European Retail Briefing -  July  2019
Analyst Comment – Infarm’s vertical farming initiatives in Edeka stores, in Germany
 
"German supermarket Edeka has launched vertical farming units in two stores in Germany, allowing customers to both see the products growing in store and pick their own. This is just one example of a growing trend across Europe to increase city-based farming and provide a sustainable and localised way of fulfilling the demands of urban areas."
-Richard Perks, Director of Retail Research

What we've seen
●	Investment in vertical and urban farming initiatives has increased in recent past years, allowing food to be grown independently from climate conditions and other outside elements.
●	Infarm has partnered with 25 major food retailers across different countries, and already deployed its in-store farming units in selected stores of German supermarket chain Edeka.
●	The initiative ties in with several current market trends, such as reducing packaging, increasing ethical and sustainable food production, reducing wastage, and transparency about provenance.
●	In the UK, Ocado has already invested £17 million to partner with vertical farming initiatives, and John Lewis is reportedly having discussions to consider the possibility of growing vegetables in store.

Infarm deploys its vertical farm units in Edeka stores, in Germany
Berlin-based Infarm is the world's largest urban farming platform, with a mission to make cities self-sufficient and sustainable in their food production. Unlike others in the vertical farming space, Infarm's technology is designed and built to work anywhere in any available space. From a single farming unit in a restaurant, to a few units in a supermarket, up to thousands of units chained together in a warehouse.

Customers can pick fresh herbs within 2-3 weeks of installation. Infarm's large module can grow up to 680,000 plants each year on only 25 square meters, making it 420x more efficient than traditional soil-based agriculture. The group has already deployed its in-store farms in selected supermarkets of German chain Edeka.

Edeka's stores in Oberhausen and in the Berliner Nollendorfplatz deployed Infarm's farming units between 2018 and 2019, in which customers can see all development stages of herbs and salad greens. The reaction to the initiative has been very positive so far, especially among younger consumers, and Infarm's plan is to be in 10,000 supermarkets by 2020, servicing 350 million people.

FIGURE 1: Infarm displays in Edeka
  
Source: Mintel

Edeka
Vertical farming and its role in food production
The term ‘vertical farming’ was coined by Gilbert Ellis Bailey in 1915. However, while he wrote about farming mainly from the perspective of plants as ‘vertical’ life forms, modern usage of the term ‘vertical farming’ refers to the practice of producing food and medicine in vertically stacked layers or vertically inclined surfaces, usually indoors and under controlled conditions.

In the beginning of the 20th century, farmers had already introduced several ways of protecting their crops, such as placing small boxes with a flat glass roof above the crops on the field, which later evolved into small and large-scale greenhouses. However, greenhouses were still subject to climate variations, which then led to technical innovations such as hydroponics and artificial lighting to further optimize growing conditions. In the second decade of the 21st century, LED lighting was introduced, paving the way for farming crops indoors.

In present days, vertical or urban farming refers to aeroponic systems that are soil-free, portable and can be placed in urban environments such as shops and supermarkets. Plants are grown vertically, with their roots suspended inside a cylinder, where they are nourished with a nutrient-rich mist. In addition to being independent from outside conditions, the initiative can potentially reduce wastage and preserve the available resources, as discussed by Mintel Trend Hungry Planet. Moreover, food wastage is a key concern of grocery shoppers, as shown by Mintel Report Supermarkets – UK, November 2018, according to which 83% of consumers think it's important to cut back on the amount of food that is wasted.

Although the concept may sound alien at first glance, history has taught us that agriculture always used some kind of technology. Vertical or urban farms allow the growing of vegetables independently of climate and weather conditions, and could potentially represent a sustainable way to increase food production in the future.

FIGURE 2: Examples of vertical farms
  
Source: Mintel

Waitrose engaged in talks about growing vegetables in store
In March 2019, John Lewis Partnership was discussing its plans to grow salad in its Waitrose supermarkets with bioengineering company ‘LettUs Grow’. The initiative would result in their shops launching what they are calling ‘pick your own’ aisles between 2019 and 2020, allowing shoppers to pick their own fresh salad in store. This would potentially eliminate the need for plastic bag packaging, a feature that is aligned with Mintel Trend Rethink Plastic. According to our survey, 73% of consumers think grocery retailers use too much plastic in their packaging. They are trialing this in the ‘Unpacked’ section of their stores, something we discuss in more detail in our Analyst Insight about Waitrose & Partners' waste reduction efforts. The initiative could also allow the retailer to make same-day home deliveries of fresh vegetables to their clients.

In store, the initiative would re-engage customers with the food system, and especially with the provenance of their food. This ties in with yet another two Mintel Trends: Experience is All, in which we discuss the importance of enhancing the shopping experience in light of the rise of Amazon and other online retailers; and Prove It, in which the focus is many consumers’ increasing concern about provenance and the origin of the products they buy.

Ocado already invested £17 million in vertical farms in the UK
Ocado, the UK's largest online-only grocery retailer, has made two investments in indoor farming, concluded in June 2019: one is a joint venture with 80 Acres, a U.S. vertical farm business, and Priva, a Dutch firm that provides climate control technology. The group also bought a stake in Jones Food, in Scunthorpe, Europe's largest vertical farm, and their plan is to deliver produce from the vertical farms to their online customers in the UK.

The facilities of the Jones Food Company may look like something out of science-fiction but could potentially become the future of farming in the UK and in the world. First settled in on the site in Scunthorpe in May 2017, it is currently Europe's largest vertical farm with more than 16,000 feet (5,000 metres) of indoor growing area, lit by 7.45 miles (12km) of LED lights, and capacity to produce 500 tonnes of herbs and other plants per year. Every element of the facility is carefully controlled to maximise growth and cleanliness. The air is filtered and pressurised to ensure insects can't get in, and the water is pH and UV tested after every use.

Ocado's investment in vertical farms would help save energy and conserve water, and is linked to the growing importance of sourcing and the origin of their products, discussed in Mintel Trend Prove It.

What it means
●	Several countries have already engaged in prototypes and initiatives to test the effectiveness of vertical and urban farms, and how it could potentially help to achieve the necessary level of food production, whilst overcoming certain environmental challenges, at least for some crops.
●	Vertical farms could become the future for food production, especially when considering the need to feed an increasing number of people, and the efficiency of the technology when it can work from a single unit in someone’s home to thousands of units chained together in a warehouse.
●	Although the positive aspects and the potential to boost food production through vertical and urban farms in comparison to traditional agricultural are undeniable, the impact of certain elements – for example the use of electricity – is yet to be verified and understood.
●	Also, one of the disadvantages to vertical farming that must be considered is its dependence on technology, meaning that if a vertical farm loses power, it will impact negatively on production.