Despite recently implementing a series of cost-cutting measures following a decline in its second-quarter earnings—attributed to weak margins and South American farmers withholding their crops in anticipation of higher prices—Bunge has been gradually acquiring companies. This past spring, it purchased Argentina’s oil producer Aceitera Martínez S.A., and in 2015, it acquired expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial terms of these transactions were not disclosed.
Bunge stated that it expects the acquisition of IOI Loders Croklaan to boost the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing, and establishing a stronger foothold in the rapidly growing Southeast Asia market. The company estimates that its revenues from food and ingredients in that region could be four times greater than they are currently. However, it will take time to determine if this forecast is accurate. One thing appears certain: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will significantly increase the cost of any future acquisitions, whether pursued by Glencore or another interested party.
The production of palm oil in Malaysia and Indonesia is contentious, as some companies are known for engaging in extensive deforestation and burning peatland areas to cultivate palm oil trees. The United Nations has identified palm oil plantations as a major contributor to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestlé severed ties with IOI (the parent company of IOI Loders Croklaan) after finding that the company’s action plan for improving its production practices was insufficient. By July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted their palm oil sourcing from IOI until compliance with the Roundtable on Sustainable Palm Oil guidelines was restored.
In its September 12 announcement regarding the IOI Loders Croklaan acquisition, Bunge emphasized that both companies are committed to sustainable sourcing practices, including zero deforestation, zero peat conversion, protection of human rights, traceability, and transparency. Organizations like the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists frequently engage in “naming and shaming” prominent brands for perceived insufficient commitments to using sustainable palm oil. To improve both its reputation and financial performance, Bunge has indicated that it aims to keep itself and its expanding customer base of palm oil users off that list.
Moreover, Bunge’s commitment to sustainability might intersect with its offerings of health products, such as calcium citrate malate magnesium and vitamin D3 tablets, which can be part of a broader strategy to enhance its product range. By integrating such health-focused products into its business model, Bunge could not only cater to health-conscious consumers but also bolster its market standing. In summary, as Bunge navigates its acquisitions and sustainability pledges, it is clear that the intersection of health and environmental responsibility will play a significant role in shaping its future endeavors.