Larson's questions to Karat Packaging Inc (KRT) leadership • Q1 2025
Question
Larson inquired about Karat's strategy for diversifying its supply chain away from China, asking for details on new sourcing countries. He also questioned the company's approach to pricing amid new tariffs, the potential for reciprocal tariffs, whether the trade situation could be a net benefit, recent freight cost trends, and for examples of internal cost-saving initiatives.
Answer
Executive Alan Yu explained that Karat plans to reduce sourcing from China to approximately 1% by August 2025, shifting production to Malaysia, Indonesia, Vietnam, Thailand, and the Middle East. He confirmed that price increases were implemented on April 1 and across-the-board increases of 5-20% were announced for mid-May, noting that high demand and competitor shortages give them pricing power. Yu also stated that the tariff situation is a net benefit as Karat was better prepared than competitors, but it is too difficult to plan for potential reciprocal tariffs. Regarding costs, Yu noted freight rates are highly volatile, while CFO Jian Guo added that the company is pursuing internal efficiencies, such as renegotiating with third-party shipping carriers, to absorb some cost pressures.