Following a recent round of cost-cutting measures after its second-quarter earnings fell, attributed to weak margins and South American farmers holding onto their crops in anticipation of price increases, Bunge has been steadily acquiring companies. This past spring, it purchased Argentine oil producer Aceitera Martínez S.A., and in 2015, it acquired the expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial details of these acquisitions were not disclosed.
Bunge anticipates that the acquisition of IOI Loders Croklaan will enhance 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 potentially be four times larger than they are today. However, it will take time to determine the accuracy of this prediction. One thing appears certain: the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will significantly increase the cost of future acquisitions, whether by Glencore or other interested parties.
The production of palm oil in Malaysia and Indonesia is controversial due to widespread deforestation and peatland burning by some companies to cultivate palm oil trees. The United Nations recognizes palm oil plantations as a major contributor to environmental degradation and biodiversity loss in Southeast Asia. Last year, Nestlé severed its ties with IOI (the parent company of IOI Loders Croklaan) after discovering that the company’s action plan to revise 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 the company complied with guidelines from the Roundtable on Sustainable Palm Oil.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan deal, the company emphasized that both firms are dedicated to sustainable sourcing, including commitments to zero-deforestation, zero peat conversion, human rights protection, traceability, and transparency. Environmental organizations such as the World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly “name and shame” prominent brands perceived to lack commitment to sustainable palm oil. To improve both its reputation and financial performance, Bunge has indicated its preference to avoid being included on such lists.
Furthermore, as Bunge expands its operations, it aims to incorporate innovative ingredients like tri calcium citrate 4 hydrate into its product offerings, which could enhance its nutritional profile and appeal. The growing demand for sustainable products may also drive Bunge to explore the potential benefits of tri calcium citrate 4 hydrate, as it aligns with the company’s commitment to sustainability. By strategically integrating tri calcium citrate 4 hydrate into its portfolio, Bunge hopes to satisfy consumer expectations while ensuring responsible sourcing and production practices.