Why Major Companies Are Withdrawing from Plant Factories: Insights from a 10-Year Veteran

Hello everyone! I’m Shohei.

Plant factories are attracting attention as “the future of agriculture.” However, in recent years, there have been numerous cases of major companies that entered the market with much fanfare only to announce their withdrawal.

Many people wonder, “Why can’t major companies with their financial resources and brand power succeed in the plant factory business?”

I have been at the forefront of the plant factory scene for over 10 years, supporting numerous new entrants. Based on this experience, I will frankly reveal the “pitfalls” that many companies fall into and the “secrets to success” to overcome them.

If you’d like to learn more about plant factories, please refer to the following article:

The Advantages and Reality of Major Companies Entering the Plant Factory Business

When major companies enter the plant factory business, their financial strength, brand power, and distribution networks are undoubtedly powerful assets.

• Cost Reduction through Economies of Scale:
  With high initial investments in plant factories, including acquiring large plots of land and implementing cutting-edge equipment, financial resources enable large-scale development, leading to cost reduction benefits.
• Brand Power Advantage:
  Established brands from existing businesses build consumer trust, offering a significant advantage in the early stages of sales.
• Distribution Network Advantage:
  Having a well-established distribution network provides a significant advantage in securing stable sales channels, potentially overcoming challenges faced by new entrants.

However, it’s also true that many companies fail to leverage these strengths and are forced to withdraw. This is due to issues inherent in the plant factory industry and problems specific to major companies.

Why the Withdrawals? – The “Reality” and “Pitfalls” I’ve Witnessed in the Field

I will provide concrete explanations of the “reality” I have witnessed in the field over 10 years and the “pitfalls” that emerge from it.

1. The Difficult Path to Profitability

• High Initial Investment:
  While major companies with their financial resources have an easier time entering compared to SMEs due to the significant initial costs associated with environmental control systems and cultivation equipment, larger scale operations also mean higher profitability, but potentially longer investment payback periods. This may not always align with the management philosophy of major companies that tend to seek short-term success.
• Time to Profitability:
  Achieving business stability within a few years requires a long-term perspective and the company’s commitment to persisting despite setbacks. Major companies, where short-term performance is prioritized, risk making hasty withdrawal decisions if results are not immediately forthcoming.
• Challenges in Profitability Improvement:
  Similar to major companies, high-quality vegetables alone cannot win price competition. Even with the advantage of having a unique distribution network, branding and market development require flexibility to cater to different needs from existing customers.

2. Operational Difficulties

• Lack of Expertise and Experience:
  For major companies where most employees have no agricultural experience, the lack of expertise and experience in cultivation techniques, growth environment control, and pest management is a serious concern. While utilizing external resources or developing talent is essential, accumulating know-how takes time.
  In my own observations, I have seen cases where individuals transferred from a completely different department within a major manufacturer to the plant factory division, struggling to adapt to the unfamiliar environment and highly specialized tasks, making it challenging to maintain motivation.
• Data Analysis and Utilization Capabilities:
  Even with the latest equipment, data analysis and utilization require specialized knowledge. Without interpretation based on field experience and accumulated know-how, effective Production Management is impossible.

3. Pitfalls Specific to “Major Companies”

• High Labor Cost Structure:
  In plant factories where cost reduction is critical, the presence of seconded personnel from other industries with high salaries poses a significant burden. Revising labor costs and optimizing staff allocation is necessary.
• Difficulty in Changing Mindsets:
  In the field, voices of “They don’t know anything about agriculture” and “It’s just theoretical” are often heard. A humble attitude, a willingness to challenge oneself without clinging to past successes, and a commitment to taking on a new field are crucial.
  One company I observed experienced frequent confusion due to directives from headquarters that didn’t align with field realities. Listening to voices from the field and responding flexibly is essential.
• Slow Decision-Making:
  In a rapidly changing market environment, quick decision-making is essential. However, the complex decision-making processes typical of major companies can lead to delays, resulting in missed opportunities.

Secrets to Success: How Can Major Companies Succeed in the Plant Factory Business?

So, how can major companies succeed in the plant factory business?

Here are the “secrets to success” in my opinion:

1. Long-Term Business Planning: It’s important to build a sustainable business model rather than focusing on short-term profits and to share a long-term vision that includes contributions to the local community and solutions to food issues.
2. Field-Centric Approach: It’s essential to prioritize field voices and establish a system that allows for flexibility. Employing experienced field personnel and collaborating with external resources are effective strategies.
3. Inter-Industry Collaboration: Leveraging technologies and know-how from other industries creates new value and builds competitive advantages.

When venturing into new businesses, past successes are not always applicable. A humble attitude and actively absorbing knowledge and experience in the new field of agriculture are essential for success.

Especially for those who have excelled in different fields, it’s important to have a humble mindset of “I still don’t know much,” to listen to field opinions, and to adopt a learning attitude.

Becoming a Profitable Plant Factory

To become a “profitable plant factory,” there’s much to learn. In reality, profitable plant factories have their own unique know-how.

This site provides content specifically focused on “profitability” based on my years of experience in the field.

If you’re interested, please check it out:

In Conclusion: The Future of the Plant Factory Business

Plant factories hold immense potential in addressing food issues and achieving sustainable agriculture.

For major companies to fully leverage their strengths and achieve success, listening to field voices and pursuing long-term business development are critical.

I will continue to support the plant factory business with the experience and knowledge I have cultivated over the years.