CHICAGO -- Leafy greens typically don't get kids excited. So Jake Counne knew he'd grown something special in his indoor vertical farm when his children, ages 5 and 7, were snacking on fresh spinach "like it was a bag of chips."
Other, more refined palates also have been impressed by Counne's spicy wasabi arugula, tart red sorrel and horseradish-tinged red mizuna -- all grown under the purple glow of LED lights in a windowless office in Chicago's Back of the Yards neighborhood.
"The flavors coming out of these leaves were unbelievable," said Steve Lombardo III, chairman of Gibsons Restaurant Group, one of Counne's first customers. "We were talking about them like we were talking about fine wines."
Counne, a real estate investor before his interest turned to agriculture, is starting Backyard Fresh Farms during a period of heightened consumer and investor interest in produce grown locally in controlled environments that are less subject to contamination, waste and unpredictable weather.
High costs have killed similar ventures. But as he prepares for a significant expansion to get his greens into stores, Counne said he believes his hydroponic farm has the technology to succeed where others have failed to make large-scale indoor vertical farming a profitable business.
"The key to what we've done here is being able to scale it to a point that not only can we grow it, we can grow it at an affordable price," said Counne, 31.
Counne currently operates a pilot farm in a 250-square-foot space at The Plant, a food business incubator housed in a former meatpacking factory in the shadow of the old Union Stockyards. There, he is testing cameras and artificial intelligence software to improve the quality and quantity of produce grown, as well as robotics to reduce the amount of time workers spend climbing ladders to tend to plants. For example, an automated lift collects trays of ready plants and takes them to an assembly line of workers for harvest.
The process has reduced labor costs by 80% compared with a first-generation vertical farm, Counne said. Combined with lower energy costs from other efficiencies, and a farm-to-retailer model that cuts out the distributor, he said he can price his product to compete with high-quality organic greens grown in the field -- which are typically priced at about $3 to $3.50 for a 5-ounce package of lettuce, he said.
Counne is in discussions with landlords in Chicago and Calumet City, Ill., where he hopes to lease 35,000 square feet in which he says could yield 6 million pounds of produce a year, in towers stacked 21 feet high, with only six laborers. His long-term vision is to open 100-square-foot facilities near major metropolitan areas around the country.
"We wanted to treat this more like a manufacturing process rather than a farming process," Counne said.
Growing produce in controlled environments, including greenhouses and indoor vertical farms, has gained steam as a sustainable solution to the food needs of a growing population because it uses less land and far less water than traditional farming and can be done year-round near cities, reducing the distance the food travels.
Food safety is another benefit. Controlled environments protect against contaminants from air, runoff or insects that can lead to recalls in field-grown greens, such as the mass romaine recall last year after E. coli exposure sickened more than 40 people. In addition, such produce is pesticide-free, has a longer shelf life and tends to be high quality because growers can control the variables.
Commercial-scale production of indoor- and greenhouse-grown produce has ramped up as growers gain capital and retail distribution, and as technological advancements make it more cost-effective.
More than $300 million in venture capital has been invested in greenhouses and indoor vertical farms during each of the past three years, up from $100 million in 2016, according to CleanTech Group, an industry market research and consulting firm in San Francisco.
But the farms are expensive to set up and take a long time to expand, so many are unprofitable. In search of viable business models, some growers partner with distribution firms or grow produce inside supermarkets themselves, said CleanTech associate Chris Sworder.
In Chicago, Gotham Greens grows lettuce and herbs in a 75,000-square-foot rooftop greenhouse in the Pullman neighborhood, while BrightFarms greens and MightyVine tomatoes grow in greenhouses in suburban Rochelle.
Indoor vertical farms, which take up a smaller footprint than greenhouses, don't rely on sunlight and generally are more expensive to operate, are rarer in the Midwest. Most of the large operations -- Plenty in California, 80 Acres in Ohio and Bowery and Aerofarms, both in New Jersey -- don't sell their products in Chicago.
FarmedHere in suburban Bedford Park, Ill., was the world's largest indoor vertical farm when it shuttered in 2017 because of high labor costs and inconsistent yields. Its co-founder and former chief operating officer, Steve Dennenberg, is on the board of advisers of Backyard Fresh Farms.
Dennenberg compared the technology his company had to "Gordon Gekko's phone," referring to the giant block of a 1980s cellphone carried by Michael Douglas' character in Wall Street. Much has changed in just two years to make indoor farming commercially viable, and he believes Counne can make it profitable.
"Everybody has the artificial technology now, but Jake (Counne) has the robots," said Dennenberg, who is working on a medical-marijuana greenhouse in Michigan. "We had neither."
Counne has nine patents pending for the software and hardware he is testing at his pilot space, where he has grown 100 varieties of vegetables from bok choy to radishes.
Sergio Arroyo, a farm technician at Backyard Fresh Farms who used to work at an aquaponics greenhouse, said the efficiencies make a big difference. One worker can produce the same amount of lettuce in the 250-square-foot space as three people could in a 10,000-square-foot greenhouse, in the same amount of time, he said. And unlike greenhouses, which in summer could reach 115 degrees, causing plants to grow too fast, indoor farms can be controlled to a more precise degree, he said.
Counne, who has mostly self-funded the seed money for his company and is in the process of raising $10 million, came to indoor farming through his interest in real estate.
A Miami native and orthodox Jew, he was living in Israel when he decided to move to Chicago in 2011 to help areas hit hard by the housing crash by buying homes people had lost to foreclosure, renovating them and renting them back to the community. His company, Medallion Properties, now manages 600 units, mostly single-family homes on the South and West sides of Chicago.
Hoping to invest in commercial or industrial properties, Counne was touring the huge former Libby, McNeill and Libby canning plant in Blue Island when the property owner mentioned a potential tenant had considered opening a small vertical farm inside. Counne researched the idea and it struck him that vertical farms could be a productive use for vacant old buildings in Chicago.
"That [Libby] building was the inspiration for everything we built," Counne said. "We want to take existing buildings and fit our technology into it."
SundayMonday Business on 08/11/2019