1.0 EXECUTIVESUMMARY.........................13 2.0 INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.1 Objective Of Global Harvest Automation Initiative (GHAI) . . . . . . . . . . . . . 18 2.2 Objective of the Global Harvest Automation Report. . . . . . . . . . . . . . . . 19 3.0 KEY INDUSTRY TRENDS IMPACTING SPECIALTY CROP MARKET. . . . . . . . . 21 3.1 Controlled Environment Agriculture (CEA). . . . . . . . . . . . . . . . . . . .22 3.2 THE H-2A TEMPORARY AGRICULTURAL WORKER PROGRAM. . . . . . . . . . 49 4.0 FOCUSONEUROPE..........................61 4.1 Overview Of The European Agriculture Industry. . . . . . . . . . . . . . . . . 62 4.2 TrendsAndDynamicsInEurope. . . . . . . . . . . . . . . . . . . . . . . 66 4.3 LaborAvailabilityInEurope. . . . . . . . . . . . . . . . . . . . . . . . . 71 5.0 IMPACTANALYSIS..........................77 5.1 IntroductionAndPurpose.. . . . . . . . . . . . . . . . . . . . . . . . .78 5.2 Current Status Of Harvest Automation . . . . . . . . . . . . . . . . . . . . .79 5.3 Impact Of Automation On Costs, Labor Shortages And Harvest Quality. . . . . . . .84 5.4 Enablers To Accelerate Harvest Automation On Farms. . . . . . . . . . . . . . .86 6.0 MARKETTRACTIONANALYSIS. . . . . . . . . . . . . . . . . . . . . .91 6.1 IntroductionAndPurpose.. . . . . . . . . . . . . . . . . . . . . . . . .92 6.2 The Specialty Crop Automation Market: The Mixing Bowl’s 2022CropRoboticsLandscape. . . . . . . . . . . . . . . . . . . . . . . .92 6.3 Current Status Of Specialty Crop Automation Start-Ups. . . . . . . . . . . . . . 94 6.4 Market Traction Of Specialty Crop Automation Start-Ups. . . . . . . . . . . . . .96 6.5 General Trends Within The Start-Up Landscape . . . . . . . . . . . . . . . . . 98 6.6 Start-Up Performance Per Activity Line. . . . . . . . . . . . . . . . . . . . 100 6.7 Progress Of Repeat Respondents. . . . . . . . . . . . . . . . . . . . . . 107 6.8 Enablers To Accelerate Technology And Market Developments. . . . . . . . . . .109 7.0 CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 8.0 Appendix: Specialty Crop Automation Start-Up Profiles. . . . . . . . . . . . 118

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Figure1: OverviewofmajorCEAsegments.. . . . . . . . . . . . . . . . . . . . . . 23 Figure 2: CEA penetration of fresh crops revenue. . . . . . . . . . . . . . . . . . . . . 26 Figure3: FundsraisedbyCEAstart-ups. . . . . . . . . . . . . . . . . . . . . . . . 28 Figure 4: Overview of CEA market drivers and challenges . . . . . . . . . . . . . . . . . 29 Figure 5: Overview of leafy green cost structure – Open-field farming vs vertical farms. . . . . . 34 Figure 6: Overview of pepper cost structure – Open-field farming vs greenhouse. . . . . . . . 35 Figure 7: Overview of strawberry cost structure – Open-field farming vs vertical farms. . . . . . 36 Figure 8: Overview of key players in major segments of the CEA market. . . . . . . . . . . . 38 Figure 9: Example of a traditional greenhouse grower diversifying its CEA product offering. . . . 39 Figure 10: Vertical farms have raised more than $2.5 billion since 2015. . . . . . . . . . . . . 40 Figure 11: Greenhouse start-ups have raised more than $1.5 billion since 2015. . . . . . . . . . 42 Figure 12: Examples of retailers and traditional open-field growers developing their exposure to CEA. . 44 Figure 13: Controlled Environment Agriculture is promising, albeit with significant headwinds ahead. . 46 Figure 14: Overview of the H-2A visa application process. . . . . . . . . . . . . . . . . . 51 Figure 15: H-2A certified jobs and visas issued. . . . . . . . . . . . . . . . . . . . . . 53 Figure 16: Survey results highlighting the increasing importance of H-2A. . . . . . . . . . . . 54 Figure 17: H-2A certified workers by farm sector. . . . . . . . . . . . . . . . . . . . . . 55 Figure 18: Growth of H-2A jobs by employer type . . . . . . . . . . . . . . . . . . . . . 56 Figure19: H-2Ajobsbyfilertype.. . . . . . . . . . . . . . . . . . . . . . . . . . .57 Figure 20: Overview of H-2A wage bill by state, U.S., 2020. . . . . . . . . . . . . . . . . . 58 Figure 21: European agriculture gross value add since 2011 [€ billion]. . . . . . . . . . . . . 62 Figure 22: European agriculture production by crop type, by value [€; percent], and by weight [tons; percent]; European specialty crop production by weight [tons; percent]. . . . . . 63 Figure 23: European specialty crop production since 2011, by country and by crop [millions tons]. . 64 Figure 24: Consumption of fruit and vegetable since 2011 [million tons]; consumption per capita of fresh fruit and vegetables [tons per capita]. . . . . . . . . . . . . . . . . . . 66 Figure 25: Fruit and vegetable imports to Europe since 2011 [million tons; percent]. . . . . . . . 67 Figure 26: Interview with Agrana – Using automation to bring crop production back to Europe. . . 68 Figure 27: Changes in production of selected vegetables since 2000, by country [thousand tons]. . 69 Figure 28: Changes in production of selected fruits and nuts since 2000, by country [thousand tons].70 Figure 29: Labor input index [annual working units] and hourly minimum wages [€] since 2011, byEuropeanregion.............................72 Figure 30: Number of farm managers in Europe by age group, from 2007 to 2016. . . . . . . . 73 Figure 31: Labor cost as a percentage of total costs, [average]; expectations for labor costs [percent share of respondents, based on survey results] . . . . . . . . . . . . . . 78

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TABLE OF FIGURES (continued)

Figure 32: Historical and anticipated investments in automation [percentage share of survey respondents]. . 79 Figure 33: Investments in automation by farm size [average], preferred method of automation by region [percent share of respondents]. . . . . . . . . . . . . . . . . . . . 80 Figure 34: Automation activities [percentage share of survey respondents], and method of investing in automation [percentage share of survey respondents]. . . . . . . . . . 81 Figure 35: Status of automation across harvest and harvest-related activities and selected crops [average percentage share of acres using automation, based on survey respondents]. . . 82 Figure 36: Expectations for share of acres automated in three to five years, by activity [average]. . . 83 Figure 37: Target return on investment for automation investments [share of respondents, based onsurveyresponses]............................84 Figure 38: Case studies of leading specialty crop growers adopting automation solutions. . . . . 85 Figure 39: Enablers to accelerate harvest automation on farms, with Western Growers’ achievementin2022.................................87 Figure 40: Interview with Jenny Maloney (Bayer) – Genetic seed innovation in bell peppers. . . . . 88 Figure 41: The Mixing Bowl 2022 Crop Robotics Landscape map . . . . . . . . . . . . . . . 93 Figure 42: Start-up overview by funding round, paying customers and number of robots in operation [# respondents; % share of total] . . . . . . . . . . . . . . . . . . . 95 Figure 43: Number of robots in service, by automation activity [based on survey responses]. . . . 96 Figure 44: Mapping of start-ups by number of paying customers and robots in service [based onsurveyresponses]..........................97 Figure 45: Percentage of roadmap focused on indoor farming [based on survey responses] . . . . 98 Figure 46: Key market traction metrics, leading weeding/thinning focused start-ups. . . . . . . 98 Figure 47: Naïo Technologies – Interview spotlight. . . . . . . . . . . . . . . . . . . . 101 Figure 48: Verdant Robotics – Interview spotlight. . . . . . . . . . . . . . . . . . . . . 102 Figure49: Burro–Interviewspotlight.. . . . . . . . . . . . . . . . . . . . . . . . . 103 Figure 50: Tortuga AgTech – Interview spotlight. . . . . . . . . . . . . . . . . . . . . 104 Figure 51: Advanced Farm – Interview spotlight. . . . . . . . . . . . . . . . . . . . . 105 Figure 52 Start-up ranking by funding round and total funding raised [based on survey responses].106 Figure 53: Number of machines in service, repeat respondents [based on survey responses]. . . . 107 Figure 54: Total funding raised to date; most recent funding round completed, repeat respondents [basedonsurveyresponses]. . . . . . . . . . . . . . . . . . . . . . . . . 108 Figure 55: Enablers to accelerate technology and market development, with Western Growers’ achievementin2022............................110 Figure 56: Interview with Josh Ruiz (Church Brothers) – Building the bridge between growers and start-ups to accelerate adoption of new solutions. . . . . . . . . . . . . . . . .111

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WESTERN GROWERS FOREWORD By Walt Duflock, Vice President of Innovation at Western Growers

like Australia and New Zealand left them in a very precarious position with regard to labor, and Brexit has done the same to Britain. These factors have increased the urgency around automation solutions globally. In the past six months, Western Growers and partners in Australia, New Zealand and Britain have collaborated on new ways to help push global startups into the U.S. market effectively and help them scale their efforts with grower conversations, field trials and case studies. There are more partnership opportunities emerging. The goals for the Global Harvest Automation Initiative (GHAI) remain the same – automate 50 percent of fresh produce activity within 10 years. The lens is widening this year to include all labor – harvest, weeding, thinning, planting and spraying – as well as labor efficiency enhancements like harvest assist. Growers treat labor as a portfolio of work they need to manage to get the crop planted, grown and harvested. The GHAI will similarly look at the entire portfolio and help growers manage to optimize it with the right mix of labor and automation for their operation. This year’s report is the second annual report and takes a deep dive into some new areas. First, the report analyzes the European market and how it compares with the U.S. when it comes to both labor as a problem and automation as a solution. Second, the report looks at Controlled Environment Agriculture (CEA) and its current and potential future impact on labor and automation. Third, we took a deeper dive into the innovator’s side of automation – how are startups doing with actual grower-driven metrics like robots in the field and number of customers. What we found showed

Walt Duflock, Vice President of Innovation at Western Growers

Labor remains the top challenge for specialty crop growers globally from both an availability and cost perspective. The lack of a domestic work force, combined with the increasing costs of any farm work force due to regulatory constraints, are forcing growers to look to international workers through the U.S. H-2A programs and international equivalents. Use of H-2A workers has grown six-fold in 16 years (48,000 in 2005 to 300,000 in 2021), and housing and transportation costs for H-2A workers increases the cost of that labor force. Globally, the pandemic shutdowns in places

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two trends: (1) Progress from a fundraising and traction perspective in key areas like weeding, spraying and harvest assist; and (2) Less progress in other key areas – notably harvest. The time it takes to build automation solutions is getting shorter and the costs are getting smaller thanks to overall advances in robotics and non- agriculture fields that benefit agtech startups, as well as the increasing talent pool that agtech startups are able to add to their teams. Western Growers worked with three new partners on this year’s version of the report. First, the Mixing Bowl team delivered the “2022 Crop Robotics Landscape.” This landscape found more than 500 robot companies and vetted 200+ for the landscape, grouped into autonomous movement, crop management and harvest segments with multiple sub-segments in each to provide a very comprehensive view of the key players and the functionalities they currently deliver. Second, the Agritecture team provided in-depth economics of multiple CEA formats and crop types. Third, Michelin arrived as the first report sponsor and met with a series of growers and startups to help them consider ag-related business units that might complement their core tire and track business. These meetings were valuable for both sides, as growers got a chance to articulate some of their needs to an international team from Michelin and the Michelin team got to validate some initial assumptions and dive deeper into the problem statements presented by the growers and startups.

FIRA USA in October 2022 in Fresno, Calif. This three-day conference brought together experts from around the globe from universities, startups and grower organizations to one place for three days of panels, keynotes and field demonstrations. The attendee target for this type of event was 400 and we were glad to deliver an event to 1,000 attendees that exceeded all expectations for attendees, exhibitors and sponsors. FIRA USA brings the report to real life and helps growers see in-person the results of the work the innovators do every day. FIRA USA will be held in September 2023 in California and will provide another opportunity for growers and startups to start or build on a lot of conversations about how and when they should invest in automation solutions. We look forward to next year’s report and next year’s FIRA USA event! Western Growers would like to thank the following people for providing major support on the Global Harvest Automation Initiative: 1. Roland Berger team members Wilfried Aulbur, Giovanni Schelfi, Eva Barbier, Harris Chacko and Duncan McHattie, who once again did a great job of assembling a lot of great new data and supporting analysis into a really solid second effort for the report; 2. Western Growers team members who helped with the review and production of the final product, including Tim Vu, Jaymee McInerney, Cory Lunde, Ann Donahue, Michelle Rivera, Kara Timmins, Jason Resnick, Dennis Donohue and Emily Lyons.

Finally, in conjunction with the GHAI and our partners at GOFAR and UC ANR, Western Growers launched

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ROLAND BERGER FOREWORD By Wilfried Aulbur, Senior Partner at Roland Berger

regulatory regimes continue to burden growers with administrative costs.

Growers reiterate these trends when asked about their most pressing challenges. Indeed, 46 percent of grower respondents in 2022 indicated profitability as their biggest challenge, with many indicating their profitability being most impacted by rising input costs due to inflation and an unstable geopolitical climate impacting raw material prices, such as fertilizers. Furthermore, 33 percent of grower respondents indicate that their most pressing challenge was labor availability, while another 34 percent indicated this was their second largest challenge. This is supported by data from Europe, where the labor input index for the agricultural industry has declined by 16 percent since 2011. Accordingly in the U.S., growers have increasingly turned to rely on international workers through the H-2A program, which has grown by more than 500 percent since 2005. This environment makes the progression of specialty crop automation technology increasingly important to the health of the industry. Automation technology has and will continue to supplement human labor and allow human labor to be redirected toward more high-skill tasks. Indeed, in 2022, 50 percent of grower respondents indicated having employees dedicated to the integration of automation technology. This indicates the first step in a broader agriculture

Wilfried Aulbur, Senior Partner at Roland Berger

Since the publication of our inaugural report last year, the challenges facing the specialty crop industry have become increasingly important. Indeed, in both the U.S., Europe and the rest of the world, minimum wages have continued to rise and the lack of labor availability has persisted. Furthermore, increasing inflation has put further pressure on input costs while

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workforce transformation, whereby farmworkers will need to be trained for new skills and capabilities to handle new automation technologies. Western Growers’ Next Gen Ag Worker program plays well into this trend and builds the foundations to prepare graduates to handle new equipment and rethink traditional growing operations. Optimistically, notable progress has been made in the commercialization of harvest automation technologies. When comparing year-on-year survey data, automation start-ups have generally made progress with respect to funding, machines in the field and paying customers. Indeed, around 75 percent of start-ups who have responded to both the 2021 and 2022 surveys made progress with respect to total funding raised and machines in the field. This indicates that automation technologies will continue to be increasingly available to lighten the burden of growers’ labor challenges. However, collaboration between all stakeholders in the ecosystem including growers, innovators, investors, and governments will be vital for continued progress. Once again, working with Western Growers, including its staff and members, has been a pleasure. The publication of this second report would not be possible without inputs from growers to understand their challenges and needs, and inputs from various start- ups to understand the challenges they are trying to solve and the challenges that they face in doing so.

Furthermore, we are truly grateful for the support of our key content partners Architecture and Mixing Bowl, who helped us crack some tough nuts on Controlled Environment Agriculture and the automation start-up landscape, and we would like to thank our sponsor and partner, Michelin. Furthermore, the competence and passion of Western Growers’ staff has been a joy to work with. Working with an organization so dedicated to connecting all stakeholders within the specialty crop industry, well beyond its state and national boundaries, and supporting growers has been motivating. And we look forward to seeing the benefits their hard work will reap for the specialty crop industry.

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Michelin is one of the major tire manufacturing companies in the world with a commercial presence in 177 countries along with nine R&D centers and 123 manufacturing sites in 26 countries. We are a world wide leader in mobility solutions for all types of vehicles and the largest off-the-road tires and tracks company, and a proud sponsor of the Global Harvest Automation Initiative. Why are we a sponsor? Our decision to sponsor the Global Harvest Automation Initiative rests on two major pillars – innovation and sustainability. Innovation is at the core of everything we do as a business and the need for innovative solutions to assist growers, especially in the context of specialty crops, was a big pull. With sustainability being at the heart of our decisions for us, the initiative’s goal to reduce food waste was another strong motivator. Our experience with similar projects in Europe and our desire to bring that experience to North America was enabled by our collaboration with Western Growers. What does the sponsorship bring us? To better understand the developments in the field, Western Growers Association helped organize a field trip to meet with prominent growers and agtech start-ups across California. The trip was comprised of field visits, content discussions and start-up meet and greets, as highlighted in the illustration below. This was extremely helpful in sharpening our thinking regarding the evolving specialty crop automation space. First, it provided us with a deeper look into specialty crop ecosystem from farm to table. Second, it enabled us to better understand some of the key challenges that growers are facing today and what matters.

One of the surprising insights was that automation does not necessarily mean autonomous today. Third, it enabled us to see novel automation technologies in the field and understand complexities. Complexity of farm operations indicate that solutions need to be developed from the ground up and must strike a balance between common sense and technology push. Furthermore, it is equally important that growers are flexible in their approach to adapt their operations to the technology that they are using. What strategic role do we envisage for Michelin? Historically, we mainly have had exposure to crop farmers in the Midwest and cereal farmers in Europe, however, the partnership with Western Growers has introduced us to the specialty crop ecosystem. We are exploring opportunities to service stakeholders, both in terms of products and services. In our opinion, it is not only about automated products but also services along the multi-node supply chain of bringing produce from the farm to the supermarket that can help growers achieve a return. A grower, typically, invests significant amount of capital before even seeing one dollar of return and therefore is highly conservative in its approach to adopt a solution. The need of the hour is to clearly understand the voice of the customer and build solutions step by step from more conservative, assured ROI solutions to, eventually, fully autonomous solutions. Through the Global Harvest Automation Initiative, we can keep a close pulse on the development of rapidly changing solutions in the fresh produce industry and will be able to contribute as the industry eventually converges to the best solutions.

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Seeing the labor crew working in real time with the machines was really helpful in understanding the requirements for solutions that want to help growers with harvest and automation

Product Line Manager Tracks and Wheels, Agriculture at Michelin


Stout Industrial Technology’s CEO Brent Shedd provided great insight into the importance of

the underlying software in making the engineering and design of robots work as planned

Business Segment Manager for Agriculture at Michelin

It was great to see Naïo Technologies, a French startup, launching and growing the business for their automation solutions in California specialty crops, and exactly what is required to achieve that Market Intelligence and Insight Manager for Agriculture at Michelin “ START-UP MEET & GREET

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A growing labor shortage and rising wages are a source of increasing concern for the global agriculture industry. Growers indicate that labor typically accounts for more than 50 percent of their total production costs, and most expect labor costs to grow at 10-30 percent over the next three to five years. The hope is that technologies can bring solutions and provide relief for the industry. This report provides an overview of promising automation solutions that work for growers and deliver quality economics today and in the future. This report is the second in an annual series that will track, measure and report on industry progress in automation across the fresh produce industry. The report is a unique combination of information gathered via public sources (U.S. Department of Agriculture; California Department of Food and Agriculture; University of California, Davis; Food and Agriculture Organization; Eurostat etc.), dedicated interviews with industry experts (growers, start-ups, investors etc.), and through close collaboration with strategic partners (Agritecture and The Mixing Bowl). This research is complemented by insights from two sets of surveys: one directed at specialty crop growers and one at start-ups. The report provides a comprehensive view of the current status and impact of harvest automation and highlights innovation leaders. This edition

also has a special focus on the European agriculture industry and looks at five selected crops in particular: apples, strawberries, broccoli, lettuce and grapes. Primarily, the study finds clear signs of progress compared to last year’s inaugural report. Around 70 percent of participating growers indicated that they had invested in automation in 2022, with an average annual spend of $450,000-$500,000 per grower. This shows considerable progress since last year when average investments in automation were around $350,000 to $400,000 per grower per year. Most progress was made in the weeding and harvest assist segments, as market-ready solutions are able to meet grower economic targets and alleviate key challenges, such as lack of labor availability. Indeed, growers reported ROIs for weeding solutions of less than one to two years depending on the type of crop and technology used. These workable solutions add to the optimism of growers and the industry in general. In addition, growers want more trained agtech personnel, with 50 percent indicating that they had internal employees who dedicated the majority of their time to the integration of automation investments. This suggests that the process of elevating and upskilling the agriculture workforce is well underway.

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Our market traction analysis of automation start- ups confirms the progress in the market. First, the Mixing Bowl’s 2022 Crop Robotics Landscape reveals a dense market map, with more than 200 companies featured across production systems and product segments. Furthermore, clear progress is observed when measured in terms of funding received, number of paying customers and number of robots in service. Approximately 15 percent of participating start-ups in the 2022 survey have completed Round B funding or above, compared to 7 percent in the 2021 survey. More than 30 percent of start-ups have reached more than 20 paying customers, compared to 20 percent last year. In addition, more than 35 percent of participating start-ups have reached more than 10 robots in service, compared to 20 percent in 2021. In line with findings from the impact analysis, most progress has been made in the weeding segment, with various start-ups gaining traction as they meet grower economic targets. FarmWise, Verdant, Stout AgTech, Carbon Robotics and Naïo Technologies are leading the game. Burro continues to make headway on harvest-assist activities and has been able to demonstrate proven benefits to grape growers. Finally, harvest automation start-ups continue to make progress, with both Advanced.Farm and Tortuga AgTech expanding in terms of robots in service and scaling technologies across crops.

While progress is clearly visible, there is still a long way to go and a lot of room for technology innovators to bring much-needed solutions to the agriculture industry. Western Growers continues to be dedicated to accelerating automation technologies across the fresh produce industry. First, Western Growers, together with its global partners, launched FIRA USA in October 2022, gathering 1,000 attendees from various stakeholder groups. Second, Western Growers is delivering on a $750,000 California Department of Food and Agriculture (CDFA) grant to identify knowledge gaps in grower workforces, curriculum at community colleges that can fill the gaps, and marketing programs to help increase usage of the curriculum and deliver 3,000 agtech-ready students over four years. Third, work has begun on the first phase of the Tech Stack, an image library and will include four commodities with photos and tags to help reduce future startup R&D costs by providing ready-made image library.

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Western Growers launched the Global Harvest Automation Initiative in February 2021. It aims to drive sustainable and domestic food security by accelerating harvest automation across the fresh produce industry, with the ambition of automating 50 percent of the U.S. harvest within 10 years. The initiative also seeks to close the growing gap between agricultural labor needs and available farm labor by helping to progress and deploy innovative automation solutions. As well as bridging the growing labor gap, harvest automation has the power to improve the overall employment attractiveness of agriculture harvesting work by introducing new skill sets and career paths to an entire labor force.

To achieve its objective, the Global Harvest Automation Initiative launched several key projects. The first of those is an innovator cohort that aims to build a platform to allow harvest automation start- ups to commoditize 60-80 percent of the technology stack and provide commercialization support for start-ups with proven traction in the market. The second is an annual impact and market traction analysis to keep track of automation solutions in the specialty crop industry. This report embodies the second edition of the impact and market traction analysis. It will be updated annually to track and report on progress around automation solutions in the fresh produce industry.

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Following 2021’s inaugural Global Harvest Automation Report, the market for specialty crop automation solutions has advanced. It has become apparent that relevant automation solutions for specialty crop growers expand beyond harvest technologies. Other automation solutions that enable savings and can serve to complement labor, such as weeding, thinning, planting and spraying, are as important to overcoming the most prominent challenges facing growers. Thus, from this edition onwards, the report will be rebranded to the “specialty crop automation report.” Next to the title change, this year’s report differs from last year in that its scope has been extended to include both the U.S. and Europe. Future reports will further expand the global coverage, with Australia and New Zealand likely contenders for next year’s edition. The objectives of last year’s report are largely retained, however, they are (1) to highlight the main challenges and trends in the agriculture industry; (2) to provide increased transparency on the status and impact of automation in the fresh produce market; and (3) to identify and highlight technology innovation leaders across different activities. Readers can consult last year’s report for further details.

The report is structured around four main chapters. Chapter 3 highlights the main challenges facing the agriculture market and focuses on two key trends, namely controlled environment agriculture (CEA) and uptake of the H-2A temporary agricultural worker program in the U.S. Chapter 4 provides an overview of the agriculture and specialty crop industry in Europe and highlights its main challenges, drawing parallels to the U.S. where relevant. Building on last year’s established baselines, Chapter 5 summarizes the main findings of the impact analysis, with a general automation status report across all specialty crops and a more detailed status and impact assessment for a selection of specialty crops. Data was gathered through dedicated interviews and by surveying grower members of Western Growers and associated partner organizations. Chapter 6 summarizes the main findings of the market traction analysis, identifying innovation leaders in terms of total funding raised, number of paying customers and number of robots in service. Data for this analysis was gathered through dedicated interviews and by surveying global harvest automation start-ups active in the fresh produce industry. Lastly, Chapter 7 provides overall conclusions and considerations for future reports.

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Today’s agriculture industry is facing a multitude of challenges, such as a growing world population, lack of labor availability, aging farmer and farmworker population, increasingly stringent regulatory environment, growing supply chain traceability requirements, changing consumer preferences and climate change. Coupled with a volatile and unstable macroeconomic and geopolitical climate, these challenges affect production costs and crop yield for growers. The 2022 grower survey indeed indicated profitability, labor availability and regulatory hurdles as key challenges. A set of key industry trends play into the above challenges, of which this report will highlight two major trends impacting the specialty crop market in the U.S.: Controlled Environment Agriculture (CEA) and the H-2A temporary agricultural worker program. The following sections go deeper into these two trends.

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Controlled environment agriculture is the production of produce inside controlled environment structures, ranging from simple shade and hoop houses to greenhouses or indoor vertical farms. These CEA systems are designed to provide optimal growing conditions for crops and prevent disease and pest damage. Vertical farms and greenhouses are the primary exterior systems that the indoor farming industry relies on. Apart from the exterior system, CEA can use different growing technologies, such as soil-based, hydroponic, aeroponic, aquaponic and aquaculture. Most of the systems adopt hydroponic systems, where crops are grown with roots bathed in nutrient-dense water. Today, CEA is estimated at less than 2 percent of the total U.S. fresh produce market, with most of the CEA market supplied by traditional greenhouses, which have been around for years. This potential for growth beyond 2 percent has led to an unprecedented level of investment in the industry over the last few years.

According to Crunchbase, close to $6 Billion has been raised in North America since 2015, leading to the emergence of many greenhouse and vertical farm start-ups. However, the CEA market is also presented with some difficult-to-overcome barriers, such as nascent technology, limited product variety, competition from incumbent players and challenging economics, even more so in the context of rising energy prices and input material costs. Furthermore, the current volatile and highly uncertain economic and geopolitical climate present significant headwinds for CEA ventures. Altogether, the CEA market is expected to grow at double digit growth rates annually until 2025, with greenhouses expected to remain dominant. The remainder of the chapter expands on the CEA market segmentation, market assessment, key players, economic comparison and takeaways for traditional growers.

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Controlled environment agriculture is primarily driven by two major growing formats, greenhouses and vertical farms. Key distinctive characteristics are that greenhouses rely to a certain extent on natural sunlight, while vertical farms rely solely on artificial light. There is a spectrum of farm types, such as shaded structures, hoop tunnels and shipping

containers, that fall under both categories and differ on the level of technology employed, construction material used, growing technique used and reliance on natural light. However, the focus of this chapter will be on the two major formats. Figure 1 below aims to highlight key characteristics as well as key advantages and disadvantages of both growing structures.


Overview Of Major CEA Market Segments


Vertical Farms

Traditional Greenhouses

Greenhouses Start-Up

Vertical Farm Start-Up


• Semi-permanent to permanent structures - shaded, polycarbonate or glass • Reliance on natural sunlight Hydroponic or soil-based growing system • Grown primarily through patient capital • Fruit and vine crops like tomatoes, cucumbers, peppers • Berries are increasing

• Permanent system – mostly glass • Heavier reliance on artificial light • Hydroponic, aeroponic, aquaponic and soil-based growing system

• Modular structures like shipping containers or

permanent structures with multiple growing levels

• Complete reliance on artificial light • Hydroponic, aeroponic and aquaponic, rarely soil-based

Typical Crops

• Primarily lettuce, variants of leafy greens and herbs

• Primarily variants of leafy greens and herbs

Typical Construction Costs

• $0.5 to $1 million per acre

• Typically, greater than $1 million per acre 1 • Example: $1.3 million per acre for AppHarvest and $3 million per acre for Bright Farms

• Typically, greater than $16 million per acre 1 • Example: $16 million per acre for 80 Acres Farms to $50 million per acre for Aerofarms

Key Advantages

• Established in the fresh-produce industry • Lowest cost structure • High variety of crops produced

• Familiarity in the industry • Near all-year production • Better unit economics than vertical farms

• Year-round production irrespective of season • Highest yield per sq.ft – lowest land required

Key Disadvantages

• Seasonal production based on climate • Largest land requirement

• Larger land requirement than vertical farm • Limited crop catalog

• Highest cost structure due to

electricity consumed and CAPEX

• Limited crop catalog • New to industry


Source: Agritecture, Roland Berger

Figure 1: Overview of major CEA segments 1) Acres reflecting the building footprint and not cultivation footprint (latter being higher )

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Greenhouse structures are made primarily of transparent material, like glass or polycarbonate, that use natural light during the daytime. These structures are filled with equipment, including screening installations, HVAC, lighting and sometimes computer-controlled climate to optimize conditions, such as air temperature and relative humidity, for plant growth. Greenhouses have been around for decades, varying from semi-permanent structures like high tunnels using the sun as a lighting source to more permanent glass or polycarbonate structures using a mix of sun and artificial lights. Traditionally, greenhouses are constructed with larger land footprint and high ceilings. Recently, however, many greenhouse start-ups have emerged employing highly automated glass structures with heavier reliance on artificial lights. 1 Examples of these include AppHarvest, Gotham Greens and Little Leaf Farms. Higher automation leads to lower labor-intensive operations - traditional

greenhouse growers roughly employ two times the labor employed in emerging greenhouses. In terms of growing technology employed, the majority of greenhouses are hydroponic and soil-based, with some players using aeroponics and aquaponics 2 . Use of advanced technology enables greenhouse start-ups to provide consistent year-round supply along with driving relatively higher yields. This enables them to grow crops that are different from traditional greenhouse growers. Most traditional greenhouses grow fruit and vine crops in the U.S., whereas greenhouse start-ups are primarily focused on leafy greens, such as lettuce, arugula, chard and fresh-cut herbs. Greenhouses have high construction costs with glass structures being more expensive than poly- carbonate ones. A high-tech greenhouse, as is common for most emerging greenhouse start-ups, typically costs more than $1 million per acre 3 to construct. 4 5

1. State of indoor farming 2020 | artemis 2. Hydroponic is a growing technology where plants are grown in water-based mineral nutrient solutions in aqueous solvents. Aeroponics is a growing technology where plants are grown in an air or mist environment without the use of soil or an aggregate medium and aquaponics is a system that couples aquaculture with hydroponics where nutrient-rich aquaculture water is fed to the plants. 3 This assumes the total structure footprint and not cultivation footprint 4 Appharvest secures 82 million to build eastern Kentucky greenhouse |, May 2019 5 BrightFarms plans three new greenhouses |, February 2019

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More novel CEA structures are typically referred to as vertical farms, whereby vertically stacked plants are grown in permanent purpose-built structures or modular structures, such as used-shipping containers, with complete control over the growing environment. There is no requirement for natural sunlight as artificial lights are used to grow the plants. Vertical farms comparatively need much smaller land as space is utilized vertically by stacking plants in levels. Characteristics of growing structures differ significantly. As example, containers are a low-upfront cost solution, but are limited in the yield they can produce. This lack of scalability limits the investment in technology; therefore it is expected to only be a niche solution catering to specific use-cases in the market or in urban areas. All large-scale vertical farms seen in the market are start-ups often employing state-of-the-art technology in automation and lighting. This results in much higher upfront construction costs for a vertical farm, of typically greater than $16 million per acre. For example, 80 Acres Farms has raised $74 million to build a

4.6 acre hydroponic farm in Kentucky 6 implying a $16 million per acre spend whereas Aerofarms has planned to build a 2.4 acre aeroponic farm in New Jersey through a $100 million raise implying a $50 million per acre cost of construction. 7 It is important to note, however, that the cost per acre will be lower if cultivation footprint is considered since vertical farms stack growing levels vertically thereby enabling higher cultivation area per building surface area. Annual operating costs for vertical farms can be 1.5 to 2.5 times a greenhouse operation, largely driven by high electricity needs. Higher operating costs drive the selection of crops, which have a shorter harvest time and have the highest yield per cubic inch of volume. Lettuce and variants of specialty leafy greens, along with fresh-cut herbs and microgreens, are the most frequently grown produce in vertical farms. Like greenhouses, vertical farms employ hydroponics as the major growing technology; however, there is more use of aeroponics as compared to soil.

6 Northern Kentucky lands giant indoor farming operation from 80 Acres Farms |, January 2021 7 Robotic warehouse farms will save the world |, April 2021

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Market share of CEA produce when compared to the total U.S. fresh produce market is estimated to be less than 2 percent today. Based on current product portfolios and sales 8 of CEA growers, the majority of CEA players are focused on fresh vegetables, fresh- cut herbs and some non-citrus fruits. Therefore, the remainder of this chapter focuses on market dynamics in the fresh vegetables and fresh-cut herbs market. As per USDA data, the total market size for fresh vegetables and fresh-cut herbs in the U.S. is estimated to be approximately $11 billion in 2021 with majority supplied by traditional outdoor growers. Currently,

CEA represents around 6 percent to 7 percent of the total fresh vegetables and fresh-cut herbs market. Based on projections from S2G ventures 9 , CEA produce is expected to grow at double digit rates and contribute approximately 10 percent to 12 percent of fresh vegetables and fresh cut herbs in the U.S. market by 2025. Despite being a niche segment of the overall fresh vegetable and fresh herbs market, CEA holds large shares of the U.S. fresh vegetable market for specific crops, such as tomatoes, cucumbers and fresh-cut herbs, primarily driven by traditional greenhouses (see Figure 2).


CEA Penetration Of Fresh Crops Revenue, 2022 [USD Million; %]



Fresh Herbs




CEA 2%

CEA 38%

CEA 38%

CEA 38%












Open Field

Open Field

Open Field

Open Field

Open Field

CEA Market Splits

Traditional greenhouse CEA Start-ups (Greenhouse and vertical farms)











Source: USDA, Nielsen, Roland Berger Figure 2: CEA penetration of fresh crops revenue

8 Scandata of latest 52 weeks US-XAOC, 2021 | Nielsen 2021 9 Growing beyond the hype: Controlled environment agriculture | S2G ventures, 2020

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Traditional greenhouses have been the dominant format in CEA, supplying fresh produce in the U.S. for more than 30 years. Currently, traditional greenhouse growers drive 80 - 90 percent of the total CEA sales. However, there has been significant growth in the number of CEA start-ups focusing on both greenhouse and vertical farm growing formats in the last decade. Incumbent traditional greenhouse growers have focused on vine and fruiting crops, like tomatoes, peppers and cucumbers whereas new start-ups, both greenhouses and vertical farms, are primarily focusing on offering lettuces or variants of leafy greens, herbs and microgreens. The clear distinction around the offerings can be attributed to two key factors: growing requirements and growing economics. In terms of growing requirements, leafy greens in traditional greenhouses are not able to achieve the same high yields as vertical farms due to inability to utilize the vertical space. Fruit and vine crops fit well to traditional greenhouse operations by utilizing vertical and horizontal space, resulting in the dominance of such crops in traditional greenhouses. From an economics perspective too, lettuce or leafy greens are more expensive to grow in a greenhouse as compared to fruit and vine crops. For example, building a lettuce greenhouse is approximately 70 percent more expensive per acre than building a tomato greenhouse as lettuce require more climate control technology to increase yield. 10 Almost all greenhouse start-ups on the other hand are focused on lettuce or leafy

greens mostly because growing a “non-traditional greenhouse crop” enables them to differentiate from a product offering perspective and with the supplemental lights and climate control technology they can grow lettuce at a much higher density (kg/ acre) than traditional greenhouses. Start-up CEA players in both greenhouses and vertical farms are developing “touch-less”, highly automated farms that use supplemental light to drive higher annual yield. Since electricity is a major part of their cost structure, leafy greens are a more suitable crop since vine crops like tomatoes use 60 percent more electricity to grow than lettuce. 11 A requirement to have higher revenue generation per surface area also favors leafy greens, as almost all parts of a lettuce plant can be sold and they grow at a higher density per square foot as compared to vine and fruiting crops. Next to crop selection, the source of financing and funding differs between traditional greenhouses and CEA start-ups. Historically, traditional greenhouses have had access to more patient capital in the form of conventional farm loans, helping them achieve steady growth over decades. However, the possibility to develop high-tech farms supplying high-quality, fresh food all year-round has led to unprecedented fundraising through aggressive growth capital, such as venture capital or private equity, with more than $1.6 billion raised annually in North America in 2021 and 2022 (see Figure 3). Nearly 60 percent of this investment has gone to vertical farm start-ups.

10 Behind the greens: Why greenhouse lettuce is not competitive yet |, January 2021 11 Vertical farms expand as demand for year-round produce grows | The New York Times, April 2022

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Funds raised by CEA start-ups 1 , 2015-2022 [USD million;%]

Share of total funds raised by CEA start-ups 1 , 2015-2022 [USD million; %]

$ M





601 752 1,867 1,686


Greenhouse start-up





Vertical farm start-up









48% 52%


32% 36% 68% 64%


2016 2017 2018 2019 2020 2021 2022

Total funds raised

Source: Crunchbase, Roland Berger Figure 3: Funds raised by CEA start-ups 1) Non-exhaustive list, only major CEA farms currently active in the North America (US and Canada) and have raised a cumulative of at least 50 million

Today, the overall CEA market is still small. Looking ahead, a combination of growth drivers and difficult- to-overcome challenges render scalability of the CEA market uncertain (See Figure 4). The key drivers are supply security, consumer preference for flavorful,

high-quality fresh produce, unpredictable growing conditions and labor availability. Key challenges include nascent industry and technology, unproven business models, competition from traditional players and limitation of product variety. Both are further detailed below.

11 Vertical farms expand as demand for year-round produce grows | The New York Times, April 2022

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