New York-based vertical farming company Bowery Farming, once hailed as a leader in the agtech space, has officially ceased operations, according to internal company documents and several employees, as reported by PitchBook. Bowery, an agtech unicorn valued at over $2 billion as recently as 2021, was celebrated for its high-tech indoor farms that produced leafy greens, herbs, and berries in urban environments using vertical farming systems. Since its founding, Bowery raised more than $700 million in funding from prominent venture capital firms, including First Round Capital, General Catalyst, and GV.
Industry-Wide Struggles and Layoffs
Bowery’s downfall is part of a broader trend affecting the vertical farming industry, a sector struggling with high operational costs and difficulties in scaling profitably. PitchBook previously reported that Bowery experienced multiple rounds of layoffs throughout 2023 as the company faced mounting financial pressure. In particular, the substantial energy and infrastructure costs of maintaining indoor farms and ensuring consistent crop production year-round have been challenging to offset with revenue from produce sales.
Growing Competition and Market Saturation
Bowery’s closure follows similar difficulties faced by other vertical farming pioneers like AeroFarms and AppHarvest. AeroFarms, which raised more than $300 million, filed for bankruptcy but later managed to exit bankruptcy protection in September 2023 after securing new funding. AppHarvest, another high-profile vertical farming company, raised over $700 million and went public at a $1 billion valuation in 2021. However, it filed for Chapter 11 bankruptcy protection in 2023 as well, further highlighting the financial strain prevalent in the industry.
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Reasons for Shutdown: Profitability Challenges and Industry Barriers
The shutdown of Bowery underscores the industry’s struggle with profitability. Vertical farming, while promising a more sustainable and climate-resilient alternative to traditional agriculture, has yet to overcome several hurdles. Key among these are:
- High Capital and Operational Costs: Setting up vertical farms requires significant initial capital, including investments in controlled environments, lighting, and automation. This translates to high overhead costs that are challenging to recover, especially as produce prices remain competitive.
- Energy Consumption: The energy requirements for artificial lighting, climate control, and other essential systems are substantial. Rising energy costs have further exacerbated these expenses, creating a high-cost barrier for vertical farming.
- Limited Crop Variety and Revenue Potential: Many vertical farming operations focus on leafy greens, herbs, and berries, which generally have lower profit margins. This narrow crop variety limits the revenue potential of such farms compared to traditional agriculture.
- Competition from Conventional Agriculture: With consumers seeking affordable food options, traditional agriculture has remained the go-to choice due to its cost-effectiveness. Conventional farms often benefit from economies of scale and are not subject to the same high setup and operational costs that indoor farms face.
Despite significant investments and public interest, vertical farming has faced an uphill battle in demonstrating long-term financial viability, leading investors to grow cautious about further backing in this space.
Bowery’s shutdown is a notable blow to the agtech sector, marking the latest in a series of high-profile closures and bankruptcies as vertical farming companies struggle to scale profitably in a challenging economic landscape.