A Startup ‘Sprout Stack’ Report
1. Business Information
Sprout Stack is a Sydney based startup venture founded in 2016 by Francisco Caffarena & Michael Harder. The company’s mission is “to grow the highest quality vegetables while minimizing the impact on environment” (Bloomberg, 2020). This innovative startup venture is able to grow produce faster than the traditional farming methods and meet people’s demand 365 days a year. The chosen venture is one of the best answers to solve the growing pressure faced by food production and supply chain sustainability (Food Magazine, 2020). The company’s five year vision is to be recognized as the global leader of providing the urban farming solutions with short term aim of expanding in organic fruit market as well (Global AgInvesting, 2016).
1.1 Targeted Customers
With its 3 fully functional farms and automated IoT system, the company is supplying restaurants and shops in Sydney’s North Shore with fresh locally produced vegetables (Sprout Stack Pty Ltd., 2020). The company is addressing the major problem of sustainability in terms of land usage, water usage and CO2 emission caused by farming. According to Hurditch (2019), farms take up around 60% of Australian land and use 92% of all fresh water used annually. By understanding this need, the company uses automated techniques for producing vegetables indoor that reduces the use of land and water by 100 times as compared to traditional farming techniques (Intili, 2018). Hence, the venture was set up to meet the customers demand of organic food without being able to have their own land to grow their own food.
The primary target market for Sprout Stack are large enterprises and communities, situated in remote and rural location through Australia like mining and gas towns. Whereas secondary market for the company is focused at consumers that have retail presence.
1.2 Major Products/Services
Sprout Stack’s containers produce large volumes of leafy green vegetables and herbs in perfectly controlled climate conditions i.e. humidity, lightning and irrigation. It supplies organic vegetables including purple radish, kale, lemon balm, celery leaves and lettuce. The current range of products can be seen in the figure below.
1.3 Competitive Advantage
“Put Simple, Sprout Stack is a Hydroponic Farm inside a Shipping Container”
The company’s major competitive advantage is its use of latest technology for achieving maximum freshness, taste and nutrition (Intili, 2018). As pointed out by Thomaier et al. (2015), indoor farming isn’t new to industry, but Sprout Stack uses innovative approach for producing products like “living salad range” that reduces wastage because the salad remains alive until it is taken home for consumption. Moreover, since all the vegetables are grown indoor, every aspect of the production can be controlled by the owners resulting in consistently good quality and shorter growing cycles of vegetables (Intili, 2018).
The venture owners use vertical hydroponics in highly controlled environment for producing organic and sustainable vegetables (Global AgInvesting, 2016). By using automated irrigation systems, the vegetables get all the nutrients while using 95% less water as compared to tradition farming (Sprout Stack Pty Ltd., 2020). Another competitive advantage it has over its competitors is that the organic farms of Sprout Stacks are modular and can be easily placed closer to the customers in order to reduce food miles and minimizing the carbon footprint (Sprout Stack Pty Ltd., 2020). It also utilizes efficient LED lights for providing the crops with ideal light so that the risks of cloudy days. The use of innovative technology by Sprout Stack, it has successfully eliminated the food miles (the distance between farms and the customers) for yielding more nutritious and sustainable product (Daily Bulletin, 2020). By combining the technological advancement with farming techniques, the company is able to cater organic vegetable demand across Australia (Intili, 2018).
1.4 Competitiveness of Industry
The company is operating in consumer staples sector, consumer products industry and agriculture producers’ sub-industry. While there are 2,172 organic farming business in Australia, the vegetable and fruits growing is still under development (IBISWorld, 2020). The Organic Farming industry in Australia doesn’t have any major company with major stakes. The current market size of organic farming in Australia is around AUD 2 bn (IBISWorld, 2020).
2. Business Model
Sprout Stack is a new business venture competing in urban sustainable farming space. The business model of the company has revolutionized the AgTech Food Industry. The current business model of the company uses revolutionary practices of growing fresh produce by combining indoor agriculture methods, skilled Australian farmers and cutting-edge urban farming techniques (Alam, 2018). It’s groundbreaking business model and a long-term vision of developing environmentally friendly vegetables for customers have attracted customers in Australia.
Currently, the company has a very short supply chain that helps it in producing chemical-free vegetables that is 95% more water efficient and uses 80% less fertilizer (Distillery, 2020). The vegetables are grown in the recycled shipping containers using hi-end technology like LED lights and automatic irrigation system (Intili, 2018). Each unit is well equipped to yield equivalent of one hectare of agricultural production. It uses near closed-loop system reusing waste material for producing and growing mushrooms inside recycled shipping containers. This is beneficial because closed-loop recycling is used for bringing the products back to company so that these can be reused or refurbished without losing material (Zhao, 2018). Sprout Stack maintains deep commitment with the triple-bottom line where water is recycled within the system. In such ways, Sprout Stack uses water less than three percent of that used by traditional farms. It also uses coconut growth substrates by upcycling it to grow mushrooms or chicken feed (Daily Bulletin, 2020).
Existing facilities of Sprout Stack are housed in containers that are parked in the warehouse in Northern Beaches of Sydney. However, the company is planning on vertically expanding its farming venture by including similar facilities in other major Australian cities.
The freight farm is grown in containers with 128 LED light strips that provide the crops with red and blue spectrums (responsible for photosynthesis). The containers also are equipped with 8-gallon size tank filled with liquid fertilizer and propane tanks that produce CO2 supplementing the growth of herbs. All of this runs on 10 gallons of water and 80 kWh of energy usage per day (Global AgInvesting, 2016).
The business is consistently regulated and inspected by Food Standards Australia New Zealand (FSANZ) that ensures the high maintenance levels of property, plant & equipment and points out the high levels of hygiene (Global AgInvesting, 2016). The use of controlled environment means that the produce is free from pathogens and other bugs. Moreover, the salad mixes are pre-packaged and sealed for ensuring that there is no contamination throughout the supply chain.
2.1 Value Proposition
The value proposition for Sprout Stock is given in the picture below:
3.0 Challenges
Although the idea was innovative enough, after being established, the company faced major two challenges i.e. food waste and high supply chain costs. This allowed the company to streamline the operations by making supply chain efficient through use of innovative technology in its indoor farming system (Alam, 2018). The company, in early days, had to face soaring electricity costs due to use of artificial lights in its indoor farming. Moreover, the installation of hydroponics, computer-controlled system and autonomous proprietary technology also remained to be challenging for Sprout Stack (Intili, 2018).
These challenges faced by the company in start were met efficiently by the owners. It reduced the soaring electricity cost by using LED lights that not only reduced the cost of producing vegetables but also improved efficiency (Daily Bulletin, 2020). In order to reduce the food waste, the company uses innovative approach for producing products like “living salad range” that reduces wastage because the salad remains alive until it is taken home for consumption. So, in terms of reducing food wastage, the company streamlined its operations.
4.0. Lessons for Other Businesses
Research suggests that controlled environmental farming is about maintaining clean and sustainable growth processes while protecting the produces from pests, weeds and climate-related issues (Benke & Tomkins, 2017). The company is a leading example in AgTech industry as it applied proprietary technology for making containers fully autonomous. The computer systems also were equipped to be monitored and adjusted from phone virtually from anywhere in the world (Daily Bulletin, 2020). The company stacks each vegetable six rows high under the perfect climatic conditions.
Other agricultural farms need to follow the steps of Sprout Stack by creating a growth algorithm so that optimal levels of light, CO2, nutrients, humidity, pH level and temperature could be monitored and controlled at each phase of life for each vegetable (Daily Bulletin, 2020). By doing so, the businesses can not only maximize yield, flavor and nutritional quality of vegetables, but can also minimize the use of resources like water and fertilizers and minimize the carbon footprint. Moreover, by following the sustainable farming practices of Sprout Stack the other competitors in farming industry can also provide great solution for consumers who seek for extending their help in saving the planet through sustainable ways.
References
Alam, S. (2018). Startup in Spotlight: Sprout Stack – Revolutionizing the AgTech Food Industry. Retrieved May 2, 2020, from https://www.cloudways.com/blog/agtech-startup-sprout-stack/
Benke, K., & Tomkins, B. (2017). Future food-production systems: vertical farming and controlled-environment agriculture. Sustainability: Science, Practice and Policy, 13(1), 13-26.
Bloomberg. (2020). Sprout Stack Pty Ltd. Retrieved May 2, 2020, from https://www.bloomberg.com/profile/company/1695519D:AU
Daily Bulletin. (2020). Does Australia need a secure, sustainable, less-wasteful food supply? Vertical farm Sprout Stack has a solution. Retrieved May 2, 2020, from https://www.dailybulletin.com.au/news/food-dining/53552-does-australia-need-a-secure-sustainable-less-wasteful-food-supply-vertical-farm-sprout-stack-has-a-solution
Distillery. (2020). Sproud Stack. Retrieved May 2, 2020, from https://www.the-distillery.com.au/gallery/sproutstack/
Food Magazine. (2020). Easing food supply concerns. Retrieved May 2, 2020, from https://www.foodmag.com.au/easing-food-supply-concerns/
Global AgInvesting. (2016). Shipping Containers To Revolutionize Fresh Food Production. Retrieved May 3, 2020, from https://www.globalaginvesting.com/shipping-containers-revolutionize-fresh-food-production/
Green Hub. (2019). Sustainable Farming. Retrieved May 2, 2020, from http://www.greenhub.org.au/sustainability/sustainable-farming/?__cf_chl_captcha_tk__=df117500632c2bed870f9aabed10500c1a981dfc-1588441235-0-AUicDFdxabtsXB7K9XuGbnMJ89k9khx72-tXzXhv83_76QGMsmyrQYJCrgPOx3wHzFnVItUY-POyjMjWVcjLvfh2W_R0olt345uR44vAjI2iKhsIPWTF
Hurditch, W. J. (2019). Sustainable water and energy management in Australia’s farming landscapes. Geography Bulletin, 1(1), 35.
IBISWorld. (2020). Organic Farming in Australia industry statistics. Retrieved May 2, 2020, from https://www.ibisworld.com/au/industry/organic-farming/1912/
Intili, D. (2018). Sprout Stack: The changing face of Australian farming. Retrieved May 2, 2020, from https://www.sbs.com.au/news/small-business-secrets/article/2018/07/20/sprout-stack-changing-face-australian-farming
Sprout Stack Pty Ltd. (2020). About Us: How. Retrieved May 2, 2020, from http://sproutstack.co/how/
Sprout Stack Pty Ltd. (2020a). Our Produce. Retrieved May 2, 2020, from http://sproutstack.co/produce/
Thomaier, S., Specht, K., Henckel, D., Dierich, A., & Siebert, R. (2015). Farming in and on urban buildings: Present practice and specific novelties of Zero-Acreage Farming (ZFarming). Renewable Agriculture and Food Systems, 30(1), 43-54.
Zhao, R. (2018). Enhancing eco-efficiency of agro-products’ closed-loop supply chain under the belt and road initiatives: A system dynamics approach. Sustainability, 10(3), 668.
