Reynolds Consumer says it’s ‘well-positioned’ to win in online grocery

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Reynolds Consumer Products Inc., with its portfolio of consumer goods from Hefty bags to Reynolds Wrap, has been focused on e-commerce for years, according to Chief Executive Lance Mitchell, which should pay off as online grocery shopping grows.

Mitchell notes that Reynolds Consumer REYN, +3.71% products are “shelf stable,” meaning they can be stored at room temperature, and cost-effective for shipping.

Not only that, Reynolds Consumer merchandise is sold at major grocery stores and warehouse clubs like Costco Wholesale Corp. COST, -1.15%  , among other retailers. Curbside pickup is gaining popularity for retailers like Walmart Inc. WMT, -0.19% and Target Corp. TGT, +1.60% And the categories that Reynolds Consumer merchandise occupies are often sold along with perishable food items.

See: Reynolds Consumer shares soar after its portfolio of everyday goods goes public in $1 billion-plus IPO

Shoppers picking up the ingredients for their next family dinner can toss aluminum foil and trash bags into the basket as well.

Consumers spent $86 billion online for consumer packaged goods in 2019, according to Nielsen data. By 2025, online food and beverage sales are expected to hit $143 billion, according to data provided by Nielsen, about 30% of all spending from shoppers who make purchases in stores and online.

Mitchell told MarketWatch that the company’s in-house e-commerce team became focused on digital, including advertising and managing online consumer responses to the company’s products, five years ago.

Also: As Amazon races to delivery in a day, Target drives digital customers to stores

“We’re participating in household categories that are growing and resilient to economic cycles,” Mitchell said.

Reynolds Consumer went public because the company has made recent investments and reduced costs.

Moreover, the company has eliminated financial swaps from its investments and stopped hedging aluminum, a key raw material. (Mitchell said the company never really hedged another key item, plastic resin.) In 2019, the company had booked an $11 million derivative loss.

“Now that we have changed our hedging strategy, that won’t be repeated,” he said.

Reynolds Consumer’s owner, New Zealand billionaire Graeme Hart, has reached his mid-60s and has started to think long-term for the company, Mitchell said.

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Not only is going public a part of that long-term thinking, preparing for increasing e-commerce and remaining innovative is part of it as well.

In 2018, 21% of the company’s revenue came from products that were less than three years old. Still, one of the company’s core products, Reynolds Wrap, was introduced in 1947.

“We’re in strong durable categories that are growing consistently. Our products are well positioned for e-commerce,” Mitchell said. “Product innovation ensures upward trajectory for volume and revenue growth.”

Reynolds stock closed down 4.3% on its first trading day, Friday, Jan. 31. Shares have bounced back on Monday, up 3.7%.

The Consumer Staples Select Sector SPDR Fund XLP, +0.00% has gained 18% over the last year while the S&P 500 index SPX, +0.73% is up 19.2% for the period.