AppHarvest Was Touted As Appalachia’s Future. What Happened?

This conversation originally aired in the Feb. 11, 2024 episode of Inside Appalachia.

When AppHarvest built its first greenhouse in 2020, it was touted as no less than the future of farming — and maybe Appalachia itself. 

The start-up was built on the idea of using cutting-edge technology and local workers to produce vegetables on an industrial scale. And this was all set to happen in eastern Kentucky, where the company’s founder said this new version of agriculture could help replace the fading coal industry. 

AppHarvest got a lot of attention — from national media, politicians and investors. But then, last year, the company filed for bankruptcy. Austyn Gaffney recently reported on AppHarvest’s downfall in a story for Grist and Louisville Public Media.

Inside Appalachia Host Mason Adams spoke with Gaffney to learn more.

The transcript below has been lightly edited for clarity.

Adams: AppHarvest has received a lot of media attention from the time it was founded. But for folks who haven’t heard of AppHarvest, can you tell us about the company?

Gaffney: AppHarvest was founded by a Kentuckian named Jonathan Webb in January of 2018, basically saying that, in order to revitalize the economy of central Appalachia, we needed to bring in more blue collar jobs. His vision for these blue collar jobs was a spattering of 12 giant greenhouses, which grew produce like tomatoes and berries and lettuce indoors. He built the first of those greenhouses in Morehead, Kentucky, in 2020, during the height of the COVID-19 pandemic, and then he added four more greenhouses over the next couple of years.

Adams: AppHarvest checked off so many boxes that people talk about it when they talk about economic development and Appalachia. They touted decent paying blue collar jobs with benefits for locals, building out the local food system, diversifying the economy in a coal producing region — even leaning in on private investment, as opposed to just grants and public funding. Where did AppHarvest go wrong?

Gaffney: Based on my reporting, the biggest problem at AppHarvest seems to have was that it grew too big too fast. It went through 12 rounds of funding, raised over $800 million in seed and venture capital funding, along with loans from banks and national organizations like the USDA. That was before they built their first greenhouse. They also started planning on going public.

You mentioned private investment. They partnered with basically what is a blank-check company for the purpose of joining the stock market. So on top of lenders, they also now have stockholders to contend with, to pay back all this money on sort of a low value product, which was tomatoes, lettuce and berries. By the summer of 2021, before they’re open even a year, AppHarvest leadership admitted on an investor call that the company was staring down a $32 million net loss. That same day, stocks dropped 29 percent and in the following months, the company was facing five different lawsuits alleging securities fraud.

Basically, stockholders were saying that leadership had lied about the productivity in the greenhouses and the success of the company. So through these suits at AppHarvest, leadership was repeatedly cited as blaming employee training, turnover and “a poor work ethic” as the root causes of the company’s failures to achieve profitability. Basically, rather than working out the kinks in its first year of operation, AppHarvest built five greenhouses while selling a low value product and blamed its failures in some ways on the laborers that kept the company going.

Adams: AppHarvest isn’t the only indoor agriculture project in the U.S., or even here in Appalachia. Multiple companies have closed or filed for bankruptcy in the last few years. Why is this particular industry so challenging?

Gaffney: Traditional farming relies on labor but also sun, rain and soil. In controlled environment agriculture (CEA), this type of industry relies on a reproduction of at least one of those, which is largely energy. In the example of AppHarvest, the greenhouses rely on a hydroponic system, the reproduction of heat and light, and pulling in water from retention ponds.

In Kentucky, we rely on coal for nearly 70 percent of our electricity. So the production of this produce is also tied to increased greenhouse gas emissions. The cost of those lights and the robotics that power parts of these facilities, especially when tied to commodified fossil fuels, can make this industry prohibitively expensive.

Over the last decade, there’s been an influx of venture capital funding into this industry, and the CEA market is predicted to be worth $3 billion by next year. So while the high costs of these facilities have accumulated quickly, they’ve also led to a domino of bankruptcies and closures, especially over the last couple of years.

Adams: There’s a lot in the story about how AppHarvest tried to cut labor costs. What was that experience like for workers?

Gaffney: The biggest complaints I learned from employees were how the big promises that AppHarvest made in its initial couple years failed to match their actual working environment.

When people were hired, especially at the inaugural Morehead greenhouse, they were deeply excited to join this new company which had this big mission, which they felt like was contributing to a sustainable future. Some of the employees told me that they would skip down the aisles during their first couple of weeks or months of work because they were so excited to be there.

But in October 2020, workers said they were told they needed to work overtime, including weekends, and one employee said when she complained, her supervisor told her she needed to “learn to sacrifice.” By the spring and the summer, extreme heat descended into the greenhouse. Former workers reported heat indexes that could reach into the 140s and the 150s, and often hovered in the territory of what the National Weather Service calls “extreme danger,” which is anything above 126 degrees Fahrenheit. That’s what these employees called “a grueling hell on earth.” They complained of heat exhaustion, rashes, dehydration and also dangerous working conditions where glass panels could fall from the greenhouse ceiling or tomato wires could snap.

This kind of mismanagement or dissatisfaction also bled into the corporate office that was based in Lexington. Former workers told me the leadership team was disorganized, and the goals of their positions were not clearly stated. One corporate worker told me they felt like they’d been sold a beautiful pipe dream, something that felt sustainable and new, and that could make it in Kentucky. But they said it turned out just to be a nightmare.

Adams: The story goes over a lot of ways that AppHarvest got things wrong. Is there a different version of AppHarvest, and that business model, that could potentially work in Appalachia?

Gaffney: It’s sort of speculative, so obviously, I can’t say for certain. But I think like all climate solutions, there’s a space for a renewable grid-powered version of AppHarvest. That could be one piece in a puzzle of solutions for a future food economy. That also includes small scale family farm markets that are sustainable and take care of our soil. But in order to feed our growing world, solutions like controlled environment agriculture — where we produce a high yield in a smaller facility without continuing to infringe on our forests and biodiversity — I think there is a space for that.

But AppHarvest grew so quickly that they weren’t able to trial and error a new type of economy with a totally new workforce. Maybe if AppHarvest had, had one greenhouse over three years, or five years or 10 years, and developed that workforce pipeline over time, they could have been successful. Instead, they built five greenhouses in less than three years. At that scale, it’s not that the science of CEA is wrong, but basically, it’s expensive. Plants are finicky, especially in indoor agriculture. If a disease or a pathogen takes hold, it can spread like wildfire.

I think they needed more room to make mistakes in their first few years, and maybe have less money to pay back in their first few years than they were able to do.