Indoor Farming Market

Market Overview

The global indoor farming market size was valued at USD 18,160.9 million in 2021. It is expected to reach USD 34,240.09 by 2030, growing at a CAGR of 7.3% during the forecast period (2022–2030). The practice of cultivating crops indoors in a controlled environment is referred to as indoor farming. The cultivation of plants in layers that are piled vertically is referred to as "vertical farming." It frequently uses soilless farming techniques, including hydroponics, aquaponics, and aeroponics, as well as controlled-environment agriculture, the goal of which is to achieve the highest possible rate of plant development.

As the global population is expected to exceed 9.8 billion by 2050 and global warming threatens crop nutrient depletion, indoor farming has become crucial to the food supply chain. In these circumstances, indoor agriculture has shown to be a productive way to produce more food with fewer resources than conventional farming, independent of the availability of arable land and the external climate.

Market Dynamics

Market Driving Factors

Minute Impact Fluctuating Climatic Conditions

Both agricultural productivity and area are influenced by climate. The integrity of food supplies and goods produced worldwide could be jeopardized by climate change. CO₂ stimulates plant growth, but this comes at the expense of crop nutrition. Higher CO₂ levels can increase plant growth, but changing temperatures, ozone, and water and nutrient constraints may counteract this. Overheating and a lack of water and nutrients can reduce crop yields. Elevated CO₂ reduces alfalfa and soybean protein and nitrogen content. Environmental changes can affect flood and drought crop and livestock losses, and indoor farming mitigates climate change. Traditional farmers have less environmental control than indoor farmers. Indoor farming saves water and nutrients and has a small footprint. Growing plants indoors mitigates the impacts of weather and seasonality on crop yield and enables year-round agricultural production, which drives market demand.

Growing Demand for Nutritious Food

People are adopting healthy, active lifestyles and pesticide-free produce globally. The demand for these products has increased indoor farming as new system integrations help raise yields, efficiencies, and costs. According to the UN, ten billion people will live in cities by 2050. This growth, combined with rising incomes in developing countries, has led to dietary changes such as increased demand for high-protein meats. Global food demand will rise from 59% to 98% by 2050.

With increasing technology and health awareness, consumers want nuanced health and wellness, ethics, and environmental claims in their food. They want food to be healthy and are willing to pay more for it. Millennials globally are exhibiting this trend. Changing customer behaviors and willingness to pay more for healthy food drive market growth. In Australia, the Commonwealth Department of Health and Ageing developed the Australian Guide to Healthy Eating and promoted programs like the Stephanie Alexander Kitchen Garden National Program. Increasing demand for nutritious food will drive the global market share.

Market Restraining Factors

Large Upfront Investments

The amount of energy required to grow produce and the economic cost of production affect the price of indoor farming. Large indoor farms spent up to 25% of their operating budget on energy, while small farms spent 12%. Indoor farming warehouses replaced sunlight with LED lights. Air conditioners and heaters control the temperature instead of natural air, leading to high initial investments. Small indoor farms and beginner farmers can't afford the hardware to control lighting, CO2 levels, nutrient reservoirs, and plumbing.

Indoor farming is energy-intensive because it requires virtual light, moisture, and climate. Indoor lettuce production requires ten times more electricity per growing area than in a heated greenhouse in temperate climates, which affects indoor farming's economics. In the U.S., the price of electricity needed to reach breakeven is USD 3-5 kW/h, while in Japan, it's even higher. High electricity costs for indoor farming hinder the industry's growth. Vertical farming requires significant work, and both small and large indoor farms spend over half of their operating budgets on personnel costs. Aeroponic farms use advanced water recapture systems that reduce water use by 95% but are expensive to install and maintain indoors. High initial investment costs are anticipated to hinder the growth of the global market during the study period.

Market Opportunities

Technological Advancements

Irradiation, biosolids, and genetically modified organisms are not used in indoor farming. Customers are willing to pay more for indoor-grown crops because they are locally grown, durable, safer, tastier, and of higher quality than crops from greenhouses or conventional farms. Indoor farming products have the attention of world-renowned chefs. Grow from Amsterdam is an indoor farm that grows greens for chefs quickly and in various ways. The rapid adaption of this sort helps drive the expansion of the sector.

Large companies and investors fund indoor farming because of its numerous benefits. Plenty, a US vertical farming startup, received more than USD 200 million in 2017 to build a 100,000-square-foot farm. Social media trends can be an opportunity for indoor farming. Millennials' recent trend of going vegan (no meat, milk, eggs, only vegetables) is driving market growth. Rise of Vegan in 2018 reports a 33% increase in vegan food delivery options in 15 countries. This allows the indoor farm to sell vegan vegetables and grow its market. Increasing technological innovations and R&D, changing consumer preferences, and funding from large companies and investors may boost market growth over the forecast period.

Regional Analysis

North America Dominates the Global Market

By region, the global indoor farming market is segmented into North America, Europe, Asia-Pacific, and Africa.

North America is the largest global market shareholder and is expected to grow at a CAGR of 7.0% during the forecast period. The US greenhouse horticulture and agriculture make it one of North America's largest markets for hydroponic systems. Hydroponics market growth depends on cost-effective production systems. Renovating vacant warehouses, derelict buildings, and high rises in New York, Chicago, and Milwaukee has increased fresh-grown foods. Opportunities will present themselves when food security and availability improve. Vertical farming should benefit from increased investment from businesses.

The European indoor farming market share is anticipated to grow at a CAGR of 7.50%, generating USD 8,749.028 million during the forecast period. Germany's greenhouses have evolved from simply covered rows of open-field crops to sophisticated plant factories. Germany leads in smart greenhouse hydroponics. Hydroponics has longer harvest cycles than traditional farming, increasing yield. Hamburg startups grow lettuce and herbs in warehouses using artificial light. Berlin's InFarm has raised USD 35 million for indoor farming. The company reduced the gap between customers and producers by installing vertical farms in German grocery stores.

China's changing climate led to hydroponics which uses LED lighting, heat pumps, and Active Heat Storage (AHS). Anxi-based Sanan Sino-Science is developing an automated smart farm factory. Indoors, temperature, water, humidity, nutrients, and LEDs replace sunlight. The intelligent factory can produce 3,000 to 3,500 tons of leafy greens annually. China's technological solid base and increased pace of clever factory construction will boost indoor farming.

South Africa's climate is ideal for agriculture, but lack of irrigation water and soil diseases hinder this country's fruit and vegetable market. South Africa's number of indoor farms has increased. Consumers spend more on healthy, pesticide-free food. Rooftop farming supplies crops year-round with fewer resources high startup costs and unreliable energy limit indoor farming in the country. South Africa's eThekwini Municipality approved a hydroponic (tunnel) farm in 2021 to attract private sector investment. Since 2018, the municipality, provincial government, and other stakeholders have invested R 96.1 million in farmers.

Segmental Analysis

The global indoor farming market is segmented by the growing system, facility, and crop type.

On the Basis of Growing Systems

By growing systems, the global market is segmented into aeroponics, hydroponics, aquaponics, soil-based, and hybrid.

Soil-based segment owns the largest market share and is expected to grow at a CAGR of 7.5% during the forecast period. Soil-based farming produces more pesticide-free crops than traditional farming. This can be mounted on bunks, mobile homes, or shipping containers. Using this method, farmers can maximize crop yields while decreasing their land footprint. It includes cultivating leafy greens, root vegetables, onions, leeks, scallions, microgreens, tomatoes, ginger, and mandarin oranges. Worms aerate the soil in a soil-based system, and a drip system recirculates drainage. An Israeli ag-tech company developed geophonic vertical farming, a soil-based growing platform embedded in a container that grows crops vertically. There is no need for expertise in hydroponics while working with soil-based systems. More than 40,000 indoor farms, including soil-based methods, exist in the US, according to the USDA. Soil-based farming is widespread because it saves money and increases plant harvesting.

Hydroponics can produce food without fertile land, using nutrient and oxygen-rich water to grow plants without soil. It takes forty-five days to harvest lettuce, basil, and baby spinach, but the conventional growing time is ninety days, and these plants require ninety percent less water. In hydroponic greenhouses located in Canada, vegetables such as peppers, tomatoes, and cucumbers are cultivated. The growing population and limited resources will drive the global hydroponics market.

On the Basis of Facility Type

By facility type, the global market is segmented into glass or poly greenhouses, indoor vertical farms, container farms, indoor deep-water culture systems, and other facility types.

The glass or poly greenhouses segment owns the largest market share and is expected to grow at a CAGR of 7.3% during the forecast period. Capsicum, green chili, beans, tomatoes, strawberries, and watermelons grow in Italy and Spain's greenhouses. Indoor farming in the United States is primarily done in greenhouses. The annual revenue generated by greenhouses covering 4,000 hectares is USD 2.8 billion. Numerous greenhouses are found in the northeast, south, and southwest rural areas. Half of the world's greenhouse vegetables are produced in Asia, with China, Japan, South Korea, and Taiwan having the most greenhouses.

On the Basis of Crop Type

By crop type, the global market is segmented into fruits and vegetables, herbs and microgreens, flowers and ornamentals, and other crop types.

The fruits and vegetable segment dominates the market and is expected to grow at a CAGR of 7.3% during the forecast period. In 2016, indoor lettuce production averaged 340,000 pounds per acre, compared to 30,000 in conventional farming. The 11-fold increase in lettuce yield drives the market growth. Hydroponic lettuce is pesticide-free and water-efficient, which boosts global demand for hydroponic lettuce. Hydroponic lettuce is harvested every 35 days year-round and has quick production, year-round availability, and consistent product attributes. Domestic lettuce dominates the US market.

Hydroponic lettuce's market will grow due to its rich taste, texture, and pesticide-free nature. Healthy eating has boosted the demand for herbs and microgreens in North America. The majority of indoor farms in the United States produce basil, cilantro, and parsley for use in restaurants, grocery shops, and supermarkets. Indoor farming grows as Europeans buy more sustainably produced goods. Locals grow basil, parsley, coriander, rosemary, thyme, mint, chives, and dill. Indoor herb farms are being built to meet regional demand. Asia-Pacific herbs include coriander and mint, and high-tech farms supply supermarkets and restaurants with fresh herbs. The expansion's high-tech indoor farm will supply fresh herbs.

Recent Developments

• August 2022, AeroFarms Microgreens + Baby Watercress, AeroFarms is expanding its retail presence and availability. The award-winning greens are now available across 160 stores and the Fresh Market stores spanning 22 states.