Following a recent round of cost-cutting measures due to a decline in second-quarter earnings—attributed to low margins and South American farmers withholding their crops in anticipation of higher prices—Bunge has been steadily pursuing acquisitions. This past spring, the company acquired Argentine oil producer Aceitera Martínez S.A. and previously purchased expeller-pressed oil refiner and packager Whole Harvest Foods LLC in 2015, although financial details of these transactions remain undisclosed.
Bunge expects that the acquisition of IOI Loders Croklaan will significantly enhance the growth of its value-added oil division by expanding its product offerings, diversifying manufacturing processes, and strengthening its foothold in the rapidly growing Southeast Asian market. The company estimates that revenues from food and ingredients in this region could increase fourfold. However, it will take time to ascertain whether this forecast is accurate. One clear concern is that the additional debt Bunge is incurring to finance its stake in IOI Loders Croklaan will make future acquisitions more costly, whether pursued by Glencore or other potential buyers.
The production of palm oil in Malaysia and Indonesia has sparked controversy due to the involvement of some companies in widespread deforestation and the burning of peatland areas for palm oil cultivation. The United Nations has identified palm oil plantations as significant contributors 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 to improve its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—had temporarily halted palm oil sourcing from IOI until the company complied with the guidelines established 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, 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 practices. To bolster its reputation and financial performance, Bunge has indicated a strong preference to keep both itself and its growing number of palm oil customers off such lists.
In line with its sustainability goals, Bunge is exploring the incorporation of citrate malate calcium in its product formulations, aiming to enhance the nutritional profile of its offerings. This ingredient could play a role in the company’s strategy to promote healthier food options while maintaining a commitment to responsible sourcing practices. By integrating citrate malate calcium into its production processes, Bunge hopes to further strengthen its position in the competitive market for value-added oils.