Can urban agriculture work on a commercial scale?
By Flavie Halais
MONTREAL, Canada — In 1999, Dickson Despommier, a professor of environmental health sciences and microbiology at Columbia University, popularized the idea of large-scale urban agriculture by releasing a conceptual model for vertical farms. Crops would grow inside tall city buildings, using very little land to produce bounties of food that would not need to be shipped far to be eaten. With nine billion people worldwide to feed by 2050, and close to 70 percent of them residing in cities, bringing food production into dense urban areas had long been seen as a logical step toward sustainable living, and Despommier’s work seemed to take us in the right direction.
Fifteen years later, despite many experiments with farming inside city buildings, the first large-scale vertical farm, as envisioned by Despommier, has yet to be built. The urban farming industry, still in its infancy, is struggling to address the engineering challenges that make growing food in cities a costly business. Sales and distribution have also proven harder than almost anybody imagined. “What’s been lacking,” says Mohamed Hage of Montréal, “are players who will do it at a true commercial scale, with the right business model.”
Hage is trying to fill exactly that gap with his company, Lufa Farms. His path to scaling up urban agriculture is not vertical but horizontal. In 2011, Lufa set up the world’s first commercial rooftop greenhouse on top of a wide industrial building in northern Montréal. The area, a nondescript industrial zone bordered by two highways and an outdoor mall full of big box stores, doesn’t turn up in design magazines. But this is where Hage, after spending hours painstakingly scouring Google Earth, found the perfect rooftop for his next-gen greenhouse.
The 31,000 square-foot facility (2,900 square meters) uses hydroponics, a technique that uses water to deliver nutrients and therefore requires no soil. Lufa’s methods exclude pesticides, herbicides or fungicides, and use biological pest control to get rid of harmful bugs. The greenhouse is computer-monitored, recirculates 100 percent of irrigation water and composts all organic waste. And in a cold-weather region with a growing season of four to six months, Lufa works year-round, growing enough tomatoes, eggplants, zucchinis and lettuce to help feed 10,000 people in the Montréal area.
Lufa’s biggest innovation has little to do with farming techniques or architecture. It’s marketing and e-commerce. Lufa sells its produce through a complex distribution system that puts to shame the usual get-what-you-get offerings of farm co-ops found in many North American cities. For a minimum of $30 a week, Lufa customers select what goes into their basket through a fancy online marketplace (Sicilian eggplants have never looked sexier). To fill out its product offerings, Lufa partnered with a slew of other local food makers to provide customers with all kinds of products, from fresh bread to dairy, to herbs, honey and dry beans.
Orders close at midnight on delivery day — and then the magic happens. Each producer receives an order indicating exactly how many baguettes, liters of milk or pounds of potatoes are needed. Everything gets cooked, picked, prepared, bottled, packed, then shipped overnight to Lufa’s warehouse to be assembled in crates, and finally sent in the morning to more than 150 pickup points throughout the city.
This order-based system drastically cuts down waste, both on the producer’s side and in Lufa’s warehouse, since there aren’t any unsold products to be discarded from store shelves. It also considerably reduces packaging. By this remarkable logistical feat, Lufa may very well have solved one the biggest problems plaguing our global food system. Some 40 percent of food in the United States goes straight to landfills uneaten. And about 1.3 billion tons of food destined for human consumption get lost or wasted each year globally, discarded anywhere along the supply chain, from farmland to supermarkets and restaurants.
From farm to table
Eating food that’s grown locally and sustainably is a fantastic and increasingly popular idea, but it’s also expensive. Producers tend to drown under marketing and distribution costs, and struggle to find retail channels for their products. To assume that urban farms can escape that trap because of their extreme proximity to consumers would be a mistake; getting food to consumers has proven a logistical nightmare for them as well.
A pillar of the new “farm-to-table” economy is to facilitate marketing and distribution for local producers and limit the number of intermediaries along the supply chain. That challenge has proven perfect for a number of new tech companies hungry for new retail sectors to “disrupt.”
One of them is Good Eggs, a San Francisco-based company operating an online marketplace similar to Lufa’s in the San Francisco Bay Area, New Orleans and Brooklyn. Good Eggs considers itself a “local-food aggregator,” pooling together the marketing and distribution needs of many farmers who are often invisible to supermarket chains and find themselves limited to alternative channels such as farmer’s markets. “A lot of the urban farms that we work with are not able to sustain themselves through traditional food retail channels,” says co-founder and CEO Rob Spiro. “The margins are too slim, and the volume requirements are too high. So they end up selling to restaurants.”
Good Eggs is determined to beat the supermarket, which it thinks will enable the model to go to scale. So the company has made it possible for customers to order throughout the week, rather than weekly, and is offering free home delivery. “If you’re less convenient than the supermarket, even if the food is better and better for the world, it’s going to be really hard to reach a mainstream audience,” Spiro says.
Whether flexibility and convenience can ultimately bring costs down enough to reach the mainstream remains to be seen. For now, the food sold by Lufa, Good Eggs and similar providers like Farmigo might be cheaper than what you’ll find at the organic food store or at the farmer’s market, but it’s still out of reach for households working with a tight budget. Good Eggs is planning to begin accepting food stamps, a form of government assistance for low-income families in the United States. But can local food aggregators work for the typical middle-class supermarket shopper?
Solving the engineering puzzle
For Lufa, logistics at the distribution level are just one of many sources of headaches. To build its first greenhouse, Lufa not only had to match the building’s structural requirements — using soil to grow root vegetables isn’t possible, for example, because it would put too much strain on the roof. It also had to respect the myriad rules and regulations imposed by local building and fire codes, from the number of bathrooms or parking spaces to the amount of glass used. “We had questions along the lines of, ‘Will birds hit the greenhouse?’” recalls Hage. “Because it’s all glass, and there’s lots of trees inside, so you have to go and do the right kinds of studies to show that no, birds do not hit the greenhouse.”
Other roadblocks reveal just how unprepared cities currently are for urban farming on the scale Lufa has in mind. Lufa can’t be considered an agricultural business, for instance, and therefore can’t claim the same tax rebates as other rural farms in the rest of Canada. Yet it still has to pay rent every month. Such types of policy changes, although welcomed by cities, could be entangled in bureaucratic procedures for years.
Last year, Lufa opened its second farm, a 43,000 square-foot (4,000 square-meter) rooftop greenhouse — the world’s largest — in the northern suburbs of Montréal. This time, the structure was integrated into a brand new building. Hage thinks building new will be important to scaling up urban farming — it allowed Lufa’s architects and engineers to work with structural challenges more easily. (A company spokesman says the second greenhouse was “significantly cheaper” on a per-square foot basis than the first one, which cost about $3 million to build.) The new farm is crammed with lots of new features; a system that increases air pressure inside the greenhouse prevents undesirable bugs from entering, and a chamber regulates airflows in order to maintain optimal growing conditions.
Lufa is also developing its own in-house technology. The company has just received a patent for a system that allows it to grow 30 percent more food on the same area. Meanwhile, the IT team is developing a suite of iPad apps for greenhouse management. One of them, which helps manage insect populations, will soon be made available to all organic growers. “We’ve decided it’s too valuable for us not to be going out to the world and saying, use it for free,” says Hage.
Lufa’s greenhouses become profitable as standalone units within about 18 months of construction. The company as a whole doesn’t expect to become profitable until later this year or next year, as much of the revenue is being channeled back into growth activites.
Lufa’s long-term goal is to become a provider of technology for property developers, real estate owners or businesspeople who wish to set up a rooftop farm on top of a building — any building. The company’s third greenhouse, which will be in Boston, will reflect some of the latest innovations cooked up by the team. “What we’re doing in Montréal and Boston is only to be able to have a test bed to be able to demonstrate our technology,” says Hage. “Every farm we build is a new R&D facility.”
No one on Lufa’s founding team had ever worked on a farm or in the food industry. Hage himself was running a software company; his business partner Lauren Rathmell was a biochemist fresh from McGill University. Yet they thought this was precisely the type of mindset needed for the urban farming sector to take off. To this day, Hage sees Lufa primarily as a tech and systems venture; most of the company’s budget goes to engineering and IT, with the e-commerce platform and logistics operations raking up the largest share. “Really,” Hage says with a laugh, “it’s farming with more software than farmers.”