Top 20 team in the 2018 High School Utah Entrepreneur Challenge at the University of Utah. lassonde.utah.edu/hsuec

1. Business Plan
Written by Andrew Pignanelli
2/26/18

2. Executive Summary
Problem:
Because of the cold climate in the majority of the United States, food cannot be grown all
year round. Fresh food is available, but only after being refrigerated for days in transport. This
makes produce, specifically greens, soggy and mushy.
Solution and Overview:
Using hydroponics and vertical indoor farming, Green Republic will grow fresh greens
locally. We will supply grocery stores and restaurants in Salt Lake City all year round. Our goal
is to prove it is possible to grow fresh food all year round, everywhere. This is not an entirely
new process, but it is still in its infancy; there is a lot of progress to be made and there is a huge
gap in the market to fill.
Goals:
In the next two years, we plan to open a farm in a warehouse very close to Salt Lake
City and begin supplying most of the city’s grocery stores with their greens. By the end of year
one we will have harvested over 200,000 heads of lettuce at the smallest scale. By the end of
year two we will have payed off all the startup funds and hopefully will have expanded to a
second city or location.
Product:
We will sell lettuce and kale starting off, with many more greens later. Both of these are
easy to make and grow quickly. They are also in high demand in both grocery stores and
restaurants. Other crops like spinach and arugula will be grown after year 1.
Prototype and Experience:
For about a month I tried to grow lettuce in my bathtub using this farming method. I
constructed a small system the could grow 36 heads of lettuce in 4 square feet. It went very
well. With less than 1 liter of water consumed over the first three weeks, and negligible energy
consumption I’ve been able to grow these plants easily. After they were planted in the machine
as sprouts it was pretty much running itself. I also got in contact with the CEOs of a few Vertical
Farms: Steve Hough from Harvest Squared and Sally Herbert from Altius Farms to discuss the
commercial viability of such a system. After those discussion I came to this conclusion: By
extrapolating this system Green Republic can dominate the Salt Lake greens market, and if I
can grow greens in my bathtub I can do it anywhere.
Competitive Advantage:
We will always have the freshest greens in Utah for 6 months out of the year. Since the
plants are grown indoors no pesticides need to be used. This also applies to GMOs. Our
greens will be entirely organic while also growing 30% faster than traditional farms. Another
large part of the competitive advantage is the lack of indoor farms in Utah. In addition to this, all
of our greens will be price-competitive. Because of high production efficiency, profit margins are
still quite high at the same prices of competitors in California.
Market:
Grocery stores highly value local food, and doubly value fresh food. The same is true
for restaurants. Farm-to-table restaurants are on the rise, and Green Republic will be the only
way to get farm-fresh greens in Salt Lake for 6 months out of the year, essentially giving us a
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3. consistent monopoly for half the time. People have been surveyed to show they prefer local,
organic and fresh greens over the alternative.
Production:
At its smallest scale the first Green Republic farm will produce 14,400 plants every six
weeks, 43,200 at the largest. The prototype of the farm can harvest 36 plants every 6 weeks.
Since harvesting and planting will be staggered, the farm will have a steady flow of 315 plants a
day (at smallest). That can be harvested by one person with proper training working full time,
which minimizes labor costs. This number will be increased with scale.
Start Up Expenses:
In order to construct the farm, pay rent and utilities for the first few months, and hire staff
to harvest the plants we will need initial investment. The spreadsheet attached to this document
goes into detail about the cost, but here are the big numbers: At scale 1, the cost is about
$100,000. Scale 2 is twice that and scale 3 three times that. Profit margins rise as the scale
goes up and break-even time drops.
The Problem
12,000 years ago society began with the most important invention in human history: ​The
Farm. ​The ability to generate a constant flow of food led to all of human history. Obviously,
there’s been a lot of improvement in the agriculture industry since ten thousand BC, but there’s
still a huge problem which has barely been addressed: Growing food all year round,
everywhere.
Leafy greens crops, specifically lettuce, cannot be grown in Utah for most of the year.
Lettuce ideally requires a temperature between 60-69 degrees to grow. Utah is only in this
temperature range for two months out of the year. The pH and salinity vary greatly in utah,
which also need to be controlled for lettuce production. Cultivating lettuce year-round with
typical outdoor farming methods is not possible in Utah.
Currently, there is a dependence on California to grow leafy greens. According to
Huffington Post, California “produces about 90 percent of all the leafy vegetables grown in the
United States from November to March.” For nearly half of a year a huge percentage of1
American food comes from one source. That's a lot of green eggs in one basket, and one which
may not last till the end of the century.
Almost all of the California greens are grown in Imperial Valley and some in the city of
Yuma, Arizona . This region is fed by the Colorado River, which is slowly running dry. Leafy2
crops require huge amounts of water when planted traditionally. Another Huffington post article
quotes this at 3.5 Gallons of water for 1 head of lettuce . The slowly-but-surely depleting water3
1
This Is Where America Gets Almost All Its Winter Lettuce
https://www.huffingtonpost.com/2015/03/04/yuma-lettuce_n_6796398.html
2
Lettuce growing region, California and Arizona
​https://www.google.com/maps/@32.8741101,-114.8611623,10z
3
“You won’t believe how much water it takes to grow your favorite foods”
https://www.huffingtonpost.com/2014/02/24/water-to-grow-foods-infographics_n_4848161.html
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4. supply and the dependence of U.S. markets on California effectively puts a limit on the
production of leafy greens. By the end of the century Southern California will not have enough
water to produce crops at its current levels, leaving the rest of the country with no other option
to grow these crops domestically.
Since these goods come from hundreds of miles away, every crop must be refrigerated
for days in transit. A head of lettuce takes days to reach the shelves, meaning there’s no
chance of a consumer ever getting food that’s ​actually ​fresh. In the life of a vegetable, days can
mean the difference between tasting good and tasting terrible. Grocery stores seek to get their
produce as quickly as possible; two days just isn’t good enough anymore.
But buying from California is not just distancing the farm physically, it’s also distancing it
emotionally. Recently there has been a huge uptick in interest for local foods, both from the
consumers and grocery stores. Harmon’s, a large Utah grocery store chain has locally sourced
foods as one of their core values. In Utah, for half of the year, it is impossible to buy food4
grown in this state due to the climate limitations discussed above.
In additions to the above issues, arable land is becoming very rare. It is not sustainable
to consume as much as Americans consume. If everyone lived like americans, the world would
need 138% of its current habitable land to sustain American lifestyles. Economically, land in the
United States and especially Utah is becoming more and more expensive. Many farmers
cannot grow enough crops on their land to sustain a good income. This has lead to lots of
farmers going into debt and being bought out by large corporations. Practices such as buying
out farms are anti-competitive and will eventually lead to rising food prices.
4
​Harmon’s Mission, Values & Vision
https://www.harmonsgrocery.com/mission-values
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5. Opportunity
Currently, there is no one solution to these problems. However, that doesn’t mean it’s
not there. Many separate solutions already exist, but they are not used together on any sort of
real scale. Buildings keep temperatures comfortable enough to live in cold areas year-round,
controlled hydroponic farming maintains the pH and lowers water requirement for plants, and
the freshness of food can be controlled by moving the farms closer to market. Combining these
is the key to the success of a solution. And that’s what Green Republic Intends to do.
The combination of these solutions is vertical indoor farming. Vertical farming is the
practice of growing plants vertically as opposed to horizontally. Regular farms place one layer
of many crops over a large area while vertical farming places many layers of crops over a small
area. This process is extremely efficient, and can produce between 7 and 10 heads of lettuce
per square foot.
The ability to control all of the variables when growing greens can greatly increase
yields. In contrast to a regular farm, indoor farms can control temperature, nutrients and light
levels. Creating a sort of ‘goldilocks’ effect for the plants makes them grow as quickly as
possible; this ends up growing 110% more crops than a traditional farm.
Water, too, is a huge factor in plant growth. In order to keep the plant’s roots sustained
in water hydroponics systems would be used. Hydroponics systems are those which grow
plants without soil, but instead deliver water directly to the roots of a plant. The least efficient
systems use 70% less water, while the most efficient use 95% less water when comparing to
traditional farms.
Since these indoor farms can be anywhere, regardless of temperature, they can be
positioned very close to market. A farm could harvest their plants and within an hour have them
on store shelves. This is much better than days in a refrigerated truck and delivers a higher
quality product than competitors hundreds of miles away.
Vertical farming is not new. There are already vertical farming companies. But none of
them have seen widespread success because they are lacking something: The ability to quickly
and efficiently get their products to market.
There are vertical indoor farms in america, though they are few and far between. In Utah, there
are two vertical farming companies: Harvest Squared and Strong Vertical Gardens. Only one of
these farms actually sells produce and the other one is still in the startup phase.
This leaves a gap in the market, which Green Republic will fill.
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6. Company Description
1. Mission Statement: ​Green Republic is a commercial farming company which will deliver
leafy greens and herbs to stores and restaurants. Our mission it to provide green
produce all year round, everywhere.
2. Philosophy and Vision
a. Values: We value innovation, community, speed and quality. It is important to
change the world and solve problems while at the same time maintain economic
viability.
b. Vision: Green republic will become Salt Lake’s year-round leafy green supplier.
We want to bring ​really ​fresh food to everyone in america.
3. Goals:
a. To win the Utah High School Entrepreneur Challenge.
b. To secure full startup funding by the end of June 2018 - See Start-Up Expenses
below.
c. To lease an industrial building for farming, packaging and distributing by the end
of July 2018.
d. To finish operations infrastructure by August 2018; this includes all of the farming
equipment like lights, water channels, shelves and pumps, packaging equipment
and trucks.
e. To secure vendors to sell to by August 2018 such as grocery stores and
restaurants.
f. To begin operations fully by September 2018.
g. Break even with startup funding by December 2019.
4. Target Market
a. Grocery stores located in close proximity to the indoor farm (i.e. Harmon’s in
SLC)
b. Food distributors in close proximity to the indoor farm (i.e. Nicolas and Co.)
c. Local restaurants with interest in farm-to-table menu options
5. Industry: ​The current size of the U.S. fresh produce industry is $63 Billion, with 24%
growth between 2010 and 2014 . There has been a 10% increase in sales of versatile5
foods and a 17% increase in sales of clean label (organic) foods. 100% of US
households buy fresh produce.
5
PMA Fresh Produce Industry Overview-2015
https://www.pma.com/~/media/pma-files/research-and-development/fresh-produce-industry-overview-201
5.pdf?la=en&la=en
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7. Products
1. Product: ​Green Republic would grow lettuce at the beginning of operations. After
successful sales and distribution other greens such as kale, spinach, arugula and
microgreens would be added to production. The most profitable plant per square foot
would be grown, so some plants which take longer to grow yet sell for similar amounts
would not be grown. Below are the specifics of production for each of these.
a. Lettuce: This is the first product which would be grown in the farm and would be
sold primarily to grocery stores. Lettuce has a germination time of 14 days and a
growing time of 5-6 weeks. These could be harvested about 8 times a year, or
roughly once every 1.5 months. Conservatively, a head of lettuce sells for $.89.
According to ​Harvest Squared founder/CEO, Steve Hough, each lettuce plant
costs 30-40 cents to grow on a smaller scale. The cost will only lower as
scale increases. This leaves a profit margin of $.40 per head of lettuce.
b. Kale: This will be the second product which would be grown in the farm and
would be sold to grocery stores and food distributors. Kale is a very popular
food, even being used in Mcdonalds Salads. Kale has a germination time of
1-2 weeks and a 7 week growing time. These could be harvested about 7
times a year of once every 1.8 months. The estimates online for a bunch of
Kale is $2. Assuming the same growing cost multiplied by 1.2 ( the time it
takes to grow kale over the time it takes to grow lettuce) we get 48 cents.
This leaves a profit margin of $1.52 per bunch.
c. Other products: In order to expand into growing microgreens, spinach or
arugula we would consult an experienced horticulturist which we do not have
access to at this time.
2. Product’s Competitive Advantage:
a. Local: There is a trend of more people buying local foods, all of our produce
would be ​grown within a few miles of wherever they’re sold​.
b. Water: The method of growing these plants is the ​Nutrient Film Technique ​which
uses ​70% less water​ than typical farms.
c. Organic: Since the plants are grown inside, pests are not an issue for the crops.
Pesticides would not have to be used at any point. ​Non-GMO​ seeds would also
be used, as the climate control boosts the growth enough to match growth levels.
d. Ultra-Fast-Logistics: Since they are grown so close to market, ​these plants
would go from their growing beds to the grocery store or restaurant within
1 hour​. This means our plants are the freshest food you will be able to buy in
Utah.
3. Prototype:
a. As an experiment, I created a miniature version of the indoor farm to prove the
concept. Using parts from an online vendor, cheap (yet very effective) LED lights
from amazon and a some parts from home depot I was able to build a system
which grows 36 heads of lettuce in 4 square feet. This leaves a density of 9
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8. heads of lettuce per square foot. Since the growing was started February 10th,
the plants have not had enough time to mature into heads of lettuce. They are
about halfway mature at the time of submission.
b. The prototype can grow 36 heads of lettuce every six weeks while being smaller
than a bathtub. It shows how efficient indoor vertical farms can be, both in water,
energy and space.
c. Pictures of prototype:
i. A picture of the prototype itself and a plant growing (week 3) are below:
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9. ii. A picture of a proposed floor plan and one of the plant rows is also below:
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10. d. Cost of Prototype: The list of parts and their subsequent costs are as follows:
i. Channels: 6x $5.20 = $31.20
ii. Top Covers: 6x$4.30 = $25.80
iii. End Caps: 12x$1.70= $20.40
iv. Pump: $30
v. Piping: $20
vi. Reservoir: $8
vii. Shelving: $30
viii. Lights: 6x$12.99 = $78
ix. Total: $233.40
e. Analysis of Cost: It is clear that the most expensive piece is the lights, which is
also what Steve Hough told me. However, with scale, the price per plant will
drop. The water consumption was very low; the whole system consumed less
than 1 liter of water being run for three weeks. The energy cost was close to
Steve Hough’s estimation at about 16¢ per plant over this period (meaning 32¢
for the whole cycle) . Assuming half kale, half lettuce and a 6 week growing
period this system will pay itself off in 9 months (these numbers can be seen in
the spreadsheet). With a few small changes this can be applied on a ​much
larger scale. There is no good reason this would fail on a commercial scale and
will be the next revolution in commercial agriculture.
Market
The market for vertical farming falls into three categories: Farm-to-table restaurants, food
retailers like grocery stores, and direct to consumer. Green Republic will only sell to
farm-to-table restaurants, food distributors and grocery stores to start off, but we will pursue
direct-to-consumer opportunities (like blue apron) if the time is right.
● Farm to table restaurants: There is a trend of upwards movement in farm-to-table
establishments . According to Food Network , many urban farms are opening up to fulfill6 7
this market. Also, Kale has “soared nearly 1300 percent” on restaurant menus in the last
4 years .8
● Grocery Stores: These would be our main point of sale. Grocery store profit margins are
very low, and it is a volume business. Harmons believes in local food and has many
stores inside or in close proximity to Salt Lake City; local foods and sustainability are
some of their core values (see “Opportunity”).
6
Top Trends for Restaurant Menus - The Balance
https://www.thebalance.com/top-trends-for-restaurant-menus-2888600
7
Trend Alert: The Urban Farm To Table Movement - Food Network
https://www.foodnetwork.com/healthyeats/restaurants/2017/06/trend-alert-the-urban-farm-to-table-movem
ent
8
Why kale is everywhere: How food trends are born - Chicago Tribune
http://www.chicagotribune.com/business/ct-restaurant-menu-trends-0521-biz-20170519-story.html
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11. ● Food Distributors: Food distributors like Nicolas and Company will be key to distribution
for restaurants. Getting in contact and establishing a contract will be important.
Competition:​ The main competition we will have is California leafy green farms. Our
competitive advantage is shown above. The reasons Utah farms are better than California ones
are shown above in the “opportunity” section.
Research: ​I’ve done a fair amount of market research online, with some of the sources listed
above. Directly, I’ve been in contact with multiple vertical farm CEOs including Sally Herbert
from Alitus Farms and Steve Hough from Harvest Squared .9 10
I spent an hour with Steve Hough and we discussed his experience starting/building a vertical
farm in a shipping container. Here are some takeaways from that talk (in no particular order):
● Considerations for building
● Fit 2000 plants for 320 ft​2 ​
(​6.25 plants per square foot​) for Cropking’s NFT
● “Utah is really behind in the indoor [farming] scene”
● Full container farm cost ​$45k
● Full energy cost 400 a month, full cost ​30-40¢​ a plant
● Special Philips LEDs cost $20k themselves ($180 per light), this is too
expensive for Green Republic’s scale
● Need growing permit, not much else
● He didn’t know anything when he started, he just did a ton of research.
● Bright Agrotech as a resource
● “Finding the formula” in terms of the whole thing is pretty important
● “The demand is out there for the products. Everyone wants to buy
these greens”
● Alerted me about Strong Vertical Gardens, the only utah vertical farm.
A theme I’ve discovered is that Utah is way behind in this market. There is one vertical farm in
utah which grows and sells on a commercial scale, Strong Vertical Gardens (SVG). Strong11
Vertical Gardens grows microgreens in their own warehouse near Heber. They would be our
only competition in-state, however this market is growing so quickly it is very likely there will be
more.
With questions about running and maintaining a farm, I asked Sally Herbert. Here is her
response verbatim (marked up).
“Andrew,
We are not yet live but will be in March. It has taken me 3 years of nearly full time work
to get this farm launched. At 54 years old (with much experience) I can say ​unequivocally that
9
​https://altiusfarms.com/
10
​http://www.harvestsquared.com/
11
​https://www.strongverticalgardens.com/
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12. this is the most difficult business venture that I have ever led​. ​Capital for the building and
growing systems is by far the biggest expense​. You can figure $75 to $100 per square foot
for a commercial greenhouse in a cold climate including growing systems. This does not include
all equipment (delivery trucks, coolers, generators). Labor is the largest component of ongoing
COGS (55%). ​It is not difficult to find customers, but meeting their demands is the
challenge​.​ There is competition and will be increasingly more. We are delivering door to door
ourselves for the start of the business, but may leverage a wholesaler at some point​.​ It will take
us 18 months (hopefully) before we are profitable.​ Tough to answer the scalability problem,
but yes it will be difficult at first. ​A seasoned horticulturalist is key to your success.​ Without
a very large equity backer and/or land, there are challenges getting capital for the build. SBA
loans will likely be part of your capital stack and they will need proper collateral to guarantee the
loan. I hope this is helpful. We are indeed pioneers in this space and therefore suffering the
challenges. I hope that you are successful in your venture. Best, Sally”
Some aspects of this plan were derived from these two interviews, but there are differences.
First off, Altius farms decided to build their own building. This costs a ton of money which can
be spent elsewhere. Leasing a building is magnitudes cheaper and is what Green Republic
plans to do. Another is location. Altius is in Nevada, we are not. They are in a completely
different sphere of influence and market. One of the similarities, however, is the
break-even-point​ which is similar to Sally’s (see “Startup Costs” below).
Marketing: ​Selling to food distributors and restaurants would not need any marketing outside of
contacting and making bids. However, grocery store sales will. In store signs and fancy
packaging can be very effective in luring customers in. Contracting out packaging design and
signage for low rates can easily be done nowadays. Experienced and cheap designers are
easy to come by.
Operational Plan
1. Scale:​ Below are the sizes of indoor farm which would be constructed inside of a
warehouse (see “floor plan”). ​The size of the operation would be entirely dependent
on startup funding. ​Since the smallest industrial building available to rent (at a good
rate) are at least 8000 square feet, it is really easy to expand after beginning operations.
a. Size 1: 14,400 plant spaces, 2150 square feet, 315 plants per day.
b. Size 2: 28,800 plant spaces, 4300 square feet, 630 plants per day.
c. Size 3: 43,200 plant spaces, 6450 square feet, 945 plants per day.
2. Production:
a. The crops would be grown indoors at an industrial site or warehouse in close
proximity to Salt Lake City. The size of this building would be between 2000 and
5000 square feet. The ratio of growing-to-walking space on the floor plan is 5
feet of growing space to 9 feet of walking space. There would also be two large
tables and packaging material for distribution.
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13. b. Taking into account just above 2000 square feet, it is possible to fit 14,400 plants
into a space of that size, or 28,800 if the height was doubled from 4 rows to 8.
This scale is the only way to maintain profitability. At 14,400 plants it would
require 800 channels, 2400 lights and at least two full time staff. A picture of the
proposed farm design is below. Since the profit margins are so low, the key to
success is volume and a system of this scale can produce 115,200 heads of
lettuce or 100,800 heads of kale every year.
c. The exact method of growing the crops indoors is called the ​nutrient film
technique (NFT) . It is a hydroponic style which runs water across the roots of a12
plant and uses no soil. In order to maintain space efficiency, the outflow of all
channels on each level and shelf would be combined into one pipe and go back
into a reservoir. The same is true with the water flowing into the channel. NFT
systems use 70% less water than regular farms.
d. Since the system is so water efficient, water permits would not be required even
at this scale.
3. Quality Control
a. One of the first steps after acquiring funding will be to contract an experienced
horticulturist for consultation on the most efficient growing procedures. Most
fundamentals of the process can be learned easily through some research, yet,
tweaking various metrics for growing the plants yield very bountiful results. This
investment would lead to better tasting and larger plants. The benefit much
outweighs the cost.
12
Nutrient Film Technique:
https://en.wikipedia.org/wiki/Nutrient_film_technique
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14. b. Since everything about a plant’s life can be controlled there is no need for
pesticides or washing. The plants are clean from the very start and there is no
need for extra preparations before packing and shipping.
4. Location
a. The farm would be located in an industrial building close to central Salt Lake City.
Outside of that, the location is determined by rent price. Rent is one of the most
important factors in the budget, and will likely be the largest expenses in the
company’s first few years.
b. Browsing listings in Salt Lake City, the rent would cost between $36,000 and
$42,000 for buildings with 8000 square feet (the smallest possible spaces without
ludicrous lease rates).
5. Legal Operations
a. There would be minimal legal operations for this company, though if needed
would be contracted out. Taxes would be filed directly.
6. Personnel
a. Minimizing labor is one of the keys to this farm’s success. Labor costs should not
exceed $30,000 per person a year in order to maintain profitability levels.
b. Assuming a ‘Size 1’ operation, one person working full time could run the
harvesting operation; at ‘Size 2’ two people would be needed and at ‘Size 3’
three would be needed.
c. For greens packaging, automatic machines would be used and could be easily
run by the harvesters, it is estimated that this machine would cost between
$3,000-$10,000 to purchase.
7. Inventory
a. Since this is a fresh-food-centered business, there would be no inventory on
hand. All of the ‘inventory’ would be plants which are not mature enough to
harvest.
8. Distribution
a. In an ideal scenario, the grocery store(s) which purchase from us would come to
the farm to collect their purchase.
b. In a non-ideal scenario we would have one truck or van to ship the plants and
someone to drive said truck. No more than two deliveries to grocery stores
would be needed every day at starting scale.
Financial Plan and Start-up Expenses
1. 12 Month profit and loss projection
a. These numbers are assuming a six week growing time and a half lettuce half kale
farm. They do not include start up expenses. This also assumes growing begins
day one rather than before and assumes day one begins once the farm starts
operations.
b. Attached is a 12-month profit/loss projection or size one. Multiply these numbers
by 1, 2 or 3 depending on the size of the operation.
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15. 2. Startup Expenses and Break Even Calculation
a. In total, the start-up expenses for Green Republic are dependent on the size of
operation.
b. Startup Cost:
i. Size 1: $102,132.00
ii. Size 2: $198,264.00
iii. Size 3: $294,396.00
c. Attached is a spreadsheet with itemized expenses.
d. Total Startup expenses depend on the size of the farm inside of an 8000 square
foot building. Size 1 is a 2150 ft​2​
farm with 14,400 plant spaces (315 plants a
day). Size 2 is a 4300 ft​2​
farm with 28,800 plant spaces (630 plants a day). Size
3 is a 6450 ft​2​
farm with 43,200 plant spaces (945 plants a day).
e. For the interest of safety, we will attempt to raise $50,000 more than absolutely
needed in order to maintain flexibility as it will definitely be needed.
Attachments:
12-month finances:
https://docs.google.com/spreadsheets/d/1p9G4O5N9-FMFuOdAHp48dOHt
9ibpGsEZf0dW6EWtJnw/edit?usp=sharing
Startup Expenses:
https://docs.google.com/spreadsheets/d/1TLC9MGFrTGtl6HJC46p2xZzbA
pLyhuMZp0h6uTy-S58/edit?usp=sharing
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