Nestlé CEO Philipp Navratil has put a strong emphasis on food safety, stating, “food safety and trust come first,” during a video apology concerning the recent infant formula recall at the company.
The issue began as a precautionary European recall of Nan stage 1 formula in mid-December, linked to the detection of Bacillus cereus bacteria. By early January, this recall expanded globally after Nestlé identified a problem with an ingredient sourced from an external supplier.
Nestlé and Navratil have now acknowledged that the source of the affected products was a factory located in the Netherlands. In an unusual move, Navratil released a video on YouTube on January 13, addressing growing concerns related to the company’s credibility.
“All recalls have now been announced,” Navratil stated, clarifying that they were executed based on country-specific or regional authority recommendations following the initial announcement in Europe.
By early January, 37 European nations, along with several in Nestlé’s Americas reporting region—such as Argentina and Mexico—and nine regions in Asia, Oceania, and Africa, including China and Australia, were included in the published recall list.
The recall was also extended to SMA, SMA Alfamino, and Beba formulas, although it remained a precautionary measure. The culprit, the toxin cereulide, produced by certain strains of Bacillus cereus, was determined to be the underlying issue. This toxin originates from the supply of arachidonic acid (ARA) oil, an Omega-6 polyunsaturated fatty acid, and can lead to vomiting and abdominal cramps in infants.
“I want to reassure you that there have been no confirmed cases of illness linked to the affected products to date. Nonetheless, it was important to act quickly and transparently,” Navratil remarked in his video.
He elaborated, “As soon as we confirmed the issue, we engaged proactively with the respective health and food-safety authorities in each country that received the affected products. We collaborated closely with the authorities and followed their guidance, leading to localized recalls as planned.”
However, this gradual approach has drawn criticism as parental fears have escalated globally, raising questions regarding Nestlé’s reputation, particularly given the company’s history with its infant formula and baby food segment.
Industry analysts are now evaluating the potential impact on Nestlé’s sales, which will likely dominate discussions when the company releases its 2025 financial results next month. Consumer advocacy group Foodwatch recently claimed that contaminated peanut oil was used in “around ten” Nestlé factories in Europe, arguing that the company “cannot be trusted.”
In an effort to counter such allegations, Navratil underscored the importance of product safety. “I first want to apologize sincerely for the worry and disruption this may have caused parents, caregivers, and our customers. You trust us to provide products that are safe and of high quality, and we take that responsibility very seriously,” he asserted.
Navratil emphasized, “What’s important to me in this situation is that we remain guided by our values: food safety and trust come first. This is at the heart of everything we do and reflects our deep sense of responsibility and care. The actions we are taking demonstrate our commitment to upholding the highest quality and safety standards.”
Nestlé has indicated that the recalled formulas account for significantly less than 0.5% of annual group sales, asserting that the financial impact of the recall is not expected to be significant. Nonetheless, the reputational damage could pose challenges for Nestlé’s broader infant formula business, which remains unaffected by the recalls.
Baby powders fall under the group’s Nutrition and Health Science division, which contributed SFr15.14bn ($18.9bn) to Nestlé’s total annual revenue of SFr91.35bn in its 2024 financial year. Analysts at Jefferies calculate that the sales risk could reach approximately SFr1.2bn.
David Hayes, an equity analyst covering Nestlé at Jefferies, noted that while revenue from the initial sales of the products will remain unchanged, “We expect the costs arising from the recall – refunds, replacements, logistics – to be treated as expenses within COGS, likely in Q1. The long-term consumer concerns regarding brand safety could negatively impact sales and profits this year.”
As the food and beverage industry continues to adapt to changing consumer preferences, it remains crucial for companies like Nestlé to address issues transparently, safeguarding their standing within the food and drink business.
