David Rosenberg is the CEO and cofounder of Newark, New Jersey-based AeroFarms, a pioneer and leader in commercial indoor vertical farming. AeroFarms plants its seeds on a proprietary cloth growing medium on large growing trays stacked in towers soaring several stories high. It then nurtures them to maturity with LED lights and an aeroponic misting system that supplies a pesticide-free mix of water, nutrients and oxygen. Result: AeroFarms can achieve yields per square foot up to 390 times greater than those of traditional field farms while using much less water.
AeroFarms’s business model exemplifies how organisations can combine profit with purpose to increase resilience for society as a whole. Rosenberg spoke with us about how indoor vertical farming could reshape the way the world’s food is grown and delivered.
"When there’s a new normal, will people forget about the stresses in our food system or will they realise we need long-term structural change?"
Deloitte: David, thanks for speaking with us today. What motivated you when you decided to launch AeroFarms back in 2004? Were you looking to address weaknesses in the current food system?
Rosenberg: We actually started with a concern about water security and the resilience of our water systems. But as I became more knowledgeable, I realised the problem is much broader. I was concerned by how much water is used to produce food. Seventy percent of fresh water goes to agriculture and 70% of freshwater contamination comes from agriculture. So, if you want to solve water, you need to solve agriculture. Then, as I dug further, I learnt that 30% of our arable land has been destroyed in the last 40 years. That’s scary. And then if you think of population growth, you realise there’s a train wreck coming.
I also learnt that our food production is often too centralised, which leads to a lot of waste in our supply chain. In the category of leafy greens, for example, 60% of what comes off the farm gets thrown away because these greens are highly perishable. In essence, our value proposition at AeroFarms lies in trying to democratise the food system and enable local food production.
Deloitte: How does AeroFarms save water?
Rosenberg: We can use up to 95% less water than traditional farming by using our proprietary aeroponics system. I don't want to say we always deliver that level of savings, because we sometimes might grow a variety of produce that requires more water. But I know we can reduce water usage by as much as 95% because we understand what the plants want. Additionally, we have created our own closed-loop plumbing systems that take any water the roots don't absorb and puts it back into the system so it can be reused. We’ve also designed our system to draw moisture from the humidity in the air and direct that back into the system.
Deloitte: My sense is that when you started, vertical farming was seen as something of a novelty. Do you think people are beginning to understand the risks inherent in our food system and how an enterprise like AeroFarms addresses those risks?
Rosenberg: One thing COVID-19 showed us was the cracks in our food system and how those cracks lead to empty shelves, which lead to anxiety and funny behaviour. There’s a deep risk inherent in that. There's the unknown of whether this is a trend or a fad. I think it's a trend, but you have to ask: When there's a new normal, will people forget about the stresses in our food system or will they realise we need long-term structural change? One thing I can tell you is, there's more and more interest from around the world in local food production for places that are more food-insecure.
Deloitte: Do you have a vision of what the future food supply should look like? Does it look like AeroFarms, or is it a mixture? What is the role of industrial agriculture in the future?
Rosenberg: I don't think it's vertical farming or nothing. I actually believe that a lot of crops are going to be grown in the field in some parts of the world at some times of the year. And other crops should be grown in greenhouses. What I also believe is that more and more of those crops are going to be grown in vertical farms, as the technology’s capex and opex goes down.
Deloitte: Tell us a little bit about your business model, specifically about the size of the vertical farms you build and where you locate them.
Rosenberg: At AeroFarms, we build indoor vertical farms, both small and big, but there are economies of scale in farming and bigger farms really help improve the economics. We went from a hyperlocal business model to more of a local business model, which means instead of having a farm as a supplier for just one particular city, a farm would serve a number of nearby surrounding cities. So, for example, one of our farms in Newark, New Jersey, serves primarily the broader area of New York, Pennsylvania, New Jersey and Connecticut. And the farm we’re opening in Virginia will serve Virginia as well as some neighbouring cities and states. This approach allows us to capture economies of scale that are actually in packaging more than they are in growing. Once you make the capital investment of automation for packaging, you want to run that 24/7, but you need enough product to support that.
Deloitte: Of course, the bigger you get and the more cities and states a single farm has to supply, the farther you have to ship, which can bring on its own problems. What is your sense of how close you need to be to your retail customers to ensure quality and freshness?
Rosenberg: It's fluid, but basically we like to be within a 200-mile circumference. We don’t deliver directly to shops. We go to a produce distributor or a retail distribution centre that then delivers to shops. This is more streamlined compared to what industrial agriculture operations do, going from the farm to a centralised packaging facility and then to a regional produce distributor and finally to shops. That usually takes an extra five to seven days, so we cut out a couple of steps and about four days out of the process.
Deloitte: So, when your arugula or kale arrives at a retail outlet for the consumer, it’s fresher.
Rosenberg: That’s right. Our goal is to harvest and be in shop within 24 hours.
We actually started with a concern about water security and the resilience of our water systems. But as I became more knowledgeable, I realised the problem is much broader.
Deloitte: Do you aspire to have an impact in your local communities? And if so, what is that?
Rosenberg: Absolutely. For one, we hire locally, of course, and in doing so, we really work to improve people's lives. We have internal programmes that are often sponsored by our own people. We have a highly educated workforce and a less educated workforce, so we get our educated workforce to teach things like computer literacy and financial literacy. We also hire people who are past offenders. I philosophically believe that if you pay your debt to society, then society should bring you back. And we also have programmes that help with childhood nutrition, building community farms in schools so children can develop the right eating habits, especially in inner cities where children aren't as exposed to produce. That's a growing initiative within the company. I would argue, though, that the biggest way we help is just by inspiring others. When you build one of our commercial indoor vertical farms, the tech and the pride that comes with it is strong and it can encourage others to build more tech in underserved communities
Deloitte: Can you talk about the technology piece? AeroFarms is about agriculture, but it's really a technology company. How do you use data?
Rosenberg: We’re mostly cloud-based, but there are thousands of sensors, and each farm tower has its own PLC [programmable logic controller] that digitally controls the farm, gathers information such as temperature, humidity, airflow and pH and CO2 levels, and then divides it into its various uses, including operations, quality assurance, sales, marketing, finance and research and development. We can track plants’ size, texture, color, spotting and ripping and monitor whether they taste sweet, peppery or bitter. All this information ties together so we can really control for what the customer wants and gets.
Deloitte: Where do you see AeroFarms headed? What do you think it will look like in five or 10 years?
Rosenberg: Certainly, I see us building farms all over the world. For example, we’re breaking ground this month on a project in Abu Dhabi in the United Arab Emirates. They don't have much farmland there, or much water, so this really fits in well with our value proposition. Beyond that, we've discussed exploring more and more different types of crops. We're always growing.