The outlook for Canada’s vertical farm sector

They were hailed as the next big thing in food: indoor vertical farms growing year-round crops using significantly less water, land and energy than farms in the great outdoors. Not only was this hightech solution more sustainable, vertical farms would also help feed the planet. Loads of hype and billions in venture capital investment later, the lights went out at many vertical farms. 

Among those that ran into trouble were: Infarm, a Berlin-based startup that declared bankruptcy in major European markets in 2023; New Jersey’s AeroFarms, which declared bankruptcy last summer and emerged with a rebuilding plan; and Kentucky’s AppHarvest, which also joined the bankruptcy list in 2023. 

“I look at it similar to the way the internet bubble was, or even the cannabis [sector]. Everybody thought they could come into the field and make money on it, and some of them were able to raise crazy amounts of money,” says Mark Lefsrud, an associate professor in bioresource engineering at McGill University. “I will not say they had a good business plan.”

READ: How UP Vertical Farms is revolutionizing smart agriculture in Canada

Part of the challenge is vertical farming is a capital-intensive business, and many companies squandered large sums of money and invested in the wrong places, says Barry Murchie, CEO and president of GoodLeaf Farms, a Guelph, Ont.-based vertical farm operation that produces a range of baby greens and microgreens. “Many of them describe themselves as tech companies and they’re comfortable with burn rates that are associated with tech companies – and this is food,” he says. “You have to be very disciplined in your use of capital, you have to be focused on where you spend your money, and you have to make sure you’re building the right foundation.” Those companies, he adds, “are the ones that are going to be left standing as this consolidation and culling plays out.” 

For companies such as GoodLeaf, there remains an opportunity for vertical farms in Canada. Most of the country’s leafy greens are imported from the southwest United States, which is experiencing a decades-long drought. Compounding the water issues are ongoing supply chain challenges, truck-driver shortages and extreme weather events, which all point to the need for a domestic alternative. 

“[It’s important for] GoodLeaf and the country to build an ecosystem that brings food sovereignty and bends the supply curve from Southern California and Arizona back in the direction of domestically sourced product,” says Murchie. “It’s not a nice-to-have, it’s a need-to-have.” 

To meet growing demand, GoodLeaf recently expanded with two new facilities in Calgary and Montreal, at around 100,000-sq.-ft apiece. “We’ve taken our time, we’ve sort of gone slow to allow us to go fast, and we’re now at a place of bringing our product to the rest of Canada,” he says. 

READ: GoodLeaf marks milestone at Montreal indoor vertical farm

Bahram Rashti is CEO and co-founder of B.C.’s UP Vertical Farms, which grows and sells a full line of leafy greens, mixed salads and baby greens. He says unlike vertical farms that raised funds and tried to figure out how to make it work along the way, his company did it the other way around. “We designed and built our first [facility], bootstrapped it, and then showed the world that this is not just an idea … We figured it out and now we’re scaling,” says Rashti. UP’s products are now sold in Costco stores across British Columbia, and the company is looking into exporting to the United States.

While vertically farmed produce is known to have a higher price tag, Rashti notes that field prices from the United States are now surpassing the alternative. “That is going to encourage more and more buyers and increase sales because all the other value propositions are already there: consistent, year-round supply of fresh, pesticide-free produce that has a longer shelf life when grown locally,” he says. 

The future of vertical farms may even expand beyond leafy greens and other vegetables. “Salad greens have a role in our grocery economy – no doubt,” says Mike Dixon, retired professor and director of the Controlled Environment Systems Research Facility at the University of Guelph. “But we’re not going to feed the world with lettuce. So, we need to expand the scope of commodities that come out of controlled environments.” 

McGill’s Lefsrud is optimistic about vertical farming in Canada. “I think it’s going to continue to grow … Kind of like the way the microbrewery market has taken over all these small towns, I’m expecting that most vertical farm systems will have their own little niche,” he says. “And the great part is you’re technically not competing with conventional agriculture – at least not Canadian conventional agriculture – because they can’t grow for 10 months of the year.”

This article first appeared in Canadian Grocer’s February 2024 issue.