A major infant formula recall that started at Nestlé has now turned into an industry-wide issue that has exposed regulatory gaps and raised questions about supply chain scrutiny.
Cereulide, a toxin that’s widely unknown outside the microbiological community, has ben catapulted into front-page news because of fears it had contaminated entire batches of branded formula sold globally.
Manufacturers including Nestlé, Danone and Lactalis are bearing the brunt of responsibility – but food safety authorities and regulators are also under scrutiny over their role in the situation.
Here’s what we know so far.
A crisis unwrapped at Christmas
It all started in late November 2025 when Nestlé was carrying out routing checks after installing new equipment on a production line at its factory in the Netherlands.
The company detected low levels of cereulide in product samples made there and upon further testing, confirmed trace amounts of the toxin.
On December 10, 2025, the company informed the Dutch food safety authorities and other potentially impacted countries as well as the European Commission. The same day, the company recalled 25 batches in 16 countries in Europe – a practice known as a ‘silent withdrawal’.
On December 24, the Swiss major traced the source of the contamination to be an ingredient, ARA oil, sourced from a global industry supplier and used across several of its factories.
In a statement, Nestlé said: “We immediately stopped using all mixes containing ARA oil from this supplier and blocked distribution of all corresponding infant formula finished products. We also sent samples of ARA oil to one of our accredited laboratories.”
The Swiss major continued to test ARA oil and other oil mixes in late December and early January to map out the extent of the issue and identify potentially impacted batches.
On December 29 and 30, Nestlé told its ingredient supplier about the contamination and alerted trade bodies SNE and ISDI to spread the word to other manufacturers.
On January 2, 2026 Nestlé notified additional food safety authorities of the issue and them launched a much-publicized product recall on January 5.
What is cereulide?
Cereulide is a heat‑stable toxin made by certain Bacillus cereus bacteria, and because it strongly binds to fats, it can be hard to detect and measure accurately in complex foods.
Modern testing instruments can now pick up extremely tiny amounts of cereulide, but there are still no agreed‑upon safety limits for how much is acceptable in food products, including infant formula.
Research shows that cereulide tends to concentrate in fatty ingredients and may build up in the body over time.
As a result, regulators and industry are now under pressure to establish clear guidance on what levels should be considered safe.
A crisis of trust
In the course of January 2026, the recalls spread from Nestlé to other formula manufacturers that had sourced ARA oil from the same supplier: including Danone and Lactalis.
Lactalis has recalled batches in 18 countries in Europe while Danone has been asked to block products from being rolled out in Singapore and recalls have been issued in Ireland, the UK and Germany.
No illnesses or deaths have been linked to any of the recalled batches so far, but consumer reports are being investigated in countries including France, the UK and Brazil.
European consumer watchdog Foodwatch International has now filed a lawsuit in a bid to trigger a criminal investigation into possible offences by manufacturers and failures of oversight by the authorities.
Meanwhile, investors are scrambling to understand the severity of the situation and its long-term impact, with Nestlé and Danone shares plunging by around 5% and 11% in the last month, respectively. (Lactalis does not have publicly-traded shares.)
Sentiment appears resilient so far, with UBS and JP Morgan keeping their ‘buy’ rating for Danone and brokers Barclays and Jefferies sticking to ‘neutral’ for Nestlé.
Behavioral finance specialist Greg Davies told us that uncertainty and unclear or delayed communication – not the recall itself – is what most damages investor sentiment.
Regulatory gaps and industry hurdles
The wider specialized nutrition industry is also facing a reckoning. The sector’s heavy dependence on globally traded, highly specific ingredients is once again in the spotlight – particularly since it’s difficult to substitute precisely-specified components when disruptions occur.
A senior industry insider told us ARA oil is likely to be tested much more stringently going forward, having been treated as a low-risk ingredient typically. This could raise costs for manufacturers, which could be passed on to consumers.
Glaring regulatory gaps – such as the absence of safety thresholds for cereulide in infant formula – have left industry and food safety authorities guessing at what point the toxin becomes unsafe.
This lack of regulatory framework means some nations apply a zero-tolerance policy to cereulide, meaning that any detection of the toxin, however small, could trigger costly recalls for manufacturers in some regions.
European Union’s food safety authority EFSA is now working urgently to publish preliminary guidance for cereulide – but the lack of a formal benchmark nearly a decade after the ISO method for detecting cereulide was published is striking.
Overall, the unfolding infant formula recalls signal a broader industry reckoning, highlighting global regulatory blind spots, ingredient supply vulnerabilities, and the urgent need for stronger international standards to prevent similar outbreaks.
