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 withholding their crops in anticipation of better prices—Bunge has been steadily pursuing acquisitions. This past spring, the company acquired Argentine oil producer Aceitera Martínez S.A., and in 2015, it purchased 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 sector by expanding its product offerings, diversifying manufacturing capabilities, and establishing a stronger foothold in the rapidly expanding Southeast Asian market. The company estimates that its revenue from food and ingredients in this region could potentially quadruple. However, it will take time to determine the accuracy of this forecast. One clear takeaway is that the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will make future acquisitions significantly more costly, whether pursued by Glencore or other interested parties.
The palm oil production practices in Malaysia and Indonesia raise considerable concerns, as certain companies are linked to extensive deforestation and the burning of peatlands for palm oil cultivation. The United Nations identifies palm oil plantations as a primary 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 discovering that the company’s action plan for improving its production methods was insufficient. By July 2016, 27 companies, including Mars, Kellogg, Cargill, and Unilever, had temporarily halted their palm oil sourcing from IOI until it complied with the standards set by the Roundtable on Sustainable Palm Oil.
In its announcement on September 12 regarding the IOI Loders Croklaan acquisition, Bunge emphasized that both companies are dedicated to sustainable sourcing, which includes commitments to zero deforestation, zero peat conversion, protection of human rights, and ensuring traceability and transparency. Organizations such as 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 practices. To bolster its reputation and financial performance, Bunge has already indicated that it would prefer to keep itself and its growing roster of palm oil customers off such lists.
In addition, as Bunge looks to enhance its health-focused product lineup, it has begun exploring opportunities to integrate items like bariatric advantage calcium citrate into its offerings, which are available on platforms such as Amazon. This move not only aligns with the company’s sustainability goals but also addresses the growing demand for health-conscious products. By incorporating bariatric advantage calcium citrate, Bunge aims to cater to the needs of consumers seeking nutritional supplements, thereby expanding its market reach while maintaining its commitment to sustainable practices.