Shares in Danone have slumped as French company Vitagermine, widened a recall of baby formula on concerns over contamination, affecting four manufacturers so far and threatening large losses for the firms.
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 closed 2.3 per cent lower after falling as much as 6 per cent in early trade, their lowest since January 2025.
Swiss group Nestle's shares had pared most of their losses, closing down 0.9 per cent after falling as much as 3 per cent in morning trade to a five-month low.
The shares' fall this month was still at nearly 9 per cent 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 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.
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 last Friday said cereulide had been detected in arachidonic acid oil manufactured in China.
The possible financial effects of the recalls could be about 10 times more for Nestle than Danone, according to Barclays estimates.
In a worst-case scenario, Danone could lose 100 million euros ($A171 million), Barclays said, while Nestle's losses could be closer to 1 billion Swiss francs ($A1.86 billion).
Infant formula accounts for about 21 per cent of Danone's group revenue, according to Bernstein analysts.
For Nestle, the category likely represents about 5 per cent.
Danone, already co-operating with Singaporean regulators who blocked batches of infant formula over contamination concerns, last Friday said it was recalling some batches after Irish regulators said products manufactured there had been exported to other European countries.
If cooked food cools slowly or is kept warm for hours, Bacillus cereus can grow and produce cereulide.
Big pots of rice or pasta, or dishes kept on a warm stove or buffet, are common risk points.
Infant formula often includes oils containing arachidonic acid to make it resemble breast milk.
Bacillus cereus spores can survive in dry ingredients used for infant formula and, under certain conditions during ingredient handling or processing, may grow and produce cereulide.
Because the toxin is heat-stable, heat treatment will not destroy it, allowing it to remain in the finished formula.
– with AAP
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