Karat Packaging (KRT) 16th Annual Wells Fargo Industrials & Materials Conference summary

Business overview and growth

• Specializes in food service packaging, supplying major QSR chains and over 150 brands nationwide.

• Online sales are a significant growth driver, projected to reach $100M+ this year, targeting $130M–$150M.

• Organic growth has been the primary strategy, with only one small acquisition in 25 years.

• Product innovation and expanding SKUs, especially in paper-based packaging, are key to growth.

• Regional expansion includes doubling warehouse capacity in Chicago and adding a new facility in Orlando.

Competitive differentiation and supply chain

• Operates as both distributor and manufacturer, offering higher profit margins and nimble operations.

• Stopped CapEx in manufacturing in 2022, increasing gross margin from low 20s to high 30s.

• Diversified sourcing away from China (now <9% of imports) to Taiwan, SE Asia, and Latin America.

• Maintains over 145 vendors, minimizing concentration risk and enabling cost negotiation.

• Adapts quickly to supply chain disruptions, often gaining market share during volatility.

Sales pipeline and customer acquisition

• Growth driven by expanding wallet share with existing clients and onboarding new national chains.

• Conversion of national accounts can accelerate from two years to three months in times of supply chain stress.

• Success stories include rapid SKU expansion with Chili's and Panda Express due to nimble response.

• Online channel growth fueled by new platforms (e.g., Sysco.com) and bulk purchasing options.

• Higher online sales margins achieved through volume discounts and inventory ramp-up.