Pacing for profitability

Tom Stenzel, CEA Alliance

The CEA Alliance is a trade association representing and serving vertical farms and greenhouse producers growing fruits and vegetables in a highly controlled indoor production environment.

Produce Grower: What’s the health of the CEA market this year versus last year?

Tom Stenzel: We’ve really seen strong growth in leafy greens this year. Indoor-grown salads are outpacing field-grown salads, and we’re now about 5% of all salad greens sold at retail in the U.S. In some markets, such as the northeast, we’re up to 15 to 20% of sales. Indoor-grown tomatoes are certainly the dominant retail category today, and strawberries are also now on a fast track.

PG: How have mergers and acquisitions, as well as the change in funding availability, affected the market?

TS: The industry went through a down cycle when interest rates increased and private equity slowed significantly. But we’re now in a better place where companies are 100% focused on positive unit economics and running profitable farms. To me, the “golly-gee-whiz” technology period is morphing into “we can actually grow great produce and succeed in the market.”

PG: What excites you most about this industry?

TS: All the signs from consumers and retailers are positive. Consumers report products are fresher, last longer and taste great. While all of our sustainability advantages matter in the big picture, we have to win the sale from the consumer by actually offering great produce.

PG: Looking forward to 2025, provide a few reasons why you’re bullish, bearish or in between about the health of the market.

TS: Both retail and food service are now attuned to indoor-grown produce. They know the advantages they get in fresher products, less shrink, etc. At my local store, I recently saw 14 facings of indoor-grown salads from four different companies. As retailers make more and more indoor produce available to consumers, the future is very bright.

Tracy Nazzaro, Traders Hill Farm

Traders Hill Farm is a Florida-based aquaponics farm that provides green romaine, butterhead, red oak and red romaine lettuce to retailers, restaurants and families across northeast Florida and southeast Georgia. The produce is grown without pesticides, herbicides or fungicides.

PG: How is the CEA market faring this year versus last year?

Tracy Nazzaro: New initiatives and expansion projects have slowed considerably due to high capital costs, putting pressure on established producers to achieve profitability. However, market acceptance of CEA-grown produce is increasing, and the industry continues to gain recognition for its strict food safety practices and sustainable methods.

PG: How are you anticipating the market to perform in 2025?

TN: CEA is well established and will continue to grow in terms of market share. However, I would expect some consolidation of smaller and mid-size producers. There is value in the economies of scale. The unfortunate truth is that agriculture is a volumetric pennies game.  

PG: What are the top challenges growers are facing in this market?

TN: Access to capital is a hurdle for growers aiming to scale and achieve profitability. Investors can expect reasonable returns, but they won’t come quickly, and “patient capital” is as rare as Bigfoot these days.

PG: Describe some of your company’s wins from the last couple of years.

TN: Our sales team has really blossomed, and we launched with several more distributors. We have also been able to add some key members to the operations team, which has really helped with efficiency.

PG: Are you planning any major changes?

TN: We have plans to increase our capacity by about 75% on our current property over the next 18 months. It has taken a long time, but we are sold out week over week, and additional capacity will allow us to service new customers.  

PG: What excites you most about being in this industry?

TN: A large part of our customer base is K-12 school districts (we service 10 school districts in Florida and two in Georgia), and it makes my heart happy to see young people fuel up with lettuce.

Photos courtesy of the CEA Alliance and Traders Hill Farm

Read the rest of the 2024 State of the Industry Report:

2024 State of the Industry

Innovations, local demand fuel growth: Vonnie Estes

Where are the robots?: Vineland Research and Innovation Centre

A new market for Eden Green

States court CEA business, education for economic development: University of Wyoming