China Enforces Cereulide Testing Amid Infant Formula Recalls by Nestle and Danone

On February 12, 2026, China's State Administration for Market Regulation issued a directive requiring infant formula producers to test for cereulide, a toxin that has prompted worldwide recalls. The directive comes in the wake of Nestle's discovery of cereulide contamination in baby formula, traced back to ARA oil from a supplier identified as Cabio Biotech Wuhan. This incident has led to a 16% drop in Cabio's shares.

Cabio Biotech Wuhan, a significant player in the production of ARA, supplies major companies like Nestle, Danone, and local Chinese brands such as China Feihe and Junlebao Dairy Group. The emergence of Cabio has disrupted the monopoly previously held by DSM-Firmenich in the global infant formula supply chain.

Despite the recalls, no cases of poisoning have been reported in China. However, Nestle expanded its recall efforts beyond Europe to Asia and the Americas in January, with Danone and other producers following suit in various countries. The Chinese regulator's order aims to maintain consumer and investor confidence by enforcing stricter safety and quality standards.

Local governments in China have been instructed to enhance their oversight of safety and quality standards in response to the cereulide issue. The recalls have sparked regulatory investigations in several countries, though no confirmed illnesses linked to the toxin have been announced by manufacturers.

While the recalls could impact the reputations of Nestle and Danone, market reactions were relatively stable, with Danone shares rising by 4.72% and Nestle gaining 1.39% on February 12, 2026. Analysts suggest that the financial markets have adjusted to the potential impacts of these global recalls.