Expanding Horizons with Vertical Farming

Will:
All right, who’s hungry? We’ve got a big World Cup win. Well, I guess it’s not a win, but it’s more of the U.S. is going to the World Cup. Super exciting. But this episode is about food and the supply chain of food. So Dan, what’s your favorite pie?

Dan:
Ooh, like dessert pie? Like pumpkin pie? I do like a good pumpkin pie but I’m not a huge fan of pies, just to be honest with you. I don’t like apple pie. I don’t like the crust of it. Chicken pot pies are not my favorite.

Will:
Dan, we want the people to like you.

Dan:
I mean, I think they already do, or I hope they do.

Will:
Yeah, so if that’s the case, then what pie do you like?

Dan:
Then it’s pumpkin pie.

Will:
All right, that’s a good choice.

Dan:
How about yourself? I’m not really in the pie type of mood right now. You know it’s not pie weather. It’s more of a getting yourself ready for beach bod weather.

Will:
Yeah, no, I hear you. It’s cutting season. An apple pie with a nice scoop of vanilla ice cream. Pretty tasty.

Dan:
Well, pairs very nicely with what we’re about to talk about.

Will:
Yeah it does. And actually Dan, that leads right into our first article. So we’re hearing a lot about supply chain of vertical farming. And why is it such a good idea compared to what some of the traditional farming methods are? Dan, can you highlight some of those for our group?

Dan:
Yeah. So vertical farming, as it sounds just crops grown on top of each other as opposed to the traditional farming which is horizontally. If you ever venture out of New York City and are lucky enough to go by Kearny, New Jersey check out the giant post office lot there. You’ll see some vertical farming areas there. But it’s a really awesome concept and one really great way to tackle getting more crops into consumers and storefronts. So your lettuces, your leafy greens for the most part is where the science has been around today. And Bowery Farms just launched a strawberry product as well. So venturing into fruits, which could pair really nicely with your apple pie. A little strawberry.

Will:
Yeah. I never like the rhubarb pies, which kind of tastes like strawberries and so that’s a pretty good segment. I think the cool thing is that from a supply chain perspective that you see on the vertical farming is that you’re reducing the amount of fuel, labor, overall trucking footprint, in order to get goods to where they’re being consumed, which is a big deal. You’re also able to do it year-round as you bring into greenhouses versus having to expand further and further onto land as we look at it from there. So you have that really great aspect of it.

Will:
The downside is that there are upfront capital expenditures that have to be done in place. You know, if you’re going to put a greenhouse on top of a city in New York City, it’s a little bit tougher than if you were going to go do it in [crosstalk]

Dan:
Lot of energy.

Will:
Lot of energy. So I-

Dan:
A good hedge though.

Will:
A good hedge.

Dan:
California produces $2 billion worth of strawberries for instance, but there’s droughts going on in California. So we have a growing population here, we need our fruits and veggies and this is a really good way to offset that area of the supply chain. But also this whole idea around sustainable growth and food, it’s not just strictly for vegetables. I mean, there’s your Beyond meats out there that are plant-based foods, but there are also plant-based milk like Oatly itself.

Will:
Yeah. And Dan maybe you can expand a little bit on and how Oatly’s had some recent struggles in terms with both growing, which is good, but how they’re trying to support that growth. And you know, some of the outside factors they’ve been susceptible to.

Dan:
Yeah. So Oatly, they highlighted this in their Q4 earnings call. This is predominantly because of the climate, the weather. And U.S. oat production was down 39% from last year and there’s those droughts in California that we mentioned. But on top of that, a lot of flooding in Western Canada of late as well, which is really impacting the rail. And then you have higher transportation costs. That’s really impacting. And we’ve talked about how there’s been those delays on rail.

Dan:
But what Oatly’s doing to move forward is they’re going to put some CapEx costs into building out their own manufacturing lines and plants to meet demand, but that’s down the line, that’s not going to impact this year or next year. What we don’t know is the seasonality around oats. You have rising costs, also fertilizer, pesticides, everything’s increasing as well. So Oatly had to raise their costs to the consumers because of everything that they’re dealing on the supply chain side, which is what we’re starting to see with other, I mean we’ve already seen it in the supermarket with some foods already today. I don’t think that’s necessarily going to stop in the short term. We’ll see. Hopefully inflation gets combated. I know Biden announced the reserves for oil so that should hopefully lower oil prices a bit. But really early on in this fight.

Will:
Yeah. I think that the thing you can take away from the Oatly side of things is that they’re looking to diversify their suppliers. They need to ensure that they can physically get the raw materials, oats in this standpoint, to make their products. So enabling that will then allow them to support their business as they continue to grow their capacity for producing oat milk, which a lot of growing people like.

Will:
In terms of growing the capacity, we want to make sure we’re getting more people listening to Safety Stocks. So if you can do us a favor by subscribing, liking, giving us five stars on Spotify and Apple. Reach out to us at hello@anvyl.com. That’s a-n-v-y-l.com. Reach out. Love to hear from you.