washingtonpost.com
The man behind MOM's Organic Market

By Thomas Heath
Washington Post Staff Writer
Sunday, December 5, 2010; 6:08 PM

I ask every Value Added subject to tell me the key decision or "aha" moment - big or small - that led them to business success.

Grocery store entrepreneur Scott Nash has two.

First came the 1989 "60 Minutes" report on Alar, raising questions about the safety of spraying the chemical on apple trees. The second involved a Post-It note on the door of a competitor.

Both were instrumental in the success of MOM's Organic Market, a chain of six stores in the Washington area carrying only certified organic produce, which means it was grown without chemicals, pesticides, herbicides or fertilizers.

In the competitive good-for-you grocery business, MOM's is growing. It plans to expand to 12 stores by 2012, including locations in Timonium next spring and in Merrifield the following year.

As it happens, I am not in MOM's niche. I tend to shop at the big-name Washington area grocery stores, and I don't look to see if the bananas, carrots or anything else I buy is organic.

But Nash is doing well without me, building a 350-employee, $50 million business around the granola crowd.

"I call them the 'lifestylers,' " said Nash, 45. "They come in and shop it and they are living the lifestyle, committed to the environment and our worldview."

It's a reliable customer base. After two decades of fits and starts, MOM's yields enough profit to allow Nash and his family to live comfortably in a high-rent Montgomery County neighborhood. Employees do fine, ranging from $9 an hour for starters to salaries in the six-figure range for top executives.

Nash is a fanatic about overhead. You won't find his stores in leafy McLean or Bethesda. MOM's are generally on back streets in low-rent retail areas. No fancy lighting or feel-good wood finishes either. The parking lot in Rockville is pocket-size.

Service is funky but efficient; coffee, cider and hot chocolate are served for free and kids get balloons. MOM's opens up an extra register at the first sign of traffic, and everyone has their grocery bags - printed with Nash's e-mail address - carried to the car. Customers are allowed in before and after store hours.

MOM's is competitive, too. To keep prices below those of its rivals, the company sends spies armed with cellphones into other stores, from where they will call in prices to a MOM's employee. If the competitor offers an item cheaper, MOM's immediately cuts its price.

Nash, who spoke by phone from behind the locked door of his bathroom so he could get a moment of quiet away from his bustling household (he has three children), told me he didn't have a plan for his career. He just fell into it, which I can relate to.

"I grew up in Beltsville and studied business at the University of Maryland," where his father taught personnel management, he said. "I tried to be a business major, but I didn't have good grades."

He quit in the middle of his sophomore year in 1986 and went to work flipping omelets for a caterer at $40 a gig. He eventually spent $400 from his student loan to buy appliances and go out on his own.

He could make an omelet, but he couldn't get enough work to keep himself busy. He abandoned eggs but stayed in food, taking a job at Organic Farms, a wholesaler that was run out of Beltsville. He learned about the organic food customer's profile while working at the business's retail outlet, which was open to the public on Friday and Saturday.

"Back then they were the radicals, far outside of the mainstream. Very counterculture people. Now organics is much more a part of the mainstream," Nash said.

Nash was hired away from Organic Farms in 1987 by a customer who ran a small mail-order business that shipped produce to consumers around the country. After four months, Nash and a fellow employee left to start their own business.

They called it Organic Foods Express. Its business model was delivering organic produce to Washingtonians' doorsteps. To find those customers, Nash and his partner drove his Chevy Malibu wagon in the middle of the night, leaving fliers throughout neighborhoods.

They did okay. But they split within months, with Nash buying out his partner for $1,400: $100 for each of their 14 customers. His mother lent him her garage and $2,000 for inventory. As business picked up, he moved into a 900-square-foot warehouse in a Beltsville industrial park for $500 a month. He bought a used walk-in cooler. He had one phone line. He grossed around $100,000 in 1987 and double that in 1988.

It was a living, but not a big one.

"I remember sitting on my bed, saying ,'What am I going to do with my life?' "

Then came the "60 Minutes" show raising questions about the safety of Alar. When National Public Radio followed up on the story, one of Nash's customers from Vienna called in on the air and talked up the produce she bought at Organic Express.

"All of a sudden, my phone rings off the hook for three hours. I took about 500 names down in those three hours."

Nash decided the mail order and delivery business were too limiting, so he took a gamble in 1990 to move to a 2,000-square-foot retail space in Rockville, increasing his overhead and spending his precious cash.

Competition in the health-food market was getting crowded during the 1990s. B. Gordon, the largest natural food store in the Washington-Baltimore region, and Fresh Fields both opened stores nearby. (Gordon's closed within a couple of years.)

Revenue was so poor that he couldn't meet his one-person payroll, instead offering his used motorcycle in lieu of a paycheck.

Then came his next break.

When Organic Farms closed down in September 1990, a friend left a Post-It note on the company's door, advising customers to visit Organic Express if they wanted the same produce.

"It was cart after cart after cart," he said. "We got a lot of customers from that."

Nash expanded the Rockville store, eventually moving to a roomier space and quadrupling revenue. He opened a second store in College Park in 2000, and has since opened four more, in Alexandria, Jessup, Bowie and Frederick.

While he expanded the business, Nash failed to keep an eye on profits. He rolled all the revenue back into new stores and more inventory.

When the 2008 financial crisis hit and banks wouldn't return his phone calls regarding a $1.2 million loan, he faced his own crisis.

"For the first time ever, we took our eye off growth and focused on efficiencies. We looked at labor costs. We focused on profit margin. We created metrics, bought software that helped us price our products more strategically and started measuring sales per employee hour."

The company downsized its staff by 10 percent, mostly through attrition.

"We weren't holding anyone accountable," he said.

MOM's now has monthly meetings in which stores sales are examined, poor-selling products are jettisoned (Suzie's sweetened rice cakes went out; Suzie's puffed corn cakes came in) and the names of employees who fail to punch in and out are made public.

"Holding people accountable has had a huge impact on turning this company around," he said.

Nash won't detail MOM's profit, but the before-tax profits are likely in the single digits. There is virtually no debt on the company. He said same-store sales, a common industry metric, are up a healthy 13 percent.

Although he hated textbooks at Maryland, Nash now reads self-help business books like "Good to Great" by Jim Collins and "The Five Dysfunctions of a Team" by Pat Lencioni. He throws around company growth terms like "flywheel" that he has picked up.

Anything that will help him grow his business and grow as a chief executive.

"I'm learning this as I go," he said.

And without a Post-It note.

Follow me at addedvalueth on Twitter.

Post a Comment


Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.

© 2010 The Washington Post Company