Inside AppHarvest

Features - Cover Story

Vertical farming grows to new heights with innovative technology and aggressive financing in Kentucky.

February 25, 2021

Photos courtesy of AppHarvest

Just a couple of hours outside Louisville, Kentucky, in the small city of Morehead, one of the biggest and most ambitious vertical farm companies in the U.S. is reaping what it sowed four years ago. Morehead only has about 7,000 residents but it’s home to hundreds of thousands of tomato plants that are thriving in a very unique vertical farm at AppHarvest’s first growing facility.

The 60-acre operation, which opened in October, is currently growing beefsteak tomatoes and will soon also be harvesting tomatoes on the vine.

The company’s goal is to provide fresher, healthier, tastier food to Americans while also maintaining high standards of environmental stewardship, employee care and sustainable growth. And in January, AppHarvest’s first crop of beefsteak tomatoes hit retail shelves in stores like Kroger, Publix, Walmart, Food City and Meijer, where they are co-branded with Sunset Grown.

“I’ve long known that the consumer is ready and if you could just give the consumer a better product … the consumer will determine the future for the better,” says David Lee, board member and president.

The flagship AppHarvest facility is expected to produce about 45 million pounds of tomatoes each year from about 720,000 beefsteak and vine tomato plants. “We look forward to every American having the ability to access fresh, healthy, affordable fruits and vegetables,” says Jonathan Webb, founder and CEO.

The Morehead location is ideal for the company’s first facility thanks to abundant rainfall and the fact that shipments can reach 70% of the U.S. in one day’s drive, Webb says. “So to build these facilities in an area where we can collect all that rain water, package it up into a fruit vegetable and send it out to the consumers is critically important in the long-term resiliency of this company.”

The Kentucky location is also important as the company is focused on building “operations and large-scale indoor farms in economically disadvantaged areas of Appalachia,” says Travis Parman, chief communications officer.

AppHarvest follows social distance guidelines at its first vertical farm.

Eastern Kentucky was once coal country, but AppHarvest is hoping to transform it into an area known for feeding the U.S. with healthy produce. “Those same men and women that powered the country in the coal mines are working with us here in this facility,” Webb says.

AppHarvest’s crops are grown from naturally bred seeds that were optimized for both flavor and nutrients, which Webb says sets them apart from most tomatoes you’ll find at the grocery store. “Most produce is bred for transportation, so you don’t get the nutrient density that you get with our tomatoes.”

And harvesting produce at peak ripeness and shipping it out quickly means less overall wear and tear on the crops, says Jackie Roberts, chief sustainability officer, noting that 30% to 40% of what we grow never makes it to the grocery store shelves due to supply chain issues.

Roberts predicts there are only 50 to 70 years worth of quality topsoil left for human agriculture. “We need new approaches to growing food that are most resource efficient,” she says. “One other aspect of being resource efficient is the challenge of food waste. When you grow and ship a long way, there’s a lot of loss along that system. Being in Appalachia, being close to 70% of the U.S. population within a day’s drive means less travel time.”

The operation’s tomatoes will be comparable in price to traditionally grown tomatoes, which board member Martha Stewart says is part of what’s exciting about the crops. “I think we all want better for us, for our families, for our friends. We want food that is sustainable, free of chemicals. We want food that tastes really good and that we can afford. Organic food nowadays is so expensive.”

“People can vote with their dollars and vote at the grocery store and decide what [they] want to put on the table,” Webb adds.

AppHarvest's first shipment of tomatoes left the greenhouse on Feb. 1. The vertical farm is expected to produce 45 million pounds of tomatoes each year.

Sustainable growing practices

“Our world has a long way to go to rebuilding our food systems,” Webb says. “COVID has highlighted that in many ways but the good things is … the private sector can lead in many of these problems facing our world and we can have a good, tasty product that we can get to every consumer, but we have to use technology quickly to rebuild American farming and the global food system.”

AppHarvest's plants are grown in the soilless substrate rockwool, which consists of fine, granular calcium carbonate. This gives the roots room to grow and absorb water and nutrients efficiently. They then grow about 45 feet high and crews wrap them as they grow. Each day, the produce is harvested and shipped out to grocery store shelves.

The company’s growing practices use 90% less water than traditional field-grown crops and yield 30% more per acre, Webb says. The non-GMO, chemical pesticide-free crops are also grown with 100% recycled rainwater.

To achieve a chemical pesticide-free crop, AppHarvest uses an integrated pest management and biological pest control. “I like to call it integrated pest management 2.0, where we really are focused on using different types of artificial intelligence, the skills of workers and training them to spot pests and disease early,” Roberts says.

She hopes that in addition to being efficient with resources, AppHarvest will reduce the runoff of fertilizers and pesticides into local waterways. “It’s really difficult to prevent,” she says.

Tomatoes at AppHarvest's Morehead facility grow about 45 feet high and are wrapped as they grow.

Technological advances

AppHarvest prides itself on its high-tech, eco-friendly growing practices. Some of the technology at the Morehead facility includes machine learning, artificial intelligence, robotics and more data-driven agriculture. From industrial software to sensors and lighting and humidity controls, the operation is leveraging tech developments.

“There are a lot of different technologies that are converging right now that will continue to evolve over the next decade,” Webb says.

It all starts with the water, Roberts says, noting that agriculture is consuming 70% to 80% of our ground and surface water. “So we need better solutions. How do we grow more food with less water?”

AppHarvest uses a closed loop system that captures rain water on the roof and stores it in a retention pond the size of 70 Olympic swimming pools. The water is then filtered through sand and UV light treatments before it heads into the greenhouse for irrigation.

AppHarvest uses sophisticatesd software to manage the vertical farm and large amount of inventory.

The water is constantly monitored for the nutrients vital to plant growth and nano bubbles are added to increase oxygen to the water. This allows the plants to better absorb nutrients in the water. “That makes a stronger plant that’s more disease resistant and it’s also one where we can build up nutrition,” Roberts says.

Financing for expansion

Unlike most greenhouse operations, AppHarvest has undergone an aggressive series of fundraising and financing to raise capital for its Morehead location and other planned facilities. It all began in 2019, when the company raised $520,000 through investment platform Harvest Returns.

On Feb. 1, the company completed its business combination with Novus Capital Corp., a publicly traded special purpose acquisition company, and started trading on the Nasdaq under new ticker symbols APPH and APPHW. The company's stock opened at $35.69 and by the afternoon, shares soared 44%. As a result, the Nasdaq temporarily halted trading due to the volatility. Trading resumed soon after and closed the day at $35.85. As of Feb. 15, the stock was trading at $33.26.

The company announced in September 2020 that it would combine with Novus Capital in order to go public. It initially sold for $10 a share with a $1 billion pro forma equity value.

As a result of the initial public offering, AppHarvest received about $475 million of gross proceeds, including $375 million from the common stock PIPE anchored by investors including Fidelity, Inclusive Capital and Novus Capital. The company says this provides $435 million in unrestricted cash, which will be used to fund operations, including building additional farms, supporting growth and other general corporate purposes.

Webb hopes that the private sector will help lead the charge to solve the world’s food issues. The company is not only publicly traded, but it’s one of few public Certified B Corporations listed. As a Certified B Corp, AppHarvest is legally required to consider the impact of their decisions on their workers, customers, suppliers, the community and the environment.

“Our take is over the next decade, every company — Fortune 500 to startups — every company in the world needs to be working toward these same goals that we’re talking about,” Webb says. “And if you’re not, you as a CEO should no longer be looking for quarterly earning calls and that’s it.”

As Webb says, it’s all a part of creating value among everyone, including the broader stakeholders, the environment, the community, the consumers — everyone the company impacts. “It’s harder on us as a company, but it’s the right thing to do. And at the end, for the investor, it’s a better return in the long run because you’re making sure your company is viable, relevant and resilient for decades to come.”

Providing healthy, nutritious food grown in an environmentally responsible way is AppHarvest's main mission.

What’s next?

While the company is focused on its Morehead location, it is also planning aggressive growth, building a 60-acre facility outside of Richmond, Kentucky, and a 15-acre leafy greens operation in Berea, Kentucky.

The company hopes to have a total of 12 farms in the central Appalachian region by the end of 2025. “And that means investment for important, long-term oriented investors. It means supply chain sophistication. It means looking eventually globally to solve the global problem, but today we’re focused on Appalachia,” Lee says.

Stewart believes the tomatoes from AppHarvest could go beyond fresh produce to have a place in prepared foods like sauces and soups as well. “We need to be making our prepared foods with this kind of produce as well as serving this kind of fresh produce to the customer,” she says.