Tainted formula crisis grows as Danone product pulled in Singapore

[SINGAPORE] Danone shares plunged after one of its infant formula products was pulled from shelves in Singapore as a global contamination crisis that started at Nestle deepens. 

The Singapore Food Agency said it removed one of Danone’s Dumex Dulac formula products from the market following stepped up testing for cereulide, a toxin that can cause nausea and vomiting. It also instructed Singapore-based manufacturer SMC Nutrition to stop export of some products that used the same raw ingredient in a directive issued on Saturday.

Shares of Danone fell as much as 12 per cent in early trading in Paris on Wednesday (Jan 21), the most in 36 years, on the news before paring back slightly. Nestle stock is down more than 4 per cent since the recall began.

Singapore’s food agency had already previously recalled five Nestle products after the Swiss food group disclosed that scores of its brands, including Beba, SMA and Alfamino, and multiple production sites had been affected by the discovery of cereulide in arachidonic acid oil, an ingredient from one of its suppliers. 

News that the contamination crisis is potentially spreading is a hugely worrying development for a highly-regulated food product that is relied upon by millions of parents globally. 

Danone said that it blocked a batch of product specifically manufactured for Singapore at the request of the authorities there. It said it had detected no issue with cereulide in any of its brands and reiterated that it follows strict food safety and quality standards, with all products undergoing rigorous testing before leaving factories. 

Nestle is currently the most affected manufacturer with products pulled from shelves in more than 60 countries worldwide. French authorities are currently probing the death of an infant there to see if there is any link to recalled products. Anti-poison centres in France have been contacted by parents whose infants are showing symptoms including vomiting and diarrhoea, the authorities said. 

A public health agency in Brazil has also said that two babies were ill, potentially caused by Nestle formula. 

Nestle said it’s not aware of an investigation in France and is in contact with health authorities in Brazil to obtain more details on the reports of ill babies. Clinical evidence is needed to definitively prove a sickness has been caused by the consumption of a food product, it said. 

“We reiterate that the safety of our products and wellbeing of infants remain our top priority,” it said. 

“This case is turning into a nightmare for the new leadership team at Nestle and appears largely out of control at this stage, with negative headlines emerging on an almost daily basis,” said Jean-Philippe Bertschy, an analyst at Vontobel. He said that Nestle is “backed into a corner” and will likely face questions about quality control standards and the level of investment in production sites in recent years as the group has cut costs. 

Bertschy added that it was clear that Nestle was not the only company affected as “other Swiss and global manufacturers that use this ingredient are also concerned.” 

Dumex is largely irrelevant for Danone but the recall in Singapore raises the possibility that the major supplier of the arachidonic acid used by Nestle was used by others, according to Kepler Cheuvreux analyst Jon Cox.

“For example in Switzerland Hochdorf has recalled some Bimbosan (goat milk) batches amid contamination with the same bacteria strain cereulide at the centre of Nestle’s issues,” he said. BLOOMBERG