The controlled-environment agriculture (CEA) sector is currently grappling with challenges, highlighted by the recent closure of major indoor grower AeroFarms. Despite these hurdles, industry experts remain optimistic about the potential of a hybrid business model, as discussed during a recent Indoor Agtech digital broadcast series hosted by AgTechNavigator.

The Flexibility of a Hybrid Model

The hybrid approach, which incorporates various growing methods, is being touted as a key solution for adapting to seasonal demands and consumer preferences. Mishkat Agritech Farms in Saudi Arabia exemplifies this model by employing both greenhouses and vertical farms to cultivate diverse crops, including lettuce and tomatoes.

Sherif Hosny, CEO of Mishkat Agritech Farms, emphasizes the benefits of flexibility: “We like to have the ability to grow crops out of season when it’s really impossible in greenhouses. Hybrid systems allow us to adapt to different seasons and product types.”

Understanding Unit Economics

However, as Henry Gordon-Smith, founder and CEO of Agritecture, points out, adopting a hybrid model requires careful consideration of unit economics. “Every control mechanism in controlled-environment agriculture incurs additional costs,” he explains, stressing that smart design is essential to align production with market demands.

Gordon-Smith references the Homegrown Innovation Challenge in Canada, which showcases how blended models can facilitate year-round berry production. “Some teams are exploring the benefits of growing certain crops outdoors while using controlled systems indoors,” he notes.

Assessing Value Proposition

Despite the promising aspects of a hybrid model, there are inherent risks and considerations. Companies must clearly define their value proposition, whether they are focused on technology or branding. Hosny emphasizes that understanding this distinction is critical for attracting the right investment: “If you’re a technology provider, concentrate on a single technology, whereas a brand should focus on consumer preferences.”

Marc Oshima, CEO of Babylon Micro-Farms, adds that implementing a hybrid strategy can enhance a company’s market presence and operational efficiency. “By having a hybrid approach, we can work more effectively with major national retailers,” he states.

Long-Term Business Strategy

Additionally, Gordon-Smith warns against neglecting alternative growing methods after initial setup: “Ignoring other potential growing methods can be a business mistake. Diverse approaches should be considered for long-term success.”

Conclusion

As the CEA industry adapts to its evolving landscape, the adoption of hybrid models may provide the resilience and flexibility needed to thrive. By balancing different growing techniques and understanding market dynamics, companies can better position themselves for future growth.