Ag-tech play RotoGro teams up with strategic organic produce group

By Zoe Gross. Published at Aug 24, 2018, in ASX Biotechs

Ag-tech cannabis play, RotoGro International (ASX:RGI), has penned a strategic deal to clinch a joint venture with Freshero in the organic, fresh produce supply industry.

This deal will see the purchase and sale of RotoGro rotational hydroponic garden systems and services, with a formal agreement to include a commitment for 600 of such systems within 24 months.

Freshero is an aspiring organic fresh produce grower with long-standing relationships across the wholesale, retail and food service space in Australasia and Southeast Asia. With CEO Tony Mahoney at its helm, Freshero is establishing urban farming growing facilities and distribution centres for fresh organic produce grown in close proximity to large urban centres.

Prior to founding Freshero, Mahoney was the founder and CEO of Nutrano Produce Group, CEO of Freshmax Group, and held several senior positions at Woolworths (ASX:WOW) for more than 10 years.

During his time at Nutrano, Mahoney oversaw the vertical integration of key fruit categories, providing supply chain expertise from farm to plate. He also oversaw the growth of Freshmax (backed by Wolseley Private Equity), which became the largest independent fresh produce business fully integrated across Australia and New Zealand, securing long-term supply partnerships in Australia, New Zealand and across the globe.

Meanwhile, the HOA and future JV agreements will leverage RGI’s patented and proprietary rotational hydroponic garden systems, crop management fertigation hardware and software systems as part of Freshero’s urban vertical farming offering.

RGI’s automated rotary hydroponic vertical farming system produces consistent, high-quality plants indoors, using less space and energy than a conventional hydroponic environment, and at lower cost. It results in 10 times the production of traditional ‘flatbed’ growing in the same amount of floor area, using 40% less electricity.

Freshero will secure in-principal supply agreements with critical domestic and international wholesale customers for retail supermarkets.

Post due diligence and initial testing, Freshero has committed to order a minimum of 100 RotoGro systems upon completion of its due diligence and initial testing.

RGI will supply the capital equipment, software and management time at agreed rates, pursuant to a JV agreement. In return, Freshero will commit to exclusive long-term service agreements with RGI for the installation of new indoor vertical farming facilities and ongoing operational management and maintenance.

On top of that, Freshero will pay RGI a revenue-based royalty per facility, which will be negotiated.

It’s worth noting here that this is an early stage play and investors should seek professional financial advice if considering this company for their portfolio.

Freshero will have a worldwide first right of refusal to use RotoGro rotational hydroponic garden systems for fresh produce.

The HOA provides for an initial testing period of 120 days which will begin on October 1 this year, enabling the duo to share growing know-how and to kick off cultivation of key product lines at the company’s research and development grow rooms in Caledon, Ontario, Canada. The initial testing period will host growers from Freshero RGI’s facility, allowing them to establish baseline crop yields for their initial selected products and varieties.

During the training and testing period, the two parties will collaborate on key terms for a definitive JV agreement, which will also include a joint business plan and facility design for Freshero’s first urban farming facility.

The proposed price to be paid for indoor vertical farming facilities is subject to refinement during the design phase. However, the order for the 100 units and related fertigation systems is anticipated to be between approximately C$1,050,000 and C$1,500,000 (depending upon the size and configuration of the units).

Freshero CEO, Tony Mahoney, commented: “We are very excited with the opportunity to enter into this agreement with RotoGro and to establish urban farms around the world utilising RotoGro’s patented and proprietary technology.”

“The need for environmentally responsible local farms which defy traditional growing seasons whilst ensuring consistent quality organic produce year-round is ever increasing. RotoGro’s proprietary technology is cutting-edge and leading the way for the future of agriculture.”

RotoGro Managing Director, Michael Carli, said: “The company has identified organic produce as a significant untapped market opportunity providing exposure to further sales revenue.”

“RotoGro can leverage its proprietary growing and crop management systems, in partnership with Freshero, to take advantage of a prime opportunity to revolutionise the agriculture industry by providing high quality organic fresh produce in a controlled environment, grown in close proximity to major retail distribution centres.”

“We will keep our shareholders updated with Freshero’s advancements over the initial testing period and we look forward to working with the Freshero team to maximise the global opportunities within the fresh produce industry and future potential sales for RotoGro.”

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