A COMBINATION OF MARKET DRIVERS AND DIFFICULT-TO-OVERCOME CHALLENGES RENDER SCALABILITY OF THE CEA MARKET UNCERTAIN Drivers
Nascent industry and technology Unproven business models Competition from traditional players Limitation of product variety
Increased supply security Customer preference for healthy produce Predictable growing conditions Less reliance on manual labor
Challenges
Source: Roland Berger Figure 4: Overview of CEA market drivers and challenges
Increased security of supply and waste reduction Due to long supply chains with multiple players, including growers, packers and distributors, and challenges with fresh produce, such as high perishability and susceptibility to bruising, retailers struggle with low shelf-life for fresh produce. In addition to this, almost 40 percent of waste in fresh fruits and vegetable supply happens prior to the retail or consumer phase. 12 Moreover, with the challenges faced by retailers due to supply chain disruptions during the Covid pandemic and increasing risk of trucker shortage, there is a desire to hedge the fresh produce supply risks that are prevalent in their operations. CEA start-ups offer a way out to increase shelf-life, minimize food waste and decrease transportation distances. It can help decentralize production by moving growing farms near urban centers. Vertical farms, with limited requirement of land, can be grown in places, such as Manhattan, directly servicing demand. Though greenhouses require more land, they can still
be established in near-urban centers to fulfill demand and ensure longer shelf-life at the retailers. Alternative solutions are also being developed to extend shelf-life for fresh produce, like Hazel Technologies’ packaging inserts or Apeel’s edible, plant-based crop protection. While they aid traditional growers to increase produce freshness and shelf-life, they don’t solve for the problem of distance and trucker shortage. Customer preference for locally grown fresh and healthy produce Though price is the primary factor to make produce purchasing decisions, the majority of consumers consider this decision to be an investment in their personal health and well-being. 13 As fresh produce is believed to be healthier than processed foods, a trend that is stronger in younger, more well-off groups in urban settings, there is a greater willingness to pay for high quality fresh produce groups. 14 In addition, consumers are placing greater importance on locally-grown, chemical pesticide-free produce – as can be seen by the increasing demand for
12 Economic drivers of food loss at the farm and pre-retail sectors: A look at the produce supply chain in the US | USDA, 2020 13 In 2022, produce shoppers demand a deal | Freshfruitportal.com, March 2022 14 Eating healthy leads to fresh food growth | Progressive grocer, 2022
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