CEA Advisors

This interview details CEA Advisors, an indoor farming company based in the United States. The interview is with Glenn Behrman, Founder and President of CEA Advisors.

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Can you talk a little bit about your latest product lines you're launching or what you're seeing working well among your own product lines?

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I'm happy to share that our business is doing well. Currently, I am focused on various large projects here and overseas and developing a new generation of growtainers® and fortunately, I don't feel pressured or rushed. I genuinely enjoy both the busy and quieter periods equally. One of our significant endeavors involves a substantial project related to constructing growtainers for a west coast industry icon. Additionally, we are conducting research on Growracks® to reduce costs, increase affordability, and promote wider adoption within the industry.

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However, what I am particularly enthusiastic about at the moment is our pursuit of introducing an entry-level growtainer to the market. When I observe the products offered by Freight Farms or Urban Crop Solutions, I believe that given the financial constraints people are facing and their continued interest in container farming, I’m convinced it is an opportune time to launch an affordable option.

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What characteristics typically define an entry-level status? Is it solely about being smaller in scale and more budget-friendly?

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It's about affordability while maintaining the same size, efficiency and capabilities. Consider companies like Growtainers, Freight Farms, Urban Crop Solutions, or similar players in the industry who are actually making a difference.  My goal is to reduce the prices of the systems. We are not cultivating high-value crops like cannabis; most container farmers focus on commodity crops. Therefore, we need to ensure that the capital expenditure (cap x) and operational expenditure (op x) are optimized for people to profit from their investments.

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I realize that every new grower has to start somewhere, just like the first car people own is often not a luxury brand but a more affordable option. So, I believe affordable container farms are a good starting point. Many buyers of container farms are not familiar with how to maximize the benefits of the best available components. It's better to provide them with what they need to make money, to help them determine if this path is suitable for them, and then encourage them to aspire to the next level.

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What are your thoughts on the current market? 

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Many individuals believe that the business in question is quite challenging. They don't perceive it as a revolutionary force capable of addressing the global issue of feeding 9 billion people by 2050. Rather, it is viewed as an ordinary business, similar to any other. Reflecting on my own career this morning, I realized that I embarked on my journey with a single small retail store, completely unaware of what lay ahead. However, through continuous learning, asking questions, taking chances and gradually making progress day by day, I managed to transform my modest venture into a thriving enterprise. Initially, I didn't set out to achieve extraordinary heights right away; instead, I approached it one step at a time. Back then, I wasn't certain if my methods were correct, but in hindsight, they taught me valuable lessons and proved to be a wise approach.

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Do you anticipate a significant decline in the number of established vertical farms, particularly those known by brand names? What are your thoughts on the industry's future prospects and the possibility of consolidation?

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Utilizing someone else's funds to venture into business with the aim of perfecting the process is morally incorrect. In my opinion, the ideal approach is to bootstrap the business, focusing on developing a quality product and efficient processes. Once established, one can then seek financial support. I'm an old school guy and believe in cashflow positive. Although the era of easily accessible funds may have benefited some in the industry, today’s tighter investment climate encourages individuals to be more prepared and have a clearer direction from the beginning. I believe that people have been somewhat misled by inflated valuations, influenced by the hype and big numbers that have been thrown around. However, all it takes is a demonstration of a profitable business model to bring about a significant shift. But beginning with commodity crops is challenging.

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Do you anticipate any upcoming advancements in the selection of crops cultivated on these farms? Numerous companies are currently focused on berries, while others are exploring the potential of mushrooms. What are your thoughts on the future prospects of crops beyond leafy greens and herbs?

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In my opinion, indoor cultivation of berries, specifically blueberries and raspberries, presents significant challenges and expenses. Like strawberries, these berries require specific conditions and are difficult to grow indoors. The concept of vertical farming, which primarily focuses on fast-growing crops with shallow roots, doesn't align well with the experience, space and climate requirements of berries. Moreover, berries necessitate cold climates and occupy substantial space. Considering a plant that demands a staggering 1000 hours of cold to produce fruit, the cost associated with such cultivation becomes expensive.

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Do you think strawberries are better positioned? And if so, what are your thoughts on strawberries?

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Growing strawberries in a container does not usually yield profitable results. After careful consideration and discussion, I have established a strong connection with Parus lighting in Korea, where Mr Park and I frequently engage in conversations about strawberry production. The reality is that strawberries cultivated in shipping containers are difficult and everybody talks about the price in the winter which is very expensive. 

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In Texas, strawberries can easily be purchased for only $1-$2 per pound during the spring and summer seasons. When assessing the price, it is important to consider the average cost over a 12-month period rather than solely focusing on months with snowy conditions. Consequently, it is not always financially viable to generate income from growing strawberries in containers. While I initially advocated for the use of growtainers for strawberries, I was always candid in stating that it should be pursued primarily for research purposes rather than expecting substantial sales and revenue, as profitability would be unattainable.

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How robust of a market is the research market? Do you believe it has the potential to significantly impact companies, or is it primarily confined to a smaller segment?

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While the segment is limited, it holds great value. We specialize in supplying unique growtainers to our industry peers for various R&D projects production and research. I recently completed a remarkable setup for an industry leader. The product I constructed has received high praise, bringing satisfaction to both the client and myself. Not only was it financially lucrative for me, but it also proved to be profitable for them. Undertaking a project for a an industry icon filled me with immense pride. Currently, I am actively engaged in another project for a similar company, and I also have a forthcoming endeavor in the field of Tissue Culture. I selectively pursue the most challenging opportunities, prioritizing quality and creativity over quantity. Although my container sales volume may be relatively lower than others, each project I undertake is one that fills me with a profound sense of accomplishment.

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You have projects in Europe and constantly consulting on different regions. Do you have a different outlook for some of these other global regions? How did the unit economics change in any given region based on the utility costs?

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It is crucial to understand that certain projects are viable only in specific locations. Factors such as labor costs, utility expenses, and market demand are dictated by the market itself. This intricate balance of considerations makes every decision intriguing. I often encounter individuals seeking advice, and I caution them against proceeding, as the risk of losing their investment is significant.

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Sometimes I receive inquiries from individuals seeking advice on implementing a growtainer in a specific environment. Drawing from my experience in previous projects and my understanding of the area, I often find myself advising against pursuing such projects.

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It can be disheartening at times. I possess the skills to create exceptional growtainers or groundbreaking vertical farms, yet success is not guaranteed. While these projects may achieve their intended goals, it does not ensure profitability or a return on investment. The outcome depends on factors like the abilities of the grower and the state of the market. One of the major challenges in this industry, often overlooked, is that if a project goes sour, there is no resale value for the technology, or the infrastructure involved. When a farm fails the Grow lights, for instance, may be sold for a mere $10 each, while the racks are reduced to being used pallet racking. There is no opportunity for recouping the investment.

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Do you think it's just a temporary slowdown in Europe? Or do you think it's a sign that maybe in Europe, there's some bigger challenges ahead for indoor farming or what are your thoughts on that market in particular?

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Currently, the utility costs pose a significant challenge. England's electricity expenses have soared to over twice the average in most European countries due to the ongoing war in Ukraine, the complex situation involving Russia, and the various economic problems plaguing Europe. Undoubtedly, the market conditions are extremely challenging. To thrive in this industry, it is imperative to establish a reasonable business case rather than relying solely on a financial model. The key determinant of success lies in having a viable business model rather than just following the crowd.

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Apart from container farms, have you encountered any large-scale farms that are currently profitable? Or is container farming the only profitable sub-segment within indoor farming?

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I don't even think that for others, container farming is a profitable sub segment. I think there are some Vertical Farms that are profitable. If you measure this industry on a case by case, operator by operator basis, I think the small local, regional, bootstrapped, dirt under their nails, mud on their boots, farms are the only ones that might be making any money.

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