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The milkman on a mission

Simon Mellin, CEO of the Modern Milkman, says inflation has shown how poorly people understand the real cost of food.

By Emma Haslett

It was a chilly December morning in 2019 when Simon Mellin found himself locked in a fridge with the Prime Minister. Boris Johnson was visiting the Leeds headquarters of Mellin’s company, the Modern Milkman, when a news crew from Good Morning Britain appeared. Johnson, sporting a branded jacket, looked for the nearest exit, followed Mellin and a colleague into the fridge and closed the door. “Bear in mind, when the door shuts the light goes off. There’s three of us in a fridge in the dark,” says Mellin, three years later. “So I got my phone out and switched my torch on.”

Disappointingly, Johnson did not resort to any of the one-liners he’s famous for. “We didn’t talk about much, it was just random general chit-chat, laughing about the situation. And then five minutes later, Boris got out of the fridge and went on his way.”

Despite this close encounter with the political class Mellin says he isn’t into politics, although it is arguable that his company is at the sharp edge of two crises occupying politicians’ thoughts: climate change and the cost of living.

Mellin, the son of a butcher, worked briefly in racing car engineering before realising that “shit, no one has a clue about food”, and returning to his home town of Colne, near Burnley, to correct that. He co-founded two businesses, one of them a free-range chicken farm, before he started the Modern Milkman in 2018. Having watched a David Attenborough documentary, he realised there was a gap in consumers’ knowledge about plastics in the supply chain: even products that purport to be low-plastic don’t often begin that way, he says. “They don’t see the ten touchpoints it has through the supply chain as it’s repackaged to get to that end state.” How could he eliminate plastic from the supply chain altogether?

His answer to the problem had a decidedly retro flavour: the milkman. To research his project he bought a milk round, getting up in the wee hours to deliver to customers. “Two or three weeks in I found a problem – we hadn’t moved at all with the times. There was no technology and no evolution as a service. And I quickly recognised that if we wrapped technology around it, we could bring it back. So that’s what we did.”

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The company now operates out of 16 hubs and purports to have saved more than 55 million plastic bottles. Mellin stops short of referring to his business as a tech company, but it nonetheless has a listing on the technology database Crunchbase, which shows it’s raised £65m over three funding rounds, including £50m last November from investors including the New York private equity firm Insight Partners and ETF Partners, based in London.

The company grew rapidly during the pandemic, with its most recent accounts, for 2021, showing 1,222 per cent growth in revenue in 2020, to just under £8m, followed by a comparatively modest 209 per cent jump in 2021, to £24.7m. “Our business [grew three times] in size in about two weeks as Covid kicked off,” says Mellin. “We’ve got quite strong brand presence in the areas that we operate in, but people had never been forced to try something different. Covid was a real catalyst for digital shopping, especially digital grocery.”

While many digital businesses – particularly subscriptions businesses – grew fast during the pandemic, for lots of them there was a reverse effect as inflation rose, the cost-of-living crisis took hold and people began to cut costs by cancelling those subscriptions. “We’ve retained a lot of the gains,” says Mellin. “A lot of subscription services are a ‘nice to have’. Impact brands [are] generally quite expensive to shop with, which blocks out 80 per cent of the population, whereas we’ve got a huge demographic spread of customers and generally people can afford to get the feel-good of using the milk round. I think a lot of these things protected us from the onslaught of cancels.”

His supermarket rivals have enjoyed huge profits – two weeks ago Sainsbury’s predicted profits of almost £700m this year, while Tesco reiterated expectations of full-year profits between £2.4bn and £2.5bn – and Mellin admits that maintaining a fair price for customers while ensuring his suppliers are able to continue operating has been “so difficult to balance”. “We’re sat between everybody, trying to keep a fair deal for the customer, but yet still give the farmer and the supplier what they need to have a viable business.”

Of all the sectors affected by inflation “food has been the hardest-impacted industry“, he says. “Every single input went absolutely insane, from fuel to wheat and barley to energy,” The result is that he did have to raise prices “significantly, a few times”, which meant customer numbers dipped. “The worst thing you can do in a subscription business is change your pricing because it disrupts your customers,” he says. Generally, though, “people have been supportive”.

His hope is that the crisis provides an opportunity for people to realise the real cost of food. “There’s so much work to be done on the food industry in the UK. It has been commoditised so much that it’s absolutely gone too far.” Part of this is the way supermarkets will only fix prices three months in advance. “How many other industries do you know where you can produce something that you don’t know what you’re going to get paid for it?”

He believes the cost-of-living crisis will change the sector. “It’s sort of got to reset itself a little bit over the next few years to get back to a point – food’s got to be affordable, people have got to be able to afford to eat, but at the same time, the value chain has got to be fair throughout the network,” he says. “It’s become very unbalanced over the last five to ten years. The big challenge is that the understanding of the cost of food, in some respects, has been lost. And that’s not a fault of the consumer. Really, that’s the retailers and the buyers.”

Which takes us back to the politicians – of the fridge-bound variety or otherwise. Although he is “not a political person”, he does acknowledge that someone in power must accept that attitudes to food production must change before another crisis begins. “If we don’t do something in the next five to ten years it will be so far gone that how do you reset it,” he says. The problem, he fears, is that the will isn’t there. “Politics is always the same, isn’t it? There’s a lot of talk and not a lot of doing. And I think the UK public are very used to it.”

[See also: Why the UK’s egg shortage demands government intervention]

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