Nestlé competitors also face tainted baby formula pressure

Baby milk: Nestlé's competitors also under pressure Keystone-SDA

The tainted baby formula crisis has spread from Swiss food producer Nestlé to French rival Danone and dairy group Lactalis.

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Lactalis has withdrawn six batches of Picot-brand baby formula from the transalpine market after the presence of cereulide was detected in an ingredient from a supplier. This toxin, produced by bacteria, can cause nausea, vomiting and diarrhoea.

+ Read about a management meltdown at Nestlé

It was cereulide that led to the recall of batches of Nestlé products. In Switzerland, Hochdorf also had to do the same with about 10,000 packages of a goat milk powder from the brand Bimbosan.

On Saturday, the Singapore Food Authority, for its part, ordered the withdrawal from the market of baby formula of the Dumex brand, which was acquired by Danone in 2022. Cereulide was reportedly detected in two other products.

Probably same supplier

Danone’s products may contain raw material from the same source as the Nestlé baby food batches. In December and early January, the sale of certain Nestlé items in Singapore and some 60 other countries had already been suspended.

It was Nestlé’s largest preventive recall in the group’s history. In addition, authorities in France are investigating whether there is a link to the death of a newborn child.

So far, no link has been confirmed. In a video message last week, Nestlé CEO Philipp Navratil apologised to parents and carers for the uncertainty caused.

Analysts worried

Food companies are also paying the price financially. Today on the Paris stock exchange, due to the withdrawal and downward revision of price targets by several analysts, Danone’s share price temporarily dropped by almost 12%. Nestlé also lost almost 1% on the Zurich stock exchange.

Concern is growing among traders. According to Bank Vontobel, the Nestlé case is becoming a “nightmare” for the new management team and seems to be getting out of control, as there is negative news almost every day.

In addition to the financial and reputational damage, the affair could raise further questions about quality controls at production sites and possible underinvestment in the savings programme, commentators add.

Translated from Italian by AI/mga

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