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Finding higher margin crops for indoor farms

"Any kitchen operation is looking to do a combination of three things; grow top mind sales, increase margin, and differentiate themselves vs. competing kitchens. We found the promise of CEA and in practice, it can hit on each of those three. Yet, it takes a lot of work to educate customers, so they understand the value proposition of CEA as it often costs more," Josh Waters, Senior Vice President of Produce Category Management at US Foods, explained.

As a distributor, US Foods is trying to educate them on the bigger picture to have the CEA producers grow their top sales. "There is demand there, if, they can understand the full story," Josh explains. US Foods is aware that consumers are willing to pay for it when a premium offering sets itself apart from a conventional offering. Current benchmarks are organic, whereas, CEA offerings and assortments are setting new benchmarks.

In an Indoor AgTech panel 'Finding higher margin crops for indoor farms', Suhas Narayanaswamy, Principal at Lewis & Clark Agrifood was appointed as the moderator for the discussion. Joining him were, Tom Spaulding, VP of Berry Commercialization at Pairwise, (a seed breeder of crop genetics, Sandro van Kouteren, CEO at Parus Europe (a vertical farm supplier), and Josh Waters, Senior Vice President, of the Produce Category Management at US Foods (getting produce in the hands of consumers through distributors and retailers).

'Fix problems with new varieties'
"When introducing new genetics, you're trying to improve the economics per acre for growers. In the context of blackberries, we have several blackberry varieties that are looking promising as the starting point of those varieties were all based on consumer needs. These needs are met and will ultimately improve economics as a premium is paid when it's good. As for smaller plants, yields are higher and thus will lower production costs, improving the economics," says Tom Spaulding, VP of Berry Commercialization at Pairwise.

However, it shouldn't be excluded that gene editing is hard, Tom points out. Pairwise always aims to start with a proper baseline. "Pick a variety that tastes good, fix the problem through a formless berry, or create the consumer problem like seedless varieties. Bring consumers something they want to pay extra for. Luckily, the current technology helps us to adjust the genetics much faster than traditional breeding."

Diving into the plant exterior, Tom points out that plant architecture is intriguing for CEA operators as that can be adjusted with breeding technology. "What if you can take a cherry tree and turn it into a strawberry-sized plant, which would work great for vertical farms, and yields would be much higher and economics would be better."

A fit for the current supply chain?
Playing into the benefits of CEA production near distribution centers, Josh comments, "We have a problem to solve as in food service, soft fruit is a huge distribution challenge. The volume that retailers move is the inverse of food service, a lower category, that creates massive supply chain challenges when importing and shipping it across the country. We're constantly battling time to maximize that shelve life and the experience that customers have. Therefore, we're super excited about CEA being a solution for soft fruit in food service. If we can shorten the supply chain and bring the growing environment closer to the consumer in these major cities, it's a massive win for us and the customer."

US Foods is mainly helping the end-users to better understand the value proposition of the product. "There are multiple levers here; the sustainability element, stable cost, consistent supply and quality. Overall, quality is what gets the buyer over the hump when they know it's lasting longer. Therefore, we need help telling that story and educating those customers as to what the product value is and what they can count on day in and day out," Josh explains.

Sandro Kouteren, CEO at Parus Europe explains, "Multiple smaller CEA environments closer to the cities you're selling to, that's what European customers would want to pay for." Is there a big difference between EU growers and US growers? According to Sandro, the main difference is the starting scale of EU growers. "They start small and build out from there on. In the US, everyone wants to start at a scale where issues occur and apply the knowledge to their farm to succeed."

Call for collaboration
There is a need for collaboration between growers and breeders. Drop the competition jacket and meet each other in the middle to get to the right, new varieties for CEA, Sandro emphasizes. Agreeing to that, Tom shares that every plant is different. "Growers need to have an open mind as they might not know how to grow a specific crop. It's a collaboration between the genetics companies and growers to understand how to take this new plant architecture and adapt it to the system."

For more information:
Sandro van Kouteren, Director Europe
[email protected]

US Foods
Josh Waters, Senior Vice President of Produce Category Management

Tom Spaulding, VP of Berry Commercialization