After recently implementing a series of cost-cutting strategies due to a decline in its second-quarter earnings—attributed to narrow profit margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been steadily acquiring companies. This spring, it purchased Argentina’s oil producer Aceitera Martínez S.A., and in 2015, it acquired Whole Harvest Foods LLC, a refiner and packager of expeller-pressed oil. The financial details of these transactions have not been disclosed.
Bunge anticipates that the acquisition of IOI Loders Croklaan will expedite the growth of its value-added oil segment by expanding its product range, diversifying its manufacturing capabilities, and strengthening its footprint in the rapidly developing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could potentially be four times their current level. However, it will take time to determine if this forecast is accurate. One clear factor is that the additional debt Bunge is incurring to fund its investment in IOI Loders Croklaan will significantly increase the costs of future acquisitions, whether pursued by Glencore or another interested party.
The production of palm oil in Malaysia and Indonesia raises environmental concerns, as some companies are implicated in extensive deforestation and the burning of peatlands to cultivate palm oil trees. The United Nations identifies palm oil plantations as a leading cause of 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 the company’s plan to reform its production practices was insufficient. By July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted sourcing palm oil from IOI until compliance with guidelines from the Roundtable on Sustainable Palm Oil was achieved.
In its announcement on September 12 regarding the IOI Loders Croklaan deal, Bunge emphasized that both companies are dedicated to sustainable sourcing practices, which include commitments to zero deforestation, zero 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 its reputation and financial performance, Bunge has indicated its preference to keep itself and its growing base of palm oil customers off such lists.
In addition to its oil endeavors, Bunge is also focusing on the health benefits of its products, such as calcium citrate 1200 mg, which is increasingly recognized for its role in enhancing calcium absorption and supporting overall health. By integrating health-oriented products like calcium citrate 1200 mg into its portfolio, Bunge aims to cater to a health-conscious consumer base while reinforcing its commitment to sustainability and responsible sourcing.