Supreme buys Typhoo Tea for £10.2m

The deal includes Typhoo Tea's stock and trade debtors with a book value of £7.5m and Supreme said it expects the integration of the business to proceed without disruption to existing operations or customer service levels.

For the year ended 30 September 2024, Typhoo generated unaudited revenue of about £20m and a loss before tax of approximately £4.6m.

Supreme's said that under its ownership, it is expected that Typhoo Tea will operate on a capital light, outsourced manufacturing model, which the board believes can generate a gross profit margin of around 30%, with "a much reduced" overhead base.

Supreme chief executive Sandy Chadha said: "The acquisition of Typhoo Tea marks a significant step in our broader diversification strategy and brings one of the most iconic UK consumer brands into the Supreme family.

"I believe Typhoo Tea will thrive under our ownership, further benefitting from Supreme's significant market reach and successful track record in creating brand loyalty, making us an ideal fit for this business.

"Having established our Soft Drinks division earlier in the year, we believe 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, alongside avenues into credible UK retailers that Supreme has been looking to partner with."

At 1040 GMT, Supreme shares were up 5.6% at 176.40p.

Dan Coatsworth, investment analyst at AJ Bell, said: "The Typhoo Tea brand lives on. Supreme has bought the loss-making business out of administration, spotting an opportunity to snap up a well-known brand on the cheap and diversify its interests to be less reliant on sales of vaping products.

"Supreme is a real hotchpotch of a business, also selling a broad range of products including batteries and vitamins. While it has existing interests in the drinks sector, Typhoo will take it into a new segment of that market.

"Supreme has a plan to make Typhoo profitable again, but buying any business out of administration comes with significant turnaround challenges."

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Kettles will be whistling in celebration at Typhoo HQ now that an historic British brand will stay on the shelves. The deal with Supreme had been brewing for some time, and there will be relief that the details have been poured over and the acquisition has been agreed. Typhoo has faced a super-tough time not just because of falling sales, but the production issues which beset the company after trespassers caused damage at its plant on Merseyside.

"For staff, there will be relief that many jobs will be saved, particularly just before Christmas. However, it’s highly likely that Supreme will want to steam ahead and find efficiencies to cut costs and try and coax the company back to profit. It’s clearly got a bargain brew for Typhoo by buying the brand out of administration. It has loyal custom it can build on, but also will spy new opportunities given tea’s wellness image to tie into the ambitions of its supplements and multivitamin arm. There are clearly opportunities ahead to appeal to health-conscious consumers and future Typhoo product launches look likely focus on this trend."