Grocery delivery startup Milkrun trims staffing by 20%, reduces hubs to hit break even

Rapid grocery delivery service Milkrun is reducing its headcount by 20% and will consolidate the number of delivery hubs as founder Dany Milham sets up the business to survive into 2024 amid a hunt for additional capital.

In a letter to staff today, Milham said that economic and market conditions are changing rapidly and they “need to get ahead of the curve and evolve the way we operate to fit the current environment and extend our runway”.

Milkrun, which launched in Sydney in September 2021, and also operates in Melbourne, will have more than 12 months of runway as a result of the changes, Startup Daily understands. The number of hubs will be reduced, while still servicing all existing markets – around 80 suburbs across the two capitals.

The company will also cut around 20% of its roles across the business. Support office team members are believed to be among the most heavily impacted. The company would not comment on how many people are effected, but up to 500 people are believed to work for the business.

“This is obviously very difficult news to deliver and receive, and I’m sorry to those of you whose roles are being impacted,” Milham said in his note to staff ahead of meetings to outline the next steps.

“We started MILKRUN with a promise to treat our people well, and that promise stands. All Milkos whose roles are impacted will receive their full statutory entitlements as well as additional ex-gratia payments and ongoing support through our health and wellbeing partner, including counselling for impacted individuals and additional wellbeing services for partners and family.”

Startup Daily understands that cost reductions will see all hubs are profitable or breakeven as a result.

The business has also beaten its own forecasts on basket since from its Series B pitch deck, being show to investors last year.  The Average Order Value (AOV)  is now above $50. The deck talked about AOV in Sydney’s Eastern suburbs growing over 15 months from $28.35 to $41.72 by June 2023. Eleven months ago it sat at $34.

Milkrun is the last local grocery delivery startup still standing, following the collapse of Send in May 2022, after it failed to find  additional investor support. Voly suffered the same fate, shuting down in November having raised $18 million in a Seed round led by Sequoia Capital India.

Voly posted a net loss of $13.6 million in FY2022.Subscription butcher startup Our Cow acquired the Voly brand and other assets from the administrators.

Milham’s venture is the best capitalised, but has also been growing rapidly, with the cash burn that saw it losing $10 per order in mid 2022 but subsequently reducing.

Milkun is hoping to carve out a 20% slice of the country’s online market share in grocery, meal kit and alcohol sectors and also has its eye on pet, baby, gift and pharmacy sales.

The CEO said they’d sent the last 18 months operating “under some tricky conditions, never straying from our mission to build a dynamic, sustainable business” praising the dedication of his team.

“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,” Milham wrote.