Karat Packaging Inc.

Can you kind of help frame that for us? That would be helpful.

Sure, Jake. Well, thank you. First of all, the fill rates. We are seeing our fill rate out of our Texas facility, which is one of our largest facilities. We're still at most of the purchase order that we received. The second quarter was at 50%. So we had to short customers almost 50% of the item they needed to order. But in California it was much better. California fuel rate was up to 85% except for the item that would basically bury under the, inside the warehouse. We had to emergency release a secondary warehouse in California just to be able to operate and start getting the product out of the warehouse shipped. So that was one of the issues. So in second quarter we did transfer, move more product into Texas. And at this moment right now, we're trying to move product into South Carolina, New Jersey, and Washington to stock up other warehouses because we have a lot of customers in different parts of the states that also need our products. So that's what we have been doing right now. Is there a softness in the market? No, I do not see a softness in the market. Actually, I've seen the market is growing even stronger. And the demand, especially the demand for composable eco-friendly product, it's It's basically growing, growing faster than ever. For example, I've seen that the San Mateo County is requiring every restaurant to be using compostable products starting October 1st, Hawaii starting September 1st. So everyone is clearing up with eco-friendly product line right now. And we spoke to a national chain account last week, and they were saying that prior to pandemic, their takeout was 15% of their overall volume. As of today, they're at 40% of their entire volume. And not to mention that, they've even added four different brands of virtual kitchen. That increased the volume, the usage of the packaging. And this is where we're seeing that the entire industry is going to be looking to grow with the disposable packaging, with this trend moving into more ghost kitchen and virtual kitchen from the existing chain accounts.

Great. Thank you. That's really helpful. And I wanted just to focus in on gross margins for a moment. One is I know in the first quarter there was that big impact of capitalization of freight and duty. Was there any impact in the second quarter? I might have missed that, but whatever impact was in the second quarter. And then you know, we've been tracking, you know, weekly spot ocean freight rates from, you know, East Asia to the West Coast, and they're down about 60%, you know, currently is from what I'm seeing year over year. So the question is, you know, when do you see that sort of benefit flowing through? I mean, is there a quarter or two delay? When should we see the benefit of really dramatically falling ocean freight rates, you know, coming through the gross margin.