Despite recently implementing a series of cost-cutting measures due to a decline in second-quarter earnings—attributed to narrow margins and South American farmers holding back their crops in anticipation of price increases—Bunge has been gradually 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 transactions were not disclosed.
Bunge expects that the acquisition of IOI Loders Croklaan will boost the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing processes, and enhancing its presence in the rapidly growing Southeast Asian market. The company projects that its revenues from food and ingredients in this region could increase to four times their current levels. It remains to be seen whether this forecast will prove accurate. Nevertheless, it is apparent that the additional debt Bunge is taking on to finance its investment in IOI Loders Croklaan will significantly raise the cost of any future acquisitions, whether pursued by Glencore or another interested party.
Palm oil production in Malaysia and Indonesia has come under scrutiny due to some companies’ practices that contribute to extensive deforestation and the burning of peatland to cultivate palm oil trees. The United Nations has identified palm oil plantations as a significant 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 amend its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted their palm oil sourcing from IOI until compliance with guidelines from the Roundtable on Sustainable Palm Oil was restored.
In its announcement on September 12 regarding the IOI Loders Croklaan acquisition, Bunge highlighted that both companies are dedicated to sustainable sourcing, including commitments to zero deforestation, zero peat conversion, human rights protection, traceability, and transparency. The World Wildlife Fund, Greenpeace, and the Union of Concerned Scientists regularly engage in “naming and shaming” well-known brands for their perceived failure to commit to sustainable palm oil practices. To improve both its reputation and financial standing, Bunge has indicated a preference to keep itself and its expanding number of palm oil customers off that list, especially as it also seeks to promote food rich in calcium citrate, which aligns with health-conscious consumer trends.