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Retail Food Group share price lower after admitting to extending use-by dates

In morning trade the Retail Food Group Limited (ASX: RFG) share price has dropped lower after the SMH reported that Michel’s Patisserie was deliberately selling batches of chocolate cakes, birthday cakes, and edible decorations to customers months after their use-by date.

At the time of writing the Retail Food Group share price is almost 2.5% to 22 cents.

What was reported?

The media outlet revealed that Retail Food Group “instructed Michel’s franchisees to ignore expiry dates on packaging and adopt a new shelf-life extension date, ranging between two and six months.”

This includes extending the use-by date on chocolate cakes by three months and spinach and feta scrolls by two months.

Retail Food Group response.

This morning the company responded to the media reports and defended its actions.

According to the response, the company “follows strict standards with regard to food quality and any product extension was granted following written approval from the supplier and with consumer safety top of mind.”

However, it has decided to withdraw any products which have received use-by extensions from its suppliers.

It added that over the last 18 months, the company’s brands have “engaged with less than 1 per cent of its supplier network to request possible shelf life extension where appropriate and safe to do so. These extensions related to c.0.25% of RFG’s annual spend with its supplier network.”

It also stressed that it has not been contacted by regulators in regard to concerns over its food safety standards.

What now?

Whilst the company may ultimately have not done anything wrong here, I feel this negative media coverage has damaged its brand even further now.

As well as putting off consumers from visiting its struggling stores, I suspect that would-be franchise buyers will also be put off by these reports. As franchise sales are the life-blood of the company, things look increasingly bleak in my opinion.

In light of this, I would urge investors to stay clear of Retail Food Group and focus on other options in the food space such as Costa Group Holdings Ltd (ASX: CGC) or Domino’s Pizza Enterprises Ltd (ASX: DMP).

Alternatively, instead of Retail Food Group, I would be buying one of these highly rated dividend shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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