According to reporting by Le Monde, Nestlé began withdrawing products in December, a move that escalated into a public apology video from CEO Philipp Navratil after criticism over delayed action. The crisis widened when the Singapore Food Agency ordered precautionary recalls of Dumex Dulac 1 (Danone, Thailand origin) and NAN HA1 SupremePro (Nestlé, Switzerland origin). Lactalis followed with recalls in 18 countries, citing cereulide contamination linked to a shared ingredient supplier. French authorities later suggested that multiple infant formula manufacturers may have received non-compliant raw materials from the same source.

At the technical core lies arachidonic acid (ARA), a high-value oil used in premium infant formula. French investigations identified China-based Cabio Biotech as the original source of the contaminated ARA, sold via a Dutch intermediary. Nestlé suspended purchases from the supplier after detecting the issue at a plant in the Netherlands. Lactalis clarified that the Dutch supplier was not dsm-firmenich, but the broader picture remains: a globalized dairy supply chain in which a single compromised input can generate systemic risk across continents.

Financial markets reacted swiftly. Danone—where infant formula represents around 21% of revenue in China and roughly 17% of profits, according to Jefferies—saw its shares fall more than 5% year-to-date, with intraday drops of 8.3%. Nestlé estimates the direct impact below 0.5% of sales, yet analysts calculate exposure of up to €1.6 billion. Investors such as Flossbach von Storch questioned the group’s communication strategy, while Jefferies warned that recalls could shave around 100 basis points off Nestlé’s volume growth outlook. JPMorgan, however, argued the market reaction to Danone may be excessive, noting EU findings that detected toxin residues remained far below regulatory safety limits.