Woolworths will resurrect the collapsed fast grocery delivery service MilkRun, folding the company’s customer base into its own and taking over the branding of its former rival.
The deal comes less than two months after MilkRun closed its operations after burning through tens of millions of dollars in funding, making it a high-profile casualty of surging inflation that triggered a global pullback in startup financing.
Once touted as a threat to established supermarkets, MilkRun was unable to turn a profit from an e-bike delivery system that at one stage delivered groceries to inner-city customers in less than 10 minutes.
As part of the new deal, Woolworths’ rival fast delivery service, Metro60, will be rebranded to MilkRun.
“The cat is well and truly out of the bag. MilkRun is back in the game, now powered by Woolworths Metro,” MilkRun said in a statement on Instagram.
Woolworths said orders would be filled from its Metro-branded stores. The supermarket’s Metro60 app promises grocery deliveries in less than one hour.
The founder of MilkRun, Dany Milham, who formerly headed mattress and furniture company Koala, announced in early 2022 that the company had secured $75m in startup funding to disrupt the supermarket sector, largely controlled by Coles and Woolworths.
Overall, MilkRun raised more than $85m from backers. The Australian Financial Review reported that the Woolworths deal was worth around $10m, although neither party has disclosed a price tag for the transaction.
The fast delivery company launched in Sydney before expanding to Melbourne, using a network of warehouses to store groceries near metropolitan customers. But it quickly dropped its 10-minute delivery promise, and then started cutting jobs, as the business proved unsustainable.
It ceased trading in April, but was not wound up.
“MilkRun pioneered rapid grocery delivery in Australia, and I’m pleased to see the brand continue in Woolworths hands,” Milham said in a statement.
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Sam Mrad, chief executive of Sydney-based fast delivery service Needly, said the deal would be attractive to Woolworths because of MilkRun’s customer list.
“Anyone would want to get those customers on board overnight and provide them with a similar service,” said Mrad.
There was a global explosion in the number of fast grocery delivery services in the early years of the pandemic, fuelled by changing buying habits and low borrowing rates that enticed venture capitalists to back the sector.
As interest rates increased to combat rising inflation, the flow of money into startups then dried up. Local delivery players Voly and Send closed last year, as have numerous similar businesses in the US and UK.
Another popular pandemic-era business sector, fast meal delivery services, has also struggled to create a profitable model, with Deliveroo among those to have closed in Australia.
Despite the closure of many fast delivery businesses, customer demand has pressured established supermarkets to invest in their own offerings, which includes arrangements with Uber Eats and DoorDash to deliver groceries.
