Vertical farming companies must prioritize long-term planning, efficient unit economics and operational consistency to succeed as the industry faces challenges in capital allocation and a likely wave of mergers and acquisitions amid a market reset, explained Eddy Badrina, CEO, Eden Green Technology.
Since vertical farm Eden Greens Technology’s portfolio expansion from leafy greens to fresh herbs last spring, the company has focused on providing consistent and organic produce year-round. By leveraging its partnership with distributor Robinson Fresh, Eden Green delivers herb varieties that are traditionally imported from various countries around the world, significantly cutting down carbon emissions and transportation costs.
Eden Greens’ strategy capitalizes on its hybrid greenhouse and vertical farm capabilities in partnership with its distributor. This collaboration enables the company to maintain its costs.
Currently, Eden Green produces 70% herbs and 30% leafy greens in its facilities – a strategic mix that comes from its ability to foresee and adjust to industry trends, Badrina said.
Unlike other industries where businesses can pivot quickly, the produce sector requires careful planning due to slow-moving sales cycles and long-term contracts, he explained.
Success in the vertical farming sector centers on selecting the right varietals, optimizing environmental controls and securing reliable sales channels, Badrina said.
“The successful ones in our industry have really tried to look two, three, four, five years ahead not just in terms of building out greenhouses or vertical farms, but really understanding where the market is when it comes to the actual SKUs, what you are actually selling in store or to a distributor or a food service company,” he said.
Controlled environment agriculture should focus on unit economics
Many companies in the vertical farming space spread themselves too thin by growing a wide range of plants without excelling at any one type, ultimately leading to lack of profitability, Badrina said.
“Functionally, a lot of these companies were just big R&D companies because they could never really go from R&D to commercialization in a true sense of finding that one or two three SKUs,” he added.
The repercussions of “over engineering” results in companies shutting down when they are “overweight on brain power and underweight on operations and execution,” Badrina said. Companies that struggle often prioritize hiring highly educated employees to develop and manage software, while giving less attention to hiring experts who understand plant cultivation.
For example, vertical farm Oishii’s specialization in premium strawberries reflects the company’s focus on advancing farming methods. The company’s partnership with Japanese robotics company Yaskawa Electrics Corporation pushes the boundary to produce year-round fruiting plants, as Oishii also produces its Rubī tomatoes.
“The market for year-round strawberries is pretty immense, and when you try to localize that and not having it shipped from overseas, that becomes even more of a tantalizing market,” Badrina said.
Other companies in the vertical farming sector have faced significant challenges, including Plenty, which saw its valuation plummet from $1.9 billion to just $15 million in a few years, while both AeroFarms and AppHarvest filed for bankruptcy in 2023 and Bowery Farming ceased operations in 2024. However, Plenty may revive its business by pivoting from leafy greens to vertically farmed strawberries. Last year, the company announced the opening of its first strawberry farm in Richmond, Va., with plans for a 2025 harvest.
Capital freeze thaws: M&A surge and new opportunities
The vertical farming industry has faced capital allocation challenges due to a two-year freeze in venture capital and private equity investments, Badrina noted.
As valuations remain high and companies struggle to buy or sell, funds have had difficulty raising new rounds, he said. However, with lower capital costs and easing inflation in 2025, more capital is expected to flow, leading to increased mergers and acquisitions, consolidation and opportunities for new companies to secure funding.
Cox Farms’ “acquisition spree,” for example, is “ahead of the game,” Badrina said. The Cox Communications agriculture subsidiary added BrightFarms and Mucci Farms to its vertical farm roster last year, making the company the largest indoor farming operator in North America.
“They have a lot longer-term capital but the fundamentals remain the same. People have to sell companies for capital flow to continue,” he added.
Further, he said, the shift in capital flow may also encourage new startups to approach the market and “try again but in a different way.”
