After more than 20 years covering the Technology and Innovation space, we didn’t think we would one day spend some time researching companies offering lawn and garden products… Here we are, investing in the Scotts Miracle-Gro, a US company that spotted the hydroponic trend at an early stage and became, through its Hawthorne division, the US leader in this booming market.
New technologies are pushing the boundaries of farming innovation and urban farming (also called vertical or indoor farming) is gradually becoming a reality, offering local and fresh production and year-round availability. Hydroponics is one of the main methods used in urban farming, allowing to grow plants without soil, by using mineral nutrient solutions in water.
The lockdown triggered a veritable boom and awareness for urban farming. Confined people not only had more time for leisure gardening but also discovered the relative fragility of the food supply chain. Fresh fruits and vegetables, considered as a given under our latitudes, became less abundant due to delivery disruptions and, as a result, saw their prices literally explode due to the supply-demand imbalance.
Local urban farming is the logical evolution of our centuries’ old agricultural system. Using city’s rooftops to grow vegetables or to raise honeybees is a good start but indoor vertical farming is the way to go in order to reach mass production levels. New energy efficient lightning techniques coupled to sensors and automated computer-based management systems are helping this agricultural technique to become financially viable.
Vertical hydroponic farms are mushrooming around the planet and delivering breathtaking results: compared to traditional farming methods, the best hydroponic projects are using 99% less water, 50% less energy and delivering an output multiplied by a factor of 89.
In the latest quarter, the Scotts Miracle-Gro’s hydroponic revenue grew 60% year-on-year, leading the company to raise its full-year top-line growth guidance to 16%-18% vs. 6%-8% previously.
Current market forecasts point to 12%+ growth per year for the global hydroponic market (source: MarketsandMarkets) but the risk is clearly on the upside. We have no doubts that the productivity gains, the elevated food safety levels, the ongoing technological advances in lightning & control as well as the environmental benefits of this farming technique are the perfect ingredients for a success story in the making.
Furthermore, the Covid-19 pandemic triggered another positive collateral effect that will support the rollout of urban vertical farms: commercial real estate prices could start to be under pressure as the gradual and widespread adoption of remote working will free unused space. Real estate costs represent the main burden of urban farm projects, a significant price drop could then be the catalyst for some ambitious and visionary ventures in the heart of our cities.