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French firms Danone and Nestlé saw a continued plunge in their share prices on Wednesday after a safety crisis involving baby formula.
At around midday in Europe, Danone shares were down 0.48%, while Nestlé shares slipped 0.33%.
A number of national authorities have issued their own warnings after an initial recall announcement from Danone last Friday.
The French firm said it was pulling “a very limited number of specific batches” of baby formula from the market, linked to fears that they could be contaminated with a dangerous toxin. Cereulide, the substance in question, can cause nausea and vomiting.
The recall came after Nestlé, one of Danone’s competitors, announced earlier in January that it would be pulling specific batches of its infant formula from shelves.
This global action followed a smaller recall in December, when cereulide was first found in a Nestlé factory in Nunspeet, the Netherlands.
Analysts estimate that the recall could cost Nestlé over €1bn, although the firm has said that it does not forecast a significant financial hit. Even so, the company will be working to improve its public image and quell doubts over product safety.
The contaminations detected by the companies have all been traced to a single Chinese supplier of arachidonic acid oil, a critical ingredient in premium infant formulas.
Private firm Lactalis has also been affected, along with smaller firms like Vitagermine and Hochdorf Swiss Nutrition.
The French authorities are currently investigating the deaths of two babies reported to have consumed Nestlé infant formula affected by the recalls due to cereulide contamination. So far, no causal link has been established.
“We are following developments with due attention and remain fully available to the authorities, cooperating with complete transparency,” said a Nestlé spokesperson last week.
Infant formula accounts for about 21% of Danone’s group revenue, according to Bernstein analysts. For Nestlé, the category likely represents around 5%.
In its recall statement, Danone stressed that it “never compromises on food safety”, adding that its priority “is to ensure that parents and healthcare professionals can continue to place their trust in the safety and quality of our infant formula products”.
Apologising for the recall, Nestlé said that the measure was “in line with… strict product quality and safety protocols”.