Vertical Farming Market Analysis By Structure, By Component (Hardware, Software, Services), By Growing Mechanism (Aeroponics, Hydroponics), By Crop Category (Fruits Vegetables, & Herbs, Flowers & Ornamentals) And Segment Forecasts, 2023 - 2030

Report Overview

The global vertical farming market size was valued at USD 5,894.4 million in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 20.1% from 2023 to 2030. Market growth is attributed to the growing adoption of environment-friendly production of fruits and vegetables. Unprecedented growth of the global population has increased the demand for urban agriculture.

Vertical farming is the practice of producing food in vertically stacked layers, such as in a used warehouse, skyscraper, or shipping container. Organic foods are perceived as healthier, more nutritious, safer, and more environmentally friendly. A critical factor that influences demand for organic food is the food purchasing behavior of consumers, which is essential for producers, policymakers, and suppliers to implement successful marketing strategies.

Obesity and heart diseases are prevalent health-related issues among consumers. Furthermore, growing depletion of groundwater and changing climatic conditions have urged traditional growers to adopt alternate farming methods. Increasing consumer concerns about health and the abovementioned factors are likely to elevate industry demand.

Unlike traditional farming, indoor farming can produce crops throughout the year, which results in increased productivity. Furthermore, indoor farming can protect crops from extreme weather conditions through the usage of techniques such as controlled environment agriculture technology, where facilities use artificial environmental control, control of light, and fertigation.

Increasing demand for high-quality food, independent agriculture techniques, and growing urbanization are some of the critical factors responsible for market growth. These factors have increased the requirement for food. Demand for food is expected to witness significant growth with a growing population by 2030. The adoption of vertical cultivation techniques allows consumers to grow crops in a warehouse or a multi-story building.

Market Dynamics

The growth of the vertical farming market is attributed to factors such as steady population growth, government incentives, limited availability of cultivable land, and the increasing demand for high-quality and fresh food. Moreover, the increasing consumer demand for organic food is positively impacting the growth of the vertical farming market, creating favorable business opportunities. With consumers placing a higher value on organic products, vertical farming is a viable solution to meet this demand.

Vertical farms are becoming technologically advanced, with the use of LED lights and automated control systems to tailor to the growing environment. Several vertical farm service providers are locating their facilities near urban hubs to capitalize on the increasing demand for local food. Therefore, becoming increasingly capital-intensive, along with using venture funding and other sources to build the infrastructure, is necessary to compete in the current market. Various industries, particularly food & beverage, were negatively impacted by the labor shortage and supply chain disruption. However, the COVID-19 outbreak created several opportunities for the vertical farming sector. Urban agriculture has become more popular because of the pandemic. For instance, East Japan Railway Company and Infarm joined in February 2020 to supply fresh food cultivated and gathered in retail outlets. These new developments are expected to provide future growth opportunities in these countries.

Component Insights

On the basis of components, vertical farming market is segmented into hardware, software, and services. The hardware segment accounted for the largest market share in 2022. Hardware plays a significant role in maintaining an environment in vertical farming. The segment is further categorized into lighting, hydroponic components, climate control, and sensors. The lighting segment led the market and accounted for more than 44% of global hardware revenue in 2022. A large share of the lighting segment can be attributed to the dependence of vertical farms on artificial lighting. Artificial lights provide sufficient light intensities required for crop growth. The climate control segment is expected to register the highest CAGR of 27.0% over forecast period. Increasing adoption of hydroponic components by farmers to minimize weight load and infrastructure needed to support equipment is anticipated to drive demand for hydroponic components.

Climate control is a kind of agriculture where plants are grown inside a greenhouse under a controlled environment that allows growers to maintain and monitor proper supply of light, carbon dioxide, water, humidity, pH levels, and nutrients for crop growth. The main aim of climate control farming is to facilitate protection and maintain optimum growth conditions throughout the development period of the crop. In many cases, climate-controlled farming is used to ensure that plants receive optimal nutrients for their growth.

Farming with the help of lighting technology ensures consistent plant growth by reducing heat stress on the root zone and providing uniform lighting. The use of LED lighting technology acts as a supplementary light source to the sun and ensures increased productivity with minimum power usage. Sensors enable comprehensive monitoring of the external environment and crop conditions. Various sensors, such as nutrient sensors, humidity sensors, and light sensors, are used to monitor crop growth. Monitoring also enables notification of changes and alerts.

Automation in vertical farming aims at minimizing time to market, reducing distribution, production, and environmental costs, and standardizing high quality. IoT has become a mainstream technology that drives several industries, such as transportation, manufacturing, and agriculture. The proliferation of IoT has revolutionized the agriculture industry.

Furthermore, the software segment is expected to exhibit a CAGR of 22.2% from 2023 to 2030, owing to upcoming trends in technologies and farming practices. Software may identify growers, crop batch, land or field, and supplier information for fruits and vegetables. Since cloud-based software gathers millions of data points in real-time that can be analyzed with machine learning techniques to ascertain how changes in specific environmental parameters affect the yield and flavor of finished products, it is anticipated that the market will grow significantly in years to come.

Growing Mechanism Insights

The Hydroponics segment registered the largest market share in 2022 and is expected to remain dominant between 2023 and 2030. Hydroponics is a popular growth mechanism due to low installation costs and ease of operations. It is a method of growing plants without soil, where soil is replaced by mineral solution inserted around plant roots. Additionally, the hydroponics method removes the risk of soil organisms causing diseases.

Growing awareness among consumers regarding the effects of pesticides is expected to boost demand for hydroponics. Hydroponically grown plants produce greater yields than similar plants grown in soil because of proper control over nutrients. In addition, plant roots are submerged under a chemical solution and checked periodically to ensure appropriate chemical composition is maintained for growth.

The Aquaponics segment is anticipated to gain significant market share over the forecast period. Aquaponics is an integration of hydroponics and aquaculture, which eliminates the need for harmful chemicals for cultivation. Plants such as lettuce, chives, peppers, kale, mint, cucumbers, and peas are grown through aquaponics. Water used in aquaponics systems contains fish waste that becomes nutrient-rich and increases crop production time. This creates a sustainable natural system, which eliminates the need for chemicals to produce food.

The Aeroponics segment is anticipated to witness considerable growth over the forecast period. This system is similar to hydroponics as neither method uses soil to grow plants. However, in aeroponics, there is no need for a growing medium as the roots of plants are hung in a dark chamber and sprayed with nutrient-rich solution periodically.

Crop Category Insights

The fruits, vegetables, & herbs segment registered the largest market share in 2022 and is expected to remain dominant between 2023 and 2030. Increasing cultivation of commonly grown fruits and vegetables in vertical farming is driving segment growth. Crops grown in vertical farming provide maximum profit to companies involved in their cultivation. At the same time, vertical farming improves biodiversity as it does not cause land disturbances. As such, vertical farming is in high demand for growing different types of crops. Further, fruits, vegetables, & herbs are segmented into tomato, lettuce, bell, chili peppers, strawberry, cucumber, leafy greens (excluding lettuce), herbs, and others. Among which tomatoes segment led the market and accounted for more than 24% of global fruits, vegetables, & herbs revenue in 2022. This large share is attributed to the high average demand for tomatoes in all regions compared to other crops such as lettuce, leafy greens, peppers, cucumbers, herbs, and so on. Some of the most commonly grown vegetables, herbs, and fruits across different regions include strawberries, lettuce, bell, chili peppers, tomato, cucumber, and leafy greens, among others. One of the important factors behind growing any crop in vertical farming is to validate the economic viability of that crop, which ensures that the company is making a large amount of money from its cultivation.

Similarly, the time taken for crops to grow fully is one of the criteria because some vegetables like lettuce and mint grow fast, whereas herbs and some fruiting crops take more time to grow but can have higher margins than many other plants. As a farmer, it is imperative to make sure that we can sell what we grow, and production costs should not be too high. In order to make this decision, the kind of crops also plays a very vital role in the feasibility study of vertical farming. Lettuces have shown consistent demand globally that has enhanced its cultivation.

The flowers and ornamentals segment is anticipated to grow with a significant CAGR during the forecast period. Increasing usage of flowers and ornamentals for decorative and aesthetic purposes is anticipated to boost market growth. Also, vertical farming has gained popularity in growing edible flowers, which include marigolds, matthiol, cloves, and snapdragons. The segment has been further segregated into perennials, annuals, and ornamentals. Ornamentals flowers held the largest market share in 2022, owing to increasing sales.

Structure Insights

The shipping container segment dominated the market with a share of about 53.32% in 2022 and is expected to remain dominant between 2023 and 2030. This growth is attributed to the ability of structure to help grow crops irrespective of geographic location. One of the primary benefits of container-based farming is that container farms are easy to transport, and one doesn't require a large piece of land or dedicated building to start cultivating.

Moreover, the price of shipping containers decreases with increased competition because the cost of acquiring used containers is relatively less, which gives other companies an opportunity to enter the market space. However, low comparative output and antagonism between light, heat, and layout are some of the drawbacks of such kind of agriculture.

Factors such as growing technological advancements and increasing penetration of precision farming are anticipated to drive shipping container segment over the forecast period. A building-based segment is widely accepted in Japan, China, and other Asian countries, and it is the fastest-growing segment in terms of revenue owing to its growing acceptance in the region. Building-based farming helps minimize cultivation costs and requires larger farming areas than single farming land, hence ensuring food security.

Shipping container-based farming uses 95% less water than traditional cultivation with drip irrigation. Shipping containers are easy to modify, stackable, durable, and can be recycled and refurbished at lower cost. Additionally, the surplus availability of unused shipping containers across the globe is likely to influence segment growth over the forecast period.

Regional Insights

In terms of revenue, Asia Pacific dominated the vertical farming market in 2022 with a share of approximately 28.04% and is expected to remain dominant between 2023 and 2030. Growing awareness regarding the importance of alternative farming owing to less availability of fertile agricultural land and increasing population in the region is the key factor anticipated to spur the demand.

Europe is anticipated to witness significant growth over a projected period owing to the growing expansion of genetically modified crop technology. Furthermore, the increasing adoption of nanotechnology and robotics for farming enhances regional market demand. The use of nanotechnology helps in improving food packaging and enhancing disease and pest control.

The European Environment Agency has carried out several initiatives to build vertical farms for the purpose of overcoming challenges of continuous population growth and climate change as well as producing food in an environment-unfriendly way. This has resulted in a rise in market demand in the region.

The growing urban population and commercialization of indoor farming are anticipated to drive demand in Africa. However, lack of financial resources to build modern vertical farms and limited access to water and land are expected to restrain regional market growth. To overcome such challenges, various models followed in the region include vertically stacked wooden crates and sack gardens.

Key Companies & Market Share Insights

Key market players are involved in strategies such as partnerships, business expansions, new product developments, and contracts to expand their market share. The players are investing in R&D for product innovation and enhancement. They are also utilizing the improved database of the customers, products, and processes to achieve the requisite transformation necessary for sustaining in this highly competitive market. The market is primarily dominated by lighting providers accounting for a major share. Some prominent players in the global vertical farming market include:

• AeroFarms (U.S.)

• Illumitex, Inc. (U.S.)

• American Hydroponics (U.S.)

• Agrilution GmbH

• Brightfarms Inc.

• Everlight Electronics Co., Ltd.

• Freight Farms

• GrowUp Urban Farms Ltd.

• Green Sense Farms, LLC

• Vertical Farm Systems

Recent Development

• In March 2023, BrightFarms, a pioneer in the indoor farming industry, is growing by establishing four additional regional greenhouse centers that introduce sustainably farmed leafy greens to a broader audience in the Eastern and Central United States. The newly built greenhouse centers are expected to meet the rising demand for organic food and initiate distribution to retailers by 2024. With this expansion, the company is expecting 10x revenue growth by 2024.

• In February 2023, AeroFarms and Public Investment Fund (PIF), a wealth funding body of Saudi Arabia, announced a joint venture to establish indoor vertical farms in the Middle East and Saudi Arabia.

Vertical Farming Market Report Scope

Segments Covered in the Report

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends and opportunities in each of the sub-segments from 2017 to 2030. For the purpose of this study, Grand View Research has segmented the global vertical farming market report based on structure, component, growing mechanism, crop category, and region:

• Structure Outlook (Revenue, USD Million, 2017 - 2030)

  • Shipping Container

  • Building-based

• Component Outlook (Revenue, USD Million, 2017 - 2030)

  • Hardware

    • Lighting

    • Hydroponic components

    • Climate control

    • Sensors

  • Software

  • Services

    • System Integration & Consulting

    • Managed Services

    • Assisted Professional Services

• Growing Mechanism Outlook (Revenue, USD Million, 2017 - 2030)

  • Hydroponics

  • Aeroponics

  • Aquaponics

• Crop Category Outlook (Revenue, USD Million, 2017 - 2030)

  • Fruits Vegetables, & Herbs

    • Tomato

    • Lettuce

    • Bell & Chili Peppers

    • Strawberry

    • Cucumber

    • Leafy Greens (excluding lettuce)

    • Herbs

    • Others

  • Flowers & Ornamentals

    • Perennials

    • Annuals

    • Ornamentals

  • Others (Cannabis, Microgreens)

• Regional Outlook (Revenue, USD Million, 2017 - 2030)

  • North America

    • U.S.

    • Canada

    • Mexico

  • Europe

    • Germany

    • U.K.

    • France

    • Italy

    • Spain

  • Asia Pacific

    • China

    • Japan

    • India

    • Singapore

    • South Korea

  • South America

    • Brazil

  • Middle East and Africa (MEA)