The Lettuce Revolution

Who would’ve thought this would be the title of a blog post? In the last few years, we’ve seen significant changes in the market for — lettuce. We’ve observed three trends:

(1) Shift to local production: urban population centers consume the most lettuce, but lettuce is mostly grown far away from urban areas. More than 90% of the US lettuce supply is grown in California and Arizona. Now, several companies – including Go Green Agriculture (http://www.gogreenagriculture.com) and BrightFarms (http://www.brightfarms.com) — are growing lettuce closer to where it’s consumed. Go Green has established a system of small-scale hydroponic facilities. BrightFarms is going even more local, with a deal with Gristedes supermarkets in New York CIty to grow lettuce right on supermarket roofs.

Go Green's model for distributed lettuce production

Go Green’s model for distributed lettuce production

(2) Shift to less intensive production: hydroponics, and now “aeroponics”, are all the rage with lettuce. Whereas hydroponic agriculture uses nutrient-rich water as the growing media, aeroponics uses almost no growth media (just air and nutrient mist). In addition to the aforementioned Go Green and Bright Farms, other companies to get their name out there are Aero Farms (http://www.aerofarms.com) and Pod Ponics (http://www.podponics.com).

(3) New “varieties”: now commonly available in California are lettuces with the root balls attached, which preserves freshness and shelf life. I can personally attest to this — I left such a head of lettuce in my fridge for two weeks and when I went to use the lettuce, it was fresher than if I had bought a regular head of lettuce from my grocery store that day.

"Living" lettuce with roots attached, available (soon) at a grocery store near you.

“Living” lettuce with roots attached, available (soon) at a grocery store near you.

Also, recently Monsanto released “Frescada”, a cross between iceberg and romaine that’s packed with vitamins. Unlike Monsanto’s corn and soybean seeds, Frescada lettuce is not genetically modified.

So why the all the focus on lettuce recently? Truthfully, we’re not sure. We don’t see cost being a major driver — we don’t know of people who have been complaining about the price of leafy greens (aside from President Obama — http://lat.ms/dzsZqm). We’re not even sure if hydro- or aeroponics will produce a lower cost lettuce.

Our guess is that the Lettuce Revolution is largely predicated on the belief that consumers want higher-quality and more sustainably-grown lettuces. Today, lettuce grown in the traditional manner can be of mixed quality. No one likes limp, slimy lettuce with browning edges. These hydro/aeroponic companies are certainly making a great product that uses far less chemicals and water than the lettuces grown outdoors in the California and Arizona deserts.

Another noticeable thing about the Lettuce Revolution — investors are getting on board. A few of the companies mentioned in this post have received VC funding. We’ve been a bit surprised by that. VCs typically like to say that they want to fund companies that can be “huge” (definition never clear when you talk with a VC), with an “enduring competitive advantage” (jargon that’s been forced down my throat many times). Based on some USDA data, the domestic market for iceberg and leafy lettuces are approximately $1 billion each. That’s nothing to sneeze at, but I wouldn’t call that huge. In addition, it already seems like there are low barriers to entry and a lack of differentiation in technologies from one new lettuce company to another.

Monsanto's new lettuce - Frescada

Monsanto’s new lettuce – Frescada

Lettuce is growing in popularity outside of the US, in places where it might be difficult to otherwise grow lettuce (i.e., the Middle East). The core hydro/aeroponic technologies are also extendable into other vegetables.

But still — VC funding for lettuce companies? No knock on the lettuce companies — they have some pretty significant talent. I personally met the young founder of Go Green Agriculture (a sharp, charismatic guy) and I recently learned that a very smart college classmate of mine with an investment banking background has joined Bright Farms.

We’re not sure how this will all play out. Consumers definitely stand to gain from the Lettuce Revolution, but I’m not sure if investors will. Lettuce farmers in California and Arizona are most at risk from the Lettuce Revolution. We could easily find that, in ten years, more lettuce is grown through hydro and aeroponics than in outdoor fields.

One thought on “The Lettuce Revolution

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s