Dairy giants rush to contain widening infant formula recall

Nestle's directors speak in front of the Nestle's logo during the general meeting of the world's biggest food and beverage company, Nestle Group, in Lausanne, Switzerland, April 7, 2016. (THE CANADIAN PRESS/Laurent Gillieron/Keystone via AP)

Editor’s note: In a statement to CTVNews.ca, a spokesperson from Nestle said, “We are conducting a precautionary recall/withdrawal of specific infant nutrition products sold in a number of countries, but it does not impact Canada.”

Three of the world’s largest dairy companies are scrambling to recall and block batches of infant milk formula after a contamination scare that began with Nestle widened on Wednesday to French groups Danone and Lactalis.

The widening recalls highlight how a single compromised ingredient can ripple 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 (SFA) on Saturday ordered the precautionary recall of a batch of Danone’s Thailand 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.

‘Share price reaction seems overdone’

Danone’s shares were down around 8.3 per cent on Wednesday, touching their lowest level since February 2025 in early trade. The company 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 past 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 roughly 10 per cent drop on Wednesday was due to the Singapore recall, Thanki added.

“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 per cent of Danone’s group revenues, according to Bernstein analysts. For Nestle, the category likely accounts for around 5 per cent.

The supplier of the contaminated arachidonic acid (ARA) Dutch, a spokesperson for Lactalis told Reuters but ruled out Amsterdam-listed ARA producer dsm-firmenich.

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 were affected by the Nestle recall.

Reporting by Mateusz Rabiega in Gdansk, Alexander Marrow in London and Sybille de la Hamaide in Paris; Editing by Milla Nissi-Prussak, Emelia Sithole-Matarise and Louise Heavens, Reuters