Why some farms do not succeed?
01.
As the vertical farming concept was relatively new and began spreading across the world, many new farm operators didn't have the required experience or the knowledge on various critical aspects of the operations and how each species behave in this new environment. As a result several farms began growing the same species of leafy greens such as lettuce and herbs that were easy to grow creating a market saturation.
02.
As many entrepreneurs do, most new farm owners underestimated the local market potential and competitive environment. Several markets experienced a sudden burst in vertical farms competing and undercutting their competitive to gain market share. This drove many businesses quickly into loss and eventual closure.
03.
Vertical Farms are notoriously famous for high energy costs. Further more, local grocers and supermarkets have existing supply chain agreements for produce and major farmers and distributors. Often, low cost product high quality product alone is not sufficient to win customers. There are several aspect of client businesses such as existing supply agreements, inventory management, local regulatory requirements, delivery capability, quantity, budgets need to be considered to entice them to switch suppliers.
04.
Overestimating Sales
Many ambitious entrepreneurs often over estimate sales. Unrealistic growth estimates based on over values propositions void of careful market analysis and test marketing leads many operators to fail in generating a sustainable revenue model. Local market potential is often grossly miscalculated leading to major disappointments. It is common to find larger vertical farms than the local market potentials.
05.
Inefficient cost allocations
Operating costs is a major concern in owning a commercial vertical farm. The energy consumption due to the required high intensity lighting and climate control is considerable. Further more, the local delivery costs and regulatory stipulations with regards delivery temperatures, inventory management, health and safety requirements are often miscalculated. Many operators do not provide for a sustainable operating cost coverage until realistic financial break even points are met.
