It is important to know what you are feeding your child for health. No matter what the food source is, it should be healthy and safe.
In a latest update, important baby food items have been recalled recently over potential health risks.
Food chains like Nestle and Danone face investor pressure to spell out the financial impact of their biggest infant formula recalls in recent history and show they have learned lessons from crises that have hit their shares and left dozens of babies ill.
Nestle started recalling products in December across Europe, Asia, and the Americas over possible contamination with cereulide, a toxin that can cause nausea and vomiting.
‘Reputation is Everything’
“I would have expected a little more proactivity and transparency in terms of communication,” said Kai Lehmann, portfolio manager at Nestle investor Flossbach von Storch. “This is precisely what Philipp Navratil promised when he took office.”
The crisis adds to the challenges facing Navratil as he tries to revive sluggish volume growth at the $260 billion consumer goods group, already pressured by U.S. import tariffs and consumers trading down to cheaper brands.
Nestle has said it does not expect a big financial hit, but Lehmann questioned whether its estimate – that fewer than 0.5% of group sales are affected—still holds. Jefferies analyst David Hayes puts Nestle’s total exposure at 1.6 billion euros ($1.9 billion).
Nestle says it has acted swiftly and proactively throughout.
As reported by several experts, analysts and consumers interviewed said the companies face a battle to restore their reputations.
The crisis prompted a video apology from the KitKat and Nescafe maker’s new CEO, Philipp Navratil, and engulfed rival producers, including Danone and privately owned Lactalis.
French authorities have opened investigations into how the withdrawals were handled, consumers are questioning the speed of the recalls, and investors want clarity on the financial impact at Nestle’s annual results on Thursday and Danone’s on Friday.
Danone declined to comment. Nestle said it was focused on replenishing stocks.
“In the infant formula business, your reputation is everything,” said Tom Booijink, senior dairy specialist for Europe and Africa at RaboResearch.
For Paul Jamieson, a father in Northumberland, England, whose daughter fell ill after consuming a Nestle-owned formula, trust has evaporated. “When that trust is compromised, it’s very difficult to feel comfortable continuing with those products,” he said.
Market Share Risks
France has identified Chinese company Cabio Biotech as the source of arachidonic acid (ARA) oil contaminated with cereulide.
Producers including Nestle and Danone have rushed to switch suppliers and boost production.
Danone is particularly exposed: around 17% of total profits come from infant formula in China, compared with less than 2% for Nestle, said Jefferies’ Hayes.
Chinese parents remain highly sensitive to contamination risks after previous scandals.
