Canada’s GoodLeaf Farms has achieved profitability across its three facilities, a rare feat in the vertical growing sector.
Success in controlled environment agriculture has been a challenge, with many startups in the United States failing to reach profitability. Most recently, 80 Acres Farms announced it was unable to continue business.
Why It Matters
Vertical indoor farming has proved to be a difficult business model. GoodLeaf shows it can be done profitably in Canada.
The success is thanks to several factors, said Andy O’Brien, CEO of GoodLeaf.
Indoor farming must walk before it can run
O’Brien said many startups in vertical farming may fail due to scaling up and advancing too rapidly.
“Any startup, regardless of the sector, it’s a walk before you run, and I think a lot of companies started running, which means that you bring on a lot more cost before you have sales,” O’Brien said.
“Some of the companies that I’ve seen in the U.S. had 250 people in R and D, and that’s before you actually had sales,” he added. “One other company in the U.S. had a payroll of 850 people and 20 million dollars in sales. Doesn’t work.”
“For GoodLeaf, it’s about having the right balance of, you know, innovation, people, and having sales to support that group.”
O’Brien says many U.S. companies began pre-COVID, with significant investment from private equity and governments.
“They went through years and years of not being able to figure a way to turn this into a business model that works. At some point in time, any investor is going to get tired of continuously funding something that they’re never getting their money back out of.”
Canada, he said, was farther behind and had to figure out a more workable business model while startups south of the border were struggling.
For GoodLeaf, he said, the focus is on what makes vertical and indoor farming different and viable. One example is the product os microgreens, a type of produce unique to the indoor system.
What makes vertical farming different and a challenge
O’Brien said vertical growers have one key challenge to overcome: there’s no playbook for how to do it.
“When I used to work at General Mills and Mars and Campbell’s, we had been doing canned soup or Cheerios or Mars Bars for 50 years, 100 years, and all over the world,” he said. “So, it’s a pretty good playbook.”
“In vertical farming, there really isn’t.”
He said part of the company’s strategy has been to view the growing spaces more like food manufacturing facilities than traditional farms.
“We’re looking at yields and waste and all things you would look at to optimize a typical factory,” he said.
The main difference between a microgreens facility and a factory, he said, is time: it takes six days to grow microgreens, 15 to grow a head of lettuce, a glacial pace compared to canning soup or molding a Mars bar.
Compared to a farm, though, the time it takes to grow product is rapid, especially for microgreens.
“If you are growing outdoors or in a greenhouse a head of lettuce, it’s going to take 50 to 60 days,” he said. “In Canada, (there are) probably two times you can do that over the course of a summer, or maybe three, depending on where you are in the country.”
GoodLeaf’s microgreens, on the other hand, only take approximately five days to grow and can be grown 365 days a year, a much different production cycle than field crops.
The future of indoor growing
GoodLeaf’s success extends across the country, with its three facilities located in Ontario, Quebec and Alberta.
O’Brien said he hopes the company’s success may encourage more similar startups in Canada.
“I do think that more competition is better for everybody, whether it be consumers to retailers to equipment suppliers, all that stuff. So, I hope that our success leads to others considering it.”
O’Brien also said GoodLeaf has seen the benefit of being a Canadian brand, as trade tensions with the U.S. push Canadian consumers toward domestic products.
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