and greenhouse start-ups. This model of incumbent growers complementing their operations with emerging CEA start-ups could become prominent as the market evolves.

As the market is dynamically evolving, there are many examples of traditional open-field and greenhouse growers collaborating with vertical farm


there are already signs of sizable CEA start-ups that are struggling to survive, such as AppHarvest and Infarm 32 , thus increasing the probabilities of market consolidation in pursuit of economies of scale or making them an acquisition target. This view is corroborated in our interview with Giovanni Schelfi, Partner at Roland Berger in Chicago and global expert on Controlled Environment Agriculture (see Figure 13). All things considered, high-tech greenhouse start-ups may have more favorable odds to survive the coming operating climate as compared to vertical farms, given lower cost structure, lower maintenance requirements and market familiarity.

Despite the large amount of funds raised by CEA start-ups, there are significant headwinds that might hamper growth of the CEA segment. In the current macroeconomic environment where growth capital is much more difficult to raise and consumer willingness to pay for premium goods is constrained, controlling costs, and focusing on reaching profitability, will be key for survival. With rising energy costs, increasing build-out costs, both for labor and raw materials, higher cost of financing and strong competition from traditional players, reaching cost parity with traditional growing methods might not be around the corner. Indeed,

27 Kroger expands partnerships with 80 Acres Farms to 316 stores |, March 2021 28 Walmart and Plenty partner to lead the future of fresh produce |, January 2022 29 Tanimura & Antle announces the acquisition of Boston, Massachusetts based Green City Growers |, March 2021

30 Taylor Farms announces investment with Pure Greens Farms |, August 2021 31 Canadian lettuce grower Vegpro builds first greenhouse |, August 2021 32 Meet the two biggest enemies of indoor farming |, December 2022

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