PROVER Beckground
Agriculture and food-related industries in the European Union (EU) provide over 44 million jobs. With a varied climate and the generational knowledge of European farmers, the EU maintains its place as one of the world’s leading producers and exporters of agricultural products. This all changed with the Coronavirus outbreak. Even though the EU’s agri-food sector showed resilience, farmers and food producers faced increased pressure to provide high-quality and safe food to the region. With up to 70% of the global food supply intended for urban consumption, most countries experienced temporary shortages in basic foods. This exposed weaknesses in the urban food system, distribution, and retail.
Despite the general slowdown of the economic system and human activities, the pandemic changed the narrative for vertical farming, often considered too futuristic. One of the key benefits of vertical farming, highlighted during the pandemic, is shortening the supply chain. Vertical farming is believed to respond to current global challenges such as growing population, resource scarcity (especially water), and supply chain security. The number and size of vertical farms in Europe is at present still rather small, but in recent years they have experienced rapid expansion. There are increasing investments and a concurrent proliferation of start-ups. Following a global trend, the expansion of this industry is mainly due to the simultaneous drop in the price of LED lighting technologies and the growing consumer demand for fresh, healthy, and local produce grown with limited inputs. The European Commission has even recognized CEA as a prospecting sector constitutive of Europe’s future farming landscape. According to The Farmers of the Future study report, the EU’s controlled environment agriculture (CEA) market held its ground in 2020, reaching over US $31 Million. Europe had a 51.4% share of the market in 2020 and “is likely to continue to account for a notable market share by the end of 2026.” Today, it is expected to witness a compound annual growth rate (CAGR) of 5.2%, and a year-over-year (YoY) growth of 18.4%. The market growth can be attributed to the changing climatic conditions across Europe. Changes in temperature and weather adversely affect crop yield. These factors are promoting the demand for indoor farming in Europe.
Contrary to an initial boom in the VF sector, the practice has struggled to be adopted in the Western Balkan region without a trained workforce. VF is rightly met with skepticism due to its limited crop choice, high energy demands from artificial lighting, high CapEx demand for equipment and real-estate and financial uncertainty. Economic viability has been identified as one of the largest obstacles to realising VF projects and whilst it has been reported in prominent surveys that there are existing profitable operations, the learning curve is steep and the financial risk is high. The sector is littered with failed start-ups that have struggled with (i) lack of digitalization in food sector, (ii) underestimated labour costs, (iii) lack of adequate VF knowledge and accessible education, (iv) inefficient workflow and inadequate ergonomic design consideration, (v) low profitability margins, (vi) costly equipment failures, and (vii) poor early decisions around pricing, crop selection and location. Moreover, with vertical farming being an emerging industry, the quick and cost-effective implementation of a vertical farming project often conflicts with the need to comply with the local regulation and building codes.