OD4012 Hydroponic Crop Farming Industry Report PDF

US INDUSTRY (SPECIALIZED) REPORT OD4012
Hydroponic Crop Farming

Color me green: As consumers increasingly buy locally grown produce, revenue is
expected to grow
Jack Curran | December 2019
IBISWorld.com +1-800-330-3772 info@IBISWorld.com

Hydroponic Crop Farming OD4012 December 2019
Contents
About This Industry...........................................4 Competitive Landscape...................................25
Industry Definition..........................................................4 Market Share Concentration....................................... 25

Major Players................................................................. 4 Key Success Factors................................................... 25
Main Activities................................................................4 Cost Structure Benchmarks........................................ 26
Supply Chain...................................................................5 Basis of Competition................................................... 29
Similar Industries........................................................... 5 Barriers to Entry........................................................... 30
Related International Industries....................................5 Industry Globalization..................................................31
Industry at a Glance.......................................... 6 Major Companies............................................ 33
Executive Summary....................................................... 8 Major Players............................................................... 33

Other Players................................................................36
Industry Performance....................................... 9
Operating Conditions...................................... 37
Key External Drivers....................................................... 9
Current Performance................................................... 10 Capital Intensity........................................................... 37
Revenue Volatility........................................................ 39
Industry Outlook............................................. 14 Regulation & Policy...................................................... 40
Industry Assistance..................................................... 40
Outlook......................................................................... 14
Performance Outlook Data......................................... 15 Key Statistics.................................................. 43
Industry Life Cycle....................................................... 15
Industry Data................................................................43
Products and Markets..................................... 18 Annual Change.............................................................43
Key Ratios.................................................................... 43
Supply Chain................................................................ 18
Products and Services.................................................18 Additional Resources...................................... 44
Demand Determinants................................................ 19
Major Markets..............................................................20 Additional Resources.................................................. 44
International Trade.......................................................22 Industry Jargon............................................................ 44
Business Locations..................................................... 23 Glossary Terms............................................................44
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About This Industry

Industry Definition Hydroponics is a method of growing plants using mineral nutrient solutions in
water, without soil. Operators in this industry generally grow food crops under glass
or protective cover.
Major Players NatureSweet Ltd.
Houweling's Tomatoes
Village Farms International Inc.
Main Activities The primary activities of this industry:

Hydroponic greenhouse tomato farming
Hydroponic greenhouse cucumber farming
Hydroponic greenhouse bell pepper farming
Other hydroponic greenhouse vegetable farming
Hydroponic greenhouse fruit production
The major products and services in this industry:

Tomatoes
Lettuce
Fresh herbs
Cucumbers
Peppers
Strawberries
Other food crops
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Supply Chain
SIMILAR INDUSTRIES
Vegetable Farming in the US Orange & Citrus Groves in Fruit & Nut Farming in the US Plant & Flower Growing in
the US the US
RELATED INTERNATIONAL INDUSTRIES
Under Cover Vegetable Outdoor Vegetable Growing Citrus Fruit, Nut and Other Fruit and Nut Growing in
Growing in Australia in Australia Fruit Growing in Australia China
Vegetable Growing in the UK Vegetable Farming in Fruit & Nut Farming in Vegetable Growing in New
Canada Canada Zealand
Kiwifruit and Berry Growing Vegetable Growing in Ireland

in New Zealand
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Industry at a Glance
Key Statistics Key External Drivers % = 2014-2019 Annual Growth
$830.8m 3.4%
Trade-weighted index
0.0%
Healthy eating index
Revenue
1.1% 3.3%
Annual Growth Annual Growth Annual Growth Per capita fruit and vegetable consumption Price of vegetables
2014-2019 2019-2024 2014-2024

Industry Structure
-0.9% 0.9%
POSITIVE IMPACT
$36.6m Life Cycle Capital Intensity
Profit
Growth Low
Annual Growth Annual Growth
2014-2019 2014-2024 MIXED IMPACT
4.4% Revenue Volatility Regulation
Medium Medium
4.4% Technology Change

Medium
Barriers to Entry
Medium
Profit Margin
Competition
Annual Growth Annual Growth
Medium
2014-2019 2014-2024
-5.6% NEGATIVE IMPACT
Industry Assistance Concentration

2,517 Low High
Businesses Globalization
High
Annual Growth Annual Growth Annual Growth
2014-2019 2019-2024 2014-2024
Key Trends
3.3% 3.0%
Despite positive demographic trends, fruit and vegetable
consumption has declined
5,159 This industry has been positively affected by poor weather

conditions
Employment
Imports of hydroponically grown produce make up a large
portion of domestic demand
2014-2019 2019-2024 2014-2024
Consumer demand for healthier foods will support demand
8.6% 2.6% for hydroponic crops
An increase in the amount of organic produce sold will boost
profit
$204.7m Import penetration from Mexico stands to present an
Wages increasing threat to industry revenue
Demand for quality organic produce will keep rising, fostering
this industry's growth
2014-2019 2019-2024 2014-2024
0.6% 2.3%
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Products & Services Segmentation
50.4% 7.0% 8.9% 9.7% 0.8% 0.1%
Tomatoes Lettuce Fresh herbs Cucumbers Peppers Strawberries

Source: IBISWorld
Major Players % = share of industry revenue SWOT
STRENGTHS
Growth Life Cycle Stage
Low Customer Class Concentration
Low Capital Requirements
WEAKNESSES
Low & Steady Level of Assistance
High Imports
Low Profit vs. Sector Average
High Product/Service Concentration
OPPORTUNITIES
High Revenue Growth (2019-2024)
High Performance Drivers
THREATS
Low Revenue Growth (2005-2019)
Low Revenue Growth (2014-2019)
Low Outlier Growth
Price of vegetables
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Executive Over the five years to 2019, revenue for the Hydroponic Crop
Summary Farming industry has mostly decreased.
During the five-year period, while overall vegetable prices have increased, industry
revenue has been limited by years with significant drops in vegetable prices.
However, extreme weather conditions damaged many crops for fresh field farmers,
so grocery stores and farmers' markets quickly turned to hydroponic farmers to
meet their demand. In particular, drought throughout many parts of the United
States over the past five years harmed agricultural industries across the board,
presenting an opportunity for hydroponic crop farmers. Over the five years to 2019,
industry revenue is expected to decrease at an annualized rate of 0.9% to $830.8
million. However, in 2019, industry revenue is expected to rise 5.3%, due to a sudden
increase in the price of vegetables and per capita consumption of fruit and
vegetables.
Revenue is projected to increase at an annualized rate of 0.9% to an estimated

$870.7 million over the five years to 2024. Poor weather conditions are projected to
increase downstream purchasers' reliability on hydroponic farmers and raise
vegetable prices causing revenue to rise. Mexican imports will pose a small threat
to the domestic industry, as the country increases its hydroponic farming
capabilities. Nevertheless, as consumers increasingly purchase locally grown
produce, imports will not pose a substantial threat. While per capita vegetable
consumption is projected to decline slightly over the next five years, IBISWorld
expects that industry associations and government spending will try to reverse this
trend by promoting healthy eating through vegetable marketing. In addition,
demand for quality organic produce will keep rising, fostering this industry's growth.
As revenue and downstream demand continues to expand over the next five years,
the number of enterprises is projected to grow. Over the five years to 2024, the total
number of industry companies is expected to increase at an annualized rate of 3.0%
to 2,923. Many of these new companies will focus exclusively on growing organic
fruits and vegetables to help meet demand at fresh markets. Meanwhile, other
operators will start farms to provide goods solely on a local basis. However, as
competition increases, profit margins will likely decline.
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Industry Performance
Key External Price of vegetables

Drivers An increase in the price of vegetables positively affects industry revenue. Price
fluctuations reflect supply levels, downstream processing activity, global demand
activity and a host of other factors. The price of vegetables is expected to increase
in 2019, presenting a potential opportunity for industry operators.
Per capita fruit and vegetable consumption

Increased public awareness of nutrition and diet positively affects fruit and
vegetable consumption. According to the US Department of Agriculture, Americans
need to increase their vegetable consumption by about 25.0% to meet health
recommendations. Per capita fruit and vegetable consumption is expected to
increase in 2019.
Healthy eating index

The healthy eating index measures the degree to which Americans follow the diet
recommended by the Department of Agriculture. The recommended diet places
emphasis on fruit and vegetables, so when the index increases, demand for
industry produce also increases. The healthy eating index is expected to decline in
2019.
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The trade-weighted index (TWI) represents the value of the dollar compared with
the currencies of major US trading partners. When the TWI increases, representing
an appreciation of the US dollar, US exports become more expensive on the global
market, hurting demand for industry products. Conversely, when the TWI falls, US
exports become more affordable on the global market, spurring demand for US
products. The TWI is expected to increase in 2019, posing a potential threat for the
industry.
Current While the Hydroponic Crop Farming industry is small compared with
Performance other industries in the agricultural sector, it has been rather resilient
to the typical volatility associated with other agricultural industries.
IBISWorld expects revenue to decrease at an annualized rate of only 0.9% over the
five years to 2019, largely as a result of declines in the price of vegetables and
rising competition from other hydroponic farming operations. However, in 2019,
IBISWorld expects revenue to rise 5.3% to $830.8 million, as a result of a significant
increase in the price of vegetables and per capita fruit and vegetable consumption.
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Consumption trends
Numerous sources, including the Harvard School of Public Health

and the Center for Disease Control, state that the consumption of
veggies and fruits can help reduce the risk of cancer and heart
disease and help maintain a balanced diet and body weight.
As a result, numerous initiatives have been undertaken to promote healthy
lifestyles. One such initiative, a campaign called "Fruits and Veggies Matter," is a
public-private partnership that aims to increase Americans' consumption of fruit
and vegetables. However, despite these initiatives, vegetable consumption has
declined over the past five years.
Over the five years to 2019, fruit and vegetable consumption has been supported by
some demographic trends, including rising disposable income, baby boomers'
consumption habits and growth in the Hispanic and Asian-American populations.
Individuals aged 20 to 64 are the largest consumers of fresh fruit and vegetable
items. This demographic has grown over the past five years, according to the US
Census Bureau. As a result of the growth of this segment, per capita fruit and
vegetable consumption has increased at an annualized rate of 1.1% over the past
five years.
Healthy demand
Despite declines in demand for fruits and vegetables as a whole,

demand for organic fruit and vegetables has increased in recent
years, boosting the industry's revenue.
In 2017, the value of the US organic market totaled about $7.3 billion, according to
the latest US Department of Agriculture (USDA) estimate. Produce is the most
popular organic food, representing about 43.0% of all organic food sales.
Consumers have become increasingly concerned with the potential effects of
genetically modified (GM) vegetables and pesticides on their bodies. Therefore,
more consumers are buying organic produce. Since many hydroponic crop farmers
do not use pesticides or GM seeds to produce their crops, this industry provides a
steady supply of organic produce.
In addition to the trend toward organic produce, this industry has been positively
affected by poor weather conditions. By contrast, fresh field farmers are largely
affected by changes in weather conditions. When farmers experience droughts or
floods, their crops become significantly damaged. Since hydroponic crop farmers
grow their produce in greenhouses, weather patterns generally do not affect them,
giving the industry a strong advantage in such situations. For example, when
extreme drought hit the Plains and Great Lakes regions in 2012, followed by
drought in California in 2013 and 2014, the price of vegetables rose and the industry
experienced a surge in demand.
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Operating landscape
Due to strong revenue growth and continual demand from

downstream consumers, industry operators have experienced
substantial profit margins.
In 2019, profit is expected to account for an estimated 4.4% of revenue. Farmers in
this industry can achieve significant profit margins because many of the goods are
sold to fresh produce markets, where prices are high and returns are favorable.
These crops are especially profitable because their consistent high quality attracts
customers at fresh markets and from the restaurant industry. Also, this industry can
yield more crops than the average vegetable farm. With climate control and no soil,
a farmer eliminates soil-borne diseases and weeds and gains precise control over
the crop's nutritional diet. Over the five years to 2019, profit has declined from
10.0% of revenue in 2014. This decline has been driven by growth in the price of
inputs, such as fertilizer.
Since profit margins are substantial and revenue continues to increase, more
companies have entered the industry over the past five years. Enterprise numbers
have increased at an annualized rate of 3.3% to 2,517 companies. Most hydroponic
facilities are family or small business operations that cover one-eighth of an acre to
one acre. To keep up with growing demand of hydroponic greenhouses, the industry
has increased its workforce and employment has grown at an annualized rate of
8.6% to 5,159 employees over the five years to 2019. However, as enterprise growth
has outpaced revenue growth, the industry has become saturated and wage costs
have not been able to keep up with rising employment. As a result, average wages
in this industry have plummeted from $58,106 per employee in 2014, to $39,686 per
employee in 2019.
Imports of hydroponically grown produce make up a large portion of domestic

demand. Most of these imports come from Canada and Mexico and, as a result, are
free from import tariffs under the North American Free Trade Agreement. Imports
from Mexico, where labor costs are much lower, have been a particularly strong
source of imports over the past five years. Imports have increased at an annualized
rate of 4.3% to $625.4 million over the five years to 2019 due to an appreciating US
dollar. Exports, meanwhile, have fallen as a result of the appreciating US dollar,
making US products more expensive to foreign buyers. The value of exports has
declined an annualized 0.1% to $92.0 million over the five years to 2019.
Historical Performance Data

Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic Price of
Demand Vegetables
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m) (Index)
2010 660 211 1,559 1,316 2,708 92.1 453 150 1,021 104
2011 705 190 1,736 1,469 2,819 96.2 489 137 1,098 100.0
2012 749 214 1,921 1,628 2,838 87.9 470 163 1,131 90.6
2013 863 287 2,351 1,991 2,978 93.8 516 186 1,285 102
2014 868 309 2,521 2,137 3,413 92.3 508 198 1,283 101
2015 866 283 2,633 2,219 3,699 85.9 505 194 1,286 108
2016 860 260 2,735 2,293 4,284 84.9 579 195 1,354 102
2017 809 260 2,709 2,259 4,809 86.1 555 192 1,278 114
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Demand Vegetables
2018 789 250 2,820 2,361 4,862 87.9 582 193 1,284 106
2019 831 264 3,004 2,517 5,159 92.0 625 205 1,364 120
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Industry Outlook
Outlook The Hydroponic Crop Farming industry is projected to expand over
the five years to 2024.
Over the five years to 2024, revenue
is forecast to grow at an annualized
rate of 0.9% to an estimated $870.7
million. Consumers are expected to
buy more locally grown produce,
supporting this industry's revenue
growth. Also, the industry will
continue to fill the gap when poor
weather conditions hurt conventional
farmers' goods. Conversely, Mexico
is expected to increase its
hydroponic crop farming output,
which is expected to pose an
ongoing threat to the industry.
Healthier habits
Consumer demand for high-quality, healthier foods will continue to

support demand for hydroponic crops.
However, IBISWorld forecasts that per capita fruit and vegetable consumption will
decrease at an annualized rate of 0.2% over the five years to 2024. However, the
consumption of fresh produce will remain strong as disposable income rises
following the economic recovery and baby boomers begin to practice healthier
eating habits.
Combined government and industry strategies to encourage fruit and vegetable

consumption, such as the "Fruits and Veggies Matter" campaign, are geared toward
educating young people about the benefits of fresh fruit and vegetable
consumption. Younger children also benefit from this factor, as the country's rate of
obesity in young children has grown. As US health officials continue to encourage
exercise and a proper diet (even altering the food served in school cafeterias
through programs such as the NY Coalition for Healthy School Food), fresh fruit and
vegetable sales will likely benefit.
The increasing popularity of organic produce is also expected to continue over the
period, as per capita disposable income rises and health concerns mount. These
factors represent a significant opportunity for industry establishments to capitalize
on a niche market that will expand into a more mainstream consumer preference in
the future; currently, the US Department of Agriculture estimates that about 4.0% of
total at-home food sold in the United States is organic. Future demand for organic
fruit and vegetables, which accounts for 43.0% of total organic food sold in the
United States, will likely be a permanent shift and not just a passing trend. As a
result, over the five years to 2024, IBISWorld anticipates that the number of industry
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operators will increase at an annualized rate of 3.0% to 2,923 operators to satisfy

rising demand.
Employment will also increase accordingly, growing at an annualized rate of 2.6% to

5,857 employees over the five years to 2024. Grocery stores and fresh food markets
are expected to need more reliable suppliers of organic produce, and because
hydroponic farms yield a higher number of crops per acre compared with fresh field
farmers, this industry will likely become a key supplier of organic foods. An increase
in the amount of organic produce sold will also boost profit because organic fruit
and vegetables typically carry a price premium.
Opportunities and threats
Along with healthy food trends, this industry will likely benefit from
the volatility associated with traditional field farming.
When extreme weather conditions damage fresh food farms' crops, demand for this
industry's products will increase as grocery stores and fresh markets need to fill the
gap in their supply chain. Furthermore, additional farmers will switch from
traditional field farming to hydroponic crop farming to eliminate elements of
volatility like storms, frost and drought.
Nevertheless, import penetration from Mexico stands to present an increasing

threat to industry revenue. Mexico is expanding its hydroponic operations,
benefiting from lower labor costs than in the United States, driving producers to
offer vegetables to US consumers at lower prices. Since Mexico's labor is less
costly and hydroponic technology enables year-round growth for farmers, demand
for Mexican crops is expected to increase. In particular, supermarkets will likely buy
more produce from Mexico, as they will demand larger volumes of crops at lower
prices. IBISWorld forecasts that imports will grow an at an annualized rate of 1.7%
to $678.9 million over the five years to 2024. Exports are also forecast to stagnate,
holding at $92.1 million over the five years to 2024, due to increased low-cost
production from Mexico as well as a strong US dollar.
Performance Outlook Data

Demand Vegetables
2019 831 264 3,004 2,517 5,159 92.0 625 205 1,364 120
2020 840 270 3,140 2,637 5,334 92.0 634 211 1,382 123
2021 845 274 3,228 2,714 5,476 91.9 645 216 1,399 125
2022 854 280 3,311 2,787 5,618 92.1 657 220 1,420 128
2023 863 284 3,392 2,857 5,752 92.0 667 225 1,438 131
2024 871 289 3,468 2,923 5,857 92.1 679 229 1,458 134
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Industry Life Cycle The life cycle stage of this industry is Growth
LIFE CYCLE REASONS

Volatility in the industry has caused IVA to fluctuate each year
Operators are continually entering the industry
Customers are rapidly accepting the industry's goods
The Hydroponic Crop Farming industry is in the growth stage of its life cycle
because of its increasing number of participants, high industry value added (IVA)
and rapid growth of customer acceptance. Industry value-added is expected to
decline at an annualized rate of 0.7% over the 10 years to 2024, while US GDP is
slated to grow at an annualized rate of 2.1% during the period. While IVA declining is
typically a sign of a mature or declining industry, volatility in the industry has
caused IVA to fluctuate each year.
In addition to steady contribution to the nation's GDP, industry participation is also

increasing, which typically signals a growing industry. Over the 10 years to 2024, the
total number of industry operators is expected to increase at an annualized rate of
3.2%. Companies have increasingly entered the industry and revenue has risen
consistently over the past five years.
Lastly, this industry's goods continue to gain acceptance from the downstream
markets. As more Americans demand high-quality and organic produce, grocery
stores and fresh food markets are realizing the importance of hydroponic crop
farmers. This industry is able to offer excellent produce year-round, providing
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produce retailers with a constant supply. In addition, hydroponic farmers act as a

security net for vegetable supply when extreme weather conditions hurt the crops
of fresh field farmers.
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Products and Markets

Supply Chain KEY BUYING INDUSTRIES KEY SELLING INDUSTRIES
1st Tier 1st Tier
Grocery Wholesaling in the US Crop Services in the US
Fruit & Vegetable Wholesaling in the US Fertilizer Manufacturing in the US
2nd Tier 2nd Tier

Fruit & Vegetable Markets in the US Pesticide Manufacturing in the US
Supermarkets & Grocery Stores in the US Biotechnology in the US
Products and
Services
Tomatoes
Unlike its field-grown counterparts, produce that is grown in

hydroponic greenhouses is mainly used for distribution on the fresh
market because it tends to be higher quality and is available year-
round.
Tomatoes represent the largest industry segment, and their market share is
increasing. Tomatoes are a popular vegetable used in a wide variety of cuisine.
Furthermore, specialty varieties of tomatoes - including heirloom varieties - have
become popular on grocery store shelves in recent years. More producers have
therefore taken advantage of the rise of the crop's popularity to cultivate it in
hydroponic farms. In 2019, tomatoes are expected to account for 50.4% of industry
revenue.
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Cucumbers
Cucumbers are the second-most popular vegetable in the industry.

They have become more popular in recent years as consumers turn to new health
trends that advocate eating more vegetables and fewer carbohydrate-heavy foods.
Cucumbers are also the key ingredient in pickle production. Furthermore, the
difficulty of producing cucumbers year-round has led to their proliferation in
hydroponic greenhouse environments. In 2019, cucumbers are expected to account
for 9.7% of industry revenue.
Fresh herbs
Many common herb varieties like basil, mint, thyme and dill are
delicate and cannot be grown outside year-round in cold climates.
Producers in cold climates therefore have turned to hydroponic greenhouse farming
to produce these crops and provide them for consumers year-round. As a result of
their popularity, herbs have taken a larger share of the market over the past five
years. In 2019, herbs are expected to account for 8.9% of revenue.
Other crops
Aside from tomatoes, lettuce and peppers (both sweet and spicy)
are the main vegetables produced hydroponically in North America.
However, this production is done mostly in Canada and Mexico, and producers of
these vegetables in the United States have not been able to compete with imports;
the market share of both these products has declined in the past five years.
Other crops produced by the industry include strawberries, spinach, arugula, green
beans and chard, in addition to other berries, other leafy greens and other specialty
vegetable varieties. None of these crops represent a food staple in the same
manner as tomatoes or lettuce, and therefore none stand to become a major
industry segment in the next five years. This segment has remained steady as a
share of revenue in the past five years.
Demand Dietary trends

Determinants
Rising nutritional awareness and a preference for a produce-rich
diet across the nation lifts demand for fresh vegetables and melons.
FDA recommendations for low fat diets and increased media attention on nutrition
issues have helped raise consumer awareness about the benefits of vegetable
consumption. Demand for vegetables may increase as consumers continue
reducing the fat content of their diets. Nutritional experts claim that the average
American is still not eating enough servings of vegetables each day.
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Quality and consumer preferences
Increasingly, consumers shop with an awareness of the benefits of

purchasing fresh and locally grown goods.
Consequently, demand for these products has increased among both nontraditional
and traditional retailers. Any change in the supply of quality and fresh vegetables
and fruits can lead to a shift in demand and sales. Also, a fall in the quality and
availability of certain products may lead to consumers substituting fresh, locally
grown produce for imported alternatives or frozen and canned goods.
Price
Demand for fresh vegetables is sensitive to price changes.

Any large increase in the price of these crops can constrain demand and encourage
consumption of alternative foods. Prices can increase sharply when adverse
weather conditions cause substantial declines in production. For example, severe
drought in California in 2013 and 2014 dramatically decreased plantings and yields
of vegetable crops in field settings, pushing the prices of produce up. Retailers and
wholesalers often try to smooth out falls in production by increasing the amount of
fresh produce from greenhouse growers and foreign growers (mainly Mexico and
Canada).
Household incomes
Demand for fresh vegetables is influenced by disposable incomes.

In the fresh vegetable market, changes in income can sometimes cause cross-
substitution between vegetables. Rather than increasing the total consumption as
disposable incomes rise, households often reduce consumption of inexpensive
vegetables and purchase more exotic vegetables or organic produce.
Product attributes
While demand for hydroponic tomatoes has been quite strong in the
retail market, food service outlets (e.g. restaurants) still prefer
mature green tomatoes.
If the industry develops flavorful, high-quality tomatoes, it may experience an
increase in demand. Additionally, the introduction of specialty types of vegetables
(such as heirloom tomatoes), and research into alternative products (such as
mushroom teas) may also boost demand for hydroponic crops.
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Major Markets
Supermarkets, grocery stores and food service providers
Supermarkets and grocery stores are the largest market segment of the industry.
Consumers generally purchase fruit and vegetables from these retailers for home
consumption. Supermarkets and grocery stores represent a relatively consistent
source of demand; moreover, their share of industry revenue is increasing as
consumers have switched to purchasing more locally grown organic and natural
produce that they can conveniently purchase. Furthermore, this market includes
supercenters and mass merchandisers like Costco and Walmart that provide
products to consumers at lower prices by vertically integrating wholesale
distribution and retailing.
Food service providers also represent a major retail sector that buys from
hydroponic farmers. An increasing number of restaurants seek to serve organic and
locally grown produce to satisfy consumer preferences; therefore, they rely on
hydroponic farms for their fruits and vegetables. In 2019, revenue from
supermarkets and food service providers is expected to account for 44.0% and
21.5% of industry sales, respectively.
Wholesalers
The majority of hydroponically grown food crops are sold to wholesalers that resell
the products to grocery stores, supermarkets and other retailers. Wholesalers
represent a key market for industry farmers because wholesalers specialize in the
efficient distribution of goods to key markets. Industry farmers typically do not have
the scale to be able to distribute their own products, and wholesalers are able to do
this function for them. Wholesalers' market share has nevertheless declined slightly
in the past five years as more producers sell their products directly to the public in
farmers' markets or other venues. In 2019, sales to wholesalers are expected to
account for 6.6% of industry revenue.
Consumers
Direct sales to consumers make up an increasing share of sales for hydroponic

crop farmers. The number of farmers markets in the United States is growing
steadily, increasing the outlets available for industry farmers to sell their products
to the public. Profit margins tend to be higher for industry producers that can
manage to sell their produce to the public because it eliminates a cut of the final
sale that would otherwise be taken by retailers and wholesalers. This strategy is
therefore a beneficial one for industry producers as well as for consumers who
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receive lower-priced, fresher produce. Sales to consumers are expected to account

International Exports in this industry are Medium and Steady

Trade
Imports in this industry are High and Increasing
The United States is an importer of

crops produced on hydroponic
farms. To supplement production
and supply fresh vegetables year-
round, the industry imports fresh
vegetables, especially during the
colder months when domestic field
production is at a lull. Over the five
years to 2019, imports are expected
to increase at an annualized rate of
4.3% to $625.4 million. The trade
balance is sensitive to changes in
exchange rates, with imports gaining
strength along with the dollar and
exports making up ground when US
currency depreciates. A stronger
dollar makes imports less costly for
consumers, with the opposite effect
on foreign buyers of US goods.
However, exchange rates have just a

muted effect on this industry relative
to other agricultural industries. This
factor is partly because trade is less
prominent in the overall Vegetable Farming industry (IBISWorld report 11120).
Hydroponic imports currently make up 45.8% of domestic demand, while exports
account for only 11.1% of industry revenue, as a greater proportion of vegetables
are consumed fresh. Therefore, the time it takes to transport these goods can erode
quality and lower returns. For this reason, close to 100.0% of US trade in this
industry takes place with the two closest countries: Canada and Mexico. The
vegetables most commonly imported include tomatoes, cucumbers, squash and
peppers. Vast expansion of hydroponic greenhouse production of vegetables in
Mexico, where producers can realize cost savings compared with producing in the
United States, has led exports to decrease at an annualized rate of 0.1% to $92.0
million over the five years to 2019.
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Business
Locations Business Concentration in the United States
WA
MT ME
ND
VT
OR MN
NH
ID WI
SD NY MA
WY MI CT RI
IA PA
NV NJ
NE
OH MD
IL IN DC DE
UT
CO WV VA
KS MO
CA KY
NC
AZ TN
OK
NM SC
AR
AL GA
MS
TX LA
FL
AK
HI
Establishments (%)
0 2 4 6
Source: IBISWorld
As hydroponic growing operations are less susceptible to weather conditions, the

industry's business locations vary significantly from the broader Vegetable Farming
23 IBISWorld.com
industry. Nevertheless, large-scale commercial hydroponic production still tends to

be concentrated in temperate climates with year-round sunshine, enabling for the
best quality and highest profit margins. As a result, large producers are
predominantly located in Pennsylvania (6.4% of establishments), New York (5.5%),
Michigan (4.6%), Ohio (4.0%) and Wisconsin (4.0%) which make up about one half
of this industry's revenue, while comprising about one-third of the farms.
Hydroponic farms in the remaining states are typically very small and owner
operated. Farms in this industry have fairly limited land requirements and are less
dependent on weather conditions than their field crop counterparts. This factor
enables them to operate close to large markets, mainly concentrated in the Mid-
Atlantic (14.5%) and New England (11.9%). The Southeast (21.5%) also has a
considerable number of industry establishments, which reflects the region's large
population base and growing consumer preferences for fresh, locally grown
produce.
24 IBISWorld.com
Competitive Landscape
Market Share Concentration in this industry is High
Concentration
The Hydroponic Crop Farming industry has
a moderate to high level of market share
concentration. The four largest companies
in the industry, NatureSweet, Houweling's
Tomatoes, Village Farms and Sunset
Produce, account for an estimated 92.9%
of industry revenue. These players benefit
from managing their own distribution
networks and marketing agreements,
which have enabled them to increase their
market share over the five years to 2019.
In addition, their revenue figures have
attracted the attention of large private
equity and hedge fund managers, who
have helped them access debt markets to
fund expansion. In contrast, the rest of the
industry is composed of small farms. Consumer demand has helped grow the
number and earnings for small hydroponic farms, but their market share is limited
because of their production capacity, distribution constraints and smaller localized
demand. IBISWorld projects industry concentration will remain steady over the next
five years as expansion by the top operators is mitigated by growing consumer
demand for locally grown produce.
25 IBISWorld.com
Key Success IBISWorld identifies 250 Key Success Factors for a business. The most important for this
Factors industry are:
Production of premium produce: Farmers who produce premium vegetables and fruits
can find buyers in the fresh produce market and command higher prices than competitors.
Premium goods can also generate brand loyalty.
Ability to attract local support: Most industry operators are small local produce growers
that benefit from direct sales to local consumers.
Automation reducing costs, particularly labor: The use of automated monitoring,

irrigation and climate control technologies can significantly enhance operators' crop yield
and bottom line.
Ability to secure sales contracts with local markets: Farmers who secure supply
contracts with local grocers, markets and restaurants benefit from these businesses'
access to key consumer markets. Additionally, these contracts can somewhat protect
operators from volatility in the direct to consumer market.
Availability of irrigation water: Water access issues can affect the quality of vegetable
harvests and the area devoted to vegetable growing.
Cost Structure
Benchmarks
26 IBISWorld.com
Profit
Returns and costs vary by farm size, region and

target segment. Regional differences in
profitability are partly driven by consumer
preferences and demand for fresh produce, as
well as seasonality, regional supply and price of
fresh, locally grown produce. The industry's
largest commercial growers are located in the
West and Southwest regions, while growers
throughout the rest of the United States tend to
be very small local marketers and seasonal
producers. Growers of fresh produce in this
industry (particularly organic produce) can
command higher prices than produce for
processing, but they depend heavily on proximity
to target consumer segments. Hydroponic
produce that suffers rough handling from long-
distance transportation is typically of inferior
quality and sells for a lower price than that of
smaller hydroponic farms that cater to specialty
stores and farmers' markets near their
operations.
Additionally, returns can vary unpredictably from

year to year, influenced by domestic weather
patterns. Since greenhouse crops are largely
immune to the effects of weather as they are
covered and protected from harsh changes,
demand for hydroponic crops increases when
the industry's main competitors, farmers who
grow in traditional, outdoor farm environments,
are heavily affected by weather changes.
IBISWorld estimates that profit margins will total
4.4% of revenue in 2019, having decreased since
2014 as a result of rising input costs, including
the price of fertilizer.
Wages
Wage costs are substantially less important to

hydroponic farms than field vegetable farms.
Farms require skilled hand labor for thinning,
cultivating, harvesting and sorting activities to
avoid damaging fragile vegetable plants and
assuring that the produce meets quality and
appearance standards. However, most US
hydroponic facilities are family or small
business operations that cover one-eighth of an
acre to one acre, while field vegetable farms are
generally much larger.
27 IBISWorld.com
Additionally, wages fluctuate during the year,

rising when crops are ready for gathering. Due
to the controlled environment, production tends
to be less seasonal than field production.
Therefore, fluctuations in labor requirements are
less dramatic. Furthermore, farmers incur an
opportunity cost of labor through owner-
operators that carry out much of the necessary
work or employ family members at no additional
cost. In 2019, wages are expected to account
Purchases
Equipment, fertilizer and seed costs account for

the single largest cost category for hydroponic
crop farmers. The relative portion of these
inputs varies by the type of produce, with some
varieties requiring minimal fertilizer application
or less costly seeds. Examples of minor
purchases include boxes or crates for
transportation and shears for picking and
maintaining trees. In 2019, purchases are
expected to account for 47.1% of total industry
revenue.
Depreciation
Farmers that specialize in hydroponic crop

farming require significant capital investment
for their initial and continued operations.
IBISWorld estimates that industry depreciation
charges account for 2.7% of revenue in 2019.
Marketing
Marketing represents a small cost for industry

farms, because produce is often sold locally or
through wholesalers.
28 IBISWorld.com
Rent
Rent represents 0.5% of industry revenue,

because hydroponic farms do not require
massive amounts of land.
Utilities
Fuel, oil, electricity and water expenditures are

included under the utilities heading. These
commodities are some of the most volatile
components of a farmer's cost structure.
Furthermore, they are largely outside the
industry's scope of control. The recent surge in
oil prices has caused this category to balloon
and has also pushed up fertilizer prices, which
are closely linked. In 2019, utility costs are
expected to account for 1.8% of revenue.
Other Costs
Other expenses for hydroponic farmers include

insurance costs, repairs and maintenance,
supplies, registration fees and other general
business expenses. The opportunity cost of land
also falls into this category.
Basis of Competition in this industry is Medium and Steady

Competition
The Hydroponic Crop Farming industry is subject to internal and
external competition.
Internally, players compete with other producers that also operate in the industry. In
addition, players are subject to external competition from outside the industry,
including fresh field crop farmers and other food manufacturers.
29 IBISWorld.com
Internal competition
Vegetables and fruits are differentiated by various factors of quality

(e.g. color, size and skin quality).
The introduction of organically grown produce has created a new subsegment in
the market. Generally speaking, organically certified farmers are able to demand a
higher price. While a basis for competition, the quality of harvested vegetables and
fruit is less difficult to control than field growers because it is largely determined by
factors controlled within greenhouses, such as weather, pests and crop moisture
levels. Production costs also make up a key competitive factor among growers,
though national and sometimes global trends, which are outside of farmers' control,
often dictate prices. Farmers that can produce fresh vegetables at lower costs have
a competitive advantage.
Access to key customer markets is also critically important to operators within this
industry. Local growers who secure supply contracts with nearby grocery stores
and markets that cater to customers who prefer locally grown and organic produce
will have an advantage in their region.
External competition
Hydroponic crop growers also compete with field-grown vegetables

for the fresh and processed markets.
Industry growers must also compete against an ever-increasing range of processed
foods in the snack and meal segment. In particular, rice and pasta have continued
to gain a hold on the meal market to the detriment of vegetables. Given the high
competition and the presence of discerning customers at the retail level, growers
must endeavor to deliver high-quality produce to the marketplace.
Industry operators also compete with do-it-yourself (DIY) consumers, who engage
in hydroponic or soil-based farming on a very small scale for their own
consumption. Throughout the economic downturn, demand for vegetable seeds
and fertilizer from DIY consumers mounted. This trend is expected to reverse
somewhat over the next five years as discretionary income grows with the
recovering economy.
Barriers to Entry Barriers to entry in this industry are Medium and Steady
30 IBISWorld.com
Overall, the Hydroponic Crop Farming

industry has moderate barriers to entry. Barriers to entry checklist
The most significant barriers are the Competition Medium
capital investment requirements
Concentration High
associated with establishing a
hydroponic farm and obtaining the Life Cycle Stage Growth
required licenses to sell fresh produce.
Technology Change Medium
Setting up a hydroponic farm from the
ground up requires considerable Regulation & Policy Medium
investment. New participants need to
Industry Assistance Low
purchase or lease land, greenhouses
and essential equipment, such as
climate monitors, irrigation systems and heating and cooling systems. Hopeful
entrants may have difficulty securing financing for these costs, given the high level
of industry volatility.
New operators hoping to compete with the large commercial hydroponic growers
may also be deterred by the difficulty in obtaining contracts with downstream
markets. Farmers who grow fresh vegetables usually operate under agreements
with chain restaurants and supermarket operators, which buy the crop according to
predetermined conditions (based on price or volume). New entrants into the
industry may find it difficult to establish such contracts, unless they can offer
benefits to their clients. However, new entrants looking to start a small operation
serving local restaurants, grocers and consumers can rent the necessary space and
equipment to get started in the industry. Furthermore, owners can operate small
farms themselves with no additional labor costs.
Industry Globalization in this industry High and Increasing

Globalization
The Hydroponic Crop Farming industry is exposed to a high level of globalization.
Most large industry players are either foreign owned or operate greenhouses in
foreign countries, mostly Canada and Mexico. This industry is also exposed to
globalization through trade. Many crops are imported from Mexico and Canada to
supply the US market. Indeed, production for the North American market is
increasingly done in Mexico where wage costs are far lower, enabling hydroponic
farms located in that country to offer produce at lower prices. Typically, US
hydroponic crop farmers do not engage directly in trade. Most commonly, produce
is exported through wholesalers.
31 IBISWorld.com
32 IBISWorld.com
Major Companies
Major Players NATURESWEET LTD.
Market Share: 44.3%

Headquartered in San Antonio, NatureSweet
Ltd. is one of the largest growers and
marketers of hydroponic greenhouse
tomatoes in North America. Previously having
only greenhouse tomato operations in Mexico,
NatureSweet entered the industry in 2013 with
its acquisition of Eurofresh Farms'
greenhouses in Willcox, AZ, and Snowflake,
AZ, which together house 289 acres of
growing space. While these two locations are
the company's only US operations,
NatureSweet's total facilities in the United States and Mexico total an estimated
1,382.5 acres.
Eurofresh was once one of the largest players in the industry, but a series of
bankruptcies forced it to exit the industry. NatureSweet purchased Eurofresh's
greenhouse assets for $55.2 million in early 2013 after Eurofresh filed for
bankruptcy. This incident was the second bankruptcy filing for the company in less
than five years. After the greenhouse acquisition, NatureSweet implemented two
rounds of layoffs in the Arizona facilities in 2013 and early 2014, reducing its full-
33 IBISWorld.com
time workforce by 135 employees, most of which were in management positions

rather than workers in greenhouse operations. Additionally, the company reduced
its workforce from 400 to about 60. In all, employment was reduced from about
1,100 workers to about 700. NatureSweet has also begun plantings of new varieties
in the Arizona greenhouses, citing a new concentration on flavor rather than yield
and pointing out that the Eurofresh facilities had several diseased plants.
In 2016, NatureSweet entered into partnership with Ganfer to expand operations in

Arizona. The venture began in November 2016 with a combined 250 acres of
greenhouse facilities, with further growth in April 2017. The venture is expected to
continue growing over the five years to 2023.
Financial performance
Over the five years to 2019, industry-relevant revenue for NatureSweet's US

operations is expected to grow at an annualized rate of 14.4% to $368.2 million.
This growth is largely due to the Eurofresh bankruptcy that took place in early 2013
giving the industry significant room for growth. Leading into the bankruptcy, the
company had low revenue prior to the period, giving the company a low starting
point. Growth in consumer demand for premium vegetables over the period as well
as efforts to improve production have supported company revenue growth. The
acquisition by NatureSweet is expected to have turned around the company's
performance in 2019. Layoffs that reduced bloated wage costs, as well as plantings
of new, popular tomato varieties are expected to benefit industry revenue and profit.
NatureSweet (US operations) - financial performance*

Year Revenue Growth Operating Income Growth
($m) (% change) ($m) (% change)
2014 187.6 9.2 4.5 95.7
2015 203.7 8.6 6.7 48.9
2016 224.9 10.4 4.5 -32.8
2017 277.0 23.2 7.0 55.6
2018 329.0 18.8 9.0 28.6
2019 368.2 11.9 9.9 10.0
Source: IBISWorld
Note: *Estimates
HOUWELING'S TOMATOES
Market Share: 34.7%

Houweling's Tomatoes is a family owned
hydroponic greenhouse company that
operates a 50-acre greenhouse facility in
Delta, British Columbia, and a 125-acre
greenhouse in Camarillo, CA. Dutch immigrant
Cornelius Houweling founded the company in
1974 in Langely, British Columbia. In 1995,
Cornelius's children expanded the company
into the United States with the first purchase
of land in California. The company is a leading
producer of hydroponic tomatoes and
cucumbers to major food retailers across the United States and Canada.
34 IBISWorld.com
Houweling's has been an industry leader in conservation and at the forefront of

industry technological change. Prior to the period, the company completed a $17.0-
million project to make its Camarillo greenhouse facility's operations energy neutral.
Gas-powered engines and solar panels power the system, and excess heat and
carbon dioxide are recaptured and used as fuel or absorbed into the tomato plants.
Excess electricity created by the cogeneration system is then sold back into the
power grid. In 2014, the company broke ground on a 28.3-acre greenhouse in Mona,
UT, which draws heat and carbon dioxide waste from a neighboring power plant.
Houweling's Tomatoes is a private company and, therefore, does not release its
financial data to the public. Nevertheless, based on its greenhouse acreage,
IBISWorld estimates that the company's 2019 revenue will total $288.2 million,
growing an annualized 4.0% over the five years to 2019. Houweling's revenue and
profit have grown quickly over the past five years, partly due to its expanded energy-
efficient facilities that virtually eliminate energy costs. The company's close
proximity to key consumer markets in California has also spurred growth. The
company's strategic production location enables it to satisfy local demand for
produce while saving on transportation costs.
Houweling's Tomatoes - financial performance*

Year Revenue Growth Operating Income Growth
2014 236.8 36.9 7.0 12.9
2015 242.1 2.2 9.4 34.3
2016 260.3 7.5 8.5 -9.6
2017 275.8 6.0 9.2 8.2
2018 275.9 0.0 9.1 -1.7
2019 288.2 4.5 9.8 7.4
Source: IBISWorld
Note: *Estimates
VILLAGE FARMS INTERNATIONAL

INC.
Market Share: 11.6%

Village Farms International Inc. is an industry
leader, listed among the largest producers and
distributors of hydroponically grown
tomatoes, bell peppers and cucumbers in
North America. Originally founded as Village
Farms Income Fund in Delta, British Columbia,
in 1989, the company changed its name to
Village Farms International in July 2009. The
company has about 1,300 employees that
operate 240 total acres of greenhouse facilities in British Columbia and the United
States. The US facilities constitute 130 acres of greenhouse acreage all located in
Texas. Village Farms also has exclusive marketing agreements with growers in the
United States, Canada and Mexico, covering an additional 189 acres.
35 IBISWorld.com
Village Farms products are marketed and distributed under its Village Farms brand
name, primarily to retail supermarkets and dedicated fresh food distribution
companies. It markets and distributes produce throughout the United States,
Canada, Mexico and Japan, with four distribution centers located across the United
States and Canada. According to the company's annual filings, the US market
represents about 50.0% of total company sales.
Over the five years to 2019, revenue generated from Village Farms' US-based
operations is expected to grow at an annualized rate of 3.5% to $96.4 million.
Company growth was driven by the expansion of its growing acreage, marketing
efforts and additional distribution channels. Meanwhile, company earnings before
interest and taxes (EBIT) have increased as a result of operational efficiencies and
rising commodity prices. IBISWorld projects that future expansion will increase
Village Farms' market share over the five years to 2024.
Village Farms International Inc. (US segment) - financial performance*

Year Revenue Growth EBIT Growth
2014 81.0 17.7 0.2 -98.0
2015 83.1 2.6 2.1 950.0
2016 83.2 0.1 -0.3 N/C
2017 90.9 9.3 -0.7 133.3
2018 88.3 -2.9 -3.9 457.1
2019* 96.4 9.2 -19.7 405.1
Source: Annual report and IBISWorld
Note: *Estimates
Other Players SUNSET PRODUCE LTD.
Sunset Produce Ltd. produces, markets, distributes and sells hydroponic

greenhouse peppers, tomatoes and cucumbers to the top retailers across North
America. It was founded by the Mastronardi family in Leamington, Ontario, in the
1920s and is now based out of Kingsville, Ontario. The family owned and employee-
managed operations include more than 2,000 acres of greenhouse production
across Canada, Costa Rica, The Dominican Republic, Guatemala, Mexico,
Nicaragua, Panama and the United States. The company's US distribution locations
are in Livonia, MI; Salinas, CA; Lakeland, FL; Maroa, IL; and Brush, CO. IBISWorld
estimates the company's revenue will total $18.8 million in 2019.
36 IBISWorld.com
Operating Conditions
37 IBISWorld.com
Capital Intensity The level of capital intensity is Low
In general, farming is a capital-intensive

process. Farms need expensive machinery for
planting, harvesting, irrigation and packaging.
Hydroponic farming requires additional
greenhouse structures and equipment,
including technically advanced monitoring
equipment and automated irrigation and
climate control systems. However, much of
this additional equipment is structural,
especially the greenhouse structures
themselves, and therefore is considered a
property cost rather than a capital cost. In
addition to the smaller footprint of hydroponic
farms relative to field vegetable farms, these
investments help to reduce labor inputs in the
industry per harvest. However, because
greenhouse farms operate yearlong rather
than seasonally, there are multiple plantings
and multiple harvests, which partially
increases the labor requirement. As a result of
these factors, for every dollar spent on capital,
the industry spends $0.11 on labor.
The Hydroponic Crop Growing industry is currently being disrupted

by the growth of vertical farming technology.
Vertical farming is a form of hydroponic farming that involves stacks of growing
trays that use less space than traditional green houses. These systems also use
LED lights to create artificial sunlight and irrigation systems to distribute water
throughout the trays. Historically, vertical farms have had high operating costs due
to their significant energy needs. As a result, vertical farming has only been a viable
option for high priced crops that can more easily generate profit. However,
companies have recently developed more efficient vertical farming systems that
use less light and water. With these more advanced techniques, vertical farming
has become a profitable option for a wider variety of crops. In the current state,
vertical farms can generate profit while producing higher volumes than traditional
green houses. As this trend continues, hydroponic growers that are able to embrace
more efficient vertical farming techniques may be able to have a competitive
advantage in the industry.
The level of technology change is Medium
The technology associated with hydroponic crop growing has

changed significantly over the past two decades.
These changes include the introduction of more vigorous and high-yielding
rootstock, mechanical harvesting and the adoption of row covers. Other important
38 IBISWorld.com
technologies include more effective pesticide sprays, increased automation and the
use of monitoring equipment, as well as the introduction of high-density planting.
Together, these new technologies have a strong and positive effect on operators
within this industry, and they also help to improve field yields for competitors
outside the industry. Another major advancement involves the use of greenhouse
technology that lets hydroponic growers use natural solar light (supplemented with
artificial lights in darker areas and during the offseason, as needed) to grow plants
more efficiently.
Technology is more heavily used within this industry when compared with field-
growing counterparts. Extensive computerized systems are used to monitor each
point in production. The industry operators commonly use glass greenhouses with
active climate control systems and irrigation systems. Glass is preferred over
plastic, as it maximizes the effects of the winter sun and makes it easier to control
temperatures. On a related note, unlike conventional farming counterparts, industry
operators must "pay for the sun," which has been facilitated by innovations in
various lighting techniques.
Revenue Volatility The level of volatility is Medium
Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in
logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility
threshold.
The Hydroponic Crop Farming industry has a moderate level of

revenue volatility.
Revenue and profit fluctuate in response to regional changes such as weather
conditions, but they are also influenced by more distant factors, such as exchange
rate shifts. These factors are difficult to anticipate and generally outside the control
of farmers; therefore, individual markets deal with considerable uncertainty. Over
the five years to 2019 industry revenue is expected to fluctuate an average 3.6%
39 IBISWorld.com
each year. This fluctuation has come as a result of unpredictable weather

conditions throughout the country during this period.
Regulation & The level of regulation is Medium and is Steady

Policy
There are seven federal marketing orders that apply to all vegetable
growers in the United States.
Marketing orders are designed and administered by handlers and growers'
representatives to establish ground rules within the vegetable markets. The US
Department of Agriculture (USDA) oversees this implementation, which involves
enforcing product quality standards, regulating the flow of products to the market,
standardizing packages and containers, creating reserve pools for storable
commodities and authorizing production and marketing research and advertising.
In addition, farmers must comply with the general regulations that apply to the farm
sector as a whole. All growers must comply with stringent food safety and disease
prevention standards. Vegetable growers must comply with regulations at the
county, state and federal levels. At the county level, farms must comply with zoning
by-laws and use land that has been approved for vegetable growing. Most states
operate agricultural departments that act as regulatory agencies. These authorities
monitor pollution levels associated with farming, which typically involves regulating
the discharge of materials, such as waste into the environment, chemical use and
odor control.
While it is currently a negligible proportion of total industry operations, hydroponic

marijuana production has increased in some regions. Some state level legislation
legalizes the use of marijuana. In total, 24 states and the District of Columbia have
legalized marijuana for medical use. More recently, recreational marijuana use was
legalized in Washington State and Colorado. This has driven further growth within
the industry.
At the national level, regulatory agencies like the Environmental Protection Authority
(EPA) also monitor the industry's environmental impact. Also, at the national level,
the US Department of Agriculture controls the licensing of organic agricultural
production. Farmers wishing to promote their produce as organic must obtain
certification from the USDA.
Industry The level of industry assistance is Low and is Steady

Assistance
Unlike most other growers in the US agriculture sector, fruit and
vegetable farmers are generally ineligible for direct payments.
However, exceptions are made for ad hoc disaster relief programs. For example,
financial assistance of up to $80,000 was offered to Florida growers in response to
severe crop losses that stemmed from the 2004 hurricane season.
40 IBISWorld.com
Non-payment programs
Despite limited availability of industry assistance, operators benefit

from several non-payment programs, including assistance through
the US Department of Agriculture's (USDA) Agricultural Marketing
Service (AMS) and the Specialty Crops program.
The AMS buys excess vegetables from handlers and processors if the products can
be used by government agencies. All food purchased by AMS must be produced in
the United States. The AMS has also bought non-surplus vegetables that were
provided to schoolchildren through the National School Lunch and the Vegetable
Pilot programs, and other groups included in federal food assistance programs
such as the food stamp program.
Additionally, the USDA's Risk Management Agency (RMA) administers subsidized

crop insurance policies. The insurance is purchased before the growing season and
provides an indemnity payment if the farmer's yield is lower than expected.
According to Census data, less than half of vegetable crops are covered by these
policies.
Under the 2014 Farm Bill, hydroponic crop farmers stand to benefit from funding
devoted to a variety of agricultural marketing or development programs. For
example, several farmers have begun growing organic produce, aided by the
controlled environment provided by greenhouses, and motivated by the higher per-
unit margins organic produce yields. The 2014 Farm Bill includes several provisions
that support organic farming, which industry operators can take advantage of.
These programs include: an annual $20 million in funding for organic research; $5.0
million to fund data collection on organic agriculture to provide farmers and
policymakers with more information about organic production and markets;
expanded crop insurance for organic farms; upgrades to the National Organic
Program, including increasing its authority to conduct investigations; and cost
assistance for organic certification.
Taxes and check-offs
Vegetable farmers have the same tax benefits that all US farmers
have, including several tax breaks and allowable deductions for
farm-related expenditure.
For example, farmers can receive a credit or refund for excise tax paid on fuel used
on a farm for farming purposes. In some instances, farmers are also entitled to tax
deductions for expenses incurred in the conservation of land used for farming.
These expenses include the cost of activities such as the treatment or movement
of earth, the eradication of brush and the planting of windbreaks. However, the total
tax deduction for conservation expenses is limited to 25.0% of the gross farm
income for a given year.
Lastly, farmers can choose to calculate their tax liability by treating taxable income
as if it has been earned in even proportions over a three-year period. Since it is
optional, farmers only do this in good years, when this smoothing would result in
lower taxes.
41 IBISWorld.com
Currently, the vegetable industry as a whole is subject to any "check-offs" or taxes

on all quantities produced, a practice that is common for many agricultural
commodities in the United States. These taxes are paid at the first point of sale,
generally from farmers to wholesalers. The proceeds are used to fund marketing
and research activities, targeted at increasing popularity and demand for the
industry's product.
42 IBISWorld.com
Key Statistics
Industry Data
Demand Vegetables
2010 660 211 1,559 1,316 2,708 92.1 453 150 1,021 104
2011 705 190 1,736 1,469 2,819 96.2 489 137 1,098 100.0
2012 749 214 1,921 1,628 2,838 87.9 470 163 1,131 90.6
2013 863 287 2,351 1,991 2,978 93.8 516 186 1,285 102
2014 868 309 2,521 2,137 3,413 92.3 508 198 1,283 101
2015 866 283 2,633 2,219 3,699 85.9 505 194 1,286 108
2016 860 260 2,735 2,293 4,284 84.9 579 195 1,354 102
2017 809 260 2,709 2,259 4,809 86.1 555 192 1,278 114
2018 789 250 2,820 2,361 4,862 87.9 582 193 1,284 106
2019 831 264 3,004 2,517 5,159 92.0 625 205 1,364 120
2020 840 270 3,140 2,637 5,334 92.0 634 211 1,382 123
2021 845 274 3,228 2,714 5,476 91.9 645 216 1,399 125
2022 854 280 3,311 2,787 5,618 92.1 657 220 1,420 128
2023 863 284 3,392 2,857 5,752 92.0 667 225 1,438 131
2024 871 289 3,468 2,923 5,857 92.1 679 229 1,458 134
Annual Change
Demand Vegetables
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
2010 0.30 7.53 6 6 2 0.98 25.9 7.57 10.2 0.68
2011 6.85 -10.2 11 12 4 4.45 7.90 -9.11 7.53 -3.39
2012 6.28 12.8 11 11 1 -8.63 -3.91 19.1 3.05 -9.40
2013 15.1 33.9 22 22 5 6.71 9.89 14.5 13.6 13.1
2014 0.57 7.67 7 7 15 -1.60 -1.65 6.32 -0.16 -1.37
2015 -0.14 -8.40 4 4 8 -6.94 -0.50 -2.02 0.21 6.82
2016 -0.72 -8.21 4 3 16 -1.17 14.5 0.36 5.30 -6.02
2017 -5.97 0.03 -1 -1 12 1.41 -4.12 -1.29 -5.64 12.5
2018 -2.44 -3.66 4 5 1 2.09 4.93 0.41 0.46 -6.75
2019 5.25 5.63 7 7 6 4.66 7.42 5.89 6.28 12.7
2020 1.15 2.23 5 5 3 0.00 1.32 2.97 1.31 2.25
2021 0.57 1.59 3 3 3 -0.11 1.84 2.22 1.20 2.20
2022 1.08 1.93 3 3 3 0.21 1.85 2.32 1.50 2.23
2023 1.05 1.71 2 3 2 -0.11 1.44 2.08 1.31 2.18
2024 0.84 1.51 2 2 2 0.10 1.79 1.64 1.33 2.21
Key Ratios
Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per Wages/Revenue Employees per Average Wage
Employee estab.
(%) (%) (%) ($'000) (%)
2010 32.0 44.4 14.0 244 22.8 1.74 55,576
2011 26.9 44.5 13.6 250 19.4 1.62 48,528
2012 28.6 41.5 11.7 264 21.7 1.48 57,400
2013 33.2 40.2 10.9 290 21.6 1.27 62,626
2014 35.6 39.6 10.6 254 22.9 1.35 58,101
2015 32.6 39.3 9.91 234 22.4 1.40 52,528
2016 30.2 42.7 9.87 201 22.7 1.57 45,518
2017 32.1 43.4 10.6 168 23.8 1.78 40,029
2018 31.7 45.4 11.1 162 24.5 1.72 39,757
2019 31.8 45.8 11.1 161 24.6 1.72 39,678
2020 32.1 45.9 10.9 158 25.1 1.70 39,520
2021 32.5 46.1 10.9 154 25.5 1.70 39,354
2022 32.7 46.3 10.8 152 25.8 1.70 39,249
2023 33.0 46.4 10.7 150 26.1 1.70 39,134
2024 33.2 46.6 10.6 149 26.3 1.69 39,064
43 IBISWorld.com
Additional Resources
Additional US Census Bureau
Resources http://www.census.gov
USDA Economic Research Service

http://www.ers.usda.gov
Nelson Pade
http://www.aquaponics.com
Village Farms
http://www.villagefarms.com
Industry Jargon FRESH FIELD FARMERS

A method of growing plants using soil and fertilizer, typically conducted outdoors.
HYDROPONIC
A method of growing plants using mineral nutrient solutions, in water, without soil.
ORGANIC
Foods that are produced using methods that do not include synthetic pesticides, chemical
fertilizers or genetically modified organisms.
Glossary Terms BARRIERS TO ENTRY

High barriers to entry mean that new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an industry.
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital
intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is
$0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of
labor.
44 IBISWorld.com
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation
using the current year (i.e. year published) as the base year. This removes the impact of
changes in the purchasing power of the dollar, leaving only the "real" growth or decline in
industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US
Bureau of Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within the United States, regardless of their
country of origin. It is derived by adding imports to industry revenue, and then subtracting
exports.
EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees, working
proprietors, partners, managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise
consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single
physical location where business is conducted or where services or industrial operations are
performed. Multiple establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by US companies to customers abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in
the United States.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is
considered high if the top players account for more than 70% of industry revenue. Medium
is 40% to 70% of industry revenue. Low is less than 40%.
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside the firm (such as commission
income, repair and service income, and rent, leasing and hiring income); and capital work
done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed
tangible assets are excluded.
45 IBISWorld.com
INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods
and services used in production. IVA is also described as the industry's contribution to GDP,
or profit plus wages and depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to
domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high
is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%,
and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an
industry's life cycle by considering its growth rate (measured by IVA) compared with GDP;
the growth rate of the number of establishments; the amount of change the industry's
products are undergoing; the rate of technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are
mostly set up by self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s
profitability. It is calculated as revenue minus expenses, excluding interest and tax.
REGIONS
West | CA, NV, OR, WA, HI, AK
Great Lakes | OH, IN, IL, WI, MI
Mid-Atlantic | NY, NJ, PA, DE, MD
New England | ME, NH, VT, MA, CT, RI
Plains | MN, IA, MO, KS, NE, SD, ND
Rocky Mountains | CO, UT, WY, ID, MT
Southeast | VA, WV, KY, TN, AR, LA, MS, AL, GA, FL, SC, NC
Southwest | OK, TX, NM, AZ
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of
the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to
±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
46 IBISWorld.com
WAGES
The gross total wages and salaries of all employees in the industry. The cost of benefits is
also included in this figure.
47 IBISWorld.com
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US INDUSTRY (SPECIALIZED) REPORT OD4012

Hydroponic Crop Farming

IBISWorld.com +1-800-330-3772 info@IBISWorld.com

About This Industry...........................................4 Competitive Landscape...................................25

Industry Definition..........................................................4 Market Share Concentration....................................... 25

Industry at a Glance.......................................... 6 Major Companies............................................ 33

Executive Summary....................................................... 8 Major Players............................................................... 33

About This Industry

Major Players NatureSweet Ltd.

Village Farms International Inc.

Main Activities The primary activities of this industry:

Hydroponic greenhouse cucumber farming

Hydroponic greenhouse bell pepper farming

Other hydroponic greenhouse vegetable farming

Hydroponic greenhouse fruit production

The major products and services in this industry:

Other food crops

RELATED INTERNATIONAL INDUSTRIES

Kiwifruit and Berry Growing Vegetable Growing in Ireland

2014-2019 2019-2024 2014-2024

4.4% Technology Change

-5.6% NEGATIVE IMPACT

Industry Assistance Concentration

5,159 This industry has been positively affected by poor weather

Products & Services Segmentation

50.4% 7.0% 8.9% 9.7% 0.8% 0.1%

Tomatoes Lettuce Fresh herbs Cucumbers Peppers Strawberries

Hydroponic Crop Farming

Major Players % = share of industry revenue SWOT

Revenue is projected to increase at an annualized rate of 0.9% to an estimated

Key External Price of vegetables

Per capita fruit and vegetable consumption

Healthy eating index

Numerous sources, including the Harvard School of Public Health

Despite declines in demand for fruits and vegetables as a whole,

Due to strong revenue growth and continual demand from

Imports of hydroponically grown produce make up a large portion of domestic

Historical Performance Data

Consumer demand for high-quality, healthier foods will continue to

Combined government and industry strategies to encourage fruit and vegetable

operators will increase at an annualized rate of 3.0% to 2,923 operators to satisfy

Employment will also increase accordingly, growing at an annualized rate of 2.6% to

Opportunities and threats

Nevertheless, import penetration from Mexico stands to present an increasing

Performance Outlook Data

LIFE CYCLE REASONS

Operators are continually entering the industry

Customers are rapidly accepting the industry's goods

In addition to steady contribution to the nation's GDP, industry participation is also

produce retailers with a constant supply. In addition, hydroponic farmers act as a

Products and Markets

2nd Tier 2nd Tier

Unlike its field-grown counterparts, produce that is grown in

Cucumbers are the second-most popular vegetable in the industry.

Demand Dietary trends

Quality and consumer preferences

Increasingly, consumers shop with an awareness of the benefits of

Demand for fresh vegetables is sensitive to price changes.

Demand for fresh vegetables is influenced by disposable incomes.

Supermarkets, grocery stores and food service providers

Direct sales to consumers make up an increasing share of sales for hydroponic

receive lower-priced, fresher produce. Sales to consumers are expected to account

International Exports in this industry are Medium and Steady