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ROTH CAPITAL PARTNERS: Zumiez comps exceed estimates.
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So I drove to Manhattan Beach to meet Andrew Sarnecki and Josh Sweeney, the partners behind HippyTree.
The two are in the trenches, trying to make a go of the business. To cut overhead, they live and work in a small apartment, with inventory stored in the garage.
It's a good thing they are childhood friends because they spend a lot of time together.
The name: HippyTree seems to have the right name and right vibe for the times. Andrew, who founded the brand four years ago, says it was all an accident.
Andrew's friends used to call him hippy when he had long dreads. Andrew signed that name to his graffiti art when he tagged railroad cars, turning the "i" in Hippy into a tree.
A fine arts major at Notre Dame specializing in photography and graphic design, Andrew began making small photo books featuring artistic photographs of South Bay surfers and South Bay scenes. He made the books, which he gave away free at surf shops, after growing frustrated his photo submissions were overlooked by surfing magazines.
The photo books were popular, and the guys at E.T. Surf told him to bring them back something they could sell. Andrew decided to make a calendar, a tide book and a T-shirt. The business needed a name, and in 2004, HippyTree was born.
Experience helps: He wasn't new to design and production, however. After college, Andrew worked for 6.5 years at Body Glove, moving from an entry level design job to art director. His experience there ranged from managing an in-house art team to designing technical wetsuits.
When his first calendar, T-shirts and tide book sold out, he realized HippyTree could turn into a legitimate business. He brought in Josh, "a good talker," to handle sales and marketing in 2005.
The calendars: There is a strategy behind HippyTree's most popular product. The calendars get the brand's foot in the door with a wide range of retailers. Zumiez and Jack's carry the calendars, as do Active, Becker and HSS. Last year, HippyTree sold 5,000 calendars.
"There are so many apparel brands out there, the calendar is a good way for (shops) to start doing business with us that is low-risk and a good introduction to the brand," Andrew said.
They now package the calendars with HippyTree's equally arty clothing catalog. "Even if (the stores) don't pick up our clothing, consumers find out about it, which creates demand."
HippyTree broadens the geographic area it photographs and features in the calendar each year, mirroring its expansion plan for the brand. The 2008 calendar featured beach towns throughout California. For 2009, the entire West Coast will be showcased.
One of the best parts of producing the calendar is the crazy road trips involved as the partners seek out surf shops and scenes to shoot in new areas, Josh said.
"The surf shops then get to put a name with a face," he said.
The calendars are carried in 150 to 200 stores, while apparel is in 85 to 100.
Apparel: Most of the line is T-shirts. There are also hats, one fleece style, one polo and one boardshort. Each season, they try to add one cut-and-sew piece. For winter, it will be a corduroy pant and flannel shirt.
"We have the technical ability to do cut and sew, but the brand is not ready," Andrew said
Because HippyTree cannot afford to sponsor athletes or advertise much, the brand is more art driven and conceptual, the partners said. Product rarely has the HippyTree name prominently featured, just the logo.
While the partners didn't know the environment would become such an important issue when they started, they have definitely run with the nature theme. The vibe of the clothes is nature meets surfing. Tag lines include "Changing Perceptions of Nature" and "Nature is coming." T-shirt graphics feature drawing of leaves in the shape of surfboards and grass blowing in the shape of wave, next to a windmill.
HippyTree reinforces their nature image and tries to connect more intimately with the consumer with hang tags that are "crafty and personal," Andrew said.
One hang tag is a packet with sunflower seeds and directions for planting.
From the beginning, HippyTree made sustainable products and now more than 75 percent of the line is made with sustainable materials.
The partners think the brand fits perfectly with rock climbing and bouldering, sports they also participate in, and are expanding in that market.
Funding: The company is self-funded with bank loans and revolving loans from friends and family. HippyTree produces two seasons a year, and borrows money to fund production, then pays family back with interest as soon as stores pay for the clothes. They do not take preseason orders, and instead hit the surf shops one or two months before the clothes, which are produced domestically, are ready.
So far, they have sold out every season. "We have yet to make a poor decision on forecasting," Andrew said. "Our margins cover what we are doing."
Revenue was $100,000 last year, a little more than expenses, and all the profit went back into the business.
But the budget is super tight and they work 12 to 16 hours a day, six days a week. "It's not easy," Andrew said. "It's a struggle everyday."
On the bright side, they'd be in debt anyway if they went to grad school or law school, the partners said.
"I have a friend who's $150k in the hole after school," Josh said. "When I heard that, I was like, ‘I'm not there yet so I'm feeling pretty good!' "