the U.S. is reliant on other countries to meet demand with 53% of fresh fruit and 32% of fresh vegetables imported annually, according to the FDA.

If just 13% of vegetables and herbs shift to local CEA production by 2025, the United States can add $2.3 billion in additional production capacity and reduce its need for fresh vegetable imports by 15%. Local production can save up to 9 trillion food miles through shorter transportation routes minimizing shelf life time spent in transit and reducing the amount of food waste. Additionally, controlled environments improve food safety, traceability and consistency of production.

2. Technology and operations advancements drive improvements to CEA unit economics that can compete with or beat outdoor production.

In order to gain market share, CEA production must become cost competitive with outdoor production.  High upfront costs of facilities and equipment as well as energy costs, labor and product inputs, have historically made costs of CEA growing prohibitive.  But innovation of grow inputs, improved grow systems, and optimization of facility productivity are driving more cost-effective production.  Those innovations combined with CEA's higher number of grow cycles, 10+ for Greenhouse and 20+ for Indoor, will enable CEA to achieve unit economics that are at cost parity with outdoor.

3. CEA will usher in the next wave of biodiversity, nutrient density, and flavor innovation providing retailers with differentiated, quality products.

According to the UN's Food and Agriculture Organization, about 75% of the world's food comes from just five animal species and 12 plants. Almost half of our plant-derived calories come from just three foods: wheat, corn and rice.  Germplasm for these plants are bred for long storage time and disease resistance, at the expense of flavor, color, and nutritional value.  The lack of biodiversity and nutritional value in our global diet restricts the value that plant molecules can play in human health.

"Controlled growing is a critical solution to address both the current supply challenges brought to light by COVID and the pressures on outdoor growing exacerbated by climate change," said Sanjeev Krishnan, S2G Ventures managing director and chief investment officer, "We believe CEA can grow its U.S. market share by five times over the next 10 years in response to these pressures and continued consumer demand for fresh produce."

Source: S2G Ventures, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset. 
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