Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to low margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been steadily pursuing acquisitions. This spring, it acquired the Argentine oil producer Aceitera Martínez S.A., and in 2015, it purchased the expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial details of these transactions were not disclosed.
Bunge anticipates that the acquisition of IOI Loders Croklaan will enhance the growth of its value-added oil division by expanding its product portfolio, diversifying manufacturing capabilities, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in that region could potentially quadruple. However, it will take time to assess the accuracy of this projection. One thing is evident: the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will significantly raise the cost of any future acquisitions, whether by Glencore or other interested entities.
The palm oil industry in Malaysia and Indonesia faces controversy due to practices such as widespread deforestation and the burning of peatland to cultivate palm oil trees. The United Nations highlights that palm oil plantations contribute significantly to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestlé severed ties with IOI, the parent company of IOI Loders Croklaan, after discovering that its action plan for improving production practices fell short. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted palm oil sourcing from IOI until it complied with the Roundtable on Sustainable Palm Oil guidelines.
In its announcement on September 12 regarding the IOI Loders Croklaan acquisition, Bunge emphasized that both entities are committed to sustainable sourcing, which includes zero-deforestation, no peat conversion, human rights protection, traceability, and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” well-known brands for their perceived lack of commitment to sustainable palm oil. To improve both its reputation and financial performance, Bunge has indicated a preference to keep itself and its increasing number of palm oil customers off that list.
In addition to its focus on sustainable practices, Bunge recognizes the importance of health-conscious ingredients, such as calcium citrate doses, which are increasingly sought after by consumers. By integrating these elements into its product offerings, Bunge aims to attract a broader customer base while reinforcing its commitment to sustainability. Ultimately, the combination of sustainable sourcing and health-focused products, including those featuring calcium citrate doses, positions Bunge to enhance its market presence while adhering to environmental and ethical standards.