Child food scandal continues to spread

ARA oil, a fatty acid that makes up less than 0,2 grams of a kilogram of infant formula (compared to 600 to 800 grams of dairy ingredients), has been used since around 1994. It first appeared in the US, where it was also the first recognized as a safe product. Later, it was also approved in the EU. The oil is now used by virtually all infant formula manufacturers. Infant formula is designed to mimic breast milk and contains numerous ingredients. In the US, at least thirty different substances are required, but more are permitted. This also sets manufacturers apart. The best alternative to breast milk is as close to the real thing as possible, and that's where the winning streak comes.

Not all ARA oil is contaminated
However, not all producers have run into problems due to the use of contaminated ARA oil. This is because there are several producers of this oil, for example, BASF and DSM-Firmenich. Only the companies that purchased ARA oil from Cabio Biotech in Wuhan, China (where do we know this place from?) have run into problems. There are plenty more of them, by the way: Nestlé, Danone, Lactalis, Vitagermine, Hochdorf, Wyeth, Sanulac, and possibly more. Producers of organic infant formula have also been affected. The number of companies affected continues to grow. Cabio Biotech is a young and rapidly growing company with a turnover of approximately €74 million last year.

ARA oil is produced using a now-familiar process, using fungi in a bioreactor. This is called precision fermentation, and many companies want to use it to produce alternatives for cow's milk and meat, among other things. However, somewhere in one of these reactors in Wuhan, a contaminant, a foreign fungus, entered the reactor and began producing toxins. This should have been noticed, but it didn't, until Nestlé Nunspeet reported problems with infant formula in early December 2025.

Oddly enough, it took about a month for a major recall to be launched, and regulators in other countries, such as France, also raised the alarm. Infant formula is now being recalled in more than sixty countries, by a growing number of manufacturers.

Stock price and other damages
Last week, Barclays Bank estimated the damage from the contamination at approximately $1 billion. It's unclear whether the bank was referring to the damage to share prices or the damage from recalling and downgrading, or destroying, the contaminated infant formula. Nestlé's share price fell by at least 8%.

The damage to Danone alone was estimated at €100 million at the time, and Cabio Biotech's share price initially plummeted by over 18%. These are all preliminary estimates. The final bill will be much higher. It's also not yet clear how many victims the pollution has claimed—this seems to be almost lost in the midst of all the panic.

Producers are not only dealing with recalls and damage claims, but also with restocking (now safe) product. Incidentally, this also presents an opportunity for the dairy industry, as it needs a significant amount of new product. Most companies will likely ignore Cabio Biotech for now. And it's not as if such a contamination could have happened to any company. There wasn't enough attention paid, and perhaps too much searching for the cheapest offer. Yet, calls for more stringent limits and similar regulations are ineffective. Problems often arise precisely in places where no one previously considered them. Protocols won't help in that regard. A broader awareness will.