Wesfarmers' (ASX: WES) Coles supermarkets seems to be pushing the English language and likewise pushing the ACCC and customers patience with claims of 'freshly' baked goods, which are pre-mixed and snap frozen in Europe before being baked in Australia.
As explained here the ACCC has taken action against Coles claiming that its advertising was potentially misleading. While the products in question are being imported from overseas, which adds an extra dimension to the case in terms of how long the dough is frozen for and where it is manufactured, the practice of using frozen dough is widespread and no doubt employed by other bakers including Domino's Pizza Enterprises (ASX: DMP) and Woolworths (ASX: WOW).
Foolish takeaway
Investors need to stay alert for consumer backlashes which at times can create significant threats for a company. One historical example worth studying is when The Coca-Cola Company (NYSE: KO) changed the recipe for Coke, with disastrous consequences. In the case of Coles, investors shouldn't expect this issue to have a pronounced effect but it will nevertheless be interesting to see how management reacts to the negative publicity.
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Motley Fool contributor Tim McArthur has no financial interest in any company mentioned in this article.
