hemp style into the future of fashion,

1.0 Executive Summary

Our Mission Statement

To bring hemp style into the future of fashion, create a long lasting sustainable product and reduce carbon footprint. Helping you elevate your shoe game in more ways than one.

Our Company

Hempsy is a new online shoe business founded by five business enthusiasts Xochitl Lopez, Alex Saba, John Pile, Sarah and Jing. We are young college professionals who share the same ambition to build a company that will not only provide high-quality products, but also to promote sustainability. Our product of choice is mainly shoes, as we believe the shoe fashion industry is an ever dynamic market that Hempsy can thrive in. In terms of style preferences and different needs, from casual to dress shoes or from daily wear to sportswear, our company ensures its fulfillment to our customer’s demands.

Overview

· Our business will be a corporation found by Xochitl Lopez, Alex Saba, John Pile, Jing Zhou and Sara Lin

· Our two main objectives in creating our products is sustainability and exceptional quality

· Location will be a leased building Orlando, Florida

· Our facility will be mainly divided into a warehouse and corporate offices

· An effective training program will be provided for the production, distribution, marketing, and management.

· Target customers will be young adults ranging from 15-30 years old

Our Product

Hempsy will sell shoes focusing mostly on casual-wear. Sustainability and exceptional quality are two important factors that we apply to our products and take pride in. Therefore, in our effort to achieve our goals, hemp will be our main fabric of choice. Our shoes will be designed to be simple and comfortable for daily use, catering to a wide range of customers with different style predilections. Our product will offer shoe types to fit a wide range of preferences including slip ons, low, mid and high tops that will come in various styles ranging from authentic to a more sporty look. We ensure to be as flexible as possible, and to do so, we offer customization for those who like to be incomparable. Our products offerings outlined below comes in a variety of sizes for men, women and kids.

Product offerings:

· Athletic shoes

· Casual shoes

· Low, Mid and High-tops

· Slip-ons and Laced-up

Our Fabric

Hemp is a fiber extracted from the cannabis plant. This plant has been proven to provide many health benefits such as treatment for cancer and a good source of nutrition. It is not only eco-friendly, it is also one of the most durable of all natural fibers. Strength, longevity, weather resistance, versatility, comfort and breathability are just some of its advantages that makes it the ideal fabric to produce our shoes.

1. Strength & Longevity – Proven to be as three times as tensile strong as cotton, hemp fabric is not as easy to wear out. In fact, it is often used for making very strong ropes and cables due to its durability. Its strength is even comparable to metal and glass and repeated wash would not easily break the fabric.

2. Weather Resistance – Hemp is UV and mold-resistant, adding protection for our delicate skin. Hemp can resist 95% of UV which is excellent for shoes, as it is worn outdoors in a regular basis. It is also moisture absorbent and air permeable which control perspiration on a hot weather and humidity.

3. Versatility – We welcome versatility to satisfy a larger variation of preferences and needs. Therefore, Hempsy will offer products that have different qualities. For instance, a mixture of hemp and recycled polyester, a more sustainable option than regular polyester, will be a better choice for running shoes due to its lightweight quality, while still taking into account our goal to be sustainable.

4. Comfort – Like cotton, this fabric gets softer each time it is worn and washed. Without any special treatment, the soft texture of hemp fabric avoids itching and roughness that other fabrics may cause.

5. Breathability – the fabrics breathability and moisture absorption prevents molds and bacteria from growing, dispelling any odour as a result. Also, hemp’s moisture absorbing properties lasts longer than any other fabric.

Sustainability Research

Our company believes in a business that contributes to the environmental, ecological and economical balance of the world. We a are a big advocate of sustainability, thus, producing shoes that are handcrafted with hemp, a more sustainable option for fabric than its counterparts, helps us further achieve this goal. The information below outlines the environmental and economic advantages of hemp as a material for production.

1. Reduced carbon footprint – As an environmentally conscious company who excels in producing carefully handcrafted products, we use hemp as our fabric to ensure that our products are created through a more sustainable process.

CO2 emissions is one of the main causes of global warming. According to NASA, we are currently experiencing increasing levels of CO2 being released in the air, as we are at the highest levels in 650,000 years. This is mainly caused by the burning of fossil fuels that businesses relies on for energy use in production. In contrast to the conventional cotton, hemp can be cultivated and its fiber can be produce leaving less CO2 emissions in the atmosphere. The difference is even greater when comparing the production of synthetic fiber with hemp, as these synthetics does not only emit significantly more CO2, it also create N20 emissions, a much more harmful substance that can also contribute to global warming. Growing and cultivating hemp also produces more biomass than any other plant. This organic matter can be converted to fuel/energy that is a more renewable and cleaner option for energy source than most plants.

The table provided below is extracted from a study done by Stockholm Environment Institute on behalf of the BioRegional Development Group which estimates the CO2 emissions per ton of spun fiber in Kilograms:

Fiber	Crop cultivation	Fiber Production	TOTAL
Polyester USA	0.00	9.52	9.52
Cotton, conventional, USA	4.20	1.70	5.90
Hemp, conventional	1.90	2.15	4.05

0. Increased Water retention – The article titled “High on Environmentalism”, Brian Palmer stated that Hemp uses considerably less water than cotton. Growing hemp 50% less water per season than cotton. In fact, cotton uses 10,000 liters of water to produce 1 kg whereas hemp only uses 300-500 liters of water to produce the same amount.

More importantly, cotton tends to be grown in the fields where water is scarce, especially

in dry regions such as in Egypt, California and Texas, as it requires warm climates but

significantly more water to be grown. On the other hand, in addition to requiring 50%

less water, hemp can be grown almost anywhere with the right fertile soil. In fact, it can

grow in all 50 states in the U.S. Additionally, in terms of production, hemp requires 4

times less water than hemp.

0. Less Land Requirement– Hemp uses less land than cotton. In fact, in the same article, Palmer also concluded that hemp only need approximately twice as less land than cotton per ton of finished textile. The land requirement for hemp is comparable to the synthetic fiber, Polyester, that is grown from an oil field. A field that is 25×25 size planted with hemp can grow hemp that suffice fiber in a year to make 100 million pair of jeans. This amount is at least 5 times greater in terms of producing shoes.

1. Minimal to no pesticides or herbicides – According to nemeton.com, while cotton requires large amounts of pesticides and herbicides, hemp, on the other hand, requires little to none of these harmful substance to maintain. In fact, 50% of all pesticides used in the U.S. come from growing cotton. Not only do these chemicals are toxic to the environment as it can contaminate the soil, water and plants itself, it can also be damaging when the products that are produced through this destructive process come in contact to with the person. As a company that promotes sustainability while taking into account the health of our customers, choosing hemp for our product is our most sensible approach, as it has natural properties that can repel insects and weed from growing, thus, drastically reducing the harmful effects that it can induce to the environment and people.

Future Product and Website Plans

Our company strives for innovation. Thus, we make sure that our products are trendy. In the future, we plan to offer more varieties of footwear and footwear accessories that caters men, women and kids.

Future Product offerings:

· Slippers

· Sandals

· Dress shoes

· Sportswear (innerware, tops, bottoms)

· Hemp socks

In addition, we plan to further develop our website when we successfully achieve a better sense of our customer’s behaviors and preferences. Meanwhile, our website will mainly serve as an online platform to sell our products. Although in the future, our site will offer exclusive mail newsletters for customers to provide them the option to be updated with any news and offers on our products. Our customers will also have a choice to pay for a monthly subscription to receive our latest products on a monthly basis. This option allows conveniency for our loyal customers to take pleasure in our monthly delivery of new offerings.

2.0 Operations

Production workflow

Our Hemp shoe will be handcrafted to fulfil the customer’s need for a quality shoe. First the raw material will be received and go through an extensive quality control process to make sure that we use only the best of the hemp material. It will then go through the production team. The team has been well trained by our lead shoe aficionado.  They will create the product by hand and by using sewing machines. Having the ability to hand craft the entire shoe allows our product to be of the highest quality. The process will include the bonding of the upper layer canvas to the outsole.  After, we then sew pieces of Hemp using the sewing maching to the product. And then we mold the shoe to fit the shape that we want it to be.This will complete making our shoe.

After the shoes are built they go through a second quality control checkpoint.  The shoe goes through a multi-level inspection. First, the shoe is assessed to make sure the shoes are the same size as each other. Then we make sure the shoe is clean and has no marks from production. Finally, we check to make sure that the workmanship is of high quality. This is where the shoe Aficionado and his assistant inspects each shoe to make sure they were fabricated correctly. If they pass, they will then go to the distribution department and then be shipped out to the customer.

Supply chain

Our supply chain consist of many different suppliers. We have multiple suppliers to take away the power from the suppliers of raising prices. We believe that when you focus on having only a few suppliers, it gives them the power to raise prices whenever they want.

Currently we use four different suppliers for our raw hemp material. We use Hemp R Us, Hempdepo , HempCity, and Hemp Direct. They are all aware that we use multiple suppliers and have agreed to sign a contract with us that as long as we buy a minimum of $20,000 of hemp a year, that they will continue to sell to us.

Hours of Operation

Our hours of operation is from 9 am to 5 pm, Monday through Friday. Our mission is to be available as much as possible and we believe that having these ours enables us to be open at peak performance hours. We are also reachable 24/7 by email and will respond to emails within 24 hours. So if for some reason someone needs to contact us during the weekend, we are available to do so by email.

Inventory

We will keep track of our inventory in a very simple way. We will have the managers record how much inventory is in house at the beginning of the day, we will add the amount of products that we made that specific day, and then we will subtract the inventory that we have sold and shipped for that day. At Hempsy, we trust our employees not to steal from the company so we have no internal security put into place.

Daily operations

· Production

· Organize raw material to be produced (hemp canvas, rubber, metal)

· Create shoes at 40 pairs a day

· Processes include bonding of the upper layer to the outsole, making the upper layer consisting the hemp material, sewing pieces of material together on a machine, molding the shoes to form its shape and finishing the overall look by trimming any unwanted strings and smoothing out any rough edges.

· Will start slower due to not having enough demand to create all the shoes.

· Do not have enough warehouse space to hold an abundance of shoes

· Management

· Open up warehouse

· Fill out orders that was received overnight

· Train new employees

· Order new raw materials

· Record ending inventory

· Marketing Team

· Work out arrangements for shipping logistics for each individual order (air/train/truck/boat)

· Define the brand image and what the brand means

· Create a social media presence (twitter, Instagram, snapchat, facebook)

· Conduct market research and what market where the product is thriving in.

· Distribution

· Ship out products from orders received overnight,

· Receive raw materials

· Organize material to be produced

· Create shipping labels

· Box up items

· Ship out orders that have been received during the day

3.0 Market Analysis

Meticulous research of the intended market is imperative when deciding whether to invest resources into a business venture. The following market analysis will detail the market need for our product, intended target market, and market potential This section will also define the industry, market competitors, along with barriers to entry, and regulations associated with our product. In short, the subsequent research will inform you of everything you, the investor, needs to know about the current market environment associated with our product and its potential to thrive.

To begin the market analysis we must first outline the need in the market for hemp based products in the footwear industry. The need for hemp based products is an environmental demand. According to The Shoe Industry, 20 billion pairs of shoes are produced annually and of those shoes about 38% end up in landfills where they will remain for the next 1,000+ years until they have completely biodegraded (The Shoe Industry. 2013). The biodegradable pitfalls of conventional shoes are a direct contradiction to that of hemp shoes which are 100% biodegradable and completely decay within three to six months. (How long do biodegradable bags take to decompose?, 2016)

In addition More Than Shipping reports that established shoe brands such as Nike, Adidas, Vans, etc import all of their assembled shoes from countries such China, Vietnam, Brazil, and Indonesia. Manufacturing and transportation of these goods generates millions of tons of CO2 annually. For every pair manufactured, 30 pounds of carbon dioxide is released into our atmosphere. That equates to 30 million tons of CO2 annually. Our hemp will be procured within the Unites States which will aid in the overall reduction of transportation costs and environmental damages. The shoe industry levies a mounting burden on our environment. Our shoe will not only curve the impact production has on the environment but will do so by not compromising the structure of the shoe itself. Rather, it will revolutionize the way shoes are fabricated. Our shoe will compete with these brands and excel in the market by providing a environmentally conscious shoe that is wearable, comfortable, and aesthetically enthralling.  For further environmental and sustainable analytics please refer to our extensive research found under the “Sustainability” section of our proposal.

Target Market

The intended target market will be young adults ranging from 15-30 years old. Essentially, millennials are forward thinking, modern, and liberal in nature. Millennials are more apt to changes in trends specifically fashion. Overall outer appearance is fairly important to millennials. Physical appearance is a reflection of yourself and is a mechanism of self expression which asserts the influence style and trends have on purchasing patterns. The truth of the matter is that we as humans make assumptions and perceptions based on the physical appearance of others and by that token, spend an insurmountable amount of time and money on our physical appearance. According to the Huffington Post, millennials have $2.45 trillion in purchasing power annually (Mak, 2016), which positions them as the most influential group on the market. Further research on millennials also indicates that they support brands that are environmentally conscious, favor brands with an impactful presence on social media outlets, and expect efficiency and convenience when making purchasing decisions.

Channels of Distribution

Online channels are the most fluid and can be reached easily. Millennials see the world through a digital lens and we plan on catering to that behavior by making our product readily available through our website forum. Our physical facility will be located in Orlando, Florida that which will provide a tangible purchasing experience. The Department of Labor reports that millennials spend 33% more on clothing than generation X (Henderson, 2016). ComScore conducted a survey which estimates that of their 5,330 respondents between the ages of 18-34, 54% of their monthly purchases were made online. (Blumenthal, 2016)

Growth Strategy

Moreover, the Hemp Business Journal affirms that hemp-based products ranging anywhere from skin care products, to pharmaceuticals, to clothing generated $688 million in 2016. The hemp industry is growing exponentially. The market has seen growth of up to 22% in food and body care products alone. Figure 1 is a visual representation of the growth in the market beginning in 2014 and includes a three year projection. The Hemp Business Journal anticipates that the hemp market will reach $2.1 billion by 2020. Figure 2 visually breaks down the segmentation within the market and the total retail value for each category.

Figure 1:

Figure 2:

Our product will fall under “consumer textiles” with a retail value of $99.5 million in annual sales. Our exclusive product is one that is vastly different from the structure of the shoes already in the market. Hemp is revolutionizing the way textiles are produced and is doing so by using sustainable modes of production. Hempsy will bring hemp based shoes to the forefront of the market will do so by implementing efficient and ethical modes of production and distribution.

Our market penetration strategy will be to infiltrate states that have either legalized hemp cultivation or the recreation/medicinal use of marijuana and or states that have decriminalized marijuana altogether. States that fit our intended market criteria are slowly increasing as political officials and the general population shift their attitudes toward the legalization of marijuana. In a recent study done by the Public Industry of California promulgates that nationally 52% of Americans favor the legalization of marijuana. In California, where it is legal to both cultivate and use recreationally, 60% favor decriminalization of marijuana altogether (Kordus, 2016). With that in mind there are 30 states that have legalized hemp cultivation which are; Washington, Oregon, California, Nevada, Colorado, Arizona, Nebraska, Wyoming, Montana, Delaware, North Dakota, Michigan, Illinois, Indiana, Kentucky, Tennessee, Alabama, Florida, South Carolina, North Carolina, Virginia, West Virginia, Pennsylvania, Rhode Island, New York, Maryland, Vermont, New Hampshire, Utah and Maine. However, under federal law marijuana is a schedule 1 drug and requires a DEA issued license to cultivate. Florida in particular is the state we are most interested in permeating. Our facility will be located in Orlando, Florida. Orlando has an estimated population of 277,173, a median income of $42,318, with an above average educational attainment percent at 89.5 for high school, graduate, or higher schools (United States Census Bureau, 2016). Florida has a land area of 53,624.76 square miles. By July 2016, it had an estimated population of 20,612,439, with the female population at 51.1 percent. Furthermore, its total retail sales per capita stood at $14,117 in 2016 (United States Census Bureau, 2016). The cumulative median household income in the state is $47,507, with a total employment of 7,777,900 persons. Besides, it has the lowest tax burdens in the U.S. at 6 percent (“Florida taxes,” n.d.) Florida also has the most lenient regulations on hemp cultivation although it is not legal for recreational usage rather only medicinal purposes. The hemp industry has made noteworthy strides in its ability to be cultivated and harvested since its initial acceptance and decriminalization in states that have successfully proposed and passed legislation. States such as California, Florida, and Colorado have acknowledged both its medicinal benefits as well as its environmentally consciousness textile alternative. The hemp industry has flourished since the decriminalization of hemp through the passing of the 2014 Federal Law Bill that allows the cultivation of hemp by farmers in certain states for research through pilot programs.

Competitive Strategy

As for our competitors, our most challenging competition would be the already established brands such as Nike, Adidas, and Vans to name a few. Other competitors in the market would be hemp shoes currently retailed. Hemp shoes retail anywhere from $30-160, ours would be $55-65. Our shoes are positioned on par with the costs of vans and nike shoes. However, our product offers advantages like longevity and cleanliness. Our hemp shoes last twice as long as the conventional shoes on the market and require less upkeep. Brands such as Nike and Adidas are household names and occupy a large share of the market. However, our competitive edge includes our ability to source our materials domestically which stimulates our local economy and generates domestic jobs. Our production medium will attract consumers who like to buy American made goods. Our product will also stimulate job creation by employing locally and would ensure our employees are paid above the minimum wage along with offering benefits such as health insurance, birth control, and even the option of opening a 401K with us. We are committed on reflecting our consciousness through our product and in our corporation structure. Our values are directly reflected in the design and structure of our shoes. By developing our workforce domestically we would evade allegations of exploiting children in third world countries for labor, as Nike has and other companies as well. Our manufacturing and transportation expenses would be less than if we were to import our product from foreign markets which would help reduce our start up costs. Reduction in initial costs would enable us to redirect the money we save into our advertisement or distribution channels or even pass the savings onto our customers.. Our focal point in our competitive niche remains our environmental sensibility. Since shoes are an indispensable component of our everyday attire, embracing a shoe like Hempsy would revolutionize the way we consume. That shift would perhaps influence other companies to divest from harmful synthetic fibers and switch over to hemp based production mediums.

The deterrent barriers to enter would be hemp legislation both federally and on a state level along with the stigma associated with hemp or other marijuana related products. Stigmatization of hemp and marijuana dissuades many from fully accepting hemp as an agricultural commodity and a medicinal pharmaceutical and not just a psychoactive drug. Other barriers to growth are global competition, limited research on hemp, and obstructed access to certified seeds.

Certain restrictions apply depending on the strain of hemp and the intended purpose. Hemp is also known as industrial hemp which refers to the various Cannabis Sativa species that are non-psychoactive. Today thousands of products have been incorporated with hemp, which has been popularly grown as a renewable source for raw materials. The fibers and stalks from the plant have been famously used in clothing, construction materials, paper, and plastic composites.

Opening hemp footwear shops in the country has started gaining interest to business people especially in states whose regulations and conditions favor better reception of the products. This type of footwear is common in modern states that are liberal. Opening online hemp shoe shops in states such as Texas, which prohibit hemp-based products, can be risky if at all possible. Before opening an online hemp shoe shop in the United States, it is important for an entrepreneur to consider the specific state and country’s regulations concerning hemp-based products in order to avoid violating any laws.

For many centuries, hemp and its products have been prohibited in the United States. However, currently, hemp is progressively being acknowledged in our country. The 2014 federal farm bill has given farmers located in industrial hemp legislation states to grow and harvest hemp. The 2014 federal farm bill, also known as the Agricultural Act of 2014, was passed on 7th February 2014 by the United States Congress and signed into law by former President Barack Obama. The bill reauthorized federal programs such as pilot programs to encourage farmers to grow, harvest, and research on hemp (Fine, 2014). The Industrial Hemp Farming Act of 2015 was introduced by a group of U.S. senators that was meant to give allowance to the American farmers in producing and cultivating industrial hemp. This meant that hemp would be removed from the government’s list of controlled substances. The Act was meant to exclude industrial hemp from the definition of marijuana. It defines hemp as a plant Cannabis sativa L plant with its parts containing a delta-nine tetrahydrocannabinol concentration of less than 0.3%. This meant that hemp meets the concentration limit of the country’s state law (Congressional Research Service, 2015).

On 1st January 2017, the California Industrial Hemp Farming Act became effective after being signed to the law authorizing the commercial production of hemp in the state. California is one of the 30 states that has passed legislation relating to industrial hemp. The California Industrial Hemp Farming Act revises the definition of marijuana so as to exclude hemp by defining it as a fiber and oilseed limited to the non psychoactive Cannabis sativa L. It enacts provisions that relate to the growing of hemp by imposing certain procedures and requirements on the growing of the plant (National Academies Press, 2017). The California Health and Safety Code is an Act in California that supports programs associated with industrial hemp. The Act defines hemp as a fiber that is limited to the various types of Cannabis sativa L having not more than three-tenths of 1% of tetrahydrocannabinol (THC). Although the act supports the growing of hemp and its products, all commercial growers and entrepreneurs must register with county agricultural commissioner, which involves conjunction of fees (Hecht, 2014).

Although the growing of hemp and its integration with other products such as footwear is still being discouraged in the United States of America, the benefits of the plant commercially are slowly shifting the government’s perception. In states like California, which have legislation that support hemp and the selling of its products are great areas for opening online hemp shoe shops. The online platform will provide a wide market and the regulations in the state will assist in setting up of the shops easily without retaliation from the public and government.

In conclusion, our pervasive market analysis has solidified Hempsy’s capability to thrive in the hemp based industry. Our innovative hemp shoe will compete with its competitors and thrive by fulfilling the shortcomings of conventional shoes. The environmental consciousness structure of our shoe will be our defining facet that will attract shoe enthusiasts and environmentally aware customers. The innovative introduction of hemp fashions of shoes will introduce competition in the market hence ensuring that the gaps available in the market are filed. The government will help in regulating the condition and quality of products supplied and produced by the business. It is again the responsibility of the government and the members of the public to ensure that a wide platform and fair competition is introduced to the market that will ensure environmental viability without compromising the style of the shoe.

4.0 Financials

The start-up costs, 2-year income projections and balance sheet projection of our company is provided in the 5.0 Appendix section.

The following are assumptions that are used to determine our the numbers for our funding and projections:

1. Selling price for our shoes will be $55-$65 a pair.

2. Approximately 12,000 pairs is projected to be sold at year 1.

3. Approximately 14,500 pairs is projected to be sold at year 2.

4. Projected 20% increase in sales for the first two years, and 25% increase in the 2 years that will follow.

5. Our startup capital will be $40,000.

6. A funding totaling $58,050 will be required from a bank/lender.

    

5.0 Appendix

(Hempfy) Shoes Startup costs

Legal			$3,500
Marketing			$4,750
Business Insurance			$800
Rent				$6,000
Training				$3,800
Office/Store Supplies			$2,000
Equipment				$8,000
Computer				$9,700
Other				$9,500
Start-up inventory Total Start-up expenses			$50,000 (2000 shoes x $25 costs $98, 050
Capital Funding				$40,000 $58,050

Projected Income Statement for 2018-2019

	2018	2019
Sales	$780,000	$936,000
Cost of Goods Sold	$300,000	$360,000
Gross Profit	$480,000	$576,000
Operating
Expenses
Rent	$72,000	$86,400
Electric	$3,600	$4,320
Telephone	$3,600	$4,320
Office Supply & Expense	$3,000	$3,600
Salary Management	$100,000	$120,000
Salary – Other	$200,000	$240,000
Payroll Taxes	$2,000	$2,400
Advertising	$1,500	$1,800
Vehicle  Expense	$2,000	$2,400
Legal	$1,000	$1,200
Taxes(6.5%)	$5,934.50	$7,121.40
Net Income	$88,365	$106,038

Projected Balance Sheet for 2018

Assets		Liabilities
Cash	$88,365	Accounts payable	$4,500
Inventory	$5,000	Salaries payable	$4,500
equipment	$7,500	bank loan	$12,300
Computer	$8,800	Total liabilities	$21,300
Total Assets	$109,665	Equity
		Retained Earnings	$88,365
		Total equity	$88,365
		Total Liabilities and owner’s equity	$109,665