AppHarvest CEO on staying cost competitive, sustainable farming outlook

Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland speak with AppHarvest Founder & CEO Jonathan Webb about the company’s first earnings report, outlook for the sustainable farming tech space, and much more.

Video transcript

MYLES UDLAND: All right, welcome back to "Yahoo Finance Live" on this Monday morning. We've seen a lot of SPACs come public over the last year. And we're finally starting to see some results roll in. AppHarvest out with its first quarterly report since its SPAC deal was completed earlier this year. The company reporting about $2.3 million in sales in the first quarter, just under 4 million pounds of tomatoes sold.

The company's CEO Jonathan Webb joins us now to talk about the quarter for AppHarvest and what the future holds for you guys. Jonathan, thanks for jumping on this morning. So just talk us through the results you guys saw in the first quarter and how you see the rest of this year playing out. Still working out of that one facility. But you are looking for acreage to be up about 30% by the end of the year.

JONATHAN WEBB: Yeah. So we launched our first production facility and had our first crop harvested in January of this year. And we hit our Q1 guidance, revenue guidance. And that facility will be fully operational through the end of the year. And we're optimistic about the targets between now and year end.

JULIE HYMAN: Hey, Jonathan. It's Julie here. I believe you guys are getting your tomatoes into places like Kroger now. And I'm curious. We've been talking a lot on this show about inflation of various kinds, food inflation, but also input cost inflation. And I wonder if inflation, ironically, is making your products more cost-competitive.

You have a lot of technology involved in your production. So I imagine it's relatively costly. But does the price of everything else going up make you guys more competitive?

JONATHAN WEBB: Well, we've said since day one, we knew what we had to target. And our competition is imports from Mexico. Nearly $4 billion pounds of tomatoes were imported from Mexico into the US last year. That was roughly 1.2 billion pounds 10 or 15 years ago.

So we know what we have to do here at AppHarvest. And that's keep our head down, grow a great tomato without the harsh chemical pesticides. We're much closer to markets. We can get to the grocers in about a day drive, whereas Mexico is about a two-week shipping.

But at the end of the day, we have to be cost-competitive. At all those large grocers, the consumers can't afford to pay much more than what they're already paying. And that's our job here at AppHarvest is to deliver a great product at an everyday price for an everyday consumer.

JULIE HYMAN: Let's talk beyond tomatoes for a second. There's a long history of hydroponic farming of tomatoes, right? Hothouse tomatoes. What about beyond that? What other types of produce are you looking at, or are you just concentrating on tomatoes for now and expanding that market?

JONATHAN WEBB: Well, two things there. One, we definitely plan on being an entire fruit and vegetable supplier to the US market. Next year, we'll have a berry facility operational, leafy green facilities, as well as vine crop facilities.

But the general thesis is controlled environment agriculture is really the third wave of sustainable infrastructure. 20 years ago with renewable energy, 10 years ago, Tesla made electric vehicles popular in the mainstream. And then right now, we're not going to have a choice but to bring most all of our fruit and vegetable production indoor with our rapidly changing climate.

We can use 90% less water, get 30 times yield per acre. And you mentioned, we've seen tomatoes grown in different structures over time. It's like comparing a 1950s sports car to a 2021 Tesla. The only similarities in those cars are they have four wheels and a steering wheel. Same thing with what we're building.

This is a very data-driven operation. AI, robotics, we're the one of the largest LED lighting installations in the world. I believe we're one of the only facilities of this size to run completely on recycled rainwater with no agricultural runoff.

So it's an evolution of how to grow fruit and vegetable indoors in a world that's got a rapidly changing climate, where we're going to have to figure out how to grow production at scale in a controlled facility.

BRIAN SOZZI: Jonathan, that's a bold vision. When do you imagine-- is it in our lifetimes that all farming will be indoors?

JONATHAN WEBB: Well, we had the UN Security Council come to Kentucky for the first time in our state history about a year ago. And the UN has said we need 70% more food by 2050. And that would mean we would roughly two planet Earths, the way we currently farm, to have enough land and water.

My background before AppHarvest was building some of the largest solar projects in the US. And I was in DC, building for military installations. All we talk about in this country is energy security. And it is arguable that food security is a much larger challenge for us to solve for. And it's absolutely in our lifetime.

2050 is less than 30 years away. And think about this statistic. Over the next 30 years, humans are going to need to grow more food than in the last 10,000 years of human existence. So our consumption rates are going up. Middle class is rising. Growing population. And add on top of that a changing climate.

We're going to have to figure out how to grow a lot more food with a lot less resources. And we can do that in a controlled environment.

MYLES UDLAND: You know, Jonathan, kind of coming back down from the high-level overview here, which I think is a thesis a lot of people can get behind, we're showing the video of the facility buildout that you guys have done. All we hear about are supply bottlenecks, the inability to get the labor needed to get projects off the ground. Have you guys struggled with that at all as you're trying to build two more facilities to be done by the end of next year?

JONATHAN WEBB: So we will have, this year, four more facilities under construction in total. Plan on launching at least five into operations next year, including the current operating asset. And very proud of this region. Eastern Kentucky, it's been known for powering the country in the coal industry.

We built this first facility in the middle of a global pandemic. And we stood up the facility and have 500 people working with us now and had record ice storms in February and virtually no impact to operations. So it's a true testament to the region, the ingenuity and tenacity of this workforce.

It might be hard to get people to work in California or New York. But here in Central Appalachia, people want to work. And we've shown, by offering a living wage-- we're paying full health care for our employees. We have nearly 8,000 people that have applied to work at this company. And we could only hire 500 so far this year. So it's an incredible workforce.

And then on the materials, we've been fortunate that, for the two facilities we have under construction right now, we've already locked in our steel and glass. And we've already got fixed pricing. So we're not impacted by the volatile swings that we're seeing in the supply right now in the supply chain.

MYLES UDLAND: All right. Thanks so much for joining the program. Jonathan Webb is the CEO at AppHarvest. Appreciate your time this morning.