Business: Urban farming / New Jersey
In a warehouse outside Jersey City, a Japanese-flavoured start-up is growing berries so coveted that people happily pay $50 for a bowlful. Is this vertical farming’s first luxury brand?
The offices of Oishii, located in a former Anheuser-Busch distribution facility on the industrial outskirts of Jersey City, just across the Hudson River from New York, resemble those of any other hi-tech start-up. There are whiteboards decorated with the fevered scratchings of nascent corporate strategies, an automated control centre where data points scroll across screens, a robot patrolling a brightly lit clean-room environment and twenty-somethings grazing on healthy snacks. Oishii produces, for the moment at least, precisely one thing: strawberries.
The product in question sits eight to a pack on a conference-room table, where Hiroki Koga, Oishii’s Japanese-born ceo and co-founder, offers a lesson in how to eat them properly. “The sweetness in strawberries is concentrated toward the bottom,” he says. “So if you start eating there, it gets less and less sweet.” Eating from the side, he says, offers the proper sensory balance. The fruit should also be at room temperature. Oishii’s berries appear uniform and absent of any visible flaw. By American standards, though, they’re slightly strange. Instead of the usual bright red, they are almost roseate and their surface, rather than being flecked by visible seeds, is pockmarked by recessed holes.
Eating them reveals more striking differences. The strawberries are remarkably sweet and aromatic, rivalling, if not exceeding, that rare specimen procured from a summer farmers’ market in that fleeting window of ideal ripeness. “These typically contain two to three times the sweetness of what’s available here traditionally,” says Koga. This isn’t just taste perception but empirical fact, per the fruit’s Brix score, its value on a scale of sweetness obtained by refractometer measurement. The sweet taste is made more jarring by the berry’s pale hue. “We wanted to prove to everyone that it’s not how it looks,” says Koga. “Everything in the US is engineered to be red.”
This is a Japanese berry, a varietal that, like some secret algorithm, can’t be disclosed but is typically grown in the country’s northern alps. The ones on Koga’s table were produced a few dozen feet away from where they sit, in a setting with climatic parameters that have been tuned to a location 11,000 km away. “These berries still think they’re in Japan,” says Koga. Next to them are the raw materials of Oishii’s process: a small shoot grown via in-vitro fertilisation and suspended in a clear nutrient-rich gel; and a larger plant resting in a proprietary growing medium.
Oishii, which means “delicious” in Japanese, is a rare success story in the world of vertical farming for two reasons. First, Oishii cracked indoor pollination. “Bees were known to not operate well in an indoor farm environment,” says Koga. “We figured out how to make them believe that they’re in nature.” (The method is also proprietary.) Pollination by hand is possible, Koga notes, but not efficient at scale. Second, Oishii was able to create a product for which people are willing to pay $50 (€47) for a tray of eight. That’s not unusual in Japan, where high-end purveyors such as Sembikiya elevate fruit to the status of luxury goods.
“We’d give people 24 hours’ notice to come to the World Trade Center subway station the next day at 18.00 [to buy strawberries] It was like a drug deal,”
In the US, where strawberries are sold by the kilogram, it was a novel proposition. Oishii treated it that way, slowly introducing its berries via collaborations with restaurants, including Manhattan’s three-Michelin-starred Chef’s Table, where a single berry, unadorned, comprised the dessert course. Soon a mix of social-media-driven novelty and scarcity kicked in: the berry became a viral Veblen good, in demand at least partially because of its price. Word crept out and a waiting list was set up. “We’d give people 24 hours’ notice to come to the World Trade Center subway station the next day at 18.00,” says Koga. “It was like a drug deal,” he adds, laughing.
The global vertical-farming market was a $3bn (€2.8bn) business in 2021, according to researcher Fortune Business Insights. Koga admits that, compared to traditional agriculture, the sector’s size represents a “rounding error”. But its expansion graph is up and to the right, with varying forecasts of up to 25 per cent annual growth over the next decade. Against a challenging backdrop for traditional agriculture – disrupted supply chains, an increasingly volatile climate, rising fertiliser and labour costs – vertical farming, which offers year-round growing, less water consumption and no reliance on pesticides, looks increasingly attractive. But it depends on technological advancements and requires huge start-up costs. It can also be tricky to execute it at any meaningful size in the urban locations where it’s most attractive.
Oishii’s strategy is starting to bear fruit. The company, which has secured $55m (€51m) in financing from investors including the Toyota-backed Sparx Group and the Sony Innovation Fund, says that it is profitable on a “per facility” basis, adding that, like many start-ups, it’s ploughing funds back into r&d. It has farms in New Jersey and near Los Angeles, an r&d site, 125 employees and plans for domestic and international expansion.
Among Oishii’s US competition are two well-funded technology-forward start-ups, Aerofarms and Bowery Farming. Both are within walking distance of Oishii’s first facility in Jersey City, New Jersey. In Denmark, Europe’s largest vertical farm is churning out 1,000 tonnes of greens and herbs a year – enough to fulfil 5 per cent of Danish consumption. In 2021, Aerofarms broke ground on a 5,000 sq m r&d centre in Abu Dhabi, which hopes to increase domestic food production (the emirate imports 90 per cent of its food). But for all the recent energy, vertical farming took off in earnest several decades ago in Japan, where multinationals such as Panasonic and Sharp entered the arena. They were driven less by a green interest, Koga suggests, than technological prowess. “They just wanted to invent something cool,” he says.
In early investor pitches, Koga, along with co-founder Brendan Somerville, a former Marine intelligence officer he met at business school, made two broad points. One – the founding principle of all vertical farms – is the need “to revolutionise agriculture sustainably through vertical farming,” says Koga. The second point? “We don’t only want to be a sustainable company; we want to introduce something that is better than what’s out there.” Koga points to Tesla. “It didn’t just introduce any electric vehicle; it had a Roadster, which was faster than a Porsche.” People went crazy for it, not because it was more sustainable, “but because it was a superior car”. Just as the original Roadster was a six-figure car with an inherently limited audience, a $50 (€47) tray of strawberries is destined to be a niche product. But Oishii has launched a $20 (€18.60) package of the fruit, which will be sold by the taste-setting US retailer Whole Foods. Is this Oishii’s Model 3 moment?
Before coming to the US in 2015, Koga had been researching and working with Japan’s vertical farming industry as a consultant for Deloitte. The problem he found was that the companies couldn’t diversify their products. “There was just no demand for vertical farm leafy greens that had to be sold at a premium,” he says. “Shortly after, he enrolled in an mba course at the University of California, Berkeley while consulting on the side for investors looking at vertical-farm start-ups. What struck him, in the middle of a California drought, was the increasing volatility of agriculture’s inputs. “Stable weather conditions, access to water and land, cheap labour – all of these things were getting harder and harder to source,” he says. Pesticides were increasingly being regulated and the cost of fertiliser went up. The new breed of start-ups was talking about sustainability but the problem was that they hadn’t moved past “commoditised” technology and leafy greens. Despite heavy investment, he says, their greens weren’t sufficiently better than those consumers could already access.
There was one product, however, for which Koga thought the juice was worth the squeeze: strawberries. They already come with prestige: they’re one of the few fruits or vegetables to have brands attached (in the US, Driscoll’s commands nearly a third of the market). But as a crop, they’re notoriously difficult; producing them indoors at any scale has tormented any number of companies (French start-up Agricool, which grew strawberries in repurposed shipping containers, recently declared bankruptcy). Unlike short-cycle leafy greens – the butter lettuce or micro rocket sold by competitors including Bowery Farming and Aerofarms – they need to be kept alive longer to turn a profit. This generally requires a lot of chemical intervention – strawberries are at the top of the so-called “dirty dozen” list of fruits and vegetables containing the most pesticides (spinach and apples also rank highly). Then there’s pollination. Koga thought that bees held the key to an entire new range of indoor agriculture. “If we could figure out how to fly bees and manage disease, that gives us a shortcut to almost every other flowering crop: melons, peppers, aubergines.”
To keep its strawberry plants disease-free without pesticide, Oishii relies on an exacting set of hygiene protocols. Moving from room to room requires repeatedly exchanging shoes for sandals and donning hairnets, masks and gloves. Jumpsuit-clad “farm operators” are cleansed by an “air shower” to enter the growing facilities, where no visitors are allowed. Julie Noyce, who manages Oishii’s indoor farms, has no agricultural experience: her previous job was at a start-up that robotically produced human handwriting. “Whenever I hire one of our operators, I tell them no one’s ever done this before,” she says. When monocle visits, only robots and bees move around the production room. “Even people who are skittish of bees really do start to appreciate them as our best co-workers,” says Noyce, adding that the clean environment ensures plants’ longevity. On an ordinary farm, the cultivars that Oishii uses would last for about a year before dying or developing a disease but “some of the seedlings in our r&d facility have stayed alive for more than two years”.
Oishii’s farm might depart from the “romantic notion” of agriculture, says Somerville, the company’s chief operating officer. But, he argues, consumers increasingly recognise the value of indoor farming. “It’s the cleanest strawberry we’ve ever had,” he says. “It has the highest concentration of sugars in the US and it’s the freshest. We deliver those things because it’s grown in this controlled environment.” And rather than being shipped 3,000 miles from California (the origin of more than 90 per cent of American strawberries) it’s a 30-minute trip to the country’s biggest market.
Having pioneered scalable production of indoor strawberries, Oishii won’t be alone for long. Rival Bowery Farming is introducing two indoor strawberries (“Garden” and “Wild”), while San Francisco-based vertical farm start-up Plenty, working with Driscoll’s, is said to be moving close to market. Koga is already thinking ahead. He envisions an Oishii-branded section in the supermarket. He’s recently been working on melons and tomatoes, and the latter are already at Oishii’s r&d farm. For Somerville, a broadening indoor strawberry market means heightened competition but also growing mainstream relevance. “This is an industry that can truly transform how we eat and our ability to feed the world in the future,” he says. “We will continue to decrease the cost of production and add new crops. It’s really just the beginning.”
Global farming faces plenty of challenges: supply-chain interruptions; a blockaded Ukraine and a sanctioned Russia (both are major food suppliers); record-high fertiliser prices; and an ongoing La Niña weather event that’s cooling the Americas. Vertical farming offers localised distribution and seemingly less resource-intensive farming. It’s growing. Deals in the sector in 2021 were worth €900m, double 2019’s value, says McAlinden Research Partners. But “in feeding the world in a resource-efficient manner, very often scale is required,” says Tracey Allen, agricultural commodities strategist at JP Morgan. “Certainly in very wealthy markets, consumers have the bandwidth to make choices over products,” she says. “But choices aren’t very widely available to consumers in emerging markets.” To make a difference, vertical farmers need to go beyond niche markets.