Vipe Desai has held numerous roles in the action sports world over the years, and his tireless passion and entrepreneurial drive led to his latest project, HDX. Desai had been on the path of starting his own company for several years before circumstances, planets, tarot cards, and all signs pointed to the fact that the time was right to launch a beverage business with a twist. Earlier this year Vipe put his plan into action for HDX, which focuses on selling a specially-formulated, natural “hydration mix”—a powdered beverage that you add to water. HDX is targeting core action sports retailers with the value proposition of adding an additional revenue stream for shops with sales of the low calorie, vitamin enriched mix, as well as renewable water bottles which take up minimal counter space and offer keystone margins.
“Noticing the trends in environmental awareness, fitness and SUP, we at the Hobie Surf Shops knew that as soon as we saw and tested the new products that HDX has put out that they were the right fit for our stores,” says Hobie’s Jake Schwaner. “Always thinking about innovation, change and being outside the box we developed a new category over the past 5 years to tap into this growing market. We looked at key buzzwords of health, endurance, environmental responsibility and sustainable alternatives and created a surf nutrition department.”
Sun Diego’s Pete Censoplano adds; “It’s always exciting when a new category opens up that is specific to our industry, it shows that we are innovating. HDX is a healthy drink alternative for our consumers who live an active life and can bring the dry mix wherever they need to go. It just fits our lifestyle.”
We caught up with Desai as HDX’s Ripping at Retail contest was just getting going to learn more about the brand and the former shop owner’s thoughts on expanding categories to keep core retail profitable.
So you just got things rolling recently. How has the initial reaction been?
We launched a couple months ago and it feels good. Every once in a while you do something and you just kind of feel like the stars are lining up. Everybody that we talk to that comes in contact with the product is like “what a great idea. This is going to kill it.” People are becoming almost addicted to our product, plus we have a story from a health and environmental perspective and that’s really speaking to people.
Are you focusing strictly on action sports retailers at this point?
Yes and no. Our core strategy is with action sports retailers but we’re also taking calls from people. If someone reaches out to us from outside that space we’ll take the call but we won’t necessarily pursue it. Like Wahoo’s wanted to support us, so we’re in a couple stores in San Diego testing it out and the product is checking. A handful of retailers are doing really well with it and some are just doing OK, but it’s a new category. If retailers are backing it, it’s selling. Once awareness builds, it’s going to be a good revenue channel for them.
That’s something that every retailer is looking for right now and new categories are definitely worth some experimentation. What shops are you finding it’s checking in so far?
Surfride in San Diego, Huntington Surf & Sport, Sun Diego, Spyder, Surf Concepts, South Coast is checking. Surfside Sports is checking. Most of the shops are checking, it’s just a handful that aren’t . It’s interesting to see the ones that aren’t, you can really see what’s going on from a sophistication level of business. It’s sales staff on the floor and the way the place is managed and operated. It really comes down to having a good sales team.
What do you have for POP strategy and what do the displays look like?
I consider the first few months our beta testing mode. We have a small glass display, it’s about a 5″ by 5″ base with individual sticks sitting in there and then our reusable water bottle sits along side it, so it’s about a 12″ by 8″ space on the counter. It’s a new category and product so we wanted to make sure we didn’t overwhelm the retailer.
What are the questions and concerns that you have been getting?
People don’t know what it is or how to use it. We’ve made it where there are postcards there that talk about the product and explain what it is. But it still seems like people don’t grasp it. It’s one of those things where you have to try it and experience it to completely understand it.
I’m like you guys carry candles, soap, and shampoo and you’re telling me my product doesn’t work but you carry what Bed Bath and Beyond carries? It’s time for retailers to understand the importance of category innovation.
Have you been doing a lot of clinics and hands on things with retailers to get them to try it?
Yeah, sampling for us is key. Every time we work with a retailer we get samples to them, to the staff and everyone. A new thing we’re doing is take in a few bottles of water to shops and ask them if they’ve tried i. They start asking questions, interacting, and then they feel attached to the brand and learn how good it tastes, and then you start to see sales pick up in the store when that guy is working.
Developing in-store brand ambassadors is so key.
Exactly. Awareness grows with the product when people become aware. People are finding out about it by word of mouth.
What’s the price and margin?
Right now the price at retail is $1.50 and retailers make full margin on it.
Is that the goal then moving forward?
Down the line it is. There’s going to be volume in convenience stores and grocery stores but that’s a very touchy business. We’ve got maybe 15,000 action sports retailers across the country if you line up all the good ones. In the grocery store business there are 185,000 convenience stores. That’s not even gas stations. It kind of gives you an idea of the volume of product. If you look at the larger landscape, it takes companies in our space years to get to $5 million-$10 million? They need to be global. Red Bull does $27 million just in LA.
You open up 7/11 and there’s your $10 million.
Exactly, you open up Starbucks and it’s $100 million.
So why are you focusing on action sports retailers?
We’re laying the groundwork of our brand around action sports, youth culture, and sports. Our core is action sports but anything outdoor related is an extension.
Once we build the cool factor, it will allow us to go to these other channels. The good thing about our product is being a dry good, it’s easy to ship the product. It doesn’t require refrigeration, it’s lightweight so it has a smaller carbon footprint, and there’s minimum waste.
Tell us about your Purchase With Purpose program.
The concept is that there are all these organizations looking to raise money for clubs or teams, or schools. Kids are selling things door to door to raise money, so we made this program where we assign a promo code for organizations, they share that with friends and family and if they buy with it from our website, automatically 25% of sales go back to that club or organization.
It’s good cause marketing.
Exactly – and no one else is doing it. We’re happy to provide 25% of sales to clubs that we approve and align with. We then highlight these organizations on our website.
To keep the alliteration initiative theme going, tell us about why you decided to launch Ripping At Retail, which lets So Cal shop kids compete in a video-based surf comp.
We have to build a rapport with our retailers. I really loved the concept of Oakley’s Surf Shop Challenge, how it brings retailers together, gets them out of the store, builds camaraderie and rivalry, and it’s a great way for Oakley to give back to their retailers and engage with them.
As much as I would love to have a hard contest on the beach, it’s very costly and time consuming with permits, insurance, and all the other stuff. We didn’t want to copy it either, so we wanted to make an evolution of it with the age of technology. Oakley’s contest is limited to a certain number of people as well. The idea was an online contest with individual waves. It’s not edited, you just film the clip, post it and we’ll judge it. Anybody that works at a surf shop 15 hours a week minimum is eligible to enter and there’s no entry fee. It’s open for everybody from central California to southern California.
What’s the benefit of this for you and why did you limit it to that area?
This is a B2B effort. It gets us involved with the retailers and the people selling it. It provides more interaction with retailers. We wanted to keep it to Southern California because this is where our core rep force is now. We’re bringing on a bunch more reps in the next 30 days across the country. We wanted to experiment here at home and fine tune the program, but we’re already working on another Ripping at Retail for skate shops this fall and we’ll probably open it to everybody across the country. We want to scale it and own it, we’re going to do a wakeboard one, one for Hawaii-biggest wave surfed by a shop employee. It plays right into the way of continuing to engage retailers. Every year, if this grows, we continue to go up in the minds of retailers and give back to employees, at the end of the day the guy that works in the shop is the front line for any brand to be successful. We want to celebrate and reward their passion with hard cash.
I’ve heard you talk a lot about the need for retailers to embrace new categories for the health of their business, but it seems like most retailers are scared to experiment right now. What’s your take on that?
Everybody’s scared, but retailers have to own their business and own up to what type of business they want. When I had my shop [H2O Surf & Snowboard Shop in Sunset Beach, California] we created categories. When we started we were a surf shop. We had surfboards, wetsuits, rash guards and leashes. By the time I was done we had women’s clothes, watches, snowboards, sunglasses-each one was a contributor to the bottom line of my sales every single month.
We had one younger manager telling us: “We’re not a liquor store, nobody’s going to buy beverages here.” Well this is a product that contributes to the lifestyle. I’m like you guys carry candles, soap, and shampoo and you’re telling me my product doesn’t work but you carry what Bed Bath and Beyond carries? It’s time for retailers to understand the importance of category innovation. Reef’s done a phenomenal job innovating the sandal category, Nixon for watches, Skullcandy for headphones. There are all these different opportunities. Boost Mobile phones, people are carrying technology. It’s like dude, it’s all these different things and it’s new money. A guy comes in and needs a pair of boardshorts, he’s not like do I buy these Phantoms or do I buy this stick of HDX, it’s both. It’s extra that you can add on to every sale.