a video apology<\/a> from the KitKat and Nescaf\u00e9 maker\u2019s new CEO Philipp Navratil and engulfed rival producers, including Danone and privately-owned Lactalis.<\/p>\nFrench 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 Nestl\u00e9\u2019s annual results on Thursday and Danone\u2019s on Friday.<\/p>\n
Danone declined to comment. Nestl\u00e9 said it was focused on replenishing stocks.<\/p>\n
\u2018Reputation is everything\u2019<\/p>\n
\u201cI would have expected a little more proactivity and transparency in terms of communication,\u201d said Kai Lehmann, portfolio manager at Nestl\u00e9 investor Flossbach von Storch. \u201cThis is precisely what Philipp Navratil promised when he took office.\u201d<\/p>\n
The crisis adds to the challenges facing Navratil as he tries to revive sluggish volume growth at the US$260 billion consumer goods group, already pressured by US import tariffs and consumers trading down to cheaper brands.<\/p>\n
Nestl\u00e9 has said it does not expect a big financial hit, but Lehmann questioned whether its estimate \u2013 that fewer than 0.5 per cent of group sales are affected \u2013 still holds. Jefferies analyst David Hayes puts Nestl\u00e9\u2019s total exposure at 1.6 billion euros (US$1.9 billion).<\/p>\n
\u201cThe downstream effects are likely to be greater, without question,\u201d Lehmann said, criticising what he called Nestl\u00e9\u2019s \u201csalami tactics\u201d in releasing information gradually. Nestl\u00e9 says it has acted swiftly and proactively throughout.<\/p>\n
Six experts, analysts and consumers interviewed by Reuters say the companies face a battle to restore their reputations.<\/p>\n
\u201cIn the infant formula business, your reputation is everything,\u201d said Tom Booijink, senior dairy specialist for Europe and Africa at RaboResearch.<\/p>\n
For Paul Jamieson, a father in Northumberland, England, whose daughter fell ill after consuming a Nestl\u00e9-owned formula, trust has evaporated. \u201cWhen that trust is compromised, it\u2019s very difficult to feel comfortable continuing with those products,\u201d he said.<\/p>\n
Market share risks<\/p>\n
France has identified Chinese company Cabio Biotech as the source of arachidonic acid (ARA) oil contaminated with cereulide. Producers including Nestl\u00e9 and Danone have rushed to switch suppliers and boost production.<\/p>\n
Cabio Biotech did not respond to a request for comment.<\/p>\n
Danone is particularly exposed: Around 17 per cent of total profits come from infant formula in China, compared with less than 2 per cent for Nestl\u00e9, said Jefferies\u2019 Hayes. Chinese parents remain highly sensitive to contamination risks after previous scandals.<\/p>\n
Danone\u2019s shares are down more than 5 per cent this year, while Nestl\u00e9\u2019s have recovered from a late January slide.<\/p>\n
Both companies risk losing sales and market share. Danone\u2019s strong Chinese business helped drive a third-quarter sales beat, while Nestl\u00e9\u2019s NAN formula, a bright spot against weaker Gerber volumes, has been caught up in the recalls.<\/p>\n
Some competitors are already benefiting. Family-owned German brand HiPP told Reuters it has seen a sharp increase in demand and has increased production. New Zealand\u2019s A2 Milk, however, said it did not expect a major boost.<\/p>\n
Hayes said the recalls may force Navratil to trim Nestl\u00e9\u2019s volume-growth forecast by around 100 basis points.<\/p>\n
\u201cIt might be unfair, but people may ask if (Navratil) is unable to really control and avoid these things because (Nestl\u00e9\u2019s) just too much of a Goliath to oversee,\u201d Hayes said.<\/p>\n
Reporting by Alexander Marrow; Editing by Mark Potter, of Reuters.<\/p>\n","protected":false},"excerpt":{"rendered":"Nestl\u00e9 and Danone face investor pressure to spell out the financial impact of their biggest infant formula recalls…\n","protected":false},"author":2,"featured_media":12334,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[126],"tags":[586,1212,199,1170],"class_list":["post-12333","post","type-post","status-publish","format-standard","has-post-thumbnail","category-nestle","tag-danone","tag-infant-formula","tag-nestle","tag-recall"],"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/12333","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/comments?post=12333"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/posts\/12333\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media\/12334"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/media?parent=12333"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/categories?post=12333"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ch\/wp-json\/wp\/v2\/tags?post=12333"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}