Vertical farming: The next big thing for food—and tech

AeroFarms' research lab is hard to find. The Newark, New Jersey, facility sits inside a storefront with paper-plastered windows and signs belonging to a part-urban-apparel-store-part-nightclub that used to inhabit the space.

Find your way in, however, and it's like stepping out of a concrete desert and into a futuristic oasis.

AeroFarms specializes in vertical farming. It grows leafy greens in stacked rows that reach to the ceiling without natural sunlight or soil, in half the time it takes a traditional farm.

This year, the 10-year-old company announced plans to develop the world's largest vertical farm, a 69,000-square-foot project in a former steel mill, down the street in the city's Ironbound District. The state of New Jersey, Goldman Sachs, Prudential Financial and RBH Group are backers.

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AeroFarms says the facility, which is expected to begin producing later this year, will grow up to 2 million pounds of kale, arugula and other salad greens annually. The company's not disclosing the names of customers, but prices will be comparable to locally sourced greens currently on store shelves: $3.99 for a 5-ounce package.

Jodi Gralnick | CNBC

Vertical farming at AeroFarms.

It's an emerging trend in agriculture: Vertical farming companies are sprouting up across the United States, trying to change the way vegetables are grown. Among them: FarmedHere in Bedford Park, Illinois; Vertical Harvest in Jackson Hole, Wyoming; Green Spirit Farms in New Buffalo, Michigan, and Alegria Fresh in Irvine, California.

Vertical farms are high-tech grow houses that typically inhabit buildings in urban areas. Produce is grown in stacks—in many cases with no soil or sunlight—for local consumption. They utilize artificial lighting, climate control and in many cases hydroponics.

The approach works best for salad greens and herbs, which have higher margins than other produce and can be grown in larger quantities than other vegetables that require more space and longer grow cycles.

"On average, we're growing in 16 days what otherwise takes 30 days in a field—using 95 percent less water, about 50 percent less fertilizers, zero pesticides, herbicides, fungicides," said David Rosenberg, chief executive and co-founder of AeroFarms.

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Seasonality isn't a factor for the business, and there's no risk of poor weather conditions or seed contamination—a worry that comes up when growing non-GMO seeds in an open field. Another benefit: lower transportation costs and less spoilage, since many of these farms supply local restaurants and supermarkets.

AeroFarms grows its greens "aeroponically," using a nutrient mist on plants anchored in a reusable cloth made of recycled plastic bottles, for which the company holds a patent. Its trays sit under specialized LED lights that generate photosynthesis.

Jodi Gralnick | CNBC

A vertical farm growing lettuce from AeroFarms.

In Portage, Indiana, Green Sense Farms uses a "modified hydroponic ebb-and-flow process" that involves pumping nutrient-laden water into the bottom of tubs filled with ground coconut husk. The water flows into the root system before draining and then being repumped later.

Green Sense Farms occupies a 32,000-square foot warehouse and supplies products to Whole Foods and other retailers in the Chicago area.

"The big advantage of indoor vertical farming is that we have less impact on the environment. We conserve the water, the nutrients, we don't pollute or generate emissions," said Robert Colangelo, co-founder and chief executive of Green Sense Farms. "But more importantly, we can grow a large crop yield in a small footprint."

Colangelo said the "lettuce room" in his farm reaps 1,500 cases of 12-pound lettuce per week.

Jodi Gralnick | CNBC

Lettuce grown in vertical farms at AeroFarms.

As a concept, vertical farming has been around for decades, and thinkers like Columbia professor Dickson Despommier are credited with advancing the concept. Until recently, however, it was never economically viable.

Even now, the concept has major drawbacks. It's capital-intensive to start a vertical farm, energy costs can run very high, and space constraints limit what can be grown. Due to the lack of soil, the produce also doesn't get an organic label—even though it costs consumers about as much as organic products do.

"The challenge has been to make it commercially profitable," said Colangelo. "We looked at a number of different methods and through trial and error we figured out how not to build a farm."

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Every project, he said, becomes more efficient as data is collected and the process improves. Colangelo said his team is beginning to develop better seeds through genetic sequencing.

And that's why vertical farming is finally taking off now: New technology is driving down costs, just as consumers are increasingly seeking out locally sourced, all-natural foods.

Lighting is one of the biggest expenditures. AeroFarms' Rosenberg said the LED lights it has specifically designed for its farm comprise 50 percent of capital expenditure.

Farmers have discovered that a mix of red and blue LED diodes works best, since the colors optimize photosynthesis and require less energy than standard yellow light.

Green Sense collaborates with Philips Lighting, which has been developing vertical farming light prototypes for the past seven years through its City Farming division.

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"In addition to being able to be very targeted, very precisely steer the growth of the plant, it's also very efficient for lighting, so the energy use is low," says Gus van der Feltz, Philips' global director of city farming. He added that the business is growing "exponentially" for the lighting giant.

Vertical farms are implementing technology in other ways, as well. Some like AeroFarms will use conveyor belts to harvest plants, and machines to package them, cutting down on labor costs.

Big data and the software to collect it is also crucial. AeroFarms said it gathers 10,000 data points per harvest cycle, information that enables the company to grow more efficiently as well as for visual and culinary appeal.

"This is really our playpen," said Rosenberg, plucking a piece of ruby streak, a mustard green, from a tray. "We're testing varieties, we're testing to optimize yield, to optimize nutritional density, texture and taste."

And it does taste good—spicy and almost overwhelmingly flavorful. Not bad for a former dance club in the middle of Newark.