This interview details Planet Farms, an indoor farming company based in Italy. The interview is with Daniele Benatoff, Co-Founder & Co-CEO of Planet Farms.
What is the opinion of Planet Farms on the current state of the vertical farming market?
At the moment we’re in a very unique phase of the sector’s evolution. As an industry we have faced and successfully overcome a lot of existential challenges that were the key unknowns when most companies set out 5-7 years ago: the product market fit, the viability of the technology, the acceptance by consumers and supermarkets as well as the range of products that could be produced in a competitive way through the indoor farming techniques. The companies that have survived and thrived until today have successfully overcome these key milestones, and Planet Farms is among these selected few on a global basis.
The challenge we collectively haven’t solved yet is related to our ability to sustain the huge growth potential from a capital standpoint. The industry is still very dependent on external capital to fuel its growth and has therefore suffered current market conditions and higher interest rates. This has led to high profile failures, which have been exacerbated by the energy crisis and a consumer squeeze. The combination of all these aspects has turned the market from great optimism to general pessimism about the prospects of the sector, despite the fact that as mentioned before, we have actually successfully cleared 80% of the key hurdles, and there is light at the end of the tunnel for the remaining 20%.
Now we’re probably nearing the end of the ‘valley of despair’ after the initial euphoria. Our future is not just related to salads, strawberries and tomatoes but offers a lot more opportunities; I believe the next 5 years will probably be the most exciting ones for the sector, because we’ll see real growth on a global level, from a small number of scale-ups that will have successfully navigated the initial exploratory phase and will now be able to capitalize on the enormous opportunity that is staring us in the face.
What are some of the biggest challenges facing Planet Farms in the future?
In a time frame of 3-5 years, our keyword will be internationalization. Asia and the US as well as the Gulf are definitely areas of interest for us, with particular focus on the US and the Gulf in the shorter term. In terms of product, the key challenges are not really related to enlarging our product range for supermarket distribution, but more likely related to demonstrating what has been Planet Farms’ conviction from day one: the biggest upside in this business is actually supplying ingredients B2B across industries rather than supplying finished products to supermarkets.
In order for that to work, we need to become even more efficient at building vertical farms and, more importantly, at operating them. We need to demonstrate that we've got a tried and tested advantage in terms of supplying some specific ingredients – for example, cotton, coffee and several other functional ingredients - that allow us to accelerate vertical farming to a whole new dimension. To let this happen, we need to consolidate our credentials in the Pharmaceutical, Cosmetics, Functional Ingredients and FMCG areas and potentially even in the luxury sector.
How do you measure the impact of Planet Farms so far (Revenue, Employees, Customer Quantity, Production Volume)?
Well, we obviously measure success in terms of profitability and value creation like every other company. We also look at several other metrics which in our mind are going to be the key drivers of valuation, mainly connected to knowledge generation. Just to list a few examples, the know-how developed in agronomy, varietal selection, as well as the ability to formulate, analyze and extract insights from data are proving to be a real differentiator. This is going to be the key factor in fueling further efficiency and enabling a smooth transition from simple products, like leafy greens or microgreens, to much more complex ones, like functional ingredients, cash crops and staple crops.
One key metric is of course production per square meter: revenue per producing square meter depends on our agronomic and operational abilities in generating yields per square meter as well as our sales capacity in defining the right price for our product. Other key factors are obviously quality, packaging and the ability to communicate our added value. We think we've done a pretty decent job so far at creating a fairly unique position in the markets we're in.
The other KPI we look at is cost per square meter, which includes labor costs as well as energy costs. We build facilities which are highly automated, with no human involvement in production: this allows both an excellent quality product as well as an excellent P&L result. At the moment – but we have further room for improvement - we have achieved a standard of seven people per 10,000 square meters of production.
From our perspective as a leader in the vertical farming and Italian industrial automation market, this is a winning solution from a technological, efficiency and cost standpoint. And it goes without saying, on the quality front we believe no one can compete with us, just ask the Cerea brothers from the iconic 3 Michelin starred Da Vittorio or our many and loyal consumers.
What have you learned that you wish you knew when you started the company?
The journey of the past six years of Planet Farms has definitely been very hard.
We've achieved what we've achieved with less capital and a much smaller head count than some of our global peers. Today, the company counts about 100 people and is still close to 90% owned by the founders and the management team.
What we wish we had known when we started is how long the initial phase would take. Our initial assumption was that we would be where we are today after 3 years - not after 6 - so it's definitely been a slower and more arduous journey than we originally envisioned.
The other thing we wish we had known is the complexity of operating in the European food market, where every single country has specific legislative and commercial standards which require a lot of upfront work. Having known all these things, I think we would have already made a move towards the North American market, probably structuring the company in a slightly different way, but we are proud of our Italian tradition and identity, and we will never give that up.
Now, we are looking to consolidate our leadership position in the European market and then build upon that to move into the North American and the Gulf markets, which are from some standpoints easier than the ones we operate in today. We aim to get there through some strategic transactions in the year to come, after further demonstrating the value of our technological know-how.
What are some predictions from Planet Farms for the vertical farming industry in 2024 and beyond?
In my opinion, 2024 will be a year of consolidation within the industry because several players will emerge cleaner and restructured after a difficult 2023, generating a renovated appetite for this market.
It's going to be the year of transition from storytelling to data driven judgment of the companies: by 2024 most companies will have had enough facilities up and running for a long enough period to actually be able to demonstrate through numbers and data whether their technology works or not. Hopefully we will be looking at a normalized year, without energy crisis and negative geopolitical events. I believe this is the start of the process of setting up a technological standard for the industry, around which suppliers will coalesce to get a further level of efficiency both for the leaders and some of the smaller players.
Moreover, our vision led us to start R&D, already five years ago, on crops like cotton and coffee: I think this choice will actually culminate in the first supply deals with large corporate clients as well as longer term offtake agreements with supermarkets, with our standard becoming a ‘new normal’ for the industry.
Ultimately, we’re generally very hopeful for 2024 and 2025, expecting a real growth in the vertical farming industry, focused not just on the products and the kind of distribution we're seeing today. Planet Farms will lead the pack in demonstrating that what we do is a key pillar of a natural, healthy, sustainable, and viable food production ecosystem of the next 10-20 years.
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