Gotham Greens CEO on Transforming Fresh Produce

Bloomberg TV and Bloomberg Radio audiences. I am a satisfied customer also, and Varage joins us on the phone in Brooklyn. Verage. Nice to have you back. Great to be back, Carrol. How are you. I'm doing really well. Um. I do want to talk about the the equity and debt rays in just a moment, but tell me about how you are doing and what life has been like under COVID. It's been a whirlwind year, no doubt, as it has been for many many people, if not everybody, but doing well.

Keeping healthy, keeping keeping our staff are team members around the country, almost four hundred of them. Healthy and safe has been really our top priority and We've been able to keep our business fully operational, and for that, I am extremely grateful. We are fortunate to be in the food system. We are fortunate to be UM considered essential employees, and we work hard to keep our supermarket customers fresh

with stock, healthy, fresh produce. What was the toughest part of staying fully operational during the pandemic, So look, we we saw the writing on the wall. Our team put a crisis management plan into place in early February, so we worked really hard to secure our supply chain, work on shifting our shift schedules around so we could enforce more social distancing, and and even sort of got on the temperature checks and things a little bit early on.

So I feel incredibly fortunate that we were able to do that, and we've certainly had to modify how we run our facilities. But very early on god confirmation from the federal government UM that that we would in fact be considered an essential industry, So we informed our employees that we could stay operational, and literally the day that the pandemic was declared, we received a surge in in request from our supermarket customers to run extra trucks on

the road and deliver more product. Uh, you know, since there was such a run on grocery store, So it really provided us with an opportunity to really improve our value proposition and the supply chain. You know, the supply chain is so reliant on California, the centralized production there, and we were able to really serve our customers. Well, yeah, that's pretty remarkable because you know, it's all been about

supply chains. What what about what you learned during the pandemic, especially with this new you know, debt and cap you know, equity rays. I do wonder about there strategies that you were thinking about implementing. And I've seen you know, your greenhouses out there in Brooklyn. I mean it's pretty remarkable. It's very high tech. But there were strategies verage that you were thinking about putting in place, but taking your time, and all of a sudden you're like, okay, we're all

in on this. Because speaking growth strategy and plan was already well in the works even prior to COVID, so in we almost doubled our capacity with new greenhouse facilities in Illinois, Maryland, Rhode Island, and Colorado. So we were able to really ramp up those facilities this year and double our growth year on year, and we already had a plan into place um to expand further further geographic

market expansion within the US two. So this funding is going to enable us to do that while continuing to build operational capacity and just build our brand and continue to be a leader in this in this segment, in this category. To be fair, did you have to put some plans on hold because you were just making sure that your employees were, say, if your teams were safe, and that you were meeting all of that increased demand by your supermarket customers. Certainly we uh for for for

a couple of months there in the spring. We were just focused on exactly that and didn't focus as much on on sort of the new site development and land acquisition, and so we certainly held our breath for a little bit. But then as as things stabilized a little bit in the summer, we um we we double down on those efforts.

It really sounds like you guys have really been kind of in warp speed, if you will, so, tell me about the visibility you feel like you have in and how you see the year playing out as a as a CEO of someone who's running a company. How confident do you feel about the outlook given this sector that we're in, which is fresh food production. I think the outlook looks bright. I think the future is right for our company, but also for our sector as a whole.

I think the pandemic has really revealed a lot of should I say, sort of risks in the supply chain, right, and our entire model is built upon decentralizing the supply chain of highly perishable fresh produce and growing it in closer proximity to large supermarket retailers and institutional food service operators. So I from the B two B side, the outlook

is strong. You know, there's a lot of headwinds in the incumbent supply chain, whether it's water related issues out west, whether it's climate related issues, the wildfires, farm labor issues. So I really do think that more and more fresh produce is going to be grown indoors. And then I think from the consumer standpoint, consumers are cooking at home

a lot more. Although there are obviously all of us are anxious to get back into restaurants and being out again, people are cooking more at home and they want better quality ingredients, and they care more about where their produce is grown and is it hygienic, is it clean? Is it um sustainably grown? So I do think on balance, the prospects are certainly very promising. Listen. I think that's

a really important aspect of its sustainability. I mean, talking with a lot of senior executives people running companies, I mean, this is what consumers want, This is what brands need to stand for. And I do think agg is one of those areas when we talk about the climate and water usage, that's a big deal. And and I'm curious you know what you're seeing in that area, and and the role that Gotham Green's can play and all of that. Absolutely.

I mean, agriculture, like you're alluding to, is a huge consumer of natural resources, right, So it's the largest consumer of land on the planet. It's the largest consumer of fresh water in the planet, so around seventy of fresh water withdrawals go towards agriculture and farming. Um. It's the largest cause of global water pollution, It contributes of global

carbon emissions. You know, the list goes on. So if we're really serious about sustainability and climate change, we need to be looking at AGG, and we're seeing a lot of innovation. We're seeing a lot of investment in research and development all throughout the AGG supply chain, from the tech side to the distribution side, to actual farming techniques,

the use of big data. So we play a role within that in our form of farming specifically, which is broadly known as controlled environment agriculture, allows us to farm

using land a lot more efficiently. So what we can grow in one acre require thirty acres out in the field, right, So we're much more land efficient, we use less water than conventional farming, and by growing the product in much closer proximity to the marketplace, we don't have to shift the product, you know, great distances, so there's less sort of fuel consumption and associated emissions, as well as less waste um. Less fresh produce gets thrown away this way.

So yeah, I mean, look, we're not sort of saving the entire agricultural system by any means, but I definitely think we're playing a role in consumers are increasingly interested and want to spend their dollars with companies that that are rooted in those kinds of values. I was going to challenge you, why not say the whole agg system farage, because you know, I remember our conversation and it's been a few years, um when you guys, you know, when I was out there in Brooklyn with you a top

the whole foods. But I do wonder, you know, I think we talked about kind of bigger, broader picture that could we ultimately should we ultimately see where we are really utilizing, especially in urban spaces. Why not use our rooftops to create farming and make it much more local

and accessible for everyone and fresh produce for everyone. Yes, absolutely, we've seen a surge in interest in urban farming, whether it's on a commercial scale like what we're doing, or whether just folks are doing in their communities, on their in their kitchens, on their fire escapes. Right. And you're seeing a surge of interest in farming in school classrooms and um, you know, even prior to the pandemic. Right.

So I think there is this growing consumer interest in in in growing food again, which I think is fantastic. I think to do things on a commercial scale and really make a dent in the meaningful dent in the overall supply chain. Um, these types of facilities have to be considerably larger to get the economies of scale. So we've sort of graduated, if you will, from these kind of smaller rooftop greenhouses to considerably larger facilities that are

just on the edges of city. So our facility in Chicago hundred and fifty thousand square feet is within the city limits, but it's just on the edge of the city. Similar in Baltimore. So, um, yeah, we we're just scaling up a lot. This is like a total addressable market just in the categories we play. Like greens around fifteen billion dollars. The current category of indoor production is maybe one per cent of that fifteen billion, So there's enormous

white space. Wow, exactly. All right, So listen, you said you've doubled capacity in the past twelve months, right, and you're still opening up new greenhouses. What do you expect to double capacity in one again? Close to it. I mean, we double capacity in the last year, We've doubled our revenue this year, um increased our unit sales by and over the next year we expect to keep up that level of growth, though some of the actual capacity increases

will probably common early. What's what's the biggest challenge for you as you grow. It's uh, it's it's a capital intensive business. We have to secure land sites, we have to develop our own facilities, so we're building them from scratch. It's a highly specialized type of building, right. It's not a type of real estate asset class that we can just you know, call up a broker and and find something. Right.

We actually have to build it from scratch, so it takes some it takes some time to build the facilities, and uh that's you know. So I think our biggest challenges is just getting getting the capacity built test enough because the market demand is certainly there. Hey wee last question, enough money out there in uh the capital markets or private markets that you guys can continue to stay a privately owned entity. Is that the goal for some time

or are you thinking about going public just quickly? That is the goal for the time being, where we don't see the need to raise money from the public markets. We have a lot of investors who have backed us from day one, and we've been able to get increasing project finance and des financing as well, which is you know, on very attractive terms. So I think for the time being we're looking at the same private but all options

are on the table as we grow. Well, let's send great to check in with you and please keep us up to date you on some of your new future plans and or as things happen. I'd love to check in with you once again. Varage Puri, thank you so much. Co founder, chief executive officer of Gotham Green's joining us

on the phone from Brooklyn. As I mentioned, they did UH do an eighty seven million new equity and debt capital raise that was just yesterday and talking about some of their growth plans going forward.