The funding, made possible thanks in part to large Japanese manufacturing giants, leading robotics companies, the Japanese Ministry of the Environment and investors with experience in vertical farming, will also support ongoing research and development, including in breeding, automation and crop expansion, Oishii CEO and Co-founder Hiroki Koga told FoodNavigator-USA.
Together, these investments “will allow us to exponentially expand into even more doors” with the existing offerings of the company’s flagship Koyo Berry as well as its Omakase Berry and newer Rubī Tomato, Koga said.
He added the funds will also allow the company to launch additional products that are “more sophisticated” than the leafy greens offered by many competing vertical farms, including potentially a new berry, melons or other high value products that are a fundamental point of differentiation for the company’s business model compared to others in the space.
A ‘next generation’ facility is ‘in the works’
The company’s top priority for this fundraise will be increasing capacity with the ongoing buildout of its new facility.
“The biggest challenge we’ve been facing at Oishii the past few years is just pure lack of supply from our facilities compared to the demand from the market,” Koga said.
He explained the “next generation” facility, which is “already in the works,” will be a “much, much, much bigger version of our current facility,” and will “incorporate some of our automation.”
The new facility will also include sustainability improvements that should help lower production costs – ultimately helping to lower the price of its produce and improve the company’s competitive position compared to conventional and other vertical farms.
These improvements include the buildout of a “mega solar facility that is adjacent to the production farm” from which “we will source the electricity for that solar farm,” Koga said.
He explained electricity is “one of the biggest expenses” and one of the few inputs that Oishii, and vertical farms more broadly, require compared to conventional farms.
“Electricity is probably the only thing that we use much more of than conventional farming. But, if we can substitute that with renewable energy, then there is literally nothing we do worse than conventional farming,” Koga said, noting that vertical farming uses less water, land and labor than conventional farms and no pesticides.
Oishii invests in breeding, crop expansion as point of differentiation
Oishii will also direct a substantial slice of the fundraise to R&D – including product development through increased investment in breeding and crop expansion – as a strategic play that not only could raise the company’s profile among consumers but also investors.
Koga explained that Oishii’s strategy from day one when it launched in 2017 was to create higher-value products with a strong technology barrier and brand barrier to protect it from competing on price – which he says has been a major downfall of the category at large.
Indeed, Oishii’s fundraise comes at a time when several vertical farms have folded under financial pressure, and many investors have pulled away from vertical farming.
“We have to admit that there was a bubble, and the bubble has burst. And it was totally expected” based on what happened to the vertical farming industry in Japan, where hundreds of players went out of business because many concentrated on leafy greens, Koga said. He explained this created a fiercely competitive environment in which there was a race to the bottom with pricing.
“The unit economics just didn’t make sense. And industry got cold feet and they withdrew their money, because it is such a CapEx heavy industry. They just didn’t have enough runway and they all collapsed,” he said.
Oishii intends to avoid this fate by offering products – like strawberries, tomatoes and melons – which are not currently produced at scale in other vertical farms. As illustrated by this fundraise, this appears to be a winning proposition for the company so far.
It plans to build on this initial success by exploring which plant breeds thrive well in the vertical farming environment, including some that may not grow well in conventional farming where environmental factors can vary and negatively impact yield, taste and quality, he said.
‘Our ultimate goal is to automate every process’
Finally, Oishii will use a portion of the current fundraise to expand automation at its facility and within its R&D process.
“Our ultimate goal is to automate every process from germination all the way to harvesting and then packing and shipping,” said Koga.
He explained this will lower costs and help ease labor constraints that currently are holding back the segment.
“We just don’t have enough people to work in the facilities to sustain the growth of vertical farms,” he explained.
Conventional farming faces this same struggle, but leaning into automation, Koga said he believes the vertical farming industry can create more appealing value-added jobs that will attract talent and further give the industry a competitive advantage.
Looking forward, he said, he sees significant potential still for vertical farming, despite the current shakeout and difficulty raising funds.
