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REYNOLDS CONSUMER PRODUCTS INC (NASDAQ:REYN)
Q1 2021 Earnings Call
May 5, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Reynolds Consumer Products' First Quarter 2021 Earnings Conference Call. [Operator Instructions]. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mark Swartzberg. Thank you. Please go ahead.

Mark Swartzberg -- Vice President, Investor Relations

Thank you. Good morning. This is Mark Swartzberg and thank you for joining us on Reynolds Consumer Products' first quarter 2021 earnings conference call. On the call today are Lance Mitchell, President and Chief Executive Officer; and Michael Graham, Chief Financial Officer.

For our agenda today, Lance will focus on market conditions, our fundamentals and our 2021 priorities, and Michael will review our quarter and outlook. Together, our remarks will be approximately 15 minutes. Then we will open it up for your questions.

During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results and outcomes to differ materially from those described in these forward-looking statements.

Please refer to Reynolds Consumer Products Annual Report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and its press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Please note, management's remarks today will focus on non-GAAP or adjusted financial measures. A reconciliation of GAAP results to non-GAAP financial measures is available in the earnings release posted under the Investor Relations heading on our website at reynoldsconsumerproducts.com.

The Company has also prepared a few presentation slides and additional supplemental financial information which are posted on Reynolds' website under the Investor Relations heading. This call is being webcast and an archive of it will also be available on the website.

I'd also like to note that we are conducting our call today from our respective remote location. As such, there may be brief delays, cross-talk or other minor technical issues during this call. We thank you in advance for your patience and understanding. While we would like to answer all of your questions during the question-and-answer session, in the interest of time, we ask that you ask one question and a follow-up and rejoin the queue if you have additional questions.

And now, I'd like to turn the call over to Lance Mitchell.

Lance Mitchell -- President and Chief Executive Officer

Thank you, Mark. Due to the continued dedication of the RCP team, we delivered another outstanding quarter in a challenging environment. I'm extremely proud that we grew revenues 4% in spite of February storms and unrelenting supply chain challenges.

We expect four factors to drive even stronger growth over the balance of the year, those are: Consumer consumption, Price increases, Innovation, and our increased supply chain capabilities. We entered 2021 expecting higher consumption to stick, and we're seeing those higher level sustain across our business.

According to our latest Harris Poll, which we have been doing in successive ways since the start of the pandemic, everyday use of foil is up five-fold versus pre-pandemic levels. Usage of waste bags per week is up more than 30%. And weekly slider food bags usage is up nearly 40% versus pre-pandemic levels.

As a result, dollar sales of foil, waste bags, parchment and other categories are growing at average annual rates, well in excess of rates preceding the pandemic. Other categories, that are more sensitive to away from home activity, including party cups and disposable dishes are posting accelerating two year CAGRs.

This is a great environment for sales growth, and our product portfolio is performing very well. Our brand share in foil, parchment and other categories is increasing following substantial increases in capacity, and our pipeline of new cooking and baking products is very strong.

Hefty Waste & Storage is also benefiting from significant and sustained increases in consumption, and innovation is increasing here too. Hefty Tableware is notching gain as demand accelerates including dollar share gains in party cups and disposable dishes. And Presto has expanded distribution for several major store brands, and we believe we're well positioned to make additional gains.

Also want to note that we're investing alongside our customer's e-commerce priorities. The next driver of our revenue growth is price. Our brand and product portfolio are strong, positioning us well for price increases in one of the toughest commodity cycles, that I've ever seen. We're communicating with our retail partners and we've already implemented price increases across our businesses in Q1. As a result of higher commodity, logistics and related costs, a second round of price increases is under way, and we're planning for a third round to be fully implemented in Q3.

This pricing is intended to offset estimated cost pressures on an annualized basis. However, timing is such that we expect considerable margin pressure in the second quarter, followed by sequential improvement from there. Michael will speak more to that, but I want to underscore this. We believe we have the pricing plan and a product portfolio to recover margin, while also maintaining business momentum.

The third driver of our strong growth is innovation. We expect increasing innovation benefit as we move through the year. In Cooking & Baking, expanding and upcoming launches include Reynolds Wrap, everyday non-stick foil; Reynolds Wrap, 100% recycled foil; Reynolds Kitchens butcher paper; Reynolds Kitchens compostable wax paper and Reynolds Wrap Star [Phonetic], a restaging of the Reynolds Wrap portfolio with up to date, easier to use packaging.

We're also deploying a high level of innovation in Waste & Storage, including the recent national launch of Hefty waste bags scented with Fabuloso licensed from Colgate-Palmolive. In Hefty Tableware, the new Eco Save line was recently awarded Product of the Year in the Tableware category by Product of the Year USA, the largest consumer voted award for innovation.

Distribution of Eco Save continues to expand. And innovation is not just limited to our brands. Presto's new product development performance demonstrates that innovation continues to be a revenue contributor for that business segment. Our fourth growth driver is replenishment at retail. We entered 2021 with a benefit of significant increases in capacity, which contributed to improvements of in-stock levels, near or exceeding 90% in most of our categories.

This is a credit to the entire RCP team. But there is more work to do and we will drive further improvements. And as we do, we expect to see retailer replenishment contribute to growth.

Before I turn the call over to Michael, a few final comments. I hope you saw our 2020 annual report, in which we introduced our environmental, social and governance framework and goals. We're committed to reporting progress in the quarters and years to come and look forward to doing so in partnership with you and all of our stakeholders.

Secondly, this is an exceptionally challenging environment. Our people continue to demonstrate the resilience, integrity and can do spirit that make me confident that we're becoming an even stronger organization. And finally, as I hope you could tell, we're focused on responding effectively to the immediate costs and supply chain pressures we face. We are stewards of great brands and exceptionally strong product portfolio and a winning business model.

Many of you heard me speak to that at the time of the IPO, and it's even more true now. It is clear from the data that favorable changes in consumer behavior are sustaining, making our long-term growth and earnings potential even greater now than it was then.

Over to you, Michael.

Michael Graham -- Chief Financial Officer

Thanks, Lance, and good morning everyone. Before I turn to our results and our outlook, I'd like to point out a couple of things. This is obviously a challenging cost environment, but one that we see as temporary. We have a track record and the tools to ultimately offset cost increases over time. And we remain committed to strong cash generation and a disciplined capital allocation, including deleverage the net debt between 2 times and 2.5 times adjusted EBITDA and continued growth of dividends over time.

Turning to the quarter, net revenues in the first quarter of 2021 were $757 million, an increase of 4% over prior year net revenues of $730 million. Growth was driven by pricing to offset rising input costs and lower levels of trade promotion. We saw an estimated 2 percentage point impact to the first quarter net revenues due to February storms, which primarily impacted the Waste & Storage and Presto business segments.

Adjusted EBITDA for the first quarter was $140 million, an increase of 4% over the prior year adjusted EBITDA of $135 million. Growth was driven by the increase in net revenues, partially offset by higher material, manufacturing and logistics costs. Adjusted earnings per share for the quarter was $0.36, an increase of 20% over prior year adjusted earnings per share of $0.30.

Turning to our segment results. Reynolds Cooking & Baking net revenues grew double-digit in the first quarter, driven by lower levels of trade promotion and increases in volume, in addition to price increases. Adjusted EBITDA increased 33% in the first quarter driven by increase in net revenues, partially offset by higher material, manufacturing and logistics costs.

For Hefty Waste & Storage, net revenues grew 1% in the first quarter driven by price increases and lower levels of trade promotion, while volume was negatively impacted by storm-related disruption in February. We estimate February storms had a 3% negative impact to revenues for the quarter. The 20% decrease in adjusted EBITDA in the first quarter was due to higher material manufacturing and logistics costs, partially offset by lower discretionary costs. For Hefty Tableware, net revenues were down 4% in the first quarter as lower levels of trade promotion were more than offset by lower volume, which was driven by fewer social gatherings, which we believe were not fully offset by increased everyday use occasions. The 3% decrease in adjusted EBITDA in the first quarter was primarily due to higher material and manufacturing costs.

Finally, Presto Products' net revenues decreased slightly in the first quarter as price increases were more than offset by volume impact of storm related disruptions in February. We estimate February storms had a 6% negative impact to net revenues for the first quarter. The 22% decrease in adjusted EBITDA in the first quarter was mainly due to higher material and manufacturing costs.

Moving to our capital structure and cash returns. As of March 31st, 2021, we had cash balance of $144 million and a total debt outstanding of $2.1 billion. We paid a quarterly dividend of $0.23 per share in the first quarter and will pay another quarterly dividend of $0.23 per share in the second quarter, payable on May 27th, 2021.

Now to our guidance, which we have updated versus our previously disclosed guidance. Starting with the guidance for the year. We are increasing our full year revenue outlook, expecting high single-digit revenue growth on the basis of continued elevated consumption, innovation, retail replenishment and pricing, with pricing expected to contribute to the majority of growth.

Our cost outlook and pricing plans are informed by current commodity indices, which have been extremely dynamic since the beginning of the year. We're facing in-year cost pressures approximating to exceed $300 million driven by increases in commodity and logistics rates.

Price increases have been implemented and a second round is under way with plans for a third round to be implemented in the third quarter. The magnitude of the increases will be determined by the level of commodity cost changes. We expect increased gross margin pressure in the near-term and are focused on tight management of SG&A to help offset near-term cost increases.

On an annualized basis, aggregated pricing actions are expected to cover the increases in input costs, but we are lowering our expected full year earnings to reflect the short-term implications of pricing in an environment where costs are still increasing.

As we anticipate pricing to catch up to increased input costs due to the rest of the year, margins are expected to expand sequentially in the third and fourth quarters. As a result, for the fiscal year 2021, we now expect net revenues to grow in the high single digits, adjusted net income to be in the range of $384 million to $407 million, adjusted EPS to be in the range of $1.83 to $1.94, adjusted EBITDA to be in the range of $670 million to $700 million and capital spending of approximately $155 million, which includes $25 million for the recent purchase of manufacturing facility, which we previously leased, and net debt to be approximately $1.8 billion at December 31st, 2021.

Turning to the second quarter. With additional pricing going into effect during the quarter, we expect high single-digit revenue growth in the second quarter with pricing expected to contribute approximately two-thirds of the growth. Commodity and logistics costs have increased resulting in a more pronounced margin pressure in the second quarter. We see this as temporary as our second round of planned pricing goes into effect.

We expect gross margins to be down approximately 2 percentage points to 3 percentage points versus our first quarter gross margin of 25.4%, half of which is solely due to higher revenue from higher prices. As a result, for the second quarter of 2021, we now expect net revenue to grow in the high single digits, adjusted net income to be in the range of $76 million to $83 million, adjusted EPS to be in the range of $0.36 to $0.39, adjusted EBITDA to be in a range of $140 million to $150 million.

In wrapping up, there are few things worth highlighting. Our revenue is growing and we expect even stronger growth driven by consumption, price increases, innovation and increased supply chain capabilities. A second round of price increases is ramping and on an annualized basis, we expect full recovery of margins based on our current cost outlook.

Our second quarter is the most challenging because costs have not stabilized, and it does not fully reflect our second round of pricing actions. Beyond the second quarter, we expect continued revenue growth and gross margin improvement as we move through the year. And we remain committed to strong cash generation and disciplined capital allocation.

With that, I'll turn it back over to you, Mark. Thanks.

Mark Swartzberg -- Vice President, Investor Relations

Thanks, Michael. As I turn it over to the operator for your questions, I'd like to remind you that we ask that you ask one question and a follow-up and then rejoin the queue if you have additional questions. Operator?

Questions and Answers:

Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Nik Modi with RBC Capital Markets. Please proceed with your question.

Nik Modi -- RBC Capital Markets -- Analyst

Yeah, good morning everyone. Just a point of clarification. What exactly was the issue with the Texas storms in terms of the impact that -- I'm just trying to get some more clarity on that. And then the broader question is Lance last quarter, you made a pretty bold statement about category growth rates doubling post pandemic relative to what you saw during the IPO roadshow.

Certainly it seems at this point that was a pretty pristine comment. But I just was hoping you could provide an update on based on what you've seen, do you still think it's 2x or do you think it will be more like 1.5x or something along those lines? Thanks.

Lance Mitchell -- President and Chief Executive Officer

Okay. I'll start with the issue with the storms and ask M.G. to add-on that with more specifics. But the issues with the storms were, first of all, we had two plants in Texas which were closed for over an entire week, where we had no production that we were able to achieve or shipments as a result of customers.

We also had multiple [Indecipherable] across many other manufacturing locations with high absence rates due to the storms in other states during that period of time, which resulted in lower productivity and lower volume shipments.

In addition to that, freight and being able to ship to customers on a timely basis and being able to get shipments out during the quarter was impacted due to the availability of trucks. So those were the three primary factors. Michael, do you want to add to that?

Michael Graham -- Chief Financial Officer

Yeah. I can add a few things to that. So when you think about the storms, the biggest driver of that overall impact was the disruption that it created as it relates to availability of trucks being able to get to our destinations. As a result of that, we saw a significant increased costs in that particular area, as well as it challenged our ability to get cases out the door.

Beyond that, obviously, there was incremental freight cost in this particular period as availability was a little tighter and there was an opportunity for people to price up accordingly. And we had to accommodate those overall pricing. So those also influenced the overall challenges that we saw as it related to that.

Lance Mitchell -- President and Chief Executive Officer

I will also add that a number of our retail partners had retail stores shut down during that period of time, which also impacted some sales in the quarter. Turning now to the growth rate, and just to be clear from what I said in the last earnings call is, if you look at a two-year CAGR for our categories that we expect continued growth and the growth of the category is continuing stronger than they were pre-pandemic, and if you look at the category growth on a two-year CAGR, that's bearing out. Foil is growing over 6%, waste bags over 5%, food bags near 5%, party cups, 8% and disposable dishes 9%.

So on a two-year CAGR which was what my reference was, meant to communicate, we are seeing those kind of growth rates. And I think all of us would agree that based on all the data that the category growth rates pre-pandemic and now post pandemic, we're seeing higher growth rate.

So I appreciate the opportunity to clarify that comment from last quarter's communication.

Nik Modi -- RBC Capital Markets -- Analyst

Great. Thanks guys.

Operator

Thank you. Our next question comes from the line of Jason English with Goldman Sachs. Please proceed with your question.

Jason English -- Goldman Sachs -- Analyst

Hey guys, thanks for sliding [Phonetic] me in. A couple of questions. So first on price increases. You said you're looking through three rounds. How did the conversations go with retailers in round one? How are they going in round two and what gives you confidence that round three will go smoothly as well?

Lance Mitchell -- President and Chief Executive Officer

Thanks, Jason. Well, retailer receptivity to pricing, the pricing actions we plan for Q1 have been fully executed exactly as planned. And our retailer customers are our partners and pricing conversations are never easy. However, the current cost environment supports additional cost increases and we show them the detailed costs that we're seeing so that we can provide them with that information so they see the cost as part of the reason that we're requiring the price increases.

The level and timing of additional price increases and decisions are made on a customer by customer basis. The Q2 price increase, most of that is in the May timeframe and is near implementation or being implemented as we speak, and the Q3 planning is under way.

Michael Graham -- Chief Financial Officer

Lance, I could take the confidence, want me to do that?

Lance Mitchell -- President and Chief Executive Officer

Sure.

Michael Graham -- Chief Financial Officer

So there are number of factors kind of baked into the confidence levels that we have around the pricing actions. First is the strength of our brands and Lance talked about that earlier. Second is our history. We've definitely had an exceptional period of increases and we acknowledge that. But clearly this is what we do. This is we manage. We manage students commodity cycles and had a track record of being able to fully offset cost increases in the past.

Third, is our pricing. We already operated at a higher level of pricing than those entering in the year and additional pricing increases are well under way and is taken, and Lance mentioned. And then fourth is our cost comparison. Remember in Q4 2020, we saw increasing pressures from sequential increases in commodity and logistics costs. So as we ramp up into the fourth quarter, our comparables will be a little bit easier from that perspective.

Jason English -- Goldman Sachs -- Analyst

Okay, that's helpful. And one more question. Based on how you talked about your guidance and your high-single digit revenue forecast with most of that coming from price, it suggest that you're not expecting volume declines. And I guess the question there is, why shouldn't we be looking for volume to be down 4%, 5%, 6% when we contemplate that there's going to be some degree of likely cross price elasticity with competitors perhaps not moving as quickly. And second, Lance we're not out of the pandemic yet. You're calling from three different locations today and workplace mobility is still down at 30% from a pre-pandemic levels, that's probably going to change in the back half of the year. So, seems like the pretty best case is to assume that you will see contraction in the third or fourth quarter of just underlying consumption in your category. So am I right that you're baking for flat volume? And are there offsets for those factors that should give us confidence in your ability to get there?

Lance Mitchell -- President and Chief Executive Officer

Well, two things. I would say first of all, we are updating our elasticity models and it's early in updating those. But the elasticity models point the fact that with inflation being across multiple categories, not just ours, that a new normal of elasticity is being evaluated by consumers.

Secondly, we did do an evaluation of open states that had higher levels of mobility versus states that were still closed that had lower states of mobility in the last four and eight-week period. I did not see discernible differences in increased consumption between those two areas. So we seek strong consumption continuing post pandemic.

Mark Swartzberg -- Vice President, Investor Relations

And Lance, this is Mark. If I could just add one thing to your response there for you Jason. Think about the fourth quarter. Remember fourth quarter last year, we were, of course, somewhat capacity constrained in a very important period for us. Think about particularly the Cooking & Baking unit. So we didn't promote quite the way we normally would. So that comparison dynamics coupled with our desire to promote here in the fourth quarter of 2021, I think it's also something you should keep in mind as you think about volume performance as we move through the year.

Jason English -- Goldman Sachs -- Analyst

Understood. That makes sense. Thank you, guys.

Operator

Thank you. Our next question comes from the line of Andrea Teixeira with J.P. Morgan. Please proceed with your question.

Andrea Teixeira -- J.P. Morgan -- Analyst

Thank you. Good morning. So I wanted to follow up on how we can track on the Nielsen data and pretty much on the tracked data. How are you seeing consumption now for the Cooking & Baking segments? And If you're able to actually grow partially as you said is pricing and we only going to see those details later today. But if you're seeing any green shoots conversely on the other businesses, especially the ones that you sell to, like B2B, like to the mom and pop services that I believe at Sam's Club [Phonetic] As mobility improves you'll have the weddings, graduations and other social gatherings that happened in the spring last year, do we see something more positive now? Or we should -- or this is something that's going to be washed out through the tough comparisons you're getting in the second quarter?

And in terms -- and to the second volume question. And in terms of a follow-up for the cost pressures, I mean if I do my math correctly, you have a double-digit cost pressure. You said by the end of the year you're going to -- on an annualized basis you're going to lap those $300 million that you called out. But can you also pull some other levers, as you said we will revolution before kind of like innovation that is cost-effective. Can you walk us through the bridge for the COGS and see how we can actually see the puts and takes for margins? Thank you.

Lance Mitchell -- President and Chief Executive Officer

Thanks, Andrea. I'll talk about the Nielsen consumption data and the B2B question, then I'll ask Michael to talk about the COGS question that you asked. The Nielsen consumption Data continues to show good strong consumption, albeit, we are now lapping a period where there is some pantry loading in the March and April timeframe of the prior year. But we're very encouraged by the continued consumption across all of our categories and our brand share in those categories during this period of time.

From a B2B standpoint, we are seeing the tableware and disposable products in B2B accelerating. We've seen very strong sales in the back half of Q1 and we expect that to continue as we go forward into Q2. Any further follow-up on those before I turn it over to MG for the COGS bridge.

Andrea Teixeira -- J.P. Morgan -- Analyst

Yeah, no, that's great. And I think that's going to ramp -- remind us again when that business was Hefty Tableware was like more impacted. I know it was puts and takes during the COVID pandemic. You had initially a negative impact and then later on customers were using disposables at home. So second quarter definitely, as you said is an easy comp and then I believe the third, but then the fourth is more normalized. Is that a good metric?

And then related to that before you pass it on to Michael. On the Cooking & Baking segment, do you think inventory on the trade kind of caught up in terms of volumes or conversely you see that it kind of like given the Nielsen data it may actually had been higher than what it should. How are the inventories on that segment?

Lance Mitchell -- President and Chief Executive Officer

Andrea, inventory on the trade in the Cooking & Baking were still at a 90% in-stock level. If you recall, we had some Q4 shipping challenges that we talked about, which we recovered in Q1, but the in-stock levels are still way below acceptable levels and are hovering at 90%. So there is more replenishment to come in Cooking & Baking as well as all the other segments.

Turning now to tableware, there were two quarters where we had challenges last year. Q2 was the biggest. We did repeat Memorial Day and 4th July there were fewer social gatherings. But the same occurred in Q4 last year where the holiday gatherings primarily in the December timeframe were much smaller. So we did see some lower sales versus prior year in tableware in Q4, and we expect those to recover, adding on the the comments from Mark about the Q4 holiday celebrations for Reynolds in cookie products as well.

Andrea Teixeira -- J.P. Morgan -- Analyst

That's encouraging. Thank you, Lance.

Michael Graham -- Chief Financial Officer

Yeah, so Andrea, when you look at the overall COGS, materials are just under two third of our COGS, with about 45 of those points coming from commodities. Polyethylene and aluminum are clearly our largest followed by [Phonetic] polystyrene. So beyond that, obviously, the COGS -- the bigger parts of it are conversion and logistics. We've already kind of talked about our plans to offset that material component and we're well on our way to sort of offsetting that through the second round of pricing, which is already in flight. And then as appropriately the third round that is currently being planned.

Andrea Teixeira -- J.P. Morgan -- Analyst

And Michael, just on that. We've heard some of your peers talk about like an outlook that actually can ease off potentially by the fall or even before that, is this -- especially the resins, polyethylene and polypropylene could potentially kind of ease off there. What are you embedding in your guide that they utilize by then.

Michael Graham -- Chief Financial Officer

Yeah, so similar, it's probably similar. Our guidance is formed by current [Indecipherable] indices. But I'm not going to say that our indices our crystal ball. There is always some variability around that and we are prepared to respond accordingly. But based upon the industries right now, it is a downward slope as we continue throughout the rest of the year.

Andrea Teixeira -- J.P. Morgan -- Analyst

Great. And on the innovation or the cost restructuring, the revolution. Any outlook for this year?

Michael Graham -- Chief Financial Officer

While we typically don't get into the specifics around our revolution, I would say that our revolution initiatives are tracking incredibly well. We had a record year in that space last year and we anticipate that will be beyond that in this year. So we continue to drive and elevate our revolution initiatives and we anticipate that's going to be significantly higher than last year. Not significantly, but sizably higher than last year.

Andrea Teixeira -- J.P. Morgan -- Analyst

And if I can squeeze the last one the cost pressures that you your had, sorry, the cost pressure from COVID. Is there any opportunity to just reduce those pressures since its more controlled now or it's kind of elevated?

Michael Graham -- Chief Financial Officer

Well, clearly the COVID cost pressures were more intense last year. We've seen that come down and is primarily focused on the PP&E now and we've kind of baked that into our overall guide we moved throughout the year and vaccines take hold.

Andrea Teixeira -- J.P. Morgan -- Analyst

Thanks, Mike. I'll pass it on.

Operator

Thank you. Our next question comes from the line of Bill Chappell with Truist Securities. Please proceed with your question.

Bill Chappell -- Truist Securities -- Analyst

Thanks, good morning. I just want to follow-up a question as the others on pricing. But I think you said in the prepared remarks you look to price for margin to cover margin, which I think is in your kind of historical policy, but not necessarily what other companies do allow this price for the dollar cost and you're actually pricing to recover margin. So do you expect your competitors to do the same? Is this any issue when you're dealing with the retailers? And did I get that correct, are you pricing to recover margin? Or you're just pricing to recover dollar cost.

Lance Mitchell -- President and Chief Executive Officer

We're pricing Bill to cover margin dollars. So I hope that's clear.

Bill Chappell -- Truist Securities -- Analyst

So there would be a long-term negative impact on margin with way the math works on that.

Lance Mitchell -- President and Chief Executive Officer

On the way the math works, right, because of the higher number.

Bill Chappell -- Truist Securities -- Analyst

Okay. And you don't see any competitors doing lesser pricing or slower pricing than you were, you expect everybody kind of move in the same fashion?

Lance Mitchell -- President and Chief Executive Officer

It is a very dynamic situation that changes by category, it changes by channel, and it's something that we managed at that dynamic level. So there is no one to answer to that question.

Bill Chappell -- Truist Securities -- Analyst

Got it. [Speech Overlap]

Lance Mitchell -- President and Chief Executive Officer

Go ahead, go ahead, I'll wait for the question.

Bill Chappell -- Truist Securities -- Analyst

No, no, no, please expand. I was going to ask some different.

Lance Mitchell -- President and Chief Executive Officer

So we, as we said, we are implementing a second round of price increases in Q2 and those are in place. We are planning a second increase for Hefty Waste bags, which was not included in the Q2 round of increases and present stays at this level versus the indices, significant increases are going to be required.

Bill Chappell -- Truist Securities -- Analyst

No, absolutely. My second question is just, maybe tell me how you're planning kind of for the foodservice or the away from the home boom over the next few months? I mean, clearly stuff like New York and New Jersey opening completely up in two weeks or other. I mean, it's going to -- I would imagine for the strain on the foodservice and supply similar to kind of how lockdowns were a year ago for the at home. So are you prepared? Or are you preparing for it? Do you expect kind of a normal ramp.

Lance Mitchell -- President and Chief Executive Officer

Well, we are seeing elevated demand for some specific products in the Tableware business, which we are meeting that demand. We're watching that elevation closely, and currently we're able to achieve it. But as things continue to open up, that could be a challenge from a pure capacity standpoint for a period of time until things normalize.

Bill Chappell -- Truist Securities -- Analyst

Okay, great. I'll pass it on. Thanks.

Operator

Thank you. Our next question comes from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question.

Rob Ottenstein -- Evercore ISI -- Analyst

Great, thank you very much. Appreciate it. So a couple of questions. First, you guys are category captains, I think 70% of your volume. Can you talk a little bit about how your discussions with retailers on the category have evolved apart from pricing which you discussed already today, but how are they thinking about shelf space, private label? Do they agree with you that demand is likely to be at an elevated level going forward? So just kind of interested in all of that.

And then second, if you could talk a little bit more about innovation and demand in the Cooking and Baking sector. Thank you.

Lance Mitchell -- President and Chief Executive Officer

Sure. From the feedback we're getting from retailers relative to the category, it's a very dynamic environment right now. But they do believe, as we do, that the categories are going to continue to be elevated over a long period of time and they are planning accordingly. We did see some migration to higher levels of brands in the categories during the pandemic and we do expect some of that to moderate as we go forward. But as I've talked about many times, these categories have been very stable between the brand and store brands balance. It didn't change significantly during the pandemic that we don't -- and they don't expect it to change post-pandemic from that balance standpoint. And the overall conversations with the retailers are from a shelf assortment standpoint is skewing toward innovation, looking for opportunities that add shelf space for new products and continued elevation of those new products, which leads into your second question, which was innovation on the Cooking and Baking products.

We have staged a significant number of changes in that and those product lines as I indicated in my opening remarks, a 100% recycled aluminum foil Reynolds Wrap, which is at a price point that is consistent and line priced with the other products in the category. So fewer feed, but no significant premium any longer because we've got a different supply source. We've changed the price point on non-stick foil to get more users into the category, and we've changed our packaging on Reynolds Wrap to make it easier to use and easier to shop the category with the graphics on the package. We've also introduced more products for Cooking, which includes butcher paper, which is used for smoking and grilling, and we continue to innovate across the Cooking & Baking product line.

Rob Ottenstein -- Evercore ISI -- Analyst

Terrific, thank you very much.

Operator

Thank you. Our next question comes from the line of Mark Astrachan with Stifel. Please proceed with your question.

Mark Astrachan -- Stifel -- Analyst

Thanks, and good morning, everyone. I guess just first maybe a follow-up to the last question. Is your expectation that the private label move pricing similarly you'd given that a year ago brands and just to do a little bit better than private label?

Lance Mitchell -- President and Chief Executive Officer

Mark, could you repeat the question, I just didn't quite catch all of it, I think it broke up a bit.

Mark Astrachan -- Stifel -- Analyst

Yeah, sorry about that. Basically just asking whether you expect private label to move pricing similarly to your brands, given what you said about the importance of brands outperforming private label last year?

Lance Mitchell -- President and Chief Executive Officer

Yeah. So we've seen evidence of private label in these categories moving consistently there. As you know, we're a big supplier of private label across cities in these categories, and the cost pressures that all of the suppliers are seeing in these categories are the same and that's is significant. If you follow the polyethylene and aluminum curve, you know that those two cost inputs which are almost doubled from their low point last year.

Mark Astrachan -- Stifel -- Analyst

Got it, OK. And secondly could you just remind how much did the price increases historically are given back if any, as we can to try to think about longer-term sustainability of the benefit of the pricing that you're talking about this year?

Lance Mitchell -- President and Chief Executive Officer

This is going to be a significant increase compared to historicals. But generally I will say that it's not all given back. There is a lot that we took back and it's partially related to overall market conditions, but it is generally, as you look through the history of these commodity cycles, you see the margins increase after the commodity cycles are stabilized.

Mark Astrachan -- Stifel -- Analyst

Got it, OK. Thank you.

Operator

Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Lauren Lieberman -- Barclays -- Analyst

Great, thanks, good morning. I was curious to discontinue the conversation on pricing. But I guess two things on this. One is that in the Reynolds Cooking & Baking business, in the past you've talked about key thresholds on pricing, where elasticity kind of kicks in, I'm going to test my memory, but it was like above 499, maybe -- so I'm just curious about as you -- the degree to which; one, pricing plans in that division and for foil in particular might take you above those threshold level so that the elasticity notwithstanding your comments on changing elasticity models would be more relevant.

And then on the Waste & Storage, and particularly the branded side of the business. Just curious about how you're monitoring or what you're anticipating in terms of price gaps to branded? Because, at least, I think all of us are historic knowledge of the branded side of that business with your public competitor. Is it three price increases wouldn't be typical, right. It kind of all goes in at once. So trying to understand maybe how much those three rounds of pricing refers more to the private label side of the house versus branded? And how to think about price gaps and the degree to which you're monitoring that on the branded side of the business? Thanks.

Lance Mitchell -- President and Chief Executive Officer

Okay, thanks good memory on Cooking and Baking, just the price threshold by a $1, 399 versus 499. But you're right, that was the key threshold pre-pandemic. Our initial indications of the elasticity models, they've changed post pandemic and an inflationary environment across all grocery, not just our categories. So it is somewhat or not. There is no question that we're crossing the 399 price threshold, but evidence suggests that old threshold no longer holds. We don't have complete data on that yet. So some of this will be tested real-time. However, there is no choice. As I mentioned a moment ago, aluminum prices have almost doubled from where they were at the low point in 2020. And so in order to ensure continued health of our business, we need to price up by commodity costs. And we won't be alone. The commodity costs will be in place for the rest of the category too. And as consumption has gone up new users are coming in the categories, we're confident the consumption levels will stay high, but time will tell. And we'll obviously be closely watching that.

On Waste & Storage, in particular Hefty waste bag price gaps, we did take a price increase in Q1. And those of you that monitor the standing data closely, saw that the price gap is closed. We are implementing a second price increase as I said a moment ago across the majority of our products in Q2. We are now planning a second increase for Hefty Waste bags, which was not included in that Q2 round. And so we will continue to move Hefty pricing up as the commodity costs have gone up significantly.

Lauren Lieberman -- Barclays -- Analyst

Okay. Lance, Just to clarify when you said it was most of your product line in 2Q, but Hefty was not a part of that system and that's 3Q planning, so Hefty would effectively probably get two rounds of pricing, not three.

Lance Mitchell -- President and Chief Executive Officer

Hefty has gone up one. We expect to get another one in in Q2 yet. But it probably, I mean, it will be announced in Q2 for Q3 implementation.

Lauren Lieberman -- Barclays -- Analyst

For Q3. Okay, perfect. Thank you so much. Made sure I got that.

Operator

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Mitchell for any final comment.

Lance Mitchell -- President and Chief Executive Officer

Thank you, operator. And thank you, everyone, for your questions. We really value your interest and your participation. Most of all, we appreciate your time. Our revenue is growing and we expect RCP to be even stronger in revenue growth this year, driven by pricing, consumer consumption, innovation and our increased by chain capabilities. I also want to thank our employees for continuing to follow the prevention measures, putting safety first as we grow our business during this exceptional time. Stay well, stay safe, and hope to see you soon. Thank you.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Mark Swartzberg -- Vice President, Investor Relations

Lance Mitchell -- President and Chief Executive Officer

Michael Graham -- Chief Financial Officer

Nik Modi -- RBC Capital Markets -- Analyst

Jason English -- Goldman Sachs -- Analyst

Andrea Teixeira -- J.P. Morgan -- Analyst

Bill Chappell -- Truist Securities -- Analyst

Rob Ottenstein -- Evercore ISI -- Analyst

Mark Astrachan -- Stifel -- Analyst

Lauren Lieberman -- Barclays -- Analyst

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