Typhoo Tea, a staple in British households for over a century, has been acquired by Supreme, a company best known for its vaping products, in a deal worth £10.2 million. This acquisition comes on the heels of Typhoo entering administration due to financial struggles.
A Lifeline for a Historic Brand
Founded in 1903, Typhoo Tea has long been a symbol of British tea culture. However, recent years have seen the company grappling with declining sales and mounting debts. The situation worsened last year when trespassers caused extensive damage to its Merseyside factory, leading to significant operational disruptions.
Supreme’s acquisition includes Typhoo’s stock and trade debtors, valued at £7.5 million. The Manchester-based company, which produces the e-cigarette brand 88Vape, views this purchase as a strategic move to diversify its portfolio beyond vaping products, especially in light of anticipated government restrictions on disposable vapes.
Supreme’s Diversification Strategy
Supreme has been actively expanding its business operations. Earlier this year, the company acquired Clearly Drinks for £15 million, marking its entry into the soft drinks market. The addition of Typhoo Tea is expected to further balance Supreme’s revenue streams, with non-vape sales projected to account for about half of the group’s total revenue.
Sandy Chadha, Supreme’s CEO, expressed confidence in the acquisition, stating, “The addition of Typhoo Tea and its highly complementary blend of great value and premium tea brands creates tangible cross-sell and product innovation opportunities in the near term.”
Challenges Leading to Administration
Typhoo’s financial troubles have been mounting over the past few years. The company reported a pre-tax loss of £38 million for the year ending September 2023, a significant increase from the £8.5 million loss the previous year. Revenues also declined from £33.7 million to £25.3 million during the same period.
The break-in at the Moreton factory not only caused extensive damage but also rendered stock unusable, contributing to exceptional costs of £24.1 million. This incident had a material impact on Typhoo’s day-to-day operations and further strained its financial position.
The Future Under Supreme’s Ownership
Under Supreme’s ownership, Typhoo Tea is expected to operate on a capital-light, outsourced manufacturing model, which the board believes can generate a gross profit margin of around 30%. Supreme anticipates that the integration of Typhoo will proceed without disrupting existing operations or customer service levels.
This acquisition not only preserves a historic British brand but also aligns with Supreme’s broader diversification strategy. By bringing Typhoo Tea into its portfolio, Supreme aims to leverage its market reach and expertise in building brand loyalty to revitalize Typhoo’s presence in the market.
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