Typhoo is the latest casualty in the tea category as falling retail prices, heavy supermarket promotions and flagging demand in the everyday black tea market led to a more than 9% fall in annual sales.
The £7.6m drop in revenues at Typhoo Tea to £74.1m in the year to 31 March 2016 – a reversal from 16% growth from 2014/15 – pushed down EBITDA 28% to £5.1m and operating profits 26% to £3.7m.
Typhoo was close to falling into the red after finance costs of £3.6m left pre-tax profits at just £56k.
The accounts published at Companies House also warn that the decline in the value of the pound will further erode profitability.
Typhoo, a staunch supporter of Remain in the EU referendum, is particularly vulnerable to post-Brexit rises in commodity prices as its only one ingredient – tea leaves – is traded in dollars, which has risen about 15% against sterling since June.
The business produces 125 million tea bags each week in its Merseyside factory and generates 95% of its sales in the UK.
International sales director Rahul Kale told The Grocer last month that 20% had been wiped from the bottom line since the Brexit vote, with up to £250k being lost every month.
CEO Somnath Saha said in the accounts that support from Typhoo owner Indian conglomerate Apeejay Surrendra Group would help the business withstand the inflationary pressure.
“Typhoo has performed well in the context of an increasingly challenging retail market and pricing volatility in the fmcg sector,” he added.
Typhoo is pining hopes of rebuilding sales on its collaboration with Nigella Lawson, who became the new face of the tea brand in January, and further TV advertising.
It is also, like many suppliers hit by increasing input costs, pushing retailers to accept price rises.
NPD for the Typhoo brand and expanding its fruit and herbal teas to capitalise on the growing market outside of black tea were also highlighted as part of its future strategy.
Typhoo rival Tata Global Beverages GB, which owns Tetley Tea, also suffered as a result of the falling retail prices in the year to 31 March 2016, plunging to a loss.
Data from Kantar revealed that tea sales plunged 4.7% to £619.8m on volumes down 2.1% in the 52 weeks to 22 May 2016 – the equivalent of 64 million fewer cups of tea.
“The company has performed well in a very challenging retail market and whilst operating profits are lower year-on-year, the balance sheet has been significantly strengthened,” a spokeswoman for Typhoo said. “By controlling costs and overheads it has been possible to make a saving of 15%. The strategy for 2016-17 is one of growth and improvement in operational performance.”
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