Milkrun bet it could beat Woolies. Now it’s part of it

Supermarket giant Woolworths has resurrected the fallen rapid grocery retailer Milkrun, relaunching its Metro60 service with the start-up’s blue branding, name and customer list on Thursday.

Milkrun built throngs of devoted customers with its ultra-fast deliveries and reasonable pricing over the past two years before failing to secure more funding and shutting its doors as investors became leery of cash-burning start-ups.

A truck waits outside Milkrun’s former office in Surry Hills on Thursday morning.Credit: Nick Bonyhady

Its failure, along with several other delivery companies backed with more than $100 million in venture capital funding collectively, came to symbolise the boom and bust of a start-up bubble fuelled by low interest rates and lockdowns.

In that time Woolworths built its own quick delivery system in partnership with Uber called Metro60, which delivered groceries within an hour. It will now go by “Milkrun powered by Metro” under a deal revealed by this masthead on Wednesday evening.

Woolworths chief executive Brad Banducci said his company had long admired Milkrun’s brand, dedication and ambition. “We are thrilled that the Milkrun story will continue to live on and thrive with Metro60 relaunching as Milkrun now powered by Metro,” Banducci said.

In a one-line statement, Milkrun co-founder Dany Milham said: “Milkrun pioneered rapid grocery delivery in Australia, and I’m pleased to see the brand continue in Woolworths hands.” He is not joining Woolworths as part of the deal, and the larger company is not taking Milkrun’s riders, bikes or warehouses.

Milkrun founder Dany Milham said he was happy the Milkrun brand would continue.Credit: Josh Robenstone

Woolworths’ decision to buy Milkrun’s brand addresses major weaknesses that bedevilled Milkrun, which had to lease its own expensive warehouses in inner-city locations and negotiated individual deals with suppliers at a much lower scale than Woolworths. As a result of Woolworths’ deal with Uber, it also uses gig workers who do not have an entitlement to a minimum wage, unlike Milkrun’s well-paid former staff.

Milkrun had planned to rival Coles and Woolworths, with its founder Dany Milham telling this masthead in January last year: “We chose the blue, the very strong Milkrun blue, because Woolies is green and Coles is red, and we have to be able to stand out.” The price Woolworths paid for Milkrun was not disclosed, but will be much lower than the tens of millions it raised from investors.

Woolworths’ rebranded service went live on Thursday in 500 suburbs across Sydney, Melbourne, Canberra and the Gold Coast. Deliveries cost $5 and take an average of 33 minutes, which is longer than Milkrun’s initial promise of 10-minute deliveries but a similar speed to what many customers reported in its final months.

AirTree partner Jackie Vullinghs, who invested in one of Milkrun’s early rounds before its value was pumped up by US firm Tiger Global, said she was encouraged by the fact that Woolworths had recognised the value of Milkrun’s brand.

Despite Milkrun’s decision to close its doors last month, ASIC searches show it never went into administration – unlike almost all failed companies – and technically continued to trade.

At the time, Milham said: “We’ve always been committed to doing things the right way, and winding down the business while we still have a sufficient cash balance enables us to ensure our people and suppliers are paid in full.”

Milkrun had been losing $13 per order at one of its best stores last year and was spending $57 to acquire each customer.

“Don’t call it a comeback (but please do, it’s been dark days since you left),” one Milkrun customer wrote on Instagram after seeing the company’s teaser post. On Thursday, its app displays a banner reading “Milkrun is back, baby!” and directing people to download the newly rebranded Woolworths version of the app.

In a leaked slide deck from last year, Milkrun had told investors that Australia was a “winner take all market, where first movers have a significant advantage.” As workers packed furniture from Milkrun’s shuttered Sydney head office into a truck on Thursday morning, it seemed the adage was true, and Woolworths, founded in 1924, had won.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.