“Difficult news”: Milkrun lays off 20% of staff, consolidates delivery hubs as economic challenges bite

Milkrun has announced layoffs affecting 20% of its staff, as the last independent player in Australia’s instant grocery delivery scene adapts to a rough economic environment for cash-intensive firms.

In Wednesday’s email to Milkrun staff, viewed by SmartCompany, co-founder Dany Milham said “rapidly” changing economic and market conditions required “structural changes and some tough decisions that will unfortunately impact some of our people”.

In response, Milkrun is “consolidating” its neighbourhood delivery hubs and conducting “structural changes at HQ”, making one in five workers redundant.

“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.

“I want to express my gratitude to each and every one of you for being an integral part of the MILKRUN story.”

Milham said affected employees will be offered “ex-gratia” payments and ongoing counselling support, on top of their statutory entitlements.

Through the consolidation, Milkrun said it will maintain operations in the regions it already services, with the same products on offer to customers.

The announcement comes during a torrid time for instant delivery services in Australia.

Milkrun secured a $75 million capital raise in January 2022, after COVID-19 lockdowns constrained traditional grocery shopping habits.

But the reopening of physical stores, competition from grocery and delivery incumbents Woolworths and Uber, and rising rental costs at its inner-city hubs have stretched Milkun’s revenue.

By mid-2022, a leaked investor pitch deck revealed Milkrun was losing roughly $13 on each order it completed.

Milkrun also abandoned its earlier promise of deliveries within 10 minutes or less.

Now, the company states that average order values have climbed above $50.

Combined with the savings of today’s layoffs and hub consolidation efforts, Milkrun claims each order will approach a break-even point or profitability.

The company now sees a 12-month runway, in which it can chase profitability or build its case for further investment.

A leaner Milkrun is set to continue where its instant delivery rivals could not: Voly, Send, and Quicko have all collapsed, while meal delivery service Deliveroo has also pulled up stumps, with its parent company saying its Australian operations are unviable without further investment.