AppHarvest CEO on Shrinking the Farming Footprint

the outlook for this certified B court business. App Harvest CEO and founder Jonathan Webb on the phone with us from Kentucky. Jonathan, how are you doing well? Thank you for having me. We'll talk to us about the business and how things are going going well considering you know, it's it's we're on the tail end of a global pandemic. But it it couldn't be more proud of our team here in Kentucky where our first facility is two point eight

millions square feet. Uh. We built that facility on time, on budget, and in the middle of in the middle of a global pandemic, and we hired five people to stand up our first operation. UH. And just really proud of our team and our our first quarter is a public company. UH. It was. It was about, you know, letting investors know that that we're here to deliver on our promises and uh, and we're showing that we're hitting the targets that we're putting out in front of in

front of investors. Well, I gotta say investors seemed to be happy since you guys put it out. Looks like the stock is up more than easily. So tell us about the business and what you're seeing in terms of the kind of growth that's out there, and uh, you know what you are doing to meet all the demand that's out there. Yeah, So we're at at harvest. We're building some of the world's largest controlled environment agriculture facilities. UH,

and we're focused on on fruit and vegetable production. First crops were growing or tomatoes by Q four next year two will be growing berries, leafy greens UH and vine crops.

But the thesis is we we have to bring outdoor, open field production into controlled environments and and we're we're targeting bringing a lot of the production that's been pushed down to Mexico, bringing that production back to the U S. So using less water, getting thirty times yield per acre and and and getting the harsh chemical pesticides out on on the demand side, and we really cannot build and

grow fast enough to meet that demand. The grocers know it, uh, the consumers are demanding it, and and we're we're really proud to be at some of the largest retail outlets. Just in our first few months of growing where you can find us a Kroger, we're now Windy's uh and and Publics and many of the top twenty five grocers are are taking our are taking our products. Do you guys really play into this whole concept of kind of you know, locally farming and then serving the community. That's

a big part of what you're doing. Yeah, we're one of four public benefit corporations that's a b corp UM and what that means is we have high environmental social government standards and uh. You know, part of what we're doing is using technology to grow fruits and vegetables, uh that that use far less resources. But the way we're doing it and who we're doing it with is something I'm incredibly proud of. Every every employeed app Harvest makes

a living wage. Every employeed app Harvest has full health care and benefits for their family. Uh And and you know, if we want to come out of COVID and say you know, essential workers are important, well, then every person in food and agriculture should should make a living wage and and and get full benefits. Also, every employeed app

Harvest has ownership in the company. Uh. And you know, I was told that this was a pretty radical idea and food and agriculture, and uh, it's the r o I. And that investment has been has been what's radical at the the the We've had nearly ten thousand people apply to work in our company in the middle of COVID H and when you see the labor shortages around the country where the polar opposite we we we can't get know, we can't go through the applications fast enough. People want

to work here. And part of that is showing yes, we spend a little money on on investing in our employees, but treating our employees with dignity and respect has been an incredible r o I on on production and productivity here inside the company. So tell me, you say you you provide a living wage, So what are your workers? I guess on average, I don't know what that always means on average, but what are they making yeah, So we we have a really wide range of skill sets

here at the company. So we have engineers and computer scientists working on the robotics and AI uh, and we have planned scientists all the way down to you know, our our our cleaning folks and janit oriole staff, and all the way up to crop care specialists. But you know, there's a standard living wage in the US and UH for US entry level even off the street, thirteen dollars an hour full benefits, UH. Hitting production targets gets people up to eighteen or twenty dollars an hour, you know.

So we're and where we're at is really you know, coal country where if you look at most of the coal mines in the US that shut down, a vast majority of those were in eastern Kentucky and West Virginia, you know. So so here we're far above the current wage that that's out and above uh well what's already out on the street around us. So you know, we're we're trying to tell people if they come to work and show up every day, you know, we'll we'll do

our best to take care of them. If if they're coming to to work and take care of of what we're doing here day to day. Jonathan, You've been talking about the business, so it sounds like there's a lot of demand. And I agree with you that people are looking for food. I know, I certainly personally am in terms of less chemicals, less impact on the environment, healthier ways. I like the idea of kind of more local production.

I also like that you guys are doing, you know, impacting UH people in a tough part of the country and and and really providing a decent living. How difficult, though, is it to get to profitability? When do you expect to get to profitability? So each facility we've islanded where UM we were. We we've got a pn L for each facility, and as we ranch each each facility up about UH year and a half two years in UH

it gets to about steady state. And then each asset is about a twenty five year twenty to twenty five year life of that asset. So each facility we build will be operating twenty to twenty five years. This is under a current environment where prices and agriculture and food generally are pretty suppressed. Because of where we're currently at. I mean, you look at our competition in Mexico. Is

this gonna last? Are we gonna? Are we gonna continue to allow food sold in the US where people in Mexico are getting paid five dollars a day and we're in some cases you know, you can find a legal chemical pesticides uh on that product. I mean, agriculture has such a long way to go to catch up where consumers are demanding and where regulators are pushing. Um. That that again, you can make an argument that the prices today are artificially suppressed, and we'll see those prices rise.

And that's where you know, app harvest today and under current environment UH can exceed and do do very well. But as those prices rise, and what we'll do even better because we can compete under the conditions today and won't change for us. The other factor on top of all of this, too is climate disruption. Uh. You look at an open field farmer that has to deal with drought or wildfires or not enough water or water scarcity.

Nine of a fruit and vegetable is water. Uh. And and we run completely on recycled rainwater, which ultimately keeps our costs lower. So um again, it's it's competing today and today's playing field, but then also have building a resilient you know, resilient uh company that that can be not only competitive today, but but really stand out five ten years from now. Hey, listen, this is something I've talked about David Lee, you know, formally impossible foods, but

also at your company president of the company. You know, we've talked about lighting in the electricity costs. You guys do hybrid lighting. I know you you you know are using the sun, You're using l E. Ed s um tell us about that component of the equation and how that is going in terms of cost and impact on the environment. Well, if you look an impact on the environment with agriculture today, you have harsh chemicals that are degrading our waters. Were the un IS predicted we have

sixty years left of fertile top soil. I mean, you talk about a statistic that we don't talk about that's completely jarring, is sixty years left. I mean, so I'm sitting again in cold country and I think of agriculture. We're mining nutrients out of the ground and they're not replenishing.

We're in a glass facility that allows us to use sunlight first and only add micro mole light from the LED that we need to add that the sun is not adding running completely on recycled rainwater, also being closer

to market reducing that diesel consumption. So if you're looking at a fruit and vegetable coming two thousand miles from California or Mexico to the East coast, you know, we get that down to a day drive by where we're at and and lighting is one one piece where we have energy and using the L E d S gets gets our lighting energy consumption down. But it's really and

we're still working on this. We're working on with a lot of universities and outside stakeholders, is what is that life cycle analysis and agriculture, there's no one you can really look to to get good answers on what what are the push points? Energy was very easy, uh to to be able to judge on. Uh. Here's an example solar and wind versus fossil fuels. That's very binary. It's you know, one verse the other. Agriculture is incredibly complex. The US has our our food is wasted and goes

to a landfill. So not only is it the inputs, uh, the energy you consume, there's the food waste because of how far we're trucking the food itself. Um. That that again there's and we're working on this with the universities to try to come up with an overall life cycle analysis. But there's nowhere to look U S d A. No one has done a really good job on saying here the environmental benefits of controlled environment agg here, the drawbacks

to open field here, the play opportunities to get better. Uh, there's no real one organization to look to, whether that's the U N or the U. S d A or any other non governmental organization. Well it's interesting, you know, and you go back that sixty years left of farming or soil available for farming, I think that was out

in and it's it's really kind of shocking. It's reminded that when it comes to climate change, are the impact that we've had in the environment, You've got to break it down in different ways to see how could potentially impact us. What does it take though for you to kind of ramp up on the scale that's needed to feed the United States, uh and potentially feed the world that this model, what does it need to get there? Well, we we've said this controlled environment agriculture is really the

third wave of sustainable infrastructure. Twenty years ago, it was renewable energy. Ten years ago Tesla began to make electric vehicles popular in the mainstream, and then today it's controlled environment agriculture. Uh and and so what is it going to take. It's gonna take tens of thousands of acres of indoor production in the US. There's a third party study walking in university and I think said a little over twenty acres of production just to bring vine crops

back from Mexico. To put that in perspective, our first facility at sixty acres million score feet. So we have to build it a lot. But the good thing with the US is when we put our mind to it, we can build really big, really fast, and the US

can lead the world and control environment agriculture. And we you know, frankly, after going public and the attention we received, we've already had conversations globally from the Middle East to Southeast Asia, high dignity ranking dignitaries, prime ministers of countries because they understand there is a real problem with food security. They don't the numbers don't add up, and these aren't like three lifetimes away. It's you know, years from now,

how do we actually feed our populations? All right, we're gonna have to leave it there. Do come back, because it's an area that I'm certainly interested in. I know our audience is certainly um so hopefully we can get you back here real soon. Thank you so much. Jonathan Webb, he is at Harvest CEO and founder, joining us on the phone from Kentucky.