Danone, Nestle shares sink as baby formula recall widens

Shares in Danone DANO.PA and Nestle NESN.S slumped on Monday as French company Vitagermine widened a recall of baby formula on concerns over contamination, affecting four manufacturers so far and threatening combined losses exceeding $1 billion.

Companies affected by the precautionary recalls of infant milk powder on worries it could be contaminated with the toxin cereulide include three of the world's largest dairy groups, Nestle, Danone and privately-owned Lactalis.

Danone shares were down 4% at 64.8 euros apiece in midday trading, their lowest since January 2025.

Swiss group Nestle's shares slid 1.8% to a four-month low, bringing January's fall to nearly 10% after batches were recalled in dozens of countries earlier this month.

COMPANIES EXPECTED TO SUFFER FINANCIAL HIT

The recalls highlight how a single compromised ingredient can spread through the tightly regulated infant nutrition sector, triggering swift action from regulators and causing rapid market jitters.

Cereulide, a toxin produced by the Bacillus cereus bacteria which can cause nausea and vomiting, 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.

The French agriculture ministry has said the product originated in China and was sold by a Dutch company, without specifying any names.

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

NESTLE MAY EXPERIENCE GREATER FINANCIAL IMPACT -BARCLAYS

The possible financial impact of the recalls could be around 10 times more for Nestle than Danone, according to Barclays estimates.

In a worst-case scenario, Danone could lose 100 million euros ($118.54 million), Barclays said, while Nestle's losses could be closer to 1 billion Swiss francs ($1.29 billion).

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

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

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

($1 = 0.7769 Swiss francs)

($1 = 0.8436 euros)

-Louise Rasmussen, Sybille de La Hamaide and Alexander Marrow/Reuters