Portland Startup Revives the Milkman Model for Farm-Fresh Produce

(Bloomberg Businessweek) -- When Julia Niiro founded MilkRun in Portland, Ore., in 2018, she wanted to combat two enduring challenges to local food systems: inefficient distribution and low farmer pay. Addressing these issues was necessary for smaller producers to disrupt an industry that’s “really, really good at processing cheap food and selling uniform waxed apples at the same place we go to buy our toilet paper,” as she put it in an impassioned 2019 TEDx Talk. But it’s much less successful at delivering the sustainably raised, flavorful food grown on nearby farms.

In America, Niiro says, efficiency and scale have superseded taste, nutrition, and the livelihood of the farmer who grows, raises, or otherwise produces our food. Producers get only 8¢ out of every dollar spent by consumers, on average.MilkRun’s mission is straightforward: “I want to make it as easy to buy from our local farmers as it is to book a stay in someone’s house or call a ride.”

The case for buying locally produced food is stronger than ever. When the Covid-19 pandemic began to shut down Oregon and the rest of the country in mid-March, it both sped up the trend toward online grocery shopping and highlighted the shortcomings of the industrial food system. In just a few weeks, farmers, unable to sell to restaurants, school districts, and coffee shops, were dumping milk and plowing under onions. Not long after, 20 U.S. meat-processing plants were shuttered because of coronavirus outbreaks, leaving farmers to euthanize tens of thousands of pigs and chickens. By contrast, the small, nonindustrial supply chains of family-run ranches, dairies, mills, and produce farms were able to keep up with increased demand.

Niiro, 34, grew up eating Jif peanut butter sandwiches on white bread in Detroit. She majored in English at Colorado State University and worked as a digital marketing director at Penton in Cleveland. “I was on your typical corporate America path,” she says. In 2014 she moved to Portland for a change of scenery and fell in with a group of chefs who were passionate about local ingredients. (One of them, James Serlin, became her husband.) When she interviewed dairy producers and vegetable farmers for a short-lived social media startup she’d founded, she discovered how hard it was for them to get their products to market and make a living. She started MilkRun with a $10,000 loan from her parents.

Niiro credits the milkman—the delivery method that was a hallmark of pre-World War II America—for inspiring her business model. With MilkRun she modernizes the technology, allowing consumers to purchase not only local dairy but also produce, meat, seafood, and locally made products from a sleek website. Then she pays farmers to deliver the orders directly to consumers’ doorsteps.

One of the first farmers she brought on board was her neighbor Garry Hansen of Garry’s Meadow Fresh, who sells all-Jersey milk, cream, and half-and-half in glass bottles. Eventually she lined MilkRun’s virtual shelves with bratwurst, dried black beans, freshly baked bread, chocolate bars, locally made dog food, and much more. She now offers roughly 500 products. Some are pricey—a 12-ounce bag of Capitola Coffee beans is $15, and a half-gallon of Garry’s organic milk is $7—while other items, such as organic kale for $3 a bunch, are less so, especially because delivery is included. Marketing director Rebecca Alexander says MilkRun can keep prices competitive because it buys directly from growers and producers, and it doesn’t have to pay processors, packagers, or distributors, all of which take a cut in traditional supply chains. Alexander says that between 60¢ and 70¢ of every dollar MilkRun customers spend goes directly to producers.

Since the onset of the coronavirus, MilkRun’s growth has climbed sharply. When I speak to Niiro in early April, she sounds dazed. “We did in sales last month what we did in the entire last year of business,” she says. The company had expanded to eight new ZIP codes (mostly in Portland’s dense western suburbs), moved to a 6,000-square-foot warehouse, and doubled its delivery days, to four. Orders jumped from 100 per day before the pandemic to 700, and May revenue exceeded $600,000, a twelvefold increase over February.

For shoppers nervous about venturing into supermarkets, grocery delivery has been a lifeline. It’s also been a lifeline for Oregon farms and ranches, especially those that used to sell mainly to restaurants or corporate clients. Prior to the pandemic, Campfire Farms, a Willamette Valley producer of pasture-raised pork, sold to Airbnb Inc.’s Portland-area office cafeteria. The cafeteria closed in mid-March, but Campfire was able to almost triple its sales to MilkRun, which softened the blow. Farmer Zach Menchini says the figure “would be higher if we had more inventory to sell.” Carman Ranch, a Wallowa County farm whose grass-fed beef is prized by Portland chefs such as Greg Higgins and Naomi Pomeroy, now processes its meat into steaks and hot dogs for MilkRun. In April it sold them 500 pounds of product—far short of the roughly 3,000 pounds per week it usually sells to restaurants, but owner Cory Carman says it helps.

Cora Wahl and her fiancé, Woody Babcock, the owners of Woodrow Farms, a small sheep dairy in Langlois, Ore., had recently doubled their flock of East Friesian ewes when they lost most of their business because of Covid-19. With almost 1,750 gallons of sheep’s milk on their hands and no experience selling directly to consumers, they reached out to creameries around the Pacific Northwest but couldn’t find buyers. The couple was on the verge of drying up their sheep—reducing the energy content of their diet so they gradually stopped lactating—when they heard that MilkRun was having trouble keeping milk in stock. Wahl called Niiro, who committed to buying the milk as long as it was bottled prior to delivery. Wahl found a custom bottling facility in Tillamook and registered a new business, Langlois Creamery.

Sheep’s milk is still an unconventional product, though, so MilkRun came up with an additional way of packaging it: ricotta cheese-making kits. “School is out, and people are looking for stuff to do at home,” says Alexander, the marketing director, who collaborated on the project with local kids’ cooking company Little Sous LLC. The cheese kits, which include colorful stickers and child-friendly recipes for ricotta pancakes and cheesecake, sell for $49. “For the price of going to the movies—which you can’t do right now—we’re going to sell you this kit, and we’ll save a farm in the process,” she says. So far, MilkRun has sold 750 quarts of Langlois Creamery’s milk.

Wahl says MilkRun has basically saved her family’s farm. “When I dropped off the milk, we hadn’t even discussed payment,” she recalls. “I was like, ‘Here, take this, do something.’ ”

Local food-system advocates are thrilled by what MilkRun is doing. “This is what we’ve been waiting for,” says Maia Hardy, food and farms manager at Portland nonprofit Ecotrust. “An easy-to-use, well-developed, and well-run platform on the user end that also has transparent sourcing.” Hardy runs an accelerator program for small and midsize farmers, and she admires the way MilkRun posts each farm’s story and contact information, along with photos.

The company expanded to Seattle earlier this month and is about to close a seed round, though Niiro won’t disclose what she’s hoping for. She says she’s in conversation with farmers and potential customers in Austin, Denver, Detroit, and New York to bring MilkRun to their cities—not to mention Vancouver, Wash., whose residents have made their wishes especially clear. Residents of the town, just across the Columbia River from Portland, have been e-mailing in droves to ask when MilkRun will expand to their area. “Vancouver, we hear you!” she says, laughing. Everything is on the table, as far as she’s concerned, but she’s also wary of moving too fast. Other food tech companies, such as Good Eggs Inc., have been forced to contract after an early burst of growth.

Whereas many food delivery companies buy a fleet of trucks and hire drivers, Niiro has been paying the farmers to deliver their own and others’ food. At least she did prior to the Covid-19 pandemic. The benefits are clear: Most farmers already own trucks and are accustomed, in most local food systems, to driving into cities to deliver their product to restaurants and farmers’ markets without being compensated for it. MilkRun’s paying the farmers for deliveries has allowed them to keep the money or hire someone else and preserve their time for farming.

With the growth the pandemic has brought on, though, Niiro has leased nine vans and hired 34 laid-off restaurant and bar workers to help farmers keep up. “I can’t tell you how overqualified our staff is,” Niiro says. Prior to the pandemic she only had four employees. Now her team includes Bill Wallender, former chef at farm-to-table restaurant Quaintrelle, and Kalani Parducci, a former bartender at the James Beard Award-winning Ox.

Niiro says the best part of her job might be educating customers about how local food systems actually work—about the natural uncertainties and occasional crop failures that mainline grocery stores can solve by ordering fruit or vegetables from a different, far-off supplier. If a farm is 1,200 pints of strawberries short of its target because the weather wasn’t as warm as anticipated, Niiro has to email a thousand MilkRun customers to explain. She also loves seeing people who are her parents’ age engage with local food for the first time. “They’re superexcited,” she says. “We get all these emails—‘We Googled garlic scapes and we LOVE them. Who knew?’ ”

One of the pandemic’s countless effects has been to highlight the fragility of the global food supply chain. That’s important for Niiro—it’s meant increased interest not only from consumers and farmers but also from investors and other influential people. “Something is very wrong when people are euthanizing hundreds of thousands of pigs a day—when grocery store shelves are empty, and communities are hungry, and we’re pouring out food,” she says. “It’s not just about delivery. We need an alternative. So let’s invest in people who are putting time into the solution. That’s the way change happens.”

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