Infant formula contamination scare spreads to Danone and Lactalis
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Three of the world’s largest dairy companies are recalling and blocking batches of infant milk formula after a contamination scare that began with Nestle widened to French groups Danone and Lactalis.
The recalls highlight how a single compromised ingredient can spread through the tightly regulated infant nutrition sector, triggering swift action from regulators and companies keen to avoid reputational harm and protect market share in lucrative regions such as China.
Nestle recalled batches of infant nutrition products in dozens of countries earlier this month, due to possible contamination with cereulide, a toxin that can cause nausea and vomiting.
A judicial inquiry in France is underway into whether there is a link between the death of a baby and the Nestle milk. The farm ministry said the results are expected in about 10 days.
The Singapore Food Agency on Saturday ordered the precautionary recall of a batch of Danone’s Thai-origin Dumex Dulac 1 and Nestle’s Swiss-origin NAN HA1 SupremePro after detecting cereulide.
Privately-owned Lactalis said on Wednesday its nutrition unit was recalling batches of baby milk in 18 countries, due to the presence of cereulide in an ingredient sourced from a supplier.
“All infant milk producers in France and internationally are likely to have been affected by deliveries of non-compliant raw materials from the same manufacturer, which led to recalls by Nestle and Lactalis,” a farm ministry official told Reuters.
‘SHARE PRICE REACTION SEEMS OVERDONE’
Danone said it was working with Singapore’s regulator and that all controls confirmed its products were safe, with no irregularities found relating to Bacillus cereus, the bacteria that can produce cereulide.
The weakness over the last week has been driven by broker downgrades citing foreign‑exchange headwinds, slower industry growth and falling Chinese birth rates that are weighing on infant formula sales, said Sagar Thanki, an investment analyst at Danone investor Guinness Global Investors.
“The process involves high temperature and drying procedures that eradicate the bacteria, though some residue of toxin may still be detectable, but well below the regulatory standard and thus safe for consumption,” JPMorgan said in a note after discussion with Danone.
“All in all, today’s share price reaction seems overdone to us, though we understand the context post the Nestle recall.”
Infant formula represents about 21% of Danone’s group revenues, according to Bernstein analysts. For Nestle, the category likely accounts for around 5%.
The supplier of the contaminated arachidonic acid, or ARA, is Dutch, a spokesperson for Lactalis told Reuters but ruled out that it was Amsterdam-listed producer dsm-firmenich.
It was sold by a Dutch company but came from China, the French farm ministry official said separately, declining to give any company names.
Nestle had also identified the quality concern at one of its factories in the Netherlands and suspended sourcing ARA oil from the supplier concerned.
dsm-firmenich has said none of its products was affected by the Nestle recall.
