Interview: Michael Guttman, Director of Sustainable Development for Kennett Township on indoor agriculture
Michael Guttman is Director of Sustainable Development for Kennett Township, a small municipality in southeastern Pennsylvania, about an hour southwest of Philadelphia. The Kennett area is unusual because it is the center of the US mushroom industry, and grows, packs, and ships 50% of the US fresh mushroom crop. That amounts to about 500M pounds per year, or about 1.5M pounds per day, 365 days a year. Since all of that is grown indoors in vertical farms, this makes Kennett the largest concentration of vertical farming in the world.
Indoor AgTech caught up with Michael to find out more about Kennett’s current initiative to diversify the indoor agriculture industry by introducing the production and distribution of other indoor crops, such as leafy greens.
First, please tell us a little about the history of indoor mushroom production in Kennett.
Commercial-level mushroom cultivation was first introduced to the US in the Kennett area around the late 19th century – first as a side business for horticulture greenhouses, one of our main businesses at the time. With the introduction of commercial canning to provide produce a longer shelf life, mushrooms could be shipped worldwide, and soon became a far more profitable crop than fresh flowers. Around 1900, the first purpose-built vertical farms were constructed, and Kennett rapidly came to dominate the industry, producing and canning 90% of the US crop until about 1960. By then, competitors around the world started eating into the canned market, so Kennett successfully shifted its focus to the fresh mushroom market in the US, where it had relatively few competitors. Today, Kennett’s massive production facilities are matched by its equally massive and highly sophisticated distribution and logistics facilities, delivering 1.5M pounds of fresh products to buyers across the country every day, usually within 48 hours of picking, for a delivered wholesale price of about $1 per pound.
Why does Kennett want to diversify into other indoor crops, and why do you think this will be successful?
Today, the total US production of other indoor crops is tiny compared to our mushroom industry, and most producers, wherever they are, have little trouble selling their daily production locally year round. Their more serious problem is getting the cost of production down, and to do so effectively they will inevitably have to scale up production and distribution dramatically. That’s already happening, and it’s likely to accelerate over the next decade as market demand grows. As they attempt to scale, those producers will ultimately need the kind of infrastructure Kennett already has. Of course they can try to build it themselves, but we offer a much better alternative: with modest tweaking, our highly scalable infrastructure can already accommodate most of their needs for the foreseeable future. The devil is always in the details, but once we figure these out, it should be easy to sell larger-scale indoor producers on the idea of locating where they can immediately leverage an already built and very scalable infrastructure for minimal additional investment. In the long run, we believe the market for other indoor-grown produce is likely to exceed that of mushrooms, so we would like to capture that economic growth, rather than see it go elsewhere.
Most other indoor crops require light to grow and, on top of the costs of lighting, they face stiff competition from conventional outdoor growers, where light comes for free and labor costs may be less. On the other hand, I’ll bet you’ve never seen an outdoor field of mushrooms, and that’s because growing them in commercial quantities requires highly controlled conditions only possible to achieve indoors. And, of course, they don’t require light. But beyond that, the technologies and industrial processes to grow and distribute almost every indoor produce crop are remarkably similar. Both the differences and similarities work to our advantage in attracting producers of new indoor agriculture crops to Kennett. The competition faced by most other crops will force them to scale faster and look for existing infrastructure they can leverage, which Kennett already has. On the other hand, the similarities will make integrating into Kennett’s infrastructure that much easier. For most produce crops, we even market, sell and ship to the exact same customers!
There’s no particular reason cannabis could not be grown and processed in Kennett, and there might be some advantages for cannabis facilities to be located close to other indoor agriculture facilities. However, today cannabis is a highly regulated market, with each state setting its own rules, and essentially defining its own unique marketplace. This doesn’t match our predominant business model of producing large quantities of fresh produce for daily delivery across the US, so right now it’s not a major focus of our diversification initiative. However, there are other crops for the pharmaceutical and nutraceutical industries with a national reach that might work very well for us as niche markets.
We noticed that a major component of Kennett’s Indoor Agriculture initiative is to create an international Center of Excellence (COE) for Indoor Agriculture in Kennett. Please tell us more about this.
Because the Kennett area dominates the US mushroom industry, we’ve tended to take for granted that we are also the de facto center for research, training, standards and advocacy for that industry, and how important it is to have such a center. However, as we researched the newly emerging ‘green’ indoor agriculture industry, both nationally and internationally, we quickly realized that it has no such center, and none clearly seems to be emerging. We realized we could help accelerate the industry’s growth not only by leveraging our existing production and distribution infrastructure, but also our expertise in all these other important areas. After some research, we decided the best way to do this is to create an international Center of Excellence (COE) for the whole indoor agriculture industry, to be located in Kennett. This would not only offer a huge leg up for the new parts of the industry, but also benefit our own existing mushroom industry. The COE also offers Kennett the opportunity to work with all the players in the industry, not just the producers who might decide to locate their growing operations here. Right now we are working out the details of how the COE will work, so you can expect some relevant announcements in the near future.
To date, most of the focus has been on growing and growing technologies. But that’s just one piece of the puzzle. We need more people to focus on how the overall business model works, and what kind of infrastructure we will need to support both production and distribution on a large scale across the country and the world. This includes dealing with advocacy, regulation, and finance as well. You don’t have to be a grower or plant scientist to make a significant contribution to this field.
Michael Guttman will be speaking at the Indoor AgTech Innovation Summit in New York, June 20-21, 2018 on Nurturing the Entrepreneurial Spirit: Indoor Farming for Sustainable Communities.