Challenges and Growth Strategies for AeroFarms in Vertical Farming

AeroFarms faces challenges such as a limited product portfolio, lack of consumer awareness, scarcity of resources, and preconceived ideas. To become a sustainable business, they need to expand their product offerings beyond green leaves and herbs, educate consumers, address resource scarcity, highlight environmental benefits, and adapt to preferences for organic products.

• AeroFarms
• Vertical Farming
• Sustainability
• Agriculture
• Growth Strategies

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1. AeroFarms Vertical farming - The future of Agriculture Bernardo Pequito Gustavo Moutinho Laura Fernandes Marta Andr e PBS Consulting Team PBS Consulting Team Porto Business School Porto Business School

2. Executive Summary Challenge Challenge Analysis Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Implementation Financials Financials Contingency Plan Contingency Plan Summary Summary 2

3. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? 3

4. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio 4

5. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Green leaves and herbs only Lack of protein and other nutrients 5

6. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Green leaves and herbs only Lack of protein and other nutrients 6

7. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Unknown Environmental and societal benefits Preconceived ideas Preference for Organic Products Green leaves and herbs only Lack of protein and other nutrients 7

8. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Scarcity of resources Unknown Environmental and societal benefits Preconceived ideas Preference for Organic Products Green leaves and herbs only Lack of protein and other nutrients 8

9. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Scarcity of resources Unknown Environmental and societal benefits Preconceived ideas Preference for Organic Products Dependency of Electric Energy High Real state price Lack of talented workforce Green leaves and herbs only Lack of protein and other nutrients 9

10. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables 10 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

11. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables Transform agriculture by developing environmentally responsible farms throughout the world Transform agriculture by developing environmentally responsible farms throughout the world 11 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

12. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables Transform agriculture by developing environmentally responsible farms throughout the world Transform agriculture by developing environmentally responsible farms throughout the world Aeroponics Based Technology 390 times more efficient than traditional farming Aeroponics Based Technology 12 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

13. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables Transform agriculture by developing environmentally responsible farms throughout the world Transform agriculture by developing environmentally responsible farms throughout the world Aeroponics Based Technology Good Good 390 times More efficient than traditional farming High quality production Efficient in terms of land usage Strategic location in urban areas Low transportation cost Fully connected farm Advanced research for optimized algorithms for plant growth Research Patented Data safety from in-house researching 13 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

14. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables Transform agriculture by developing environmentally responsible farms throughout the world Transform agriculture by developing environmentally responsible farms throughout the world Aeroponics Based Technology Good Good Bad Bad 390 times More efficient than traditional farming High quality production Efficient in terms of land usage Strategic location in urban areas Low transportation cost Fully connected farm Advanced research for optimized algorithms for plant growth Research Patented Data safety from in-house researching High level of capital expenditure Higher carbon emission High Real state price in the strategic locations Dependant on fundraising to expand Expensive led lighting system 14 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

15. Where we are today Largest vertical farming company. Crop Cultivation of Greens and Vegetables Transform agriculture by developing environmentally responsible farms throughout the world Transform agriculture by developing environmentally responsible farms throughout the world Aeroponics Based Technology Aeroponics Based Technology Good Good Bad Bad 390 times More efficient than traditional farming High quality production Efficient in terms of land usage Strategic location in urban areas Low transportation cost Fully connected farm Advanced research for optimized algorithms for plant growth Research Patented Data safety from in-house researching AeroFarms is in a privileged position to revolutionize the farming industry in a sustainable manner AeroFarms is in a privileged position to revolutionize the farming industry in a sustainable manner High level of capital expenditure Higher carbon emission High Real state price in the strategic locations Dependant on fundraising to expand Expensive led lighting system 15 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

16. The market is growing significantly Projected Vertical Farming Market (Global) Projected Vertical Farming Market (Global) * Forecast * Forecast 14 12 $12.77 $12.77 Billion in Billion in 2026 2026 10 8 6 4 2 0 2013 2016 2020 2023* 2026* 16 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

17. The market is growing significantly Projected Vertical Farming Market (Global) Projected Vertical Farming Market (Global) * Forecast * Forecast 14 12 $12.77 $12.77 Billion in Billion in 2026 2026 10 8 6 4 2 0 2013 2016 2020 2023* 2026* AeroFarms is in a privileged position to revolutionize the farming industry in a sustainable manner AeroFarms is in a privileged position to revolutionize the farming industry in a sustainable manner 17 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

18. There are other business models besides the one AeroFarms is using Aeroponics Aeroponics- -based vertical farming based vertical farming The roots of plants hang in the air and an sprinkler system sprays the roots with nutrient-rich water 18 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

19. There are other business models besides the one AeroFarms is using Aeroponics Aeroponics- -based vertical farming based vertical farming The roots of plants hang in the air and an sprinkler system sprays the roots with nutrient-rich water Hydroponics Hydroponics systems The roots of plants remain submerged in a continuous flow of nutrient-rich water systems 19 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

20. There are other business models besides the one AeroFarms is using Aeroponics Aeroponics- -based vertical farming based vertical farming The roots of plants hang in the air and an sprinkler system sprays the roots with nutrient-rich water Hydroponics Hydroponics systems The roots of plants remain submerged in a continuous flow of nutrient-rich water systems Aquaponics systems Aquaponics systems Both hydroponics and aquaculture are used. Water is enriched by fish poop, essential for plant nutrition. Plants absorption of nitrogen cleanse the water enough for fishes to survive 20 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

21. There are other business models besides the one AeroFarms is using Market Value of Vertical Farming in the USA by technology Type (US Million) Market Value of Vertical Farming in the USA by technology Type (US Million) 800 700 600 500 400 300 200 100 0 2017 2018 2019 2020 2021 Aquaponics Hydroponics Aeroponics 21 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

22. There are other business models besides the one AeroFarms is using Market Value of Vertical Farming in the USA by technology Type (US Million) Market Value of Vertical Farming in the USA by technology Type (US Million) 800 700 600 500 400 300 200 100 0 2017 2018 2019 2020 2021 Aquaponics Hydroponics Aeroponics Alternative and more Sustainable Business Models are expanding significantly. AeroFarms can gain market Alternative and more Sustainable Business Models are expanding significantly. AeroFarms can gain market power leveraging its solidified market positioning. power leveraging its solidified market positioning. 22 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

23. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools 23 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

24. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools What are consumers looking for? What are consumers looking for? 24 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

25. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools What are consumers looking for? What are consumers looking for? Convenience Organic Environmentally friendly Healthy 25 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

26. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools What are consumers looking for? What are consumers looking for? Convenience Organic Environmentally friendly Healthy 26 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

27. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools What are consumers looking for? What are consumers looking for? Convenience Organic Environmentally friendly Healthy Lack of Certification Lack of Certification USA Certified Organic Seal USA Certified Organic Seal 27 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

28. There are several consumers using the products of AeroFarms Retailers Retailers Airlines Airlines Schools Schools What are consumers looking for? What are consumers looking for? Convenience Organic Environmentally friendly Healthy Lack of Certification Lack of Certification USA Certified Organic Seal USA Certified Organic Seal AeroFarms products are not perceived as sustainable nor environmentally friendly, causing distrust. AeroFarms products are not perceived as sustainable nor environmentally friendly, causing distrust. 28 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

29. AeroFarms is competing with firms from different business models Hydroponic Hydroponic- -based vertical based vertical farming farming Aeroponics Aeroponics- -based vertical based vertical farming farming Aquaponic Aquaponic- -based vertical based vertical farming farming 29 Analysis Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

30. AeroFarms is competing with firms from different business models Hydroponic Hydroponic- -based vertical based vertical farming farming Aeroponics Aeroponics- -based vertical based vertical farming farming Aquaponic Aquaponic- -based vertical based vertical farming farming Bowery Farming Inc. Plenty Inc Gotham Greens Farms LLC. Bright Farms Inc. Google Alphabet Verticrop Farmedhere Lufa Farms 30 Analysis Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

31. AeroFarms is competing with firms from different business models Hydroponic Hydroponic- -based vertical based vertical farming farming Aeroponics Aeroponics- -based vertical based vertical farming farming Aquaponic Aquaponic- -based vertical based vertical farming farming Google Alphabet Verticrop Farmedhere X X Bowery Farming Inc. Plenty Inc Gotham Greens Farms LLC. Bright Farms Inc. Lufa Farms 31 Analysis Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

32. AeroFarms is competing with firms from different business models Hydroponic Hydroponic- -based vertical based vertical farming farming Aeroponics Aeroponics- -based vertical based vertical farming farming Aquaponic Aquaponic- -based vertical based vertical farming farming Google Alphabet Verticrop Farmedhere X X Bowery Farming Inc. Plenty Inc Gotham Greens Farms LLC. Bright Farms Inc. Lufa Farms Difficulty expanding due to Difficulty expanding due to smaller sizing smaller sizing 32 Analysis Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

33. AeroFarms is competing with firms from different business models Hydroponic Hydroponic- -based vertical based vertical farming farming Aeroponics Aeroponics- -based vertical based vertical farming farming Aquaponic Aquaponic- -based vertical based vertical farming farming Google Alphabet Verticrop Farmedhere X X Bowery Farming Inc. Plenty Inc Gotham Greens Farms LLC. Bright Farms Inc. Lufa Farms Difficulty expanding due to Difficulty expanding due to smaller sizing smaller sizing There are other players in the market researching for innovative practices. AeroFarms can benefit from these There are other players in the market researching for innovative practices. AeroFarms can benefit from these know know- -hows to accelerate its growth hows to accelerate its growth 33 Analysis Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

34. To Sum Up Close to consumer Higher quality production Innovative In-house know-how Sophisticated production S W High Costs on capital expenditure Lack of USDA certification seal Expanding market Value for sustainability Technology advancements Health concerns Climate change Competitors in parallel business models O T 34 Analysis Analysis Alternatives & Recommendation Implementation Contingency Plan Financials

35. Alternatives & Recommendation Alternatives & Recommendation

36. Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Scarcity of resources Dependency of Electric Energy High Real state price Lack of talented workforce Fundraising Limitations Unknown Environmental and societal benefits Preconceived ideas Preference for Organic Products Green leaves and herbs only Lack of protein and other nutrients What are AaeroFarm alternatives to grow ? 36 Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Contingency Plan Financials

37. Alternative 1 Expand to New Markets Expand to New Markets Advantages Disadvantages Access to fast growing countries Access More Enlighted markets R&D markets could be an opportunity for talent and technology High Capex Increase complexity Lack of human resources 37 Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Contingency Plan Financials

38. Alternative 2 Develop New Products Develop New Products Advantages Disadvantages High Risk Lack of knowledge Complexity from diversification Loss of quality and focus in current portfolio Enlarge portfolio Leverage technology advancements Customer convenience Enrich Customer experience 38 Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Contingency Plan Financials

39. Alternative 1 versus Alternative 2 Alternative 1 New Markets Alternative 2 New Products Potential of current technologies (Aquaponics) Increase portfolio to meet market demand Current Markets still have potential to grow You should focus on US and China Increase to 25 stores by 2022 39 Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Contingency Plan Financials

40. A triple A Strategy should be implemented to tackle AeroFarm Challenge What should be AeroFarm s future growth strategy to become a sustainable business? Limited Product Portfolio Consumer Lack of awareness Scarcity of resources Unknown Environmental and societal benefits Preconceived ideas Preference for Organic Products Dependency of Electric Energy High Real state price Lack of talented workforce Green leaves and herbs only Lack of protein and other nutrients ALIGN with Sustainability and technological trends AMAZE Customers ACCELARATE Synergies 40 Analysis Alternatives & Recommendation Alternatives & Recommendation Implementation Contingency Plan Financials

41. Implementation Implementation

42. Triple A strategy Accelerate Synergies What? How? Why? Enter the Hydroponics Hydroponics Industry with M&A (e.g. Bowery Farming Inc. and Plenty Inc.) What s in there for us? What s in there for us? Bundles off vegetables ready to eat Complete salads Cheery tomatoes, baby carrots, cucumber Hydroponics Market is the more representative one Limited Product Portfolio Accelerate Synergies What s in there for them? What s in there for them? Access to your distribution channels More high value products Deal Structure Deal Structure Joint Venture with new entity Keep the management and culture of both companies 42 Analysis Alternatives & Recommendation Implementation Implementation Contingency Plan Financials

43. Triple A Strategy Amaze customers What? How? Why? Organic certification Organic certification is important, work with USDA Not land intensive, allowing soil to heal No carbon releases No pesticides Enlighten Customers Enlighten Customers Active communication is social media Chose partnerships with influencers that are acknowledge for the nutrition trends and benefits Beyonce, Angelina Jolie and Leonardo Dicaprio Produce a documentary about a comparison of traditional farming with vertical farming and its benefits Netflix, National Geography Work directly with local organic small shops Taste trials Consumer Lack of Awareness Amaze Customers 43 Analysis Alternatives & Recommendation Implementation Implementation Contingency Plan Financials

44. Triple A Strategy Align with sustainability and technology trends What? How? Why? Pioneer in circular buildings circular buildings Partnership with real state developers New business opportunities and synergies Introduce solar panel solar panel buildings for new farms Partnership with Tesla Solar inc. Make Buildings self-sufficient ALIGN with Sustainabil ity and technologi cal trends Scarcity of resources Create Academy for farmers of the future Academy for farmers of the future Partner with universities to create tailor made courses Internships and final projects initiatives New York and New Jersey Universities Work with primary and high schools for informed them of benefits 44 Analysis Alternatives & Recommendation Implementation Implementation Contingency Plan Financials

45. Circular Economy in an environmental atmosphere Waste Waste Plastic bottles Paper to develop new packaging O2 and Food O2 and Food Farming 4.0 Offices CO2 and Waste CO2 and Waste 45 Analysis Alternatives & Recommendation Implementation Implementation Contingency Plan Financials

46. Detailed Implementation Plan for the three Pillar recommendations 46 Analysis Alternatives & Recommendation Implementation Implementation Contingency Plan Financials

47. Financials Financials

48. Main assumptions about current situation Assumptions (Current situation) 2019 100M available for expansion 100M available for expansion Number of farms Average landspace (acres) Average production (pounds) Average CAPEX for New Farm 19 2 2,000,000 39,000,000 $ Break Break- -even as been reached but even as been reached but growth is crucial growth is crucial Current budget for expansion EBITDA margin WACC 100,000,000 $ 0% 15% 48 Analysis Alternatives & Recommendation Implementation Contingency Plan Financials Financials

49. Main assumptions about current situation Reach total number of farms of Reach total number of farms of 65 in 6 years 65 in 6 years Expansion in US and in Asia Expansion in US and in Asia 49 Analysis Alternatives & Recommendation Implementation Contingency Plan Financials Financials

50. Impacts on EBITDA Impacts on EBITDA 2020 2021 2022 2023 2024 2025 2026 1. Accelate synergies M&A team Synergies from Hydroponics Increase of gross margin (3,000,000) $ 5,000,000 $ 8,888,889 $ (3,000,000) $ 10,000,000 $ 13,333,333 $ (3,000,000) $ 20,000,000 $ 15,555,556 $ (3,000,000) $ 20,000,000 $ 8,888,889 $ (3,000,000) $ 20,000,000 $ 8,888,889 $ (3,000,000) $ 20,000,000 $ 8,888,889 $ (3,000,000) $ 20,000,000 $ 265,555,556 $ 2. Amaze customers Marketing Budget (5,000,000) $ (10,000,000) $ (10,000,000) $ (10,000,000) $ (10,000,000) $ (10,000,000) $ (10,000,000) $ 3. Align with sustainability trends Circular buildings iniciatives and team (2,000,000) Academy farmers of the future $ $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) $ (2,000,000) Impact on EBITDA $ 1,888,889 $ 6,333,333 18,555,556 $ 11,888,889 $ 11,888,889 $ 11,888,889 $ 268,555,556 $ Analysis Alternatives & Recommendation Implementation Contingency Plan Financials Financials

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