On-demand grocery delivery start-up Milkrun axes 20pc of staff as it hunts profitability

The on-demand grocery delivery start-up failed to raise additional capital in the past year, and ditched its promise of 10 minute deliveries.

Milkrun founder and chief executive Dany Milham.

On-demand grocery delivery start-up Milkrun is shedding 20 per cent of its workforce and is consolidating its delivery hubs, with CEO Dany Milham blaming macroeconomic conditions and a tough venture capital environment for the decision.

As The Australian previously reported Milkrun has attempted and failed to raise fresh capital on multiple occasions in the past year, putting pressure on the loss-making start-up to improve its financial situation.

“With economic and market conditions changing rapidly, we need to get ahead of the curve and evolve the way we operate to fit the current environment and extend our runway. This means making some structural changes and some tough decisions that will unfortunately impact some of our people,” Mr Milham said in a letter to staff seen by The Australian.

“From today we will be consolidating a number of our hubs but will be still continuing to service all our current markets.

“We will also be making some structural changes at HQ. This means we will be reducing the total number of roles across the business by around 20 per cent.

“This is obviously very difficult news to deliver and receive, and I’m sorry to those of you whose roles are being impacted.”

Milkrun rider Amy Farnsworth making delivery to Lauren Mason. Picture: Josie Hayden

The CEO said that employees will receive their full statutory entitlements as well as additional ex-gratia payments and ongoing support through the company’s health and wellbeing partner, including counselling for impacted individuals and additional wellbeing services for partners and family.

“For support office team members, if your role is being impacted, you will receive a meeting invitation in the next 30 minutes for a time today to discuss what this means for you. For hub operations, you would have received communications earlier this morning if your role was impacted,” he said.

“I want to express my gratitude to each and every one of you for being an integral part of the Milkrun story. Your hard work, dedication, and contribution to creating a vibrant culture have been invaluable. Your efforts have not gone unnoticed and have helped bring a touch of Milkrun magic to the world.

The Australian understands the changes will mean Milkrun’s delivery hubs will each be profitable or break-even, and the company now has runway to survive at least 12 months.

The company has also doubled its average order value in the past year to more than $50, a crucial metric of its ongoing viability.

Mr Milham did not say how many staff Milkrun currently employs, but it’s understood to be more than 500.

Milkrun became one of Australia’s fastest growing start-ups last year when it raised a $75m Series A round led by major US fund Tiger Global Management, with participation from Sydney-based venture capital fund AirTree Ventures, as well as Skip Capital and Grok Ventures, the funds associated with Atlassian’s billionaire co-founders Scott Farquhar and Mike Cannon-Brookes.

In recent months, however, the company has been forced to abandon its promise of 10-minute deliveries amid mounting costs. It is the nation’s last remaining grocery delivery start-up following the closures of Send, Voly, Quicko.

Start-ups across the country have been forced to cut costs and lay-off staff in recent months as rising interest rates and deteriorating economic conditions put unprofitable companies under heavy pressure.

The overall health of the grocery delivery sector is also looking increasingly shaky, with start-ups closing over the past 12 months, in some cases after burning through millions of their investors’ cash and losing money on every order.

Last month creditors of failed grocery delivery start-up Voly agreed to a deal to be repaid between just 15c and 27c in the dollar, while assets and customer database were picked up by subscription butcher service Our Cow.

Hall Chadwick administrators Richard Albarran and John Vouris found that Voly may have been trading while insolvent for more than a year, and burned through more than $13m in cash in just 12 months before it collapsed.

Voly offered 15-minute grocery delivery and had 80,000 users across Sydney. The start-up terminated all 112 staff in November.

Deliveroo was the highest-profile casualty, collapsing into administration in November leaving its 15,000 local riders and thousands of restaurants in the lurch.