The Secret Behind “Plant Factory Losses” That Many People Don’t Know

Hello everyone! I’m Shohei.

To those who are searching about “plant factory deficits” and viewing this page.

I actually searched “plant factory deficit” before writing this article.

As you can see, there are tons of results. 1.16 million hits…

After reading some of them, I, who have been on the ground at a plant factory, felt a sense of discomfort…

For example, when you read that “60% of plant factories are in the red,” do you think that 60% of plant factories are not viable as businesses?

That’s not true.

I think those who are on the ground will understand this.

Even people in the plant factory industry understand, but there are several sites with content that says, “Isn’t that wording misleading to the general public?”

So, while dispelling those misunderstandings, I’d like to write about the relationship between plant factories and deficits.

Well, in reality, many plant factories are fighting a tough reality. That’s an undeniable fact.

Now, let’s explain each point with actual statistical data.
Data source: 大規模施設園芸・植物工場　実態調査・事例調査（一般社団法人日本施設園芸協会）

Also, I’ve written about what plant factories are like in the following article. Please take a look.

Deficits are factored in from the start of the business

First, there’s one thing that doesn’t seem to be clearly written on several sites.

That is, plant factories originally assume that they will be in the red or barely break even at the start of the business.

This is because plant factories require a large amount of capital investment. During the depreciation period, there is not much profit.

Of course, there may be situations where the deficit is larger than expected, or the profit is smaller, but…

However, every plant factory is operated with the awareness that “the business may continue to be in the red for the first few years.”

In other words, what I want to say is,

Well, I think there are cases where the business plan was too naive, or the deviation from the forecast was too large, and the deficit is expanding and causing hardship.

However, I don’t think you should take the content written on many other sites as it is.

Because, in the explanation of why plant factories are in the red,

Many sites only point out these points as causes.

That’s a little different, or rather, it’s misleading.

So, can you make money with the plant factory business? Or not?

Now, the introduction has been long. Based on the fact that we who are running the plant factory business are prepared for deficits, let’s move on to the next topic.

We will move on to the fundamental problem.

This is the main point, or rather, the most important point.

Can you make money with the plant factory business?

The conclusion is that it’s quite difficult, and every plant factory is desperately trying to survive.

In the end, you can’t make money! So, what was the long introduction in the first half for? But from here, I will explain with data.

First of all, as a major premise, plant factory businesses must be operated at the lowest possible cost. But recently, material costs and electricity costs have been rising, and labor costs have also been rising, so many plant factories are struggling.

In fact, according to the survey, about 70% of plant factories are in the red or break even. Some plant factories cannot survive without subsidies.

	Solar Type	Hybrid Type	Artificial Light Type
Recent Financial Results (Deficit/Break-Even)	55%	77%	84%
Annual Sales (Average)	490 million yen	270 million yen	160 million yen

Looking at the recent financial results and annual sales data, the solar type has a higher percentage of profits and higher annual sales compared to the hybrid and artificial light types.

From this, it can be said that the solar type tends to be more profitable.

Harsh reality without subsidies

By the way, subsidies from the government are often used for capital investment in all types.

In particular, in the solar type, many companies are using energy-related subsidies, accounting for as much as 63%.

On the other hand, 27% of plant factories are working hard without subsidies. In the artificial light type, 48% are working hard without subsidies.

From this data, it can be seen that the management of plant factories is in a difficult situation, and in particular, it is difficult for the artificial light type to secure profits.

The challenges that plant factories are facing are also written in the following article. Please also refer to this.

Why are they in the red? Deciphering from the data

If you decipher the data further, you can see some facts.

I will explain the factors that lead to the deficit of plant factories based on data.

1. The higher the productivity per area, the more profitable

Yield per area

Looking at the data, there seems to be a correlation between yield per area and profitability. The more yield, the more profitable, and the less yield, the more unprofitable.

Well, it’s obvious. It’s clearly shown in the data.

Let’s look at the ratio of profit and loss by yield.

Solar type is 27.3kg/m2 or more, yield is high. Artificial light type is 59.5kg/m2 or more, yield is high.

In other words, the key is “high-level Crop management”.

You have to get more harvesting material in the same area.

Deeply understand plant physiology, learn the know-how to improve profitability in order to make full use of the equipment.

Facility area (scale)

It turns out that the more yield per area, the more profitable. However, profitability also changes depending on the area (scale) itself.

Next, let’s look at the ratio of profit and loss for each area.

In both solar and artificial light types, the larger the cultivation area, the larger the ratio of profit/break-even.

It is often said that “plant factories are not profitable unless they are large-scale,” but it seems clear from the data.

Economies of scale work, and increasing the scale of facilities leads to improved profitability.

2. The higher the labor costs and utility costs, the more unprofitable

Next, let’s look at the cost structure for each business operator. There are common points among unprofitable business operators.

In plant factory management, cost management is an important factor that affects profitability.

In every plant factory, the ratio of labor costs and utility costs is high.

In other words, reducing labor costs and utility costs is essential for improving profitability.

Even in this respect, high skills and know-how of the on-site staff are required.

Unfortunately, running costs are expected to continue to rise in the future. Let’s continue to thoroughly reduce costs in order to survive.

3. The fewer the number of business partners, the more unprofitable

This is also interesting data.

Business operators who diversify their sales channels by using contract cultivation and direct sales/EC tend to be more profitable.

Let’s look at the ratio of profit and loss by the number of business partners.

In this way, the more business partners, the less deficit.

However, having many business partners may simply mean that the facility is large-scale.

4. It takes time to stabilize the business

According to the data, it takes some time to stabilize the plant factory business in the first place.

Now, let’s look at the profit/loss ratio by the year the business was started.

In business operators who started their business in 2019 or later, the deficit ratio is high at 72%.

As I wrote at length in the first half, it is difficult to make enough profit during the depreciation period. In the first place, immediately after starting up, you will struggle with sales channel development and on-site stabilization.

However, according to the data, even if you start your business at a fairly early stage, you are not necessarily successful in making a profit.

I think that even if the depreciation has ended, business operators who are using old equipment cannot improve productivity. I expect there are such subtle cases.

Successful strategies to overcome plant factory deficits

I have explained it at length, but let me summarize.

The main challenges facing plant factories are the following three points.

In the first place, I will omit the story that the facility must be large or that the equipment performance is too low.

In order to solve these problems, it is important to minimize the initial investment and improve the on-site operating power.

Conclusion: The only way to eliminate deficits is to steadily improve the on-site capabilities

As a conclusion to this point, other than what is determined by the initial equipment, the only solution is to steadily improve the on-site capabilities.

Even so, how should you learn?

The specific know-how of plant factories is surprisingly not available on the surface.

Every plant factory struggles with education, but on my site, I provide the know-how that I have been practicing for many years.

I myself am also active in education and training to be useful for plant factories.

If you have any problems with your plant factory, please feel free to contact me. I hope that we can work together to solve problems and aim for better plant factory management.

Conclusion: Towards the future of plant factories

Regarding the future of plant factories, the current situation is not optimistic.

In order to continue the business, thorough cost reduction and efficiency are prerequisites. It is required to minimize the initial investment and improve productivity and quality through steady improvement activities on site.

It is important to carefully examine the future possibilities and accumulate steady efforts. You should be careful about introducing high-cost new technologies.

In particular, initial investment should be thoroughly suppressed.

I myself have been working in the plant factory industry for many years, and I sincerely hope for the further development of the industry.

I hope that plant factories will be established as sustainable businesses and contribute to solving food supply and environmental problems. For that purpose, it is necessary for all concerned parties to put their wisdom together and make efforts to solve problems.

Why are plant factories struggling with losses?

The primary reasons for plant factory losses are high initial investments and operational costs. Specifically, these include significant expenses for equipment investments, as well as high operating costs such as electricity bills and labor. Further challenges include the difficulty of adjusting production to fluctuating demand and market development obstacles, making it difficult to secure stable profits.

What are the drawbacks of plant factories?

The main drawbacks of plant factories are high costs and technical challenges. High initial investments and operating costs make profitability a significant hurdle. Moreover, advanced environmental control technology is required, leading to challenges in securing technically skilled personnel. Furthermore, adapting production to demand fluctuations and overcoming market development obstacles are essential for business continuity.