We have written about the terrible economics of vertical farming in these pages before. With a string of high-profile bankruptcies and defaults, investors have been rushing away from the sector.

AppHarvest, one of the few stock-market listed companies in the sector, has seen its share price drop from a peak above $35 (€33.25) in 2021 to 2 cents today.

Despite all this, Dublin-based investment company Greenman Group think they have found a problem which vertical farming can actually help solve.

Greenman’s core business is focused on the real-estate sector in Europe through investment fund management and retail real-estate management. The company also has a focus on technology and green energy investments.

In 2021, Greenman launched a vertical farming business called Potager Farms.

At the time, Johnnie Wilkinson, CEO of Greenman Group, said that their experience within the retail food sector had shown that vertical farming “will become an increasingly important part of the food supply chain in Europe”.

He added that “vertical farming is expanding rapidly across Europe as agricultural space becomes increasingly scare, and pressure on the sustainability of supply chains and food production continues to mount”.

Well, two years later, and Greenman’s ambitions are considerably lower for the future of vertical farming and where Potager will fit into its wider portfolio.

Fundamental problems

Before looking at that, though, it is important to remind ourselves of the fundamental problems facing vertical farming as a business prospect.

Put simply, vertical farms, with their high capital costs and energy-intensive growing methods, just cannot compete with traditional methods powered by soil, sun and rain.

A study from Cornell University in 2020 found that it cost half as much to grow lettuce on farmland in California and truck it to New York than it did to grow it in a vertical farm in New York.

The prospects for the industry have gotten significantly worse since that study was undertaken. Energy costs have soared, construction costs have gone through the roof, and consumers have been searching out cheaper produce to help cut their own grocery bills.

This leaves the industry facing even larger losses, just as potential customers are at their most unwilling to accept price rises.

Clearly, vertical farms are not the future of agriculture.

However, when the Irish Farmers Journal recently caught up with Wilkinson, he explained why Potager still had a future within Greenman’s business.

Clearly, vertical farms are not the future of agriculture

Greenman, he explained has considerable competitive advantages – the group already has a large portfolio of retail and grocery real estate in Germany.

The tenants in those shopping centers are looking for ways to reduce their own carbon footprint, and are also trying to reduce the carbon footprint of their suppliers – so-called Scope 3 emissions.

Vertical farms – the solution?

The solution Greenman is offering though Potager is to locate a vertical farm on the same site as the supermarket tenant. The farm would draw power from solar installations on-site and deliver freshly grown, organic, zero-miles produce for consumers.

Even under this almost-perfect set of circumstances, Wilkinson admits that there would still be a small premium involved in the price for the produce over what would be supplied by traditional farms. However, he feels that this price is one that environmentally-conscious consumers would be willing to pay.

The numbers for vertical farming just never added up. The ever-growing list of failures in the space are testament to that.

Greenman Group, however, seem to have a reasonable possibility of making a go of it, albeit at a relatively small scale that can only work under a very specific set of circumstances.

But taking a step back from the business, it is important to acknowledge the role of investors in funding new ideas, such as vertical farming. OK, they often get it wrong, but they also sometimes get it right, and through that, can accelerate the growth of businesses and entire industries.

The solution Greenman is offering though Potager is to locate a vertical farm on the same site as the supermarket tenant

Greenman Group is certainly active in this space – it is currently running the €100,000 Growing Further competition aimed at companies trying to positively impact retail food supply chains in Europe.

The winners of that, to be announced in January, will give us all a better idea of what the next round of innovation in the space will look like – and what the next big thing investors will chase will be.