- Agricultural technology start-up Pure Harvest has raised an additional USD180.5mn in its largest fundraising round yet as it eyes further expansion in the Middle East and Asia, outside of the markets where it has an existing presence: the UAE, Saudi Arabia and Kuwait.
- Asian markets with targeted drives for self-sufficiency and robust digital infrastructure are likely to emerge as Pure Harvest's next markets for expansion.
The latest investments from the Olayan Group, British-based Metric Capital Partners and South Korean venture capital firm IMM Investment bring the total amount raised by Pure Harvest to USD387.1mn.
Pure Harvest is a smart farming company that grows fresh fruit and vegetables using technology-based controlled-environment agriculture (CEA) and sustainable farming methods. The company utilises hydroponics and Internet of Things (IoT) sensors measuring climate, energy and water usage and the progress of photosynthesis to maximise efficiency and yields. At the time of writing, Pure Harvests primary products are tomatoes, strawberries and spinach, but a portion of the funds raised have also been allocated towards expanding its crop portfolio.
According to the most recent data from the World Bank just 0.6% of the UAE’s land in 2018 was classified as arable, making it no surprise that the country imports around 90% of the food it consumes. Thus, the government’s targeted drive to achieve food security is incredibly demanding, though this presents technology start-ups such as Pure Harvest with a significant opportunity to address these challenges. In broad terms, the UAE is food-secure given its political and economic stability. However, water scarcity and regional security issues present headwinds, adding impetus to the government’s efforts.
Released in 2018, the National Strategy for Food Security aims to advance the UAE into first position on the Global Food Security Index (GFSI) by 2051 (from 35th in 2021) and is geared around five key goals:
- Promoting the global trade of agribusiness produce and diversify sources of food imports
- Exploit technology to boost domestic food supply
- Reduce food waste
- Maintain food safety standards and promote healthy eating
- Upgrade the country’s ability to respond effectively to food crises
The strategy also defines the UAE’s national food basket which consists of 18 food types, two of which (tomatoes, leafy greens) Pure Harvest is focused on producing.
At an Emirate level, Abu Dhabi’s government launched a AED1bn programme in 2019 to support the development of local agricultural technology (agritech) companies, including tax rebates covering up to 75% of total research and development costs. The scheme is part of a plan to establish Abu Dhabi as a global hub for agritech development and investment.
The UAE presents substantial opportunity for the use of hydroponics which Pure Harvest has capitalised on early. According to the most recent iteration of the GFSI, the UAE scores well below the global average of 60.9 points, tallying just 15 points out of a potential 100 (higher scores indicating a favourable environment for food security) in terms of exposure to water scarcity. This, coupled with its reliance on fruit and vegetable imports, makes the UAE well-positioned to benefit from increased investment in hydroponic solutions. Water is recirculated within a hydroponic system and thus uses significantly less water than traditional soil-based farming. When coupled with CEA in a greenhouse, farming can take place all year round, leading to sustained high yields. In 2020, our Food and Drink team highlighted the UAE (along with other Gulf Cooperation Council markets Bahrain, Kuwait and Qatar) as most likely to see growing investment in hydroponics globally.
Pure Harvest currently has four operational farms in the UAE and one in Saudi Arabia, and plans to enter Kuwait and expand its presence in Saudi Arabia over the next 18 months. Looking longer term, Pure Harvest has indicated it would grow its geographic portfolio to include Asia, outlining Singapore, South Korea, Indonesia, Malaysia and the Philippines as potential new markets. Pure Harvest’s robust application of technology - particularly the IoT - will determine the course of the company’s expansion. The UAE, Saudi Arabia and Kuwait share a high level of digital maturity and are already well into their 5G journeys. Therefore, Pure Harvest benefits from an existing ecosystem that is conducive to the integration of its technology. As a result, Singapore and South Korea are likely to be the most attractive markets for expansion from an operational standpoint as both benefit from advanced digital markets.
Singapore and South Korea score highly on our Agribusiness Digital Maturity Index, assessing market readiness for digital transformation at an industry level. As can be observed in the chart, Singapore and South Korea outperform in the Infrastructure Maturity pillar of our Index. 5G already accounts for a significant portion of mobile subscriptions in both markets and corresponding network infrastructure is available almost nationwide. 5G's greatest utility is outside of commercial mobile connectivity and has the potential to substantially enhance enterprise operations like those in agriculture. The use of 5G-powered narrowband IoT (NB-IoT) would allow for connection of many IoT devices over a wide area, such as greenhouse facilities. NB-IoT devices also stay operational for longer without charging and maintenance and also are low power consumers versus traditional wireless broadband solutions.
South Korea And Singapore Favourable Markets For Pure Harvest Expansion
Asia-Pacific - Selected Markets' Digital Maturity Scores (2020)
Singapore and South Korea both score higher than the UAE on the GFSI, ranking 15th and 32nd, respectively. However, the food security situations of Singapore and South Korea are hindered by factors to which Pure Harvest could address specific solutions.
Singapore’s natural resources are extremely limited, particularly arable land. Consequently, the country relies heavily on imports to a similar extent as the UAE. In response, the government is attempting to reach 30% self-sufficiency by 2030 and is working towards enhancing the space available for the industry and investing in agritech R&D.
South Korea’s food security is weighed down significantly by water scarcity despite advanced water infrastructure. This, coupled with South Korea’s technologically literate population, has fostered the adoption of hydroponic vertical farming in the country. South Korea is also home to several agritech start-ups such as vertical farming company N.Thing which secured USD26mn in funding in October 2021 for global expansion, some of which is to be used to establish facilities in Abu Dhabi, and Green Labs, a cloud-based farm management system that uses AI and data analytics to optimise crop growth.
The appetite for agritech solutions in both countries creates a potentially lucrative opportunity for Pure Harvest should it choose to develop operations there. In the medium-to-long term it is likely we will see Pure Harvest file for an initial public offering to gain access to greater capital financing opportunities and continue its global expansion.
Telecommunications operators in these countries may also serve to benefit from the growth of agritech solutions, whether it be by partnering with companies such as Pure Harvest or by developing their own capabilities as part of a targeted drive for digital transformation and value-added enterprise services. Going forward we could see operators offer private 5G networks at farming facilities used by agritech start-ups.
This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.