Ultra Fresh and Super Local : The Future of Indoor AgTech in Finland
Netled and Pirkanmaa Coop represented Finland at the Indoor AgTech Innovation Summit to share their unique perspectives on this new and emerging technology and their unique partnership.
When it comes to food, consumers want it all: they want their food to taste great, be healthy and nutritious, readily available in abundant supply, locally grown, fresh, and sustainably produced.
And if that wasn’t a tough enough order to fill, they want all of that for an affordable, competitive price.
It was a dilemma that Pirkanmaa Coop faced when they noticed their customers were wanting their food not just to be fresh and local, but ultra fresh and super local. Pirkanmaa Coop is also a member of a much larger corporation called S Group. As one of Finland's biggest retailers, S Group has over 46% of the market share in the grocery business, with 2.4 million customer-owners (i.e. - half of the population of Finland). Many of you are probably thinking that in order to meet this demand, Pirkanmaa Coop began establishing farms right next to their grocery stores, with local farmers literally waiting to pluck fresh crops straight from the field whenever a customer was ready to buy. After all, how else are you going to meet such a request?
Instead, they found their solution in a ultra-controlled, super futuristic vertical farming cabinet from a startup called Netled.
Now, you’re probably thinking, “Where’s my happy farmer, toiling away in the beautiful, sunny fields, pouring all of their love into each and every piece of produce?” Don’t worry, farmers and producers are still here and will still be here for a long time. No one has any intent on replacing them with robots. But the potential of indoor agtech and controlled environmental agriculture (CEA) to check off all of the requirements for consumers cannot be ignored, as Niko Kivoja, the CEO of Tampere-based startup NetLed, explains in his session at the Indoor AgTech Innovation Summit 2021: Eliminating Risk: The Power of a Perfectly Controlled Environment.
In his session, Niko talks about the benefits of CEA in helping meet the needs of the ever more demanding consumer. When using CEA, there are less bugs, therefore little to no pesticides or chemicals needed. There is also more control over light, water, nutrients, and temperature. This makes quality control a lot easier. If the right location is chosen, waste heat from other industrial processes can be used, creating a more circular solution.
In fact, even without using vertical farming technology, greenhouses see much better quality and yields during the winter. With -20 degree temperatures, there were no bugs to worry about, and no additional solar radiation coming in and causing the greenhouses to overheat. So if eliminating the sun and using CEA produces better yields than typical greenhouse setups, why not do it year-round?
Of course, with all new technologies come new challenges. One of those challenges tends to be getting the business model right. Niko further elaborates on this point by stating that he does not consider Netled to be a food producer or operator, but rather, to be a technology or service provider. As he clearly states in his presentation for Indoor AgTech, “those who focus on salad production business OR tech business, not both, will succeed in the long term.” The CEA operators should therefore be distinctly separate from those providing the technology. However, it’s still very important that the two work closely together.
Another challenge faced by CEA, however, is educating the public: how do we get consumers to embrace this new type of technology? It was a major topic of discussion for Ville Jylhä, COO of Pirkanmaa Coop, in the Indoor AgTech Innovation Summit’s session, Keeping Pace with the Changing Retail Landscape. Ville and all of the other speakers agreed that marketing and branding will be key to securing the future of Indoor AgTech and CEA, as well as dispelling some major myths. People tend to criticize what’s new, for one thing. CEA also looks expensive and like it consumes lots of energy to the outside world if you don’t properly crunch the numbers. Furthermore, the idea of growing without soil and without sunlight seems “unnatural” or unsafe.
If those challenges listed above weren’t enough, consumers often have this fear that this new technology is going to replace farmers and greenhouses. However, there is actually lots of space for innovation and opportunities in CEA. It’s a very misunderstood industry, and it will be the job of operators, retailers and technology service providers to educate the public.
Both Pirkanmaa Coop and Netled feel these challenges can be overcome with their new partnership. As Ville Jylhä, the COO of Pirkanmaa Coop explains, they have established Netled’s instore growing cabinets in one of their centrally located flagship hypermarket stores. The cabinets have been on display since December 2020 and have generally received positive feedback from their customers. They plan to deploy more of these cabinets in their other hypermarkets. Their other hypermarkets are already selling the vertically farmed leafy greens (minus the in-store cabinet showing the process) and if all goes well they have plans for continued expansion.
This partnership also will support Pirkanmaa Coop with it’s other initiatives. Their parent company, S Group, has plans to be carbon-negative by 2025 with an emphasis on sustainability. Part of this strategy is promoting local products by making up to 80% of their product offering local. So far, the initiative has been a win for Pirkanmaa Coop, win for Netled, and most importantly, a win for the sustainability-conscious consumer.
Not everyone agrees that this type of display is the best way to educate the consumer about CEA, however. Gilles Dreyfus, another panel speaker with Ville in the session on Keeping Pace with a Changing Retail Landscape, stated that such a model just didn’t work for consumers in France. They did a pilot where they established a small 40ft container located just outside the store. However, no one seemed to care and they just went straight past it: they just wanted to shop in a fast and efficient way.
For retailers in the US, Walter Robb of Whole Foods states that shopping though digital channels and doing either pick-up or delivery was the growing trend in the USA. Therefore, it seems wasteful to use prime retail space for slowly growing plants when you need the space for moving products. He also pointed out that grocery retailers should focus on what they do best: which is displaying, marketing, and merchandising a product, not growing it.
Ben Hartman of Good Eggs, with their completely online solution, has taken a different approach to getting the message across about the benefits of CEA and Indoor Ag. They place an emphasis on storytelling through their online channels to help the consumer understand that their food is produced as fresh and locally as possible.
When asked to comment on these counterpoints his fellow speakers made about displaying in-store growing cabinets, Ville agrees it is not profitable to use retail space for food production, but that is not the point of their in-store growing cabinets. More important is creating a new customer experience and educating Finnish consumers on a new way of doing things. In-store growing cabinets are a good way to promote vertical farming and can definitely be profitable to produce and sell when they are combined with a larger farm near the stores. In-store growing cabinets also help to show Pirkanmaa Coop’s commitment to sustainability, and that they are investing their profits in the things that are important to the community. A coop’s mission, after all, is not quite the same as a typical corporation’s mission. While it is important to be profitable, Pirkanmaa Coop’s main mission is to give back to their customers as much as possible. Whether that be through the re-distribution of profits or reinvesting in better services for the community.
This community-driven approach, coupled with the fact that Finnish people have had a history of embracing new technology, might be the key to making Pirkanmaa Coop’s and NetLed’s partnership a success.
Events like the Indoor AgTech Innovation Summit could further serve a key role in helping the different players in CEA overcome these challenges. Forerunners in the industry are able to share their experiences and best practices with like-minded peers, and facilitate new partnerships and cooperation in the industry. By taking the platform virtually it saves people time, travel costs, and is more eco-friendly. Both Niko and Ville, for example, feel it's a great way to start a dialogue with a potential investor or partner. Of course, there are still benefits to be had by having physical events where vendors can really display their product and close the final deal.
Either way, both types of events will most likely have their place in the future.
It’s great to see Pirkanmaa Coop and Netled are paving the way in Finland for a market that doesn’t yet “exist” and sharing it with the world. Interestingly enough, even though Netled is a technology provider, Niko believes there is actually too much emphasis on the technology, and more discussions need to happen around creating successful and sustainable business models. For example, balancing the best location vs the best size for vertical farms so that production is efficient, local, and sustainable while still being relatively profitable.
It is important to point out as well that CEA needs to be able to compete with greenhouses and open field production when it comes to price, because eventually the “hype” over buying super locally will be over. This is why Netled and Pirkanmaa coop are moving quickly to help better educate Finns on the benefits of CEA and striking while the iron is still hot.
Finland, after all, was one of the first countries to give women the right to vote, and to make cell phones a common household item. Will Finland be a trendsetter in this department as well?
FoodTechies Finland is looking forward to following the results of their journey to see how much the Finns have embraced CEA over the next year.
For more information on Netled, visit https://www.netled.fi
For more information on S Group and Pirkanmaa Coop, visit, https://s-ryhma.fi/en
For more information in the Indoor AgTech Innovation Summit, visit https://indooragtechnyc.com