The agriculture industry is considered one of the biggest industries in the world, contributing to several nations' GDP. Traditional agriculture requires ideal climatic conditions, arable land availability and fertility, and sufficient water supply. However, since 2010, there has been an increase in population growth, which is presumed to reach 9.72 billion by 2050. Also, there is another issue of decreasing arable land for farming. This eventually creates a requirement for agricultural automation and digitization to cater to the needs of the growing population. The utilization of alternative farming methods, such as indoor farming, can address all these issues. Vertical or indoor utilizes artificial intelligence (AI), digital technologies, precision algorithms, GPS trackers, and monitors and sensors to ensure optimum utilization of resources to achieve high crop yields and reduce operational costs. Indoor farming technology comprises specialized equipment, software, and IT services. Hence countries in North America, Europe, and Asia-Pacific, among other regions, are inclining toward adopting advanced farming technologies, such as vertical farming and container farming, to improve the agricultural yield to cater to growing food demand. Apart from the growing demand for food, there are several other microeconomic factors that are anticipated to contribute to the growth of the indoor farming technology market. Some of the factors are the reduction of agricultural labor, climate change, urbanization, reduction of agricultural land, and favorable government support.
The indoor farming technology market is anticipated to progress significantly since farmers are looking for an ideal solution for sustainable agriculture. Indoor farming produces several vegetables and fruits, microgreens and herbs, and ornamentals on vertically inclined surfaces or under greenhouses and container farms. In the case of indoor farming, vegetables and other fruits are grown on a single level, such as in a field or a greenhouse. The vertical farming method produces foods in vertically stacked layers usually incorporated into structures, including a shipping container, repurposed warehouse, and skyscraper. Indoor farming technology involves the integration of numerous technologies such as big data analytics, robotics, artificial intelligence (AI), and the Internet of Things (IoT) so that crops can be produced perfectly without any agronomic constraint.
Indoor Farming Technology Market
The indoor farming technology market was valued at $4,830.3 million in 2021, which is expected to grow with a CAGR of 23.99% and reach $ 17,128.9 million by 2027. The growth in the indoor farming technology market is expected to be driven by increasing demand for food products, fresh and organic produce, and the requirement for an alternative growing method for sustainable agriculture.
Population growth in developing countries such as China and India is creating more demand for food products, and farmers are looking for a sustainable way to grow crops. Land degradation, climate change, and other environmental factors also affect agricultural yield. Hence, growers are open to the adoption of innovative technologies related to agriculture. Also, increasing urbanization is further supporting the growth of the indoor farming technology market. Another major factor driving the indoor farming technology market is the increase in government initiatives and support toward agricultural digitization. Government initiatives increase the awareness of several tech-based agricultural methods and the benefits these solutions entail when applied correctly in the agricultural industry.
One of the major challenges in the growth and development of the indoor farming technology market is the initial investment and operation cost while growing crops indoors. In addition, selective fruits and vegetables can be grown under vertical and greenhouse farms, due to which many farmers do not prefer to go for indoor farming. Uncertainty about getting successful in this business, high energy consumption in indoor farming, and lack of awareness among the farmers can further challenge this market’s growth.
However, integrating several innovative technologies such as IoT, blockchain, AI, sensors, data management systems, and GPS trackers into indoor farming can open new opportunities for this market to grow in the future. Moreover, business expansion in developing countries such as India and China by establishing new distribution channels, setting up new farms, and partnering with any local farms can bring more profit to the market players operating in this market.
Indoor Farming Technology Market (by Product)
The product segment for the indoor farming technology market includes technology. The technology segment is further bifurcated into hardware systems (lighting systems; climate control systems; sensors, controllers, and monitoring systems; and irrigation systems), software and services, and integrated systems.
Among all the three technology segments, the hardware systems segment is expected to dominate the indoor farming technology market with a significant share of $ 10,093.5 million by 2027.
Indoor Farming Technology Market (by Facility Type)
The facility type segment for the indoor farming technology market includes greenhouses, indoor vertical farms, and container farms. Greenhouses are inflated structures that are covered with transparent material to grow crops in a controlled environment. Indoor vertical farms are modular farms that can be accommodated or adjusted in any building. This farming involves vertically stacking layers of plant beds in empty buildings or even skyscrapers.
Among all three segments of facility types, the greenhouse farming segment is anticipated to dominate the indoor farming technology market with a significant share. The increasing number of greenhouses in several countries and the feasibility of growing more plants and crops in greenhouses are the major drivers for this segment’s growth.
Indoor Farming Technology Market (by Growing System)
The growing system segment for the indoor farming technology market is divided into various segments, namely hydroponics, aeroponics, aquaponics, soil-based, and hybrid. Among them, hydroponics and aquaponics are highly gaining popularity due to convenience and easily available equipment. Aquaponics is a growing method that combines the traditional method of aquaculture and the hydroponic method of growing crops, creating a symbiotic environment.
Among all the five growing systems, the hydroponic segment is expected to dominate the indoor farming technology market with a significant share of $7,779.4 million by 2027. The growth in the hydroponic segment is expected to be driven by a rise in demand for organic fruits and vegetables from the end consumers.
Indoor Farming Technology Market (by Crop Type)
The crop type segment for the indoor farming technology market is divided into various segments, namely, fruits and vegetables, herbs and microgreens, medicinal crops, and flowers and ornamentals. Medicinal crops are the future of indoor farming. Crops such as ginger, beets, thyme, tobacco, and, most importantly, cannabis are high-value crops that can be grown with the highest profitability through indoor farming.
Among all the four crop types, the fruit and vegetables segment is expected to dominate the indoor farming technology market with a significant share of $ 8,179.3 million by 2027. The growth in the fruit and vegetables segment is expected to be driven by the increasing popularity of the consumption of fresh, pesticide-free fruits for healthy living; many growers have initiated the cultivation of fruits, such as lemons, oranges, figs, grapefruits, cherries, and strawberries.
Indoor Farming Technology Market (by Region)
The indoor farming technology market is expected to grow during the forecast period due to high technology adoption in agriculture and increasing demand for healthier crops and pesticide-free crops. Also, the production of crops can be increased by utilizing vertical farming lighting to light multiple layers of crops, attaining a higher yield with a smaller footprint. The indoor farming technology market thus has a huge presence in the North America and Europe regions.
The North America region is expected to dominate the indoor farming technology market, which can be attributed to the high technological advancement and the presence of leading indoor farming technology solution providers in the region. The growth in the market is further driven by the increasing research and development activities and large-scale adoption of digital technologies in countries such as the U.S., Canada, and Mexico. The U.S. is the major player in this market. The country produces several green vegetables, including kale, lettuce, arugula, and pak choi. In 2019, more than 2,000 vertical farms were there in the U.S., and out of that, 60% of the market was mainly driven by small and medium-scale companies.
China is anticipated to register the highest growth rate during the forecast period 2022-2027. This is due to ongoing efforts to digitize every industry, which will further benefit the agricultural industry. Apart from that, the regional governments are enacting technology-friendly policies, which are anticipated to significantly impact the market.
Impact of COVID-19 on the Indoor Farming Technology Market
The COVID-19 pandemic has unfavorably impacted many industries across the world, including the agriculture industry and indoor farming industry. North America region is one of the highest revenue-generating regions for the indoor farming technology market. Due to COVID-19, the production of fruits and vegetables, microgreens, ornamentals, and others under indoor farming was hindered up to a level that led to low revenue generation. This has further hampered the growth of the indoor farming technology market in 2020. However, the improved COVID-19 situation is expected to grow in the studied market during the forecast period. COVID-19 has also increased the demand for rapid pharmaceutical development, and vertical indoor farming can provide high-quality monoclonal antibodies, bioinks, vaccines, and other proteins efficiently and quickly. For instance, in March 2020, a start-up, iBio, announced that it was developing SARS-CoV-2 vaccine candidates by utilizing vertical indoor farming. This is further increasing the market size even further.
Other regions, such as Europe, have a huge market for indoor farming technology, and Asia-Pacific is a developing market for the same. However, these regions also faced the effects of the COVID-19 pandemic, which significantly impacted their agricultural production. During the first wave, Italy got affected by the virus in the worst manner, and during the second wave of COVID-19, India was hit brutally by the virus. However, farmers and other agricultural organizations understood the need for and importance of controlled agricultural methods, such as vertical farming and container farming, to feed such a huge population. The COVID-19 situation in these regions normalized to an extent at the end of 2020, and in the near future, the indoor farming technology market is anticipated to grow in Asia-Pacific and Europe regions.
In 2021, COVID-19 accelerated a prevalent trend wherein consumers choose to improve their well-being by consuming natural fruits, vegetables, cereals, grains, and pulses that are perceived to be better for them. In addition, a general concern regarding health, weight management, and disease prevention has also impacted dietary choices among consumers. Due to this, the demand for natural food and food products has increased and created a better market opportunity for the indoor farming technology market during 2022-2027.
Competitive Landscape of the Indoor Farming Technology Market
Some of the leading companies operating in the indoor farming technology market are American Hydroponics, Argus Control Systems Ltd., Autogrow Systems Ltd., Certhon, Current by General Electric, Everlight Electronics Co., Ltd., Freight Farms, GE Lighting, General Hydroponics Inc., Illumitex, LOGIQS B.V., LumiGrow, Lumileds, Netafim, OSRAM GmbH, Priva Holdings B.V., Richel Group Signify N.V., Smart Cannabis Corp., Tevatronic Ltd., and Vertical Farm System Pty Ltd.
The indoor farming technology market has seen major development by key players operating in the market, such as new product launches, mergers and acquisitions, business expansion activities, partnerships, collaborations, and joint ventures. The favored strategy for the companies has been new product launches and mergers and acquisitions to strengthen their positions in the indoor farming technology market. For instance, in March 2021, Netafim acquired a Dutch greenhouse company called Gakon to meet the increasing demand for local all-climate food production.
Other strategies adopted by the key market players are collaboration and joint ventures. The companies have put in considerable effort to develop new strategies for increasing the availability of products needed for indoor farming. For instance, in July 2020, Netafim entered a partnership with Sentek Technologies to distribute Sentek’s line of industry-leading soil moisture sensors. Product innovation and introduction have helped companies to grow and sustain the competition by retaining present customers and attracting new ones with their constant introduction and improvisation of products. Partnership with regional players helps in expanding their business and increases their product availability in a particular country.
The growing demand for organic fruits and vegetables and farmers' acceptance of vertical culture farming drive the indoor farming technology demand during 2022-2027.
