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HomeAustraliaAnother blow to the 10-minute grocery-delivery model as MilkRun shuts down

Another blow to the 10-minute grocery-delivery model as MilkRun shuts down


Sydney-based startup MilkRun made a big impression with its promise to deliver groceries within ten minutes over A$85 million from some of the biggest names in Australian venture capital, including Atlassian billionaire Mike Cannon-Brookes.

MilkRun co-founder and CEO Dany Milham had already found success with fast shipping mattress company Koala. Less than a year ago, he confidently predicted that MilkRun would be bigger than Coles or Woolworths within ten years.

Today the company is finished, with more than 400 employees laid off.

It has joined an ever-growing list of platform delivery companies that have made their mark in the Australian market. This includes three other local startups promising deliveries within 10 minutes – To steer May 2022, Full in November 2022, and CoLab who went into voluntary administration last week. Britain’s Deliveroo shut down its Australian operations in November 2022, while Germany’s Foodora shut down in 2018.

Read more: Deliveroo’s departure from Australia shows why gig workers need more protection

In a email to staffMilham attributed the end of MilkRun to the slowing economy:

Economic and capital market conditions have continued to deteriorate, and while the company continued to perform well, we strongly believe that this is the right decision in the current environment.

Sure, the effect of things like inflation increasing operating costs (including debt) and cutting discretionary spending couldn’t have helped.

But even in the best of conditions, MilkRun faced an uphill climb.

Could Milkrun ever make money?

Milkrun was clearly not profitable. This in itself was not a problem. Many startups lose money for years before they become hugely profitable. For example, Amazon, founded in 1994, didn’t have its first profitable year to 2003.

Some startups need significant scale to be profitable. Others forgo profits to increase market share. Supposedly the big venture capital firms that put money into MilkRun – Cannon-Brookes’ private investment company Grok Ventures, Airtree Companies (who invested in Canva), and based in New York Tiger global management – saw such potential.

But what exactly was that potential? How was MilkRun ever able to scale to become profitable? Was there really a market big enough for super-fast grocery delivery? Or were they swept up in the delivery mania that came with the pandemic, lockdowns and the surge in online ordering in 2020 and 2021?

A food delivery boy in Sydney, October 2021.
Mark Bakker/AP

MilkRun started during the pandemic – the perfect time for “last mile” deliveries. But in the middle of last year, when lockdowns were a thing of the past, the numbers didn’t look good.

It was quiet loss of at least $10 on each delivery. While that was much better than the $40 loss it had initially suffered, Milham’s soon-to-be-profitable plan would entail that by June 2022 drop MilkRun’s 10 minute delivery promise – subverting the main branding point.

The costs would have increased anyway

Even without the unexpected economic hit of inflation over the past year, MilkRun has faced rising costs.

To increase its market share, it would have to expand from the densely populated, affluent inner-city areas. Operating in more suburban areas, with longer distances and more dispersed customers, would increase “last mile” delivery costs.

Any hint of profitability would also inevitably spark competition from the major supermarketswhose thousands of suburban stores and supply chains positioned them to compete in the courier delivery market at any given time.

The costs of MilkRun’s “dark store” distribution network, set up when rents were suppressed by closed borders, were also likely to rise.

Narrow road to profitability

Perhaps MilkRun’s goal was to increase market share until drone delivery became viable or other business areas (such as alcohol delivery) and profit opportunities emerged. But based on today’s unit economy, even in ideal conditions, this was a big ask in a post-pandemic world.

No doubt the writing has been on the wall for about a year, and MilkRun reportedly failed to convince investors to waste more money in the company.

Venture capitalists know that many of the startups they fund will fail. They will get behind an idea early on, when the path to profitability is unclear. But they won’t keep pumping more money into it if there’s no path.

It’s easy to be a “Monday expert” who dismisses decisions after the fact. But MilkRun has always had a challenging business model, something that has become increasingly apparent as the world emerged from lockdowns, demand declined, the cost of living rose and operating costs soared.

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