WEBVTT - AppHarvest CEO on Shrinking the Farming Footprint 0:00:00.040 --> 0:00:03.600 You're listening to Bloomberg Business Week with Carol Messer and 0:00:03.680 --> 0:00:08.200 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The actech 0:00:08.240 --> 0:00:11.280 company app Harvest reported its first quarter as a publicly 0:00:11.320 --> 0:00:14.720 traded company after going public via a spack back in February. 0:00:14.960 --> 0:00:17.760 First quarter net sales matching guidance, as the company reiterated 0:00:17.760 --> 0:00:21.319 its revenue outlook for the year. Let's talk about the quarter, 0:00:21.400 --> 0:00:25.000 the outlook for this certified B court business. App Harvest 0:00:25.040 --> 0:00:27.840 CEO and founder Jonathan Webb on the phone with us 0:00:27.880 --> 0:00:31.600 from Kentucky. Jonathan, how are you doing well? Thank you 0:00:31.640 --> 0:00:33.520 for having me. We'll talk to us about the business 0:00:33.560 --> 0:00:38.159 and how things are going going well considering you know, 0:00:38.479 --> 0:00:41.600 it's it's we're on the tail end of a global pandemic. 0:00:41.760 --> 0:00:44.160 But it it couldn't be more proud of our team here 0:00:44.159 --> 0:00:48.080 in Kentucky where our first facility is two point eight 0:00:48.080 --> 0:00:51.960 millions square feet. Uh. We built that facility on time, 0:00:52.000 --> 0:00:54.040 on budget, and in the middle of in the middle 0:00:54.040 --> 0:00:57.320 of a global pandemic, and we hired five people to 0:00:57.440 --> 0:01:01.000 stand up our first operation. UH. And just really proud 0:01:01.040 --> 0:01:04.080 of our team and our our first quarter is a 0:01:04.080 --> 0:01:07.319 public company. UH. It was. It was about, you know, 0:01:07.400 --> 0:01:10.039 letting investors know that that we're here to deliver on 0:01:10.080 --> 0:01:13.000 our promises and uh, and we're showing that we're hitting 0:01:13.000 --> 0:01:15.039 the targets that we're putting out in front of in 0:01:15.040 --> 0:01:17.360 front of investors. Well, I gotta say investors seemed to 0:01:17.360 --> 0:01:19.120 be happy since you guys put it out. Looks like 0:01:19.120 --> 0:01:22.760 the stock is up more than easily. So tell us 0:01:22.800 --> 0:01:25.160 about the business and what you're seeing in terms of 0:01:25.520 --> 0:01:28.200 the kind of growth that's out there, and uh, you 0:01:28.240 --> 0:01:30.279 know what you are doing to meet all the demand 0:01:30.319 --> 0:01:34.240 that's out there. Yeah, So we're at at harvest. We're 0:01:34.280 --> 0:01:39.440 building some of the world's largest controlled environment agriculture facilities. UH, 0:01:39.440 --> 0:01:43.559 and we're focused on on fruit and vegetable production. First 0:01:43.560 --> 0:01:47.440 crops were growing or tomatoes by Q four next year 0:01:48.240 --> 0:01:52.800 two will be growing berries, leafy greens UH and vine crops. 0:01:53.480 --> 0:01:56.960 But the thesis is we we have to bring outdoor, 0:01:57.040 --> 0:02:01.040 open field production into controlled environments and and we're we're 0:02:01.080 --> 0:02:03.680 targeting bringing a lot of the production that's been pushed 0:02:03.680 --> 0:02:07.160 down to Mexico, bringing that production back to the U S. 0:02:07.280 --> 0:02:11.840 So using less water, getting thirty times yield per acre 0:02:11.960 --> 0:02:14.880 and and and getting the harsh chemical pesticides out on 0:02:14.880 --> 0:02:18.000 on the demand side, and we really cannot build and 0:02:18.040 --> 0:02:22.280 grow fast enough to meet that demand. The grocers know it, uh, 0:02:22.400 --> 0:02:26.000 the consumers are demanding it, and and we're we're really 0:02:26.040 --> 0:02:28.560 proud to be at some of the largest retail outlets. 0:02:28.919 --> 0:02:31.160 Just in our first few months of growing where you 0:02:31.200 --> 0:02:35.160 can find us a Kroger, we're now Windy's uh and 0:02:35.160 --> 0:02:38.320 and Publics and many of the top twenty five grocers 0:02:38.919 --> 0:02:41.240 are are taking our are taking our products. Do you 0:02:41.280 --> 0:02:44.160 guys really play into this whole concept of kind of 0:02:44.440 --> 0:02:47.480 you know, locally farming and then serving the community. That's 0:02:47.480 --> 0:02:50.919 a big part of what you're doing. Yeah, we're one 0:02:50.919 --> 0:02:55.400 of four public benefit corporations that's a b corp UM 0:02:55.440 --> 0:02:58.799 and what that means is we have high environmental social 0:02:58.840 --> 0:03:01.680 government standards and uh. You know, part of what we're 0:03:01.720 --> 0:03:05.680 doing is using technology to grow fruits and vegetables, uh 0:03:05.720 --> 0:03:09.359 that that use far less resources. But the way we're 0:03:09.400 --> 0:03:11.360 doing it and who we're doing it with is something 0:03:11.400 --> 0:03:14.839 I'm incredibly proud of. Every every employeed app Harvest makes 0:03:14.840 --> 0:03:18.800 a living wage. Every employeed app Harvest has full health 0:03:18.840 --> 0:03:22.880 care and benefits for their family. Uh And and you know, 0:03:22.919 --> 0:03:24.720 if we want to come out of COVID and say 0:03:25.200 --> 0:03:28.880 you know, essential workers are important, well, then every person 0:03:28.919 --> 0:03:31.600 in food and agriculture should should make a living wage 0:03:31.639 --> 0:03:35.280 and and and get full benefits. Also, every employeed app 0:03:35.320 --> 0:03:38.680 Harvest has ownership in the company. Uh. And you know, 0:03:38.720 --> 0:03:41.120 I was told that this was a pretty radical idea 0:03:41.160 --> 0:03:44.160 and food and agriculture, and uh, it's the r o I. 0:03:44.320 --> 0:03:47.720 And that investment has been has been what's radical at 0:03:47.760 --> 0:03:50.880 the the the We've had nearly ten thousand people apply 0:03:50.960 --> 0:03:53.280 to work in our company in the middle of COVID 0:03:53.800 --> 0:03:55.920 H and when you see the labor shortages around the 0:03:55.960 --> 0:04:00.120 country where the polar opposite we we we can't get know, 0:04:00.560 --> 0:04:03.200 we can't go through the applications fast enough. People want 0:04:03.200 --> 0:04:05.840 to work here. And part of that is showing yes, 0:04:05.920 --> 0:04:09.200 we spend a little money on on investing in our employees, 0:04:09.880 --> 0:04:13.000 but treating our employees with dignity and respect has been 0:04:13.040 --> 0:04:17.159 an incredible r o I on on production and productivity 0:04:17.880 --> 0:04:20.359 here inside the company. So tell me, you say you 0:04:20.360 --> 0:04:22.839 you provide a living wage, So what are your workers? 0:04:23.120 --> 0:04:24.920 I guess on average, I don't know what that always 0:04:24.920 --> 0:04:29.039 means on average, but what are they making yeah, So 0:04:29.160 --> 0:04:32.000 we we have a really wide range of skill sets 0:04:32.000 --> 0:04:35.279 here at the company. So we have engineers and computer 0:04:35.360 --> 0:04:38.800 scientists working on the robotics and AI uh, and we 0:04:38.839 --> 0:04:41.960 have planned scientists all the way down to you know, 0:04:42.080 --> 0:04:45.839 our our our cleaning folks and janit oriole staff, and 0:04:45.920 --> 0:04:48.560 all the way up to crop care specialists. But you know, 0:04:48.880 --> 0:04:51.800 there's a standard living wage in the US and UH 0:04:51.920 --> 0:04:56.159 for US entry level even off the street, thirteen dollars 0:04:56.200 --> 0:05:01.360 an hour full benefits, UH. Hitting production targets gets people 0:05:01.440 --> 0:05:03.680 up to eighteen or twenty dollars an hour, you know. 0:05:03.800 --> 0:05:07.120 So we're and where we're at is really you know, 0:05:07.200 --> 0:05:09.680 coal country where if you look at most of the 0:05:09.680 --> 0:05:12.119 coal mines in the US that shut down, a vast 0:05:12.160 --> 0:05:14.840 majority of those were in eastern Kentucky and West Virginia, 0:05:15.240 --> 0:05:20.599 you know. So so here we're far above the current 0:05:20.600 --> 0:05:25.760 wage that that's out and above uh well what's already 0:05:25.760 --> 0:05:27.920 out on the street around us. So you know, we're 0:05:27.960 --> 0:05:30.040 we're trying to tell people if they come to work 0:05:30.120 --> 0:05:33.000 and show up every day, you know, we'll we'll do 0:05:33.040 --> 0:05:34.800 our best to take care of them. If if they're 0:05:34.839 --> 0:05:37.200 coming to to work and take care of of what 0:05:37.240 --> 0:05:39.320 we're doing here day to day. Jonathan, You've been talking 0:05:39.360 --> 0:05:42.040 about the business, so it sounds like there's a lot 0:05:42.080 --> 0:05:44.320 of demand. And I agree with you that people are 0:05:44.360 --> 0:05:47.120 looking for food. I know, I certainly personally am in 0:05:47.200 --> 0:05:50.960 terms of less chemicals, less impact on the environment, healthier ways. 0:05:51.360 --> 0:05:53.359 I like the idea of kind of more local production. 0:05:53.400 --> 0:05:55.480 I also like that you guys are doing, you know, 0:05:55.680 --> 0:05:59.120 impacting UH people in a tough part of the country 0:05:59.279 --> 0:06:04.240 and and and really providing a decent living. How difficult, though, 0:06:04.320 --> 0:06:06.560 is it to get to profitability? When do you expect 0:06:06.560 --> 0:06:12.039 to get to profitability? So each facility we've islanded where 0:06:12.160 --> 0:06:15.719 UM we were. We we've got a pn L for 0:06:15.760 --> 0:06:19.240 each facility, and as we ranch each each facility up 0:06:19.279 --> 0:06:22.760 about UH year and a half two years in UH 0:06:22.800 --> 0:06:25.679 it gets to about steady state. And then each asset 0:06:25.800 --> 0:06:28.040 is about a twenty five year twenty to twenty five 0:06:28.120 --> 0:06:31.680 year life of that asset. So each facility we build 0:06:32.400 --> 0:06:35.640 will be operating twenty to twenty five years. This is 0:06:35.720 --> 0:06:39.920 under a current environment where prices and agriculture and food 0:06:41.160 --> 0:06:45.680 generally are pretty suppressed. Because of where we're currently at. 0:06:45.720 --> 0:06:49.719 I mean, you look at our competition in Mexico. Is 0:06:49.760 --> 0:06:52.600 this gonna last? Are we gonna? Are we gonna continue 0:06:52.600 --> 0:06:55.080 to allow food sold in the US where people in 0:06:55.120 --> 0:06:58.720 Mexico are getting paid five dollars a day and we're 0:06:58.760 --> 0:07:00.880 in some cases you know, you can find a legal 0:07:00.920 --> 0:07:06.040 chemical pesticides uh on that product. I mean, agriculture has 0:07:06.080 --> 0:07:09.359 such a long way to go to catch up where 0:07:09.400 --> 0:07:14.640 consumers are demanding and where regulators are pushing. Um. That 0:07:14.640 --> 0:07:17.400 that again, you can make an argument that the prices 0:07:17.440 --> 0:07:20.760 today are artificially suppressed, and we'll see those prices rise. 0:07:20.800 --> 0:07:23.360 And that's where you know, app harvest today and under 0:07:23.360 --> 0:07:27.200 current environment UH can exceed and do do very well. 0:07:27.440 --> 0:07:30.640 But as those prices rise, and what we'll do even 0:07:30.680 --> 0:07:33.160 better because we can compete under the conditions today and 0:07:33.240 --> 0:07:35.520 won't change for us. The other factor on top of 0:07:35.520 --> 0:07:39.600 all of this, too is climate disruption. Uh. You look 0:07:39.640 --> 0:07:41.920 at an open field farmer that has to deal with 0:07:42.000 --> 0:07:45.880 drought or wildfires or not enough water or water scarcity. 0:07:45.960 --> 0:07:49.720 Nine of a fruit and vegetable is water. Uh. And 0:07:49.720 --> 0:07:53.280 and we run completely on recycled rainwater, which ultimately keeps 0:07:53.320 --> 0:07:58.000 our costs lower. So um again, it's it's competing today 0:07:58.080 --> 0:08:00.600 and today's playing field, but then also have building a 0:08:00.640 --> 0:08:05.440 resilient you know, resilient uh company that that can be 0:08:05.560 --> 0:08:08.240 not only competitive today, but but really stand out five 0:08:08.280 --> 0:08:10.280 ten years from now. Hey, listen, this is something I've 0:08:10.280 --> 0:08:13.560 talked about David Lee, you know, formally impossible foods, but 0:08:14.080 --> 0:08:16.560 also at your company president of the company. You know, 0:08:16.560 --> 0:08:19.240 we've talked about lighting in the electricity costs. You guys 0:08:19.240 --> 0:08:21.880 do hybrid lighting. I know you you you know are 0:08:22.040 --> 0:08:25.320 using the sun, You're using l E. Ed s um 0:08:25.320 --> 0:08:28.400 tell us about that component of the equation and how 0:08:28.480 --> 0:08:31.000 that is going in terms of cost and impact on 0:08:31.040 --> 0:08:35.080 the environment. Well, if you look an impact on the 0:08:35.120 --> 0:08:38.760 environment with agriculture today, you have harsh chemicals that are 0:08:38.800 --> 0:08:42.240 degrading our waters. Were the un IS predicted we have 0:08:42.320 --> 0:08:45.120 sixty years left of fertile top soil. I mean, you 0:08:45.160 --> 0:08:47.320 talk about a statistic that we don't talk about that's 0:08:47.360 --> 0:08:51.600 completely jarring, is sixty years left. I mean, so I'm 0:08:51.640 --> 0:08:54.760 sitting again in cold country and I think of agriculture. 0:08:54.760 --> 0:08:57.840 We're mining nutrients out of the ground and they're not replenishing. 0:08:58.400 --> 0:09:01.679 We're in a glass facility that allows us to use 0:09:01.760 --> 0:09:05.160 sunlight first and only add micro mole light from the 0:09:05.280 --> 0:09:07.640 LED that we need to add that the sun is 0:09:07.640 --> 0:09:13.040 not adding running completely on recycled rainwater, also being closer 0:09:13.080 --> 0:09:17.120 to market reducing that diesel consumption. So if you're looking 0:09:17.120 --> 0:09:20.120 at a fruit and vegetable coming two thousand miles from 0:09:20.160 --> 0:09:22.440 California or Mexico to the East coast, you know, we 0:09:22.480 --> 0:09:24.360 get that down to a day drive by where we're 0:09:24.360 --> 0:09:29.040 at and and lighting is one one piece where we 0:09:29.080 --> 0:09:31.160 have energy and using the L E d S gets 0:09:31.400 --> 0:09:35.040 gets our lighting energy consumption down. But it's really and 0:09:35.080 --> 0:09:37.120 we're still working on this. We're working on with a 0:09:37.120 --> 0:09:40.320 lot of universities and outside stakeholders, is what is that 0:09:40.440 --> 0:09:43.760 life cycle analysis and agriculture, there's no one you can 0:09:43.800 --> 0:09:46.960 really look to to get good answers on what what 0:09:47.080 --> 0:09:52.160 are the push points? Energy was very easy, uh to 0:09:52.160 --> 0:09:56.800 to be able to judge on. Uh. Here's an example 0:09:57.120 --> 0:10:01.720 solar and wind versus fossil fuels. That's very binary. It's 0:10:01.840 --> 0:10:05.360 you know, one verse the other. Agriculture is incredibly complex. 0:10:05.720 --> 0:10:11.040 The US has our our food is wasted and goes 0:10:11.080 --> 0:10:16.480 to a landfill. So not only is it the inputs, uh, 0:10:16.520 --> 0:10:19.400 the energy you consume, there's the food waste because of 0:10:19.400 --> 0:10:24.040 how far we're trucking the food itself. Um. That that 0:10:24.120 --> 0:10:27.359 again there's and we're working on this with the universities 0:10:27.400 --> 0:10:29.680 to try to come up with an overall life cycle analysis. 0:10:29.720 --> 0:10:31.760 But there's nowhere to look U S d A. No 0:10:31.800 --> 0:10:34.240 one has done a really good job on saying here 0:10:34.280 --> 0:10:38.599 the environmental benefits of controlled environment agg here, the drawbacks 0:10:38.640 --> 0:10:42.400 to open field here, the play opportunities to get better. Uh, 0:10:42.440 --> 0:10:45.040 there's no real one organization to look to, whether that's 0:10:45.080 --> 0:10:47.440 the U N or the U. S d A or 0:10:47.480 --> 0:10:50.560 any other non governmental organization. Well it's interesting, you know, 0:10:50.600 --> 0:10:53.360 and you go back that sixty years left of farming 0:10:53.480 --> 0:10:56.640 or soil available for farming, I think that was out 0:10:56.640 --> 0:11:00.640 in and it's it's really kind of shocking. It's reminded 0:11:00.640 --> 0:11:03.079 that when it comes to climate change, are the impact 0:11:03.120 --> 0:11:04.520 that we've had in the environment, You've got to break 0:11:04.520 --> 0:11:06.320 it down in different ways to see how could potentially 0:11:06.400 --> 0:11:08.840 impact us. What does it take though for you to 0:11:08.920 --> 0:11:12.120 kind of ramp up on the scale that's needed to 0:11:12.240 --> 0:11:15.440 feed the United States, uh and potentially feed the world 0:11:15.440 --> 0:11:19.080 that this model, what does it need to get there? Well, 0:11:19.120 --> 0:11:22.320 we we've said this controlled environment agriculture is really the 0:11:22.440 --> 0:11:26.120 third wave of sustainable infrastructure. Twenty years ago, it was 0:11:26.160 --> 0:11:29.680 renewable energy. Ten years ago Tesla began to make electric 0:11:29.800 --> 0:11:33.000 vehicles popular in the mainstream, and then today it's controlled 0:11:33.080 --> 0:11:36.040 environment agriculture. Uh and and so what is it going 0:11:36.080 --> 0:11:39.800 to take. It's gonna take tens of thousands of acres 0:11:39.840 --> 0:11:43.600 of indoor production in the US. There's a third party 0:11:43.720 --> 0:11:47.000 study walking in university and I think said a little 0:11:47.000 --> 0:11:51.320 over twenty acres of production just to bring vine crops 0:11:51.360 --> 0:11:54.720 back from Mexico. To put that in perspective, our first 0:11:54.760 --> 0:11:59.640 facility at sixty acres million score feet. So we have 0:11:59.679 --> 0:12:01.400 to build it a lot. But the good thing with 0:12:01.440 --> 0:12:03.480 the US is when we put our mind to it, 0:12:03.880 --> 0:12:06.600 we can build really big, really fast, and the US 0:12:06.679 --> 0:12:09.960 can lead the world and control environment agriculture. And we 0:12:10.240 --> 0:12:13.440 you know, frankly, after going public and the attention we received, 0:12:13.880 --> 0:12:17.920 we've already had conversations globally from the Middle East to 0:12:17.960 --> 0:12:22.920 Southeast Asia, high dignity ranking dignitaries, prime ministers of countries 0:12:23.280 --> 0:12:27.640 because they understand there is a real problem with food security. 0:12:28.040 --> 0:12:30.600 They don't the numbers don't add up, and these aren't 0:12:30.640 --> 0:12:36.760 like three lifetimes away. It's you know, years from now, 0:12:36.960 --> 0:12:39.600 how do we actually feed our populations? All right, we're 0:12:39.600 --> 0:12:41.319 gonna have to leave it there. Do come back, because 0:12:41.320 --> 0:12:43.000 it's an area that I'm certainly interested in. I know 0:12:43.040 --> 0:12:46.560 our audience is certainly um so hopefully we can get 0:12:46.600 --> 0:12:49.720 you back here real soon. Thank you so much. Jonathan Webb, 0:12:49.840 --> 0:12:52.840 he is at Harvest CEO and founder, joining us on 0:12:52.880 --> 0:12:54.719 the phone from Kentucky.