Jane Lanhee Lee

(Reuters) – Retail giant Walmart (NYSE 🙂 Inc announced on Tuesday it was investing in Plenty, an indoor vertical farming facility. The company will purchase greens from Plenty for its California locations.

South San Francisco-based startup growing leafy greens under lights in their greenhouse is the most significant investment in indoor farming. The Walmart distribution deal is also a signal of widespread market appeal in an industry that hasn’t delivered as expected. This industry faces high costs.

Martin Mundo is the Walmart executive responsible for buying produce in the U.S. Walmart stated that the deal was subject to regulatory approval.

Plenty, which secured SoftBank Group Corp’s Vision Fund 1 investment in 2017, recently said Arama Kukutai replaced the previous CEO and co-founder, Matt Barnard, who will remain as executive chairman of the board. 

Kukutai was also an early investor in Plenty. In two years, Plenty managed to double its yield from leafy green plants. He explained that increasing yields was the key to profitability.

“Their path to yield is absolutely critical,” said Mundo about why Walmart chose Plenty over nearly a dozen other indoor farms it visited as it sees this as an environmentally sustainable way of farming. Mundo said that Plenty has the ability to grow cherry tomatoes and strawberries at large scales and other greens.

In late 2020 Plenty raised funds from berry brand Driscoll’s and signed a joint development agreement to grow Driscoll’s strawberries.

Mundo said once Plenty’s new farm in Compton, California comes on line later this year, it will serve leafy greens to all of the Walmart stores in the state. 

Plenty isn’t alone in raising big funds in recent months. In May New York-based indoor vertical farming startup Bowery Farming raised $300 million in a round https://www.reuters.com/article/agriculture-indoor-farming-funding-idAFL2N2NA0LM that put the company valuation at $2.3 billion. Many declined to disclose the value of this new round.

Other companies have also struggled. AeroFarms said in October https://www.aerofarms.com/2021/10/14/terminate-business-combination its deal to list on the stock market through a blank check company was terminated. 

Michael Rose is a partner in Better Food Ventures, which invests into food technology. He said that he’s seen at least two companies have to accept a lower value to raise capital. However, he said this was common in emerging industries. 

“What we’ve seen during the pandemic is they’re selling everything they can produce,” Rose said about the indoor farms. Rose said that while they can charge more for salads, they’ll be subject to price pressure as they expand and become more competitive.

“We’re still early … We’re talking years down the road.”