Top 10 Indoor Agriculture Companies

A New Type Of Farming – Indoor Agriculture

Damage to topsoil, drought, and the overuse of fertilizers, herbicides, and pesticides, combined with a growing global population, are putting pressure on our agricultural systems.

Indoor agriculture, whether using hydroponic (flowing water), aquaponics (water + fish), or aeroponics (sprayed water), can help boost production while reducing resource consumption, including -90% in water usage by agriculture.

These systems are also a lot more space efficient and offer control cultivation conditions, allowing for cultivation closer to urban centers, reducing the overall carbon emissions and improving the quality of the products. Until recently, the focus of indoor agriculture operations has been on leafy greens, salads, and herbs, as well as berries and tomatoes.

Source: Grand View Research

The sector grew extremely quickly from 2018-2020, then crashed somewhat in 2022, with many companies growing too quickly without paying enough attention to profitability. Now that the storm is starting to pass, the industry is much stronger and ready to keep growing to make farming more sustainable.

Top 10 Indoor Agriculture Companies

1. GrowGeneration Corp.

GrowGeneration is the largest retailer of hydroponic products in the US. It sells products for both home-growing and commercial-scale facilities. It also has a large and recognized education resource center for hydroponic cultivation.

Source: Grow Generation

The company sells virtually everything needed for hydroponics, including artificial lights, sensors, potting material, fertilizers, tools, harvesting machines, etc.

Source: Grow Generation

The down cycle in vertical farming and cannabis has shrunk sales by 34% in 2022, a decline that continued in 2023.

The sector has experienced severe cyclicality, and Grow Generation sales have suffered. However, it is still a leader in its industry, with a large part of the market share.

Considering that cannabis seems to keep getting closer to legalization and is seeing record sales volume, it is likely that the demand for hydroponic equipment might rebound at some point in 2024.

Consequently, GrowGeneration’s profit should return as soon as the operational and profit issues of the cannabis market and vertical farming companies are over. In the meantime, a still large cash stash and solid balance sheet should help it weather the storm.

2. Village Farms International, Inc.

A sector beyond berries and salad that relies heavily on indoor farming is cannabis cultivation. The industry has been prone to a rapid and brutal boom and bust cycle, with the last high in 2021.

Village Farms is a veteran company in Controlled Environment Agriculture (CEA), which includes vertical farming and commercial greenhouses. The company operates 545 acres of CEA facilities.

Source: Village Farms

It entered the Canadian cannabis market early in 2017 and the USA market in 2018. Its installations are estimated to be able to supply 1/3rd of the total forecasted Canadian market, with an ever larger capacity by surface in Texas and the US market.

It also owns 12% of Altum, a platform for large-scale import of cannabidiol products to the Asia Pacific Region. It has launched its cannabis products in Germany and started to build a cannabis facility in the Netherlands.

This is an interesting stock for investors looking at indoor farming and the cannabis sector. Village Farm’s decades of experience with other plants also make it a relatively safe bet from a technology standpoint; they are far from newcomers in the industry.

Still, due to the refocus of the company on cannabis, its fortune and stock price might be more dependent on the cannabis market cycle than the overall vertical farming trend.

Source: Village Farms

3. Hydrofarm Holdings Group, Inc.

Hydrofarm is the leading manufacturer of hydroponic cultivation systems. The company owns outright 70 brands and also distributes for 80 others. It sells through many retailers and distribution channels, including online and offline, B2B and B2C (including GrowGeneration mentioned above).

Source: HydroFarm

Two-thirds of sales are consumable products, and one-third are durable equipment. The company has expanded sales through organic growth and a large acquisition in 2021. Its revenues have grown overall over time, but with a strong cyclicality, with 2022 being the first down cycle since 2018.

Source: HydroFarm

This was continued with a decline in sales to $226M in 2023 from $344M in 2022.

The company is counting on cannabis to keep growing in the long term and for Hydrofarm to be a successful supplier to the industry, riding out the speculators and volatility:

“Like the Gold Rush, the path to stabilization is wiping out some speculators. But the surviving picks and shovels suppliers should thrive“.

This attitude makes sense to some extent, as the company was still free cash flow positive in 2023 despite the worst downturn in the industry in a decade.

Hydrofarm is a stock for investors looking for a “pick and shovel” stock in the CEA market, with more exposure to consumable purchases than the capex-driven constructors. And willing to take the risk of a purchase at a very cheap price, counting on a rebound in 2024 or 2025.

4. Urban-gro, Inc.

The company offers turnkey facilities for indoor cultivation and vertical farming.

Source: Urban-gro

It is also active in construction (hospitals, schools, pools, etc.) and in the building of industrial facilities (brewing, food processing, oil & gas, etc.).

Integrating vertically all the various jobs and licensing required for construction can improve the process efficiency and speed.

Source: Urban-gro

Thanks to its diversified activity, the company can rotate from indoor farming (or “Controlled Environment Agriculture” – CEA) to other sectors if needed during a downturn, like in 2022-2023.

However, it is extremely exposed to the economic cycle, as it derives its revenues from newly built facilities instead of recurring sales of consumables.

Source: Urban-gro

The company will do well if capex in vertical farming and cannabis picks up. Its industrial building activity has worked well as a buffer. The trend of onshoring industrial activities back to the USA could benefit them, as could the relocation of European factories to the US, looking for cheaper energy.

Considering the order backlog and cash buffer, only a prolonged economic downturn should endanger the company, making it a good option for conservative investors.

5. Pentair

Hydroponics is not the only option for indoor farming, and mixing it with aquaculture, or so-called “aquaponics,” is a growing trend in the market to maximize the efficiency and profitability of indoor cultivation. We discuss in detail the technical aspect of aquaponics in our article “Aquaponics – Everything You Need to Know”.

Pentair is a leader in water management, including aquaculture and aquaponics, through its Pentair AES department. It sells everything needed to raise sea animals, including pumps, pipes, filters, sterilization, electrics, testing, controlling, heating, feed, etc. It even sells a key-in-hand complete fish farm able to grow 300 pounds of fish at a time.

While a leader in the aquaculture industry, Pentair is first and foremost a water company, with larger operations in irrigation and water purification.

Source: Pentair

On one hand, this provides investors in the company a deep expertise in water management, cleaning, etc., as well as stable revenue streams. On the other hand, it makes the aquaculture only a small part of the whole company.

This is not necessarily bad, as water resources are under growing stress, making Pentair operate in a growing market. However, for investors looking for direct exposure to aquaculture trends, this might be too little of the overall company’s activity.

6. Agrify

Agrify provides integrated cultivation solutions to the cannabis industry. This allows it to optimize operational costs through mass production and standardization, with only $350/lb instead of the industry average of $436-$516/lb.

Source: Agrify

The company also provides dedicated software solutions, design consulting, and equipment for processing cannabis plants & flowers and purifying cannabinoid compounds (extraction and post-processing).

Source: Agrify

This makes Agrify a strong contender for benefiting from the growth of the cannabis industry. In general, indoor farming’s semi-automatized and standardized growth containers could also be used for plants other than cannabis.

Like most industries, Agrify had a pretty poor 2023, with revenues declining by more than half. However, it managed to turn a positive gross profit and decline operating losses, which indicate the company’s ability to survive the downturn.

7. Edible Garden

In 2023, several vertical farming companies, notably AeroFarms, and AppHarvest, filed for bankruptcy due to the difficulty of raising more capital and high operating costs.

Meanwhile, Edible Garden grew that year, largely thanks to tight relations with major retailers like Walmart, Meijer, and Wakefern.

Source: Edible Garden

They were key in getting a large volume of sales for Edible Garden’s herbs productions (cilantro, basil, bay leaves, oregano, thyme, etc.) and salads. In summer 2023, the company also launched “Pulp”, a line of Fermented sauces & chili oils located in the refrigerated section of supermarkets.

Source: Edible Garden

Besides its distribution network, a key to the company’s success has been attention to detail and innovation in the fresh herbs segment, including display that keeps the product fresh automatically and better packaging that keeps the herbs ultra-fresh.

Source: Edible Garden

Edible Garden’s success is a demonstration that vertical/indoor farming can perform well at scale if it is combined with attention to detail, high-quality products, and a robust understanding of logistics and retail channels.

With many of its competitors out of business or restructuring, this could be an opportunity for the company to expand, as it is currently only active in the Great Lake Region and recently started expanding in California and Florida.

8. Local Bounti

Local Bounti is an indoor farming company focusing on leafy greens, especially salads. Its production uses 90% less water and 90% less land than traditional agriculture.

Source: Local Bounti

Like many other vertical farming companies, Local Bounti struggled in 2023, with a change of CEO in December 2023, and the company back under control by its founder.

The company has also been pushing forward, with a patent for its “Stack and Flow” technology granted in February 2024. This technology allows reduced footage, reduced costs, and boosted productivity in cultivation facilities. Stack and Flow is now deployed in 4/6ths of the company’s growing facilities.

The company’s improving operations will be crucial in making it profitable. In the meantime, it will need some extra money to cover operating and interest expenses, some of which will be provided by a $15M credit deal with Cargill in January 2024.

9. Cubic Farm

Cubic Farm is focused on developing hydroponic and indoor cultivation.

Previously, it built containerized systems with a focus on fresh products. By early 2023, this business line appeared too expensive, and it was redesigned to focus on large lettuce cultivation exclusively.

The fresh cultivation system has been downsized and leased to Langley Indoor Produce Ltd., which raised $1M for this purpose.

As a result, the new Cubic Farm is a much leaner business, with a focus re-centered on its other cultivation line, growing feed for animals. The feed cultivation, Hydrogeen, works by germinating and cultivating from sprouted-grain animal feed.

Source: Cubic Farm

This consumes 90% less water than normal methods, while providing higher quality feed that is more digestible and can be produced on demand. It also significantly improves production metrics for both beef and milk production.

Source: Cubic Farm

This is an original business model, with most other hydroponic and indoor farming companies more focused on cannabis, leafy greens, and herbs.

It could also be a very successful one, especially as ranchers struggle to find enough feed in some years because of increasingly more frequent and severe droughts. If they fail to find the feed, they will have to cull their herd and lose a lot of money. In such a case, buying from Cubic Farm “Feed as a Service” (FaaS) can make a lot of economic sense.

10. iPower

iPower is an online retailer of gardening and home products with a strong focus on indoor cultivation. It mainly sells its own in-house brand (90% of the revenue mix).

While it sells on multiple marketplaces, including Amazon, Walmart, Wayfair, Home Depot, MercadoLibre, and eBay, it also sells directly through its websites zenhydro.com and simpledeluxe.com for retail and the small commercial cultivator markets.

Source: iPower – Zenhydro

Defying the overall industry trend, the company continued to grow from 2022 to 2023, with revenues up 12% year over year.

iPower is well positioned to capture the part of the market building homemade or small local cultivation instead of ultra-optimized and at-scale facilities to provide the largest supermarket chains.

Considering the growing interest in hydroponics, cooking, and healthy food following the pandemic and the rise of remote work, this is a good segment to occupy. They want to expand their product selection, notably with the iFarm and the iPower Supersuit, a home electronic mini hydroponic system.

Source: iPower

iPower started with hydroponics but has since branched out in more product categories, including pet toys, beds and accessories, and homeware & furniture. This gives iPower a good potential to grow into more of a “lifestyle” brand than a purely “indoor cultivation” company.