A Closer Look at How Local Bounti Is Committed to Its Talent and Its Crops
July 13, 2022 
Editor’s Note: The controlled-environment agriculture (CEA) industry is growing quickly, and with that growth comes growing pains. Greenhouse Grower Senior Editor Brian Sparks recently sat down with Craig Hurlbert, co-founder and co-CEO of fresh leafy greens producer Local Bounti, to learn more about the company’s development, how its success starts with its team and continues through its technology, and more.
Brian Sparks: Let’s start by talking about how Local Bounti was formed, and your current role at the company.
Craig Hurlbert: Our origin story is interesting. Travis Joyner (co-founder and co-CEO of Local Bounti) and I had a private equity firm where we were making investments to help management teams monetize their companies. We crossed paths with the controlled-environment agriculture space as it related to leafy greens about five years ago now, and we got very excited and wanted to make an investment in the space. We studied the industry and talked to a lot of technology providers and other companies, and long story short, we didn’t find a business we felt was going about it in a way to succeed over the long term. And so, we shut down our private equity firm and started Local Bounti with the goal of starting a new chapter in agriculture – building a brand that would be around for generations to come.
Both Travis and I came from the energy world, where every single industrial facility has five people chasing down every single bit of efficiency that gets lost. And so that thinking led us to really focus on how you grow things in the most cap-ex and op-ex efficient manner and still give the plant exactly what it needs when it needs it, to taste fresh and delicious. When we started asking those questions, we realized that from our lens, the existing technology as it stood was not really focused on efficiency. With our proprietary Stack & Flow Technology we cracked that code, and because of that we were off to the races. Today, just a few years after beginning this journey, we are public on the NYSE under the ticker symbol LOCL, and have more than 250 employees with reach into 10,000 grocery stores and counting.
Brian Sparks: When it comes to gaining that technology and basic production knowledge, how did you go about working through that process and building a team that could focus on that?
Craig Hurlbert: We focused our attention early on finding talent in both the vertical and horizonal growing sectors. We got lucky very early on in finding folks that had relevant experience in both vertical and horizontal, which we’ve found is not very common. But what I will tell you is when you acquire a company that has been doing this for 25 years, the amount of talent and knowledge on the production side that you get is impossible to recreate. We got three things when we acquired Pete’s. I’ll focus on just one here, and I think it’s the most important one: talent. We got people that have deep production experience, and importantly, alignment of our values. Local Bounti had this strong focus on unit economics and some production talent, but it’s hard to get 25 years of production knowledge unless you’ve grown things for 25 years. When we combined our businesses together, it was complementary in so many ways, but production knowledge is one of the most important. And so, we’ve been able to take the best of both worlds, put them together and really have something unique for our shareholders and our employees to get behind.
Brian Sparks: On that talent side of thing, there’s building talent, and there’s also a retaining talent. What steps do you take as the company to make sure that once you have that talent in place, that you can keep them and help them expand in their roles?
Craig Hurlbert: At Local Bounti, we think about our organizational chart as flipped over. Our leadership team is on the bottom, and the people in the facility are on the top. The whole organization is working to create a good environment for them. And if you bring that attitude to the equation, everything that flows from that is good. You’re more humble, you’re more willing to do what needs to be done to do the right thing consistently. That’s a big part of the way we think about our people inside the company.
Another thing that’s really valuable is because we’re publicly traded, we’re able to link our employees through stock compensation in such a way to get them invested in the business to benefit from the upside. In fact, when we were at the decision point of go public or stay private, I looked back at my time as CEO of two other privately held companies. It’s harder to link people in a private setting than it is in a public setting because in a public setting, you’re traded every day. There’s a value there, and each person can do what’s best for themselves. This is going to sound corny, but we literally love our people. Before I first met Brian Cook, the CEO of Pete’s, I thought it was going to be really hard to find people that share our values. And after my dinner with Brian, I called Travis and I said I think Brian actually enhances our values, if that’s possible. This industry is competitive, but the good people know which companies have it and which companies treat their people well, and we’re maniacal about that.
Brian Sparks: Let’s shift a little bit and talk about technology. You have a Stack & Flow system in place. Can you talk about how that works, and how you’re combining the best of what’s happening in vertical farming with traditional greenhouse production?
Craig Hurlbert: We have a pioneer patent on Stack & Flow Technology, which is essentially taking the best of vertical to horizontal growing. We believe we will have a significant portfolio of patents that surround this technology in the near future. We’re working on that currently. Why wouldn’t we just go to the Netherlands and buy the latest technology, bring it back, stick it in the ground, and grow plants? The answer to that was that this business is a commodity business, so growing things that taste delicious with great texture at the lowest cost is an imperative in order to please your customers over the long term.
Indoor farming is capital intensive. We don’t benefit from six generations of land ownership. We have to build something, and regardless of the size of your facility, it’s not going to be cheap. In a capital intensive business, you better be chasing unit economics. So rather than just go buy the greenhouse technology or the vertical technology, we decided to study both. And here’s what we learned in a nutshell: With vertical farming, you get high yield but also have high cap-ex and op-ex. A high-yield, high-cost model business model doesn’t sound really good to us. I’ve been on the record saying I don’t believe vertical farming will make it. It will be very niche. On the flip side, greenhouses are lower cap-ex and op-ex, but also lower yield. We didn’t see the value of investing in either of those on a standalone basis. So, we decided, is there a way to combine the two together to get high yield but low cost? And that’s what Stack & Flow Technology does. We get a higher yield in a lower cost model.
We have vertical experts in our facilities and we have greenhouse experts in our facilities on the production side, and that has unlocked some amazing innovation for us to do things differently. It’s a very exciting technology, and we are looking forward to utilizing it to continue delivering value for our consumers, customers, and shareholders.
The other exciting piece is that Pete’s has been operating for 25 years now, and we can go in and bolt on our Stack technology to their current system that they’ve already got, and get an extra 40% output.
Brian Sparks: How do you calculate or determine return on investment?
Craig Hurlbert: Without great unit economics, you can’t have great financial performance. It just doesn’t work. At Local Bounti, we like to say, we do the math, and it all comes down to each individual plant. Had we not invented Stack & Flow Technology we probably wouldn’t have started Local Bounti.
Brian Sparks: How do you define greenhouse technology?
Craig Hurlbert: I think the biggest frustration for me when we are talking to other companies is how quickly the conversation goes to technology. I think the industry would do better if it focused more on economics. Are you earning a gross margin on a GAAP basis in the facilities that you have right now? I can tell you right now at Local Bounti, in our very first plant in our very first year, we had positive gross margins. There are companies that have been in business for more than 15 years that still don’t have positive gross margins. They’re projecting them out in the future. That’s a venture capital expedition. That’s not a production company. And so, from my perspective, if you want to talk about technology, we will talk technology all day long, but our technology leads to a financial return. If it doesn’t, you’re probably not thinking about it in the right way.
Brian Sparks: As you look ahead at where the future is going with controlled environment agriculture production, what are some of the main factors that are driving this, both for the industry and for your own company?
Craig Hurlbert: The whole industry is very cluttered today with a bunch of companies that won’t survive. I think there are going to be multiple situations where cash just gets completely blown out, and that’s going happen sooner rather than later, especially in the environment that we’re living in right now. Sadly, not everybody’s going to succeed because indoor farming is hard to do and you can’t have negative gross margins and run a positive business. The next wave of privately held companies that are coming and the ones that are already here are going to have a harder time raising money.
That’s the negative, but here’s the positive: Indoor farming is absolutely 1000% inevitable. It’s a better product, it’s grown more sustainably with less water and less land. It behaves better with the consumer. There are less herbicides and pesticides and fewer food miles attached to it compared to traditional agriculture. The pent-up demand for the product is real. Because of all these factors, once consumers figure out who can deliver a consistent product, we will create a brand-new category of product.
The traditional growers are really good at what they do, but indoor farming is definitely going to be an important part of the future of agriculture. So for us, we couldn’t be more excited to continue on our mission to nourish humankind and protect our planet.
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