Jane Lanhee Lee

(Reuters) – Retail giant Walmart (NYSE 🙂 Inc announced on Tuesday that it has invested in Plenty, an indoor vertical farming facility. The company will purchase green leafy vegetables from Plenty for its California locations.

South San Francisco’s startup, which grows green leafy leaves under lamps, received one of the largest investments in indoor farming. Walmart also signed a distribution agreement. This is an indication of mass appeal in an industry that is still behind in its early predictions. The industry has faced high costs.

Martin Mundo (the Walmart executive who is responsible for purchasing all U.S. produce) declined to disclose how much Walmart would invest, but only said that the company will be having a seat on the board when the deal closes. 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 is an investor in Plenty. He said that Plenty was able to grow its yields in the leafy green rooms by 700% within two years. 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.

Others have had to struggle. 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. He said they were able to charge higher prices for these salads at the moment, but as they grow, and are able compete on a larger scale, pricing pressure will be a problem.

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