Vertical-farming business Infarm is consolidating operations and cutting hundreds of jobs due to “challenging” business conditions.

The Berlin-based company, set up in 2013, plans to “downsize” operations in the UK, France and the Netherlands, while its presence in Japan is under review.

In a letter to employees from the three founders – brothers Erez and Guy Galonska, CEO and CTO, respectively, and chief brand officer Osnat Michaeli – the firm said more than half the workforce will be laid off. Infarm estimates that amounts to around 500 jobs, although final numbers have not yet been determined.

Controlled-environment agriculture is a capital-intensive industry, often requiring artificial lighting for 24-hour production and huge technology inputs. Vertically-farmed produce has also yet to become competitive with traditional field-grown crops, and the majority of operators are unprofitable.

Speaking to Just Food in May, CEO Erez Galonska confirmed Infarm had yet to turn a profit, although he was confident the business was on a “very clear road to profitability”. Rising energy prices, particularly in Europe where the company predominately operates, have compounded the challenges.

“In our current set-up, we recognise that Infarm cannot withstand the challenging market conditions, particularly with regards to escalating energy prices and tough financial markets,” the founders informed employees. “We have to adapt our ambitious growth targets and increase our efficiencies to make our business profitable and continue the pursuit of our long-term mission.”

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That mission revolves around sustainable, environment-friendly agriculture. “We truly believe that vertical farming has the potential to provide food security in a warming world beset by climate shocks and instability and we, as Infarm, have a critical role to play in the future of food,” the letter read.

Infarm’s announcement comes a matter of weeks after the company took its wheat proposition to the COP27 summit in Egypt. In June, the business unveiled a plan for a new growing centre in Baltimore, Maryland, its third in the US and its largest to date. That plan remains on the cards.

However, Infarm is now consolidating “farming capacity” to growing centres in what it terms “core markets” in Frankfurt, Germany, Copenhagen in Denmark and Toronto, Canada. There, the founders said they have “established strong retailer relationships and secured contracts of significant volume and can therefore achieve profitability in 2023”.

“Critical market factors”

The letter explained further: “Infarm is making a significant strategy shift and accelerating its drive towards profitability. We are focusing on growing centres where we have a clear path to profitability in 2023 and consolidating those where this cannot be achieved in the near term.”

It added: “Recently, some critical market factors have worsened. These directly affect our industry and our operations. Energy prices have escalated (doubled across Europe), which puts a lot of additional pressure on our business and seriously impacts our cost of production in affected markets. This is in addition to inflation, supply-chain disruptions and rising material costs.

“Based on the data we have today, we are forecasting slower growth caused by a significant downturn. We grew our teams to support a global growth strategy, but today, it is clear that a consolidation and focused growth mindset is required to overcome the challenges.”

Erez Galonska said in May that Infarm planned to expand its growing hubs to 25 from 17 in two to three years and reach 100 in 20 countries by the decade’s end. Last December, a new farm project in Qatar was revealed with a target to open in 2023.

Contacted by Just Food, an Infarm spokesperson said the company would not add to the detail contained in the staff letter.

With a valuation of US$1bn and $500m pocketed from investors, Infarm has partnered with retailers such as Marks and Spencer, Whole Foods Market, Kroger, Safeway, E.Leclerc and Edeka for the supply of fresh leafy greens and herbs. Mushrooms were added to the line-up with plans for strawberries, peppers, cherry tomatoes and peas.

Staff affected by the job cuts will receive severance pay, Infarm said. “We are proud of what we have built together as a team and of the exceptionally talented people who joined our mission – saying goodbye to so many of you is extremely painful. We want to thank you for your unique contribution over the months and years,” the founders wrote.

Just Food analysis, summer 2021: Indoor farming and the prospects for profitability