Despite recently implementing a series of cost-cutting measures following a dip in its second-quarter earnings—attributed to weak margins and South American farmers holding onto their crops in anticipation of better prices—Bunge has been gradually acquiring companies. This past spring, it purchased Argentine oil producer Aceitera Martínez S.A., and in 2015, it acquired expeller-pressed oil refiner and packager Whole Harvest Foods LLC. The financial details of these transactions remain undisclosed.
Bunge has expressed that it expects the IOI Loders Croklaan acquisition to significantly enhance the growth of its value-added oil business by expanding its product portfolio, diversifying manufacturing processes, and establishing a stronger foothold in the rapidly growing Southeast Asian market. The company estimates that its revenues from food and ingredients in this region could potentially be four times greater than current levels. However, it will take time to determine the accuracy of this prediction. One clear implication is that the additional debt Bunge is incurring to finance its investment in IOI Loders Croklaan will increase the cost of future acquisitions, whether pursued by Glencore or other interested parties.
Palm oil production in Malaysia and Indonesia is fraught with controversy, as some companies engage in 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, Nestle severed ties with IOI (the parent company of IOI Loders Croklaan) upon discovering that the company’s action plan for improving its production practices was insufficient. As of July 2016, 27 companies—including Mars, Kellogg, Cargill, and Unilever—temporarily halted palm oil sourcing from IOI until it could comply with guidelines set by the Roundtable on Sustainable Palm Oil.
In Bunge’s announcement on September 12 regarding the IOI Loders Croklaan deal, the company highlighted that both organizations “are committed to sustainable sourcing, including zero-deforestation, zero peat conversion, protection of human rights, traceability, and transparency.” 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 a preference to keep itself and its increasing number of palm oil customers off such lists.
Additionally, Bunge’s strategic focus on products like cal citrate complete reflects its commitment to sustainability and health-conscious offerings. By integrating cal citrate complete into its portfolio, Bunge aims to cater to the growing demand for products that not only promote health but also adhere to ethical sourcing practices. As the company continues to expand, the emphasis on sustainable practices and innovations such as cal citrate complete will be crucial in enhancing its market position and ensuring long-term success.