Karat Packaging Inc. reported a net sales increase of 10.7% for the fiscal year ending December 31, 2025, reaching $467.7 million, compared to $422.6 million in 2024. The company’s net income also rose to $32.7 million, reflecting a 6.0% increase from the previous year. However, the gross margin decreased to 36.8%, down from 38.9% in 2024, primarily due to rising costs associated with ocean freight and tariffs, which nearly doubled from $14.7 million to $29.3 million year-over-year. The overall cost of goods sold increased by 14.4% to $295.6 million, driven by higher product costs and increased shipping expenses.
In terms of operational changes, Karat Packaging has shifted towards a more asset-light model, reducing its domestic manufacturing contribution to approximately 9% of net sales, down from 11% in the prior year. This strategic pivot was influenced by rising domestic labor costs and decreasing ocean freight rates. The company has also diversified its global vendor network, reducing its reliance on Chinese suppliers from 22% to 15% of total sourcing, while increasing imports from countries like Malaysia and Vietnam, which now account for 17% of sourcing.
Karat Packaging's customer base continues to expand, with significant contracts contributing to growth. The company secured a paper bag contract with a national chain, projected to generate approximately $17 million in annual revenue, which helped boost paper bag sales from $7.9 million in 2024 to $13.7 million in 2025. The company also reported adding over 120 new accounts in the chain and distributor channel during the year. As of December 31, 2025, the company employed approximately 696 individuals, reflecting its commitment to scaling operations.
Looking ahead, Karat Packaging aims to capitalize on the growing demand for eco-friendly products, which constituted 34.1% of total sales in 2025, up from 33.6% in 2024. The company plans to continue investing in its e-commerce platform and expanding its distribution network to support growth. Additionally, the company has initiated a share repurchase program of up to $15 million, with approximately $3 million repurchased during the year. The Board of Directors has also declared a quarterly cash dividend of $0.45 per share, reinforcing its commitment to returning value to shareholders while navigating the evolving market landscape.
About Karat Packaging Inc.
Karat Packaging Inc. is a distributor and manufacturer of disposable foodservice products, including containers, bags, tableware, and eco-friendly solutions. Serving restaurant chains, supermarkets, and online customers nationwide, it emphasizes sustainability with a growing line of compostable and recycled products. The company leverages global sourcing, domestic manufacturing, and a broad distribution network to provide innovative, customizable, and cost-effective packaging solutions.
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