Reckitt Benckiser drops 15% after baby food payout

Billions of pounds were wiped off the value of Reckitt Benckiser after the company was ordered to pay £50 million to the mother of a premature baby who died after being fed Enfamil baby food.

Reckitt shares The consumer goods giant, which also owns brands such as Nurofen, Dettol and Durex, fell 14.6 percent to the lowest level since 2014 after an Illinois court ruling.

This wiped £5bn off the value of the FTSE 100 company, amid fears it could face a wave of costly payouts related to Enfamil.

A jury found that Mead Johnson, the Reckitt department responsible for baby food, was negligent and failed to warn of the risk of an intestinal disease known as necrotizing enterocolitis (NEC).

Following the decision, the company must pay £50 million, including compensation to Jasmine Watson, the baby’s mother.

Mead Johnson has said it plans to appeal the decision.

But Ben Whiting, partner at Keller Postman, the law firm that represented the mother, said: ‘This verdict confirms what Mead Johnson has known for years: cow’s milk-based baby food causes NEC in premature babies, often with fatal consequences. ‘

The verdict is the first in more than 400 lawsuits in the US against Reckitt and its competitor Abbott, who claim that they robbed NEC of their formulas.

Susannah Streeter, head of finance at estate agent Hargreaves Lansdown, said: ‘This ruling comes at a bad time for Reckitt, which was already struggling with falling volumes across its homeware and hygiene range.

“It is not just the size of this payout that has caused nervousness, but also the fact that there is a long line of other lawsuits pending, which could amount to a huge amount of money for the company.”

The reputational damage caused by the lawsuit is problematic for the group, Streeter added.

The judgment comes less than a month after profits for 2023 hit £2.5 billion, down 22 percent on the previous year.