Approaching the end of a very shaky 2020 from a general business perspective, we went looking for horticultural market data that might show that sector to have overperformed relative to business in general and that might portend positive opportunity for players in horticultural lighting and AgTech. S2G Ventures has published one such report that projects leafy greens grown in vertical farms, which are dependent on LED lighting, will soon be a $1B (billion) market in the US. The 2020 Global CEA Census Report from Autogrow and Agritecture Consulting reported that 20% of respondents of its survey founded their controlled environment agriculture (CEA)-focused companies during the pandemic year of 2020, and 95% have an excellent or good outlook on their business for the next year. In the cannabis sector, legal sales in Oregon have surpassed $1B for the first time in 2020.
The clear message is that there is significant opportunity in the horticulture space, and particularly for manufacturers in the solid-state lighting (SSL) and broader AgTech sectors. But that doesn’t mean it will be easy, because new vendors have flooded into the space in part driven by what we called the greenrush at the start of 2020. Many were motivated by legalized cannabis, although vegetables will remain a larger market long term. For either, manufacturers will need solid science and high-quality products on their side to succeed.
Let’s review some details of the market projects we led with. S2G Ventures is a multi-stage, venture-investment fund focused on food and agriculture and what the firm has described as a “healthy and humane planet.” For example, the fund is invested in AppHarvest, a Kentucky tomato greenhouse operation we have written about.
In the new report “Growing beyond the hype: Controlled environment agriculture,” S2G said it believes that CEA can grow by 5× in market share over the coming decade including greenhouse, vertical farm, and shipping-container settings. The firm acknowledges cost challenges and technology obstacles but sees a bright future.
To make a point about the potential, S2G focused just on leafy greens. It said that in 2020, CEA will account for around $100M (million) in leafy green revenue based on supplying a bit over 1% of the market in the US. If the CEA share could grow to 10% by, say, 2025, that would represent a $1B market. And of course there are inherent and intertwined side benefits of the environmental, social, and governance (ESG) type. The report said that if CEA share could hit 13% in 2025, the US would save 330B gallons of water and 1.3B lb of rotten produce. At the same time, localization of farms would add 2.3B lb of capacity and a 15% reduction in imported vegetables.
