Vertical farming startup Plenty expands with $680 million JV alongside UAE’s Mawarid

Vertical Farming Startup Plenty to Expand via $680 Million JV with UAE’s Mawarid

July 18- U.S. vertical farming startup Plenty is forming a joint venture with Mawarid, a subsidiary of Alpha Dhabi Holding (ALPHADHABI.AD), in a $680 million deal to develop a network of indoor farms in the Middle East, the companies told Reuters. This ambitious partnership aims to address the challenges of food security and sustainability in the region by leveraging advanced vertical farming techniques.

Five Farms in Five Years

The joint venture plans to build five farms in the region over the next five years. An initial combined investment of about $130 million by the companies will fund the construction of an indoor farm in Abu Dhabi. This farm is expected to break ground early next year and could be up and running by 2026. It aims to produce over 4.5 million pounds of premium strawberries for local consumption and export within Gulf Cooperation Council (GCC) member countries.

Innovative Financing Model

Part of the financing comes from debt provided by a local bank in the region. This highlights an unusual source of capital for the capital-intensive indoor farming industry, which has raised billions from venture capital investors. This financial support underscores confidence in Plenty’s innovative approach and its potential to transform agriculture in the Middle East.

Sustainable Farming Methods

Vertical farms use stacked layers in controlled indoor environments. They are promoted as a sustainable way to grow fruits and vegetables closer to the point of consumption while using less water. This method is suitable for regions like the Middle East, where water scarcity and arable land are significant issues. By growing crops indoors, Plenty aims to reduce the environmental impact of agriculture and ensure a stable supply of fresh produce.

Overcoming Financial Barriers

The high costs of building new facilities have been a significant barrier to scaling production. Funding for indoor farming has declined to just a fifth of its peak in 2021, according to PitchBook. However, Plenty’s strategic partnership with Mawarid and the innovative financing model show a new path forward for the industry.

High Return on Investment

“We are targeting returns north of 20%, which is significantly higher than traditional agriculture. In that context, we think there’s a lot of capital for the space,” said Arama Kukutai, CEO of San Francisco-based Plenty. This ambitious return on investment highlights the potential profitability of vertical farming despite its high initial costs.

Pre-Sale Agreement with Driscoll’s

Plenty said its United Arab Emirates farm’s strawberry production has been pre-sold to Driscoll’s, which dominates the market for berries in the region. This pre-sale agreement ensures a market for the farm’s produce and underscores the quality and demand for vertically farmed products.

Seeking New Financial Avenues

The partnership comes as the indoor farming sector seeks new financial avenues to sustain growth. In early 2022, Plenty raised $400 million at a valuation of $1.43 billion, according to PitchBook. To date, Plenty has raised over $940 million from investors, including Softbank and Walmart. This substantial backing from prominent investors highlights the growing confidence in Plenty’s business model and its potential to revolutionize agriculture.

Enhancing Food Security

“We’ve been looking to bring food security into the UAE. We want to offer a solution which was able to deal with the issue of scarce land and scarce water and could pivot to different crops if necessary,” said Mawarid CEO Kashif Shamsi. This strategic vision aligns with the UAE’s goals of enhancing food security and sustainability through innovative agricultural practices.

A Step Forward for Vertical Farming

The joint venture between Plenty and Mawarid represents a significant step forward for the vertical farming industry. By combining advanced technology with substantial financial backing, the partnership aims to address critical challenges in agriculture and create a sustainable future for food production in the Middle East. This initiative promises to provide high-quality produce and sets a precedent for future investments and innovations in vertical farming.