In April 2023, Australian grocery delivery startup MilkRun collapsed, leaving 400 staff members jobless. Once a strong player in the instant grocery industry, MilkRun faced deteriorating economic and capital market conditions, ultimately leading to its downfall. In this article, we'll discuss what happened, why it happened, and the potential future impact on the industry.
One of the main reasons behind MilkRun's decision to lay off staff was the deteriorating economic and capital market conditions. In February, the company had already announced layoffs of 20% of its staff as part of a move to consolidate its delivery hubs. Despite raising significant funding, including an $11 million seed round and a further $75 million from investors, the economic environment changed quickly, making it difficult for MilkRun to find a path to profitability with the remaining funds available. Industry analysts, such as Jackie Vullinghs from AirTree Ventures, acknowledged MilkRun's ambitious vision but noted the rapidly shifting economic environment as a major challenge for the company. The collapse of MilkRun is seen as part of a broader trend in the instant grocery industry, with other competitors also facing challenges and shutting down. As the pandemic abated, the popularity of instant grocers waned, and the cost of maintaining dark stores in central locations and paying riders became a burden for the industry. The company had the necessary funds to handle obligations such as paying suppliers and providing severance to the 400 employees and riders who were made redundant.
While MilkRun faced financial challenges, the company managed to fulfill its financial obligations to suppliers and provided severance packages to its employees. Although MilkRun sought additional Series B funding, the rising costs and economic conditions made further investment unappealing, leading to the discontinuation of its 10-minute delivery promise. Despite these adjustments, a sustainable profitability path remained elusive. MilkRun’s co-founder expressed a commitment to continue backing outlier founders at the earliest stages of their journey, indicating a potential focus on supporting new ventures in the future.
The shutdown of MilkRun, coupled with its recent layoffs, mirrors the wider challenges confronting the instant grocery sector. The decline in popularity of instant grocers, compounded by the high costs associated with maintaining facilities and paying delivery staff, has put significant pressure on the industry. Other local and global firms have encountered similar challenges, with some ceasing operations. This situation underscores the ongoing difficulties and possible future consolidations within the instant grocery market.
MilkRun's collapse and layoffs were primarily due to deteriorating economic conditions and the struggle to find a path to profitability. The company's downfall highlights the challenges faced by the instant grocery industry, with other competitors also facing difficulties. These developments could signal further consolidations within the sector. MilkRun's future may involve supporting new ventures, as their co-founder expressed a commitment to backing outlier founders at the earliest stages of their journey.
