Karat Packaging Reports 4.2% Sales Increase to $422.6 Million, Net Income Declines by 7.1%

Karat Packaging Inc. reported a net sales increase of 4.2% for the fiscal year ending December 31, 2024, reaching $422.6 million, compared to $405.7 million in 2023. The company achieved a gross profit of $164.3 million, reflecting a gross margin of 38.9%, which is a 120-basis-point improvement from the previous year. However, net income decreased by 7.1% to $30.8 million, resulting in a net income margin of 7.3%, down from 8.2% in 2023. The decline in profitability was attributed to a rise in operating expenses, which increased by 14.1% to $126.6 million, primarily due to higher selling and general administrative costs.

In terms of operational changes, Karat Packaging has shifted towards a more asset-light model, reducing its domestic manufacturing from 20% of net sales in 2023 to approximately 11% in 2024. This strategy involved increasing imports and scaling back on domestic production, which has allowed the company to enhance its supply chain resilience and improve operating cash flows. The company also expanded its vendor network, now comprising over 140 suppliers, to mitigate reliance on individual sources and adapt to changing market conditions.

Karat Packaging has made significant strides in expanding its customer base, particularly in the supermarket segment, gaining notable clients such as Albertsons and H-E-B. The company’s e-commerce channel has also seen substantial growth, with online sales increasing by 48% year-over-year, contributing to a higher margin compared to traditional sales channels. As of December 31, 2024, the company employed approximately 721 individuals, reflecting its commitment to scaling operations and enhancing customer engagement.

Looking ahead, Karat Packaging aims to continue its growth trajectory by focusing on expanding its product offerings, particularly in eco-friendly disposable products, which accounted for 33.6% of total sales in 2024. The company plans to invest in research and development to enhance its Karat Earth® line and is exploring opportunities for strategic acquisitions to bolster its market position. Despite facing challenges such as fluctuating raw material costs and evolving regulatory landscapes, the company remains optimistic about its ability to navigate these issues and drive long-term growth.