In May, the European Food Standards Authority warned that the contaminants found in the oil’s edible form are carcinogenic. It warned that even moderate consumption of the substances represented a risk to children and said that, due to a lack of definitive data, no level could be considered safe.
Sales fell by three per cent in the year to August 2016 as consumers ditched the product for palm-oil free alternatives. Coop, the country’s biggest supermarket chain removed 200 products containing palm oil, though not Nutella, from its shelves in May as a precaution.
In response, Ferrero has launched an advertising campaign in an attempt to reassure customers that its products are totally safe.
Ferrero insists that the decision to keep palm oil in Nutella, despite safety fears, is about quality, not cost. The substance is used to give the spread its smooth texture which it says can’t be achieved by using other oils. “Making Nutella without palm oil would produce an inferior substitute for the real product, it would be a step backward,” Ferrero's purchasing manager Vincenzo Tapella told Reuters.
Substitute oils, derived for example from sunflowers or rapeseed, could be used but would increase the cost of making the product by as much as $22m (£18m), a calculation by Reuters found. Ferrero has not confirmed the figures. The company was not immediately available for comment.
The cancer fears centre on a compounds known as glycidyl fatty acid esters (GE), which are produced in palm oil when it is heated above 200 degrees celsius, as it is in the processing of for many foods.
Dr Helle Knutsen, chair of Contam, the EFSA panel that investigated palm oil, said in May: “There is sufficient evidence that glycidol is genotoxic and carcinogenic, therefore the Contam panel did not set a safe level for GE.”
The contaminants can be found in some other vegetable oils, margarines and processed foods but the EFSA found that they are produced in higher, potentially dangerous, amounts in palm oil.
The World Health Organisation and UN Food and Agriculture Organisation have also expressed concerns about GE but have stopped short of issuing warnings about its consumption.
A spokesperson for Ferrero said: "The health and safety of consumers is an absolute and first priority for Ferrero.
"The presence of contaminants in food products, analyzed by the EFSA, depends on the oils and fats used as well as the processes they are subjected to.
"It is for this reason that for some time now Ferrero has been carefully selecting raw materials and industrial processes that limit their presence to minimum levels, fully in line with the parameters defined by the EFSA."
It is not the first time that palm oil has caused controversy. In November Amnesty International raised concerns that global firms including Colgate-Palmolive, Kellogg's, Nestlé, Procter & Gamble, Reckitt Benckiser and Unilever have been using palm oil produced by children as young as eight, working in hazardous conditions on Indonesian plantations.
Children were carrying sacks of palm fruit weighing up to 25kg, for Singapore-based company Wilmar, Amnesty found.
Palm oil has long been linked to environmental degradation, including mass deforestation causing the loss of critical habitats for endangered species such as orangutans. Ferrero says all of the oil it uses comes from sustainable sources as certified by the Roundtable on Sustainable Palm Oil, a body set up by major producers and purchasers to set standards and self-regulate the industry.
The RSPO has been criticised by many non-governmental organisations who say that its standards are too low and enforcement too weak. Greenpeace said in its 2013 report "Certifying Destruction" that the RSPO's standards left it free to fell pristine forests to make way for plantations.
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