The company's S-1 lays the groundwork for what is widely expected to be one of the largest initial public offerings of the year, second only to Uber's IPO in May. It's also...Technologyread more
Fraud investigator Harry Markopolos' accusations extended beyond GE's management to actuaries, auditors and analysts who he claims overlooked billions in liabilities.Marketsread more
Trump's tweet comes a day after Apple put out a press release describing the money it spends on U.S.-based suppliers and vendors.Technologyread more
CNBC combed through Wall Street research to see which stocks are still a buy after their earnings reports.Marketsread more
President Donald Trump held a call on Wednesday with the CEOs of three major U.S. banks, according to people with knowledge of the situation.Marketsread more
Despite aggressive strides, Waymo needs one thing before their self-driving cars become a seriously useful transportation system: people. We talked to the ones closest to it.Technologyread more
Scientists say the smoke plumes, filled with megatons of tiny, harmful particles, could travel to other areas of the world and cause serious respiratory problems for people.Weather & Natural Disastersread more
Some Weight Watchers loyalists applaud Kurbo by WW. But nutritionists worry Kurbo promotes an unhealthy relationship with food during an especially impressionable time.Health and Scienceread more
Benefits from what President Trump called "the biggest reform of all time" to the tax code have dwindled to a faint breeze just 20 months after its enactment, writes John...Politicsread more
Epstein, 66, was found in his cell in Manhattan federal lockup Saturday morning and transferred to a nearby hospital, where he was subsequently pronounced dead.Politicsread more
Air travelers faced delays at U.S. airports on Friday afternoon after a computer issue snarled processing of international arrivals.Airlinesread more
Below is the transcript of an interview with Sustenir Agriculture's Co-founder and CEO Benjamin Swan. The interview will play out in CNBC's latest episode of Managing Asia on 11 January 2019, 6.30PM SG/HK (in APAC) and 11.00PM BST time (in EMEA). If you choose to use anything, please attribute to CNBC and Christine Tan.
Christine Tan: Okay Ben, so you were working for Marina Bay Sands, Citibank, and UOB, what made you leave corporate life and do something crazy like vertical farming?
Benjamin Swan: It all started with an article on Facebook. I was on my way home from work and I read an article by Dickson Despommier on the future of farming and vertical farming very specifically. I was looking at a lot of the illustrations and thought to myself, you know, this space that is being used in these illustrations just wouldn't work for Asia given our land scarcity, especially here in Singapore and even in Hong Kong. So I went home that night and jumped on archiCAD and actually rendered up pretty much what you see up the back of the facility today. I was inspired by that and then started learning about indoor farming. I went on to Professor You and Dr. Google, which is YouTube and Google, and actually learnt what is traditional farming and applied a hypothesis on how growing could happen inside of a building using those renderings. I came up with an excel sheet and came up with a hypothesis and took it for a very long test drive. I used that excel sheet to effectively solve problems of indoor farming.
Christine Tan: Why this passion on farming? Did you think you could really make a difference?
Benjamin Swan: I felt that everything I have done in my life kind of boiled down to this point. My construction days, working as a banker, all my skills that I had learnt, I felt that this was my opportunity to do something that would make a difference, an opportunity to fight the good fight. And why farming? Farming right now we know is a problem. We are reliant on techniques that have been used for centuries and whilst we are trying to bring in automation, and improving the ways we're using machinery and so forth, the thing that we can't improve is land usage. So vertical farming can solve that problem. Growing our kale indoors, we're 127 times more efficient than traditional farms per square foot.
Christine Tan: You have no background in agriculture. Did you not think of the risk you were taking when you started the business?
Benjamin Swan: Absolutely, it was a calculated risk. So I did all of this whilst working full time. So I'd finish calls from New York when I was working for Citibank in the early hours of the morning, and I'd go underneath my business partner's pool to go and take measurements of plants so I could understand, you know, all the inputs and outputs of the plant, the diminishing returns on those imports so I could optimize growing. And to be completely frank for the first six months of exploring this space, it just didn't work. The numbers weren't making sense especially on the capex. I mean this is a very capex heavy industry. It wasn't until about six or seven months after starting to trial different lights, different techniques. When the cost for LEDs started to come down, then it started to make sense. So obviously I started pushing a bit harder.
Christine Tan: So your first project was to try to grow kale, a crop notoriously difficult to grow in a place like Singapore and is usually imported from overseas. Why kale?
Benjamin Swan: So kale is a superfood. It actually has three times the nutritional value of, say, lettuce. The importance of growing a superfood meant that we could go out more on the branding aspects and talk about the value of quality over quantity. So our consumers can start to think about the environmental impact of the produce they're buying in-store. We do have to focus on products and get us a high margin in order to break even on the cost. We're paying real estate here, electricity, a lot of manpower. So, we need to make sure that we can grow products that will break even.
Christine Tan: To increase the yield in vertical farming is all about squeezing and more growing racks to maximize the confined space you're actually growing in?
Benjamin Swan: Absolutely we need to maximize not only the real estate, but then also the electricity that is being consumed. We haven't reinvented the wheel here with indoor farming or vertical farming. We've simply optimized it.
Christine Tan: So, in June you launched your own vertically grown strawberries, the first fruit is locally produced here in Singapore. How did you make such a breakthrough?
Benjamin Swan: Just by trying. Just by thinking big and we know the Singaporeans love strawberries. All Singaporeans wait for the seasons of Japan and Korea. Why can't Singaporeans have local strawberries all year long? And with indoor vertical farming, we can make that happen.
Christine Tan: So how long did it take for you to get it right?
Benjamin Swan: It actually took about three and a half, to four months.
Christine Tan: Really?
Benjamin Swan: Absolutely. In 54 square metres we're doing about 400 kilos right now. We've just introduced bees into space to help with the pollination. Right now all our guys...
Christine Tan: You're introducing bees into the space?
Benjamin Swan: Into the space to help us with the pollination. Pollination, to date, has been done by hand with a forensic brush. It's very laborious and you'll never get it as perfect as a bee can. So we're expecting the yield will increase a further 40 to 50 percent just by bringing the bees into the space.
Christine Tan: Where do you get your bees from?
Benjamin Swan: Locally. We're working with the local bee partner and he brings his bees in and then we rotate them so they have a healthy lifestyle of outdoors and indoors. And look, this has never been done before. All we can do is try.
Christine Tan: So now, you're growing lettuce, arugula, basil, two types of kale, strawberries. What's next? What else do you want to grow?
Benjamin Swan: The sky's the limit, not just metaphorically, but physically. We can do anything in this space. We've literally grown every single leafy green, edible flower. Anything is possible with indoor farming. Obviously some products aren't feasible to grow indoors, those that have a very long life cycle, so we need to choose products that have a shorter life cycle.
Christine Tan: You're not the only vertical farm in Singapore, and you're clearly not the first mover. Are you worried about competition in this space?
Benjamin Swan: Absolutely not. Absolutely not. Everyone needs to eat and we need to find more and innovative ways to produce food.
Christine Tan: In terms of margins that you want, doesn't that affect how much you can sell your produce to? Given all the competition coming online?
Benjamin Swan: We're not even scratching the surface on the demands required just for Singapore. So there is plenty of room for even other operators to come into this space and bring good quality local produce to Singaporeans.
Christine Tan: So when you look at the entire business model of vertical farming, there are high set-up costs where a lot of money is ploughed into equipment, into technology. How long did it take for you to break even, to become profitable?
Benjamin Swan: We actually just broke even (in 2018). So it took about three years of full commercial operations to get there. For us, we started off very heavily focused B2B and obviously we had a lot of volume, a lot of exposure in the market about our brand and what our brand could deliver. The end-state for us is always to push directly to the end consumers because the value propositions of our product factors is 100% clean, it's traceable, it's local. That affects the end consumer more than it does the wholesalers.
Christine Tan: Can you talk about your margins? What are they like?
Benjamin Swan: The margins are very profitable here. Obviously we've just broken even but that's at 70 percent of our capacity within the facility. We've made some changes in the produce that we're growing right now. We were growing cherry tomatoes, for example, but with the strawberries now becoming our hero product, we want to expand on that. So we decommissioned one of the rooms, which was a tomato room, to grow the strawberries. So in that transition, there's a little bit of down time. And we've still been able to break even. The point is here that the infrastructure we have is completely agile. As our consumer demands change, we can change with them.
Christine Tan: So what your margins like? What are you targeting for?
Benjamin Swan: What we targeting for? Circa 40-45 percent EBITDA figures.
Christine Tan: So it's been five years, can you talk about your revenue figures? How did you manage to do this year?
Benjamin Swan: In 2018, we've had year-on-year growth of about 83% which is very huge for a brick-and- mortar business.
Christine Tan: How many tons of vegetables or fruits do you sell every year? Do you try to sell every year?
Benjamin Swan: We sell, right now, per month we sell about almost five tons of produce into market. That's both business and retail. So we are 80 percent, 83 percent into retail and the rest of it is into our wholesale partners.
Christine Tan: So both you and your business partner Martin, invested something like S$3 million into the venture. You are now in the process of building another vertical farm, a bigger one, in Hong Kong. So is your next phase of growth all about replicating and scaling up your business model overseas?
Benjamin Swan: Exactly. The way that the infrastructure has been designed is that it can be retrofitted into any existing footprint. That, on the construction perspective, makes us very sustainable.
Christine Tan: So what are your expansion plans? Which cities do you want to be in?
Benjamin Swan: Well. We've got to be focused on Asia-Pacific for now. But I want to be in every major city across the globe.
Christine Tan: And you have plans to further expand in Singapore? Is this ten thousand square feet facility enough for you here in the city?
Benjamin Swan: Well, we've got another 50,000 square feet that will start in Q1 (2019). So, 50,000 square feet in Hong Kong, our existing 10,000 here in Singapore, with another 50,000 coming next month.
Christine Tan: How exactly will you fund all this expansion? I understand you just completed your Series A funding.
Benjamin Swan: We have. We've just raised S$22 million to expand into Hong Kong and a further expansion into Singapore.
Christine Tan: Where will this money go into?
Benjamin Swan: Just purely into the deployment of capex for the expansion, some operational costs in building, the core competencies, to build brand, and to manage the space.
Christine Tan: Has it been easy finding investors for your vertical farming business?
Benjamin Swan: Given it's a sunrise industry, a lot of investors I guess were a little bit hesitant about investing in the space. They want more proven cases in order to invest. I think the industry right now is very fragmented. You've got a lot of vendors and suppliers supplying all different parts of technology, a lot of them are untested right now. So I think a lot of investors are waiting for more of a steady state before they will invest big. And that's why we have a lot of investment in smaller companies or startups right now to push and innovate and this space.
Christine Tan: Did it take a lot longer for you to complete a Series A funding as a result?
Benjamin Swan: Yeah. In total it took about seven months, a lot of road shows, a lot of snappy no's. But we did manage to find a few investors who were very forward thinking.
Christine Tan: When you say investors that are forward thinking, are they key cornerstone investors? Anyone we know about?
Benjamin Swan: There are a few, but given that we're kind of closing up the back end of the Series A, I can't disclose exactly who.
Christine Tan: Any sovereign wealth fund investors?
Benjamin Swan: Potentially yes.
Christine Tan: Ben, now, as an urban farmer, how big a challenge was it for you to find this 10,000 square feet facility to set up your vertical farming business? Did you explore other areas to find the optimal growing environment?
Benjamin Swan: What actually happened was, we went out and spoke with the AVA about taking a space inside a building. That was very new for them. So the biggest challenge that we had was finding ways to rewrite the policies that would enable us to grow inside of this building. It's more so the paradigm from traditional farming to indoor farming. And the way we assess it, needs to be very different. So it's about setting up different policies and guidelines around how indoor farms are assessed, and how licenses are issued.
Christine Tan: Why not explore a rooftop garden? Where you can actually save on energy costs?
Benjamin Swan: In the future we could, but rooftop has its limitations. Obviously it will reduce your electricity consumption for the likes of the LEDs, but you're limited to only growing local produce. That's why growing bok choy and gai lan on rooftops is ideal. That's one of the reasons why we don't choose bok choy or gai lan inside of our environment. Not only is it not sustainable for other local farmers, to flood the market with a lot of those produce, but if we can grow the impossible, shouldn't we?
Christine Tan: In a land scarce place like Singapore, obviously vertical farming has received a lot of support when it comes to food security. But there are some who argue that vertical farming requires a lot of energy use when it comes to climate control, when it comes to lighting. And that doesn't really cut down on the production of greenhouse gasses. How would you respond? And is it a sustainable form of agriculture in your opinion?
Benjamin Swan: I believe today it is already. When you think about the logistics required getting the produce over to where it's being consumed, there's a lot of logistics right now with the centralized farming systems. What we're really not talking about is, right now in Singapore alone, 33 percent of produce is wasted just through logistics, this is common knowledge. What we're not talking about is the 15 percent that's wasted through the retailers and then as well for the end consumers, there's another 15 percent. This is very conservative, so 60 percent of produce is wasted just getting it to the end consumer. Not just farming and transportation, but also the amount of land required in order to produce the products to get to the end consumer. So that's an extra 60 percent of farming land required to get that produce to the end consumer. So, how much carbon will be reduced from the ozone had it still been forest?
Christine Tan: So unlike traditional farming, you leverage a lot on technology and innovation. To what extent do you use AI, artificial intelligence, robotics to actually help you in your growing process?
Benjamin Swan: Right now, what we've done is everything that you see out the back is 100 percent designed by Sustenir. We are working in the space of AI and computer deep learning, as well as, robotics. We're in the process of developing our own AI system called "SARA" which is Sustenir's agricultural real-time assistant. That helps us not only to monitor the environment but to also, through its lifecycle, detect what the plants are doing. We're integrating robotics as well and given the cost of robotics now, they're coming down, it's actually becoming a lot more feasible for us.
Christine Tan: Where do you see the future of vertical farming? What will it look like?
Benjamin Swan: Vertical farming is going to be a supplement to all farming systems. And it will really decentralize the food value chain as it's seen today. Because we can grow as impossible crops locally, vertical farmers will be used to bring those products that can't be grown into market so communities can have great temporal products all year round. And then we can work with outdoor farmers to help them integrate smart technology very bespoke to their footprints to help them optimize their farming.
Christine Tan: So you see vertical farming existing alongside traditional farming?
Benjamin Swan: Yes I do. What we're doing here with indoor farms, is we're creating clean data. It's something that you can never do with outdoor farming. One day you'll get temperature change, cloud cover. So with this environment we can find out the precise way to grow the product as optimally as possible. And then taking that data into outdoor farms, we can help outdoor farms optimize their farming footprint.
Christine Tan: You and your business partner Martin, are both in your thirties. Are you both what some people call the next generation of farmers?
Benjamin Swan: Absolutely. I guess we are.
Christine Tan: What drives you? What motivates you? What keeps you going?
Benjamin Swan: We are both very passionate about sustainability. In fact, when we first talked about starting a business together, we were looking at doing sustainable condominiums. This was just after the GFC and it's a little bit harder to find funding for that. So it was then that I read the article on vertical farming and had that "Aha!" moment. And I call Marty up after I did the renderings, I was speaking earlier and I asked him, "Do you know about vertical farming?" He was like, "Kinda..." I was like "Stay tuned". And it just kind of kicked off from there.
Christine Tan: How did both of you meet?
Benjamin Swan: We actually met in a pub when I moved to Singapore. I think about two months after I moved to Singapore and I think I was talking about my job in Marina Bay Sands and the initiatives I was doing towards using more sustainable products inside of the construction and so forth. And then we found a common ground that...
Christine Tan: You hit it off?
Benjamin Swan: We hit it off yeah.
Christine Tan: So at Sustenir, you're the CEO while he remains the Managing Director. But both of you own half of the company. Who makes the decisions? Who calls the shots?
Benjamin Swan: As the CEO, it does all boil down to me. Obviously I've always used him as a very strong sounding board, as well as my board of directors.
Christine Tan: Building up your skills a farmer, is one thing, but really trying to get your cash flow in order is another. Did the entrepreneurial instincts come to you easily?
Benjamin Swan: They did. I surprised myself. I definitely surprised myself and never in my wildest dreams thought I'd be a farmer nor did I think I was going to be an entrepreneur and here we are today, and I'm on CNBC.
Christine Tan: What advice would you give other people on how to do a startup?
Benjamin Swan: No one ever told me that, that being an entrepreneur would be so difficult and what I did find was that having a good routine is something that really pushed me through those times where I really had to dig my heels in deep. And that routine of you know healthy lifestyle, going to the gym. Those are the things that really allow me to persevere and get things done.
Christine Tan: When do you get your best ideas?
Benjamin Swan: Actually, when I go to the gym in the morning. So every morning I do go to the gym, and I actually say it's a part of my work day. It's time that I use to get my body ready to get the blood pumping. But then also to think about how am going to plan out my day. The ideas come best when I'm actually at gym.
Christine Tan: You're 38 years old, worked for MBS, Citibank and UOB, you co-founded Sustenir in 2013. How would you describe your leadership and your management style?
Benjamin Swan: I try to bring in people that are passionate, as passionate as I am about this business. I want them to take ownership on this space. I create an environment for all my leaders inside of this company, to craft the way they want to get their job done. I give them that freedom, I set the KPIs as what needs to be achieved but allow them to do it in the way that they want to do it, thereby giving them full ownership.
Christine Tan: Do you ever get mad? What frustrates you the most being an entrepreneur?
Benjamin Swan: Competency. Of course I get mad and if you met me as a younger man, you would probably think I was a little bit crazy. But I think becoming an entrepreneur and becoming a leader has humbled me in a way. And I need to think of myself as the foundation of this company, the rock that keeps everyone stable.
Christine Tan: You need to set a good example.
Benjamin Swan: I need to set a good example.
Christine Tan: You're in charge of about 30 employees now. Has it been hard to attract talent to work for you? How does farming resonate with the younger generation of workers?
Benjamin Swan: It's very difficult because when people think of farming they think they're going to be out in the soil, in the sun. It's not until we bring them into this environment that they actually go "wow, this is pretty cool". We like to think of this as more of a tech company. We're actually using technology to create great products.
Christine Tan: And finally, it's been five years. You have this 10,000 square feet facility here in Singapore, building a bigger one here, as well as in Hong Kong. Where do you see the company in the next five years? What is your ultimate ambition for Sustenir?
Benjamin Swan: The ultimate ambition for Sustenir is to have one of our farms in every major city across the world. But what we want to do is - we want to have the excellence that we create within this environment and apply that into local farming around it, like a hub and spoke system. So we want to have ubiquity, no matter where you're eating our produce you know that it's local, you know that it's sustainable, and you know it's 100% clean.
Christine Tan: You just completed your Series A funding, any plans for public listing one day?
Benjamin Swan: One day potentially.
Christine Tan: What happens if somebody comes up to you and says, "Let me buy over Sustenir" What would you say?
Benjamin Swan: I'm not in this to make money. I'm in this to make a change.
Christine Tan: So you'd say no?
Benjamin Swan: If I can maintain control of the company, then I would definitely consider it.
For more information:
Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
CNBC is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe with regional headquarters Singapore, Abu Dhabi, London and New York. The TV channel is available in more than 410 million homes worldwide.
CNBC.com is the preeminent financial news source on the web, featuring an unprecedented amount of video, real-time market analysis, web-exclusive live video and analytical financial tools.
CNBC is a division of NBCUniversal. For more information, visit www.cnbc.com.
About Managing Asia:
Managing Asia is the Asia Pacific region's ground-breaking interview programme featuring CEOs, entrepreneurs and other business leaders.