Vertical Farming (VF) is an exciting emerging technology, particularly for growing leafy greens. Vertical farms produce consistently high quality, long shelf life produce year-round, with significantly lower wastage and water usage than traditional growing methods. So, what explains the recent high-profile failures across the UK and Europe, and what must change for the business model to succeed at scale?
The Promise
Vertical farms grow produce hydroponically in tightly controlled multi-layer indoor systems, with optimised light, temperature, humidity, CO₂, airflow, irrigation, and nutrient conditions. The result is a consistently high-quality product, in terms of flavour, texture, and appearance, sheltered from pests, pathogens, and bad weather.
Having been grown in a hygienic environment, VF produce has minimal risk of contamination and so can be directly packed without chemical washing. Avoiding washing preserves flavour, texture, and extends freshness from around 5-7 to 14+ days.
VFs are also in many ways more efficient than traditional agriculture. For one they are more land-efficient, producing high yields from compact footprints. This allows sites to be located near urban population centres, reducing food miles and delivery times. Combined with longer product life, this proximity further reduces waste, both on retailers’ shelves and in consumers’ fridges. Water efficiency is also high, as water used for irrigation is recirculated in closed loops and that which isn’t absorbed by plants is filtered, sterilised, and reused, rather than lost to evaporation or runoff.
The Failures (and why they failed)
Despite the promise of VF technology, multiple high-profile ventures have collapsed over the past four years: Infarm (Germany), Plenty (US) and Future Crops (NL) declared bankruptcy, Jones Food Company (UK) entered administration in 2025, Eider VF (UK) was wound up in 2023, and Agricool (FR) entered receivership in 2022.
High energy usage is a structural disadvantage of the VF business model, which relies on energy-intensive climate control and LED lighting systems rather than the free sunlight and prevailing weather conditions relied upon by traditional agriculture. Vertical farms reliant on grid electricity are vulnerable to energy price spikes, such as during the 2022 energy crisis following Russia’s invasion of Ukraine. “Soaring power costs” were explicitly cited as a factor contributing to Infarm’s 2022-23 downsizing / insolvency and were speculated to have hastened the collapse of both Jones Food and Agricool. Co-locating vertical farms with sustainable energy sources, however, can insulate vertical farms from grid price volatility. GrowUp Farms in the UK provides a strong proof of concept, pairing its facility with a neighbouring bioenergy plant that supplies renewable heat and electricity.
To date, most vertical farms remain small-scale, each investing heavily in bespoke R&D, resulting in duplicated costs, and struggling to reach cost parity with greenhouse or open field produce, because they cannot amortise their high capex investments across sufficient output. Single-site or small multi-site operations are also fragile, as highlighted by the fire that shut down Planet Farms’ Milan facility in 2024.
High unit costs and fragile suppliers have left major retailers interested but cautious, often testing products rather than committing to substantial volumes. Infarm, for example, supplied Aldi, Marks & Spencer, Carrefour, and Whole Foods but through pilot or premium ranges, not core SKUs. At Food Strategy Associates, we also believe that retailers haven’t adjusted margin expectations to account for VF produce’s lower wastage levels. As a result, retailers have not given vertical farms the long-term, high-volume contracts necessary to expand production and improve unit economics.
The Future
As an investment, vertical farms do not align neatly with either infrastructure investors or consumer investors. Infrastructure investors are comfortable with the high capex associated with VFs, but they also expect strong, long-term contract security – something which grocery retail cannot provide. Consumer investors, by contrast, are used to retail volatility but are put off by VF’s heavy upfront capex. Although many current investors are infrastructure funds, the relatively small ticket sizes to date have kept their exposure low. If the sector is to scale meaningfully, investment sizes will need to rise, but contract security will not necessarily increase accordingly. As a result, the overall risk to investors will increase.
Vertical farming requires a hybrid investment mindset that combines the asset-backed patience of infrastructure capital with the risk appetite and brand-building instincts of consumer investors. Few investors possess both, which helps explain why vertical farms have struggled to find sustainable financing models.
As a firm we are bullish, so where do we think investment will come from in the future? Retailer investment is a natural next step for the industry, because through vertical integration retailers can contribute the secure long-term volume demand that vertical farms require to justify high upfront capex investment. This began with Walmart’s investment in Plenty in 2022, and the ~€100m investment made by Schwarz Gruppe (parent of Lidl and Kaufland) in the Dutch ‘Blue Skies Group’ vertical farming venture. Schwarz Gruppe’s move is smart; with Lidl as Europe’s largest retailer, they could support vertical farming Europe-wide, and could also deliver a superior product to consumers. In a parallel move, Ocado acquired a majority stake in Jones Food in 2019 in a bid to address “fundamental consumer concerns on freshness and sustainability”. Ocadoeven had ambitions to co-locate vertical farms with their fulfilment centres, enabling extremely short harvesting, packing, and dispatch windows. Although both investments have hit turbulence, with Schwarz Gruppe embroiled in a legal dispute with its JV partners, and Jones Food now in administration, these moves echo the ambition of Marks & Spencer in the 1970s, when it transformed the UK chilled-ready-meals supply chain by underwriting its own cold-chain infrastructure. Waitrose, with its Leckford Estate and heritage of vertical integration; M&S, with a premium focus and sustainability credentials; and Tesco, with the purchasing scale to drive towards cost parity, all look like plausible next movers in the UK.
Another logical pool of capital lies in the Gulf states, where vertical farming economics are among the most attractive globally. The region faces extreme climate constraints, limited arable land, and high reliance on food imports, but benefits from cheap energy and abundant capital. Many Gulf ventures already have sovereign or state-linked backing, and the region’s investors are known for their long-term, technology-driven outlook. Partnerships in joint ventures, IP acquisition, or co-development with Western firms would allow them to accelerate the industrialisation of vertical farming and establish themselves as global leaders in controlled-environment agriculture.
The vertical farming industry remains highly fragmented, with dozens of small players duplicating R&D costs. We see an opportunity for a strategic consolidator, whether a retailer, private equity firm, or sovereign wealth fund. Such a player, we believe, could achieve the scale efficiencies and technological standardisation required to accelerate vertical farming take off.
Over the long-term, energy costs are likely to decline in real terms, as they have done historically, driven by the growth of global renewable capacity and efficiency improvements. At the same time, underlying vertical farming technology will continue to improve through scale and learning effects.
The remaining challenge lies on the demand side: the benefits of vertically farmed produce are still poorly understood and must be better communicated to retailers and consumers alike. Someone will need to pick up the mantle of educating consumers on what makes vertically farmed produce different. A retailer with vertical farms integrated into its supply chain would be a natural candidate. Given its pan-European reach and recent investment in Blue Skies, Lidl and the Schwarz Gruppe are well placed to lead that narrative. Alternatively, a dedicated vertically farmed brand built around the freshness, provenance, and low waste of its product could be a powerful communication medium, however breaking through in a predominantly private-label category would be a significant challenge.
Supporting the Next Phase
At Food Strategy Associates, we’re keeping a close eye on the evolution of vertical farming. Our team has deep experience in controlled agriculture systems and their role in the wider food industry. So, if you have a professional interest in vertical farming, please reach out – we’d love to talk.
Nigel Devine
Partner
nigel@foodstrategy.co.uk
Richard Wyborn
Partner
richardw@foodstrategy.co.uk