Farming goes indoors

Beyond profits: Lim, seen here briefing an investor, says the company is also looking at creating new high-valued jobs and generate income for local communities.

THE pandemic has shone a light on many of the gaps that exist in the country’s economy. And one of these is the need for better food security, an issue that resonated with Gerard Lim long before Covid-19.

Many years ago, he started noticing that most of the vegetables sold in local supermarkets and grocers were not necessarily the best of quality as top grade vegetables grown here were mainly exported. That means locals were consuming lower grade vegetables.

Additionally, a lot of the vegetables that can be grown in Malaysia were, in fact, imported.

Lim wasn’t a farmer but he knew that technology could help boost quality production for local consumption and improve the local supply chain for vegetables.

“My exposure and experience with farming started about five years ago, when I introduced smart farming solutions using sensors, the Internet of Things and Big Data to various farmers. But I found that many farmers in Malaysia were smallholders who could not afford the technology.

“I knew that if I wanted to move the needle, I had to adopt the technology and build large commercial scale, industrial grade farms to achieve better economies of scale.

“What was compelling to me was that I was not alone in wanting better quality food and vegetables. There was a ready and strong demand from friends and contacts who wanted the same good quality, clean and fresh vegetables, ” he points out.

Lim has vast experience with tech startups and had previously served in the Malaysian Communications and Multimedia Commission (MCMC).

When he left the regulatory body last year, the time seemed right to embark on a venture that would focus on scaling up smart farming. And with the Covid-19 pandemic ongoing, it became even more evident that there was a need to grow food and vegetables closer to where they are consumed.

He founded Agroz Group Sdn Bhd, an agritech and indoor vertical farming company, to simplify the distribution supply chain of vegetables while reducing the long- and mid-haul transport of vegetables from far away farms. This is done by establishing indoor vertical farms to grow vegetables in local neighbourhoods instead.

Lim is targeting to build 100,000 sq ft of indoor vertical farms in Malaysia this year to make Agroz the largest indoor vertical farm operator in Malaysia.

While it should seem like a no-brainer to support a move into the agriculture industry at a time like this, Lim notes that it is not all straightforward. A lot of stakeholders do not understand that smart farming is different from traditional farms.

“Malaysia does not have policies to support the use of advanced technologies for smart farming, urban farming and indoor vertical farming. So, existing special grants, incentives and loans are provided for the use of chemical fertilisers and pesticides for traditional farming but there are no grants, incentives and loans for the use of technology in smart farming, ” he says.

This makes it a challenge for the company to access ongoing assistance for the agriculture industry.

The lack of policy support and guidelines also make it difficult for them to get funding from financial institutions. Lim says most banks in Malaysia were not particularly supportive of indoor vertical farming as they do not understand these new modern, high-tech forms of farming.

Agroz is currently seeking to raise RM100mil through the issuance of redeemable convertible preference shares to fund its expansion.

Lim says the company has drawn interest from several investors, both local and foreign, and they are in the midst of evaluating some of these offers. He is, however, open to any other interest.

To sweeten the deal for potential investors, Lim is looking at exit plans in five years’ time, either through an initial public offering or via a trade sale to a special purpose acquisition company.

At the moment, Agroz has a small farm in Seri Kembangan, Selangor. It is in the midst of building a 3,000 sq ft farm in Sg Buloh and upgrading a commercial-scale indoor vertical farm in Shah Alam to 90,000 sq ft.

Lim believes Agroz’s indoor vertical farms will complement traditional farming.

“Customers who demand for higher quality will prefer to buy their vegetables from sources like Agroz, which delivers clean, fresh and quality vegetables from farms that you can see and are located within your neighbourhood.

“At the same time, we need to recognise that the market is huge with Malaysia importing over RM5bil worth of vegetables in 2019 alone. And this number is increasing.

“So it will take an entire industry of indoor vertical farmers to grow clean and fresh vegetables in farms within the city before we even make a dent in the traditional agriculture space. Taking even a 10% share, which is only RM500mil, of the multi-billion ringgit market would take some time, ” he says.

However, its efforts, and perhaps that of many other budding agritech companies that have popped up in recent times, are moving in the right direction.

Lim points out that Malaysia ranks 28th on the 2019 Global Food Security (GFS) Index, according to the Economist Group. Singapore, on the other hand, which hardly produces its own food, has topped the index two years in a row, in 2018 and 2019.

A myriad of advanced technologies to ensure that the methods and approach of growing food is repeatable, scalable and traceable to feed a growing population is key to achieving better sufficiency to meet domestic demands.

“We also aim to create hundreds of new high-valued jobs and generate income in our local communities heading into this post-Covid-19 era, ” Lim says.

In some countries, green jobs have been mulled over as a potential area to generate jobs to help with economic recovery. This could also be a space that policymakers could explore further.

Currently, Agroz’s produce is sold directly to consumers through a subscription programme and also supplied to neighbourhood grocers, eateries, restaurants and the hospitality industry.

The company is already growing 200kg of produce per month and will soon have the capacity to grow 1 tonne per day from the various farms already committed.

Once its 100,000 sq ft of indoor vertical farms is achieved, it is expected to produce 3 tonnes of vegetables every day.

Agroz has a current order book of RM5mil to license its technology including supply of its indoor vertical farm systems to warehouses and land asset owners as well as through supply of vegetable products to consumers and businesses. Lim says its got more orders in the pipeline.