Indoor vertical farmer AeroFarms is the latest controlled environment agriculture company to suffer a setback, filing for Chapter 11 bankruptcy on June 8. But Marc Oshima, chief marketing officer and co-founder of the Newark, N.J.-based company, is confident that AeroFarms will emerge stronger.
“Chapter 11 bankruptcy is a means of protection to be able to reset,” Oshima told The Packer. “The financing is more about housekeeping. It's a recapitalization — a financial restructuring. This an opportunity to clean up the cap table and bring in new money.”
In a news release announcing the petition, AeroFarms said it had entered into an agreement with an existing group of AeroFarms investors to provide $10 million in debtor-in-possession financing, as part of a larger round of financing that includes those investors. Upon approval by the Bankruptcy Court, the DIP financing, together with cash generated from ongoing operations, is expected to provide AeroFarms with the necessary liquidity to support its operations during the bankruptcy process, the release said.
“We've been one of the pioneers in this space and helping to create a lot of movement here. But there have been some headwinds,” Oshima said. “There have been some closings and there’s been financial stock performance that have put things under the spotlight, and then you layer in the macroenvironment of a COVID supply chain, the war in Ukraine and [changing] financial markets.”
The financial markets have “changed pretty dramatically,” said Oshima, pointing to numbers from AgFunder that indicate agtech investment for the first quarter of 2023 was approximately $10 million, whereas a year prior it was at $875 million.
“In spite of all that, we're very fortunate that AeroFarms still has a group of investors who are excited and continue to be excited by what we're doing, and they are continuing to invest in the company,” Oshima said.
Part of this excitement is fueled by AeroFarms’ growth at retail.
“We had an incredibly successful launch with H-E-B, which as you know, is often rated the No. 1 supermarket in Texas, and we're expanding further there again in August,” Oshima said. “With Walmart, this past month, we doubled the number of stores we're in, and with Stop & Shop we just increased by 40% the number of stores we're in. This is on the heels of launching nationwide with Whole Foods — we’re the first indoor grower to be part of their global planogram. And we're nationwide with The Fresh Market, and we launched nationwide with Amazon Fresh. So, the proposition has been really well received both by the customer as well as the consumer.
“We've created an entire new category at retail,” Oshima continued. “We’re 50% market share per Nielsen syndicated data.”
And Oshima says that AeroFarms’ newest farm in Danville, Va., featuring its “model five technology” continues to scale according to plan.
“We feel like we're at this exciting trajectory of where we are as a company and the growth, [but] change is sometimes not easy,” Oshima said.
Coincident with the filings, AeroFarms announced that co-founder and CEO David Rosenberg was stepping down from his CEO role.
“Our CEO did decide to step down, but he continues to be bullish about the industry — bullish about the opportunity and bullish about the company's future,” Oshima said.
What ultimately led AeroFarms to file for bankruptcy?
Oshima says it was a number of factors, including international expansion and investment in research and development beyond leafy greens into areas such as a cacao initiative, which aims to make more resilient seedlings of cacao trees, for eventual planting outdoors.
With the restructuring, AeroFarms will now be “hyperfocused” on its core leafy greens business, said Oshima, adding that “major launches” are planned for July and August.
“Our day-to-day business is delivering leafy greens. That is front and center, and we are committed that there's not going to be any business interruption,” Oshima said. “So, we think we will emerge from this in an even stronger position.
“For me, I continue to be wildly optimistic because I see — with the confidence of the investors and the strong response we have had from the consumer and the customer — a path forward,” he said.
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