Danone shares sank on Monday after the French food and beverage company said on Friday it would recall a limited number of infant-formula batches from several markets following food-safety authorities flagging a potential contamination concern.
By 09:16 GMT on Monday the stock was down 5.8% in Paris.
Background and regulatory actions
The pullback follows regulatory action earlier in the week in Singapore, where authorities halted sales of a Danone-manufactured baby-formula brand over possible bacterial risks. Irish authorities later specified that the recall covers formula produced in Ireland and shipped to parts of the European Union, the U.K., and some non-EU markets.
The Irish Food Safety Authority linked the recall to a particular toxin. In its statement the agency said that an ingredient - ARA oil - which was manufactured in China, was contaminated with cereulide and added as an ingredient in base powder used to make infant formula and follow-on formula.
Company response
Danone said its internal checks showed no safety breach and that routine testing confirmed products were safe and "fully compliant will all applicable safety regulations." The company added that some local food-safety regulators were continuing to update their guidance, and that as a responsible manufacturer and to comply with the latest guidance it would withdraw from targeted markets a very limited number of specific batches of infant formula products.
Broader industry impact
The recall is associated with the same contaminated raw ingredient that has been implicated in previous withdrawals by Nestl e9. Other producers, including Lactalis and Hochdorf, have also been affected. In the U.K., a batch of Aptamil First Infant Formula was pulled, and Danone has already recalled Dumex products in Singapore.
Kepler Cheuvreux analyst Jon Cox noted that while no direct link has been established between consumption of cereulide-tainted formula and infant sickness, the publicity around the recalls is likely to weigh on affected brands. He added that Danone's stock could come under pressure, pointing out that infant formula accounts for around one third of Danone's operating profit.
Markets and affected geographies
- Products produced in Ireland and shipped to parts of the EU, the U.K., and some non-EU markets are included in the recall.
- Earlier regulatory action halted sales in Singapore; certain Dumex products were recalled there.
- Danone said product lines destined for China were not impacted.
Summary assessment
The combination of targeted recalls, ongoing regulatory updates, and broad publicity has exerted downward pressure on Danone's share price. The recall is limited in scope according to the company, but it involves an ingredient previously connected to withdrawals at multiple manufacturers, and the situation is evolving as regulators update guidance in various jurisdictions.