When so much divides the world, there is one thing that unites us all — the need for food, explains Carl Delfeld, global growth stock specialist and editor of Cabot Explorer.
Food represents 14% of our consumer spending but in emerging market countries it ranges between 30% and 70%. As the incomes of emerging market nations such as India and China rises, food prices will also increase.
In addition, as incomes rise from low levels, the quality of diet increases as well. Consumption of rice and vegetables may hold steady but the demand for meat, milk and fruit is surging. And eating more beef, pork and chicken drives demand for grain as animal feed.
Cargill is the world’s largest agricultural commodity trader and active in more than 60 countries. You can’t buy Cargill since it remains a private company but you can invest alongside Cargill in an innovative company leading the charge into sustainable and environmentally-friendly farming — a new trend that is spreading across the world.
Traditional farming is tied to pesticides, greenhouse gas emissions, land and water grabs, and expensive infrastructure and distribution. Local Bounti (LOCL) meets these challenges through its sustainable production and delivery of fresh produce.
Founded in 2018 by Craig Hurlbert and Travis Joyner, the company uses proprietary technology to grow leafy greens such as romaine and butter lettuce along with herbs like cilantro and basil using 90% less land and water than traditional agricultural methods — and without pesticides.
This is not vertical farming, which can be very costly, or just indoor greenhouses that normally generate lower yields. This Montana-based company uses a combination of vertical farming and greenhouses that it calls Stack & Flow Technology.
Local Bounti is one of the few startups that went public via SPAC last year that exceeded its 2021 revenue projections, with 32% gross margins. The company raised $125 million through a private investment in public equity, or PIPE, from major investors including agriculture giant Cargill, which is providing $200 million in debt financing.
The company is poised to expand distribution to major food retailers. It will see a roughly 20x increase in its sales footprint overnight due to its acquisition of farming operator Pete’s (gross margin of 45%), which already sells at roughly 10,000 retail locations across 35 states and provinces in the U.S. and Canada.
Local Bounti’s lettuce and herbs are currently distributed at 500 locations in nine states. It has 12 of its own greenhouses and will gain three more from the Pete’s merger, including one under construction.
There is also the potential opportunity to license its technology to major agriculture players since the company already has more than 50 patents. Local Bounti is disrupting the cultivation and delivery of produce and has the potential to scale up its already growing footprint in this emerging market.
