Danone, Nestle shares fall as baby formula recall widens on contamination concerns

French food group Danone logo is seen at the company headquarters in Paris, France, February 5, 2024. REUTERS/Sarah Meyssonnier

Paris, Jan 26 (Saudi Arabia Breaking News) – Shares in Danone and Nestle fell on Monday after French company Vitagermine widened a precautionary recall of baby formula over concerns about possible contamination, affecting four manufacturers so far and raising the risk of combined losses exceeding $1 billion.

Companies impacted by the recalls of infant milk powder include Nestle, Danone and privately owned Lactalis, amid worries the products could be contaminated with cereulide, a toxin produced by Bacillus cereus bacteria that can cause nausea and vomiting.

Danone shares were down 4% at 64.8 euros in midday trading, their lowest level since January. Nestle shares fell 1.8% to a four-month low, extending the Swiss group’s January decline to nearly 10% after batches were recalled in dozens of countries earlier this month.

The recalls highlight how a single compromised ingredient can spread through the tightly regulated infant nutrition sector, triggering swift action from regulators and prompting market jitters. Cereulide was detected in an ingredient sourced from a supplier.

French investigators are examining whether there is a link between the death of two infants and recalled formula products. France’s agriculture ministry has said the product originated in China and was sold by a Dutch company, without naming any firms.

Ireland’s Food Safety Authority said on Friday that cereulide had been detected in arachidonic acid oil manufactured in China.

Barclays estimates the financial impact could be around 10 times greater for Nestle than for Danone. In a worst-case scenario, Danone could lose 100 million euros ($118.54 million), while Nestle’s losses could be closer to 1 billion Swiss francs ($1.19 billion), the bank said.

Infant formula accounts for 21% of Danone’s group revenue, according to Bernstein analysts, while the category likely represents around 5% for Nestle.

Danone, which has been cooperating with Singaporean regulators who blocked batches of infant formula over contamination concerns, began recalling some batches on Friday after Irish regulators said products manufactured there had been exported to other European countries.

On Monday, Vitagermine said it had recalled three specific batches of its Babybio infant formula.

Source: Reuters