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Thu. 7 Apr 2022, 8:08am ET Benzinga News, Contracts

Karat Packaging Inc. (NASDAQ:KRT) (Karat), a specialty distributor and manufacturer of environmentally friendly, disposable foodservice products and related items, today announced it has entered a definitive joint venture agreement with Happiness Moon, Co. Ltd (Happiness Moon) to establish a new corporation, Green Earth Technology (Green Earth), to build a new 180,000 square-foot factory in Taiwan.

The new facility will have state-of-the-art robotic automation to manufacture compostable foodservice products from bagasse, a derivative of sugar cane pulp, which is a fast-growing source of 100% compostable foodservice products. Happiness Moon is one of the leading manufacturers of disposable foodservice products and machinery in Taiwan, with a global blue chip customer base.

Karat will hold a 49 percent interest in Green Earth, and its initial investment is approximately $6 million. Manufacturing is anticipated to start in the second half of 2022, using proven machinery and technologies developed by Happiness Moon. The new plant is expected to produce approximately 7,560 tons of products in 2023, or approximately 648 containers of take-out boxes, plates, bowls, tableware, and other bagasse products. Approximately one half of the production will be earmarked for Karat's customers, with the remainder for other customers in Asia and Europe.

"Our investment demonstrates Karat's commitment and leadership position in providing eco-friendly disposable foodservice products," said Alan Yu, Chief Executive Officer. "Most bagasse products in the United States are currently imported from China. The joint venture will enhance Karat's vertical integration in its supply chain and accelerate growth and margin expansion.

"Our objective in the next several years is to become the leading manufacturer of bagasse foodservice products for the U.S. market. After thoroughly assessing the technology and robotic capability in Taiwan, which we believe will enhance efficiencies and productivity, we plan to bring the proprietary manufacturing processes to the U.S. and build a first-of-its-kind bagasse production plant.

"Expanding the use of environmentally friendly, compostable products, which have a lower carbon footprint, represents a critical step to help businesses and consumers transition toward sustainable living. Karat's unique complementary operating platform of supplier network and manufacturing enables us to provide customers broader product offerings and customization, with shorter lead times," Mr. Yu added.