Nestlé supplier CABIO Biotech under scrutiny over infant formula recall

by SONG Jianan

A global recall of Nestlé infant formula has put upstream suppliers under scrutiny, prompting the Shanghai Stock Exchange to seek clarification from CABIO Biotech (Wuhan) Co., Ltd. (688089.SH), a major supplier of arachidonic acid (ARA) used in infant formula, the company said on Jan 12.

CABIO Biotech said the inquiry relates to information disclosure linked to the recall, as testing and regulatory reviews remain ongoing.

Nestlé said it has expanded a precautionary recall of selected infant formula products to at least 50 countries and regions worldwide, including China. In the mainland China market, the recall covers 30 batches across four brands—Illuma, NAN Optipro, S-26 Comfort and Wyeth S-26 growing-up formula. Products registered and sold outside the affected batches are not impacted, the company said.

Nestlé said its investigation identified quality issues in oil materials supplied by a vendor, meaning certain batches could potentially contain Bacillus cereus, a bacterium that can cause foodborne illness such as diarrhea and vomiting. The company said the issue lies with the oil inputs, rather than with ARA itself.

ARA is widely used in infant formula as a key nutritional ingredient.

As one of the world's leading ARA suppliers, CABIO Biotech works with a range of dairy and food companies, including Nestlé, Danone, Cargill, China Feihe, Yili, Beingmate, Junlebao, Wondersun and Mengniu.

Several dairy companies said their infant formula products do not use ARA supplied by the vendor involved in the Nestlé recall, seeking to reassure consumers and investors about their sourcing.

Founded in 2004, CABIO Biotech listed on Shanghai's STAR Market in 2019. Its core products include ARA and DHA, which are widely used in infant nutrition.

The market reaction was swift. On Jan 8, CABIO Biotech shares fell more than 12% intraday, closing down 11.91% at 21.15 yuan, cutting its market capitalization to 3.56 billion yuan. The stock closed at 20.46 yuan on Jan 12, up 0.05% on the day.