Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The actech
Speaker 1: company app Harvest reported its first quarter as a publicly
Speaker 1: traded company after going public via a spack back in February.
Speaker 1: First quarter net sales matching guidance, as the company reiterated
Speaker 1: its revenue outlook for the year. Let's talk about the quarter,
Speaker 1: the outlook for this certified B court business. App Harvest
Speaker 1: CEO and founder Jonathan Webb on the phone with us
Speaker 1: from Kentucky. Jonathan, how are you doing well? Thank you
Speaker 1: for having me. We'll talk to us about the business
Speaker 1: and how things are going going well considering you know,
Speaker 1: it's it's we're on the tail end of a global pandemic.
Speaker 1: But it it couldn't be more proud of our team here
Speaker 1: in Kentucky where our first facility is two point eight
Speaker 1: millions square feet. Uh. We built that facility on time,
Speaker 1: on budget, and in the middle of in the middle
Speaker 1: of a global pandemic, and we hired five people to
Speaker 1: stand up our first operation. UH. And just really proud
Speaker 1: of our team and our our first quarter is a
Speaker 1: public company. UH. It was. It was about, you know,
Speaker 1: letting investors know that that we're here to deliver on
Speaker 1: our promises and uh, and we're showing that we're hitting
Speaker 1: the targets that we're putting out in front of in
Speaker 1: front of investors. Well, I gotta say investors seemed to
Speaker 1: be happy since you guys put it out. Looks like
Speaker 1: the stock is up more than easily. So tell us
Speaker 1: about the business and what you're seeing in terms of
Speaker 1: the kind of growth that's out there, and uh, you
Speaker 1: know what you are doing to meet all the demand
Speaker 1: that's out there. Yeah, So we're at at harvest. We're
Speaker 1: building some of the world's largest controlled environment agriculture facilities. UH,
Speaker 1: and we're focused on on fruit and vegetable production. First
Speaker 1: crops were growing or tomatoes by Q four next year
Speaker 1: two will be growing berries, leafy greens UH and vine crops.
Speaker 1: But the thesis is we we have to bring outdoor,
Speaker 1: open field production into controlled environments and and we're we're
Speaker 1: targeting bringing a lot of the production that's been pushed
Speaker 1: down to Mexico, bringing that production back to the U S.
Speaker 1: So using less water, getting thirty times yield per acre
Speaker 1: and and and getting the harsh chemical pesticides out on
Speaker 1: on the demand side, and we really cannot build and
Speaker 1: grow fast enough to meet that demand. The grocers know it, uh,
Speaker 1: the consumers are demanding it, and and we're we're really
Speaker 1: proud to be at some of the largest retail outlets.
Speaker 1: Just in our first few months of growing where you
Speaker 1: can find us a Kroger, we're now Windy's uh and
Speaker 1: and Publics and many of the top twenty five grocers
Speaker 1: are are taking our are taking our products. Do you
Speaker 1: guys really play into this whole concept of kind of
Speaker 1: you know, locally farming and then serving the community. That's
Speaker 1: a big part of what you're doing. Yeah, we're one
Speaker 1: of four public benefit corporations that's a b corp UM
Speaker 1: and what that means is we have high environmental social
Speaker 1: government standards and uh. You know, part of what we're
Speaker 1: doing is using technology to grow fruits and vegetables, uh
Speaker 1: that that use far less resources. But the way we're
Speaker 1: doing it and who we're doing it with is something
Speaker 1: I'm incredibly proud of. Every every employeed app Harvest makes
Speaker 1: a living wage. Every employeed app Harvest has full health
Speaker 1: care and benefits for their family. Uh And and you know,
Speaker 1: if we want to come out of COVID and say
Speaker 1: you know, essential workers are important, well, then every person
Speaker 1: in food and agriculture should should make a living wage
Speaker 1: and and and get full benefits. Also, every employeed app
Speaker 1: Harvest has ownership in the company. Uh. And you know,
Speaker 1: I was told that this was a pretty radical idea
Speaker 1: and food and agriculture, and uh, it's the r o I.
Speaker 1: And that investment has been has been what's radical at
Speaker 1: the the the We've had nearly ten thousand people apply
Speaker 1: to work in our company in the middle of COVID
Speaker 1: H and when you see the labor shortages around the
Speaker 1: country where the polar opposite we we we can't get know,
Speaker 1: we can't go through the applications fast enough. People want
Speaker 1: to work here. And part of that is showing yes,
Speaker 1: we spend a little money on on investing in our employees,
Speaker 1: but treating our employees with dignity and respect has been
Speaker 1: an incredible r o I on on production and productivity
Speaker 1: here inside the company. So tell me, you say you
Speaker 1: you provide a living wage, So what are your workers?
Speaker 1: I guess on average, I don't know what that always
Speaker 1: means on average, but what are they making yeah, So
Speaker 1: we we have a really wide range of skill sets
Speaker 1: here at the company. So we have engineers and computer
Speaker 1: scientists working on the robotics and AI uh, and we
Speaker 1: have planned scientists all the way down to you know,
Speaker 1: our our our cleaning folks and janit oriole staff, and
Speaker 1: all the way up to crop care specialists. But you know,
Speaker 1: there's a standard living wage in the US and UH
Speaker 1: for US entry level even off the street, thirteen dollars
Speaker 1: an hour full benefits, UH. Hitting production targets gets people
Speaker 1: up to eighteen or twenty dollars an hour, you know.
Speaker 1: So we're and where we're at is really you know,
Speaker 1: coal country where if you look at most of the
Speaker 1: coal mines in the US that shut down, a vast
Speaker 1: majority of those were in eastern Kentucky and West Virginia,
Speaker 1: you know. So so here we're far above the current
Speaker 1: wage that that's out and above uh well what's already
Speaker 1: out on the street around us. So you know, we're
Speaker 1: we're trying to tell people if they come to work
Speaker 1: and show up every day, you know, we'll we'll do
Speaker 1: our best to take care of them. If if they're
Speaker 1: coming to to work and take care of of what
Speaker 1: we're doing here day to day. Jonathan, You've been talking
Speaker 1: about the business, so it sounds like there's a lot
Speaker 1: of demand. And I agree with you that people are
Speaker 1: looking for food. I know, I certainly personally am in
Speaker 1: terms of less chemicals, less impact on the environment, healthier ways.
Speaker 1: I like the idea of kind of more local production.
Speaker 1: I also like that you guys are doing, you know,
Speaker 1: impacting UH people in a tough part of the country
Speaker 1: and and and really providing a decent living. How difficult, though,
Speaker 1: is it to get to profitability? When do you expect
Speaker 1: to get to profitability? So each facility we've islanded where
Speaker 1: UM we were. We we've got a pn L for
Speaker 1: each facility, and as we ranch each each facility up
Speaker 1: about UH year and a half two years in UH
Speaker 1: it gets to about steady state. And then each asset
Speaker 1: is about a twenty five year twenty to twenty five
Speaker 1: year life of that asset. So each facility we build
Speaker 1: will be operating twenty to twenty five years. This is
Speaker 1: under a current environment where prices and agriculture and food
Speaker 1: generally are pretty suppressed. Because of where we're currently at.
Speaker 1: I mean, you look at our competition in Mexico. Is
Speaker 1: this gonna last? Are we gonna? Are we gonna continue
Speaker 1: to allow food sold in the US where people in
Speaker 1: Mexico are getting paid five dollars a day and we're
Speaker 1: in some cases you know, you can find a legal
Speaker 1: chemical pesticides uh on that product. I mean, agriculture has
Speaker 1: such a long way to go to catch up where
Speaker 1: consumers are demanding and where regulators are pushing. Um. That
Speaker 1: that again, you can make an argument that the prices
Speaker 1: today are artificially suppressed, and we'll see those prices rise.
Speaker 1: And that's where you know, app harvest today and under
Speaker 1: current environment UH can exceed and do do very well.
Speaker 1: But as those prices rise, and what we'll do even
Speaker 1: better because we can compete under the conditions today and
Speaker 1: won't change for us. The other factor on top of
Speaker 1: all of this, too is climate disruption. Uh. You look
Speaker 1: at an open field farmer that has to deal with
Speaker 1: drought or wildfires or not enough water or water scarcity.
Speaker 1: Nine of a fruit and vegetable is water. Uh. And
Speaker 1: and we run completely on recycled rainwater, which ultimately keeps
Speaker 1: our costs lower. So um again, it's it's competing today
Speaker 1: and today's playing field, but then also have building a
Speaker 1: resilient you know, resilient uh company that that can be
Speaker 1: not only competitive today, but but really stand out five
Speaker 1: ten years from now. Hey, listen, this is something I've
Speaker 1: talked about David Lee, you know, formally impossible foods, but
Speaker 1: also at your company president of the company. You know,
Speaker 1: we've talked about lighting in the electricity costs. You guys
Speaker 1: do hybrid lighting. I know you you you know are
Speaker 1: using the sun, You're using l E. Ed s um
Speaker 1: tell us about that component of the equation and how
Speaker 1: that is going in terms of cost and impact on
Speaker 1: the environment. Well, if you look an impact on the
Speaker 1: environment with agriculture today, you have harsh chemicals that are
Speaker 1: degrading our waters. Were the un IS predicted we have
Speaker 1: sixty years left of fertile top soil. I mean, you
Speaker 1: talk about a statistic that we don't talk about that's
Speaker 1: completely jarring, is sixty years left. I mean, so I'm
Speaker 1: sitting again in cold country and I think of agriculture.
Speaker 1: We're mining nutrients out of the ground and they're not replenishing.
Speaker 1: We're in a glass facility that allows us to use
Speaker 1: sunlight first and only add micro mole light from the
Speaker 1: LED that we need to add that the sun is
Speaker 1: not adding running completely on recycled rainwater, also being closer
Speaker 1: to market reducing that diesel consumption. So if you're looking
Speaker 1: at a fruit and vegetable coming two thousand miles from
Speaker 1: California or Mexico to the East coast, you know, we
Speaker 1: get that down to a day drive by where we're
Speaker 1: at and and lighting is one one piece where we
Speaker 1: have energy and using the L E d S gets
Speaker 1: gets our lighting energy consumption down. But it's really and
Speaker 1: we're still working on this. We're working on with a
Speaker 1: lot of universities and outside stakeholders, is what is that
Speaker 1: life cycle analysis and agriculture, there's no one you can
Speaker 1: really look to to get good answers on what what
Speaker 1: are the push points? Energy was very easy, uh to
Speaker 1: to be able to judge on. Uh. Here's an example
Speaker 1: solar and wind versus fossil fuels. That's very binary. It's
Speaker 1: you know, one verse the other. Agriculture is incredibly complex.
Speaker 1: The US has our our food is wasted and goes
Speaker 1: to a landfill. So not only is it the inputs, uh,
Speaker 1: the energy you consume, there's the food waste because of
Speaker 1: how far we're trucking the food itself. Um. That that
Speaker 1: again there's and we're working on this with the universities
Speaker 1: to try to come up with an overall life cycle analysis.
Speaker 1: But there's nowhere to look U S d A. No
Speaker 1: one has done a really good job on saying here
Speaker 1: the environmental benefits of controlled environment agg here, the drawbacks
Speaker 1: to open field here, the play opportunities to get better. Uh,
Speaker 1: there's no real one organization to look to, whether that's
Speaker 1: the U N or the U. S d A or
Speaker 1: any other non governmental organization. Well it's interesting, you know,
Speaker 1: and you go back that sixty years left of farming
Speaker 1: or soil available for farming, I think that was out
Speaker 1: in and it's it's really kind of shocking. It's reminded
Speaker 1: that when it comes to climate change, are the impact
Speaker 1: that we've had in the environment, You've got to break
Speaker 1: it down in different ways to see how could potentially
Speaker 1: impact us. What does it take though for you to
Speaker 1: kind of ramp up on the scale that's needed to
Speaker 1: feed the United States, uh and potentially feed the world
Speaker 1: that this model, what does it need to get there? Well,
Speaker 1: we we've said this controlled environment agriculture is really the
Speaker 1: third wave of sustainable infrastructure. Twenty years ago, it was
Speaker 1: renewable energy. Ten years ago Tesla began to make electric
Speaker 1: vehicles popular in the mainstream, and then today it's controlled
Speaker 1: environment agriculture. Uh and and so what is it going
Speaker 1: to take. It's gonna take tens of thousands of acres
Speaker 1: of indoor production in the US. There's a third party
Speaker 1: study walking in university and I think said a little
Speaker 1: over twenty acres of production just to bring vine crops
Speaker 1: back from Mexico. To put that in perspective, our first
Speaker 1: facility at sixty acres million score feet. So we have
Speaker 1: to build it a lot. But the good thing with
Speaker 1: the US is when we put our mind to it,
Speaker 1: we can build really big, really fast, and the US
Speaker 1: can lead the world and control environment agriculture. And we
Speaker 1: you know, frankly, after going public and the attention we received,
Speaker 1: we've already had conversations globally from the Middle East to
Speaker 1: Southeast Asia, high dignity ranking dignitaries, prime ministers of countries
Speaker 1: because they understand there is a real problem with food security.
Speaker 1: They don't the numbers don't add up, and these aren't
Speaker 1: like three lifetimes away. It's you know, years from now,
Speaker 1: how do we actually feed our populations? All right, we're
Speaker 1: gonna have to leave it there. Do come back, because
Speaker 1: it's an area that I'm certainly interested in. I know
Speaker 1: our audience is certainly um so hopefully we can get
Speaker 1: you back here real soon. Thank you so much. Jonathan Webb,
Speaker 1: he is at Harvest CEO and founder, joining us on
Speaker 1: the phone from Kentucky.