Even as COVID-19 has shaken the hospitality sector to its core, B2B booze marketplace startup Kaddy has seen revenue continue to double month-on-month, and has closed a $3.5 million funding round to accelerate that growth.
Kaddy was founded last year by Mike Abbott, the former head of operations at Uber ANZ who oversaw the disruptor’s launch in Australia, along with Rich Coombes, co-founder of Batlow Cider, Capital Brewing and Will & Co Coffee.
The pair, who are also old school mates, set out to streamline the B2B transactions between liquor suppliers and their trade customers, offering “a one-stop shop for ordering, invoicing and payments”, Coombes tells SmartCompany.
For the bottle shops, bars and pubs, Kaddy stops paper invoices from piling up on desks in the back office. For suppliers, including independent and craft producers, it’s designed to make onboarding new customers easier.
Coombes himself has been in the suppliers’ shoes. When you’re building a new booze brand, some of the biggest challenges are in distribution, gaining visibility for the product and acquiring trade customers, he says.
You can get bogged down in the admin side of things.
“You’re very passionate about building the brand, but running a back office with a small team can be quite clunky,” he explains.
“There are not many efficiencies there.”
Beating the odds
Hospitality has been one of the sectors hardest hit by the COVID-19 pandemic, as bars and pubs were forced to close to maintain physical distancing rules. Now, venues are starting to re-open with strict guidelines and hygiene regulations in place.
Needless to say, it’s not been an ideal situation for startups in the space either. But Kaddy’s funding round closed slap bang in the middle of it all.
The funding comes from existing investors KTM Ventures and restaurant entrepreneur John Szangolies, and also includes new backing from SpringCapital.
It follows an $800,000 seed round in June last year, which fuelled the startup’s launch in September, and allowed the founders to grow a customer base of about 50 suppliers and 100 trade partners.
“We were getting really strong feedback from both sides of the marketplace,” Abbott tells SmartCompany.
He admits Kaddy did see a dip in activity on the platform when COVID-19 struck, as bars simply stopped ordering. And so, for a couple of weeks in March, things were “a little hairy”.
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Abbott and Coombes considered pivoting their model and launching a direct-to-consumer or delivery arm of the business, but the team stayed true to their “core vision”, and turned their attention instead to the retail customers.
Bottle shops have been performing strongly throughout the lockdown period, Abbott notes.
“We were lucky in that our customer base was somewhat diversified — half of our customer base were liquor stores.”
In the end, it paid off. Revenues for the startup have come close to doubling month-on-month, even throughout the COVID-19 crisis.
Ultimately, “that’s what allowed us to get the capital raise away,” Abbott says.
Hospo after COVID-19
With the worst of the health crisis seemingly behind us, bars and pubs are now starting to re-open and the hospitality industry is coming back to life.
But Coombes believes the virus will have a lasting effect on the sector. Partly, like everywhere else, the virus may well drive innovation.
Over the past five to ten years, there’s been a boom in new booze brands coming out of Australia. But, while producers have been creating exciting new tipples, innovation on the admin side hasn’t been so strong.
“There’s been this huge proliferation of brands over the past 10 years … there are now 650 craft brewers in the country,” Coombes says.
“The rate of growth is incredible … the infrastructure and the technology and the innovation hasn’t grown at that same pace.”
Despite the hardships of the past couple of months, there is an opportunity here: there’s consumer demand for these boutique and locally-produced products, but it’s not always easy for trade customers to gain regular access to them.
The crisis has caused all kinds of business owners to reconsider the ways in which they do things, and where they can increase efficiencies and reduce costs. As far as Coombes is concerned, streamlining B2B sales is an easy win.
“The COVID period experience has made Kaddy even more relevant to the way they do business,” he says.
As we move past the crisis, Abbott says tech will play a bigger part in hospitality. Customers are thinking about how they can do things differently, and at the same time, an ongoing trend towards localisation is accelerating.
“Consumers are getting more demanding,” Abbott explains.
“The savvy retailers, bars, restaurants and pubs, they’re grabbing onto this trend,” he adds.
“To do it well, you can be dealing with a whole bunch of suppliers, and you need to stay on top of the trends and what’s going on in your local area … That’s an important area where we think we can help.”