The strategy of moving beyond the tomato market to vegetables and berries is a good business strategy, however, the company is in a race against the oldest challenge in business: can it execute that strategy when the business cash flow is so dismally poor?” (Disclosure: Branscome has made financial donations to the Daily Yonder.) “AppHarvest does use the highest tech in greenhouse production from the Netherlands, and its commitment to Appalachian Kentucky has rightfully given it a very high profile. “The best high tech in agriculture will not overcome a bad business model based on selling a commodity product-tomatoes–in a highly competitive market,” James Branscome, retired managing director of Investment Analysis, S&P Global, said in an email interview. Still, questions remain about whether the CEA company can turn a profit before its money runs out. Also, when you can grow year round and you’ve got facilities that are going to have a projected 20 to 30 year efficient life – that’s where the opportunity comes in to recoup those investments.” “So when you’re able to have literally millions of plants in a small area where you’ve got crop care specialists who can efficiently harvest and pack those harvest, and you’re reducing your food miles based on where you’re distributing those harvests, you get a higher quality product that’s having to travel a shorter distance. “A lot of what enables the profitability is the scale,” Parman said. Adding the Richmond facility, the company said, will allow it to grow 1.5 million tomato plants across a combined 120 acres. Already workers at the Somerset facility have planted nearly 1 million strawberry plants and will rotate crops there between berries and cucumbers. The company said it expects to harvest 10 miles of lettuce a day in Berea. Parman said the expanded crops, as well as a change in the varieties of tomatoes the company grows, will bring in more revenue. Those farms – a 15-acre farm in Berea growing salad greens a 30-acre facility in Somerset growing berries and English cucumbers, and a 60-acre facility in Richmond growing tomatoes – will join the initial 60-acre facility in Morehead that also grows tomatoes through controlled environment agriculture (CEA).
A lot of people get confused thinking those losses are just cash spent, instead of investments in assets that hold long-term value like the farms and equipment we’re putting in.” “We’re a little bit unusual since we went public while we were still in hyper growth mode. “The thing that seems to be confusing for a lot of folks is that what gets qualified as those losses are also investments in the farms,” he said. And those revenues, he said, only reflect sales on one crop. The negative balance includes capital investments the company has made to build out its four farms located across rural Kentucky. Travis Parman, the company’s chief communications officer, said those aren’t losses. The poor sales left the company with a net loss of over $24 million. Loren Eggleton, AppHarvest’s chief financial officer, said that the low numbers were due to crop health issues. In November, AppHarvest’s third quarter earnings call reported net quarterly sales of only $542,000, a precipitous drop from earnings earlier in the year. While officials at an indoor farming operation in Kentucky say their plan to re-invent agriculture in Appalachia is on track, experts are wondering whether their plan remains financially viable after a low earnings report. The Daily Yonder's coverage of rural economic issues, including workforce development and the future of work in rural America, is supported in part by Microsoft.
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