The Vertical Farming Paradox: When High-Tech Dreams Collide with Cold, Hard Economics

We have seen a lot of ambition in this industry. Vertical farming promised a way to grow produce indoors, year-round, using less land and water. This vision attracts major investment. But you must face the facts. 

Two of the UK's leading vertical farming companies have collapsed. Vertical Future and Jones Food Company have both failed. Their stories show a painful truth. The technology is not the problem. The business models are. High-tech growing does not save you from simple economics.  

You can understand their collapse by examining a single, straightforward factor. It is a fundamental, unseen flaw.

The Problem: High Energy Costs

Your biggest operating cost is energy. A vertical farm operates in a controlled environment. It relies on artificial lights and climate control 24/7. You give up the sun, your most abundant source of free energy. This makes your business vulnerable to high electricity prices.  

In the UK and Europe, this cost is a serious barrier. The average commercial electricity price in the UK is about £0.22 per kWh. In mainland Europe, it is around €0.28 per kWh. These prices are two to three times higher than in the US and the Middle East.  

A typical vertical farm uses 38.8 kWh to produce one kilogram of produce. You can see how those costs compare.  

The data is clear. Your energy costs in the UK and Europe are two to three times higher than in other regions. For a business with thin margins, this is a barrier to profitability.  

Case Study: Two Failed Models

The failures of Vertical Future and Jones Food Company show two different approaches to the same problem.

Vertical Future: The Pivot That Did Not Work

Vertical Future started in 2016 by growing leafy greens. This model proved too limited. The company pivoted to a technology business. It sold automated systems and a software platform named DIANA. This pivot was an attempt to improve unit economics.

The company raised about £37 million in funding. It still posted losses of over £10 million. It tried to raise a fresh £60 million but failed. The company is now for sale on an insolvency market.

The pivot shows a common mistake. You cannot be a farmer and a technology company at the same time. It is difficult to master both capital-intensive disciplines.  

Jones Food Company: The Challenge of Scale

Jones Food Company was a different kind of pioneer. Ocado, a major UK grocer, acquired it in 2019. This gave JFC a major investor and a sales channel to retailers like Asda and Ocado.

The company operated two of Europe's largest vertical farms. It produced about one-third of the UK's cut basil. They were an "expensive proposition". It required constant funding to cover operating losses. Ocado provided £25 million in 2021 and another £3.65 million in 2023.

The company’s directors stated they would "require further cash support". JFC went into administration with £22 million in unpaid debts. A major backer could not make the business profitable and the unit economics simply did not work at scale.  

Table 1: Vertical Farming Company Profile Comparison

The Future: Lessons Learned and New Paths

The collapse of these companies is part of a larger trend. The industry is in a "shakeout" period. This is a normal part of a new industry's maturity cycle. This process is removing unsustainable business models from the market. What's broken is not the technology, but the business approach.  

The future of vertical farming belongs to companies that learn these lessons. You can succeed by following new trends.

• Focus on High-Value Crops: Move away from low-margin leafy greens. High-value crops like strawberries offer a better path to profitability.  

• Prioritize Energy Efficiency: You must find ways to reduce energy consumption. Consider hybrid systems that use both natural light and LEDs. Integrate renewable energy sources like solar power to offset electrical use.  

• Embrace Automation and AI: Use AI to optimize plant growth. Automation and robotics will reduce your labor costs and increase efficiency.  

How Agri Companies Can Thrive in the UK and EU

Despite high energy costs, some UK and EU-based companies are building viable businesses. They do it by addressing the core energy problem directly.

• Renewable Energy Partnerships: Some companies partner with renewable energy providers. They arrange a power purchase agreement to get a discount on electricity. Others co-locate farms next to sustainable energy sources to stabilize costs and reduce carbon emissions. GrowUp Farms, founded in 2013, addresses the energy challenge by locating its farm next to a sustainable power source.  

• Hybrid Systems and Technology: You can reduce energy consumption by using a hybrid approach. This combines vertical farming with traditional greenhouses to use natural light. Companies like Intelligent Growth Solutions (IGS), a pure technology vendor, create systems designed to be energy-efficient. IGS technology is reported to provide 50% power savings.  

• Long-Term Strategy: Fischer Farms, founded in 2017, is another UK example. It aims to prove its business model in the UK before expanding to countries with lower electricity costs. Fischer Farms plans to use 100% renewable energy for its second farm. Its goal is to become cost-competitive with herbs imported from the Mediterranean, despite the UK's high power costs.  

Conclusion

Vertical farming will not replace traditional agriculture. It will co-exist as a part of a more resilient food system. Its future depends on companies that build for profitability, not just for investment. The failures of Vertical Future and Jones Food Company provide a clear lesson.

They show that without a sound economic model, even the most innovative technology and significant capital will not guarantee success. The industry is now adapting, moving toward a more strategic approach rooted in economic reality.