Hunger Management

The scions of an entrepreneurial family are growing a venture of their own

by Mark Pendergrast

mywebgrocer_0211_bp4942_leadRich Tarrant is CEO and founder, with his two brothers, Jerry and Brian, of MyWebGrocer, an Internet shopping software company. MyWebGrocer, whose clients include giants such as Kroger, Winn-Dixie, Ahold, and Publix, employs more than 100 people in its Colchester offices.

Picture alternative scenarios.

A: Susan Hawkins, 35, commutes from New Jersey to her high-pressure job in a Manhattan ad agency. Her husband is a lawyer. They have three young children. Dinner is often a last-minute take-out affair. On the weekends, children in tow, Susan stocks up on groceries at her local supermarket, but it is a chaotic, time-consuming affair, frequently punctuated by tantrums.

B: The same Susan Hawkins has just put the kids to bed. Sipping a glass of wine, she logs in to her account on her local supermarket’s website, where she sees a circular with the latest sales and coupons. A message reminds her that she might be running out of lettuce, butter, and potatoes.

She decides to make beef stroganoff, so she clicks on a recipe, asks for ingredients for five, and begins to click on items for her online shopping cart. The next day, on her way home, she stops by the supermarket window, where her order is waiting for her. She pays $10 extra for the service.

As one can imagine, most harried mothers would choose the second scenario, which helps to explain the phenomenal growth of MyWebGrocer (MWG), the Colchester-based Internet shopping software company founded by Rich Tarrant Jr. and his two brothers, Jerry and Brian, in 1999.

The idea for the business originated earlier that year at oldest brother Jerry’s house in Colchester, where they were brainstorming various business ideas. Jerry observed that his wife, Lori, with two small children and a third on the way, dreaded grocery shopping. “Wouldn’t it be nice,” he said, “if she could order groceries from Shaw’s online, the same as books on Amazon, and have them delivered, or she could just go and pick them up?”

It’s no surprise that the idea took root. The Tarrant brothers grew up with the entrepreneurial example of their father, Richard Tarrant, who co-founded health care software company IDX (now GE Healthcare) when young Rich was 3 years old. The elder Tarrant made a rule that none of his children could join IDX. Instead, he would support them in their own endeavors.

Rich Jr. started his career as a bond broker on Wall Street and, in 1994, co-founded Amicus Health Care Living Centers with his brothers (he also has two younger sisters), to serve patients with Alzheimer’s and other forms of dementia.

“I saw that the assisted living niche needed to be filled,” he says. The company was perhaps too successful. By the time they sold it in 2005, it had 300 employees. “We were at a crossroads,” Tarrant says, “where we needed to sell or add another layer of management.” The litigious nature of health care was also becoming onerous.

While his brothers ran Amicus, in 1998 he founded Nationwide Health Care Advisors, which helped facilitate sales and mergers of nursing homes, hospitals, and assisted-living facilities. But he wasn’t having much fun.

The Internet was exploding, and he was intrigued by its possibilities, so he looked seriously at online groceries. He learned of a California company called Webvan that had set up an expensive network of warehouses to deliver food directly to homes.

“I thought they were going at it backwards,” Tarrant recalls. “In the U. S. there were already 36,000 convenient food warehouses called supermarkets with pre-existing brand recognition. Why not help them offer their goods online?”

He contracted with Tim Kenney, owner of Nybor, a Vermont software firm, to build the prototype for MyWebGrocer, and in 2000 acquired his first client, Connecticut-based Geissler’s Supermarkets. Programmers and operations people were in Williston. Then the dot-com bubble burst, and Internet companies began to disappear like corrupted computer files. Webvan went bankrupt in 2001.

“We were nervous,” Tarrant admits, but he remained confident in the fundamental concept of Web-based grocery sales, and he could rely on continued funding from Amicus.

By 2003, business began to pick up, with ShopRite supermarkets as the first major client, and MWG’s growth has been steady ever since. Supermarkets pay $4 for each aggregate online order, with the cost usually passed on to the consumer, whose fee for the service depends on whether the order is picked up or delivered (around $10 on average).

“Most consumers prefer the pick-up option,” Tarrant says, “where they can drive up, push an intercom, and get their groceries, rather than having to wait at home, stuck in a three-hour delivery window.”

In 2006, Tarrant moved back to Vermont after 15 years in New York City so that he and his wife, Tracy Appleton, could raise their daughter, Lily (now 7), here, and because the business was growing fast and needed its CEO on-site.

In 2008, MyWebGrocer bought the U.S. business of Irish competitor Buy4Now. Gross sales crested $10 million that year.

In 2009, the Stripes Group, which specializes in bootstrap companies led by dynamic founders, invested $13 million in MWG, and Stripes’ managing partner Dan Marriott took a seat on the board.

“Rich Tarrant is a fantastic leader of a great team serving a huge market,” says Marriott. “MWG is riding two major trends: online grocery shopping and the growth of consumer goods digital advertising.”

Tarrant predicts that sales will grow 65 percent in 2011, and his predictions have been right on target. “Rich’s best strength is in sizing up a situation, identifying unmet needs, and creating a solution,” says his brother Jerry, the company’s chief financial officer. “The last couple of years, even during the recession, our company doubled in size.”

In October 2007, when 35 people worked at MWG, Tarrant said he expected to have several hundred employees in eight more years. There are now more than 100 people building websites and serving customers at 354 Mountain View Drive in Colchester, where Tarrant’s office commands a glorious panorama of Burlington and the mountains. It is likely that by 2015, that number will have tripled or more.

At the University of Vermont, Tarrant, at 6 feet 4 inches tall, was the captain of the basketball team. He brings that same leadership and team-building approach to MWG, and he is eloquent in explaining the advantages of ordering groceries online, making him a popular speaker at grocery trade shows.

In 2010, four major supermarkets came on board as MWG clients: Kroger, Winn-Dixie, Ahold (a Dutch conglomerate that owns Stop & Shop and Giant) and Publix. MyWebGrocer now builds websites for over 110 retailers representing more than 10,000 stores.

Although none of his employees touches any groceries, Tarrant aims for them to manage all digital solutions for clients, including interactive online circulars, e-mail marketing initiatives, mobile phone apps, social media strategies, and customer acquisition programs. “We send nearly five million e-mails per month to consumers on behalf of our clients,” he says.

Tim Kenney, who built the original Web platform for MWG, came aboard as the firm’s chief operating officer in 2008. Alec Newcomb was hired in 2006 as the executive vice president and is now chief strategy officer. He is responsible for cutting-edge applications such as the company’s new Social Grocery site on Facebook and mobile phone apps.

“Ninety-four percent of Americans have cell phones,” Newcomb says, “which, in conjunction with social media, presents a huge opportunity for us.”

Groceries account for $600 billion in U.S. annual sales, making them one of the largest consumer goods segments; yet supermarkets generally have only a 2 percent profit margin, so they must seek every possible advantage. Many are recognizing the virtues of online shopping, as are the food manufacturers.

MyWebGrocer operates the largest grocery ad platform in the country. With the acquisition of Kroger as a client, MWG arguably reached a tipping point.

Now that so many consumers are logging on to supermarket websites, consumer packaged goods brands such as Kellogg’s, Procter & Gamble, Kraft, Snapple, Heinz, and Campbell Soup Co. are buying more advertising from MyWebGrocer.

Tarrant’s team has compiled impressive data on the impact of such ads. One major beverage brand’s online sales grew 62 percent over the prior year’s period.

“Kellogg’s online advertising with MyWebGrocer has shown double-digit product sales growth online,” Kamela Warren, Kellogg’s e-business manager, observes.

One of the beauties of grocery sales via the Internet is that they are easy to track. The average online order is around $160 for some 45 items, versus a typical $30 foray down the supermarket aisles.

“Certain stores are doing more than 10 percent of their total sales volume through the online channel,” Tarrant says. Not only that; online orders tend to grow over time. “When consumers are shopping from a previous list in the quiet, unhurried atmosphere of their homes, they submit bigger orders.”

Ironically, none of these online supermarket sales are in Vermont, though it seems inevitable that Lori Tarrant will be able to order from Shaw’s online at some point. Hannaford’s attempt at home delivery failed, and it appears to have made Hannaford management skittish about online groceries, even though MyWebGrocer serves Food Lion, which is owned by the same conglomerate.

The first, and thus far only, Vermont client is Burlington’s Healthy Living. That’s unusual because it is not the customary big supermarket chain.

“This online service changes the paradigm in grocery shopping,” says Eli Lesser-Goldsmith, owner and general manager of Healthy Living. “Once people give it a shot, we’ve gotten nothing but positive feedback.”

To attract customers away from local supermarkets, the store offers three free, online orders, then charges only $7.95 per order. “It’s only a matter of time before the supermarkets offer this service, but we take pride in being an early adopter,” Lesser-Goldsmith says.

Tarrant is careful when discussing the future of MWG or his own plans. Maybe MWG will expand at some point into drugstore chains, which are carrying more and more groceries, but he says he has enough on his plate with the ever-expanding supermarket and consumer goods advertising business.

Might the company go public? “Not on the immediate horizon,” says Tarrant.

Would he consider running for public office? He laughs, pointing out that his grandfather ran for the U. S. Senate as a Democrat and lost, and his father lost his bid as a Republican. Rich Tarrant Jr. is likely to remain an entrepreneur. •