Typhoo Tea is to call in administrators, as Britain’s oldest tea brand struggles with more than £70m in debt amid a sales slump in the highly competitive drinks market.

The 121-year-old company has filed a court notice to appoint administrators EY to explore rescue options, in a bid to give it some breathing space from creditors and to try to pay back its debts.

Typhoo, which was founded in 1903 by the Birmingham grocer John Sumner, has been struggling for a number of years as many drinkers have switched from tea to coffee, energy drinks and newer trends such as bubble tea.

Tea consumption has been in decline for years, with the research firm Mintel forecasting an 8% fall between 2023 and 2028.

“This action has been taken to enable us to pursue a sale of the business,” said Dave McNulty, the chief executive of Typhoo. “This does not mean that we are in administration. Given the delicate nature of this we are not in a position to comment any further.”

Sales at the company, which employs about 100 people, fell from £34m to £25m in the year to the end of September 2023, the most recent results available.

Losses ballooned from £9.6m to £38m year on year because of a redundancy programme and a trespassing incident at its sole factory in Moreton, Wirral.

The company was still in the process of implementing its transformation plan – including scrapping unprofitable product lines, closing its “inefficient and unsuitable” factory in favour of using co-packing partners, and making redundancies – when trespassers took over the site for “several days”, causing huge amounts of damage.

In total, the company took charges of £24m in relation to its restructuring plans and impairment to the Typhoo brand, property and machinery.

Included in this figure is just over £2.5m paid in staff redundancy costs last year.

Typhoo subsequently recovered £4.3m from an insurance claim related to the trespassing incident, and a gross sales price of £4.6m from the sale of the factory and its land.

“The abrupt closure of the Typhoo factory as a result of the trespassing incident necessitated the relocation of production to third parties faster than anticipated,” the company said. “This led to significantly higher direct expenses, impairment of assets and inefficiencies on production as our co-packing partners ramped up their production.”

Despite the mounting problems at the business, the accounts show that directors and key management personnel were paid £1.2m last year, with the unnamed highest-paid director taking home £324,000.

“The brand itself has also been struggling for some time,” said Roger Hutton, an insolvency expert and partner at the law firm Clarion. “The last time Typhoo Tea made a pre-tax profit was the £220,000 it posted in the year to 31 March 2017. Since then, the company has made over £100m in pre-tax losses.

“While the court filing doesn’t mean the company is officially in administration yet, time is of the essence to help secure the future of the company and the earlier interventions are taken, the more solutions there are.”