By Aimee Look

As some of the world's largest food companies grapple with recalls of tainted infant formula, Nestle is rushing to prevent the reputational damage from spilling over into a bigger financial hit.

The Swiss giant, the world's largest food maker, estimated a direct impact of 200 million Swiss francs ($258.7 million) on its top line this year, barely making a dent for a group that generated 89.49 billion francs in sales last year. But some analysts expect the risk of the crisis to its reputation to continue to loom.

For Nestle Chief Executive Philipp Navratil, the crisis added yet another hurdle to his quest to steer the beleaguered conglomerate to calmer waters after rounds of disappointing results and leadership shake-ups over the past few years.

The company--named after pharmacist Henri Nestle, who in 1867 started selling infant nutrition he had created--late last year identified traces of a toxin called cereulide in its baby formula. The discovery has since inflated into a series of recalls of different brands and regulatory action from over 60 countries.

With the industry immersed in the crisis, Navratil vied to make one thing clear: Nestle responded first. "We moved fast," the CEO told reporters in a call.

But some analysts say the reputational damage Nestle might incur is yet to be uncovered, and optics are far more important than speed.

"I don't think it matters who found it first," Fulvio Cazzol, an analyst at Berenberg, said. "The reputational damage is definitely the bigger issue."

The company said it first found traces of the toxin in routine checks in November after installing new equipment on a production line at a Netherlands factory. Nestle said it stopped production right away and sent samples to a lab, then recalled products that had been produced in that factory in December as the first public recall.

In the U.S., Nestle uses a different supplier for its Alfamino products, so products weren't affected, according to the U.S. Food and Drug Administration.

Now that Nestle has come out to say it was the first one to detect the toxin, the narrative has shifted a bit, said Vontobel managing director Jean-Philippe Bertschy.

Nestle's European peer Danone worked with the same supplier and also announced the withdrawal of some batches of infant formula from targeted markets.

Bertschy said the financial impact of the recall should be affecting Nestle less than Danone, as Nestle's sprawling portfolio acts as a buffer.

Danone, which reports year-end results on Friday, didn't immediately respond to a request for comment. The company previously said it was fully compliant with all applicable regulations when announcing the withdrawal.

Shares in both Nestle and France's Danone have been under pressure in early 2026, down 0.4% and 5.9%, respectively, since the start of the year through Wednesday's close. The Stoxx Europe 600 Food & Beverages index rose 6.1% during that period.

Nestle shares climbed 4% Thursday after the company's outlook reassured investors, with analysts at Bernstein saying it was better than expected in light of recall fears. Danone shares rose 2.2%.

The company said it expects organic sales growth of between 3% and 4% in 2026, including an impact of 0.2 percentage points from the infant-formula recall.

Infant formula makes up around a fifth of sales at Danone, according to Berenberg's Cazzol. For Nestle, sales in infant formula represent only a single-digit percentage, Cazzol added.

Write to Aimee Look at aimee.look@wsj.com

(END) Dow Jones Newswires

February 19, 2026 11:55 ET (16:55 GMT)

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