We're pleased to welcome Reynolds Consumer Products back to our conference this year. Joining us today, we have CEO Lance Mitchell and CFO Michael Graham. We're gonna- Yeah, I thought I'd start out, but realized as we've had some of these smaller breakout sessions, that there's still a lot of folks that don't quite know us. We're still a fairly new public company. We went public January of 2020. With a board meeting in early March, and it seemed like right after that board meeting, we were working from our home offices to try to figure out how to stay safe. So things changed rapidly in a very, you know, that period of time for our company. Those of you who don't know, Reynolds Consumer Products, we're at $6 billion in revenue, and we have 6,000 teammates who are dedicated to producing our products. We manufacture and sell products across three main categories: cooking products, including aluminum foil, butcher paper, wax paper, plastic wrap, baking cups, and many more. Waste and storage bags for food storage as well as storage for organizing and disposable tableware. These are under iconic brands. You know, the iconic brands are Reynolds and Hefty, as well as dedicated store brands. And the dedicated store brands is a unique capability that provides us a strategic competitive advantage in our categories. 95% of households in the United States have one or more of our products in their pantry, and we have the number one or number two market share position in our products across our categories. So our, our 6,000 teammates are dedicated to producing products that simplify daily life, so consumers can enjoy what matters most. And that's our mission statement. Our mission statement is really meant to convey that our products provide consumers with convenience, which is a gift of time, so they can use that time to spend more time with their families and pursue hobbies. That's Reynolds Consumer Products. Excellent. So let's get in to maybe some details and some things a little bit closer in, and hopefully, people who are familiar with the story will know what I'm talking about. But let's start with Reynolds Cooking & Baking. You know, it's been great to see what you've achieved with that business. And in particular, you've been really successful in improving operations, you know, more recently, in more recently challenging periods. So I guess let's start there. Talk a little bit how confident you are in the outlook ahead and in rebuilding the profitability of that business. Yeah, the challenge you speak of, and we're getting right into the meat of some of the issues that we need to talk about, is that we... Going through the pandemic and then the supply chain issues and then the overall issue of commodity costs, we navigated through all that only to have a self-inflicted wound of having some of our manufacturing equipment experiencing unplanned downtime. And so we have spent a lot of time getting that corrected over the last several months. We established a very specific plan, detailed plan with milestones that was both a bottom-up plan as well as top-down, and it's being executed through the leadership team at all levels. We've got scorecards in place that we monitor to ensure that we're achieving those outcomes. We've brought in some third parties to help us really understand or provide us with some different perspectives of what we could do better in different ways. And quite frankly, the easiest answer to this is we were running that equipment so hard to keep up with demand that we just did not keep up with planned maintenance. And so we've reinstituted our planned maintenance programs, put those in place, reestablished some processes, as well as some new processes with outside help. And we've put in predictive maintenance sensors now, so that we don't have to wait for failure, we can see failure coming and predict it so that we can address it before it occurs. Okay. And then just in terms of the confidence in the profitability for the business and sort of, you know, rebuilding beyond where we are today. Yeah, I mentioned we have these scorecards. So these scorecards are very detailed. They provide us with very specific information about what's working and what we're achieving. And we're on goal across the board on those scorecards. The scorecard, simplified one, we use for the board of directors on a monthly basis, but in our monthly business reviews and other business updates, we're looking at it in much more detail. And it's reflected in our financial results. For our Q1 and Q2 results, we achieved exactly what we said we would in that business unit. In fact, exceeded it. Great. And with that third party perspective, I'm curious if there was any, in addition to better processes being put in place, but any kind of new cost savings opportunities that were identified, that might be something we talk about further down the line? There were new processes that they helped us identify. They also helped us identify some equipment modifications that we could make that would improve the reliability. We actually took one of the longest planned downtimes in the history of that business, over three weeks, invested that time in upgrades, changing of processes, and some automation equipment that we previously were putting in place for our spooling operations. Okay, great. So let's step back. I mean, from a total category perspective, kind of whether it's foil or one of your other categories, how has the demand been playing out, you know, by comparison to your expectations at the start of this year? I guess I'd like to start off with that by saying we're very confident in the volume and revenue guide that we have for the year, which, you know, really hasn't changed since the beginning of the year when we announced in February. We're also very confident in our guide for both revenue and profit for Q3. However, we have seen some changes in consumer demand, primarily elasticities impacting a little bit more moderately than we'd expected. In our foil category, it's actually doing better than we'd originally planned from a consumer takeaway standpoint, responding well to the price points that we've established, some planned promotions that we've put in place, you know, through the holidays of Memorial Day and Fourth of July, and just the price gaps. Offset a little bit by some trade down to private label and waste bags. We're being flexible. We're adjusting our promotional advertising plans, you know, accordingly. Okay. Anything you'd call out kind of about your own performance in these categories? In terms of the categories, I guess, let me back up, like, overall category demand in both these foil categories, Hefty waste bags, it's a bit worse, or is it a matter of? It depends on the comparison period. Both are better than 2019, pre-pandemic. You know, waste bags, even more so than foil. Versus prior year, foil's up and waste bags as a category is down modestly. Okay. Okay. Anything else in the other big categories, food bags, disposable tableware, that's worth calling out? Yeah, I think we... You know, obviously, I, when I talked about the brief introduction, those are the other two main categories we play in, is food bags and disposable tableware. Let me start with disposable tableware. Disposable tableware, we've seen more elasticity than we had expected. We've taken significant pricing in that category because of raw material, commodity costs and labor costs, upwards of 50% price increases. And as a result, we have seen the impact of that in some of the consumer takeaway, particularly in everyday use occasions. So we're gonna use the same playbook that we used with Reynolds Wrap. You know, in that category, where we found the right price points, got the price points right, got the promotional activity right. Not to drive share, because we have high share positions in these categories. It's to drive category growth. We have both brand and store brand in disposable tableware. In fact, most people don't recognize this, but Hefty has the number one Party Cup, branded Party Cup in the category. It's not Solo, even though Toby Keith sang a song about it. It's Hefty Party Cups, and we have a very strong private label presence, too. So we've proven with our playbook in tableware, that we know how to find the right price points, the right promotional programs to drive category growth, and that's the playbook we're gonna use in the tableware. Okay, and then food bags? Food bags, you know, it's a little bit different story there. The category is migrating. First of all, there's two parts of the food bag category. There's sliders, which are the more premium closure, and, you know, we participate very strongly in that with the Hefty Sliders, while some private label sliders. We're pleased with how that's performing overall. It's stable from a performance standpoint. We believe there's opportunities for continued category and share growth. But the category main amount of product that's used is the Press to Close, and that is migrating more to private label. I mentioned that we do both brands and private label in our product lines. In Press to Close food bags, we only do private label. So that migration to private label food bags is actually benefiting Reynolds Consumer Products. Okay. Going a bit higher level again, just think about advertising. So your advertising as a percentage of sales is generally less than consumer products peers. So, you know, how do you determine the optimal level of advertising for that return on advertising investment? How do you measure that? You know, I get asked this question quite frequently in a lot of investor sessions and from analysts, and it... because it is lower than a lot of peers in the CPG business. I'd say a couple of things. First of all, you've got to look at just our branded sales. So our branded sales, we're advertising at about 5% of our revenue. And then we look at how effective is that 5% we're spending. And that 5% is effective if you're growing market share and the categories are growing. And we have proven, if you look across our categories and you look at our share position across our categories, we've proven share growth through our brands in those categories. Reynolds Wrap has grown three share points in the last year. Hefty recently is just stable in the category, but has been growing share for the last five years. And the tableware business, we're very pleased with the share growth there, too, of Hefty. So effective advertising is about the category growing and is your share growing? And we're seeing effective outcomes from our investments. If you think about the foil category, we're the only brand in that category. So our primary voice to the consumer is about use occasions and focusing on younger consumers coming into the category, Millennials and Gen Xers, as opposed to trying to compete against another company in the category. Yeah. Let's talk about that for a minute. So I think that your very high share position in foil is really interesting because, like, the onus is on you to grow the category, right? And same with parchment revenue, but with the Reynolds brand family, almost. So maybe can you talk a little bit about, I guess, innovation under the Reynolds brand? Let's start there as we think about kinda driving overall category growth for at-home cooking. Yeah, I would say, first of all, innovation is across all of our categories, and it's one of our passions as a company. It's one of our cultural foundations, and 20% of our revenue comes from products that are less than three years old. We established that goal aspirationally about six years ago, long before we were public, and we've been achieving that goal for the last several years. It is part of the DNA of Reynolds Consumer Products to develop new products. A color change or a count change, that does not count as a new product. It's truly got to be a new product. Specifically, in the cooking business, there are several things that we have done. One of the things we've done is we've repositioned our Non-Stick Reynolds Wrap. Previously, it was all Heavy Duty. We've moved it to the gauge that is consistent with everyday, so we're able to bring the price points down and be able to provide the value to consumers to be able to bring them into the Non-Stick category. And that has been growing significantly. We've line priced Heavy Duty so that we've been able to get more Heavy Duty users into the category, and we do that through recipe integration and teaching of young cooks who are coming into the category as part of the last several years, particularly with COVID, more people staying at home and cooking at home. We've introduced new products like Air Fryer Liners. So the recent innovations of air fryer lining is coming into a lot of homes. We developed a product that is now growing very significantly and used for that. And parchment, which you mentioned, is... That category is up 40% since 2018, just demonstrating how many new cooks there are cooking every day. And of course, we have the, the brand position in that, in that part of the category. Okay, great. With Non-Stick and Heavy Duty, so that's actually something I'm a little arm's length from in terms of when did you, I guess, delineate between the two. I know Heavy Duty has always existed, and Non-Stick has had for a long time, but when would you say you really started to emphasize the differentiation between the two? And, you know, how is the shelf organized now? We repositioned- Yeah, yeah. - Non-Stick two years ago. Okay. We did a packaging change at the same time so that we could really make the shelf easier to shop for the consumer. If you probably haven't noticed that, but Reynolds Wrap Everyday, Heavy Duty, Non-Stick, is really called out more on the graphic designs of our packaging, just so that the consumer can really understand the difference. And then through our advertising and promotional campaigns, we've been, you know, teaching them about the different use occasions for each one of those products. Okay. What are the relative price points like between Non-Stick and Everyday? We line priced it. Okay. You get 75 ft of Reynolds Wrap Everyday for the same price, you get 50 ft of Non-Stick or 50 ft of Heavy Duty. So it is line priced, but it's just different footage. Okay, great. And then let's talk maybe a bit about waste bags. So I guess the, you know, the category saw some significant growth in units, you know, in consumption. People were at home, right? More trash being generated at home. Then I'd say maybe six months ago, we started to hear conversations around the sort of trash being stuffed in the bag. So in some ways, I think, you know, that category is on the front lines of what's happening in terms of consumer trends, right? Sort of consumers at the low end, feeling more pressured, maybe arguably higher-end consumers spending less time at home. So I guess, what's your current read on the consumer environment? And a big topic this week, not surprisingly, has been the waiting for the Godot recession sort of thing. I'd just be curious to know your perspective on that. Well, on household penetration or consumer behavior, as it relates to not just waste bags, but across the board, we have seen a change in consumer behavior from putting, you know, a lot of product into the pantry. And I'm not talking about the stock up that occurred during the pandemic, but usually you'd have another roll on hand or another box on hand of waste bags. And frequency of use is still up. I mean, people are spending more time at home than they were pre-pandemic. There are not, you know, everybody back in the office five days a week, so there are more use occasions than there were before. But in this year, there has been more return to the office, and there have been, what we've seen, a change in the way that they're managing their pantry. So it's not just stuffing the bags more, but it's more run out to zero. Run out to zero means I'm gonna wait till I run all the way down and have nothing left, and then I'm gonna go buy my next roll of Reynolds Wrap or my next bag of, of Hefty. And that's a different behavior than what's been previously where they would have one in the pantry. Mm-hmm. So it's... Eventually, you're gonna replenish that. It's a change because the, you know, the cost and the inflationary environment that we're in. Okay. And then trade spend is, I mean, in this context, right, so trade spend is up versus year-ago levels. So kind of what are you seeing as it returns from that? And maybe anything you can share on the, the approach, right? Is it frequency, depth, you know, getting a little bit more in the weeds on how you're leveraging trade spend. Yeah, and as I mentioned in one of my comments earlier, first of all, we don't necessarily focus on promotions trying to gain share. Our focus on promotions is about how do we fundamentally grow the category? Because we're on both sides of this with brands and store brands, so we're working to find the right periods of time to be able to get trial, repeat, and ensure we've got the right price points on shelf. So it's not necessarily about high-low, it's more about perhaps TPRs, temporary price reductions, to ensure we have the shelf price right for a longer extended period of time, which is a deep store promotion. And one of the things that COVID and the supply chain disruptions provided us is, there were two years where we had very limited promotions. So we were able to, with our retail partners, step back and say: "Let's not just repeat what has been done historically in the past. We can wipe the slate clean and, and really look at starting over. What worked in the past, what didn't work, and let's, let's look at the highest ROI events, and let's repeat those. But let's not necessarily do that BOGO that we did every year just because we did it before." So what we're seeing is, we're not, we're not at the same levels that we were pre-COVID from a percentage on promotion standpoint. What we're doing is, is more about getting the price points right, and so it's longer period of time, less depth, and getting the high... When we are promoting, it's for the holiday or use occasions to really drive category. Okay. What's the response been from retailers on that front? Are retailers agitating for, for more, more, more, you know, or? It's as long as we're collaborative and we're working, which we are. It's a very collaborative process about how are we going to invest to grow the category? So our, our strategy as a company, because we do both brands and store brands, is consistent with their strategies. Their focus is growing the category, not necessarily a brand or a store brand, but the entire category both. So we focus on the same, and those promotional programs are designed to, to really focus on the same thing they're trying to achieve. So it's a collaborative process. Okay. We've definitely seen in a Walmart, like, holiday period, like, much bigger promotional baskets and, you know, Fourth of July, Memorial Day, Thanksgiving, a big one for you guys. Right. So let's talk about the pending holiday season. Not to rush the beautiful autumn weather. But as you think ahead to holiday, actually, you know, what can you tell us maybe a bit about, marketing and marketing plans, promotional plans and activity, with the backdrop of a questionable consumer environment? Yeah. Our disposable tableware and our, of course, our cooking business is most focused on the holiday. The other two business segments are less seasonal than those two businesses. So we've got very specific programs put in place, which include promotional pricing during that period of time on all channels, as well as getting secondary placement. We find that, particularly with cooking products, getting secondary placement throughout the retailers is the best way to really provide an opportunity for ensuring that the consumer remembers to buy a foil or parchment paper or a Turkey Oven Bag. Okay. Are we through the period of having to worry about how many turkeys are being cooked year-over-year, and whether it's group Thanksgivings or many small Thanksgivings? It's not something that our marketing folks are talking about this year, so- Okay. Okay. We're there. Yes. That's good. Okay, good. Good news for all of us. Wanted to just talk for a moment about guidance for commodities and input costs. So I guess, you know, kind of almost putting that aside, if we've seen decreases relative to your assumptions, like, what would your approach to the... Let's say, sorry, let me say it differently. If the commodity and input cost outlook is better than what is embedded in your assumptions, you know, what would happen with that kind of profit flexibility, that you might find with P&L? You know, I, I have been fortunate and privileged to be in this role as a CEO of this company for going on 13 years. We've been through commodity cycles, and we have managed through those very effectively. This is not the first one. This has been this very big one, meaning the commodities went up very quickly and very high. But it's not the first time this company has been through managing pricing with commodities moving. We're now in an environment where we're able to manage to ensure that we get the pricing right for the consumer, margins for the retailer, and ensure that we're, we're restoring our margins for our shareholders. Because prices are stabilizing, we're on a downward trend for most of the commodities in, in our categories. If they continue to go down even further, which we're not projecting, we're projecting some stabilization here as to the level they're at, then there are things we can do from a promotional standpoint to ensure that we get, again, not high-low, but to ensure that we get that equation for all the participants in the category, the consumer, the retailers, and of course, our shareholders. We get that, we get that right. Okay. The competitive dynamics in your categories differ pretty significantly. Foil, where you're the only brand to play in, but then, of course, we have the trash or waste bag category, where it's a much more competitive landscape. So what's your experience been with that category, in particular, as we move through a commodity cycle? Does it tend to follow the same suit? Is that sort of more of a watch-out point for how things could unfold? I'd say that the overall, that has been fairly good competitive environment. It's been pretty stable. I think the thing that we watch carefully is the store brands, because the store brands have about 50% or less than that of the share of the waste bag category. So that's an important part of what we need to manage the price gaps, too, and as we look at how to price in the category. Okay. Would you also think about, you know, some of the theoretical savings, again, if commodities were to come in a bit, a bit better? Is there scope for stepping up advertising or refreshing on, on Hefty in particular? Because, you know, the Ultra Strong and the ad campaign- Fabulous. So, you know, really a tremendous result... but it would seem your branded competitors kind of getting back on their right footing, which is healthy for the category, obviously. Right. Just thoughts about maybe refreshing the marketing or activity or any product activity to kind of continue the momentum you've had on the branded side? I think we're doing a very effective job, as I mentioned earlier, of advertising in, in that category as well, all of our categories. There's always potentially an opportunity for some improvement, but I wouldn't say that there's necessarily a step change required in, in the category from an investing standpoint. I do think that we'll continue to invest in innovation, and regardless of whether or not the, the commodities are stable or going down slightly, that's another area of, of investment for us to ensure that we're- we've got a product pipeline that ensures that that 20% of revenue from products are less than three-year-old, it continues. So it's-- we're always going to be investing in advertising as well as investing in innovation. Okay, great. Michael, so cash flow has improved a lot this year, and you called that working capital initiatives again with second quarter results. Can you just tell us, you know, what, what's been driving these improvements? Yeah. Thanks, Lauren. You know, cash has been very strong in the first half of the year. We've been quite pleased with the results. The primary driver of that has been our efforts in all around managing inventory. Across all of our segments, we've made significant strides to reduce our overall inventory levels. We embarked upon this early in the year and had specific goals around how we're going to go after that inventory reductions in each of our businesses that have been successful in just managing to that overall goal. You'll see that continue to come down through the rest of the year. So we're really pleased. Around the second part of it is our ongoing efforts around improving our overall payment terms extensions. We're well on our way on that journey, and we'll continue to opportunistically go after those opportunities to extend terms with our suppliers. Okay. Have you made any changes in the incentive structure? You know, sort of often when you see kind of cash flow tick in the right direction, it's because, you know, paying for performance is something that helps. Yeah, more recently, we did add a, you know, a cash component to our overall incentive structure as a measure to make sure that our organization is driving overall improvement in that overall area. So that's, you know, worked well for us. Yeah. Okay. Now that I'm on the topic, any other changes in the incentive comp structure that has been, that's worth noting, that you've made of late or in the past year? Cash flow was the big change. EPS was the other that, you know, as we went public, was a change for our management team. Okay. Michael, sticking with the thread to the CFO, you know, paying back to paying down debt, can you just remind us of the capital allocation priorities for the business? Yeah. Well, largely our capital priorities aren't changed. Invest in our business, continue to have a very disciplined approach to our capital spending. Evaluate bolt-on M&As. We've continuously done that. Hasn't been a rich environment for us at this point in time, but we're continuing to look at those opportunities. And then deleverage to a target 2-2.5 x EBITDA. You know, you know, and not to mention, last month, as you indicated, we did announce a voluntary cash payment of about $100 million. And so we're pleased with that, and you should expect to look for more of that type of activity as we move forward. Great. I would love to talk a bit about bolt-on M&A, because it's actually even going back to, you know, the IPO period. It's something that I feel like I never really got my head around in terms of what bolt-on M&A might look like for you guys. So, I just think kind of the criteria, to the degree it's, you can find a way to articulate this, you know, but what are the, what are the types of things that are interesting? I think what's most interesting is, first of all, we're, what Michael talked about is there are a lot of opportunities to continue to invest in our business, both from a growth standpoint as well as for cost reductions. So that's a very important part of our capital allocation. Our dividends are very strong, and we're going to continue to pay dividends to give cash back to our shareholders. And then paying down our debt. Those are the three biggest priorities. And then as we look at M&A, it's got to be very close in, and it, it, when we say bolt-on, it's like, not transformational, it's smaller. Okay. Which limits those opportunities fairly significant. As Michael indicated, target-rich environment, when you narrow it that much, there's not that many opportunities. So we, we are looking primarily at what can we do to improve the R&D development, sustainability of our products. So perhaps research and development, small companies that have developed some new products and sustainable, that we can then take to our product lines and, and scale in a much faster, bigger way, is those kind of things that we're looking at. Okay. Okay. So more like technology than necessarily brands- Yes. -category. Okay. And then what about international? I mean, that was something that kind of came up here and there early on, and I was just curious to the degree which that is... It's been a tumultuous few years, but as we look out five years, will we be having a bigger company? Yeah. In a previous life, I've run a company that had multinational and it was in 38 countries. And I can tell you that's not in our DNA. That is not something that we're looking to expand beyond North America. We've got a lot of good growth opportunities in North America, the United States, of course, some new products, but also in Canada and Mexico, where we're underdeveloped in those two countries with our products. We recently just got the waste bags into Canada. So we've got expansion opportunities in North America. We're going to plan our own backyard for the next few years, and then we can look further out... But we don't need to do that part of our, you know, near-term strategy. Okay, great. So finally, before wrapping up, I just wanted to take a moment to touch on ESG, and you mentioned it as we were talking about bolt-on M&A. So, you do provide targets, you know, under ESG scorecard, you know, offer sustainable options in each of your product lines, recyclable, reusable packaging, recycling instructions. I have a long list here, so, but could you just give an update on where you stand versus those targets? You know, and how you kind of see your targets evolving as you actually hit them. Yeah, we established three different pillars in our ESG strategy, you know, we had all the components of that as a privately held company, but by going public, we really needed to formalize that. Those three pillars are products, people, and communities. So for example, on the products, we've achieved ensuring that all of our products have labeling on how to recycle those products. So that particular specific goal on our ESG platform has been achieved. On people, we set a goal to ensure that we had pay equity across our organization. As an example, we've achieved that goal. Recycling education to consumers was part of our community's commitment, as well as giving back to communities. On the educational, we've achieved a lot of that goal. So we're looking now at saying: All right, we've achieved these goals. We are looking at our stakeholders to add more and different goals to our list, to ensure that it's a, you know, evolving and continuous improvement. In greenhouse gas emissions, we committed that we would, by 2025, reduce our emissions by 25%. And I can tell you, our board challenged us: "You're not gonna sign up for that unless we see a clear path to achieve it." And we do have a very clear path to achieve that through primarily, energy reduction in our manufacturing operations, but through other very specific actions that we are taking over the next several years to achieve that outcome. Okay, great. And then just as ESG preference is growing among consumers, and particularly in younger cohorts, which has also been an area we've been very successful, younger cohorts, with bringing them into, to cooking at home and so on. I just wonder how your strategy towards ESG might differ from other, you know, companies in this conference, just frankly, given the product offering, right? Food that, you know, - Well, one of the goals that we have in our ESG platform is to have a sustainable product solution for our entire product portfolio by 2025, so that a consumer can make that decision about a sustainable product choice in any one of our products. We are well on our way to achieving that. We've got the pipeline to achieve that across all of our product lines. The next challenge is going to be to narrow that price gap so that the materials that we're using in order to achieve that do not have a significant premium cost versus our, you know, standard offering. So that, that's really how we're thinking about bringing that capability into our company and the, the younger consumers, as well as, you know, expanding our... It used to be called Hefty EnergyBag. It's now the Hefty ReNew Program, which is a hard-to-recycle plastics curbside recycling. We're expanding that across other municipalities. More to come on that as we're able to announce that, but we've got more municipalities that have signed up to join us in that endeavor. Okay, that's great. Please join me in thanking Lance and Michael for being here. It was great and good to see you guys.