Infant formula recall hits Danone, Nestle shares
Danone shares fell after French company Vitagermine expanded a recall of baby food over contamination concerns, affecting four manufacturers so far and threatening major losses for the firms.
Companies affected by the precautionary recall of baby milk powder over concerns it may be contaminated with the toxin cerulide include the world’s three largest dairy groups: Nestle, Danone and privately owned Lactalis.
Danone shares closed 2.3 percent lower after falling as much as 6 percent in early trading, the lowest since January 2025.
Shares in Swiss group Nestle fell 0.9 per cent, recouping most of their losses after falling as much as 3 per cent to a five-month low in morning trade.
Shares’ decline this month was still around 9 percent following batch recalls in dozens of countries earlier this month.
The recalls highlight how a single compromised ingredient can spread throughout the heavily regulated infant nutrition industry, triggering rapid action by regulators and causing rapid market shakeups.
Cereulide, a toxin produced by Bacillus cereus bacteria that can cause nausea and vomiting, was detected in an ingredient obtained from a supplier.
French researchers are investigating whether there is a link between the deaths of two babies and the recalled formula products.
The French agriculture ministry, without naming any names, said the product was of Chinese origin and sold by a Dutch company.
The Irish Food Safety Authority said on Friday that cerulidine had been detected in arachidonic acid oil produced in China.
The potential financial impacts of the recall could be 10 times greater for Nestle than for Danone, Barclays estimates.
Barclays said in a worst-case scenario Danone could lose 100 million euros ($A171 million), while Nestle’s losses could be close to 1 billion Swiss francs ($A1.86 billion).
Baby food accounts for about 21 percent of Danone’s group revenue, according to Bernstein analysts.
For Nestle, this category probably represents about 5 percent.
Danone, which has already cooperated with Singapore regulators who have blocked batches of baby food over contamination concerns, said on Friday it was recalling some batches after Irish regulators said products produced there were being exported to other European countries.
On Monday, Vitagermine said it was recalling three specific batches of its Babybio baby food.
If cooked food cools slowly or is kept warm for hours, Bacillus cereus can grow and produce cereulides.
Large pots of rice or pasta or meals stored on a hot stove or sideboard are common risk points.
Baby food often contains fats containing arachidonic acid to make it similar to breast milk.
Bacillus cereus spores can survive in dry ingredients used for baby food and can grow and produce cerulide under certain conditions during handling or processing of the ingredient.
Since the toxin is heat stable, heat treatment will not destroy it and allow it to remain in the finished formula.
Australia’s Associated Press is the beating heart of Australian news. AAP is Australia’s only independent national news channel and has been providing accurate, reliable and fast-paced news content to the media industry, government and corporate sector for 85 years. We inform Australia.
