With supply chain issues and rising inflations, most of us have seen the effects at our local grocers. Whether it’s a higher price than we usually pay for bananas, or maybe the truck didn’t deliver any that day, we can see the real effects of these issues in our day-to-day lives. Grocers also see these just as well as we do, and megastore Walmart has taken a step in looking at alternative solutions to alleviating produce supply and cost concerns.
Last week Walmart announced a $400 million round of funding for Plenty Unlimited inc. Led by One Madison Group and JS Capital. While the deal also includes placing a Walmart executive on the board for Plenty, it is a significant investment into a startup vertical farming company expected to open its second farm location later this year.
Why Vertical Farming?
For those of us who don’t keep up with farming practices, vertical farming offers pesticide-free products that take less water and soil to grow. Their most significant selling points to Walmart included vertical farming since it is an indoor process, could be done near distribution hubs, and crops can be produced year-round. This would potentially offer product availability regardless of climate shifts or natural disasters if conventional farms in California were affected.
A year round supply of easily distributed organic produce, would potentially place Walmart in competition with Rival Amazon’s Whole Foods market. For now Plenty’s products will be sold at Walmart locations in California where the current and upcoming farms are located. Walmart stated that this partnership is a culmination of 4 years of research into vertical farming startups and practices.
With rising costs across every industry, their partnership comes at an ideal time to test how viable the new supply from Plenty can be, and if it can grow on a scale needed to supply their nation-wide locations by expanding their farming network outside of just California.
Now as for us traders, why would this matter? Walmart can potentially gain the market share it currently is lacking. When people want organic produce often times Wholefoods or another local specialty grocer comes to mind. Walmart now has the opportunity to change that predisposition. In the near future they could begin to creep into Whole foods sales of organic produce by offering similar quality products, from more local vertical farms at lower price points due to lower costs of business and offering a more convenient shopping experience.