IFPA Takes on Tech

Vonnie Estes, PMA:
Welcome to PMA takes on tech. The podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes Vice President of Technology for the Produce Marketing Association. And I've spent years in the AG Tech sector. So I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Our episode today is powered by Paine Schwartz Partners, a global leader in sustainable food chain investing, Paine Schwartz Partners is a private equity firm with a demonstrated 20 plus year track record of investments across the food and agribusiness value chain. The firm leverages a thesis driven approach and operational expertise to enhance value across its portfolio, please visit www.paintschwartz.com to find out more about the firm and its activities.

Vonnie Estes, PMA:
Our conversation today is with Daniel Malechuk, CEO of Kalera. Kalera is an Orlando based vertical farming company. It has high yield automated data-driven hydroponic production facilities designed for rapid rollout. Indeed, Kalera is one of the fastest growing and largest vertical farming companies with two operating facilities in Orlando, one in St. Paul, Minnesota and one in Atlanta. It plans to open five additional large-scale facilities across the U.S by early 2022, including locations in Houston, Denver, Hawaii, Columbus, and Seattle.

Vonnie Estes, PMA:
To me, Kalera seemed to have exploded onto the vertical farming scene this past year, but as Daniel explains, the company has been diligently at work for 10 years. In February, Kalera also acquired Vindara, a company that develops seeds specifically designed for use in vertical indoor farm environments. Jade Stinson co-founder and CEO of Vindara also joins the conversation to discuss the importance of breeding for indoor AG. Let's jump into the conversation with Daniel about his background in the food industry and what drew him to Kalera.

Daniel Malechuck, Kalera:
Yeah. I spent my entire career in food for nearly two decades now. I have been in various degrees of the food industry across multiple different verticals, whether it be retail, food service, manufacturing and have really enjoyed, always working on something that is powerful, which to me, is feeding people.

Daniel Malechuck, Kalera:
And so have worked in again, a lot of different opportunities there, before I had the chance to come to Kalera here and have been with Kalera as their CEO for about two years now. And really before that, about five years ago, three years ago, didn't know what vertical farming was. Wasn't very familiar with it to be totally candid got intrigued when the opportunity came to me and have not slowed down since. Very excited and passionate about waking up every morning, knowing that it gives me a chance to feed people locally, safely, sustainably.

Vonnie Estes, PMA:
Great. I have to admit before you purchased Vindara who I was tracking because I like breeding companies and then you also became a member of PMA so thank you for that. I had not heard of the company. I think that's mostly because my personal feed and the information that I get is a bias towards VC backed companies and also West Coast companies, which is a lesson to me to pay more attention.

Vonnie Estes, PMA:
So I was so excited when I started reading about the history of the company and how fast you've grown. You're the fastest growing vertical farm company and we'll soon have farms Coast to Coast.

Vonnie Estes, PMA:
So please tell us about how the company started and the number of farms you have now?

Daniel Malechuck, Kalera:
Yeah. Kalera has been around for a little over 11 years now, and it really started with the science. And as we all know that Science and Technology continues to accelerate, but our two co-founders formed the company originally as part of a project to have a fully self-sustainable city here in Florida. And although that project fell through many years ago, the two founders continued the dream of working on indoor vertical farming. And so that process continued as trial and error and lots of great science that has gone into the company continued to be the focus.

Daniel Malechuck, Kalera:
And it was over really the last two years that we've come out from underneath the radar, out of stealth mode and that somewhat coincided with when I joined the company. And very aggressively, we've worked for years to get to the point where we are today, which is to really have a model that's able to be scaled very successfully and fairly quickly and inexpensively again, having industry leading unit economics, to be able to take our facilities coast to coast, as you've mentioned and even beyond.

Daniel Malechuck, Kalera:
And that's part of what's been really exciting about the last two years is how quickly we've accelerated and executed. Of course, when I got here, we had already our Marriott HyCube, which is located on the largest Marriott property of the world's property here in Orlando, Florida. And it was really a proof of concept for Kalera to go out of the lab for say, or the research and development segment and right into practice. And it really redefined what pick the plate freshness means for the future there. And so that was an exciting undertaking for the company, but it also gave us the confidence that we would be able to then scale more quickly and much more of a larger scale.

Daniel Malechuck, Kalera:
So we opened our Orlando facility, which was here in Orlando, Florida, and we opened that in March of last year. And then beyond, we have now opened our Atlanta facility, which is up and running and we are actually now grand opening our Houston facility this week. And the weeks ahead, we've got our first seeding going into that. So we're really excited that the momentum continues as we continue our expansion.

Vonnie Estes, PMA:
And so when you build and open these new farms, are they all exactly the same or are you innovating as you go along? How does that look?

Daniel Malechuck, Kalera:
Well, we continually learn. That's a really great question. So no two farms are exactly the same. Every time we go, we tweak, we get better and we continue to improve.

Daniel Malechuck, Kalera:
As well as that, not every design is a 100% identical. So we like to think we improve each time we go and we'll continue to develop, but the basis and the baseline is always the same, which is great science that we've worked on for over a decade. A lot of it proprietary and the ability to rapidly roll out very cost-effectively and hyper focused on being farmers first and leveraging the technology when and where and how we can as we come along. But that never changes. We never lose sight of that fact that at the end of the day, what we have to do is provide an incredible quality product, but yet at a very affordable price, because those two things are table stakes for us. We want to have a great product that's affordable.

Daniel Malechuck, Kalera:
And so where we take our design, it's generally the same every facility that we go into. It may have some slight adaptations and continual improvement as we go along. So for the most part, they're the same, but there are tweaks for every facility as we advance and as we open new facilities.

Vonnie Estes, PMA:
And what are your growth plans going forward? It sounds like you're just moving amazingly fast. Are you going to keep that growth rate up or what's the plan there?

Daniel Malechuck, Kalera:
Yeah. Kalera is excited that as you've heard me mentioned already, not only did we open Orlando, but we've got Atlanta that just opened, then we've got Houston, which is opening as we speak. And then beyond that, we've got facilities that we're opening in Denver, Colorado outside of Seattle Washington, St. Paul Minnesota area, as well as Columbus Ohio and Honolulu Hawaii.

Daniel Malechuck, Kalera:
So those are all in the works. They're being opened as we speak and construction is underway. But beyond that, we're very excited that there's much more in the pipeline, not only domestically, but Internationally for Kalera here as well.

Vonnie Estes, PMA:
Wow. So who do you sell to when you go into an area, say you went into Houston, do you look for local retailers that you sell to there? Or do you sell, do you have Nationwide chains that you sell to and then sell to the local area to those chains? How are you thinking about that? And how does that work?

Daniel Malechuck, Kalera:
That's a question that we do spend a lot of time thinking about. And more importantly is really everybody is our customer. But it always starts with quote and quote, the big guys and gals out there that can really help move some volume with you.

Daniel Malechuck, Kalera:
But what's so great about Kalera's model is we're balanced well between food service and retail, because we understand that 50% of any given market is really a food service. And so we see that here in central Florida, for example, where we have a really great balance between our customer in the retail segment of Publix. But then of course you go beyond Publix into the restaurant or a hospitality industry. And we have such amazing customers such as Universal Studios, where we do the theme parks here for Universal Studios, and then all the great restaurants we work with Levy Entertainment Group and the Orlando magic here. If you were to go to the Superbowl that the Tampa Bay Buccaneers played in back in February at the stadium here in Tampa Bay, we supplied the product for there.

Daniel Malechuck, Kalera:
And so we have a really great mix and a good balance, like I said. So as we expand into new markets, for example, as we move into Houston, Texas. We've got great retail customers lined up there as well. For example, Kroger who is going to be working with us on our product. And so that is a tremendous new customer for us. We're excited, but again, keeping that balance of always being focused on everybody needs our products. And it's not just retailers, specifically, you think about great restaurants and hospitality people and they want fresh, clean, local, safe, sustainable product as well. And so it's a really great balance for us as we expand across the nation and beyond to always keep that in mind that we're focused on both segments.

Vonnie Estes, PMA:
I didn't know that. I don't know that any other indoor farming facility or company is, they may be doing that, but I haven't heard them really push that except maybe some of the really small ones that are very local, but that's a really great business model because that is what people want. And that's great that you're really focusing on that. I bet that's been challenging this year, as you're trying to focus and get out into food service with all the challenges and food services this year.

Daniel Malechuck, Kalera:
It has but I tell you what it's coming roaring back, which is really exciting. And we've got some really great restaurant customers and even some larger chains that we're working with and have even secured partnerships with. And I'll give a quick example of say, for example, Tavistock group. They are a phenomenal restaurant chain. That's got multiple locations here not only in Orlando, but in Atlanta, for example, one of the finest restaurants in all of Atlanta is called Atlas and The Garden Room. And it is just an, if you haven't been there in Atlanta, it's probably one of the finest restaurants I've ever been to. The service, the food and everything, but they feature our products. And when you come there, it's the finest ingredients and why would you stop at the center of a plate keep going to produce and Kalera has been no exception.

Daniel Malechuck, Kalera:
And so it's been really neat to see how chefs really have gravitated towards local and fresh and all of those attributes that our product have. That I think for them, are quite a bit revolutionary. And a lot of times we're selling our product to them alive root ball on product. So when they get it, it's a fresh experience that sometimes they'll even serve. For example, Alfond Inn, here is a very nice hotel in Orlando, which they serve the product with root ball on. They come to the table and we've even heard that they've presented the product to the customer and they twist the root ball off and make it an incredible Caesars Salad for example, right there in front of the customer saying that "This product was alive until now." And they serve it to the customer right then. And the customer just is overwhelmed by the crisp nature of the product and how fresh it is. And so equally important to retail is that food service experiences as well.

Vonnie Estes, PMA:
That's a great story. Yeah. I think with a lot of these types of products, when you're selling through food service, you really have an opportunity, especially in these more high end restaurants to showcase the product and to tell a story about the product and to give this amazing narrative and background that you don't have on a label because people in retail, people just don't have time. So it is a great opportunity to be able to showcase the product.

Vonnie Estes, PMA:
So what do you grow? What are your different products? You said you do some root on, you must do some not root on. So what are the different products and different types of things?

Daniel Malechuck, Kalera:
We're very focused on greens right now. And that's micro greens where we have a variety of up to 50 different micro greens that we can do. And this is everything from cilantro to pea shoots, to broccoli to spicy micro mix, et cetera. And we even do something that has a flavor of almost like a sweet popcorn. And we do that for one of our really good customers as well.

Daniel Malechuck, Kalera:
And so we have a really great portfolio of micro greens but then we of course do a lot of leafy greens and we do everything from romaine to Kalera crunch, which is an incredible item that sounds like a cracker or a chip when you eat it, it's so crunchy. All the way through to Oak leaves and frisee et cetera. And so we continue to expand our portfolio of the items that we can do in the varieties and how we serve them with and for our customers. And so that is part of the innovation that our team never stops on our product portfolio mix, but we are, again, hyper-focused on greens at this point.

Daniel Malechuck, Kalera:
One of the things that's important to me is number one, to do things and to do them very well and just stay focused on what you can do very well in such a large market. We feel that it's something that we want to continue to fine tune and perfect to be the best at not only here regionally, but globally. And so that is... We'll talk a little bit more about our acquisition and how that plays into that part of commitment for excellence, but I'm excited about what the future holds as well as we continue to expand our product offering to our customers.

Vonnie Estes, PMA:
So we'll be talking about breeding, as you said in a minute, but what is the technology behind Kalera that makes the company successful? Did you develop it yourselves or with partners? And how did that come about that you're able to grow this great product and do it so quickly?

Daniel Malechuck, Kalera:
Well, to be honest, nothing was quick about it. We failed and failed and failed.

Vonnie Estes, PMA:
It just looks like that from the outside.

Daniel Malechuck, Kalera:
Yeah. And keep in mind, the company's been really focused since 2010. And so it's nearly over a decade now, a labor of love by our team and our scientists. And one of the things that we think we do extraordinarily well is to continually focus on keeping a great quality product affordable. And that's one of our mission statements, or it's one of the key words in our mission statement rather is that affordable, not only fresh and clean and sustainable, but to have the ability to go to the market and to offer a product that is in line with, but yet significantly better for you healthier, cleaner, and sustainable than traditional product. And so we don't want to do it and just have it be elitist or something that only a certain segment of the population has to make a very strong, conscious decision to be able to afford. Not everybody can afford 5, 6, 7, $8 for four or five ounces of greens.

Daniel Malechuck, Kalera:
And so instead we've made our product and we've had this focus since day one to be lean, mean and really strategic about how we get high yields. And again, we are very confident that we have industry leading yields and with this and through the ability to leverage our technology, as well as the design process that we've utilized to be able to offer product out there at very competitive pricing, but yet superior in many ways to traditionally farm product. And so that's something that we're very, very excited about, but also very proud of the fact that we, again, continually to fine tune that. But yet we feel that we've essentially perfected mother nature indoors through that combination of science and technology with farming to offer a very great product from a quality standpoint yet at an affordable price.

Vonnie Estes, PMA:
Let's switch a little bit to talk about the company. And as I was starting to read about you and learn about you, and then I started reading about some of your newest board members. So to me as someone who hadn't been following the company, and maybe some of the people listening to this, it just felt like you exploded onto the scene with these impressive board members. So tell us a little bit about that process and who you've added?

Daniel Malechuck, Kalera:
Well, like all things that Kalera does, we're very deliberate in trying to build the most incredible company that we can both domestically and globally. And that doesn't stop with board members, right? It's not only about the product, but it's about management and building a world-class management team, which we feel that we've done a really great job of, but it continues with the board of directors. And we're very pleased to have assembled a fine board that is going to help us continue to scale and think about our business, not only domestically, but abroad and internationally, and some of the folks that we've been able to assemble on this board. I mean, you look at Sonny Perdue. He was this time last year, the head of all the food for the United States of America, one of the largest food, if not the largest food producing country in the entire world.

Daniel Malechuck, Kalera:
And what was so great about adding Sonny to our board is not only, to see him come from a farming family and understands that background, but he's been Governor of great state of Georgia. He served our country at the very highest level as the Head of USDA and the Secretary of Agriculture and his perspective is unparalleled. And to add him to the board and believe me, he's not just a figurehead on the board or a name only. He's here and he's active. In fact, I just chatted with him a little bit earlier, right before this call. And so he's very active in the business and a very, very valuable asset to not only the management team, but to our shareholders as to the company as well.

Daniel Malechuck, Kalera:
But then beyond that, you've got great names such as just Kim Lopdrup, who is been a CEO of Red Lobster and help them globally and be very successful. And he's very active and moving to the Chairman of our board position here in the very near future. And then we've got several other big names that we continue to add. Maria Sastre, who has been just in, across multiple boards and throughout multiple different industries, including travel and the cruise lines and was on the board of Publix and is on General Mills's is board.

Daniel Malechuck, Kalera:
And keep looking forward. You're going to hear more great things, continue to come on the Kalera board. And we've got several other members, probably for the time of the podcast, you won't go through them all. But it's all very deliberate against to assemble a world-class team, both at the board level and throughout the company. And Kalera is very, very diligent on being very quiet. And then when it came time to really expand and to have our coming out party, that's what I think you've seen over the last 18 months even, or so as we've prepped for this moment, and now we're ready to run and run hard, run fast. And I think we probably caught a lot of people in the industry by surprise, but here we are and we're ready to keep on executing and moving forward.

Vonnie Estes, PMA:
Yeah. No question here you are. So you're publicly listed on the Oslo exchange, but I have heard rumblings of the potential of you going public in the U.S. Tell us why and how it would be an advantage to do this? And as much as you legally can about your plans in this area?

Daniel Malechuck, Kalera:
Yeah, sure. Kalera is a US-based company. We've got a US-based management team, US-based operations, and our original investors came, this is years ago back in 2013 even when the company was really just getting started and almost eight years ago or so, the U.S was probably not as hyper focused on sustainability in this arena specifically as perhaps Europe was. So our original shareholders came from, at least the bulk of them, from the Nordics and from Europe.

Daniel Malechuck, Kalera:
But over time, obviously now we are so blessed to have over 1000 shareholders all around the world on all continents, practically and a lions share them still in Europe, but certainly here in North America and the U.S and Asia and Australia and beyond. And so we are excited to bring the company home and get on a U.S main listing and our targeting. We're working heavily with that. You've seen some press probably about that process and it continuing to go well, as we move forward here, but we've also been very deliberate, just like you saw with the board members that we select. We're very focused on having the best process with the least amount of dilution for our shareholders to absolutely continue to accelerate Kalera's growth, but to bring us back into the U.S and to have access to the U.S capital markets, which have all kinds of advantages for our existing shareholders and for beyond for future shareholders as well.

Vonnie Estes, PMA:
Well, let's pivot and talk about breeding one of my favorite subjects. So in February of this year, Kalera acquired Vindara, a company developing seeds specifically for the indoor vertical farm environment. So first let me welcome Jade. Jade Stinson is the President and Co-founder of Vindara. So welcome, Jade. Thanks for being here.

Jade Stinson, Vindara:
Thank you. Great to be here.

Vonnie Estes, PMA:
Please tell us a little bit about your background and how you came to start the company?

Jade Stinson, Vindara:
So up until the past few years, I've spent my time between University and Corporate America. At school, my PhD focus was to work on a project to protect the British potato from quarantine diseases, which really kicked my interest in agriculture. From there, I joined BSF within the Performance Chemicals Division here in the United States, and then relocated to the Research Triangle Area to head up Global Operations for the Professional Specialty Solutions Business within the Agricultural Products Division.

Jade Stinson, Vindara:
After 10 years in the company, I decided to join a venture development accelerator as the Chief Science Officer also known as the VP of Will it work. So from there, I sourced and scouted a number of deal flow. I mean, we looked at probably 400 different companies and technologies to really try and find transformational technologies that would ultimately benefit the food system. And it was within the accelerator that we founded Vindara.

Vonnie Estes, PMA:
Ah, okay. Yeah. Another way I look at that is how many miracles would it take to make this work? And I always stop at "If it takes three, it's probably not going to happen." That's really interesting. So when did you realize there is going to be a need to breed for indoor crops in mind? And what did you do first when you started thinking about that?

Jade Stinson, Vindara:
Yeah, after doing diligence in the sector, we learned quickly and we knew straight away that the off the shelf varieties have been bred for very different environments these outdoor or greenhouse environments. And when you think about the phenotypes or the characteristics of the crops, this is a direct result of the genotype and environment interaction. So these highly controlled environments are actually great for predicting the phenotypes of crops. So now we can actually focus on output traits and not the input traits relating to developing varieties around disease and durability.

Jade Stinson, Vindara:
So the first thing we did was we went to the market and we asked different players and we needed targets. So we had to develop varieties that would benefit the growers directly as a drop-in solution. We didn't make a decision on the variety or the type or the traits, we listened to the market and that's what we run after.

Vonnie Estes, PMA:
And which crops did you start with then?

Jade Stinson, Vindara:
So our first crop program is the obvious one, which is lettuce. But if you think about lettuce, it's very segmented and you've got Full heads, Teen leaf, Baby leaf, Cut leaf in terms of the structure. And then you've got the different species. So you've got Romaine, Butterhead, Crisphead, Oak leaf et cetera. So that's where we started. We ran hard after Romaine variety, and then we introduced a Basil program followed by a Spinach program. And right now we have nine active crop programs.

Vonnie Estes, PMA:
And what technology do you use that makes this go faster within the company? What makes your ability to breed faster, to get different varieties up quicker?

Jade Stinson, Vindara:
Yeah, so we're accelerating the traditional breeding methods. Our speed is what differentiates us. So I'll keep the specifics a little bit confidential, but what I can say is that we leveraged genetic diversity and we're only able to move as fast as we can due to advances in various different types of technology. This predominantly is around genomics and deep machine learning, having the computing power and analytics.

Jade Stinson, Vindara:
And so we heavily leverage these to get our products to market unprecedented speed. We'll have commercially available seed at large volumes in September so we've proved out that we can get there in that time. And our ultimate goal is to really democratize the breeding selection process even down to the consumer level.

Vonnie Estes, PMA:
Oh, wow. So do you plan on using some of the new molecular breeding technologies like Gene editing as consumers get more comfortable with the technology?

Jade Stinson, Vindara:
So what we'll say here is the traits for anything code is Multigenic. So you need to understand these, the computational breeding, which is a part of the data that we gather in our development process. So the same targets can actually be used for Gene editing. So while it's not core to Vindara, we do partner with a University on a CRISPER project on one of our proprietary varietals.

Vonnie Estes, PMA:
Oh, that's great to hear. Yeah. It'll be interesting to see this move forward as a good tool when the industry gets comfortable with it.

Jade Stinson, Vindara:
Yeah. Absolutely.

Vonnie Estes, PMA:
So how opening back up to the conversation here with Daniel. How did Kalera and Vindara meet? Did Kalera realize the power of genetics? Other companies aren't doing this, so how did this come about?

Daniel Malechuck, Kalera:
I'd like to say it was something as amazing as that but actually goes back to my undergraduate studies. I went to North Carolina State University and had gotten a call to donate money to the school, which I've done in the past. And any ways they said, "Hey, have you heard of this company, Vindara, they're a startup coming out of NC State and they're working in this arena and maybe you should connect with them and have a call." So it actually was a result of Dr. Stinson was coming out of an NC State incubator. And so we got connected that way over a year ago now. And I think so it gave us the opportunity to connect with Jade in an early stage. And our team started very quickly working with her and testing the seeds that she had generated and going through that.

Daniel Malechuck, Kalera:
And so the conversations continued over the course of several months and our teams got together and we were seeing great results from the seeds that Vindara had developed. And so it just became more and more important for us to secure up the supply chain of what we think is one of the most critical steps to having incredible product, which is the seed obviously. And so if you could find a way to increase yield and shorten, grow time by having seeds that are specifically tailored for indoor farming, and you could secure that, then we moved very quickly. Once we realized the power of how incredible what Vindara had to offer was.

Vonnie Estes, PMA:
Yeah, that's great. I think a lot of people don't realize the power of genetics, especially in an environment like yours, where you can control so many other things. And so what's left to control is the genetics to really work the best that it can in that environment. So why did you decide to acquire the company instead of partner?

Daniel Malechuck, Kalera:
Well knowing how quickly Kalera is growing and going to continue to grow for the future. Seeds, number one, they're a significant expense as part of your cost to goods sold, but number two, to have that ability to guarantee that supply chain, to continue to develop and Kalera is always committed to being the leader in this space. And that's no exception when it comes to having the only company in the world that does what Vindara does. And I think it became clear that this could be a very strong play for Kalera to continue to focus on growing great plants and continuing to have the ability to have that affordable function of our plants remain present for us as we go forward.

Vonnie Estes, PMA:
And for you Jade, why did you decide to be acquired instead of Partnering?

Jade Stinson, Vindara:
I think we have a shared vision on, we want everyone to have access to affordable food. And we really loved that about Kalera. We saw their great growth strategy and we were really pleased to partner with them.

Vonnie Estes, PMA:
So what trait, you talked a little bit Jade about what traits you are focusing on, but can you talk a little bit more about how soon the consumer will notice a difference with new improved traits and what traits you're looking at for the future?

Jade Stinson, Vindara:
I think initially it's agronomic. Right? It's getting to improving these unit economics, which everyone always points to in the sector. So how can we make great seeds and actually great economics for the growers? We focused a little bit on texture and color, but I think the next iteration, now we've kind of got our tuned in, pedigrees, I'll say is really around dialing in the nutrient and the flavor profiles, which at that point you'll see a direct impact to the consumer.

Vonnie Estes, PMA:
It is interesting to hear the focus Kalera and Vindara have on breeding for indoor environments. Outdoor plants are bred for qualities necessary for outdoor environments, such as drought, flood and insect resistance, traits not needed in indoor growing. Breeders for indoor AG are focusing on traits such as rapid growth, performance in low light environments and manipulation of plant stature. In addition, novel crops can be bred for flavor and nutrient density.

Vonnie Estes, PMA:
Germplasm developments have the potential to expose consumers to a variety of different products with additional desirable traits. Kalera's fast paced growth and dual focus on food service and retail. We'll get these products in front of consumers quickly.

Vonnie Estes, PMA:
That's it for this episode of PMA takes on tech, thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts, please subscribe. And I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables and we will see you next time.