Inside Smallhold’s specialty mushroom supply chain

Kai Ryssdal and Maria Hollenhorst Oct 10, 2023
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Smallhold hopes to build a network of mushroom farms across the U.S. Above, yellow oyster mushrooms grow in Smallhold’s Vernon, California, farm. Sofia Terenzio/Marketplace

Inside Smallhold’s specialty mushroom supply chain

Kai Ryssdal and Maria Hollenhorst Oct 10, 2023
Heard on:
Smallhold hopes to build a network of mushroom farms across the U.S. Above, yellow oyster mushrooms grow in Smallhold’s Vernon, California, farm. Sofia Terenzio/Marketplace
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In the lobby of a warehouse in Vernon, California, south of downtown Los Angeles, a sign reads: “We change minds with mushrooms.” 

“Once you start getting into mushrooms, then you start to become obsessed with the whole thing,” said Andrew Carter, co-founder and CEO of Smallhold, a company hoping to connect more Americans to the fruiting bodies of fungi. 

According to the Department of Agriculture, people in the United States consume roughly 3 pounds of fresh mushrooms annually. However, they’re becoming increasingly popular as a meat replacement and an ingredient in biodegradable packaging, coffee alternatives, skin creams and more

“People are incorporating mushrooms in almost every industry now, and we want to be the leader in high-quality, sustainably produced mushrooms,” Carter said. “We have these farms strategically located around the United States to access as many people as possible.”

Andrew Carter stands in a lab coat surrounded by shelves of mushrooms
Andrew Carter, co-founder and CEO of mushroom startup Smallhold, stands inside one of the company’s grow chambers. (Sofia Terenzio/Marketplace)

In the United States, the mushroom industry is concentrated in Pennsylvania. According to the American Mushroom Institute, more than 60% of mushrooms produced in the U.S. are grown in and around Kennett Square, which touts itself as the mushroom capital of the world.  

Smallhold, a Brooklyn, New York-based, venture capital-backed startup, hopes to buck that model with a distributed network of farms close to urban centers.

“We want to be as close as possible to our target consumers,” Carter said. 

The company has facilities in Los Angeles County, Brooklyn and Austin, Texas. “But we’re trying to grow them everywhere,” Carter said. 

Smallhold grows mushroom varieties that, until recently, were uncommon in American grocery stores. White button, cremini and portobello mushrooms (which are the same type of mushroom harvested at different ages) account for more than 95% of mushroom sales in the U.S. 

But interest in specialty mushrooms, such as shiitake, lion’s mane and oyster mushrooms, is growing. Sales for commercially grown specialty mushrooms increased 32% in the 2021-2022 season from the year before. 

A table with mushrooms in blue bins. A worker prepares more in the background.
Workers ready blue oyster mushrooms for retail shelves. (Sofia Terenzio/Marketplace)

Smallhold produces six varieties of mushrooms, including yellow oysters, blue oysters and lion’s mane.

“Not a lot of people are really familiar with these mushrooms, because they need to be fresh [and] they need to be grown in certain ways,” Carter said. 

Carter gave “Marketplace” host Kai Ryssdal a tour of the Vernon facility, which has about three dozen temperature-controlled grow chambers. 

“All of our mushrooms are grown on sawdust,” Carter said. “Most of the time, sawdust ends up in plywood, it goes to compost, sometimes it goes to landfill, but we’re diverting that.” 

Yellow oyster mushrooms sprout out of sawdust substrate
Yellow oyster mushrooms grow on sawdust substrate in Smallhold’s Vernon, California, farm. (Sofia Terenzio/Marketplace)

Carter has spent more than a decade in the indoor agriculture industry, mostly focused on leafy greens. He began experimenting with mushroom production around 2016.

“We spent the first few years of the business building out the technology and different applications of it,” he said. “It wasn’t really till COVID that you saw, like, really rapid growth.”

As more people cooked at home during the pandemic, interest in mushrooms grew. Smallhold pivoted from selling mushrooms to restaurants and grocery stores to home delivery of grow kits. Today, Smallhold’s products are available in retailers such as Whole Foods nationwide. 

Lion’s Mane mushrooms grow on green metal shelves.
Lion’s mane mushrooms grows on sawdust substrate. (Sofia Terenzio/Marketplace)

“They grow really rapidly,” Carter said, pointing to some young lion’s mane mushrooms. “These will be mature in the next two to three days.”

Click the audio player above to hear Ryssdal’s conversation with Carter at the Vernon, California, mushroom farm. 

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