Groots

This interview details Groots, an indoor farming company based in Spain. The interview is with Alejandro Rueda Gómez, CFO at Groots.

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What is the origin story of Groots?

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Groots started in 2018 when the founders, Carlos, Alessandro, and Joaquim, collectively decided to leave their respective jobs to start a venture in Vertical Farming, a sector they saw with great potential. From the project's inception, they identified potential enhancements in vertical farming systems, particularly in reducing initial CAPEX and labor requirements.

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The first years were dedicated to intensive R&D, focusing mostly on technology development. After successfully testing the system in a prototype farm, they launched the first medium-scale farm in 2020, in a town close to Barcelona, with a monthly production capacity of 30,000 plants. Around that time, I joined the company, as the team began to grow. In less than a year, our revenues increased tenfold as we secured agreements with major supermarket chains, guaranteeing the sale of the entire production. Afterward, in 2022, we moved to the farm where we currently operate, now recognized as the largest vertical farm in Spain, with a production capacity ten times greater than our first farm.

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What are some of the biggest challenges facing Groots in the future? 

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The main obstacle is the high initial capital expenditure required for infrastructure to scale production. This, in turn, forces the company to secure capital from diverse sources, tying us closely to fluctuations in the cost of capital. That’s why our primary focus at the moment is to achieve profitability. We believe this will help us unlock new financing tools that are typically inaccessible to startups, and it will also provide a buffer against the variability of the capital market.

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Scaling operations also requires the development of new crops. However, it’s not just about technical development; the challenge lies in the profitability of the crops. While our system can grow more than 50 types of plants, only a few prove economically viable. Here, we work hard to decrease production costs and enhance the quality and price of the product. For example, we can sell a kilogram of basil to wholesalers or undergo the entire processing and packaging process to sell directly to retailers at almost double the price. This involves an additional set of operations, but it is necessary to reach profitability.

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What is unique about Groots compared to competitors? 

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First, our technology. The founders spent almost three years studying the existing vertical farming systems and designing one able to minimize CAPEX and OPEX. We are also very good at efficiently converting energy from kilowatts into kilograms of produce, which is what the whole industry is about. 

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Second, our verticality. We integrate almost the whole product value chain, from the seed to a product ready for the consumer. Thus we work almost as two industries in one: we have the farm operations in charge of producing as many kilograms of the best quality herbs and greens at the lowest cost; and the processing team in charge of packaging and distributing them to retailers nationally. Many companies get stuck at the farm, but we believe you need to increase the final value of your crop if you want to reach profitability.

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Finally, our privileged geographical position has allowed us to enter a market with high demand for our produce, due to the Mediterranean diet. Additionally, we can produce at low costs, benefiting from abundant sunlight, favorable energy prices, and a competitive labor market.

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What are some other relevant metrics of the company (growing area size, production quantity, team size, etc.)?

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Our farm has 3.000 sqm and can produce 300.000 plants per month. We have a diverse team of 35 individuals from more than 10 countries. We are currently selling at more than 400 stores in Spain, mostly in the Catalonia region, as we are working with some of the top retailers in the zone (Carrefour, Auchan, El Corte Inglés, Bonpreu, Eroski, among many others)

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What are some goals in 2024 and beyond for Groots?

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Our focus includes continuing our national expansion and venturing into new markets abroad. Building on the success of our recently launched line of pesto sauces late last year, which performed exceptionally well in the stores we entered, we aim to broaden the availability of this product across all our current retailers and explore additional opportunities. Additionally, we're excited about the progress of a significant R&D project done in collaboration with one of Spain's largest breweries, dedicated to hops production. Looking ahead, we anticipate moving into the next phase of this innovative project. Lastly, our confidence is high as we target reaching profitability this year, potentially marking us as one of the first vertical companies to achieve this milestone

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How can people connect with you or learn more about Groots?

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Connect with Groots through our website (www.groots.eco), on Instagram (@groots.eco), on LinkedIn (@grootsfarming), or directly at hola@groots.eco. We welcome inquiries and look forward to sharing more about our journey and innovations.

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