Motley Fool Money: Interview with Karat Packaging CEO Alan Yu

Episode: From Boba Tea Shop to Packaging Powerhouse
Date: September 21, 2025
Host: Andy Cross, Tom Gardner, Matt Grier
Guest: Alan Yu, Co-founder & CEO, Karat Packaging (KRT)

Episode Overview

This episode dives into the remarkable journey of Karat Packaging — from humble beginnings as a single boba tea shop to becoming a dominant player in the food packaging industry with nearly half a billion dollars in annual revenue. CEO Alan Yu shares insights on Karat’s growth strategy, its customer-first ethos, market trends (especially around eco-friendly packaging), innovation, sourcing challenges, and the company’s unique founder-led model.

Key Discussion Points & Insights

1. Karat’s Origin Story and Business Focus

• Startup to Powerhouse: Karat Packaging started as a boba tea shop in 2000 but evolved by fulfilling a key need for fast, customizable, and affordable packaging.
  • “We originally started as a Boba tea shop … but now our core product has migrated, shifted into packaging ... our customers actually in every day of your life, if you go out and buy foods … you will be using our product.” – Alan Yu [01:25]
• One-Stop-Shop for every size business, from single-location startups to major national chains (Panda Express, In-N-Out, Applebee’s, etc.).
• Domestic Manufacturing complements a robust U.S. distribution network with 10 warehouses.

2. Finding and Filling a Market Niche

• Customization for All: Karat saw an unmet demand for custom-printed packaging for small and mid-size restaurants who were overlooked by bigger suppliers.
  • “You could be a growing business with just five restaurants or one a startup. You can have your own name brand on your takeout container, your soda cup … regardless if you're one store or 100 stores or a thousand store, we'll definitely take care of you.” – Alan Yu [03:19]
• Trend Spotting: Early recognition and adaptation to shifts, particularly the move away from Styrofoam and plastic due to bans and consumer preferences.
  • “Most Asian countries have already moved away from Styrofoam ... more and more [U.S. companies] are converting away from Styrofoam into a more eco-friendly packaging, and that's where we see the opportunity.” – Alan Yu [05:35]

3. Regulatory Winds as Tailwinds

• Ban-backing Growth: Legislation banning Styrofoam and plastic (especially in California) is accelerating the shift to paper and eco-friendly products, boosting Karat’s opportunity set.
  • “California, I believe they just banned plastic bags starting 2026 January … California banned Styrofoam January of this year and we've seen opportunities started coming everywhere.” – Alan Yu [07:39]

4. Karat’s Differentiation: Nimbleness and Customer Focus

• Nimble Culture: Despite scale, Karat maintains a “startup” mindset—fast, flexible, and directly connected to customers of all sizes.
  • “Our company has grown from a startup to almost half a billion dollar company, we still act as a startup. We treat our customer as our family … Every customer is a VIP.” – Alan Yu [08:13], echoing his opening statement at [00:05]
• Service Model: Direct sales to customers, not just distributors. Smaller chains receive attention large competitors don’t provide.

5. Innovation and Product Development

• Continuous Expansion: 7,000 SKUs, with 500+ new products in the last year.
• Packaging Innovation: Shift in restaurant/hospitality environments from plastic to more creative, customizable, and often corrugated or cardboard containers that balance cost, function, and eco-appeal.
  • “People are being creative … it's also economic. It is cheaper to have a corrugated boxes or cardboard boxes versus a plastic containers ... they’re recyclable.” – Alan Yu [09:31]
• Global Inspiration: Regular trips to Asia, especially Korea and China, inform Karat’s product innovation pipeline—spotting packaging trends and adapting them for the U.S.
  • “A drink shops or a boba tea shop in Asia, they … attract customers not because [of] the drink, it's because they’re packaging ... if this idea … is good in Asia … we can do it here domestically too.” – Alan Yu [10:38]

6. Founder Ownership & Company Culture

• Unusual Leadership Structure: Between Alan and co-founder Marvin, the two still hold a majority of the company.
  • “It's not common to have a founder with over 50% in shares. … after we went public, we've given some RSU to our employees that have helped the company grow.” – Alan Yu [11:56]
• Complementary Roles: Alan leads market-facing activities while Marvin handles manufacturing and vendor relationships.

7. Evolving Distribution & Logistics

• National Footprint: Grown from a California base to a national presence. Strategic warehouse placement shortens delivery windows, critical for online expansion and customer satisfaction.
  • “Instead of adding additional warehouse facilities, we're increasing … the sizes of our current distribution center … so the customer can receive their product within 40 hours. That really help our business model growth.” – Alan Yu [13:44]

8. Sourcing Amid Trade Wars

• Rapid Diversification: Over five years, Karat moved from sourcing almost entirely from China to less than 10% today—now spread across Taiwan, Korea, Vietnam, Malaysia, Indonesia, and increasingly Latin America.
  • “Five years ago … most of our product would come out of China. Today … less than 10% of our product are from China. And we're trying to move away that 10% by within the next 60 days …” – Alan Yu [16:57]
• Unique Agility: Karat can quickly establish new vendor relationships by supplying its own equipment, slashing transition times to as little as 2-3 months.
  • “The quickest way is we invest in that vendors and we give them the equipment … and we give them the order. … Only takes around two to three months and we can start a new, new, new country. That's something we do. Other people do not do that.” – Alan Yu [18:57]

9. Relentless U.S. Focus

• Sticking to the U.S. Market: No plans to expand internationally; the U.S. market is huge and still offers much more room for growth before looking beyond.
  • “Why … spend time to other countries?” – Alan Yu [20:17]

10. Technology as a Lever

• Efficiency Gains: Headcount has dropped from 1,000 to under 700 thanks to automation, digitization, and use of AI.
  • “We have become almost paperless … 99% of [customer questions are] answered by AI. … 60% of online order are processed through mobile application.” – Alan Yu [20:59]

11. Acquisition Strategy

• Cautious on M&A: Karat prefers organic growth and category expansion over risky acquisitions; wary of integration challenges that plague industry peers.
  • “We've tried and made several offers to different companies … a majority … have not been very successful in terms of integrating … so instead of acquiring … we actually just brought in more categories.” – Alan Yu [22:38]
• Outpacing Peers: Karat expects double-digit growth this year, while competitors shrink or grow only modestly.

Notable Quotes & Memorable Moments

• “Every customer is a VIP.”
  – Alan Yu [00:05], [08:13]
• “If you are one single retail startup, these large manufacturer would not even talk to you … we will treat you … regardless if you're one store or 1,000 stores.”
  – Alan Yu [03:19]
• On regulatory bans:
  “If you heard that more and more [places] over the next three years [are banning Styrofoam/plastic], that's a very good sign for Karat.”
  – Tom Gardner [07:19]
  “Yes, definitely. … we've seen opportunities started coming everywhere.”
  – Alan Yu [07:39]
• On founder ownership:
  “It's not common to have a founder with over 50% in shares.”
  – Alan Yu [11:56]
• On supplier diversification:
  “Five years ago … most of our product would come out of China. Today … less than 10% of our product are from China … we're trying to move away that 10% by within the next 60 days.”
  – Alan Yu [16:57]
• On U.S. focus:
  “Why risk? Why even spend time to other countries?”
  – Alan Yu [20:17]
• On technology & AI:
  “99% of [customer inquiries] is answered by AI so you know, less customer service needed.”
  – Alan Yu [20:59]

Key Timestamps

| Segment | Timestamp | |-----------------------------------------------------|-------------| | Opening: Karat’s startup roots, core values | 00:05–01:25 | | Market opportunity and niche in customization | 03:03–06:18 | | Regulatory landscape (Styrofoam/plastic bans) | 07:19–08:13 | | Competitive differentiation, “every customer is VIP”| 08:13–08:59 | | Innovation and global sourcing for R&D | 09:31–11:33 | | Founder partnership and share structure | 11:33–13:09 | | Distribution/logistics evolution | 13:09–16:32 | | Sourcing/geopolitical risk adaptation | 16:32–18:57 | | U.S. market focus over international | 20:02–20:49 | | Technology and AI transformation | 20:49–21:53 | | M&A strategy—organic growth v. acquisition | 21:53–24:02 | | Episode wrap-up and closing thanks | 24:02–24:50 |

Summary & Takeaways

Alan Yu’s interview reveals how Karat Packaging’s entrepreneurial agility, keen market observation, and genuine customer care have fueled robust growth despite global supply chain turbulence and rapidly changing regulations. Their nimble approach to both customer service and supply chain management, continuous SKU and innovation pipeline, and commitment to the U.S. market make Karat a standout in the packaging sector—especially as environmental trends and legislation disrupt traditional players.

Karat’s story provides a compelling lesson in scaling while maintaining startup values, anticipating macro trends (like eco-packaging), and leveraging both technology and a founder-led culture for competitive advantage.